2021
Annual report
Unless otherwise specified, references in this annual report to other
documents, including but not limited to other reports and websites,
including our own, are for information purposes only. The contents of
such other documents and websites are not incorporated by reference
in this annual report nor otherwise considered to be a part of it.
Unless the context requires otherwise, 'Banco Santander' means
Banco Santander, S.A., and 'Santander', 'the Group' and 'Santander
Group' mean Banco Santander, S.A. and subsidiaries.
320 Economic and financial review
322 Economic, regulatory and competitive context
325 Group selected data
327 Group financial performance
368 Financial information by segments
410 Research, development and innovation
(R&D&I)
412 Significant events since year end
413 Trend information 2022
421 Alternative performance measures (APM)
430 Risk management and compliance
432 Risk management and compliance
439 Risk management and control model
446 Credit risk
466 Market, structural and liquidity risk
480 Capital risk
483 Operational risk
489 Compliance and conduct risk
496 Model risk
498 Strategic risk
499 Climate and environmental risk
Consolidated directors' report
6 Business model and strategy
15 Responsible banking
Consolidated non-financial statement
23 Our approach
33 Doing things the right way
71 Promoting inclusive and sustainable growth
117 Key metrics
131 Further information
131 Non-financial information Law content
index
136 UNEP FI Principles for Responsible Banking
reporting index
144 Global Reporting Initiative (GRI) content
index
164 Sustainability Accounting Standards Board
(SASB) content index
166 Stakeholder Capitalism Metrics content
index
172 SDGs contribution content index
175 Independent verification report
179 Corporate Governance
182 2021 Overview
188 Ownership structure
193 Shareholders. Engagement and general
meeting
200 Board of directors
247 Management team
249 Remuneration
273 Group structure and internal governance
276 Internal control over financial reporting (ICFR)
284 Other corporate governance information
Auditor's report and consolidated
financial statements
514 Auditor's report
504 Glossary
524 Consolidated financial statements
540 Notes to the consolidated financial
statements
767 Appendix
808 General information
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
2021 consolidated
directors’ report
This report was approved unanimously by our board
of directors on 24 February 2022
Our approach to this document
We changed the layout of our consolidated directors’ report in 2018
by including the contents previously provided in these documents
which we ceased to prepare separately:
– Annual report
– Consolidated directors’ report
– Annual corporate governance report (CNMV format document)
– Report of the board committees
– Sustainability report
– Annual report on our directors’ remuneration (CNMV format
document)
Auditors’ reviews
The consolidated directors’ report also includes all information
required by Spanish Act 11/2018 on non-financial information and
diversity. It can be found in the 'Responsible banking' chapter, which
constitutes the consolidated non-financial information statement.
This report's format presents information more clearly, avoiding
repetition and raising the level of disclosure.
As required by law, contents of our 2021 consolidated directors’
report has been subjected to three types of reviews by our
independent statutory auditors, PricewaterhouseCoopers Auditores,
S.L., summarized as follows:
– PricewaterhouseCoopers Auditores, S.L. has verified that the
information in this report is consistent with our consolidated
financial statements, and that its contents comply with the
applicable regulations. For more details, see ‘Other information:
Consolidated management report section of the 'Auditor’s report'
within 'Auditor's report and consolidated annual accounts'.
– PricewaterhouseCoopers Auditores, S.L. has issued a verification
report, with limited assurance, on the non-financial and diversity
information required by Spanish Act 11/2018 included in this
report. To read that report, see the 'Independent verification report'
in the 'Responsible banking' chapter.
– PricewaterhouseCoopers Auditores, S.L. has issued an independent
reasonable assurance report on the design and effectiveness of
Banco Santander's internal control over financial reporting, found
in section 8.6 of the 'Corporate governance' chapter.
Non-IFRS and alternative performance measures
This report contains, in addition to financial information prepared in
accordance with International Financial Reporting Standards (IFRS)
and derived from our consolidated financial statements, alternative
performance measures (APMs) as defined in the Guidelines on
Alternative Performance Measures issued by the European Securities
and Markets Authority (ESMA) on 5 October 2015 and other non-IFRS
measures. These financial measures that qualify as APMs and non-
IFRS measures have been calculated with information from
Santander Group; however, those financial measures are not defined
or detailed in the applicable financial reporting framework nor have
been audited or reviewed by our auditors.
We use these APMs and non-IFRS measures when planning,
monitoring and evaluating our performance. We consider these
APMs and non-IFRS measures to be useful metrics for our
management and investors to compare operating performance
between accounting periods.
Nonetheless, these APMs and non-IFRS measures should be
considered supplemental information to, and are not meant to
substitute IFRS measures. Furthermore, companies in our industry
and others may calculate or use APMs and non-IFRS measures
differently, thus making them less useful for comparison purposes.
For more details on APMs and non-IFRS measures, see section 8 of
the 'Economic and financial review'.
Annual report 2021
4
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Forward-looking statements
Banco Santander advises that this annual report contains “forward-
looking statements” as per the meaning of the US Private Securities
Litigation Reform Act of 1995. These statements may be identified by
words like expect, project, anticipate, should, intend, probability, risk,
target, goal, objective, estimate, future and similar expressions.
Found throughout this report, they include (but are not limited to)
statements on our future business development, economic
performance and shareholder remuneration policy. However, a
number of risks, uncertainties and other important factors may cause
actual developments and results to differ materially from our
expectations.
The following important factors, in addition to others discussed
elsewhere in this annual report, could affect our future results and
could cause materially different outcomes from those anticipated in
forward-looking statements:
– general economic or industry conditions of areas where we have
significant operations or investments (such as a worse economic
environment; higher volatility in capital markets; inflation or
deflation; changes in demographics, consumer spending,
investment or saving habits; and the effects of the covid-19
pandemic on the global economy);
– exposure to various market risks (particularly interest rate risk,
foreign exchange rate risk, equity price risk and risks associated
with the replacement of benchmark indices);
– potential losses from early repayments on our loan and
investment portfolio, declines in value of collateral securing our
loan portfolio, and counterparty risk;
Past performance is not indicative of future results
Statements about historical performance or accretion must not be
construed to indicate that future performance, share price or
earnings (including earnings per share) in any future period will
necessarily match or exceed those of any prior period. Nothing in this
annual report should be taken as a profit forecast.
XHTML electronic format and XBRL tags
This annual report has been prepared in eXtensible HyperText
Markup Language (XHTML) format, and the consolidated financial
statements it includes have been tagged with eXtensible Business
Reporting Language (XBRL), in accordance with Directive 2004/109/
EC and Commission Delegated Regulation (EU) 2019/815.
No offer
Neither this annual report nor any of the information contained
herein constitutes an offer to sell, or the solicitation of an offer to
buy, any securities.
– political stability in Spain, the United Kingdom, other European
countries, Latin America and the US;
– changes in legislation, regulations, taxes, including regulatory
capital and liquidity requirements, especially in view of the UK exit
of the European Union and increased regulation in response to
financial crisis;
– our ability to integrate successfully our acquisitions and related
challenges that result from the inherent diversion of
management’s focus and resources from other strategic
opportunities and operational matters; and
– changes in our access to liquidity and funding on acceptable terms,
in particular if resulting from credit spread shifts or downgrades in
credit ratings for the entire group or significant subsidiaries.
Numerous factors could affect our future results and could cause
those results deviating from those anticipated in the forward-looking
statements. Other unknown or unpredictable factors could cause
actual results to differ materially from those in the forward-looking
statements.
Our forward-looking statements speak only as at date of approval of
this annual report and are informed by the knowledge, information
and views available as at the date of this report. Banco Santander is
not required to update or revise any forward-looking statements,
regardless of new information, future events or otherwise.
To view the XBRL tags, you must open this document using an
appropriate viewer. You can find this document with an XBRL viewer
on Banco Santander's corporate website.
Annual report 2021
5
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Business model
and strategy
We follow The Santander Way:
For more information see the 'Responsible banking' chapter.
Annual report 2021
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Corporate
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Economic and
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Our business model | Our customer focus, global scale and diversification
are the foundations for generating value for our shareholders
01. Customer focus
Deepening the relationships with
our customers through a simpler
value proposition, superior
customer experience and our
digital proposition
→ We have increased our number of customers over the
last seven years, and notably in 2021, with balanced
growth by region and business.
→ Our aim is to further enhance our customers'
experience and satisfaction.
Total
customers
153 mn
+5 mn in 2021
+32 mn since 2015
→ We also help a new generation of customers with new
ways to interact with their finances, which is reflected
in an increase in digitalization (54% digital sales / total
sales in 2021).
Top 3
Customer
satisfaction
A
8 countries
A. NPS (Net Promoter Score) – Customer Satisfaction internal benchmark of individual customers' satisfaction audited by Stiga / Deloitte in H2'21.
02. Our scale
Local scale and global reach
→ Regional and global scale based on three geographic
regions, where we maintain leadership positions in our
core markets.
→ Worldwide reach through our global businesses and
PagoNxt, enabling greater collaboration across the
Group to generate higher revenue and efficiencies.
A
Top 3
in 10 of our markets
DCB
A. Market share in lending as of Sep-21 including only privately-owned banks. UK benchmark only covers the mortgage market (source: central banks). Digital Consumer
Bank (DCB) refers to auto financing market shares in the majority of our Europe footprint (source: information from local auto associations and market intelligence
reported by SCF units).
03. Diversification
Our geographic and business
diversification makes us more
resilient under adverse
circumstances
→ We have a diversified geographical footprint which is well
balanced between emerging and developed markets.
→ Business diversification between customer segments
(individuals, SMEs, mid-market companies and large
corporates).
→ This diversification remains a source of great strength and
earnings stability.
Underlying attributable profit by region
A
A. 2021 underlying attributable profit by region. Operating areas excluding Corporate Centre.
Group net operating income (Pre-Provision Profit)
EUR billion
Our strong model is reflected in the
resilience of our business. It is a
competitive strength that
continues to differentiate us.
Annual report 2021
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Contents
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Corporate
governance
Economic and
financial review
Risk management
and compliance
2021 results: growth, profitability, strength and shareholder
value creation
Over the last seven years, we have laid the foundations to deliver great value and service to our customers,
while increasing profit, improving profitability and strengthening our capital base.
In 2021, we delivered an all-time record profit before tax (PBT) of EUR 15.3 billion, reflecting strong business
momentum across the Group.
We improved our efficiency, cost of risk and profitability, reached our capital target and improved our
shareholder value creation by 11% in 2021.
Strong operating performance in 2021: EUR 8.7bn of underlying profit
2021 (vs. 2020)
Growth
Profitability
Strength
Total customers
153mn (+5mn)
A
Total revenue
EUR 46.4bn (+7%)
B
RoTE
12.7% (+529bps)
Efficiency ratio
46.2% (-86bps)
C
FL CET1
12.0% (+7bps)
D
Cost of credit
0.8% (-51bps)
E
2021 Shareholder value creation: +11%
A. Changes in constant euros. In euros: +4%.
B. Underlying RoTE. Statutory RoTE: 12.0%.
C. Including acquisition of SC USA minority interest which closed on 31 January 2022 and the announced acquisition of Amherst Pierpont which is subject to completion,
regulatory approval and other conditions.
D. Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months.
E. TNAV per share + cash DPS of EUR 7.6 cents paid in calendar year 2021.
Geographical and business diversification delivers growth and profitability
2021 (vs. 2020)
EUR billion
A
Loans
Customer funds
B
Revenue
Underlying profit
+4% YoY
+6% YoY
+7% YoY
+78% YoY
% of Group’s
customer
loans
% of Group’s
underlying
C
profit
Europe
North America
South America
576
134
129
712
137
162
16.3
11.0
15.4
Digital Consumer
Bank
Note: YoY changes in constant euros.
A. Gross loans and advances to customers excluding reverse repos.
B. Customer funds: customer deposits excluding repos + marketed mutual funds.
C. Underlying contribution as a % of operating areas and excluding the Corporate Centre.
117
58
5.3
3.0
3.1
3.3
1.3
60%
14%
14%
12%
28%
29%
31%
12%
Annual report 2021
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Looking ahead
Thanks to our scale, geographic footprint and business diversification, we have numerous opportunities to
grow, which should allow us to remain our customers' first choice.
To make the most of those opportunities, our focus is on implementing plans that enhance the existing
connectivity across all the geographies and businesses, and improve the profitability of our core businesses
through disciplined capital allocation.
We will do this while delivering on our commitment to offer our customers financial products and services in a
Simple, Personal and Fair way, and creating value for our shareholders.
Our focus and 2022 goals
2022 Group goals
Growth
Profitability
Balance Sheet
Strength
Shareholder
Remuneration
B
Mid-single digit
Revenue growth
A
C/I
45%
RoTE >13%
FL CET1
12%
Payout
40%
A. Constant EUR.
B. For the 2022 results the shareholder remuneration policy that the board intends to apply is a total remuneration of approximately 40% of the group's underlying
profit, split in approximately equal parts between cash dividends and share buybacks, thus continuing the policy applied with respect to 2021 results. The
implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.
Improving customer service and increasing connectivity
Investing in Tech …
… and building common solutions
Tech investment to transform the business…
EUR 2bn / year
…and help customers transact online.
In 2021:
76%
digital transactions
of our core banks
(vs 55% in 2019)
54%
digital sales
total sales
(vs 36% in 2019)
/
→ PagoNxt: common tech backbone for payments of Santander
customers and open market.
→ One Santander:
• Regional Consumer Finance platform in South America.
• Common App and Regional Business Owners in Europe.
• T&O shared services in North America.
• Global Financial Crime & Compliance solutions.
→ Digital Consumer Bank: re-platform auto, consumer and retail.
Annual report 2021
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Corporate
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Continuing to execute our three strategic priorities:
1. One Santander
The aim is to create a better bank for our customers
that is more efficient, profitable and sustainable. This
project incorporates improved customer service, our
omni-channel strategy and a common operating model
in each region.
2. PagoNxt
Our common tech backbone that will unify the payments
of all Santander customers.
3. Digital Consumer Bank
The combination of our auto and consumer businesses,
leveraging the technology of Openbank – Santander’s full
service native digital bank - to accelerate the tech
transformation of our Consumer Finance business to
maintain its high profitability and growth.
1. One Santander
Europe
2021 Key data
Loans
EUR 576bn
↑ +3%
2022 Strategic focus
Customer funds
EUR 712bn
↑ +6%
Efficiency
51.0 %
↓ -5.4pp
Profitable growth from individual customers.
SME value proposition leveraging PagoNxt.
Cost of credit
0.39 %
↓ -19bps
Profit
EUR 3.0bn
↑ +110%
A
RoTE
7.4 %
↑ +3.8pp
Disciplined capital allocation; growing Santander Corporate
& Investment Banking and Wealth management & Insurance.
Common operating model to drive EUR 1bn run-rate savings
by end 2022.
Cost of credit normalization.
Note: 2021 data and year-on-year changes (underlying profit, loans and funds in constant euros).
A.Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 9.9% (+5.4pp).
Annual report 2021
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North America
2021 Key data
Loans
EUR 134bn
↑ +4%
Customer funds
EUR 137bn
↑ +9%
Efficiency
45.6 %
↑ +1.8pp
Cost of credit
0.93 %
↓ -199bps
Profit
EUR 3.1bn
↑ +109%
RoTEA
13.1 %
↑ +6.2pp
2022 Strategic focus
Positioned to deliver above cost of capital returns
across core businesses.
• Refocusing US on our market leading consumer
franchise.
• Simplifying: disciplined capital allocation. Exit
home lending / Review certain Corporate &
Investment segments.
• Synergies from 2021's strategic investments;
B
.
(Amherst Pierpont / SC USA minorities)
8 pp increase in digital transactions from 47% to
55%; digital sales up from 62% to 70% driven by
greater customer focus & tech investment.
Note: 2021 data and year-on-year changes (underlying profit, loans and funds in constant euros).
A. Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 24.6% (+13.8pp).
B. Acquisition of SC USA minority interest closed on 31 January 2022. The announced acquisition of Amherst Pierpont is subject to completion, regulatory approval and other
conditions.
South America
2021 Key data
2022 Strategic focus
Loans
EUR 129bn
↑ +12%
Customer funds
EUR 162bn
↑ +9%
Efficiency
35.0 %
↓ -1.0pp
Double-digit growth in retail segments.
Leading regional Consumer Finance.
Cost of credit
2.60 %
↓ -72bps
Profit
EUR 3.3bn
↑ +24%
A
RoTE
20.3 %
↑ +2.6pp
Accelerate connectivity in Corporate and Santander
Corporate & Investment Banking segments.
Proven risk management capabilities able to control
cost of credit.
Fee businesses and transactional services on the back of
Group´s payments platforms will drive "recurrence"
growth from our current 70% to ~80%.
Note: 2021 data and year-on-year changes (underlying profit, loans and funds in constant euros).
A Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 26.0% (+3.9pp).
Building a more responsible bank by embedding ESG in our strategic priorities
In 2021, One Santander focused on helping customers in the transition to a green economy, jointly developing green products and
services across regions, while promoting the financial health of our diverse customer base, especially the most vulnerable.
Annual report 2021
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2. PagoNxt
2021 Revenue performance
A
Merchant acquiring
Santander banks
with Getnet
6
International Trade
Santander banks
with One Trade
8
Total payments
B
volume (TPV)
EUR 116bn
↑ +50%
Total active
merchants
1.2 mn
One Trade active
SMEs and
corporates
>8k
Ebury revenue
C
growth
+30 %
2022 Strategic focus
Continue to expand our global platforms.
Consolidating our retail leadership positions with Getnet.
Deploy One Trade's international payments services.
Implement the instant functionality of Payments Hub in
various markets.
Continue the gradual migration of our global payments
services and financial inclusion platform of Superdigital in
Latin America.
A. Constant EUR mn and YoY changes in constant euros.
B. TPV: Total Payments Volume.
C. Changes in constant euros (estimated fiscal year from May’21-April’22 vs May’20-April’21). Management accounting data.
Building a more responsible bank by embedding ESG in our strategic priorities
In 2021, PagoNxt continued to develop consumer solutions, such as Superdigital, to tackle financial exclusion in Latin America, while
supporting entrepreneurship with solutions for merchants, such as Getnet.
3. Digital Consumer Bank
2021 Key data
Loans
EUR 117bn
↓ -1%
Customer funds
EUR 58bn
↑ +10%
Efficiency
45.0 %
0.0pp
Cost of credit
0.46 %
↓ -38bps
Profit
EUR 1.3bn
↑ +16%
A
RoTE
14.0 %
↑ +2.3pp
2022 Strategic focus
To become the largest digital consumer bank leveraging SCF’s
footprint in auto and consumer finance, profiting from
Openbank's technology stack and reinforcing leadership
position with strategic alliances.
Auto: Strengthening auto financing leadership by reinforcing
mobility solutions with focus on leasing and subscription.
Consumer (non-auto): Gaining market share in consumer
lending, with focus on e-commerce checkout lending and buy
now, pay later (BNPL).
Simplification for efficiency: maintaining high speed
digitalization in order to transform the business and improve
efficiency.
Note: 2021 data and year-on-year changes (underlying profit, loans and funds in constant euros).
A. Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 14.8% (+2.5pp).
Building a more responsible bank by embedding ESG in our strategic priorities
In 2021, Digital Consumer Bank focused on developing green finance solutions (both in auto and consumer loans), while making
progress in measuring the emissions financed in our loan portfolio.
Annual report 2021
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Global businesses (SCIB and WM&I) enhance our local scale with global reach and collaboration
Our global businesses built on their 2020 results, reporting outstanding performance in 2021, with double-
digit profit growth.
SCIB and WM&I continue to bring connectivity across the Group to generate higher revenue and efficiencies.
Santander Corporate & Investment Banking
2021 Key data
Revenue
EUR 5.7bn
↑ +10%
Profit
EUR 2.2bn
↑ +26%
Fee income
EUR 1.8bn
↑ +16%
RoTE
18.1 %
↑ +2.5pp
2022 Strategic focus
Santander CIB supports corporate and institutional
customers, offering tailored services and value-added
wholesale products suited to their complexity and
sophistication.
Continue the business transformation to partner with our
clients as strategic advisors, strengthening our value-added
services, with an increased focus on ESG and Digital solutions.
Our aim in Europe is to become one of the top wholesale
banks in the region, while strengthening our leadership
position in LatAm and to up-tier our franchise in the US to
compete on a level playing field.
Note: 2021 data and YoY changes (underlying profit, revenue lines and commercial activity in constant euros).
Wealth Management & Insurance
2021 Key data
Assets under
management
EUR 399bn
↑ +8%
Fee contribution
EUR 3.4bn
↑ +12%
32% of Group total fees
Profit
EUR 907 mn
↑ +13%
2022 Strategic focus
Commercial
activity (Flows)
EUR 11.7bn
Private Banking
EUR 8bn
Santander Asset
Management
Insurance
Premiums A
+12 %
Our aim: to become the best responsible wealth and insurance
manager in Europe and the Americas.
Private Banking: continue to build our global platform, expand
and develop our product and service proposition, and deploy the
best digital tools. We aim to renew or improve our top 3 position
as Best Global Private Bank according to EuromoneyC
.
RoTE
59.7 %
↑ +5.6pp
B
Contribution to Group's profit
EUR 2.3bn
↑ +12%
SAM: continue to be the preferred funds partner for our retail
network by completing the creation of the global hubs,
expanding the One Investments model and methodologies, and
working to complete the implementation of our digital funds
distribution platforms.
Insurance: optimize our customer service by completing our
digital proposition using customer data; manage our portfolio to
extend policy life; and increase customer base penetration.
ESG transversal across our businesses: offer sustainable
investment management in our private banking platform, expand
our ESG range to help reach our commitment of EUR 100bn AuM
by 2025, work towards our Net Zero commitments and create a
sustainable insurance value proposition.
Note: 2021 data and YoY changes (underlying profit, revenue lines and commercial activity in constant euros).
A. Protection business.
B. Including fees generated by asset management and insurance transferred to the commercial network.
C. Clients up to USD 250 million.
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ESG commitments: we are creating value for our shareholders by focusing on
delivering profitable growth in a responsible way
In 2021, we continued to deliver on our ESG commitments,
supporting our customers’ green transition and financially empowering more people
Supporting
the green transition
Building a more
inclusive society
With a talented
and diverse team
EUR 66bn
Green finance since 2019
A
>200%
YoY green finance in retail
B
EUR 27bn
AuM in Sustainable funds
C
#1
Financial advisor in
Project Finance renewables
D
7.5mn
People financially empowered
since 2019
>EUR 550mn
Credit allocated to microfinance
in 2021
1.4mn
Microentrepreneurs supported
since 2019
8
Countries with microfinance
initiatives underway
6
Geographies where we are Top 10
company to work for
>26%
Women in senior
leadership positions
ESG
Metrics included in
executives' incentives
#1
Bank in Bloomberg Gender
Equality Index
Note: audited data.
A. Only SCIB global business.
B. All segments excluding SCIB and WM&I.
C. AuMs classified as Article 8 and 9 funds (SFDR) from SAM, plus third-party funds and other ESG products according to EU taxonomy from Private Banking. We apply
equivalent ESG criteria to SAM's funds in Latin America.
D. Banco Santander, S.A. emerged as the top financial advisor for renewable energy project financing in 2021, with a total deal credit of USD 10.3 billion and a market share
of 28%, according to Bloomberg NEF’s H2’21 Clean Energy League Tables.
We continued to progress towards our 2025 ESG commitments
and in our Net Zero target by 2050. In 2021 we set the first
decarbonization targets to support the green transition:
→ Reduce our thermal coal exposure to zero.
→ Align our power generation portfolio to the Paris Agreement by 2030.
For more information see the 'Responsible banking' chapter.
Annual report 2021
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Responsible
banking
Consolidated Statement of Non-Financial
Information 2021
Annual report 2021
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About this chapter
GRI 102-45, 102-46, 102-48, 102-49, 102-50, 102-51, 102-52, 102-54 and 102-56
This chapter is the consolidated non-financial statements of Banco Santander, S.A.
and subsidiaries. It provides detailed information in accordance with Art. 49, sections
5, 6, 7, 8 and 9 of the Spanish Commercial Code as amended by Ley (“Act”) 11/2018,
which transposes into Spanish law Directive 2014/95/EU of the European Parliament
and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards
disclosure of non-financial and diversity information.
Scope
This chapter covers the core activities of Banco Santander and its
subsidiaries in Europe, the United States and Latin America from 1
January to 31 December 2021 (for more details, see Notes 3 and 52
to the consolidated financial statements and Sections 3 and 4 of the
Economic and financial review). It gives economic, social and
environmental information according to the bank’s accounting
criteria. Significant criteria differences from the 2020 Responsible
banking chapter are explained in the related section as well as in the
Global Reporting Initiative (GRI) Content Index.
International standards considered in preparing this
Responsible banking chapter
Banco Santander follows international standards to prepare
sustainability reports. This chapter meets the GRI Standards
(comprehensive option), the GRI G4 guidelines on financial services
disclosures, the Sustainability Accounting Standards Board’s (SASB)
2018-10 industry standards, and the World Economic Forum's
Stakeholder Capitalism Metrics. It shows Santander's progress with
respect to the UN Principles for Responsible Banking, the TCFD
recommendations, the 2030 Agenda and the UN Sustainable
Development Goals. It also takes into account the European
Taxonomy regulation (Regulation (EU) 2020/852 and Commission
Delegated Regulations 2021/2139 of 4 June and 2021/2178 of 6
July).
Material aspects and stakeholder involvement
Banco Santander maintains active dialogue with its stakeholders to
understand their expectations. It conducts a materiality assessment
of ESG matters and closely monitors questionnaires and
recommendations of Dow Jones, FTSE4Good and other major
sustainability indices, as well as the World Business Council for
Sustainable Development (WBCSD) and other international
sustainability initiatives it takes part in.
This chapter illustrates the sustainability of the bank’s local and
global operations, especially in terms of internal and external impact.
For details on its preparation and on materiality assessment findings,
see section 'What our stakeholders tell us'.
External verification
This report has been verified with limited assurance by
PricewaterhouseCoopers Auditores, S.L., an independent firm that
also audited Banco Santander, S.A.’s financial statements for 2021.
The use by Banco Santander S.A. of any MSCI ESG RESEARCH LLC or its affiliates
(“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index names
herein, do not constitute a sponsorship, endorsement, recommendation, or
promotion of Banco Santander S.A. by MSCI. MSCI services and data are the property
of MSCI or its information providers, and are provided ‘as-is’ and without warranty.
MSCI names and logos are trademarks or service marks of MSCI.
Annual report 2021
16
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
2021 overview
Our approach
What our stakeholders tell us
Our ESG priorities
Governance
Doing things the right way
A strong and inclusive culture
Conduct and ethical behaviour
A talented and motivated team
Acting responsibly towards customers
Responsible procurement
Shareholder value
Promoting inclusive and sustainable growth
Supporting the green transition
Financial inclusion and empowerment
Sustainable investment
Support to higher education and other local initiatives
Key metrics
Further information
Non-financial information. Law content index
UNEP FI Principles for Responsible Banking reporting index
Global Reporting Initiative (GRI) content index
Sustainability Accounting Standards Board (SASB) content index
Stakeholder Capitalism Metrics content index
SDGs contribution content index
Independent verification report
18
23
24
27
29
33
34
37
44
61
68
69
71
72
96
104
107
117
131
131
136
144
164
166
172
175
Annual report 2021
17
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
2021 overview
Helping people and businesses prosper
People
Customers
EUR 11,216 million
Staff costs
A
EUR 972,682 million
loans outstanding (net)
EUR 542,339 million
to households
EUR 22,152 million
to government agencies
EUR 323,475 million
to companies
EUR 86,716 million
to others
B
Shareholders
Communities
Suppliers
Tax contribution
40% of ordinary profit
intended for their remuneration
C
EUR 152 million
invested in communities
EUR 6,757 million
paid to suppliers
D
EUR 7,617 million
Total taxes paid by the group
Building a more responsible bank by embedding ESG
Environmental
Social
Governance
→ Embedding a climate strategy to
→ Creating a workplace that attracts
→ Promoting our culture, the Santander
deliver net zero by 2050
2.1% of exposure to sectors with
decarbonization targets against total
lending on the balance sheet
38% of credit risk exposure with
decarbonization targets against SCIB
exposure to climate concerning sectors
and retains diverse talent
54% women in our workforce
98% workforce with a permanent
contract; and 9.8% promoted
Way
84% of employees said they felt
proud to work for Santander and are
motivated to build a bank that is even
more Simple, Personal, Fair.
→ Helping our customers transition to a
→ Fostering financial inclusion and
→ Ensuring sound corporate
low-carbon economy
EUR 32.3 bn in green finance
mobilized in 2021
EUR 27 bn in sustainable AuM
empowerment
EUR 571 million credit disbursed to
1 million micro-entrepreneurs
→ Minimizing our environmental
→ Supporting our communities
footprint
39% reduction of CO2 emissions;
Carbon neutral by offsetting
118,517tn CO2 emissions
162k Scholarships and grants
through Santander Universities
2.1 million people helped through
social action programmes
governance and risk management
66.7% independent directors
93% of employees can identify risks
in their job every day
→ Acting responsibly towards
customers and suppliers
65% of complaints are resolved in less
than 15 days, 85% in less than 30 days.
94% of our total services are locally
sourcedD
A. From Group consolidated financial statements.
B. Including financial business activities and customer prepayments.
C. Pay-out of approximately 40% of ordinary profit, equally divided between a cash dividend and a share buyback
D. Data refers exclusively to purchases negotiated by Aquanima, our procurement global entity.
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Meeting our public commitments
The 11 public commitments Banco Santander announced in 2019
reflect our responsible banking ambitions and help embed
environmental, social and governance (ESG) criteria in operations.
They are “SMART” (Specific, Measurable, Achievable, Realistic and
Time-bound) to fulfil the UN Sustainable Development Goals and the
targets set out in the Paris Agreement on climate change.
In 2021, we met (or exceeded) all our commitments for 2019-2021
and made progress on all our targets. Our new public commitments
include initial decarbonization targets for the power industry for
2025 and 2030, which measure emission intensity.
Top 10 company to work for
A
Women board members
B
(%)
Women in senior positions
C
Equal pay gap
Financially empowered people
(cumulative)
D
2018
2019
2020
2021
Target
4
33%
20%
3%
5
6
40%
40%
6
40%
Top 10 in 6
countries by 2021
40-60% by 2021
22.7%
23.7%
26.3%
30% by 2025
2%
1.5%
1%
~0% by 2025
2.0mn
4.9mn
7.5mn
10mn by 2025
Green finance raised and facilitatedE
(cumulative)(EUR)
F
Electricity used from renewable energy sources
43%
19bn
50%
33.8bn
65.7 bn
57%
75%
120bn by 2025
220bn by 2030
60% by 2021
100% by 2025
since 2020
Carbon neutral in our own operations
G
Reduction of unnecessary single-use plastics in
H
corporate buildings and branches
Scholarships, internships and entrepreneurship
I
programmes (cumulative)
75%
98%
100%
100% by 2021
69k
225k
388k
J
325k by 2021
People helped through our community programmes
K
(cumulative)
1.6mn
4.0mn
6.1mn
4mn by 2021
Cumulative target
From… to…
A. According to Great Place to Work, Top Employer, Merco and other external indices in each country
B. Senior positions make up 1% of the total workforce
C. Equal pay gap based on same jobs, levels and functions
D. Unbanked, underbanked and financially vulnerable individuals who receive tailored finance solutions and become more aware and resilient through financial education.
E. Includes Grupo Santander's contribution to green finance: project finance; syndicated loans; green bonds; capital finance; export finance, advisory services, structuring and
other products, to help customers transition to a low-carbon economy. EUR 220bn committed from 2019 to 2030
F. In countries where we can verify electricity from renewable sources at Banco Santander properties
G. In our core geographies (G10)
H. For G10. Does not account for Covid-19 measures that might have involved plastic
I. Students given a scholarship through Santander Universities who will do an internship at an SME or take part in Santander-endorsed entrepreneurship programmes
J.The initial target of 200k beneficiaries was reached in 2020 and therefore the bank committed to offer 125k additional scholarships by 2021
K. Does not include Santander Universities or financial education initiatives
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Our progress in 2021
E
S
G
→ Commitment to net zero emissions by 2050. Founding member of UNEP FI’s Net Zero
Banking Alliance. First decarbonization targets set.
→ SAM joined the Net Zero Asset Managers initiative, becoming the first asset manager in
Spain to commit to net-zero emissions by 2050 and halve emissions on 50% of its AUMs.
→ New sustainable finance classification system setting the criteria to offer, manage and
report sustainable financing.
→ Beyond the 32.3bn mobilized by SCIB in green finance, our third green bond raised EUR 1
billion in an eight-year non-preferred senior debt issue that will finance wind and solar
power projects.
→ Santander Universities launched the Santander X Environmental Challenge to support
innovative companies worldwide and promote a low-carbon economy.
→ We ranked in the Top 3 in NPS in 8 markets, up from 6 in 2020.
→ Santander Chile, Santander Colombia and Santander Perú launched new microfinance
programmes for entrepreneurs, while we continued to expand Prospera in Brazil and TUIIO
in Mexico.
A
→ We have worked to develop a new global health and well-being policy.
→ Santander Universities launched the Santander X Global Challenge | Finance For All to find
innovative solutions that ensure access to banking products and services.
→ ESG criteria are included in the short-term variable remuneration scheme that generally
applies to Group employees. We also approved the inclusion of ESG criteria in long-term
incentives for senior executives.
→ ESG course available to all employees and three-level ESG training model adapted to our
employees’ needs.
→ New ESG certification by Aquanima (our global procurement entity).
→ ESG disclosure enhanced. In addition to the Global reporting Initiative (GRI) and
Sustainability Accounting Standards Board (SASB), this report includes Stakeholder
Capitalism Metrics (IBC-WEF). Improved position in key ESG ratings such as DJSI, MSCI, CDP,
Shareaction, Sustainalytics, FTSE4Good and BGEI.
A.
This policy will be approved in 2022.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Awards and recognition
One of the world’s best places to work
For the third consecutive year, Great Place to Work named Banco
Santander one of world's 25 best workplaces, out of more than
10,000 organizations worldwide that foster exceptional employee
experiences centred on trust and fair treatment. We were the only
bank in the ranking.
Top Employers 2021
Santander received its fifth consecutive Top Employers Europe
certification in recognition of its excellent working conditions and
contribution to employee development. We received the certificate in
three of our core markets in Europe (Spain, Poland and the UK) as
well as for our Santander Consumer Finance units in Germany, the
Netherlands, Austria, Poland, France and Belgium.
Best Bank for Financial Inclusion and Best Bank for
Sustainable Finance in Latin America
Euromoney named Banco Santander “Best Bank for Financial
Inclusion” and “Best Bank for Sustainable Finance in Latin America”. It
highlighted our efforts to make financial services more accessible
and financially empower people and businesses through
programmes in Latin America, Europe and the US. It also commended
our work to promote digital channels (especially among the elderly)
during the pandemic and aid the transition to a low-carbon economy.
ESG indices and analysts
→ Featured in the Dow Jones Sustainability Index for the 21st year
in a row, with top marks in financial inclusion, environmental
reporting, operational eco-efficiency and social reporting.
Santander was also included in the 2022 S&P Sustainability
Yearbook, receiving a silver class award for its performance
during 2021.
→ MSCI increased our rating from BBB (2020) to AA (2021),
recognizing our efforts to capitalize on financial access
opportunities; our cyber security and privacy plans; and our
board’s commitment to consider climate matters in our long-
term strategy.
→ CDP rating category up from B to A-, putting us among leading
financial institutions.
→ Sustainalytics also recognized our progress, raising our score
from 27.1 to 23.9
→ We are members of the FTSE4Good Index, and improved from
4.3 in 2020 to 4.5 out of 5 in 2021.
→ We increased our score in the Bloomberg Gender-Equality
Index (BGEI) from 85 to 90 and were the highest-ranked bank
and second highest company.
One of the 100 most valuable brands in the world
Our work to help communities prosper in a way that is Simple,
Personal and Fair earned us recognition as the biggest bank in the
eurozone and sixth globally in Interbrand’s 2021 Best Global Brands
ranking.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Local Awards
→ Eikon Award in the Sustainability/
Education category for the 2021
Financial Education Campaign
→ Top 10 best Company to work for and
Top 10 Best Company to work for the
LGBTQI+collective by GPTW
→ Best Sustainable Finance Bank for SME
in Latin America by Euromoney
Magazine
→ Top 3 best company to work for and Top
4 best company for women to work for
by GPTW
→ The American Chamber of Commerce
→ Best Financial Inclusion Bank and Best
gave us the ECO Award for Brazil's most
innovative company in sustainability.
Socially Responsible Bank by
International Finance
→ Melhores do ESG – Exame: Exame
magazine recognised Santander as the
best ESG Financial Institution
→ Outstanding Leader in Sustainable
Finance in Latin America by Global
Finance Magazine
→ In a special award for the 10th
anniversary of the Época Negócios 360°
yearbook, Santander Brasil was named
company of the decade in sustainability
→ Índice de Sustentabilidade Empresarial:
for the 12th consecutive year we are in
the Índice de Sustentabilidade
Empresarial (ISE) portfolio. Promoted by
B3 - Brasil, Bolsa, Balcão
→ Social Mobility Employer Index 2021:
Top 20 in the index for UK employers
who have taken the most action to
improve social mobility in the workplace
(first bank)
→ Our partnership with the Alzheimer's
Society received 6 awards for our
strategic work, support to the charity
and for making Santander be a better
bank for people affected by Alzheimer's
and dementia
→ Tuiio recognized as an outstanding
practice to end poverty in Mexico by
Global Compact
→ Santander the only bank in Mexico
included in the S&P Global
Sustainability Yearbook 2021. Member
of the Dow Jones Sustainability Index
MILA Pacific Alliance Index (DJSI MILA
2021) for the second year in a row
→ Expansión named Santander México a
“Top company for women” for its work to
support talented women
→ Top Workplaces USA 2021 & 2022:
Santander Consumer
→ Top 4 best Company for women to work
for by GPTW
→ Outstanding leadership in sustainable
finance in Latin America by Global
Finance
→ ALAS 2021: excellence in information
disclosure, Líderes Sustentables 2021.
→ Members of DJSI Chile, DJSI MILA and
DJSI Emerging Markets.
→ Golden CSR Leaf of Polityka for the fifth
time for consistent implementation and
development of CSR.
→ Santander Bank Polska joined the
Diversity IN Check, the list of the most
inclusive and diversity-friendly companies
→ Top Employers Polska 2021 award
→ Equal Company Certificate 2021, awarded
by Forbes Women magazine
→ Top Employers: Ranked first in Spain in
2021
→ Santander awarded most innovative
entity in digital banking by ‘The Banker’
for its financial inclusion initiatives. The
magazine highlights the agreement
between Santander and Spain’s public
postal service to provide rural areas
with basic financial services
→ Santander received an "A for Excellence"
rating in its Empresa Familiarmente
Responsable ("Family-responsible
company" or EFR) from Fundación
MásFamilia
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Our approach
By delivering on our purpose to help people and businesses prosper,
we grow as a business while helping address society’s challenges.
Our strategy is....
E
S
G
Deliver our net zero carbon ambition by 2050 by setting decarbonization targets,
helping our customers transition and remaining carbon neutral in our own
operations.
Support inclusive growth through financial empowerment; support education,
enterprise and employment; and building a diverse, talented workforce.
Embed behaviours, processes, policies and governance to ensure we are acting
responsibly, listening to our stakeholders, and treating them in a Simple, Personal
and Fair way – all based on solid governance and prudent risk management.
By being responsible
we build loyalty
I'm loyal to
Santander because…
People
Customers
Communities
Shareholders
… Santander does things the right way
In our day-to-day business, we make
sure we don't just meet our legal and
regulatory requirements, but also exceed
people's expectations by being Simple,
Personal and Fair in all we do.
… Santander promotes inclusive and
sustainable growth
We focus on areas where our activity can
have a major impact on helping people
and businesses prosper.
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
What our stakeholders tell us
Listening to our stakeholders and creating value
GRI 102-15, 102-21, 102-23, 102-24, 102-25, 102-26, 102-36, 102-37, 102-40, 102-41, 102-42, 102-43 and 102-44
We run surveys and ‘speak-up’ channels for employees, as well as
interactive platforms for customers. We assess externalities to
identify risks and opportunities and appraise our impact on the
community. We respond to demands from top analysts, investors
and indices interested in ESG matters; keep pace with new regulation
and best practices worldwide; and take part in consultations with
authorities, trade bodies and other organizations that influence
policymaking on sustainable development. We’re also involved in
major local and international initiatives to support inclusive and
sustainable growth (see ‘Joint initiatives to promote our agenda’ in
‘Governance and priorities’).
For more information, see 'International and local
initiatives that Santander supports' in the
'Governance’ section of this chapter.
For more information, see 'Economic, Regulatory
and Competitive Context' in the 'Economic and
Financial Review'.
Key dialogue channels for stakeholders
GRI 102-44
People
86%
employees participated
in the 2021 Global
Engagement Survey
4,338
complaints received
through ethical channels
Customers
+4 millions
of surveys to measure
customer satisfaction
Shareholders
15,260
shareholders surveyed
about Santander being
Simple, Personal and Fair
+45,000
banked individuals
surveyed about
Santander being Simple,
Personal and Fair
18,695
shareholders and
investors participated in
studies and quality
surveys
478,586
complaints received
139,301
queries handled by email,
phone, WhatsApp and
online
116
meetings with minority
shareholders and 942
contacts with institutional
investors
Communities
997
universities and academic
institutions with
agreements
A
+1,400
partnerships with social
institutions and entities
+300
social media profiles
+25 million followers
A. This figure only includes universities that have an agreement with Santander Universities. Adding Universia´s data, the total figure is 1,415 universities and academic
institutions in 28 countries
Annual report 2021
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Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Materiality assessment: Identifying the issues
that matter
GRI 102-47, 103-1
Our in-depth materiality review included direct stakeholder input
(internal and external interviews and surveys on the bank’s ESG
priorities), in line with best practice. Following the proposed
Corporate Sustainability Reporting Directive (CSRD) and leading ESG
reporting standards, we applied the principle of double materiality:
(1) financial materiality (how ESG issues impact financial
performance); and (2) environmental and social materiality (how ESG
action impacts society and the environment).
Basics for 2021 materiality assessment
→ Phase 1
Based on the external landscape, key trends and our own operations,
we drew up a preliminary list of 15 ESG topics and placed them into
three categories: E, S and G.
→ Phase 2
We ran workshops, surveys and one-to-one interviews to set
priorities; and gathered feedback from customers, employees, senior
managers, investors and NGOs.
→ Phase 3
We gave topics a score and weighted them to produce a ranking in
order of importance to Banco Santander.
Analysis inputs
Global and
sector-based
→ Regulators' and international institutions' requirements (such as
EU taxonomy)
→ Sustainability frameworks and standards
(such as UN Sustainable Development Goals, UN Principles for
Responsible Banking,Task force on Climate-related Financial Disclosures,
Global Reporting Initiative, Sustainability Accounting Standards Board,…)
→ ESG analysts' and indexes' expectations
→ Banking sector reporting trends (peer banks)
Stakeholder
opinion
Customers
9,000 surveys in 9 countries
Employees
500 surveys in each country and HQ
(more than 1,800 responses)
Senior management
Specific session to discuss materiality in our annual
senior management leadership meeting. One-to-one
interviews with heads of corporate areas and
representatives of businesses and regions.
Investors
Interviews with major investors
NGOs
One-to-one interviews with international NGOs
Annual report 2021
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Group material topics matrix
A
Conclusions and changes since 2020
Environmental
Social
Governance
‘Green finance’ and ‘ESG in risk
management’ are now crucial topics.
‘Portfolio alignment with net zero by
mid-century’ is a major topic. In 2020,
‘Climate strategy’ had medium
importance and ‘ESG products &
services’ low/medium.
‘Customer experience’ remains highly
material. ‘Customer financial
wellbeing’ and ‘Financial inclusion
and empowerment’ are now among
the crucial topics. In 2020, ‘Customer
satisfaction’ was also one of three
high priority topics.
‘Culture, conduct & ethical
behaviour’ (crucial topic) and ‘Privacy,
data protection and cyber
security’ (major topic) increased in
importance. In 2020: ‘Compliance
and risk management’ had medium
importance and ‘Cybersecurity and
data protection’ had low importance.
A. Issues such as food waste, light and noise pollution are not material to the Group.
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Our ESG priorities
Our materiality assessment identified 15 ESG topics we should focus on.
Crucial topics
—
Customer experience
and satisfaction
Supporting customers
and local economies
with products and
services that meet their
needs. Giving them
services and products
that are Simple, Personal
and Fair. Innovating and
using digital
technologies to
maximize access to
products and services.
—
Financial inclusion
and empowerment
Designing, developing
and delivering products
and services that ensure
access to the financial
system and meet credit
needs. Building
resilience through
financial education.
—
Green Finance
Supporting our
customers in their
transition to a low-
carbon economy by
embedding
environmental factors
in products and risk
analyses, and by
supporting the growth
of sustainable financial
product markets.
—
ESG in risk
management,
embedding climate
Ensuring our risk
management
framework incorporates
customers’ and
operations’
environmental (e.g.
climate) and social (e.g.
human rights) risks, and
outlining them in
policies and procedures.
—
Culture, conduct &
ethical behaviour
Ensuring exemplary
conduct by everybody:
being Simple, Personal &
Fair in all we do; and
embedding Risk Pro,
ethical channels and
best-in-class policies and
controls on employees’
internal conduct,
transparency towards
customers and ethical
behaviour.
Major topics
—
—
Portfolio
alignment to net
zero achieved by
Privacy, data
protection and
cybersecurity
Managing the risks mid century
from collecting,
Analysing our
retaining and using
portfolios’ carbon
personal
footprint and
information.
aligning them with
the Paris
Agreement by
taking actions to
steer them to net
zero, applying
climate
methodologies, and
setting targets.
—
Equality,
diversity,
inclusion &
wellbeing
Ensuring equality,
fairness, health,
emotional and
financial wellbeing
and respect
among employees,
with zero
tolerance for
harassment and
discrimination.
—
Operational and
business
resilience
Adapting to a
changing
environment
(including adverse
events),
maintaining the
resilience of the
business and
building on
strategic priorities
(One Santander,
Digital Consumer
Bank and PagoNxt).
—
Corporate
Governance
Guarantee effective
corporate governance
to continue creating
value for
shareholders,
allocating capital
efficiently and
ensuring profitable
growth in a
responsible way that
meets our
stakeholders'
expectations.
Introduce ESG
standards in variable
pay schemes.
—
Talent
management
and
development
Attracting, engaging
and retaining a
productive and
talented workforce
with benefits and
development
opportunities.
Ensuring
meritocracy.
Relevant topics
—
Operational footprint
Reducing direct operational
and indirect value chain
impacts through energy and
water management; the use
and recycling of materials;
and green building design
(incl. initiatives for employees
to assess and reduce their
footprint).
—
Responsible
procurement
Assessing ESG in our supply
chain to manage associated
reputational and service-level
risks.
—
Education and support to
communities
Leveraging Santander Universities to
provide education, employability and
entrepreneurship opportunities and
to connect startups and SMEs with
talent, clients, training and other
resources. Supporting community
wellbeing and improving the lives of
people at risk of exclusion.
—
Biodiversity
Managing the impact of our
financial products and services
on ecosystems and biodiversity
through whom we lend to,
including (but not limited to)
natural resource extraction,
cultivation and project
development.
Annual report 2021
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Our 2021 materiality assessment led to an
ambitious action plan for 2022-2025.
Our Goals
Priority Action Plans
E
S
G
Deliver our net zero carbon ambition by 2050
by setting decarbonization targets, helping our
customers transition and remaining carbon
neutral in our own operations
→ Execute our climate strategy towards net zero by 2050
→ Measure and develop our green transition and sustainable
finance value propositions across units
→ Embed environmental, social and climate criteria into risk
management
Support inclusive growth through financial
empowerment; support for education,
enterprise and employment; and building a
diverse, talented workforce.
→ Continue to promote a diverse & inclusive workplace that
fosters employee wellbeing
→ Continue improving customer experience and satisfaction
→ Enhance our financial empowerment and inclusion
proposition
Embed behaviours, processes, policies and
governance to ensure we are acting
responsibly, listening to our stakeholders, and
treating all our stakeholders in a Simple,
Personal and Fair way – all based on solid
governance and prudent risk management
→ Foster culture, conduct and ethical behaviour. The Santander
Way behaviours refresh
→ Engage with external stakeholders (ESG analysts, indexes,
NGOs,...)
RB Public commitments ahead
1. Electricity from renewable sources (%)
2. Thermal coal-related power & mining phase out
2021 figure
75%
€7bn
Target
100%
0 exposure
A
3. Reduce emission intensity in power generation portfolio
0.23 tCO2e/MWh
0.18 tCO2e/MWh
0.11 tCO2e/MWh
4. Green Finance raised and facilitated (cumulative)B
€65.7 bn
5. Sustainable investment (€bn AUM under ESG funds)
6. People financially empowered (millions)(cumulative)
B
7. Women in senior positions
8. Equal Pay Gap
Maintain commitments achieved:
€27 bn
7,5 M
26.3%
1%
€120 bn
€220 bn
€100 bn
10 M
30%
0%
Period
by 2025
by 2030
by 2025
by 2030
2019-2025
2019-2030
by 2025
2019-2025
by 2025
by 2025
→ Be carbon neutral in our operations
→ Eliminate use of single-use plastics in
our buildings and offices
→ Have a board of directors with 40-60%
women members
A. The 2021 figure of 0.23 tCO2e/MWh corresponds to the latest available portfolio data (2019).
B. The 2021 figure is a cumulative figure from 2019.
Annual report 2021
28
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Governance
GRI 102-14, 102-16, 102-31, 102-34, 103-2, 103-3, FS1, FS2 and FS3
Our principles, frameworks and policies ensure we behave
responsibly in all we do. We strengthened our responsible banking
governance to continue doing things the right way and promote
inclusive and sustainable growth.
Responsible banking corporate framework
Created in 2021, the framework's common principles, roles and
responsibilities, key processes and governance to drive us towards a
more sustainable business model that delivers on our purpose to
help people and businesses prosper. It also reinforces our
commitment to Agenda 2030: the UN Sustainable Development
Goals (SDGs), the Paris Agreement and the Principles for Responsible
Banking. The corporate framework is approved by the Board.
Policies and guidance
The Group's policies and guidance set the standard for all units. We
systematically review the scope of policies relating to the integration
of ESG criteria to ensure compliance with international best practice.
In 2021, the Responsible Banking function was made part of the
policy approval process to embed sustainability criteria in all policies.
Core policies that integrate ESG criteria into our business model,
to make us a more responsible bank
A
General code of conduct
Corporate culture policy
B
General sustainability policy
Brings together the ethical principles
and rules of conduct our employees
must follow and is central to our
compliance function.
Establishes the guidelines and
standards to ensure a consistent
group culture.
Outlines our sustainability principles
and voluntary commitments to
generate long-term value for our
stakeholders.
Human rights policy
Sets out how we protect human
rights, in line with the UN Guiding
Principles on Business and Human
Rights.
Environmental, social & climate
change risk management policy
Sensitive sectors policy
Details how we identify and manage
risks, in oil and gas, energy, mining
and metals, and in soft commodities.
Provides guidelines for assessing and
determining our involvement in
industries that pose a reputational
risk.
Other policies that support our responsible banking strategy
Consumer
protection
policy
C
Code of conduct
in security
markets
Cybersecurity
policy
Third-party
certification
policy
D
E
Tax policy
Conflicts of
interest policy
Financing of
political parties
policy
Policy on
contributions
for social
F
purpose
Global mobility
policy
A. These policies are approved by the board of directors and are available on our corporate website (except the Sensitive sectors policy).
B. Includes Banco Santander's Diversity & Inclusion Principles and the Corporate Volunteering Standard.
C. Includes financial consumer protection principles.
D. Includes principles on the responsible behaviour of suppliers. These principles are publicly available on our corporate website.
E. Our tax strategy and an extract of our Tax policy are available on our corporate website.
F. Updated and available on our corporate website.
Annual report 2021
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Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Decision-making and oversight bodies
Implementation bodies
Board of directors
Approves and supervises the
implementation of general policies and
strategies relating to our corporate
culture, values, responsible business
practices and sustainability. It also
makes sure all the Group‘s employees
are aware of codes of conduct and act
ethically, and ensures compliance with
the laws, customs and good practices of
the industries and countries where we
operate.
Responsible banking, sustainability &
culture committee (“RBSCC”)
(meets at least four times a year)
Supports the board and oversees the
Group's responsible banking agenda and
strategy.
For more details, see 4.9 ´Responsible banking,
sustainability and culture committee activities in 2021´
in Corporate governance chapter
Responsible banking forum
(meets at least six times a year)
Executes the responsible banking
agenda across the Group, drives
decision-making on responsible banking
issues and ensures the execution of any
mandates from the RBSCC, other board
committees and the board of directors. It
also ensures alignment on key issues,
including the review and escalation of
reports to the RBSCC.
Core topics addressed in 2021
Management meeting
Chaired by the CEO, discusses responsible banking agenda
progress, including climate change, with a special focus on TCFD
and ESG business opportunities.
In 2021, the meeting was informed four times on the progress of
the responsible banking agenda.
Corporate responsible banking unit
Coordinates and drives the responsible banking agenda.
A senior adviser on responsible business practices supports this
unit and reports directly to the executive chairman.
Responsible banking network
Our subsidiaries' sustainability and culture units execute
responsible banking agendas according to our corporate strategy
and policies. They are led by a senior manager, who is part of the
group-wide Responsible banking network, which meets every two
months.
We issue guiding principles for subsidiaries and global business
units to embed our responsible banking agenda across the Group.
The corporate responsible banking unit and local units hold regular
bilateral meetings.
Working groups on financial education, training, sustainable
finance, microfinance and climate change help agree actions and
align efforts.
In 2021, the network held six virtual meetings to discuss progress
on the Group´s agenda. 10 bilateral meetings focused on each
units’ ESG agenda. The network also ran the third Responsible
Banking workshop, which representatives from all businesses and
geographies attended over three days (one day for each initial: E, S
and G).
In 2021, we addressed five ESG core topics: Climate change and green finance; diversity and inclusion; our culture, “The
Santander Way”; Santander’s materiality assessment; and policies related to responsible banking.
Annual report 2021
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Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Helping society tackle global challenges: 2030 agenda
Our activity and investments contribute to several United Nations'
Sustainable Development Goals and support the Paris Agreement.
We analysed our agenda’s contribution to the SDGs and determined
the most relevant goals to Banco Santander’s activity, commitments
and strategy.
For more details, see the ´Banco Santander and the SDGs´ brochure
on our corporate website.
The SDGs on which Banco Santander has the greatest impact
Our skilled and committed
team enables us to respond
to customers' needs; help
entrepreneurs create
businesses and jobs; and
strengthen local
economies.
We tackle climate change
by reducing our own carbon
footprint and
environmental impact,
while helping our
customers transition to a
sustainable economy.
We promote transparency, the
fight against corruption and robust
institutions for sustainable
development.
We have policies and codes of
conduct that regulate our activity
and behaviour and steer our
commitments towards a more
responsible banking system.
Other SDGs on which Banco Santander also has an impact
We want to reduce poverty and boost the welfare and
economy of the countries we operate in. Our financial
inclusion products and services and community
investment programmes empower millions each year.
Our pioneering Santander Universities programme
helps universities and students prosper, promoting
education, entrepreneurship and employment. Also,
Santander Scholarships is one of the world's largest
private education grant funds.
We promote an inclusive and diverse workplace,
ensuring equal opportunity as a strategic priority. We
also run initiatives to drive diversity.
We're the global leader in renewable energy financing,
and finance energy efficiency projects; low-emission,
electric and hybrid vehicles; and other cleaner
transport solutions.
Our products and services give society's most
vulnerable better access to financial services and we
teach them the concepts and skills they need to
manage their finances effectively.
We finance sustainable infrastructure and promote
access to affordable housing to guarantee basic
services and inclusive economic growth.
We are firmly committed to reducing our
environmental footprint, implementing energy
efficiency plans and promoting the use of renewable
energies, as well as offsetting the consumption of our
internal operations.
We participate in prominent local and international
initiatives and working groups.
For more details on how Banco Santander
supported the UN Sustainable Development Goals
in 2021, see the `SDGs contribution content index`at
the end of this chapter
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Partnerships to promote our agenda
GRI 102-12 and FS5
We drive our responsible banking agenda through a number of local
and international initiatives and working groups, including:
UNEP Finance initiative
We are a founding signatory to the United Nations
Principles for Responsible Banking. In 2021, we
continued participating in Phase III of the UNEP FI
project on the TCFD's recommendations for banks.
World Business Council for Sustainable
Development (WBCSD)
Our Group Executive Chair, Ana Botín, completed her
tenure on the WBCSD's executive committee. In 2021,
we participated in the Banking for Impact on Climate in
Agriculture (B4ICA).
United Nations Global Compact
Banking Environment Initiative (BEI)
We've been part of the Global Compact network since
2002 and member signatory of the United Nations
Global Compact's gender equality programme since
2020.
We continued to participate in the Bank 2030 initiative,
aimed at building a roadmap for the banking industry
to help society in the transition towards a low-carbon
economy.
Glasgow Financial Alliance for Net Zero,
Net Zero Banking Alliance and Net Zero
Asset Management
In support of our Net Zero ambition, we joined the
Glasgow Financial Alliance for Net Zero, Net Zero Asset
Management and were co-founders to the Net Zero
Banking Alliance. Within GFANZ, we co-led the Net
Zero Public Policy and their call to action launched in
October.
CEO Partnership for Economic Inclusion
We're part of a private-sector alliance for financial
inclusion, led by Queen Máxima of the Netherlands,
Special Representative of the United Nations, to
promote inclusive financing for development.
Other international and local initiatives that Santander supports
→ UN Women's Empowerment Principles
→ Consultative Group of the Taskforce on Scaling Voluntary
→ The Valuable 500
→ UN Principles for Responsible Investment
→ CDP (Carbon Disclosure Project)
→ UN Global Investors for Sustainable Development (GISD)
Alliance
→ Green Recovery Alliance of the European Union
→ Equator Principles
Carbon Markets
→ Partnership for Carbon Accounting Financials (PCAF)
→ International Wildlife Trade Financial Taskforce
→ Round Table on Responsible Soy
→ Working group on Sustainable Livestock
→ Climate Leadership Council
→ The Wolfsberg Group
Annual report 2021
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Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Doing things
the right way
To meet the new business environment, we’re
focusing on...
Our strong and inclusive
culture: The Santander Way
A strong corporate culture is critical to succeeding in
today’s competitive, fast-moving environment.
Conduct and
ethical behaviour
A talented
and engaged team
Acting responsibly towards
customers
Responsible
procurement
Shareholder
value
We conduct our business in compliance with the highest
standards of conduct and ethical behaviour.
The more prepared and motivated our workforce is, the
stronger its commitment to helping people and
businesses prosper will be. Our team reflects the
diversity of the communities where we operate.
We develop our products and services responsibly, and
aspire to deliver excellent customer service.
Our procurement processes apply ethical, social and
environmental criteria to ensure we operate in a
sustainable way.
We have clear and robust governance that manages risks
and opportunities prudently and helps us devise long-
term strategies to safeguard the interests of our
shareholders and broader society.
Annual report 2021
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Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
A strong and inclusive culture:
The Santander Way
Corporate culture: Values and behaviours
GRI 102-16
The Santander Way is our purpose, our aim and how we do business.
It's the bedrock for building a more responsible bank. By fulfilling our
purpose of helping people and businesses prosper, our business
grows and creates value for everyone.
To live The Santander Way and be Simple, Personal and Fair in
A
embedded in
everything we do, we have eight corporate behaviours
every stage of the employee lifecycle, from recruitment and training
to performance reviews and compensation. In addition, our principles
on diversity and inclusion strengthen our relations with our broad
base of stakeholders, making sure we are fully inclusive.
The Santander Way
Our
purpose
To help people and
businesses prosper.
Our values
Simple | Personal | Fair
Corporate behaviours
A
Our
aim
Our
"how"
To be the best open
financial services
platform by acting
responsibly and earning
the lasting loyalty of our
people, customers,
shareholders and
communities.
Show
respect
Truly
listen
Talk
straight
Keep
promises
Actively
collaborate passion
Bring
Support
people
Embrace
change
Leadership commitments
Being open and inclusive
Inspiring and executing
transformation
Encouraging the team to prosper
Leading by example
A. In 2021, we updated our corporate behaviours, which we'll implement across the Group during 2022.
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Cultural transformation: an ongoing journey
GRI FS5
Since 2015, we've strived to ensure everything we do for our
customers, employees, shareholders and communities is Simple,
Personal and Fair. The standards we uphold across Santander are a
clear indication of our ambition.
Guided by clear governance, our talented and engaged workforce
enabled us to make great strides in strengthening our culture and
values.
In 2021, employee commitment was 4 pp above the industry
average at 80% (-2 pp from 2019 but up +10 pp from 2014). 78% of
employees recommended working at Santander (-3 pp from 2019
and +7 pp from 2014). 88% feel their work has clear purpose (+1 pp
A
from 2019),10 pp above the industry average.
A.Figures from the 2021 Global Engagement Survey. In 2020, the unusual
circumstances caused by covid-19 led us to run a pulse survey with a sample of
employees
Culture plan 2021
B
Objectives
Achievements
Diversity and
inclusion
To foster a workplace where our
people can be themselves and
reflect the diverse society we
live in
• We instituted global minimum parental leave of 14 weeks for one parent and
4 weeks for the other.
• 26.3% of senior positions are held by women, up 2.6pp on 2020.
Furthermore, 40% of members of the board of directors are women.
• We revised cultural diversity standards to get detailed insights into
demographics and personal aspects.
• We carried out a gender pay gap analysis to draw up action plans in each
subsidiary.
• We held global events for International Women’s Day, International LGBT+
Pride Day and the International Day of Persons with Disabilities, which
leaders and employees from many regions participated in.
• Santander featured as the world’s highest-scoring bank in the 2022
Bloomberg Gender-Equality Index and was ranked among the 25 best
companies to work for by Great Place to Work.
Speaking up
To make active listening our
most effective tool
• We implemented the policy on Canal Abierto, our ethical channel, in the
Group's core geographies.
Acting
responsibly
towards our
customers
Responsible
procurement
To provide our customers with
the best service and leading the
banking industry in customer
satisfaction.
Enhancing our responsible
business practices and our
service model for vulnerable
customers
To strengthen our commitment
by continuing to review our
suppliers based on ESG
standards
• We strengthened our “customer-obsession” culture and reviewed our pricing
techniques to check if they were cost-effective, resilient to risk and useful.
• We continued to implement our model for managing vulnerable customers
across the Group. We created working groups to share best practices.
• We instituted special indicators for the entire Group to monitor conduct risks
with customers as part of our Excellence plan for recoveries.
• We enhanced our process for validating ESG products.
• We conducted an ESG review of the top 200 high-risk suppliers in our
geographies and developed special plans to work with each one and aid its
ESG transition.
• We approved the plan to broaden our review pool to 1,000 suppliers.
• We began to adopt ESG standards in sourcing products and services.
B. For more details on diversity and inclusion and speaking up, see section 'A talented and engaged team'. Further information on the Simple, Personal and Fair approach
towards customers and suppliers can be found under the 'Acting responsibly towards customers' and 'Responsible procurement' sections respectively.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Risk Pro: our risk culture
SASB FN-CF-230a.2, FN-CF-230a.3
The Group's risk culture is called Risk Pro (known as “I AM RISK” in the
UK and the US). It’s a core element of both our corporate culture, The
Santander Way, and our purpose to help people and businesses
prosper. Risk Pro makes risk management “Everyone’s business” (the
initiative’s motto). It's the responsibility not just of the Risk and
Compliance and conduct functions but of all employees as well. The
risks Santander employees must manage everyday can relate to
finance, operations, conduct, compliance, cyber security,
reputational, fraud, financial crime and climate. It's everyone’s
responsibility to stay alert and know how to recognize, control and
report them. Our performance review system, MyContribution,
assigns Santander employees a common risk objective, which is 10%
of their review.
Promoting and enhancing our risk culture
Our risk culture is embedded in all stages of the employee cycle
(hiring and onboarding, career development, daily tasks, reward and
recognition). Constant communication, leading by example, support
from senior management and speaking up are key to assimilating
Risk Pro within the Group.
In 2021, all subsidiaries made progress with implementing the
Target Operating Model for risk culture. Created in 2020, it draws on
best practices to strengthen our risk culture. In November, we
celebrated Risk Pro Month at the Corporate Centre; we also had our
first global Risk Pro Week with the participation of the top
management and our main geographies and global businesses to
raise employees’ awareness of the importance of risk management
in their day-to-day.
We also ran training activities to develop the required skills of our
employees on strong risk culture behaviours. The Group launched
Dojo, a new learning platform that will significantly boost
employees’ understanding about risks.
To better assess the strength of our risk culture across the Group, we
also revised questions on the risk profile assessment (RPA) and the
Global Engagement survey as well as the indicators on the Risk Pro
dashboard to enhance them.
Aside from our globally distributed e-magazine, Risk and C&C e-zine,
we set up a Risk Pro community on Santander Now and opened many
risk-themed channels (such as Supplier risk management and Credit
Planet) to boost awareness of the importance of risk management.
For more details on environmental and social risks,
see section 10. Climate and environmental risk in
the 'Risk Management and compliance' chapter.
For more details on our prevention of corruption,
bribery, money laundering and terrorism financing,
see section 7.2. 'Compliance and conduct risk
management' in the 'Risk management and
compliance' chapter.
For more details on MyContribution model see
'Performance review and remuneration' in 'A
talented and motivated team' section.
Active listening
GRI 102-17
Speaking up and truly listening are integral to our corporate culture.
Our ethical channel, Canal Abierto, is the main tool in our active
listening strategy for all our stakeholders. It is available in our core
geographies and enables us to learn about potential financial and
accounting mistakes, or violations of our corporate behaviours,
internal regulation or the law, which our employees, customers,
shareholders and member of the community can report to us
anonymously and confidentially. It’s accessible online or by phone, in
several languages and available 24 hours a day, seven days a week.
In addition to Canal Abierto, the Group practices active listening
through its customer assistance and complaints channels, employee
and supplier surveys and other tools. Active listening is effective in
our cultural transformation, where ethics, honesty and responsibility
should always characterize everything we do.
More details on our employee active listening in
'A talented and motivated team' section.
More details on our customer active listening in
'Acting responsible towards customers' section.
More details on our supplier active listening in
'Responsible Procurement' section.
Annual report 2021
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Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Conduct and ethical
behaviour
General code of conduct
The General code of conduct (GCC) sets out the ethical principles and
values all Santander employees must demonstrate. They include
equal opportunity, diversity and non-discrimination, respect for
people and collective rights, work-life balance, and social and
environmental responsibility. The Compliance and conduct function
is in charge of administering the code and promoting a culture of
ethics and compliance within the organization. The Internal audit
function regularly reviews compliance with the GCC's rules and
procedures. Furthermore, it acts independently to verify that the code
and its locally-adapted versions are appropriate and effective.
Training
Every year, all our employees undertake mandatory training on the
GCC.
In 2021, we launched a new course called “Your conduct matters”.
Employees can brush up on the conduct rules they must follow in
their day-to-day and learn why their conduct matters in helping the
Group avoid criminal liability; managing conflicts of interest; and
receiving courtesies from third parties.
We also have “Corporate defense”, a programme to prevent criminal
risks to the Group. Every year, each Compliance unit conducts a risk
assessment on whether the actions employees take on the Group’s
behalf are unethical or infringe internal or external regulation and
become a liability to the Group. It considers inherent risks and the
unit’s control environment with recommendations or action plans for
specific areas for improvement.
We also launched a programme in our core units about competition.
It is based on international standards and best practices
recommended by competition authorities.
Key initiatives
To strengthen and promote our ethics and compliance culture, we
ran these initiatives:
• #yourconductmatters: Employee awareness campaigns via email,
Intranet and other means to boost understanding of the General
code of conduct and its implementing regulation.
• Answering employees’ queries on ethics and rules in the GCC.
• Analysing and managing conflicts of interest between employees
or directors and the Group, and giving recommendations to avoid
them.
• Handling complaints received through our ethical channel, Canal
Abierto, enhancing processes based on lessons learned.
• Setting common principles and guidelines on receiving courtesies
or invitations from third parties, including the obligation to register
them. No courtesy should be worth more than 150 euros.
Procurement management policy
Santander's Procurement management policy sets out the principles
and lines of action employees who procure goods and services and
negotiate with suppliers must follow. It requires, at all times,
transparent, objective and balanced decision-making, avoidance of
conflicts of interest; and protection of confidential information.
For more details see section
7.2. 'Compliance and conduct
risk management' in the `Risk
management and compliance'
chapter
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Code of Conduct in Securities Markets
Santander’s Code of Conduct in Securities Markets (CCMV) is our
main policy on market abuse risk management and control. It sets
out the standards board members, directors and employees must
abide by when handling sensitive information or trading in securities
markets on their own behalf. It outlines the necessary controls and
transparency to safeguard the interests of the Group’s investors as
well as market integrity.
The last updated version that the board of directors approved in June
2020 includes the minimum market abuse risk standards our units
trading in securities markets must consider.
Our core units have tools to help detect potential market abuse and
ensure the consistent management of those risks across the Group.
According to CCMV guidelines, those subject to it receive regular
training on market abuse. Furthermore, once a year they verify their
understanding of key obligations and the penalties that Santander
and its employees could face if they fail to fulfil them.
Financial Crime Compliance (FCC)
GRI 103-1, 103-2, 103-3 and 205-2
SASB FN-AC-510a.1, FN-CB-510a.1, FN-IB-510a.1
FCC on vulnerable customers
The new Financial Crime Compliance Customer Lifecycle Due
Diligence Procedure, approved in late 2020 and transposed across
the Group in 2021, includes a section on vulnerable customers. The
procedure reinforces the Group's commitment to "reducing the
stigma associated with the provision of financial services to
vulnerable customers" and provides a compliance framework for
Santander business units to follow in meeting this commitment
while mitigating financial crime risk responsibly.
FCC on anti-bribery and corruption
In 2021, the board of directors approved a more extensive FCC
Corporate Framework. Its scope of financial crime risk includes
bribery and corruption. It sets out essential details of the Group’s
anti-bribery and corruption (“ABC”) programme, including required
processes and controls to manage bribery and corruption risk with
third parties, sponsorships, charitable and political donations, joint
ventures and principal investments, travel, gifts and courtesies,
marketing, employment, and work experience.
FCC on training
As part of the Group’s strategic FCC transformation plan, we
redesigned the required computer-based introductory training
module. It features case studies on compliance challenges regarding
product innovation and international sanctions; lessons on
environmental crime, human trafficking and child exploitation online,
drug trafficking, and terrorist financing.
Also, as part of the more extensive FCC Corporate Framework, we
launched an upskilling initiative for the corporate FCC function, with
several in-depth, face-to-face (virtual) training sessions with external
and internal experts in bribery and corruption, tax evasion, complex
ownership structures and payments infrastructure and other areas.
Our courses have a self-assessment to ensure understanding of key
financial crime risks and policy requirements. In 2021, 164,547
employees were trained.
For more details on financial
crime compliance, see section
7.2. 'Compliance and conduct
risk management' in the 'Risk
management and compliance'
chapter
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Environmental and social risk management
GRI 102-11, 413-2, FS10 and FS11
We embed environmental and social standards in risk management
to support sustainable and inclusive growth, uphold human rights,
preserve the environment and aid the transition to a low-carbon
economy.
Our Environmental, social and climate change risk management
policy sets out the standards for investing in, and providing financial
products and services to, companies and customers who engage in
sensitive activities in the oil and gas, power generation, mining and
metals, and soft commodities industries (especially retail customers
involved in farming and ranching in the Amazon). We review
customers in credit risk, insurance, advisory, equity and asset
management transactions (especially in the corporate and
investment banking (SCIB) segment).
We analyse customers subject to the policy with a detailed
questionnaire that their assigned banker completes before a team of
analysts conducts an overall assessment of their environmental and
social (E&S) risks (which we update every year). We also analyse one-
off, project-related transactions in accordance with the Equator
Principles and such international regulations as the IFC Performance
Standards. Following our environmental and social due diligence of
projects, we set out corrective measures based on their risk rating.
We apply our Environmental, social and climate change risk
management policy in conjunction with our Human rights policy. In
addition, the Social and environmental risks and Compliance
departments carry out extra due diligence on cases with red flags. In
2021, we ran extra due diligence on customers in an industry and
region with human rights concerns (namely forced labour).
The findings, which provide further input for decision-making, are
submitted to risk approval committees.
In 2021, we began to consider social and environmental components
in our credit quality analyses of customers in the SCIB segment.
We created a multidisciplinary team to help enhance the
identification, remediation and mitigation of social and
environmental risks (including human rights), analyse customer
engagement throughout their relationship with us, spot deficiencies
and implement action plans.
Moreover, the Group follows the precautionary principle, analysing
and managing key environmental risks throughout the value chain as
well as considering the direct impact on the assets where we operate
and the indirect impact stemming from our activity.
For more details on environmental and
social risk management and climate risks,
see 'Risk management and compliance'
chapter of this report.
Our environmental, social and climate
change risk management, human rights
and sustainability policies are available on
our corporate website
www.santander.com.
Equator Principles
We have applied the Equator Principles to all project-related
transactions (especially project finance) since 2009 and promote
them through the Equator Principles Association working groups to
make sure every project we’re involved in meets the expected
sustainability standards.
In 2021, we analysed 63 projects that fall within the scope of the
Equator Principles (see table with the categorization of projects
according to the Equator Principles in the 'Key metrics' section of this
chapter).
Tackling environmental crime
The principle of nature conservation extends to all the Group's units.
The Financial crime compliance function understands the importance
of recognizing that “behind every environmental crime there is a
financial network”, not only because of the large sources of revenue
that organized crime draw from these activities, but because crimes
like illegal deforestation have a significant impact on carbon
sequestration. Industries we consider "restricted" due to exposure to
environmental crime risk include (but are not limited to) logging,
pulp and paper mills, palm plantations, commercial fishing, trapping
and transport of live animals and waste management. Given their
"restricted" status, Santander entities that provide services to
companies in those industries must respond to their elevated
financial crime risk by implementing enhanced controls.
Furthermore, our customer screening tools include specific terms on
environmental crimes to help us flag issues and conduct
assessments, and our global and in-person senior management
training also includes environmental crime case studies and trends.
We engage in several public-private partnerships as part of our
commitment to detect, disrupt and deter environmental crime. In
2021, our Financial crime compliance function was the chair of the
United Nations Office on Drugs and Crime's (UNODC) Private Sector
Dialogue on Disruption of Financial Crimes Related to Forestry
Crimes, which brought together financial institutions, authorities,
investigative law enforcement units and supranational governmental
bodies to discuss intelligence sharing, typologies and policy
strategies on disrupting the financial crime networks behind illegal
deforestation. The inter-governmental Financial Action Task Force
(the FATF – the “global money laundering and terrorist financing
watchdog”) also asked the function to represent the private sector in
an awareness-raising, global webcast on environmental crime.
Santander also remains an active member of the United for Wildlife’s
Financial Taskforce against illegal wildlife trade.
Annual report 2021
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farms and ranches to which we had granted loans. This daily
verification will last for the duration of each loan, which will also be
screened to make sure the properties do not overlap with indigenous
peoples' officially-recognized land.
◦ Clients’ practices in Brazil are reviewed regularly. We conduct
annual ESG reviews of more than 2,000 customers, including beef
processors, soy traders and logging companies.
◦ Looking ahead, we expect beef processing clients in the Amazon to
have a fully traceable supply chain that is deforestation-free by 2025,
including indirect suppliers of cattle, as a prerequisite for granting
credit.
Find more information about our "Santander
and the Brazilian Amazon", on our corporate
website www.santander.com
In 2021, we launched an introductory course on sustainability and
ESG for all Santander employees that highlights the importance of
human rights. In addition, we embed ESG criteria in all our processes
and activities and make sure our policies uphold human rights.
Our human rights policy is available on our
corporate website www.santander.com.
Santander and the Brazilian Amazon
GRI 304-3
Santander is committed to protecting the Amazon rainforest, while
helping promote sustainable development and practices.
Deforestation in the Brazilian Amazon has been taking place over
several decades: logging, mining, property speculation, lack of clear
land titles and large infrastructure projects in the region have all
played a role.
Given the growing concerns about climate change and biodiversity
conservation; our global policy on environmental, social and climate
change risk management; and our commitment to the Equator
Principles, we take additional care when lending to Brazilian clients
with operations in the Amazon:
◦ All loan requests by farmers and ranchers to Santander Brasil are
checked for embargoes issued by the government because of illegal
deforestation. In the first quarter of 2022, we will have the capability
to check, on a daily basis, whether there was deforestation on the
Human rights protection
GRI 412-2
Santander commits to respecting and upholding the human rights of
our employees, customers, partners and communities when doing
business. As a financial institution, we operate according to our
internal framework on human rights as well as the international
standards we are subject to.
Our board-approved Human rights policy, based on the highest
international standards (especially the 2011 United Nations Guiding
Principles on Business and Human Rights), sets out our
responsibilities in terms of commitment, due diligence, access to
remedy and claim. Our Human rights policy is consistent with our
General code of conduct, Consumer protection policy, Corporate
culture policy and Environmental, social and climate change risk
management policy. It sets out Santander’s standards and
commitments to uphold and defend these human rights:
• Zero tolerance towards employee, customer and supplier
discrimination, forced labour and child exploitation.
• Freedom of association, collective bargaining, health and
satisfactory employment conditions.
• Support to communities in collaboration with government
agencies, civil associations and other organizations to ensure a
clean, healthy environment and help stamp out corruption.
Annual report 2021
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Principles of action in tax matters
GRI 103-1, 103-2, 103-3, 207-1, 207-2, 207-3
Santander pays its fair share of taxes in the jurisdictions where we
operate. Our board-approved tax strategy (available online) sets out
the principles that apply to the entire organization.
All the group’s entities must comply with its tax risk management
and control system in accordance with the internal control model.
Since 2010, we've abided by the Code of Good Tax Practices in Spain
and by the Code of Practice on Taxation for Banks in the United
Kingdom. Furthermore, we've participated in cooperative compliance
initiatives led by various tax authorities. Since 2015, we've voluntarily
submitted the annual Tax Transparency Report to Spain's Tax
Authority.
Core principles of Santander’s tax strategy
→ Satisfy our tax obligations based on a reasonable interpretation of
tax laws, grounded on their spirit and intention.
→ Respect the rules on transfer pricing and pay taxes in each
jurisdiction in accordance with our functions, assumed risks and
profits.
→ Not give customers tax advice or planning strategies when
marketing and selling financial products and services.
→ Communicate Santander's total tax contribution clearly,
distinguishing between taxes borne by the Group and by third
parties for each jurisdiction.
→ Not create or acquire entities registered in offshore jurisdictions
without board of directors' approval; and adequately monitor and
gradually reduce the group's operations in such territories.A
→ Maintain a good working relationship with tax authorities based on
the principles of transparency and mutual trust to avoid disputes
and minimize litigation.
For more details on Grupo Santander's tax
strategy, visit our corporate website
www.santander.com.
A. By the end of 2021, we had one subsidiary and three branches in offshore
jurisdictions, having liquidated a subsidiary in Isle of Man. See detailed
information on offshore entities in note 3 c) to the consolidated financial
statements.
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Tax contribution
To contribute to the communities in our geographies, we pay all
B
taxes borne directly by the Group (taxes paid by the Group
) and
collect others' taxes originating from our business operations (taxes
C
).
from third parties
In 2021, our tax contribution totalled EUR 16,178 million, including
EUR 7,617 million in taxes directly paid by the Group.
For every 100 euros in total income, EUR 34 are taxed, including:
• EUR 16 in taxes paid directly by Santander.
• EUR 18 in taxes collected from third parties;
The taxes recorded in our annual income statement mainly stem
from corporation tax accrued during the accounting period (EUR
4,894 million in 2021, which represents an effective rate of 33.6%,
or, deducting the extraordinary results, EUR 5,076 million, which
D
). They also include non-
represents an effective rate of 33.3%
recoverable VAT, employers' social security contributions and other
charges, including those that are exclusively levied on banks and
financial transactions (such as in Spain, the UK, Poland, Portugal,
Brazil and Argentina). These taxes are recorded as they are
generated, irrespective of when payment is made.
The taxes Santander pays directly (see table below) are included in
the cash flow statement. The tax rate when comparing the corporate
income tax paid (EUR 4,012 million) with the Group’s pretax profit is
27.6%. Additionally, total taxes paid directly by the Group amounts to
52% of the profit before tax.
The taxes we accrue and the amounts we pay do not usually match
because the laws in some countries dictate a different payment date
than when income was generated or an operation was taxed.
We pay taxes in the jurisdictions where we earn a profit. Thus, the
profits obtained, and the taxes accrued and paid, correspond to the
countries where we operate.
For more details on the country by country report
requested on GRI 207-4, see ‘Key Metrics’ in this
chapter.
B. Including net corporation tax payments, VAT and other non-recoverable indirect
taxes, employer's social security contributions and other withholding taxes, as
well as other charges and tariffs.
C. Including net payments for salary withholdings and employees' social security
contributions, recoverable VAT, tax deducted at source on capital, non-resident
taxes and others.
D. See notes 27 and 51c of the consolidated annual accounts.
Tax disclosure by jurisdiction
EUR million
Jurisdiction
Spain
UK
Portugal
Poland
Germany
Rest of Europe
Total Europe
Brazil
Mexico
Chile
Argentina
Uruguay
Rest of Latin America
Total Latin America
United States
Other
TOTAL
2021
Corporate
income taxE
399
Other
taxes paid
1,308
Total
taxes paid by
F
the Group
1,707
Third-party
taxes
1,341
525
17
206
204
329
1,680
1,385
207
180
115
27
32
1,946
376
10
4,012
458
202
198
53
259
2,478
363
248
66
272
76
6
1,031
94
2
3,605
983
219
404
257
588
4,158
1,748
455
246
387
103
38
2,977
470
12
7,617
475
281
134
175
54
2,460
1,712
699
274
2,626
27
8
5,346
749
6
8,561
Total
contribution
3,048
1,458
500
538
432
642
6,618
3,460
1,154
520
3,013
130
46
8,323
1,219
18
16,178
E. The Group's income taxes for the year 2020 amounted to EUR 2,946 million
F. Total own taxes paid for all these concepts amounted to EUR 7.6bn, broken down as EUR 4,012 mn in Corporate Income Tax, EUR 1,048 mn in non-recoverable VAT and other
sales taxes, EUR 1,380 mn in employer-paid payroll taxes, EUR 142 mn in property taxes, EUR 304 mn in bank levies and EUR 731 mn in other taxes.
Annual report 2021
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Ethical channels
GRI 205-3 and 406-1
Canal Abierto is our global ethical, anonymous and/or confidential,
channel for reporting misconduct. It protects whistleblowers by
expressly prohibiting reprisals or any negative consequence against
them. Every unit in the Group administers its own ethical channel in
its local language according to the common standards of the
corporate Canal Abierto.
Minimum standards include:
•
•
•
•
•
subsidiary CEOs’ endorsement of the ethical channel;
employees’ awareness of the importance of using the channel;
reporting to the Group about management, action and
improvement plans;
guarantee of easy platform access and anonymity (if desired);
use of external platforms to receive reports according to best
practice;
• mechanisms in place to manage conflicts of interest in internal
investigations of reported cases; and
•
internal audits of the channel.
These standards are included in our Canal Abierto policy, which we
approved in 2020 and implemented in our core markets in 2021.
TYPES OF ISSUES RECEIVED
Marketing of products
and services
Privacy/security and
confidentiality of information
Internal fraud
Workplace
harassement
SPF + labour
regulations
Canal Abierto is mainly set up to receive reports from employees;
however, it’s open in some subsidiaries to third parties (e.g. suppliers,
customers, investors and other interest groups), who cannot use it to
submit complaints or queries.
All incidents reported through Canal Abierto are handled
appropriately, even if they are found to be unsubstantiated. Canal
Abierto and its common standards help create an environment where
employees can feel free to speak up and report what is not up to par
so appropriate action can be taken to handle it. Thus, the
implementation of Canal Abierto standards and the many actions
taken correlate with the better Speak Up results from the Global
engagement survey.
In 2021, we received 4,338 reports on the Group’s channels. Of the
3,628 that had been well founded to merit investigation, 1,196 led to
disciplinary action and 312 resulted in dismissal. The average
processing time was 42 days.
By category, the main concerns were related to corporate values
(SPF) and behaviours and to labour regulations, followed by internal
fraud, workplace harassment and marketing of products and
services.
In 2021, 79 equal opportunity and non-discrimination complaints
were received in the Group, 8 of which resulted in disciplinary action,
including 3 dismissals.
We received reports of five alleged cases of corruption in the year.
Following a subsidiary-wide investigation, the allegations were
deemed unfounded, resulting in no disciplinary or other actions.
Issues received
Issues deemed well-founded for investigation
Disciplinary actions
which led to dismissal
2021
2020
4,338
3,628
1,196
312
4,390
3,787
1,083
315
Relations with political parties
Santander is committed to principles of transparency, honesty and
impartiality in its interactions with political parties and other entities
with public and social purposes that are also political in nature.
Since 2016, our board executive committee-approved policy on
financing political parties (available on our corporate website) has
applied to all our subsidiaries worldwide. It prohibits making
monetary or in-kind election donations and contributions. In
commercial relationships, Santander prohibits full or partial debt
forgiveness for political parties and their affiliates. Even though they
can negotiate the terms of debt, the interest rate can never be below
market rate. Furthermore, the policy applies to political parties’
electoral candidates to the extent local laws provide.
Santander did not make any donations or contributions to political
parties in 2021.
Annual report 2021
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14%11%24%20%31%
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A talented and motivated team
We want to be an employer of choice because of our purpose, culture and responsible way
of achieving great results. Our strategy is based on three pillars.
ó
Promoting a diverse and inclusive
workplace that fosters employee
wellbeing
ó
Ensuring we have the right
talent and skills
ó
Providing work-life balance
and job efficiency solutions
Focusing on the employee is pivotal to
our cultural transformation and our
strategy
Attracting and retaining the best
talent and encouraging our people
to learn and develop enables us to
provide a better service
Delivering the best work
experience boosts our efficiency
and productivity
Our goal
Achievement in 2021
Treating our employees responsibly builds stronger teams willing to go
the extra mile for our customers and guarantees the returns our
shareholders expect. That way, we can invest more in our communities
while making our people proud to be part of Santander in a virtuous circle
of loyalty that drives our success.
In 2019, we set out to be among the top 10 companies to work for in
6 of our geographies by 2021.
A
Top 10
company in
6 geographies
B
A. According to a leading external source in each country (Great Place to Work, Top Employer,
Merco, etc).
B. Spain, Argentina, Uruguay, Mexico, Brazil and Chile, using the
latest publications.
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A diverse and inclusive workplace
We focus on creating a diverse and inclusive workplace that
promotes employee experience and well-being. We listen to their
concerns and measure our performance through engagement
surveys and external ratings.
Santander, a great company to work for
Santander ranked for the third consecutive year among the world’s
25 Best Workplaces by Great Place To Work (GPTW). The bank stood
out from over 10,000 companies in 92 countries that foster
exceptional employee experiences centred on trust and fair
treatment. Santander, coming in at number 24, is the only bank in the
ranking.
GPTW recognized Santander as the best company to work for in Chile
and ranked us in the top 3 in Argentina and top 6 in Uruguay.
Santander Argentina was ranked among the top companies for
women, while Santander Brasil was named the best employer for the
LGBT+ community.
Diversity and Inclusion
GRI 103-1, 102-35, 102-38, 102-39, 103-2, 103-3, 405-1, 405-2
SASB FN-AC-330a.1, FN-IB-330a.1
In line with the diversity, equity and inclusion (DE&I) strategy we
defined in 2020, we continue to cultivate a workplace where our
people can be themselves and reflect the diverse society we live in.
Our structure enables us to manage diversity properly, ensure
compliance with policies on this matter and promote these
initiatives:
• Global executive DE&I working group, which brings together
senior positions from all our geographies regularly to review
results, propose initiatives and drive internal change.
• Global DE&I team, which draws up global initiatives, coordinates
the teams involved and acts as liaison for the subsidiaries and
businesses.
• Local DE&I teams in each subsidiary and business, which are
responsible for implementing strategic plans and initiatives locally
as well as sharing best practice.
Through them, we followed these strategic pillars in 2021:
• Involving our leaders: Their commitment to openness, inclusion
and diversity will help strengthen a diverse and inclusive culture. In
2021, our directors received DE&I global mandatory training and
31% connected to webinars that delved deeper into those topics.
• Raising awareness: Promoting diversity through global standards
and actions, such as flexiworking, parental leave, training,
employee networks and celebrating international days.
• Promoting equality: Special focus on increasing the number of
women in senior positions and on development programmes.
Santander also received the Top Employers Europe 2021 certification
for the fifth consecutive year. It acknowledges excellence in the
working conditions the bank provides for its employees and its
contribution to their personal and professional development. Only
four banks in the world, including Santander, have been awarded the
European certificate.
Santander received the certificate in three of its main markets in
Europe (Spain, Poland and the UK) and its Santander Consumer
Finance units in Germany, the Netherlands, Austria, Poland and
Belgium. It also obtained this distinction in Chile.
54%
of employees are women
+0.7 pp vs 2020
26.3%
of senior positions are held by
women A
,+2,6 pp vs 2020
38.6
Average age of the
workforce, -0.6 pp vs 2020
1.9%
B
of employees have a disability
,
+0,01 pp vs. 2020
Data at year end.
A. Senior positions are 1% of total headcount
B. Data from Mexico not included as it is confidential information.
86%
of employees believe Santander treats employees fairly regardless of
their age, family, marital status, gender identity, disability, race, colour,
religion or sexual orientation. -1 pp vs 2019.
C
C. 2021 Global Engagement survey.
Annual report 2021
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Initiatives and achievements in 2021
Gender
→ 26.3% of Group senior positions are held by women, up 2.6 pp from 2020. For this, we focused on our
talented women pipeline with a large group destined for future promotion.
→ We introduced a new Faro executive hiring process to ensure a diverse candidate pool and selection panel.
51% of employees promoted to the Faro category were women.
→ Santander Women Network has around 5,500 members in 10 countries and is rolling out to another seven.
In Spain and at the Corporate Centre, the number of men in the network climbed 140%.
→ Our succession plans now include “bias champions” to make sure unconscious bias does not affect decision-
making.
→ 8,600 people in nine countries connected to our International Women's Day event, which they rated 8.8 out
of 10.
→ We ran women's mentoring and development programmes in almost all our geographies.
→ In our Corporate Centre, we launched Liderazgo Responsable (Responsible leadership) to raise executives’
awareness of the importance of promoting diversity and inclusion in their teams, among other key aspects.
Participants were diverse in terms of gender, length of service, generation and role.
→ In Brazil, “Promoting Women's Leadership” helped sharpen women managers’ and executives’ leadership
skills. The programme focused on boosting their careers at Santander, creating a talent pipeline and paving
the way to gender equality in senior management. Close to 200 women took part in 2021.
→ In Poland, we ran the "IT with a female eye" initiative to encourage women to take on roles in tech.
Cultural
diversity
→ We published several videos featuring senior managers to highlight cultural diversity in decision-making and
business as well as how unconscious bias can impact on our actions and decisions.
→ At the Corporate Centre, we ran BeKind, a programme for 300 employees to help make Santander a place
where everyone can be themselves and make the most of their potential.
→ In the UK, launched the first "Accelerating You: Black Talent Programme" as part of our plan to double the
number of Black managers.
→ In the US, we continued to run “Through our eyes” events for employees to share experiences and ideas on
racial and social injustice.
→ Also in the US, we have several employee networks: Bold for Black employees; AAPPI for Asian-American and
Pacific Islander employees; and Conexión for Hispanic employees. They all held numerous events in 2021.
LGTB+
→ Santander's network for LGTB+ employees, Embrace, has been active in Brazil, Mexico, Argentina, the UK, the
US and at the Corporate Centre for several years. In 2021, we rolled it out to Santander Portugal, Santander
Polska and to Santander España, which took second prize in the TOP LGTB+ Diversity Company category at
the INTRAMA diversity and inclusion awards.
We ran these initiatives in 2021:
→ 2,850 employees joined our global Pride Day event, which representatives of the Embrace network from four
countries helped organize. We also ran local events in our geographies to celebrate Pride Week.
→ At the Corporate Centre, a Guide to leave for pregnancy, birth and child adoption was created for employees.
→ During Pride Week, we held events and issued communications in Argentina, Mexico, Spain, Poland, Portugal,
UK and the US as well as at SCF, Openbank and the Corporate Centre.
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People with
disabilities
→ Global mapping to share subsidiaries' best practices for people with disabilities.
→ Recruitment targets for people with disabilities and internship programmes to spot talented people early.
→ Hiring of people with neurodiversity.
→ Volunteering and mentoring for people with disabilities.
→ Scholarships to increase access to education for students with disabilities.
→ Creation of networks for employees with disabilities.
→ Awareness campaigns.
→ Conformance with WCAG 2.0 Level AA accessibility standards for approving Santander websites and apps.
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Gender equality
Santander fosters equal opportunity between men and women.
While women make up 54% of our workforce, their presence in
senior positions is less. We're taking action to have more women at
all levels of senior positions.
In 2021 we instituted global minimum parental leave of 14 weeks
for one parent and 4 weeks for the other.
We're also taking measures to fight sexual harassment, which our
code of conduct addresses explicitly, and have an equality plan in
Spain with rules to prevent sexual harassment and gender-based
disparities.
Equal pay
GRI 102-35
In 2021, we adapted our global equal pay policies to make them
neutral and eliminate gender-based disparities. We also amended
our policies on remuneration, performance management and
succession planning.
Our strategy attaches importance to equal pay between men and
women, which we measure in terms of pay gap and equal pay for
equal work.
Women members
on our board
Women in senior
A
positions
Equal pay
gap
Our target:
Our target:
40-60% 30%
in 2025
in 2021
Our target:
0%
in 2025
Our progress:
40%
Our progress:
26.3%
Our progress:
1%
A. Senior positions are 1% of total headcount.
Grupo Santander features in the
Bloomberg Gender-Equality Index
and is its highest-scoring bank
Gender pay gap: 32.3%
Equal pay gap: 1%
What it measures:
The equal pay gap gauges the difference "equal pay for equal
work" for women and men in the same job at the same level. Our
comparison does not consider certain factors, such as tenure,
years of service, previous experience and background.
Our progress:
Santander set up fair pay programmes to reduce the equal pay
gap (our target is 0% in 2025). They include systematic reviews
tied to remuneration cycles (merit-based promotions and
bonuses), work reorganization and career development plans to
recruit, engage and retain diverse talent.
Our equal pay gap, which stood at 1.5% in 2020, declined this
year as a result of our strong commitment and wide-ranging
action plans across the organization.
We continued to make progress in standardizing the criteria of
our approach in all geographies and increasing the headcount of
the segment we analysed. We will continue conducting robust
reviews and analyses of pay data to detect, understand and act on
any gaps.
What it measures:
The gender pay gap measures differences in compensation
between women and men in an organization, business, industry
or the broader economy, irrespective of the type of work. At
Santander, fewer women hold senior and business management
roles than men (something we are focused on addressing), while
more women work in retail banking and support roles.
We calculate the gender pay gap as the difference in the median
remuneration paid to male and female employees, expressed as a
percentage of the male remuneration. Our remuneration
schemes factor in base salary and variable pay, but not corporate
benefits/in-kind compensation or local allowances.
Our progress:
Santander addresses the gender pay gap with a methodology
based on best practices and common guidelines for the Group
and local units. We maintain rigorous standards for promotions,
recruitment, succession planning, implicit bias training and talent
pipelines to strengthen diversity, with communications from
executives as well as mentoring, networking and other actions
aimed at achieving greater balance in the organization. Local
units have action plans in place based on their own characteristics
and conditions.
The gender pay gap was slightly wider than last year (31.7% in
2020) because of the greater pay difference between new hires
and leavers' owing to the general under-representation of
women in STEMA
selected to fill non-executive and support roles.
fields and to our higher ratio of women to men
A. STEM: Science, Technology, Engineer and Mathematics.
Annual report 2021
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People with disabilities
GRI FS14
Our diversity, equality and inclusion strategy sets two objectives for
the inclusion of people with disabilities:
• To meet (or exceed) the legal quota for employees with
disabilities, raising their 2019 headcount by 1% in countries
A
.
without a legal quota by 2025
• To comply with local accessibility laws and make sure all new
digital products meet the Web Accessibility Initiative’s (WAI) WCAG
2.0 Level AA standards.
Santander has networks for employees with disabilities in Argentina,
Mexico, Spain, the UK, the US and our Corporate Centre. In 2021, on
top of local celebrations in our geographies, we held a global event
to mark International Day of Persons with Disabilities, with
employees from Argentina, Brazil, Spain, Portugal and the UK. 954
people connected to our global event.
A.This objective exempts countries where it is not legal to collect disability data.
In 2021, despite the organizational changes that the Group has
implemented in some geographies, the number of employees with
disabilities remained at 1.9%.
Fundación Universia is a core partner in Santander's efforts to include
people with disabilities. We work closely to make Banco Santander a
more diverse and inclusive bank.
We also collaborate through volunteering in other programs of
guidance for people with disabilities: Speaking without frontiers,
InMentoring Programme, Digital Mentoring, Families helping
families, adapted bicycles.
For more details on our D&I initiatives,
see the Diversity and Inclusion report in
our corporate website.
For more details on Fundación Universia
see 'Supporting higher education' or
'Support to higher education and other
local initiatives' in this chapter or go to
www.fundacionuniversia.net.
2021 Initiatives
In Brazil, #Diversiprática helps
university students with
disabilities and the Black
community through a
foundation course for the
CPA10 and CPA20 financial
market certificates. We also
launched an engagement plan
that includes a welcome
toolkit for employees with
disabilities and their
managers, as well as
mentoring and training
programmes.
Santander Portugal renewed
its partnership with Associação
Salvador. Its "Destination:
Employment" project
promotes the employability of
people with disabilities
through guidance and
empowerment of candidates,
raising awareness among
companies and identifying job
opportunities. Five people
were hired through the project.
Santander España devised an
onboarding plan for people
with disabilities at its branches
and other plans for
technology-based roles. It
helped 30 people with
disabilities join us in 2021.
In Argentina, the Inclúyeme
(“Include me”) programme
promotes the employability of
people with disabilities and
assists companies in
implementing social and labor
inclusion strategies. Moreover,
we hold 10 financial education
talks for 200 people. We
began using the Háblalo (“Talk
about it”) app at our branches
to remove communication
barriers, and undertook basic
sign language training.
The Bank also collaborates
with the Portuguese
Asperger's Syndrome
Association (APSA) to promote
the social and professional
integration of people with
Asperger's syndrome, hiring
two people from it.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Employee wellbeing
GRI 102-35, 403-2, 403-3, 403-5, 403-6,403-9
In 2021, we appointed a global head of health and well-being to help
draw up a strategy and implement it across our footprint. We also
have local teams with around 60-70 members with their own
organizational structure and resources that coordinate all our well-
being initiatives.
We drafted our Global health and well-being policy, which will be
available to the public in 2022. To ensure enforcement of the policy
and to fulfil our strategic priorities, we began working on a global
guide that will set standards on mental and emotional health, digital
balance and other priority areas to be implemented by subsidiaries.
Covid-19
As part of our Covid-19 response, we continued to enforce these
prevention measures to make sure our employees stayed healthy:
• Masks, gloves and protective screens handed out to office and
branch employees. We imposed strict personal hygiene policies
and rearranged work spaces to accommodate social distancing.
• Remote working, especially for our most vulnerable employees in
accordance with domestic and international authorities’
recommendations. We offer equipment (e.g. office chairs,
computer monitors and keyboards) and training (on ergonomics
and stress) to make remote working more comfortable.
• Employee testing (153,000 in Spain alone) as part of our
monitoring and back-to-the-office procedures.
• Information and training on Covid-19 prevention. Our corporate
Intranet and all subsidiary and divisional platforms have a section
for Covid-19 updates.
• Corporate monitoring plan in all our geographies in accordance
with local authorities’ guidelines, including employee health
screening through apps, tests and questionnaires. Progress with
the plan was reported to global and local executive and
management committees.
92%
of employees believe everyone in their work
environment is taking responsibility to comply
with Covd-19 measures and procedures
A
Since the outbreak of the pandemic, we’ve worked on several public
and private initiatives (providing funding, resources and expertise) as
a leader in the response to Covid-19. The public vaccination centre
we opened at Santander Group City in July, August and September to
benefit the Region of Madrid administered 57,575 vaccines with
utmost care (NPS=97). The bank and its partners provided all human
and material resources to the centre.
Occupational health
GRI 103-1, 103-2, 103-3
On top of the measures we took to protect our employees, our
collective bargaining and other industry and bank agreements
include provisions on employee health and occupational risk
prevention, such as check ups and testing on a regular basis or
following prolonged absence.
We also work with employees’ legal representatives regularly to
revise our occupational risk prevention plans, which we implement
through:
• regular workplace assessments of health and safety risks and
preventative measures to eliminate or control them;
• considering prevention measures when designing, procuring or
acquiring offices, furniture, equipment, products and IT equipment;
• work safety procedures, which the occupational risks prevention
team perform alongside other units to spot potential risks to
employees’ health and to implement prevention measures.
• information and continuous learning for employees;
• embedding occupational risk prevention in all operations that may
impact on employees' health and safety.
We have certifications on the security, quality and sustainability of
our work environments based on national standards (e.g. Gold-level
LEED O+M certification for our corporate offices in the US and ISO
14001 certification in Brazil). In 2021, we started the process to
obtain ISO 45001 certification for our corporate centre, the Santander
Group City.
A. 2021 Global Engagement Survey
2.8%
absenteeism
A,B
9,519
thousand hours missed due
to non-occupational illness
B
and accidents
0.04
Accident rate
C
A. Days missed due to work-related accidents and non-occupational illness or accidents for every 100 days
worked.
B. Santander UK does not count hours not worked due to covid-19 as absences so they will not affect the
remuneration objectives set prior to the health crisis.
C. Hours missed due to occupational accidents involving leave for every 100 hours worked. Worked hours
are theorical. In-itine accidents are included
For more details on absenteeism data, see
the 'Key metrics' section in this chapter.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
BeHealthy
We’re committed to being one of the world's healthiest
companies. Our employees receive health and wellness benefits.
We also raise awareness through our global BeHealthy
programme, which celebrated its fifth year in 2021.
Its four pillars are: know your numbers; eat well; move; and be
balanced. Every year, we set health and well-being objectives and
priorities with an activities calendar and global strategies for our
subsidiaries to implement.
In April, we held BeHealthy Week, with daily, in-person and
virtual events that covered the programme’s four pillars. The
#SantanderBeHealthy campaign, launched by Executive Chair Ana
Botín, top executives and our ambassador, Rafa Nadal, generated
two million impressions on over 25 corporate accounts and
through hundreds of employees.
Health was a key component of Santander Week in September,
where all our subsidiaries ran initiatives to remind employees of
the importance of health and well-being according to our four
BeHealthy programme pillars.
We celebrated Global Mental Health Week in October, with all
our subsidiaries and divisions taking part. 1,600 employees joined
an online event with Yale University professor Laurie Santos,
creator of the online course “The Science of Happiness”.
Speak up - Active listening
GRI 406-1
SASB FN-AC-510a.2, FN-CB-510a.2, FN-IB-510a.2
We listen to our employees and encourage them to speak up. We act
on their feedback, data and experiences and develop plans that will
effect change. The many internal listening actions we take involve
global and local employee surveys; performance reviews; exit
interviews; incident monitoring; and our ethical channel, Canal
Abierto.
Our active listening programme covered several topics in 2021, such
as financial crime and Covid-19. Furthermore, 86% of our employees
took a global engagement survey (GES) about the corporate purpose,
the employee net promoter score (eNPS), Covid-19, streamlining
processes and cooperation. We received poor marks on streamlining
processes, cooperation and ways of working.
Still, it showed employees are committed to our purpose of helping
people and businesses prosper; they feel Santander responded
effectively to economic and business challenges in the pandemic
with the right measures to ensure safety; and they recognize the
strength of our risk culture and the flexibility Santander offers them
to work remotely.
All Group employees can access health-related platforms (like
"Gympass" to use gyms) and apps for nutrition, mental health,
physical health, exercise, meditation and other services free of
charge or at bargain rates.
85%
of employees say Santander is taking
appropriate steps to ensure employees
stay safe and healthy
A
A. 2021 Global Engagement Survey
In 2021, we revised our global engagement survey and decided to
conduct it every quarter.
86% of employees agree
Santander's response to
economic and business
challenges has been effective
during the pandemicA
168,456
employees surveyed, of which
A
86% responded
A. 2021 Global Engagement Survey
For more details, see ‘Ethical
channels' in 'Conduct and ethical
behaviour' in this chapter.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Volunteering
The corporate volunteering standard in our Corporate culture policy
entitles employees to spend a certain number of working hours each
month or year volunteering. We also promote several initiatives to
enable employees to participate in, and contribute to, social
programmes and initiatives that the Group already supports.
We hold two important group-wide volunteering events for
employees each year: Santander Week, observed in all our countries
at the same time, and International Volunteering Day. Locally, the
Group’s subsidiaries organize multiple volunteering programmes as
part of their community investment commitments.
In 2021, many of our collaborations continued to focus on alleviating
the effects of the pandemic on the most vulnerable. We continued to
run our usual volunteer programmes, always under the strictest
sanitary measures. When we couldn't run them face-to-face, we
delivered them virtually.
+28,000
employees
participating in
community activities
+46,000
hours volunteered
For more details on our social contribution to
communities, see the 'Support to higher education
and other local initiatives' section in this report.
Volunteering initiatives
In Uruguay, we continued to help clear
beaches of plastic during the holiday season
in Montevideo. Employees, their children
and families were invited to lend a hand.
Finanzas para Mortales had 155 volunteer
trainers from the bank; reinforced its digital
activity; increased its training content; and
broadened the groups to which it provides
knowledge in basic finance. In total, it
closed 2021 benefiting 75,320 people, 15%
more than the previous year).
For the fourth time, employees of the
Northern macro-region, in cooperation with
the Santander Foundation, organized the
"North Helps" run. 2,009 people, including
employees, their children and friends,
António Simões, the polish management
board and the bank's senior management,
took part. We raised a total of PLN
68,104.74.
In Chile, volunteers took part in the
Santander Presente initiative to coach and
mentor more than 120 adults in the
process of passing their school-leaving
exams.
In Argentina, the circa 300 employees who
form part of the Financial Educators
Network trained to be volunteers and give
lectures on financial education to young
people, entrepreneurs, adults, people with
disabilities and other groups.
In Mexico, in collaboration with Fideicomiso
Por los Niños de México, Todos en
Santander, and through HR Virtual
Volunteering, more than 5,000 people
benefited from educational activities
focused on the integral development of
children. these activities are managed by
the organizations the Fideicomiso supports.
In Portugal, 56 employees participated in
the Junior Achievement programme,
sharing their knowledge and experience
with 997 students from the 1st to the 12th
grade on topics such as citizenship, financial
literacy and entrepreneurship. In addition,
11 employees participated in the Legal pro
bono programme, providing free legal
assistance to the non-profit organization
Terra dos Sonhos.
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Ensuring we have the right talent and skills
Managing our talent lifecycle is critical to our business strategy. To
understand future skills gaps and needs, we implemented the
Strategic Workforce Planning (SWP) tool to help us to re-train and
develop employees on a near constant basis.
We also launched Dojo, our continuous learning ecosystem available
to all employees, and reached almost 100% in our roll-out of
Workday.
Talent attraction
GRI 103-1, 103-2, 103-3, 401-1 and 404-1
In 2021, Santander filled 35,000 vacancies worldwide (45% with
women). We prioritized the career development of our people, filling
over 70% of vacancies with internal candidates.
We digitalized and automated hiring processes through the
“Selection” module on Workday in all our geographies (except at our
US subsidiary, which will implement it from 2022). Having a single
system enabled us to standardize hiring, share best practices and
ensure a greater candidate experience. It also meant we could list
vacancies in all the countries where we operate on our Global Job
Posting portal, a new search engine that makes it easier to see the
positions available in each country. We promote geographic and in-
company relocations as a key means of cultivating talent.
Attracting tech and digital professionals
Our recruitment teams prioritized the attraction of talented tech and
digital professionals to help with the transformation of our
businesses. In 2021, the Group filled over 8,500 STEM vacancies
after running brand awareness campaigns on social media and in
forums.
We ran the “Be Tech” programme with our IT and Communications
divisions to position Santander as an attractive employer for STEM
candidates. Among its stand-out initiatives were:
• “Be Tech Up”, where 50 junior employees in digital roles became
brand ambassadors through social media to promote the Group’s
technology projects. The contents they posted helped us gain
thousands of followers on such networks as LinkedIn.
• “Women in Tech”, which focused on attracting women to
technology-based roles. The inaugural Women in Tech summit had
over 1,000 participants.
Talent management figures
A
Total employees (thousand)
% employees with a permanent contract
A
% employees working full time
A
Employees joining/leaving (turnover)
% of workforce promoted
B
Average length of service (years)
A
% coverage of collective agreements
A,C
2021
197
97.6
94.3
20.0
9.8
11.3
70.7
2020
191
97.9
94.9
12.6
6.7
10.2
71.6
A. At year end
B. The increase in the external turnover rate is due to the restructuring processes
carried out in 2021 in some of the Group's geographies.
C. The figure of % of employees covered by collective bargaining agreements in
2020 has been recalculated, considering SCF employees in the United States not
covered by collective bargaining agreements.
For more details, see the ‘Key metrics’
section in this chapter.
Our partnerships with the world’s leading universities and technical
schools enabled us to introduce future professionals to our value
proposition. They are a key source of the talented young people we
find in our scholarship and internship programmes.
We ran webinars, bootcamps, hackathons, training programmes and
specialized talks by employees and senior managers at more than 70
universities and schools specializing in tech and digital learning.
Annual report 2021
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Corporate mobility
Career development
Continuous learning drives our transformation. We encourage
employees to take charge of their career development. We provide
them with the means to draw up their own personal development
plan based on their ambitions. We strive and review all our diversity
parameters to promote optimum diversity on our talent
programmes.
Our main career development programmes in 2021 were:
• Talent reviews to assess employees’ potential and support the
professional growth of the most promising ones. For Europe, we
carried out our "European Talent Review".
• Succession planning: Our strategic approach enables us to identify
potential successors to key roles and provide them with career
development opportunities, ensuring our future sustainability and
success.
• Top Talent, to promote the development of over 130 managers
with high potential. Participants assessed their skills and potential
as leaders to come up with a career development plan. We’re
working on development plans for every Promontorio successor
(over 230 talented people with high potential).
• Young Leaders 2, with185 talented young employees from all our
geographies and a diversity rating of 52%. It aims to create a
strong talent pool, teach skills needed for the future and promote
diversity and inclusion. It will last nine months and take place in
the Young Leaders Smart City, a virtual, immersive space where
they’ll come up against several challenges.
• Elevate, is the new global learning ecosystem the Group launched
in 2021 for all Faro and Solaruco executives. It is a hybrid executive
education experience with first-rate activities led by renowned
international experts to promote continuous learning and
cooperation towards a common culture that will strengthen
Santander’s leadership.
• In addition, other local programs such as Open Mentoring at the
Corporate Centre, Light your skills at Santander Consumer Finance
Germany and Futuro in Poland were implemented.
Driven diverse experiences are the best way to shore up skills and
form diverse teams and multicultural leaders, so we promote
geographical and functional re-location across our footprint. Though
the pandemic affected international mobility in 2021, we sought to
offer viable alternatives.
Our mobility initiatives were:
• Global Job Posting offers employees the chance to apply for jobs
in other countries, companies and divisions of Santander.
• Global career strategy. We’re working on a global career strategy
to enhance our internal talent development, harness our
worldwide presence and meet our businesses’ challenges
successfully.
• Mundo Santander has been one of Santander's flagship talent
programmes since 2008. It supports the development of over
2,000 employees who have taken part in strategic assignments in
other countries for 3 to 6 months. It promotes the sharing of best
practice and the broadening of participants’ global outlook. In
2021, we redesigned Mundo Santander so participants could work
on international projects virtually. Though the programme will
remain virtual in 2022, participants will be able to undertake a
project in another country should public health conditions allow.
• We also launched an awareness campaign to promote
employees’ international mobility, with videos of real examples
told by the people involved.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Learning and development
GRI 103-1, 103-2, 103-3, 404-2
We value continuous learning so our employees can adapt to an
ever-changing environment and help accelerate our transformation.
Our global learning and development policy sets the standards for
designing, reviewing, launching, overseeing and enhancing training
and development programmes to:
• support our business and cultural transformation in accordance
with Santander’s governance standards; and,
• foster innovation, knowledge sharing and transfer, and the skills
employees need to perform their duties successfully as part of
global talent management.
The three pillars of our employee upskilling and reskilling are
strategic workforce planning (SWP), our current skill model and the
strategic global business and countries needs. We review them every
year to recognize common, high-impact skills and design learning
solutions for our employees.
We promote our learning solutions on our digital ecosystem, Dojo,
through study plans and “roadmaps” for learning. Dojo facilitates
informal, interactive and structured ways of learning, combining
many formats, settings and tools so every employee can choose
what, when, how and how much to learn. It's designed to produce
“lifelong learners”.
Furthermore, each subsidiary’s Learning and Development team
pinpoints specific learning needs relating to its geography and
designs training courses consistent with Dojo’s standards.
After launching in 2020, Dojo had reached 63,700 employees in our
main geographies by the end of 2021. It has four academies: Agile,
Engineering Excellence, Cloud and Commercial (launched in 2021). It
also offers 22 certifications, 26 channels and 24 learning programs
launched in 2021covering topics such agile, data, leadership,
customer experience, cloud and digital transformation. Today, Dojo
covers 252 skills with more than 72,560 learning activities.
Main Group data
Millions euros invested in training
Investment per employee (euros)
% employees trained
A
Hours of training per employee
Employee satisfaction (over 10)
A
2021
75.1
381.3
99.0
30.6
8.5
2020
61.3
320.7
100.0
30.9
8.2
A. Calculated considering the staff at the end of each year. The incorporation of
both employees and entities to the Group at the end of 2021 fiscal year has a
signification impact on the result of this indicator in comparison to 2020.
For more details, see the
‘Key metrics' section in
this chapter.
Global training
Main initiatives:
→ The Risk Pro Banking School promotes a strong, uniform risk
culture. It runs the Advanced Executive Risk Programme, Key
risks and Risk pro Insights workshops and specialized courses.
→ The Global Internal Audit School offers practical solutions
designed to adapt to business and regulatory changes.
→ The Technology and Operations School continued to enhance
its three key areas — Technology, Operations and Cyber
security — (updated to key position programmes) and made its
core contents available to the entire Group on Dojo (Agile
Academies, Engineering Excellence and Cloud, Channels and
Badges).
→ Mandatory global online training ensures we deliver a high
level of service, and helps us comply with financial regulation
and avoid penalties from external regulators. It’s available
across our footprint and part of performance and incentive
plans. The topics that courses cover relate to the Group’s
external and internal regulation and strategy. In 2021, Risk Pro:
Everyone’s Business, Cyber Heroes and courses on the General
code of conduct, corporate defence, conduct risk in the
marketing of products and services, financial crime and market
abuse were prominent. To complement mandatory global
training, each subsidiary has required courses about local law
and regulation.
→ In Responsible banking, we are working on three training
modules we set with global businesses and subsidiaries:
• The first is multidisciplinary and common for all employees.
We launched a global, mandatory module to familiarize
them with sustainability and its relevance to the Group.
• The second is for all functions involved in our sustainability
agenda and consists of an introduction to sustainability/ESG,
ESG Talks (to be broadcast live across our footprint), internal
certification and special programmes for each business and
function.
• The third includes the appropriate certifications for each
business according to its needs (e.g. CFA, EFPA, GARP and
others).
Some subsidiaries and global businesses provided additional
training on climate change, sustainability, sustainable finance,
sustainable investment, diversity and inclusion.
In 2021, we also trained our employees on diversity and
inclusion, health and safety, customer and supplier relations,
the environment and anti-corruption.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Performance review and remuneration
GRI 404-3
Our comprehensive remuneration framework combines fixed and
variable schemes based on employees and the company's
achievements. Short and long-term variable remuneration reflects
what we have accomplished (group-wide quantitative and qualitative
targets, as well as individual and team targets) and how (e.g.
behaviour, leadership, sustainability, commitment, growth and risk
management). We also have pension plans, banking products and
services, life insurance, medical insurance and other corporate
benefits our employees can choose.
Fixed remuneration schemes reflect local market conditions. To set
pay, we strictly abide by the practices, regulations and collective
agreements in force in each country and region.
Our remuneration policy for all Group employees forbids differential
treatment that is not based on a review of performance and
corporate behaviours. It also promotes equal pay between men and
women.
To comply with EU regulations on remuneration, we identified 1,018
employees subject to a deferred variable pay policy because their
decisions can have a material impact on Banco Santander’s capital.
300 employees fewer vs 2020, mainly due to the entry into force of
the new CRD V regulation. The policy defers a significant amount of
their variable pay (40%-60% depending on their responsibilities) for
three to seven years in accordance with internal and local
regulations. 50% is delivered in shares and subject to potential
reduction ("malus") or recovery ("clawback").
MyContribution
MyContribution is our common performance management model.
Performance management is key to enriching our culture and
ensuring colleagues perform to the best of their abilities in keeping
with their career goals. Our model applies to all employees in 2021.
MyContribution has three components:
• What: 50% is based on employees' individual goals set in line
with group-wide strategy.
Key initiatives in 2021
→ The inclusion of share options as part of variable pay (which was
previously paid in shares) and the update of multi-annual target
metrics will be put to a vote at the next AGM in 2022. The proposal
includes keeping the relative total shareholder return and adding
the return on tangible equity and metrics linked to responsible
banking commitments.
→ Under the succession policy, senior managers must make sure the
successor pool is strong and diverse (especially in terms of gender
diversity).
→ Progress in monitoring the gender pay gap calculation and analysis
methodology.
→ The remuneration policy added the principle that remuneration
must be free of gender-based bias and help eliminate disparities
that could result.
For more details on remuneration
data, see the ‘Key metrics’ section
of this chapter.
For more details on board
remuneration, see section 6 of
the 'Corporate governance
chapter'.
• How: 40% is based on how employees deliver on objectives
and foster the values of Simple, Personal and Fair, the eight
corporate behaviours and the four leadership commitments,
which combine to form The Santander Way.
• Risk: 10% is based on how employees manage risk in their
day-to-day role.
MyContribution is updated regularly. It now highlights our risk
culture with a separate category created in 2020 to assess it.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Corporate benefits
GRI 401-2
We offer several benefits to our employees in all geographies. Each
subsidiary has programmes that adapt to local circumstances.
Benefits range from free services for employees and their families to
discounts on products and services.
We focus on well-being to help employees stay in sound physical and
mental shape, to support their families and to adapt health cover to
new circumstances and needs. In Spain, our Santander Contigo
programme provides assistance with daily tasks, legal and computer
support, and other services. In other geographies, services and
financial aid for childcare and support for elderly relatives in their
charge are also substantial.
For more details on our initiatives promoting
employees' wellbeing, see "Employee
wellbeing" in this section
Corporate benefits in Mexico
Santander México offers these benefits to employees:
→ Family: Nursery subsidies, scholarships for employees' children,
support talks and digital tools.
→ Health: Plans for all employees, with permanent access to doctors,
dentists, psychologists, social welfare officers and other healthcare
professionals.
→ Financial products: Reduced interest rates, credit cards without
extra fees, mortgages with special rates, favourable lending
conditions for car and motorcycle purchases, etc.
→ Discounts and insurance: Reduced rates on glasses, at sports
facilities and on other products as well as for life and car insurance.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Work-life balance and job efficiency
The way we work
We continue to promote our employees' work-life balance through
flexible working, health and well-being programmes and office
safety measures.
FlexiWorking
At Santander we promote flexiworking and we believe our diverse
organization must adapt to the needs and characteristics of its
teams.
We redesigned our global flexiworking framework to address where,
when and how much we work:
82%
of employees say Santander is providing
the appropriate flexibility they need to be
effective and productive.
A
86%
of our employees believed Santander’s
response to the pandemic's challenges
A
was effective .
• 'Where': Possibility of home/remote working.
A. 2021 Global Engagement Survey
5 principles of New Ways of Working
→ The customer comes first. Customers must always
be at the heart of everything we do.
→ Many ways of working (where, when and how
much). Employees will be assessed on their
experience, effectiveness and efficiency.
→ Workspace is no longer just a workplace
→ Testing and learning through continuous listening
→ Flexibility, fairness, inclusion and equal
opportunity are guiding principles in decision-
making.
• 'When': Intensive day, flexible start/end and break times and
alternative shifts.
• 'How much': Part-time working, special leave, flexible holidays, job
sharing and other measures.
We have empowered our managers with the decision regarding the
best flexible working model for their teams. In this way, each area
and business unit has implemented new ways of working based on
the characteristics and needs of the team and its performance
expectations. Since the pandemic is not over, we must remain
cautious and flexible.
In 2020, our return to the office depended on the severity of the
pandemic developments and local regulations. In 2021, most of our
branch teams have now returned, although in many cases we still
operate under a hybrid working model. To support our employees
who work remotely, we provide material such as office chairs to
improve their conditions, as well as training on ergonomics and
stress.
We continued to implement tools to drive digitization and
collaboration, which helped our employees perform well and
manage remote working effectively as well as to maintain their right
to disconnect, preventing them from sending emails or holding
meetings outside working hours.
Listening to employees, understanding the situation and attending to
their needs is essential to identify and facilitate managers to adopt
measures that can achieve a balance between work and professional
life, while guaranteeing productivity, corporate culture and our
attractiveness as an employer.
Agile methodologies
We’re implementing agile methodologies and organizational
structures in our Technology and Support functions in several
countries.
In 2021, we continued to transform and bring more teams from our
subsidiaries and global functions into the Agile environment (our
subsidiaries in Spain, Mexico and Argentina were key to boosting
implementation) for better customer focus, more collaboration
between IT and the businesses, faster decision-making and different
ways of working that will heighten employees’ sense of
accountability for the end product.
Annual report 2021
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Restructuring
In recent years, amid staff reductions in Spain, Portugal, Poland, the
UK and other core geographies, we have consistently applied internal
and external flexibility measures to support employees' transition to
new employment while maintaining dialogue with their trade unions
and legal representatives. In Europe, we also abide by the principles
of the Joint declaration on workforce restructuring that our
management representatives signed in 2016 with the European
Works Council.
We take these steps to ensure the best possible outcome:
→ We prioritize voluntary employment termination.
→ We hold informal meetings with workers’ legal representatives to
find alternatives that will reduce the impact of losing jobs and to
uphold their rights before formal proceedings commence.
→ We consider particularly vulnerable employees’ personal
circumstances (e.g. disabilities, severely ill children, victims of
gender-based violence, etc.).
→ We help employees with outplacement either in Santander or in
other companies through internal and external flexibility measures.
→ We pay severance above the amount required by law, in keeping
with agreements with trade unions.
Social dialogue and restructuring
In 2021, we continued to guarantee freedom of association and the
right to collective bargaining. Our Human rights policy considers
forming or joining unions and other representative bodies a basic
right of workers in accordance with Article 10 of our General code of
conduct. We also ensured respect for freedom of association, trade
union activity, collective bargaining and protections for employees’
representatives under the laws of each country where we operate.
We continued to promote and comply with the International Labour
Organization’s Fundamental Conventions. We also remained in
constant dialogue with employees’ legal representatives through
bilateral and special committee meetings where all parties discussed
reporting, queries and negotiations about work conditions and
employee benefits.
Meetings we held in 2021:
• Occupational health and safety committees
• Equality plan follow-up committee
• Santander Employees pension plan control committee
• Training committee
• Other meetings: 2021 engagement survey results; Banco
Santander mass redundancy agreement follow-up committee (five
meetings as well as regular information exchange); meetings with
subsidiaries’ business committees
◦ Bilateral meetings with trade union representatives
Agreements entered into:
• Capitalization of pension supplements for Banco Popular
beneficiaries + extension
• Capitalization of pension supplements for Banco Santander
beneficiaries (from October 2020)
• Increase in employer contributions to the Santander Employees
pension plan
• Integration of working conditions for Santander España
Technology & Operations staff
• Integration of working conditions for Santander Consumer Finance
staff
• Implementation of the Grupo Santander Consumer collective
bargaining agreement and 2022 salary review
• Santander Global Operations equality plan
• 24th Collective bargaining agreement for the banking industry
(members of the industry negotiation committee)
We considered the risk of failing to uphold employees’ rights low as
our labour relations had proved effective in every country.
Annual report 2021
59
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Restructuring processes we carried out:
In 2021, we began to reduce our workforce on organizational,
production-based and economic grounds. Following informal
discussions with workers’ legal representatives to explain our
reasons, we entered into formal negotiations that ended with an
agreement with most trade unions (82.99%) All of the measures
agreed with the European Works Council to align workforce
restructuring with socially responsible practices were in the
restructuring agreement. The alternative measures we proposed
included geographic and in-company relocations to lower the
number of potential lay-offs.
Our workforce reduction gave priority to voluntary employment
termination and was considerate of workers’ vulnerable
circumstances. We reduced the number of terminated contracts
substantially (from the initial 5,072 to 3,572) and outplaced 1,500
workers in the Group. In addition to relocating employees
geographically, 70% of the lay-offs involved early retirement
agreements with either guaranteed temporary pay until full
retirement or compensation packages above the amount provided by
law, with social security contributions up to 63 years old in order not
to interrupt the contribution period of employees over 50 years of
age who met length-of-service requirements.
We also hired a specialized relocation agency free of charge to help
affected employees (and their relatives) who wanted to find a new
job, through advice and training, entrepreneurship initiatives, job
searches and other activities.
There have been no class action or law suits filed by trade unions to
contest the redundancy programme nor any rulings against
Santander.
Within a common movement to most banks in Europe, addressing
the change in banking consumers' habits and based on an intense
process of digital transformation, Santander Portugal has been
reducing the number of branches and digitalizing processes, with the
correspondent reduction of its workforce in 2021. Our preferred
approach was to reach individual settlements according to
Portuguese law. Therefore, the process was conducted in constant
contact with trade unions and the legal representative unit and the
settlement offers included increased severance benefits, health
plans, outplacement programs and early retirement proposals.
We hired an independent legal adviser to review negotiations and
contact with the employees. In addition, we also created the Nova
Etapa programme to support people in the transition to new
personal and professional ventures.
This set of measures made it possible to reach agreements with
around 96% of the workers covered by the workforce reduction.
Having exhausted all individual agreement negotiations, the
collective dismissal process was concluded involving 49 employees,
which represent only around 4% of the overall workforce reduction
undergone by the Bank.
Annual report 2021
60
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Acting responsibly
towards customers
ó
Providing the best experience
ó
Designing products to meet their
needs and aid their sustainable
transition
Our customers are at the centre
of everything we do
ó
Strengthening
our customer-
obsessed culture
ó
Introducing consumer protection
principles into our practices
ó
Protecting privacy and personal
data and using them appropriately
ó
Cyber as a culture driver to protect
our customers’ information
Customer experience and satisfaction
GRI 102-16 and 102-34
Transforming customer experience
In 2021, we continued to promote our customer experience (CX)
strategy to give the best service.
We created local, regional and global initiatives, which our executive
committees monitor closely. Supported by our multicultural and
multidisciplinary team, we prioritize customer experience
enhancement initiatives with the greatest impact on customer
satisfaction and potential to scale up. The CX team focused on four
areas in 2021:
1. Strategy: To unify our vision, we came up with common CX
guidelines to enhance customers' journeys and touchpoints, and
keep them at the centre of our efforts. We also created a Customer
Experience Observatory to monitor trends and learn from
successful cases in the banking and other industries.
2. CX plans: We helped our subsidiaries devise and execute local
plans to improve customer experience. In 2021, we launched
initiatives in several geographies. Applying behavioural economics,
we ran a range of use cases for new product design, procedures,
communications and pricing strategy.
3. Culture: We strive to foster a productive environment for our
customers that strengthens our “Customer obsession” culture
across our footprint. In 2021, we created global and local CX
training courses and certifications for our employees.
4. Community: Working as one team helps us serve our customers
better. In 2021, we continued to streamline our global CX
community to bring about synergies and share best practices,
knowledge and tools across the Group.
Our Consumer protection function shares best practices across the
Group through CuVo (Customer Voice), a monthly global working
group formed of all our customer-facing areas. In 2021, we ran these
initiatives:
• In Spain, we improved the terms and conditions of the ONE account
and launched the “Porque Tú, Porque Te” campaign as part of our
quest to be number one for our customers.
• In Europe we have been working on a new unique app that will be
launched for all 4 countries: One Europe App. So far it has been
launched in Spain and Portugal, and the plan is to launch it in
Poland and the UK in 2022.
• In Chile, we separated infrastructure to make sure any issue on a
digital channel did not cross over to another. We also enhanced our
banking app to give a better digital experience.
• In Argentina, we focused on better customer service through
workshops and e-learning courses to promote our “Customer
obsession” culture.
• In Uruguay, we migrated all our customers to Supernet, reducing
waiting times and incident numbers.
• In Brazil, we launched Dial My App, which connects our remote
customer service lines to our app, giving customers who call our
contact centre a fully digital experience.
Annual report 2021
61
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Customer satisfaction
Our strategy sets out to inspire loyalty among our customers. In
2021, we conducted more than four million surveys to monitor their
feedback about Santander and find out how we can improve our
products and services and, ultimately, their experience.
To measure customer loyalty and satisfaction, Santander uses the
NPS, an indicator of our relations with customers. This methodology
is based on service, image, and products and pricing, which are the
1
three core areas we constantly work to improve on.
In 2021, we ranked in the top 3 in NPS in 8 of our markets, up from 6
of the previous year. We also improved our position in most
countries, most notably in the categories of Personal and Fair (which
form part of our values). By region:
• As leaders in NPS in Brazil and Chile and climbing the rankings
elsewhere, we're well positioned in South America and continue to
set ourselves apart from our peers.
• The closure of branches and changes to contractual terms and
conditions make for testing times in Europe’s banking industry. In
2021, we ranked second in Spain and broke into the top 3 in the UK
and Poland.
• We're setting our action plans on North America. In Mexico, with a
declining market, we have maintained our position in 2021 and in
the U.S. we have improved our position compared to the previous
year.
In 2022, we’ll continue working on our Simple, Personal and Fair
values and our customer service channels.
In 2021, as fewer customers visited our branches, their changing
perceptions and habits meant our digital channels and their impact
on the NPS grew.
Top 3
8 of 9 countries
A
A.Due to its business model, Santander US's objective
is distinct and does not account for the metric.
South America
B
Europe
North America
2019
2020
2021
4º
3º
2º
2º
2º
1º
2º
1º
1º
2º
3º
2º
3º
2º
2º
4º
4º
3º
3º
1º
3º
2º
6º
3º
4º
4º
4º
9º
9º
8º
NPS to measure customer satisfaction, audited by Stiga/Deloitte.
Key peers by country: Argentina: Galicia, BBVA, ICBC, HSBC, Banco Macro, Banco de la Nación; Brazil: Itaú, CEF, Bradesco, Banco do Brasil; Chile: BCI, Banco de Chile, Itaú,
Scotiabank, Banco Estado; Uruguay: Brou, Itaú, BBVA, Scotiabank; Spain: BBVA, Caixabank, Sabadell, Bankia, Unicaja; Poland: ING, Millenium, MBank, Bank Polski, Bank Pekao,
BNP Paribas; Portugal: BPI, Millenium BCP, CGD, Novo Banco; UK: Nationwide, Barclays, Halifax, NatWest, Lloyds, HSBC, TSB, RBS; Mexico: Scotiabank, Banorte, HSBC, Banamex;
US: JP Morgan, Bank of America, Capital One, PNC, M&T Bank, TD Bank, Citigroup, Citizens, Wells Fargo.
B. The 2020 figure for Poland was revised during the financial year 2021, the final result being 4th.
We monitor all
drivers that have an
impact on
Santander NPS
SERVICE
Branch
Channels
Personal
Simple
General service, waiting times, branch assistance, layout
Mobile, internet, ATM, CDM, contact centre, personal manager
Personal attention, kindness, employee professionalism
User-friendliness, speed and agility
Communications
Problems
Others
IMAGE
PRODUCT & PRICE
Clear statements, information on offers and deals, coherent information
Perceived issues
Data protection
Strong and sound, socially responsible, innovative, trustworthy, transparent
Simple product and service proposition, fees and charges, benefits, credit cards
Group NPS by channel
C
64
Branch
43
Contact Centre
58
Internet
69
Mobile
Internet: Excluding Chile, the UK and Uruguay.
C. Internal NPS (last info available): Obtained from customer surveys issued within 48 hours of their contact with the bank via any channel. Weighted average of active Group
customers.
1
This index is based on customer recommendations, using a scale from 0 to 10. Depending on their score, these are: promoters (9-10); neutral (7-8) or detractors (0 to 6). The
NPS is calculated by subtracting the percentage of promoters from the percentage of detractors.
Annual report 2021
62
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Product governance and consumer protection
Product, service and consumer protection framework
Being responsible means offering our customers products and
services that are Simple, Personal and Fair (SPF). Our daily operations
must be brilliant, and do more than what the law requires, to give our
customers an exceptional experience.
We followed up on the thematic reviews from 2020 on responsible
business practices in account packages, revolving cards and
overdrafts. We checked that 26 local plans on transparency,
disclosure to customers, sales, fees and credit conditions were
consistent with best practice. They will be implemented in 2022.
We ran product governance and customer protection awareness
campaigns and workshops in line with our strategic priorities.
Product and services design
GRI 416-1, 417-1 and FS15
Product governance
Santander’s governance structure enables it to safeguard customers'
interests.
Our product governance forum ensures the products and services
that we market meet the needs of identified target segments and are
reasonably and clearly priced.
In 2021, we enhanced our ESG product validation and passed nine
proposals that impact on this matter.
Our Product, service and consumer protection framework sets out
the principles that promote a strong SPF relationship with customers
and establishes the basics for managing and mitigating conduct risk
in design, sales, post-sales and services.
Consumer protection policy and principles
The Compliance and conduct function abides by our Consumer
protection policy, which sets out the highest ethical standards we
expect our teams to uphold towards customers.
We report on our consumer protection principles in all our
geographies to make sure we embed them in our day-to-day. We use
our customers’ voice and business indicators to spot unsatisfactory
customer service, fee-related issues, incidents at ATMs and other
areas for improvement, and to come up with plans to address them.
We’re working on adding artificial intelligence to our reporting for
greater insight into how we can better protect our customers.
In order to identify risks that stem from new regulations or problems
with products and services, we conduct thematic reviews for the
entire Group, assess them and make decisions on how to improve
and mitigate the risks identified. In 2021, our review focused on such
responsible business practices as pricing techniques and fair value for
our customers. We also carried out a more detailed price comparison
of Santander Asset Management España's investment funds and
pensions against industry figures; we plan to extend that study to our
other geographies in 2022.
Consumer protection principles
Treat customers
fairly
Complaints
handling
Consideration of
special customers'
circumstances and
prevention of over-
indebtedness
Data
protection
Customer-centric design
of products and services
Responsible
pricing
Financial
education
Transparent
communication
Responsible
innovation
Safeguarding
of assets
Annual report 2021
63
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Sales processes
Salesforce cultural transformation
Our product and service disclosures throughout the entire customer
cycle are transparent and comprehensive. We apply robust quality
and conduct control standards to marketing and sales material,
brochures and contracts according to Santander’s internal regulation.
That's why all our employees undertake a mandatory, annual course
on the management of conduct risks in sales and consumer
protection. We run special training programmes for our sales teams
to arm them with the knowledge and skills that will enable them to
sell our products and services properly.
Those programmes and our sales methods ensure we offer products
and services that will meet each customer’s needs and preferences.
That way, we avoid inappropriate practices like product and service
bundles that don’t add value for customers.
Remuneration schemes (where customer satisfaction and quality
bear significant weight) are key to transforming our sales practices
and promoting sustainable business. In 2021, at least 40% of our
salesforce’s variable pay was linked to customer satisfaction and
quality measures, an area where we enhanced best practices through
continuous monitoring.
We worked on a global project to give branches a conduct and quality
rating. While it will impact on employees’ pay, they’ll have access to
metrics for better awareness and management of conduct-related
risks.
We broadened the scope of our remuneration reviews and
monitoring for teams in charge of loans and credit origination, and
collections and recoveries to embed conduct and quality in their
culture and objectives.
Post-sales management
Conduct in collections and recoveries
In 2021, we implemented metrics to monitor conduct risks in all our
geographies as part of our Recoveries excellence plan. They helped
enhance control over the ethical standards we established last year
and over customer contact, disclosures and transparency, data
protection, vulnerable customers and training for employees who
work in these teams.
They consist of:
• quality control for calls to make sure scripts and standards are
followed;
• number of customer complaints about the managed portfolio and
in relation to the thresholds established in view of historical data
and the current situation; and
• the percentage of employees who have completed mandatory
training.
Vulnerable customers
GRI FS14
In 2021, we worked on an instruction manual about our vulnerable
customer and special case management model, and set a roadmap
for its roll-out among subsidiaries. This will ensure a consistent,
Group-wide approach to identifying and managing vulnerable
customers in such high-impact procedures as collections and fraud
management. We offered monthly training courses, ran an
awareness campaign at the Corporate Centre and shared the manual
across our footprint.
Our subsidiaries also made progress with the roll-out of vulnerable
customer management:
We used big data to identify potentially vulnerable customers and
provide them with a personalized, priority service through our
contact centre. This service, which has served 500,000 customers, is
rated with an NPS 2.5 times higher than the standard service.
We developed a methodology based on advanced data analytics and
algorithms for our collections teams to spot potentially vulnerable
retail customers. We took a 1,478 sample of the customers we
identified as vulnerable and proactively offered tailor-made solutions
to the 293 we had found to be "extremely vulnerable”. We also
waived account fees for a further 100,000 vulnerable customers.
Openbank also identified 387 vulnerable customers and registered
them in the CRM system to offer personalized services.
We continued to roll out our new customer support function. It keeps
a record of vulnerable customers’ support needs so our employees
are aware of their situation. During the year, close to 30,000 new
notes were added to our systems.
Each month, we saw positive metric results, with no areas of concern
and a significant decline in complaints within set thresholds. Though
results showed good quality control of calls, we have revised scripts
and are working with the subsidiaries to enhance them and make
sure conduct guidelines are appropriate and holistic.
For more details on product governance, consumer
protection and conduct and collection & recovery,
see section 7.2. 'Compliance and conduct risk
management' in the 'Risk management and
compliance' chapter.
Annual report 2021
64
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Complaints management
GRI 102-34
Handling customer issues and complaints proactively and effectively
is a vital component of customer experience and highly valuable to
the business.
Our complaints management and root-cause analyses are consistent
with the Group’s Simple, Personal and Fair strategy and set standards
for all geographies to properly handle complaints and offer the best
service. We use our findings to enhance our products and services
and have an early warning system to identify risks.
We also track management of fraud-related complaints in all
geographies according to special taxonomies. Our local units’
customer-centric management includes a “trust payment” of the
stolen amount in most fraud cases while they are under
investigation. They are informed that it’s a temporary refund that
Santander will not claim back if the investigation finds in the
customer’s favour. Cases are falling significantly in Mexico (where
fraud accounts for 70% of complaints), thanks to a new task force
and the measures we're taking.
In 2021, we continued to focus on resolving complaints at the first
point of contact with customers and on opening digital channels like
Gent& in Brazil and the complaints section of our app in Chile and
Mexico for quicker, alternative access to feedback mechanisms.
We also came up with a root-cause analysis methodology that uses
artificial intelligence. It helps us apply customer voice algorithms and
get the most out of the structured and unstructured data on our
systems. We’re testing our initial findings in Brazil and Mexico.
We heightened the monitoring and reporting of customer issues in
areas that are considered critical due to the knock-on effects of the
pandemic. Having implemented conduct standards during recovery in
2020, we continued to monitor pandemic-related complaints each
month. While we saw improvement in most countries, Santander
México (the subsidiary with the highest volume of cases) dropped
from 40 complaints per 10,000 customers in Q1 2021 to 12 in Q4.
In 2021, the over 300 complaints prevention and mitigation
measures we worked on included enhanced ATM features; customer
communication and disclosure; Service Level Agreements; and
operations to optimize customer experience with digital channels
and account closure.
For more details on complaints management, see
section 7.2. 'Compliance and conduct risk
management' in the `Risk management and
compliance' chapter and our Culture report in our
corporate website.
TYPE OF COMPLAINTS
A,B
(%)
AVERAGE RESOLUTION TIME
A,B
(%)
RESOLUTION
A, B
(%)
Banking
procedures
Loans
Payments
methods
Others
Investments
Insurance
1 - 5 days
5 - 10 days
10 - 15 days
15 - 30 days
More than
30 days
In favour of the Bank
In favour of the customer
A. Personal Protection Insurance (PPI) Complaints excluded from the volume, distribution by product and resolution term figures. Regarding the uphold ratio, the UK has been
fully excluded.
B. Complaints metric follows the criteria established by the Group (homogeneous in all geographies).
Process enhancement
In H1'21, we launched Gent& for individuals and
businesses. It's a chatbot based on artificial intelligence to
resolve queries and complaints as well as give customers
more autonomy. As of June, it clocked 9.3 million users and
over 100 million interactions on our retail customer app,
our business app, Way, WhatsApp, WhatsApp business and
Portal Santander. It covered 21 services, including
electronic credit card bills, bill amounts, expiry dates, credit
limits and debt restructuring requests.
In July, we launched the “Txumani” digital card project,
which we expect to reduce e-commerce fraud. Complaints
about unrecognized transfers fell from 400 to 100 per day.
We implemented a new protocol for customers over the
age of 80 to prevent them falling victim to scams. After
registering their biometric data at a branch, they will be
able to make changes to their personal details and use
online banking.
Annual report 2021
65
25.1%32.1%1.6%29.1%8.9%3.2%32.2%23.2%9.9%20.0%14.7%80.2%19.8%
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Privacy, data protection and cybersecurity
Privacy and data protection
At Santander we are committed to providing our customers with a
high degree of trust and security in relation to their personal data.
Our standards afford people greater control over their data, ensuring
we only use their data strictly necessary and for the specific purposes
for which it is collected. That's why we only process personal data
that are appropriate, relevant and necessary to the purpose for which
they’ve been collected, throughout the data’s entire life cycle and in
accordance with the law. We apply all reasonable measures to erase
or rectify data that are impertinent, inaccurate or incomplete. We
only store personal data for as long as strictly necessary for their
legitimate use. Our security measures ensure the unwavering
confidentiality, integrity, availability and resilience of our data
processing systems and services.
Our compliance programme guarantees robust management of data
protection risks. It includes:
• corporate-based criteria as general lines of action to meet
regulatory requirements.
• local subsidiaries’ responsibility to abide by the General Data
Protection Regulation (GDPR) and local regulation on data
protection.
• a solid governance model consisting of:
◦ corporate and local policies;
◦ a data protection officer (DPO) and managers in each unit. We
formally disclosed appointees to local authorities;
◦ a corporate oversight programme based on management KPIs;
annual reviews; and an annual monitoring forum chaired by the
Group Chief Compliance Officer, where subsidiaries report on
compliance status and other key data protection matters.
Other items that bolster our commitment to personal data protection
are:
• a homogeneous monitoring and reporting model among units that
includes performance indicators;
• work with third-party service providers that must comply with data
protection regulation;
• data protection compliance embedded in the annual internal audit
programme;
• data protection management tools to maintain a group-wide
register of processing activities (some 6,000), regular KPI reports
and security incidents management;
• promotion of corporate initiatives and the exchange of best
practices among units, including workshops and online training
courses;
• special training on data protection for DPOs and data controllers;
• constant monitoring of regulatory developments to update and
consolidate criteria, methodologies and documents; and
• employee training and awareness
Annual report 2021
66
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
• We were co-leaders of the Cyber Experts working group to share
cyber intelligence at the European Financial Services Roundtable
(EFR);
• We officially joined Europol’s NoMoreRansom initiative that offers
free resources to ransomware victims; and
• We provided resources and specialist training (e.g. on forensic
engineering) to help government agencies and conducted joint
operations with the police.
In 2021, we also updated our Cyber security and IT conduct policy,
which sets out the acceptable uses of Santander’s IT equipment and
services in order to protect the bank. The policy explains risk areas,
misuse and how to avoid, mitigate and manage reputational and
commercial risks according to our cyber security rules. It also dictates
how the Group and subsidiaries should manage the technology, work
implements and information provided to employees in order to
prevent legal, reputational or cyber-related incidents.
Cybersecurity
At Santander we have embedded cyber security in our culture. The
objective is to promote behaviours to protect our customers’
information and the Group. Our employee performance review
includes cyber security within its Risk component. In 2021, we give
training and advice to our payment operators, information
technology (IT) technicians, developers, executives and board
members, with an updated mandatory training course on cyber
security.
Our campaigns to spread awareness on digital channels help our
customers and society stay safe online. In 2021, we launched a new
cyber security campaign through our corporate sponsorship of Rafael
Nadal to reinforce messages of confidence in online banking and
good online habits. We continue to spread awareness through
special websites, social media campaigns, targeted announcements
and online workshops.
We’re working with public- and private-sector organizations to
promote knowledge sharing and cooperation on cyber security. In
2021, Santander showed leadership and went beyond basic
information exchange in the fight against cyber crime:
• We headed the Ransomware Threat Cell working group as part of
the World Economic Forum's (WEF) public-private Partnership
Against Cybercrime initiative;
Cybersecurity is the responsibility
of everyone at Santander
For more details on employees'
cybersecurity training, see the
section 'A talented and
motivated team' in this chapter. management' in the 'Risk
For more details on our
cybersecurity plan, see section
'6.2 Operational risk
management and compliance'
chapter.
93%
93%
78%
81%
of employees can identify risks in
their job every day
of employees see cyber security
as a top priority
of employees feel encouraged by
managers to report important
information, even bad news
of employees say they can report
unethical conduct without fear
of reprisal
Source: Global engagement survey 2021
Annual report 2021
67
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Responsible procurement
GRI 102-9, 102-10, 103-1, 103-2, 103-3, 204-1, 308-1, 308-2, 414-1 and 414-2
Being responsible also
involves our suppliers
ó
Third-party certification policy
Responsible behaviour principles for suppliers
Risk control
Whistleblowing channels
Our third-party certification policy provides a common methodology
for subsidiaries to select, approve and evaluate their suppliers. Its
responsible conduct principles set out standards for all Group-
certified suppliers in regard to usual service issues (like price and
service quality) as well as diversity, inclusion, human rights and
sustainability.
Santander has three supplier control and audit processes to uphold
the policy and our corporate values.
In 2021, we reaffirmed our commitment to responsible purchasing
and set two initiatives in motion to assess our suppliers’ compliance
with environmental, social and governance (ESG) standards.
• ESG standards in procurement: We surveyed the top 200 high-risk
suppliers in our geographies (in particular, Spain, Portugal, the UK,
Poland, the US, Mexico, Brazil, Argentina and Chile) to spot ESG
risks. The survey had 18 questions that addressed such topics as
carbon footprint, gender inclusivity, disability, flexible work
schemes, minimum wage and good corporate governance
practices. It covered 74% of selected providers, as the rest did not
provide answers. Of those, we recognized a high number carried
potential ESG risks (49%). Thus, we created remediation plans that
must be implemented to attain a level of risk the Group can
tolerate.
The main weaknesses we found in the supply chain are the lack of
environmental policy, certification (such as the ISO 14001) and
greenhouse gas (GHG) reduction targets; in good governance, they
were each organization’s lack of proof of remuneration policies
and missing content in their codes of conduct.
As a result, in 2022 we will introduce ESG standards into critical
supplier hiring. We expect to expand the initiative to our Top 1,000
high-risk suppliers.
• ESG supplier standards: We use questionnaires from business
tenders to compile additional information on the corporate
governance and the social and environmental impact of our
suppliers in service categories involving intensive labour (such as
travel and energy).
We support the local economy. Santander has 6,976 certified
A
and 26.9% of all new suppliers in 2021
suppliers (-19% from 2020)
were certified with the inclusion of environmental and social criteria.
B
Through Aquanima
, we delivered 8,401 contracts (-5% compared to
2020) to 4,808 suppliers (+5% compared to 2020). 93.7% are based
in the same location where we procure services and account for
95.8% of our total purchasing (-0.7 pp from 2020).
We plan to roll out our ethical channels for suppliers in our core
markets to our other geographies next year.
In 2021, we tailored our response to suppliers (especially those most
vulnerable) to meet their most urgent needs.
To ensure our suppliers’ income remained steady during the crisis,
we continued to pay them for basic services, extended credit lines to
provide them with liquidity, paid invoices early and shortened
payment periods (among other measures). In particular, Santander
España and Corporate Centre reduced payment periods from 11.2
days in 2020 to 9.7 days in 2021, delivering on the Group's
commitment to supporting its suppliers.
We prepared and closely monitored several recommendations based
on best practice to make sure measures will be applied consistently
across the Group.
Risk control
→ In 2021, we set up our supplier risk management platform in our
Designed to rationalize and combine supplier
core markets.B
management and critical reporting, it enables us to consolidate
certification information for all suppliers.
→ Last year, we expanded our supplier risk assessment team. It
reviews our essential suppliers’ cyber security, business continuity,
physical security, facilities and data protection. In 2022, we will add
new topics for evaluation (e.g. ESG, ABC, etc.).
→ We list our core suppliers of goods and services by region
according to the risks previously mentioned.
→ We closely monitor and report regularly on our suppliers to senior
management and banking regulators (e.g. ECB, PRA and OCC). In
2021, indicators for supplier risk and our ability to identify and
mitigate them improved considerably.
A. In 2021, we lowered total volume after revising and consolidating suppliers.
B. Except for Poland, which has its own system.
Annual report 2021
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Shareholder value
GRI 102-23, 102-24, 102-27, 102-28, 102-36 and 102-37
Shareholder engagement
As a responsible bank, we seek to match our interests with our
shareholders’ expectations, create long-term value and inspire their
and broader society’s lasting loyalty.
We demonstrate our commitment to transparency for shareholders
through constant, fluid communication with them to make sure
managers and governing bodies will hear their opinions.
>3.9
million
shareholders
(-81,895 vs 2020)
Shareholder remuneration
GRI102-36, 102-37
Following the European Central Bank’s (ECB) announcement that it
would lift its recommendation to limit shareholder remuneration
until 30 September 2021, the board of directors approved a cash
dividend and share buyback worth 1.7 billion euros (40% of first-half
underlying profit) as shareholder remuneration from 2021 profits.
The board of directors voted to submit a resolution at the 2022
Annual general meeting to approve a final cash dividend in the gross
amount of 5.15 eurocents per share, worth approximately 865
million euros, in addition to a a Second Buyback Programme worth
865 million euros that must be approved by the ECB.
Banco Santander stock
Banco Santander shares trade in Spain, Mexico, Poland, the US (as
American depository shares) and the UK (as CREST depository
interests).
For further details on Santander's
shareholder engagement, see sections '1.4
Engagement with our shareholders in 2021'
and 3. Shareholder. Engagement and general
meeting'in the Corporate Governance
chapter.
For more details on Santander's shareholder
remuneration, see section '3.3 Dividends and
shareholder remuneration' in the Corporate
Governance chapter.
For more details on the Santander share, see
section '2.6 "Stock market information'in the
Corporate Governance chapter.
SHARE CAPITAL
OWNERSHIP
GEOGRAPHICAL DISTRIBUTION
OF SHARE CAPITAL
A
Board
Retail
shareholders
Institutional
investors
Americas
Europe
Rest of the
world
A. Shares owned or represented by directors. For more details on shares owned and represented by directors, see 'Tenure and equity ownership' in section 4.2 and subsection
A.3 in section 9.2 'Statistical information on corporate governance required by the CNMV' of the 'Corporate Governance' chapter.
For more details, see section 2.1.
'Share capital' in the Corporate
Governance chapter.
Annual report 2021
69
1.05%39.63%59.32%1.47%22.44%76.09%
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Communication with shareholders, investors and analysts
GRI FS5
Shareholder and investor relations priorities in 2021:
→ Digital transformation and better shareholder experience.
Continued enhancement of online communication and assistance
channels. Streamlining the general meeting proxy and voting
platform on the website so shareholders could exercise their rights
at the 2021 AGM according to Directive (EU) 2017/828; and holding
virtual events to report on the Group’s strategy and results.
→ Regular communication with shareholders, investors, analysts and
ratings agencies to earn their trust.
→ Reporting on the Group, its shares, and shareholder benefits.
→ More personalized shareholder assistance on the channels that
best fit their needs, and higher satisfaction based on shareholder
surveys.
→ Simple products and exclusive benefits on santander.com and our
shareholder and investor app, plus university scholarships for
shareholders and family members with disabilities — 60 grants
awarded in 2021 — and other initiatives.
→ A stronger image in the Group's markets. Our Investor and
shareholder relations team was recognized by such prestigious
magazines as IR Magazine and Institutional Investor, and by
Asociación Española de Expertos en la Relación con Clientes
(Spanish association of customer relations experts or “AEERC”) and
OZ for our efforts to integrate new channels through WhatsApp
Business.
ESG indices and analysts
GRI 102-12
For 21 years in a row, Santander has featured in the Dow Jones
Sustainability World Index (DJSI World), which comprises 242
companies, including 24 banks. Our score in 2021 was 85 points out
of 100, just four points below the highest (13th place among banks).
We achieved top marks in materiality, environmental reporting,
financial inclusion, social reporting and operational eco-efficiency.
Our performance was recognized by S&P Global with an upgrade to
Silver Class (from Bronze) in its Sustainability Yearbook (published in
2022).
MSCI also raised Santander’s ranking considerably, from BBB to AA.
In 2021, our CDP score improved from B to A-, putting us among the
leading groups of financial institutions and above the Financial
Services sector average, which was B.
Sustainalytics also improved our rating, raising our score from 27.1
to 23.9 with higher-than-average corporate governance, product
governance, resilience, human capital management and data privacy
and security.
We retained our "advanced" classification in the Vigeo Index with 61
points, beating the industry average on environmental and corporate
governance matters.
We featured in the Bloomberg Gender-Equality Index (BGEI) for the
seventh year running. Our score improved significantly from 85.13
points to 90.26, which is above the industry average (72.69). We are
the highest-ranked bank in the Index and the second company
overall. The bank obtained the maximum score in the disclosure
component and in Pro-Women Brand.
We are the first IBEX company to receive AENOR's Good Corporate
Governance Index certification, achieving the highest score. It
measures such aspects as the board of directors (from different
angles); participation at the general shareholders' meeting;
transparency, anti-corruption and fraud; sustainability and
Environmental, Social and Governance (ESG) criteria.
18,695
responses from
shareholders and investors
through studies and
qualitative surveys
116
events with shareholders
>1,000
communications (mainly on
digital channels)
942
engagements with institutional
investors (including 85 meetings
focused on ESG)
139,301
queries answered via email,
telephone, WhatsApp and video
conference
For more details, see
sections 3.1 'Shareholder
engagement’ in the
Corporate Governance
chapter.
We also improved from 4.3 in 2020 to 4.5 points out of 5 on the
FTSE4Good Index.
ISS-ESG once again awarded us its prime badge for companies with
an ESG performance above the sector-specific “Prime” threshold.
A
ESG ANALYST RATINGS
2020
Difference
2021
Versus industry
average
Score
DJSI
MSCIB
83
BBB
C
Sustainalytics
27.1
Vigeo Eiris (V.E)
62
ISS-ESG
CDP
BGEI
C
B
85.13
Shareaction
57
p
p
p
=
=
p
p
p
85
AA
97th percentile, 13th
out of 242 banks
3% AAA 29% AA
among 191 banks
23.9
26th percentile, 268th
of 1045 banks
61
C
A-
11th of 31 diversified
banks
Decile rank of 1
Among 20% of banks
with best score
90.26
89
1st bank and 2nd
overall
20 points above
industry average
A. Source: Latest score available to each analyst in 2021.
B. Read the MSCI disclaimer on page 16.
C. Sustainalytics risk rating: the lower, the better.
Annual report 2021
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Promoting inclusive
and sustainable growth
Supporting the
green transition
Financial inclusion
and empowerment
Sustainable
investment
We're fully committed to helping meet the objectives of
the Paris Agreement while supporting our customers'
transition to a low-carbon economy
We help people who are at risk of financial exclusion by
giving them access to basic financial services, boosting
entrepreneurship and employment, and providing them
with the skills they need to manage their finances
efficiently
We embed ESG in our decision-making, offering a
sustainable value proposition for customers, and an
active ESG engagement
Support for higher education
and other local initiatives
We support education and social welfare in the
communities where we operate, with a special focus on
higher education as the driving force behind society's
progress
Annual report 2021
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governance
Economic and
financial review
Risk management
and compliance
Supporting the green
transition
Tackling climate change is a key objective at Santander. We
support the Paris Agreement goals and our ambition is to be net
zero carbon emissions by 2050. Our main lines of action are:
GRI FS7, FS8
ó
Aligning our portfolio
to meet the Paris
Agreement goals
ó
Supporting our
customers
in the green transition
ó
Reducing
our environmental
impact
ó
Risk
Align portfolios to
contribute to
limiting temperature
increases to 1.5ºC in line
with NZBA and NZAMi
Help our customers
transition to a low carbon
economy
Remain carbon neutral
and source electricity
from renewable energy
by 2025
Integrate climate
considerations into risk
management
frameworks. Ensure we
meet regulatory and
supervisory expectations
Target
Progress
2018
2019
2020
2021
1
Green finance raised and facilitated
19 bn
33.8 bn
65.7 bn
2025/2030 target
120 bn by 2025
220 bn by 2030
Thermal coal-related power &
mining phase out
Emission intensity of power
generation portfolio
0.23
7.0 bn
0 by 2030
0.18 tCO2e/MWh in 2025
0.11 tCO2e/MWh in 2030
We set the green finance target to aid our customers' transition to a
green economy. We aim to raise or facilitate the mobilization of EUR
120 bn between 2019 and 2025, and EUR 220 bn between 2019 and
20301
.
Our exposure to sectors with decarbonization targets published in
2021 (power generation and coal) is about 2.1% of total lending on
the balance sheet and represents around 38% of SCIB credit risk
exposure to SCIB's climate concerning sectors (see 'Metrics and
2
Targets')
1
In 2021 SCIB's contribution to the green finance target includes: Project Finance (MLA): 4.5bn (based on data available on Dealogic League Tables as of 22 February 2022),
Project Finance (financial adviser): 9bn, Green bonds (DCM): 7.6bn, Project bonds: 0.3bn; Export Finance (ECAs): 0.1bn; M&A: 8bn; Equity Capital Markets: 2.9bn. For a total of
32.3bn. Information obtained from public sources, such as Dealogic, Inframation news, TXF or Mergermarket league tables. All roles undertaken by Banco Santander in the
same project are accounted for. Other sustainable finance components, such as financial inclusion and entrepreneurship, are excluded. During the 2021 financial year, an
internal audit identified a duplicate project in the TXF table for Export Finance and Dealogic for Project Finance (MLA), thereby reducing the cumulative figure at year-end 2020
by EUR 371 million.
2
“Exposure to sectors with decarbonization targets” metric measured in terms of drawn amounts, as of June 2021. "Concerning sectors exposure in the SCIB segment"
measured in credit risk exposure, in line with the Climate materiality assessment, as of June 2021.
Annual report 2021
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Our approach
In February 2021, the Group's board of directors approved the
ambition to be net-zero in carbon emissions by 2050. This applies to
the Group’s operations (which have been carbon neutral since 2020)
and emissions from our lending, advisory and investment services.
We're working to align our climate relevant portfolios with the Paris
Agreement goals and set decarbonization targets for the climate-
material sectors in our portfolio. We are committed to:
i. Ending financial services to power generation customers by 2030
if over 10% of their revenues depend on coal;
ii. Cutting our exposure to thermal coal mining to zero by 2030.
iii. Reducing the emissions intensity of our power generation
portfolio from 0.23tCO2e/MWh in 2019 to 0.18tCO2e/MWh by
2025 and to 0.11tCO2e/MWh by 2030
In April 2021, we became a founding member of the Net Zero
Banking Alliance (under the United Nations Environment Programme
Finance Initiative, NZBA), committing to:
i.
transition operational and attributable greenhouse gas (GHG)
emissions from lending and investment portfolios towards
pathways to net-zero by mid-century;
ii. set intermediate targets for priority GHG-emitting sectors for
2030 (or sooner); and
iii. prioritize client engagement with products and services that
facilitate the necessary transition in the real economy.
We are working on our decarbonization action plans, defining and
implementing the risk and business levers needed to deliver on our
portfolio net zero targets.
Our strategy
At Santander, we want to play our part in supporting our customers
and the global economy to be net zero by 2050.
We are offering our customers decarbonization solutions to help
them fulfil their climate goals. We are aligning our portfolios with the
Paris Agreement Goals and keeping our operations carbon-neutral.
Integrating climate within our risk management is key to delivering
our plan.
We have a four-pronged climate strategy and public commitments
to:
1) align our portfolio with the Paris Agreement Goals and set sector-
portfolio alignment targets in line with the NZBA and with NZAMi:
to ensure projected carbon emissions will help limit warming to a
1.5ºC rise above pre-industrial levels.
2) help customers transition to a low-carbon economy, with the
commitment to raise EUR 120bn in green finance between 2019
and 2025 and EUR 220bn by 2030; offer our customers guidance,
advice and specific business solutions; and enable them to invest
in a wide-ranging ESG proposition according to their sustainability
preferences.
Santander's climate change project is one of our strategic projects.
Progress is reviewed every quarter at the Responsible Banking Forum
and at least twice a year by the Responsible Banking, Sustainability
and Culture Committee. Also, at a senior management level, the
strategy committee and the management meeting, chaired by the
CEO, also conduct a progress check several times a year.
Santander Asset Management (SAM) joined the global Net Zero Asset
Managers initiative (NZAMi) in March 2021 as part of its commitment
to fighting climate change. To deliver on this commitment, SAM set
an interim target to halve net emissions for 50% of its AUM in scope 3
by 2030. It is also participating in investors’ climate initiatives as a
tool for driving change, delivering on its engagement plan, defining a
sectoral strategy to reduce pollution, shifting portfolio construction
gradually towards net zero, developing climate investment solutions
and maintaining leadership in climate stewardship and advocacy in
its core markets.
Disclosing our approach is key to helping markets and other
stakeholders assess how we embed climate in our processes and
policies and report on our climate-related performance. We use the
Task force on Climate-related Financial Disclosures (TCFD) as
reference. Our Climate finance report 2020-June 2021 included
information about, and expanded on, TCFD.
See our latest update on the TCFD's four-pillar framework (Strategy,
Governance, Risk management and Metrics & Targets) below.
More details on our Climate Report 2020-June
2021 available on our corporate website
See more details of the SAM strategy at "Our
net zero strategy" in the Sustainable
Investment section.
3) reduce our impact on the environment by remaining carbon
neutral and sourcing all our electricity from renewable energy by
2025.
4) embed climate in risk management; understand and manage the
sources of climate change risks in our portfolios.
Santander Asset Management operates in 10 countries and aims to
achieve net zero greenhouse gas emissions with its assets under
management by 2050, and it was the first asset manager in Spain
and Latam (excluding Brazil) to join the NZAMi. This is consistent with
Santander’s push for leadership in sustainability and the Group
commitment to be net zero in carbon emissions by 2050.
3
Assets in scope are assets with a defined Net Zero methodology, which currently amount to 54% of total AUM. For c.50% of those, SAM has carbon metrics available today.
This objective might be reviewed upwards depending on data availability.
Annual report 2021
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governance
Economic and
financial review
Risk management
and compliance
2021 highlights
→ To help deliver on our green finance target, we raised or
→ Santander's employee pension funds manager recognize the
magnitude of the challenges that climate and energy transition
pose to governments, companies and civil society. The pension
funds manager are also aware of their impact on the ability to
comply with their fiduciary duty to provide long-term risk-
adjusted returns to their members. They initiated the necessary
actions to consider employee pension plans' alignment to net
zero, showing their full support for Santander's vision and its
commitment to sustainability and climate change.
→ We continue to fight deforestation and its damage to climate
and biodiversity (especially in the Amazon). Protecting the
Amazon rainforest is critical to tackle climate change (for more
details, see our webpage on "Santander and the Brazilian
Amazon")
→ We consider biodiversity a material topic (see our materiality
assessment). Further progress in the sector is needed.
Santander participated in the Taskforce for Nature related
Financial Disclosures and a proof of concept soy pilot
coordinated by Global Canopy and UNEP FI.
→ Santander UK was a founding member of the UK National Parks
‘Net Zero with Nature’ project. It seeks to attract funding to
scale up peatland and woodland restoration across the UK. The
project will generate verified high quality carbon credits and
biodiversity units.
facilitated EUR 32.3bn (EUR 65.7bn since 2019) and harnessed
climate finance opportunities through several initiatives. (For
more details see "Supporting our customers in the green
transition" section.)
◦ The volume of greenfield renewable energy projects we have
financed or advised represents enough installed capacity to
power 9.2 million homes in a year and avoids 251 million
A
tons of CO2 emissions
during the useful life of those projects.
◦ As well as our existing Green Book products, we developed
the sustainable finance classification system (SFCS), which
enables us to identify lending towards economic activities
that contribute to climate change mitigation and adaptation
and to track these volumes consistently across the Group.
◦ We issued our third EUR 1 billion green bond to finance and
refinance renewable wind and solar power.
→ We're expanding our range of ESG products in Wealth
Management. As of December 2021, we had over €27bn AuM,
€11bn in Santander Asset Management and €16bn from third
party funds in Private Banking.
→ We reduced and offset CO2 emissions from our own operations,
after becoming carbon neutral in 2020. Furthermore, 75% of
our electricity comes from renewable energy sources. (For
more details, see 'Environmental Footprint').
→ Climate change risks and opportunities assessments are part of
our financial planning (three-year time horizons) and strategic
processes (five years). In 2021, our financial planning
considered our decarbonization targets as well as the green
finance target and the volume of AuMs under sustainable
funds. This enabled us to measure three-year projections as a
key component to support the delivery of our commitments.
A. Emissions to be avoided over the lifetime of projects, which we have financed or advised on in 2021. Emission factors from the International Energy Agency (source
updated in 2021 with 2019 data) have been used. The estimated share attributed to Santander is 66.7 million tonnes of CO2.
For more details on the Brazilian Amazon,
see section 'Environmental and Social risk
management', and "Santander and the
Brazilian Amazon"in our corporate website
Annual report 2021
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Governance
GRI 201-2, FS1, FS2, FS3
Governance bodies of Banco Santander involved in climate change management
and frequency on which climate change is presented (in brackets)
RBSCC
(at least twice a year)
Board level
Executive level
Fora
Climate-project
support
Board of directors
(as required)
Board risk committee
(as required)
Management meeting
(several times per year)
RB forum
(at least twice a year)
Climate steering group
(each two months)
Executive committee
(as required)
Core group
(monthly)
Extended group
(quarterly)
Co leads meeting
(weekly)
• The internal audit function conducted the first review of the
climate change project in 2021. It proposed new control measures
to reinforce governance.
• The responsible banking, sustainability and culture committee
(RBSCC) reviews and challenges climate change strategy and other
environmental considerations. It’s an advisory body that assists the
board with overseeing the climate change-related components of
the responsible banking strategy. It contributes to more informed
board decisions and enhanced strategic focus based on the related
risks and opportunities.
In 2021, the RBSCC held four meetings, including three on climate
change (at least two meetings covering climate are required). The
committee discussed climate change project updates; climate-
related financial risks and opportunities; roadmaps to fulfil TCFD
and ECB expectations; discussions to approve the net zero ambition
and fulfilment of the bank’s net zero commitments; Santander’s
sustainable finance proposition to help our customers’ transition to
a low-carbon economy; plans for business lines; and progress on
our carbon footprint and green finance commitments.
• To streamline our governance, we created the Responsible
banking forum (RB Forum). It executes the responsible banking
agenda across the Group, drives decision-making on responsible
banking issues and ensures the execution of any mandates from
the RBSCC, other board committees and the board of directors. It
also ensures alignment on key issues, as well as the review and
escalation of reports to the RBSCC.
The RB Forum meets at least six times per year. It reviews climate
change and net zero strategy before discussion at the RBSCC. In
2021, the RB Forum met four times and addressed such climate-
related topics as net zero strategy, sustainable finance and carbon
offsetting.
• The Group management meeting, chaired by the CEO, receives
progress reports on the responsible banking agenda and on
climate change several times a year.
• Specialist working groups cascade Santander’s climate change
agenda. It includes such matters as TCFD implementation,
supervisors’ expectations, climate commitments and governance,
throughout the Group. The climate project and working group, co-
led by SCIB, Risk and Responsible Banking with members from
several functions and geographies, meets weekly to monitor and
drive progress with the climate change project roadmap; monthly
with the corporate areas involved to ensure headway; and
quarterly with all subsidiaries and areas.
• A climate steering group meets every two months. Its members
are the Group chief credit officer, the global head of Enterprise-
wide risk management, the chief of staff to the global head of
Santander Corporate and Investment Banking, the global head of
Responsible banking, the head of the chair’s office, the director of
group strategy and the senior adviser on responsible business
practices to the executive chair; and receives feedback from
executive directors as part of the RB Forum.
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Corporate
governance
Economic and
financial review
Risk management
and compliance
• Santander has several working groups that meet regularly to drive
the climate change agenda: Santander Spain's climate change
project, coordinating all local climate initiatives; Santander UK's
climate leadership group, supporting the UK's senior leaders
ambition to be a leader in climate matters; the public policy
sustainability working group, advising on climate, regulatory
developments and the Group's positioning in policy debates; the
footprint working group, in charge of how we measure and reduce
our internal carbon footprint; and the sustainable bond working
group, overseeing the issuance of sustainable bonds.
• In 2021, the short-term variable pay that generally applies to
Group employees took into account the progress made in towards
ESG objectives (e.g. green finance and climate change goals).
• For 2022, the board proposed (resolution at the 2022 AGM) the
inclusion of ESG metrics in the long-term incentives of senior
executives. They include green finance and decarbonization targets
consistent with our commitments: namely setting targets for ten
sectors before 2024 to fulfil NZBA requirements; and aligning our
Power Generation portfolio gradually to ensure delivery on our
mid-term target for 2025.
Management and staff training
GRI FS4
In January 2022, the board of directors completed a third climate
change training programme. It included modules on the Paris
Agreement, net zero, portfolio alignment and climate risk
management. In 2021, the Santander UK board and senior executives
took part in exercises on climate risk and stress tests. Santander
España's board and senior executives received climate change
training.
We launched "Climate Dialogues" for senior managers to discuss
critical climate-related topics in four sessions with renowned experts
Alzbeta Klen (IFC Director and Global Head of Climate business), Andy
Marsh (President and CEO of Plug Power Inc.), Hakan Samuelsson
(President and Chief Executive of Volvo Cars) and David Antonioli
(Verra CEO).
For more details on the RBSCC, see section
4.9 'Responsible banking, sustainability and
culture committee' in the Corporate
governance chapter.
For more details on our policies and
governance, see the 'Governance' section of
this chapter.
For more details on the RB Forum, see our
Climate Report 2020-June 2021 available at
our corporate website.
Our General sustainability policy is available
on our corporate website
www.santander.com
In March, we held a CDP-sponsored workshop on climate change for
risk analysts. Over 182 attendees talked about the physical and
transition risks of climate change. A follow-up CDP webinar on
climate change (held in April with around 80 attendees) delved
deeper into the TCFD's reporting standards and recommendations.
In December, the chairs of the responsible banking, sustainability and
culture committee from the group’s geographies attended a special
session on climate change and net zero.
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governance
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Risk management
and compliance
Risk management
GRI 102-15, 102-29, 102-30, 201-2
▪ We continue to make progress with embedding climate and
environmental risks in our key risk management processes. In
2021, we developed a quantitative metric for our risk appetite
statement.
▪ We made significant progress with the credit granting process and
with developing a more restrictive risk policy on sensitive sectors
and activities that could damage our reputation. All SCIB corporate
customers (groups) now have a climate assessment as part of the
internal credit ratings.
▪ In 2021, we adapted our risk appetite to include specific limits
regarding our exposure to coal customers. This will ensure the
fulfilment of the decarbonization targets for coal-mining and coal-
related power generation customers as well as aiding climate risk
management. (see 'Metrics and targets')
▪ In early 2022, the new version of the Environmental, social and
climate change risk management policy was approved with new
restrictions that will help us decarbonize our portfolios and reduce
climate-related risk, including new criteria which prohibits
financing and advising on new oil upstream clients, except for
transactions for the specific financing of renewable energy, and
direct financing of oil upstream greenfield projects.
▪ We launched initiatives to meet regulatory requirements, such as
the CBES in the UK and the SSM stress tests for 2022.
Furthermore, senior managers were more involved in overseeing
risks associated with climate change.
▪ Santander’s Economic research department analyses the
impact of climate change based on the published scenarios
from the Network for Greening the Financial System, the 2021
Biennial Exploratory Scenario and other external sources.
▪ We introduced a climate change rationale into Santander’s
baseline scenario to assess macroeconomic impacts on our
portfolios. We also developed alternative scenarios to
measure the impact other climate assumptions have on
economic variables. Our climate scenarios model impacts on
different economic sectors.
▪ We align climate scenario development with supervisory
expectations as reflected in the ECB guide on climate-related
and environmental risks published in November 2020.
▪ We conduct regular materiality assessments to identify the most
climate material portfolios. They cover more than 80% of our
balance sheet and include assessments of residual value, strategic,
market and liquidity risks.
▪ Our Risk taxonomy and heat maps, based on TCFD and UNEP FI
programmes, form the basis of a qualitative classification of
portfolios and their potential exposure to climate risks. The
internal climate change risk taxonomy recognizes sectors that
are directly exposed to physical and transition climate risks.
▪ We use materiality assessment findings as inputs to monitor,
measure and report on financial impacts and to develop new
metrics for risk management, credit policies and business
strategy.
▪ We are developing internal tools and models to assess climate-
related risks and impacts in our portfolios:
▪ KLIMA tool: To manage climate-related risks at corporate and
unit level, considering transition and physical risks, taxonomy
and heatmaps for different sectors and geographies. It is a key
element to manage climate-related risk in the short, medium
and long term following climate scenarios.
▪ Advanced models: Santander performs internal climate
scenario analysis and stress tests using a platform acquired
from an external vendor, which follows a UNEP FI
methodology supplemented with external information and
scenario expansion. The platform is complemented by the
materiality assessment exercises and heatmaps related to
physical and transition risk.
MATERIALITY ASSESSMENT - CLIMATE RISK ANALYSIS AND HEAT
MAPPING OF PORTFOLIOS
September 2021 - Billions euros
Power (conventional)
of which power generation
clients with > 10% of revenues
coming from coal
Power (Renewables - Project
Finance)
Oil & Gas
Mining & metals
of which Coal Mining
Transport
Real Estate
Agriculture
Construction
Manufacturing
Water supply
Climate sectors
Other sectors
Total portfolio
TR PR
SCIB
25
Other
segments
2
4
12
19
9
4
27
6
3
20
33
3
157
59
216
0
0
0
2
0
94
361
4
7
14
1
484
161
646
Low
Moderately low
Medium
High
Very high
TR: Transition Risk. PR: Physical Risk
SCIB : REC (on and off balance sheet lending + guarantees + derivatives PFE),
Other segments : Drawn amount
Other sectors= SCIB and Corporate NACES outside of risk taxonomy perimeter //
Individuals and SCF: Cards and Other Consumer
Other segments include Individuals, SCF, Corporates and Institutions.
For more details on our risk management
approach and progress, see section 10
'Climate and Environmental risk' of the Risk
management and compliance chapter.
For more details on our Climate Report 2020-
June2021, see our corporate website.
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Metrics and targets
Santander aims to achieve net zero carbon emissions within its own
operations and customers’ financed emissions by 2050, focusing
initially on the most material sectors to climate risk like power
generation, and oil and gas. We’ve been publishing the PACTA
analysis of our power generation portfolio since 2019.
In April, Santander became a founding member of the Net Zero
Banking Alliance (NZBA). We committed to set and disclose
decarbonization targets for the most GHG intensive sectors. In 2022,
we will engage with NZBA working groups to help set specific
guidance and further develop NZBA guidelines.
We disclose performance data on scope 1, 2 and 3 emissions (see
'Environmental footprint'), along with other climate relevant metrics
(e.g. energy consumption). We also report on our renewables and
carbon neutrality targets.
Regarding our scope 3 emissions (category 15 related to financing),
we began to disclose the financed emissions from our customers in
2021, following the Partnership for Carbon Accounting Financials
(PCAF, which we became a member of in September 2021) standard.
This means we can assess the GHG emissions linked to our portfolios
and devise alignment strategies.
We are setting alignment strategies and practical decarbonization
targets using emissions data from our customers, which need to be
accurate enough to monitor real progress. We are working on
improving these data through external databases and model
developments using information from our customers.
As we set and publish future decarbonization targets, we will
disclose financed emissions progressively starting with the most
concerning sectors, in line with the roadmap described below.
We have been carbon neutral in our own operations since 2020 by
reducing and offsetting own emissions and increasing the use of
renewable energy.
Beyond portfolio alignment, we are also working to obtain financed
emissions for our balance sheet, albeit with lower-quality emissions-
related data to support also different disclosure requirements.
Below we provide information about our third PACTA exercise and
more details about decarbonization targets as part of our TCFD
disclosures.
Portfolio Alignment
Santander publicly supports the Paris Agreement on climate change.
We joined the UN Collective Commitment to Climate Action (CCCA)
when it was launched in September 2019. We announced our
ambition to be net zero in carbon emissions by 2050 in our 2020
Annual Report. We were founding members of the NZBA in April
2021 to help us progress in our net zero ambition.
The most carbon-intensive sectors for Santander, as identified in the
climate materiality assessment, are power generation, oil and gas,
transport and mining and metals. We analysed how our customers in
those sectors are positioned in terms of current and expected
emissions from their activities to align with the Net Zero pathway
towards 2050.
Progress on the Collective Commitment to Climate Action
To fulfil UNEP FI Net Zero Banking Alliance (NZBA) commitments, we
need to set and publish sector-specific, scenario- based targets to
align our portfolio with the Paris Agreement goals.
We follow NZBA guidelines and recommendations and consider our
climate materiality assessment to prioritize the most carbon
intensive sectors where data and methodologies are available.
Our methodology relies on financial information from our customers
(total equity, total debt, total assets, company valuation, etc.), as well
as emissions and production data. Where no public emissions data
exist, we estimate emissions based on a proxy (average emissions by
industry, country, etc.). Once we have an idea of our customers' total
emissions, we can apply our attribution factor in line with the PCAF
approach to determine the emissions Santander financed.
Roadmap for delivery on Net Zero
The ambition for many sectors to have net zero emissions by 2050
depends on several exogenous factors. Data and methodologies
need to be more widely available and reliable before we can
accurately measure emissions and set decarbonization targets.
For the most concerning sectors identified in the materiality
assessment (power, oil and gas, mining and metals, and transport),
we’ve been measuring the GHG emissions from our customers’
activities and Santander's share of emissions, per PCAF guidelines.
Those sectors are considered to have more GHG emissions directly or
indirectly linked to their activities and value chains as well as the
most potential to reduce emissions and help achieve the Paris
Agreement goals.
We plan to set decarbonization targets based on emissions metrics
for: oil and gas, mining and metals (coal-related) and aviation within
our transport portfolio by September 2022 or earlier in line with our
NZBA commitment. Those decarbonization targets must be
compatible with helping our customers transition to a greener
economy.
Subject to the availability of data and methodology, we will set
decarbonization targets for mortgages, commercial real estate, auto
manufacturing, auto lending, cement, agriculture and some sub-
sectors before the end of March 2024.
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Power generation: focus on SCIB corporate customers
Production capacity across technologies (%). June 2021
2021
2020
A. Corporate Economy: The aggregate/combined production of all assets in the Asset Resolution's database, which captures approximately 70% of total world CO2 emissions
(CO2 is the largest greenhouse gas (GHG) contributor to human induced climate change). Considering the inclusion of other GHG (such as nitrous oxide and methane – relevant
in agriculture), the database captures approximately 60% of total GHG emissions. Based on data from the 2018 World Energy Outlook from the International Energy Agency.
Power generation
We're committed to aligning our power generation portfolio with
the Paris Agreement by 2030.
We're ending financial services to power generation clients by
2030 if over 10% of their revenue depends on thermal coal.
Power generation is responsible for a significant part of the
anthropogenic greenhouse gas (GHG) emissions causing global
temperatures to rise. The power sector relies on technological
alternatives that produce varying levels of emissions: coal, oil and
gas-fired power plants produce significantly high emissions as
opposed to renewable energy sources (wind and solar). Therefore,
the technology mix of our power generation clients – and of our
portfolio – is significant.
As of June 2021, our SCIB power generation portfolio total exposure
including corporates and project finance was around EUR 34.7 billion.
Our project finance portfolio in renewables accounted for EUR 11
billion.
As explained above, the technology mix of our power generation
corporate clients is key to track our progress on reducing emissions.
We conducted a PACTA exercise, as we had done last year, to
calculate the technology mix of our SCIB corporate clients in the
power generation sector (as shown in the graph above). The
percentage of production capacity of renewables financed by
Santander grew 2.92 percentage points and coal fell 2.46 points. Gas
technology increased 3.36 points, offsetting the -4.09 p.p. reduction
in coal and hydro technology, which was mainly due to intense
droughts in Brazil.
We estimated the current and future emissions of our power
generation portfolio and proposed the first GHG decarbonization
targets for 2025 and 2030.
In setting our targets, we considered the expected trajectory of our
portfolio and how it compares with the latest recognized scenario to
achieve net zero emissions by 2050: “International Energy Agency
(IEA) – Net Zero Emissions”. We based the pathway on the SDA and
the convergence ambition approach. The SDA assumes global
convergence of key sector’ emissions intensity by 2050.
Based on 2019 portfolio data, the emissions intensity of our power
generation portfolio stands at 0.23 tCO2e/MWh. Our commitment
is to reduce it to 0.18 tCO2e/MWh by 2025, and to 0.11 tCO2e/
MWh by 2030, in line with the Paris Agreement.
Gas will play a relevant role in the transition of power generation in
many countries, enabling them to avoid using more polluting
production alternatives (such as coal-fired power plants) while
deploying renewables capacities in line with their Nationally
Determined Contributions (NDCs). That's why we're drawing up
internal guidance for acceptable gas power generation projects to
work with, aimed at reducing the GHG of our portfolios. Our
approach aims to support a fair transition in those countries and
including the general energy market situation of that country; energy
mix pathway (based on NDCs); to lower average emissions of the
energy-mix in the geography so it replaces production assets with
higher emission levels; the use of advanced, low-emissions
technology; and, in developed economies, preparedness to transition
in the future (Hydrogen readiness; carbon capture modules; etc).
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27.8%9.3%28.6%11.8%4.7%3.6%5.5%3.4%27.2%28.2%26.1%24.8%17.9%23.4%18.7%27.5%5.9%11.9%5.6%11.8%16.5%23.6%15.5%20.7%CoalOilGasHydroNuclearRenewableCorporateEconomy (A)SantanderCorporateEconomy (A)Santander
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Coal
In February 2021, in our 2020 Annual Report we committed to
cutting our worldwide exposure to thermal coal mining to zero by
2030.
To meet the coal targets, in 2021 we did the following:
• Customer engagement: In 2021 we engaged with our customers
impacted by the two coal decarbonization targets to analyse and
assess their coal exit-plans.
There are only 7 coal-mining customers (representing €4bn in risk
exposure) and only 18 power generation customers with more
than 10% revenues coming from thermal coal (representing €3bn
in risk exposure, with an average weighted revenue from coal of
34.8%).
In our engagement we are offering them help to
transition and decarbonize. The majority of the customers we
engaged with have transition plans and are receiving our support
to close, transform or divest the coal mines or coal-fired power
plants.
• Risk Appetite: We set new limits to monitor and manage our
exposure to customers impacted by our coal commitments. These
limits will ensure we meet the two coal decarbonization targets by
2030, although the exposure to these customers may not have a
linear decreasing trend as we work with them to help them
decarbonize.
• Environmental, social and climate change risk policy: We
outlined new criteria regarding thermal coal to ensure the
decarbonization of our portfolios (for more details, see the 'Risk
management' section).
• Long-term incentives: We added the power generation portfolio
decarbonization target (% of emissions intensity reduction for
power generation) to the remuneration scheme for Santander's
most senior executives (for more details, see the 'Remuneration'
section).
Oil and gas
The oil and gas sector represents a significant amount of the GHG
emissions produced worldwide, and needs a clear transition pathway
to decarbonize. Many economic activities (power generation,
transport, manufacturing, etc.) are still heavily dependent on oil and
gas.
The risk limits for SCIB oil and gas customers have been adjusted to
consider their climate change transition plans. As a result, a tiering
has been established and risk management limits have been
modified accordingly, while a strict monitoring of transition plans'
execution is being implemented. Further actions and levers are being
explored within the current work to set alignment targets for this
sector.
In early 2022, we updated the ESCC risk policy to include new
restrictions that will help us decarbonize our oil and gas portfolio,
which prohibits financing and advising on new oil upstream clients,
except for transactions for the specific financing of renewable
energy, and direct financing of oil upstream greenfield projects.
Mortgages and Real estate
This sector is material to Santander's exposure. Residential and
commercial buildings generate a significant amount of GHG
emissions, given their overall energy consumption in this sector adds
up to a significant amount of GHG emissions. Accounting for the
emissions associated to the collaterals and assets that Santander
finances requires extensive data collection (energy efficiency labels,
property surface area in sqm, etc.).
To fulfil our net zero ambition within this sector, we're progressing
with the most material portfolios to assess the emissions baseline
with enough data quality to set decarbonization pathways, strategies
and effective commercial plans. We're working on our mortgage
portfolios in the UK and Spain, which respectively comprise over 63%
and 16% of the Group's mortgage exposure.
To measure the energy efficiency of mortgage collaterals, we have
been working on gathering energy performance certifications (EPC):
4
, as it is a
EPCs are not comparable across geographies
measurement scale defined locally, and depends among other
things on local policy and weather conditions. Therefore, each letter
label corresponds to different levels of emissions per surface area
per geography or EPC standard. In many geographies there is a
significant lack of EPCs, and EPC data should be estimated with real
data and supplemented with estimation models.
The first breakdown of the energy efficiency labels (EPCs) of UK
mortgage collaterals, according to the UK's local EPC scale, is ("A"
being the best performance, and "G" the worst): "B" for 13%,"C" for
23%, "D" for 42%, "E" for 17%, "F" for 4%, "G" for 1%.
At Santander España, the estimations of the portfolio EPC
distribution, according to the Spain's EPCs local scale, is: "A" for
1% ,"B" for 2%,"C" for 4%, "D" for 14%, "E" for 63%, "F" for 8%, "G" for
8%.
Both in the UK and Spain the breakdown of EPCs in our mortgage
portfolio are broadly aligned with each geography EPCs' profile.
Transport
The automotive sector is material to the bank's exposure and
emissions. SCF's Consumer business division is working on assessing
the carbon footprint of our auto-loan portfolios. In H2'21, SCF UK
began measuring 'green assets' financed within the portfolio and
created a CO2 emissions financed dashboard that identifies the green
assets financed. We're helping auto-manufacturers invest in new
technologies to produce more efficient vehicles and reduce the
average grCO2/km of the ones they produce. We'll also set an
alignment target as part of our NZBA commitment and will be
analysed along with auto lending as the two are related. (Please see
the agreement signed with Ferrari below)
Aviation is also a relevant sub-sector that accounts for a significant
amount of emissions within the transport sector. We're assessing
transition plans and carbon footprint to set decarbonization targets
by September 2022.
4
According to PCAF databases, as an example, the "D" EPC rating in England has an estimated emissions intensity of 0.03045 tCO2/m2, while the "E" EPC rating in Spain has an
estimated emissions intensity of 0.023739 tCO2/m2.
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Metals
Metals manufacturing, which produces a significant amount of GHG
emissions should be decarbonize replacing some of the current
technologies used for combustion and electricity.
We have been assessing our steel and iron portfolio to understand
its level of emissions and decarbonization plans. It is on the right
track towards net zero. As indicated in our target roadmap published
in our Climate finance report, we will be publishing our target for that
sector no later than September 2022.
Though we have few customers and a very little exposure to
aluminium. We'll keep working with our customers in that sub-
sector to help them decarbonize their operations.
Agriculture
Agriculture is a key sector on the path to net zero; however, it is also
one of the most challenging in terms of data and alignment
methodologies. We participate alongside other major banks in the
Banking for Impact on Climate in Agriculture (B4ICA) initiative
coordinated by WBCSD in partnership with UNEP FI and PCAF.
NZBA and GFANZ engagement and the collective
commitment to climate action
We remain engaged with the UNEP FI on climate. Since 2018, we
have participated in TCFD recommendations pilots I & II, making
headway with an internal methodology to assess climate change-
related impacts on our credit risk exposures. As part of the Collective
Commitment to Climate Action and the Net Zero Banking Alliance,
we participate in working groups aimed at strengthening the
initiative and further developing other initiatives.
We're also in the Glasgow Financial Alliance for Net Zero (GFANZ),
which is the umbrella organization for the finance industry from the
2021 COP in Glasgow and beyond. Our Group Executive Chair is a
member of the Principals Group that sets the strategic direction for
GFANZ.
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Supporting our customers in the green transition
SASB FN-IB-410a.2, FN-IB-410a.3
As one of the world’s largest banks we have a responsibility and an
opportunity to support the green transition and encourage more
people and businesses to go green. Enhancing our sustainable
finance proposition across all our divisions and regions is critical to
meet our climate ambition. To help us achieve this, we developed in
2021 the Sustainable Finance Classification System (SFCS), an
internal guide that enables us to recognize sustainable finance
activities and measure them consistently throughout the Group.
Corporate and Investment Banking
Building on our strong track record of renewable energy finance and
advisory services, SCIB aims to introduce ESG and sustainability into
all sectors and products in response to increasing demand from
corporates and investors and in pursuit of Santander's own
commitments. Our ambition is to become the leading financial
platform for energy transition-enabling technologies by supporting
our clients in achieving their sustainability objectives and
transitioning towards more responsible, social and environmentally
sustainable business models.
In 2021, SCIB appointed a Global Head of ESG. The team is focused
on three main areas:
• ESG solutions, covering ESG analytics, sustainable capital markets/
financing and ESG product development
• Corporate Finance
• ESG Factories, to partner with the Group’s businesses to develop
specific solutions for other segments.
Financing renewable energies
For the last 10 years, we've been leading the banking industry in
renewable energy finance. We are among the top 3 banks in terms of
number of deals and the top 5 in deal value globally.
The greenfield renewable energy projects that we have financed or
advised in 2021 have a total installed capacity of 13,604 MW, and
A
. We also helped
prevent the emission of 251 million tons of CO2
expand, improve and maintain renewable energy brownfield projects
that have a total installed capacity of 1,776 MW (more details in the
graphs below).
Our renewable energy greenfield and brownfield portfolio totalled
more than EUR 12.9 billion by the end of the year. Spread over 326
transactions, it accounts for approximately half of our project finance
portfolio.
Santander Corporate & Investment Banking (SCIB)
aims to be a leading bank in providing sustainable
finance and ESG solutions.
GLOBAL RENEWABLE ENERGY PROJECT FINANCE VOLUME
BY MLA - FY 2021
A
Bank 1
Bank 2
Banco Santander
Bank 3
B
Rank Mandated Arranger
1
2
3
4
5
6
7
8
9
10
Peer 1
Bank 4
Bank 5
Bank 6
Peer 2
Bank 7
Vol. (USDm)
6,421
5,534
5,280
4,228
3,504
3,084
3,071
3,003
2,796
2,703
Nº. %share
6.6
82
5.7
68
5.4
129
4.3
64
3.6
63
3.1
40
3.1
40
3.1
40
2.8
53
2.8
30
A. In the lead arranger category of Dealogic and Bloomberg New Energy Finance
league tables for project finance
B. Peers are BBVA, BNP Paribas, Citi, HSBC, ING, Itaú, Scotia Bank and UniCredit,
which are similar in size to Santander.
The generation capacity of the renewable energy
projects we have financed or advised in 2021
amounts to the yearly consumption of 9.2 million
households.
B
A. Emissions prevented over the projects' useful lifespans, we have financed or
advised, in 2021 based on: emissions factors figures from the International
Energy Agency (updated in 2021 with data from 2019). 66.7 million tons of CO2 is
the estimated part allocated to Santander.
B. Based on final electricity consumption data published by the International Energy
Agency (updated in 2021 with data from 2019).
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GREENFIELD FINANCE
5
BROWNFIELD FINANCE
6
(MW financed)
C
(MW financed)
C
BREAKDOWN OF FINANCED MW BY TYPE OF RENEWABLE ENERGY
Wind
energy
Solar
energy
D
Others
77% 35%
2019
77% 46%
2020
58% 26%
2021
22% 54%
2019
18% 33%
2020
39% 64%
2021
1% 11%
2019
5% 21%
2020
3% 10%
2021
Greenfield Brownfield
E
BREAKDOWN OF GREENFIELD AND BROWNFIELD FINANCE BY COUNTRY IN 2021
5,400 MW
61 MW
USA
3,212 MW
1,225 MW
Spain
2,119 MW
Brazil
1,286 MW
156 MW
United
Kingdom
900 MW
267 MW
264 MW
Germany
Poland
Italy
318 MW
Mexico
C. Of the megawatts attributable to Banco Santander in 2021, 33% were from greenfield finance and 36% were from brownfield finance.
D. Includes hydropower in 2019, solar and wind energy in 2020 and battery energy storage, mix solar-biomass and energy from waste in 2021
E. Other greenfield finance: Chile (81 MW), Portugal (53 MW) and France (24 MW). Other brownfield finance: Portugal (18 MW)
Greenfield Brownfield
Renewable energy projects financed and advised in 2021
Santander was the sole
financial advisor and green
loan coordinator in a landmark
transaction to finance Vineyard
Wind I, an 800 MW offshore
wind project off the coast of
Massachusetts and the first
large scale offshore wind farm
in the US.
Santander was mandated lead
arranger in the financing of
Dogger Bank C, a 1.2 GW wind
farm being built off the coast
of Yorkshire. It is the largest
offshore wind project
financing to date, and is due to
be the largest offshore wind
farm globally. Each phase will
produce enough electricity to
supply 5% of the UK’s energy
demand.
Santander advised on the
financing of enfinium Ltd, a
waste to energy (WtE) firm
which is a leading operator in
the sector, with an annual
waste capacity of 2.3 million
tonnes and gross capacity of
265MW.
Santander was mandated lead
arranger in the financing for
the Darwin Project, a 900MW
offshore wind farm, to be built
in the German North Sea, close
to the Netherlands and some
72km from mainland
Germany. It is the first
offshore wind transaction with
private PPAs in Germany and
continental Europe.
Santander acted as Financial
Advisor for the company,
leading also the structuring
and bookrunning of the
institutional tranche in the
refinancing of Project Ares, a
portfolio of two concentrated
solar power plants with a total
installed capacity of 99.8 MW
owned by Celeo.
Santander acted as Mandated
Lead Arranger of Provence
Grand Large's first floating
offshore wind farm being
financed by commercial
banks globally. The 24 MW
project is located in France
and is supported by three key
entities with track record in
the French offshore wind
market.
5
New projects to be built.
6
Projects already existing and producing electricity at the financing date.
Santander was mandated lead arranger and hedge provider in the
financing of the Alpino Project, to build and operate two ground-
mounted solar PV projects in Lazio with a combined capacity of
118MW. The project will be a key milestone in the Italian
renewable space, since it will be one of the first corporate PPA-
backed projects in the country.
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M&A advisory in renewable energy
We supported Grupo Enel in the restructuring of its Latin American
business, including advisory on two landmark transactions: first, the
merger of Enel Green Power Latam with Enel Americas, the largest
listed pan-American utility company; and second, the integration of
Enel Green Power Central America into Enel Colombia, Enel’s joint-
venture with Grupo Energia de Bogotá for the business in Colombia
and Central America.
Partnering with clients on their transition
In the first ESG corporate finance advisory role in Hydrogen,
Santander acted as sole financial advisor to Plug Power, a US-based
global leader in fuel cell systems and hydrogen related services, in
the launch of a 50-50 joint venture with Groupe Renault. The
resulting company, “Hyvia” will lead the way towards a complete
ecosystem of fuel cell powered light-commercial vehicles, green
hydrogen and refuelling stations across Europe. Santander also acted
as exclusive financial advisor to Plug Power in its partnership with
Acciona, a Spain-based global renewable energy operator, to create a
leading green hydrogen platform in Spain and Portugal.
We advised the French start-up Verkor on the creation of a strategic
partnership with Renault Group. Renault Group and Verkor will co-
develop and manufacture low-carbon and high-performance battery
cells to foster the emergence of a competitive, sovereign and
sustainable battery supply chain in Europe.
As part of Santander’s new alliance with Scuderia Ferrari, we aim to
offer Formula 1’s most successful team a wide range of advice and
support to help them become carbon neutral by 2030.
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Developing new solutions
We have developed new sustainable products, such as our
sustainability-linked supply chain finance offering and our
sustainability-linked swaps offering.
In recent years, we have created various frameworks to
develop our ESG product offering such as:
→ Sustainable Guarantees Framework, with second party opinion
from Vigeo Eiris (2019)
→ Social Loans Framework in Argentina, with second party opinion
from Sustainalytics (2020)
→ Sustainable Finance Classification System, reviewed by
Sustainalytics (2021)
Landmark deals in 2021
First large scale EV charging
network transaction in Europe
First sustainability linked
bond in Mexico
First social project bond
in Latin America
Santander was mandated lead arranger
and hedge provider, leading the first
project finance for a large-scale electric
vehicle (EV) charging network in Europe,
due to be powered entirely by green
energy and installed across select
Carrefour hypermarkets in France by 2023.
Santander was the Sustainability Co-
ordinator for Coca-Cola FEMSA in the first
sustainability-linked bond in the local debt
market in Mexico.
Santander was the sole structuring agent
for Latin America's first social project bond
issuance, which is linked to the Puerta de
Hierro-Cruz del Viso roadway project in
Colombia.
First UK retailer to offer sustainability-linked supply chain finance
Santander partnered with Tesco PLC to
offer sustainability-linked Supply Chain
Finance (SCF) to their supplier base. Tesco
suppliers will be offered preferential
financing rates via Santander's market
leading SCF platform which incentivizes
suppliers to make to positive changes to
their business while tracking performance
and creating a culture of continuous
improvement.
Sustainability coordinator for one of
the largest sustainability-linked
facilities
Santander acted as Joint Sustainability
Coordinator in one of the largest ever
sustainability-linked revolving credit
facilities (RCF) for Anheuser-Busch InBev
and the first of its kind among publicly
listed companies in the alcohol beverage
industry.
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Retail and commercial banking
As one of the top retail and commercial banks, we have the
responsibility to support the development of inclusive and
sustainable societies.
Building on our existing Green and Social Book offering of ESG-
oriented products (launched in 2019), we continue to reinforce our
sustainable finance proposition with dedicated purpose lending and
sustainability-linked loans.
Focusing on green finance, our products and services are designed
around five key verticals adapted to the specific needs of our
customers in all geographies.
Green solutions for our individual, SME and corporate customers
What do we finance?
What do our customers need?
Green
buildings
Purchase, construction and
renovation of energy-efficient
buildings. Renewable power system
installation and refurbishments that
use 30% less energy.
Developer loans, private solar
panel installation, smart meters,
energy-efficient lighting,
mortgages with an A or B energy
rating.
Clean mobility
Clean transport and infrastructure.
Leasing of electric and hybrid
vehicles (<50 g CO2 per passenger-
km) and financing of charging
stations and bicycle lanes.
Renewables
Renewable energy production and
transportation. Energy storage.
Financing of solar panels, wind
farms and battery and storage
battery production.
Agro
Sustainable and protected
agriculture. Land and forest
conservation. Sustainable farming.
Financing of greenhouses, reduced
irrigation systems, efficient
machinery, reforestation and
reduced fertilizer use.
Circular
economy
Activities to adapt to, or mitigate,
climate change; preserve biodiversity;
and boost the circular economy.
Financing of water, waste and soil
treatment; greater energy
efficiency; lower emissions; and
conservation.
Sustainability is part of what we do
As part of our commitment to renewable energy, in 2021 we invested in the El Escudo wind farm project in Cantabria, Spain.
The licence for the 105MW farm, which will be the region’s biggest renewable energy initiative, is expected for 2022. It will also
provide the region with the means to execute a rural development plan, drive energy transition to reduce CO2 emissions by
45,000 tons per year and generate enough energy to power 95,000 homes.
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In 2021, we became sustainable finance leaders in our markets thanks to several new partnerships,
products and projects. In particular:
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Other initiatives
Banking Environment Initiative (BEI)
SCIB deepened its engagement with clients in key sustainability
topics such as sustainability strategy and ESG ratings.
Our collaboration with The University of Cambridge Institute for
Sustainability Leadership’s (CISL) Banking Environment Initiative on a
new guide to bank-client engagement aims to address the need for a
market-wide transformation of how banks and corporate clients
interact. Let’s Discuss Climate: The essential guide to bank-client
engagement focuses on the customer service model to enable
bankers to have meaningful conversations with large corporate
clients about their decarbonization plans and associated financing
needs.
Other partnerships
Santander also hosted conferences on the topic of carbon markets,
such as “The Future of the Carbon Market in Brazil” and “The Role of
Voluntary Carbon Markets” ( co-hosted by Verra), to discuss the
challenges and opportunities for businesses.
In 2021, we joined a pioneering project promoted by Repsol
Foundation along with Sylvestris Group to drive CO₂ offsetting
through reforestation. We will finance the creation of three forests
that will cover more than 300 hectares. Thanks to its contribution,
Santander will be able to offset the emission of 82,000 tons of CO2;
contribute to protecting biodiversity and the fight against climate
change; and support rural development and job creation.
Carbon markets and nature-based solutions
Santander announced a new and exciting partnership with UK
National Parks to support their “Net Zero with Nature” initiative.
Together with SCIB, Santander UK is helping fund the restoration of
220 hectares of damaged peatland in Scotland's Cairngorms National
Park. Furthermore, with global impact firm Palladium, Santander will
explore the role it can play in the carbon and biodiversity credit
market.
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Sustainable finance classification system (SFCS)
Sustainable finance is key to meeting our ambition to be net zero by
2050. That’s why we developed our Sustainable finance classification
system (SFCS), an internal guide that outlines harmonized criteria to
consider an asset green, social or sustainable in all the Group’s units
and businesses. The SFCS, reviewed by Sustainalytics, draws on such
international industry guidelines, standards and principles as the EU
Taxonomy, ICMA, LMA Principles, UNEP FI framework and Climate
Bond Standards.
It also ensures a consistent approach to sustainable finance across
Santander that will enable us to track activities, support product
development, mitigate the risk of greenwashing and reinforce our
transparency and commitment to promote and increase our green,
social and sustainability-linked activity.
International industry guidelines, standards and principles that the SFCS draws upon
EU taxonomy
ICMA Green/
Social Bond
Principles
LMA Green
Loan Principles
LMA
Sustainability
Linked Loan
Principles
ICMA
Sustainability
Linked Bond
Principles
Febraban
taxonomy
(Brazil)
UNEP FI
framework
Climate Bond
Standards
Eligible products
Dedicated purpose
Sustainability linked financing
→ Transaction proceeds go towards eligible green or social
projects
→ Eligibility criteria: Specific activities and thresholds, based on
industry principles and guidelines (ICMA, LMA, Climate Bond
Standards) and the EU Taxonomy
→ Sustainability-linked transactions designed to incentivize
customers to set and work towards ambitious ESG targets
→ Transaction structured according to pre-determined
sustainability performance targets (KPIs and/or ESG ratings)
→ Alignment with recognized industry principles and guidelines
(ICMA and LMA)
Added value
Green and social finance standards aligned with
international standards
Green alternatives to the most in-demand
traditional products
Ability to meet growing demand for ESG products
and services
New product development
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Information about Article 8 of the EU Taxonomy Regulation
In 2020, the European Parliament adopted the Taxonomy Regulation.
It identifies activities deemed sustainable. It states that companies
subject to the Non-Financial Reporting Directive (NFRD), including
financial corporations, must disclose how operations align with the
Taxonomy. The primary indicator of alignment is the green asset ratio
(GAR), which companies must publish from 2024. It shows the extent
to which financed activities meet the Taxonomy’s technical
7
standards.
It’s the ratio of an entity’s Taxonomy aligned assets to
balance sheet assets (excluding exposure to sovereigns, central
banks and the trading portfolio).
The ratio numerator comprises exposure to these four portfolios:
1.Financial corporations.
2.Non-financial corporations.
3.Households.
4.Local governments.
From 2022, companies must make their eligibility ratio public before
calculating and publishing the GAR in 2024. The eligibility ratio is
calculated like the GAR. The only difference is that the eligibility ratio
numerator covers activities included in the Taxonomy but doesn’t
determine if they meet the technical criteria that it establishes to
consider an activity "green" (environmentally sustainable).
The European Commission has two approaches to calculate the
eligibility ratio: mandatory reporting based on information that is
publicly disclosed by counterparties; and voluntary reporting, which
is an estimate based on proxies when no information about eligibility
has been made public by counterparties.
Taking into account its definition, the eligibility ratio has the following
limitations:
– Because the numerator and denominator consider different
portfolios, it is not possible to reach 100% eligibility. The
numerator covers minor exposure because it doesn’t include
certain portfolios the denominator does.
– The EU Taxonomy does not currently cover every activity that
companies perform and banks finance. Therefore, financed
activities that it does not assess (e.g. activities under one of the four
other environmental objectives in the future) will only be included
in the ratio's denominator. Furthermore, activities not included in
the Taxonomy are not necessarily deemed harmful to the
environment or unsustainable. They are not included because of
the Taxonomy’s current scope.
This report provides a ratio calculated exclusively on the household
portfolio (which includes home equity loans, building renovation
loans and auto loans), plus a voluntary ratio with proxies about the
remaining portfolios: financial corporations, non-financial
corporations and local governments. We consider proxies to meet, in
the best possible way, the requirements of the Disclosures Delegated
Act published in December and the FAQs the European Commission
published on 20 December 2021 and 2 February 2022, and make
interpreting them easier. We will broaden the scope of mandatory
reporting as more data from our counterparties becomes available.
As of this report’s publication date, no public information is available
8
We supplemented the
about our customers’ eligibility ratios.
mandatory approach with a voluntary approach to offer the most
complete eligibility ratio estimation possible.
7
For now, the EU Taxonomy covers only two environmental objectives (climate change mitigation and climate change adaptation). However, in order to quality as substantially
contributing to these two objectives, the activity must cause no significant harm to the remaining four environmental objectives pending to be developed by the EU
Taxonomy (sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; and protection and restoration
of biodiversity and ecosystems). Additionally, minimum social safeguards criteria must be met-
8
The requirement to disclose the ratio of Taxonomy-based eligible and non-eligible economic activities will take effect for financial and non-financial corporations at the same
time. Therefore, as of this report’s publication date, we do not have information from non-financial corporations
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9
How did we calculate our proportion of eligible activities?
Santander's eligibility ratio is 35% according to mandatory reporting and 43% according to voluntary
reporting; however, our balance sheet’s potential eligibility ratio is 74%.
Denominator
Pursuant to the Disclosures Delegated Act, we calculated the
eligibility ratio for 90% of the balance sheet. The 10% excluded
comprises exposure to sovereign debt, central banks and the trading
book.
Eligibility ratios
As explained above, the mandatory ratio, which is the household
exposures in the numerator divided by the denominator, as required
by the Disclosures Delegated Act, is 35%.
The voluntary ratio, which includes exposures to financial and non-
financial corporations and to local governments to supplement that
mandatory quotient, is 43%. In addition, exposure to the four
numerator counterparties (e.g. financial corporations, non-financial
corporations, households and local governments) was 74% of the
balance sheet (over the previously mentioned 90%).
Numerator
To meet regulatory requirements, we calculated two numerators:
Mandatory reporting: includes information on the household loan
portfolio (residential property loans, building renovation loans and
vehicle loans).
Voluntary reporting: supplements the initial calculation with
Santander's exposures to local governments and to financial and
non-financial corporations. It includes non-financial corporations that
are subject to, or exempt from, the Non-Financial Information
Disclosure Directive, in line with the considerations of the Platform
on Sustainable Finance
on voluntary reporting.
10
In voluntary reporting, we apply these proxies to exposures:
– Financial corporations: We only consider 5% of our global
exposure, based on the European Central Bank's Investments in EU
taxonomy-eligible activities, EU-taxonomy-aligned activities and
activities exposed to transition risk study.
– Non-financial corporations: We consider eligible 33% of our
exposure to non-financial corporations subject to the Non-Financial
Reporting Directive (NFRD) and 23% to those not subject to it. We
came up with this proxy based on counterparty data in our internal
records.
9
Article 10.3 (d) of the Disclosures Delegated Act: To meet EU Taxonomy disclosure obligations, we reviewed our activities according to Article 10 of Commission Delegated
Regulation (EU) 2021/2178 of 6 July 2021 (the “Disclosures Delegated Act”). The information we disclosed within the scope of prudential consolidation in accordance with
Title II, Chapter 2, Section 2 of Regulation (EU) 575/2013 comprises the full balance sheet for the 2021 fiscal year.
The platform takes the place of the Technical Expert Group (TEG) on Sustainable Finance. Under Art. 20 of the Taxonomy Regulation, it will advise the EC on implementing
technical selection criteria, revising the Taxonomy Regulation, drafting sustainable finance policy and dealing with social and other sustainability objectives. It will also
perform monitoring tasks.
10
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Our exposures reported under the Disclosures Delegated Act
Eligible activities under Article 10, 3 (a) of the Disclosures Delegated Act
11
Lending
Mandatory approach
Voluntary approach
Potentially eligible portfolios
Proportion of eligible economic activities
EUR bn
12
%
35%
43 %
74 %
495.70
613.40
1,050.90
Proportion of non-eligible economic
activities
13
%
65 %
57 %
26 %
EUR bn
920.50
802.90
365.30
Coverage
14
%
90 %
Other exposures to report under Articles 10.3 (b) and (c) of the
Disclosures Delegated Act
Counterparty
Exposure to central governments, central
banks and supranational issuers
Exposure to derivatives
Exposure to companies exempt from
disclosing non-financial information pursuant
to Article 19 bis and 29 bis of Directive
2013/34/EU
Trading portfolio
Interbank lending
Proportion of exposure
to total assets
%
EUR bn
7 %
4 %
103.3
59.1
14 %
4 %
1 %
200.2
62.6
9.8
How do our financial strategy, product design and
relations with customers and counterparties comply with
Regulation (EU) 2020/852?
Our objectives are consistent with the EU Taxonomy. Our sustainable
finance proposition to support our customers' transition considers
the standards and enhancements of the EU Taxonomy. See
'Supporting the green transition'.
For more information on how do our financial
strategy, product design and relations with
customers and counterparties comply with
the EU Taxonomy, please see section
'Supporting the green transition.
11
We identified relevant counterparties according to the breakdown of financial assets by instrument and industry of the Financial Reporting (FINREP) counterparties we use in
other reports.
12
13
14
Of the total assets included in the ratio calculation.
Of the total assets included in the ratio calculation.
Of the total assets of balance sheet.
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Environmental footprint
GRI 103-1, 103-2, 103-3
Santander's group-wide strategy is to reduce the ecological impact of
our operations to protect and conserve our environment in line with
our principles.
To ensure we correctly recognize and deal with our impact, our
internal environmental management stands on these three pillars:
• Reducing and offsetting CO2 emissions.
• Reducing and managing waste responsibly.
• Raising employees’ and other stakeholders’ awareness of
environmental issues.
We’ve been measuring our environmental footprint (energy
consumption, waste and emissions) since 2001. Since then, our strict
energy efficiency and sustainability initiatives aims to ensure we have
the lowest possible impact on the environment. Upon completing our
Year-to-year plan (the 2015-2017 Plan and the 2019-2021 Plan)
:
15
• we reduced electricity consumption by 26%;
• we reduced CO2 emissions by 88%; and
• we reduced paper consumption by 78%.
This significant drop in emissions was mainly due to our substantially
lower electricity use and energy from renewable sources
15
.
2021 saw the end of the 2019-2021 Energy efficiency and
sustainability plan Santander had executed, with projects to improve
energy consumption; use raw materials in buildings; optimize space;
and raise employees' awareness of the importance of reducing our
environmental footprint inside and outside the office. That plan alone
reduced our electricity consumption 4% and our atmospheric
emissions by 2%.
We're working on our 2022-2025 energy efficiency and sustainability
plan. Some of its +90 measures are:
• using more renewable energy (mainly solar) through self-
consumption installations and long-term purchase agreements
under which Santander is the end consumer;
• purchasing renewable electricity in every country where it's
16
;
possible to certify its origin
• installing the latest temperature control and highlighting
technology at our branches and office buildings;
Carbon offset projects
• optimizing our use of space;
• creating more parking spaces at our buildings for electric and plug-
in hybrid vehicles, and subsidizing electricity costs for our
employees;
• using ISO 14001 as the basis for our environmental policies and
objectives to reduce consumption, waste and emissions;
• obtaining LEED or BREEAM certification for our buildings; and
• raising awareness among employees in our 10 core markets
(where we can confirm our electricity comes from renewable
sources).
All of those measures are consistent with Santander's public
commitment to be carbon neutral from 2020 by investing in
emissions offsetting projects and by sourcing 100% of its electricity
from renewable energy.
Carbon neutral
In 2021, Santander set an ambitious goal to achieve carbon neutrality
in all our internal operations. After, we offset the rest of emissions
we were not able to cut, and each subsidiary was responsible to pay
its share of emissions. In 2021, we selected four projects that
obtained enough carbon credits to offset the Scope 1, 2 and 3
emissions we could not previously reduce through other means.
They cover renewable energy and reforestation, and are certified
under some of the industry's most well-known standards. The Group
brought together its core subsidiaries and several areas to
demonstrate its strong commitment to reducing its ecological
footprint and fighting climate change.
Use of energy from renewable sources
75% of the energy our buildings consume comes from renewable
sources; in Germany, Spain, Mexico, Portugal and the UK, that figure
is 100%. We continue working on achieving 100% group-wide by
2025.
By buying green energy, we reduced emissions from electricity
consumption by 56% and total emissions by 37%.
Reforestation in
Galicia
Proyecto
Oaxaca III
Hydroelectric
power production
Forest conservation
in the Madre de Dios
region
35-year project in Borela
(Pontevedra), Spain to
reforest 78.34 hectares of
land with native species.
120 MW wind farm in
Juchitán de Zaragoza,
Oaxaca on the Isthmus of
Tehuanetepec in Mexico.
10,656 MWh hydroelectric
power plant to reduce
greenhouse gases from fossil
fuel electricity production in
Nova Marilândia, Mato
Grosso in Brazil's mid-west.
Project to prevent deforestation
and protect degradation in areas
in the Tambopata National
Reserve and Bahuaja-Sonene
National Park in Peru's Madre de
Dios region.
15
The Covid-19 pandemic caused most of our environmental footprint indicators to plummet, as low building occupancy and travel cancellations pared down energy
consumption and emissions.
16
In countries where electricity from renewable sources can be verified.
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Implementation and certification of Environmental Management Systems
An environmental management system can make sure a building's
ecological impact is being handled properly. Santander aims to get
the main buildings that it occupies in its core markets ISO 14001-
certified.
Furthermore, some buildings in Chile and Brazil began to generate
their own renewable power directly. We also distributed 2,544,161
Eco-cards (made out of materials such as PVC and PLA
geographies, and expect to issue more in the next few years.
) in 16
17
19
Santander also has these certifications:
▪ LEED PLATINUM for three buildings in Poland: Atrium I, Warszawa
Atrium II and Business Garden Poznan.
▪ LEED GOLD for 10 buildings in Germany (Santander Platz and An
der Welle 5), Brazil (Torre Santander and the Campinas data
processing centres), Spain (Tripark, Abelias, Luca de Tena and the
Santander North data centre) and Poland (Robotnicza, 11 Street).
• Zero Waste for the Santander Group City and for the first time, in
the headquarters of Santander España.
Other buildings are also being reviewed for similar certifications.
18
Other initiatives
In 2020, we began to remodel our Pereda and Hernán Cortés
buildings in the city of Santander. Both buildings’ design achieved
BREEAM certification.
We installed 150 additional electric car charging stations at our
corporate centre, the Santander Group City in Boadilla del Monte
(Madrid, Spain), bringing our total to 340. In Portugal, UK, and the US
some of our buildings also have electric car charging stations.
2021 Environmental footprint
GRI 301-1, 301-2, 302-1, 303-3, 303-5, 305-1, 305-2, 305-3, 306-2, 306-3
15 20
Single-use plastics
As part of our public responsible banking commitments, we also set
out to remove all unnecessary single-use plastic from offices and
buildings in our core markets in 2021. By the end of the year, we had
achieved that aim and are now guaranteeing that the materials used
in the Group's dining areas, vending machines and delivery service
are environmentally friendly.
Climate awareness
Santander organizes local and global awareness campaigns to
impress on employees the importance of reducing consumption and
waste. Each subsidiary posts news and topics of interest relating to
the environment and the Group's environmental initiatives on their
internal portals.
For the twelfth year running, we took part in the Earth Hour,
switching off the lights at our most emblematic buildings.
1,808,668 m
water consumed from the
supply system
3
Diff. 2020-2021 (%)
–12.4%
118,517 tonnes
CO2 equivalent
total emissions (market based)
Diff. 2020-2021 (%)
–39.0%
903
million kWh
total electricity
7,345 T
total paper
consumption
.
–1.9%
75%
renewable
energy
Scope 1 25,672 tonnes
CO2 equivalent
direct emissions
82% –18.1%
recycled or
certified
paper
Scope 2 57,425 T CO2
indirect emissions from electricity (market based)
6,323,866 KG
paper and card waste
3,714,227 GJ
total internal energy consumption
6.7%
–1.2%
269,615 tonnes CO2
equivalent
indirect emissions from electricity (location based)
Scope 3 35,420 tonnes CO2
equivalent
indirect emissions from employee travel
17
18
19
20
We have ISO 14001-certified buildings in Argentina, Brazil, Chile, Spain, Mexico and the UK.
Light and noise pollution, however, are not considered significant given the nature of Banco Santander's business.
PLA: Polylactic acid is a biodegradable polymer extracted from lactic acid.
A two-year environmental footprint table, showing employee consumption and emissions is available under the Key metrics section in this chapter.
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Financial inclusion
and empowerment
Santander Finance for All is our initiative to support financial inclusion and
empowerment. We financially empower people in three ways:
ó
Finance
ó
Access
ó
Resilience
We help people access and use
basic financial services through
simple payment platforms and
cash-in/cash-out services in
remote and small communities.
We provide tailored finance to
individuals and SMEs with lower
access to credit or which are in
financial distress.
We help people gain financial
knowledge, making economic
concepts more understandable
and enabling them to make better
financial decisions.
860k
people financially empowered in 2021
1.1 mn
people financially empowered in 2021
1.3 mn
people financially empowered in 2021
Our goal
We believe we can help more people prosper and enjoy the benefits
of growth by empowering them financially, giving them access to
tailored financial products and services, and improving their
financial resilience through education. We aim to financially
A
empower 10 million people between 2019 and 2025.
Progress
Financially empowered people
2019
B
7.5 mn
2021
10 mn
2025
Since 2019, we have financially empowered: 2.2 mn people through access
initiatives; 2.5 mn people through finance initiatives; and 2.8 mn people through
resilience initiatives.
A. To assess our contribution to financial inclusion, we use a methodology with principles, definitions and criteria for counting people who have been financially empowered
through our initiatives, products and services.
B. Cumulative since 2019.
In Latin America, we focus on giving people access to the financial
system. In mature markets, we seek to ensure that no one needs to
leave it.
Euromoney named Santander "Best Bank for
Financial Inclusion" and "Best Bank for Sustainable
Finance in Latin America".
In the regions where we operate, we target unbanked and underserved
individuals and SMEs who have higher barriers in accessing credit, have
limited financial knowledge or are in financial distress.
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Access
GRI FS7 and FS14
We aim to make sure everyone can access the basic financial products
and services they need, and know how to use them.
Promoting digital access
We help people access the banking system through digital platforms
so they can make payments; use basic, tailored financial services; take
greater control of their finances; and make faster and more secure
transactions.
860k
people financially
empowered in 2021 through
initiatives that promote
access to the financial
system.
Superdigital: Banking without a bank
Superdigital is Santander's flagship mobile platform for financial
inclusion in Brazil, Mexico and Chile. It enables the unbanked and
underserved to make cash deposits, withdrawals and payments.
With smartphone ownership growing and network coverage improving
in Latin America, it helps communities through basic, user-friendly
products and offers a unique banking experience supported by our own
technology.
Superdigital enables people without a bank account to:
• make online transactions;
• split bills with others;
• get automated alerts about their finances.
Superdigital aims to serve 5 million customers by 2023 in Latin
America.
So far, it has financially empowered 245k people.
21
Getnet: Accelerating commerce for merchants and their connected
ecosystem
Getnet is a global acquiring franchise developed to create opportunities
for merchants worldwide. It improves the simplicity, speed, and safety
of payments for merchants.
The service is currently present in Brazil, Mexico, Chile, Argentina,
Uruguay and Europe, and supports 875k SMEs as of 2021. Additionally,
long-tail customers, operating in large part in the informal sector, had
an average TPV (Total Payment Volume) growth of 20% YoY.
Getnet has developed pioneering contactless payments solutions for
Spain and Mexico public transport network, essential for those with
lower income. And with many stores still closed, our Pay by Link
solution allows small retailers to continue their day-to-day activities
uninterrupted.
Getnet actively collaborates with Prospera, Santander's microfinance
proposal in Brazil. It gives microentrepreneurs access to credit, and
gives them financial inclusion solutions. This partnership has resulted
in 22k active clients. They have increased their TPV by 14%, moving
local economies.
Cuenta Life
Empowering the base of the pyramid
In 2021, we developed the "Life cycle" to customize our offer to
support people financially at different stages of life.
Our clients, having contracted Life products, are part of the
Meritolife program, which has a special focus on education, actively
encouraging good financial behaviour by rewarding people's
efforts.
So far, this initiative has enabled more than 900k people get access
to the financial system.
Santander Mexico's banking services financially empower the
elderly and retirees. They tailor products and services to their
needs, including consumer credit with custom insurance,
fraud monitoring, and a separate credit admission policy and
sales channel.
This has enabled Santander to empower 3,221 elderly persons and
retirees with income of less than MXN 11,000 a month (EUR 440).
21
Only Superdigital customers with a reported income below the country's minimum wage are considered financially empowered.
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Promoting access to the financial system
GRI FS13
We offer financial support to special groups so customers will not only
have access to basic products, but also know how to use them.
Also, our agreements with private and state-run entities widen our
footprint to ensure underserved communities can get cash anywhere.
Branches in underbanked and remote regions
Financial inclusion branches
and remote agents
Branches in sparsely
populated regions
Products designed for local communities
help unbanked people access the financial
system, providing inclusion and growth
opportunities.
Financial inclusion branches have already
empowered more than 30k people.
830 agent offices, 518 branches and ATMs
provide access to finance and fight social
exclusion in communities with under
10k inhabitants.
Branches in low income, small
or isolated regions
We have 54 branches in low income, small
or isolated communities. They benefit over
105k people, especially in Madeira and the
Azores Islands. where 19 branches
facilitate access to financial services to
over 39k people.
Support to our senior customers
Partnerships to reach underserved communities
Alzheimer’s Society
Correos Cash
We encouraged customers with dementia to inform us of their
diagnosis through a partnership with Alzheimer's Society. After
that, we customized our services for these customers with products
adapted to vulnerable customers, such as the Carers Card.
This campaign has enabled us to help 6,654 customers so far.
Customers can withdraw and deposit cash at 4,675 post offices and
rural help desks in Spain. Likewise, postmen and postwomen can
deliver cash to all houses in Spain.
Through this partnership, we've helped 2.483 people.
Define Project
Partnered retailers
Thanks to an agreement with Universidad de Alicante and co-
financed by the European Union, Santander helped the elderly
increase their digital finance literacy to use online tools and avoid
erroneous transactions and fraud.
Santander's partnerships with retailers enable customers to make
basic transactions at more than 22,086 convenience stores, such as 7
Eleven and Oxxo.
Here & Now
In order to support elderly customers (+65), especially those
unfamiliar with digital channels, we launched the “Here & Now”
service.
In 2021, more than 85k customers were helped in the
programme's second run.
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Finance
GRI 413-1 and FS7; SASB FN-CB-240a.1, FN-CB-240a.3, FN-CB-240a.4,
We seek to provide tailored finance to people with less access to credit.
We offer solutions to unbanked and underserved groups.
Finance for SMEs and entrepreneurs
We aim to foster social mobility by helping low-income and
underbanked entrepreneurs set up and grow their businesses.
Santander Microfinance
Our microfinance programmes provide finance to unbanked and
underbanked entrepreneurs in eight counties. In 2021, we launched
new programmes in Colombia, Peru and Chile.
1 million
microentrepreneurs supported in 2021
The programmes include tailor-made micro-loans that help micro-
entrepreneurs meet their working capital needs, as well as savings
products, current accounts, cards and micro-insurance. A large part of
our lending goes to women, who are less likely to have access to
financial services in developing countries
EUR 571 million
total credit disbursed to micro-entrepreneurs in 2021
EUR 323 million in outstanding credit at the end of 2021
Our microfinance programmes benefit from a hybrid model of in-
person and online agents, with disbursements in less than 24h and
paperless, and the support of commercial agents, which enhances
customer experience. Every programme is highly regarded, as it is
reflected in the program's NPS, above 80.
72%
of microentrepreneurs supported in 2021 are women
Our micro-finance programmes in Latin America
MEXICO
Launch: 2017
EUR 86 million disbursed in 2021
264k microentrepreneurs
supported.
PERU
Launch: 2021
EUR 3.2 million disbursed in
2021.
10k microentrepreneurs
supported.
ARGENTINA
Launch: 2018
EUR 98k disbursed in 2021.
173 microentrepreneurs
supported.
CHILE
Launch: 2021
Recent launch. 100% based on
digital channels.
Tailors credit to customers'
financial habits.
*These initiatives don't contribute
towards our microfinance group
results.
EL SALVADOR
Launch: 2006
EUR 70 million disbursed in
2021.*
54k microentrepreneurs
supported.*
COLOMBIA
Launch: 2021
EUR 3.3 million disbursed in
2021.
5.4k microentrepreneurs
supported.
BRAZIL
Launch: 2002
EUR 473 million disbursed in
2021.
744k microentrepreneurs
d.
URUGUAY
Launch: 2019
EUR 4.4 million disbursed in
2021.
6.7k microentrepreneurs
d.
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Sílvio Neves
Virginia Álvarez Castillo
Sílvio Neves, from Icoaraci in Belém, Pará state (Brazil), has been an
artisan for 45 years. His products include traditional ceramic vases,
which cost between BRL 10 and 350. He makes them in a wooden
shed, where he couldn't install a kiln to finish production.
Virginia lives in Valle del Chalco, Estado de México. When demand fell
as the pandemic broke out, she had to give up selling shoes from a
catalogue.
"I used to have to travel far to get access to a kiln, but then I managed
to get a loan", says Sílvio. "With the loan from Prospera, he replaced the
wooden shed with stone and installed the kiln."
Thanks to Tuiio, she became a seamstress and started making and
selling masks at MXN 15 each, helping her overcome the economic
hardship the Covid crisis had caused.
The loan came in 2021, when a micro-finance agent knocked on his
door offering financing. With other professionals from the Icoaraci
Artisans Association, BRL 20,000 was raised, and half of the amount
went to Silvio to remodel his space.
"I had tried to get loans before, but the rates were too high. Now I have
one I can repay."
Furthermore, Virginia's new job enabled her to deal with a greater loss:
her parents. Now, she dreams of having a bigger business. About Tuiio,
she says: "If it were a person, I would say to them "Thanks, friend.
Thank you for supporting me when I needed it most".
Luz Mary
Feliciana José Albino
Feliciana is an indigenous woman who lives the Agua Zarca region in
Pueblo Nuevo, Mexico. Thanks to Tuiio's financial education tool, she is
able to bring help with savings to her community in their native
language, Mazahua.
Luz Mary is a single mother of three in Zipaquira, Colombia. She
describes herself as a tireless fighter, and a forward-looking, optimistic
person. She owns livestock and needed financing to cure her cattle of
illness. She turned to Prospera to get a line of credit and continue her
business.
When Luz Mary talks about Prospera, she tells of the trust and
friendship between her and the people who work there. She says "I can
only say thank you to Banco Santander for checking on me and being
this supportive, and thank you, life, for letting me meet such charming
people."
Other local initiatives to support SMEs and entrepreneurs
Small business loans
To continue to support small business
customers impacted by the Covid-19
pandemic, Santander granted more than
7,900 Paycheck Protection Programme
loans to small businesses in 2021, saving
over 58k jobs.
EUR 90 million were lent to small
businesses operating in low- to moderate-
income communities across the bank's
footprint.
Loans to SMEs at their risk
limit
They include such alternatives to support
SMEs as "Fondo Smart" and "Préstamos
ICO".
They have enabled Santander to support
185k SMEs since 2019.
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Financing low-income households' basic needs
We offer products and services that enable low-income households to
access housing and meet other basic financial needs.
Affordable housing programmes
Social housing fund
As part of Santander US's Inclusive Communities plan, housing and
home improvement programmes support people through low-
interest mortgages and paid mortgage insurance for low-income
homebuyers.
This initiative has enabled Santander to help more than 130k people
since 2019.
Banco Santander gave 1,100 homes to the "Fondo Social de
Viviendas", including 1,008 to rent to low-income individuals.
In addition, Banco Santander has 573 homes to rent at affordable
rates. A total of 1,581 rental agreements are signed with lower
income customers.
Special programmes for SMEs and individuals in financial distress
Supporting customers in
arrears
IRIS solutions to manage
impairments
Agreement with multilateral
organizations
Helping vulnerable customers get out of
arrears with self-service tools and direct
colleague support.
This initiative enabled Santander UK to
support 103k customers in financial
distress in 2021.
We review customers who are struggling
financially and lend them a hand to
support them in meeting their payment
obligations.
Since 2019, we have renegotiated the debt
of 30k customers and given payment
holidays to 51k customers.
Santander signed agreements in Brazil,
Spain, Poland and Portugal with the EIB,
EIF and IFC to offer lines of credit with
advantageous conditions that help
mitigate the effects of the pandemic.
During 2021, those bodies continued the
COVID-19 relief initiatives they started in
2020.
Promoting Tresmares Capital - an independent alternative
financing platform for SMEs
Tresmares takes ESG criteria into account in its investment decisions,
both in the private equity and in the direct lending division. It seeks to
foster growth in SMEs with a positive ESG footprint, and to increase
ESG awareness and consciousness in management teams.
To date, Tresmares has invested more than EUR 600 million in Spanish
SMEs in such sectors as education, preventive healthcare, sustainable
agriculture and recycling solutions, and hopes to continue promoting
significant changes in the Spanish economy.
Further collaboration: investing in fintechs
Mouro Capital, the successor to Santander Innoventures, helps startups
grow with business models that target people at risk of financial
exclusion.
Through Mouro, we allocated EUR 340 million to the fund to invest in
42 fintech companies. We remain committed to deploying capital in
such a fast growing space.
Mouro Capital is a responsible investor, incorporating ESG in its
investment, and an active signatory of the UN PRI and UN Global
Compact, promoting sustainability and diversity initiatives within the
VC space.
Some financial inclusion initiatives we've supported are ePesos and
Payjoy.
In our commitment to helping people and businesses prosper and to
continue to support our fintech partners, we look for new partners to
strengthen and expand our lines of action. Some of the new initiatives
we've supported are:
Decent: Low-cost health insurance for self-employed individuals only
operating in the US.
Upgrade: A US-based mainstream credit platform that's developing a
more responsible credit product to help customers get out of persistent
cycles of debt.
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Promoting financial education
GRI FS7 y FS16
Our goal is to promote better financial health and market stability by We strengthened our financial education proposition and created
making financial concepts easier to understand and helping people
make better choices. Financial education is one of the 10 principles of
our consumer protection policy.
common principles for the Group that are consistent with the
Organisation for Economic Co-operation and Development (OECD) . As
they apply to all initiatives, they guarantee the transparency and quality
of our programmes and promote accessible, interactive education and
sound decision-making.
79
Initiatives supported
in 2021
1.3 million
People financially empowered
from financial education initiatives
in 2021
We use apps and other digital channels to make financial education
more accessible and maximize the impact of our initiatives by
promoting:
→ basic financial concepts
→ better use of products and services
→ better management of personal finance
→ the use digital banking
→ responsible consumption and fraud prevention
→ entrepreneurship/training for SMEs
→ sustainable finance
→ behavioural economics
2021 Highlights
Global financial education site
It offers content about financial education events. On top of
that, it holds information on all of our financial education
initiatives.
Financial Literacy for All (FL4ALL)
A group of companies, business leaders, sports
professionals, NGOs and entertainment groups dedicated
to integrating financial education into US culture.
The Numbers
Game
Promoting financial
education through a series
of football-based
challenges to reinforce the
development of
mathematical ability.
Finanzas para Mortales -
Educational justice
Alongside Instituciones Penitenciarias
(Spain’s prison authority) and the UCEIF
foundation, the Santander Financial
Institute (SANFI) ran employee-led basic
finance courses to integrate people
deprived of liberty. Employees taught
prisoners ample economic and financial
concepts to enable them to make
responsible and informed decisions
about daily personal and household
finances.
Universia financial education for
higher education students
Using digital channels and developed by the
Pontificia Universidad Católica de Chile, it aims to
empower students from Instituto Profesional
AIEP through tools to manage their finances.
Financial education talks
"Tempo é Dinheiro”
During National financial education
week, Santander México gave more
than 20 financial education lessons,
focusing on the responsible use of
financial products and services.
Financial education podcasts on such
topics as savings, investment,
responsible consumption and fraud
prevention in the digital era.
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Partnerships to boost financial inclusion
Getnet and Prospera
Without GetDay initiative, we are present in 35 cities, around 21
Brazilian states, ensuring access to our solutions throughout the
country. We closed 2021 with 44k new entrepreneurs that count with
Getnet to make their business grow and prosper.
CEO Partnership for Economic lnclusion
Founded by the United Nations Secretary-General's Special Advocate
for Inclusive Finance for Development, Her Majesty Queen Maxima of
the Netherlands, the CEOP brings together an influential group of CEOs
from several industries to boost financial inclusion around the world.
The collaboration of the CEOs and their companies represents the first
high-level private-private partnership to further financial and economic
inclusion. With a strong focus on finding sustainable solutions that can
drive business growth, the group has agreed to develop partnerships
and make specific commitments to expand inclusion among
traditionally underserved customer groups such as women, farmers,
migrants, and small business owners.
For more details, see
www.unsgsa.org/ceop
Santander BEST Africa
Santander BEST Africa (Building Equality through Sustainable Tourism)
is the first development cooperation programme driven by Fundación
Banco Santander. It's an initiative that aims to contribute to the social
and economic development of Africa by supporting women
entrepreneurs and their community in the tourism sector, which was
greatly affected by the coronavirus crisis.
The programme has supported business continuity and employment
during the pandemic and promotes the training and education of, and
knowledge sharing between, women entrepreneurs as an effective
means of reinforcing economic sustainability in the sector post-Covid.
One of the 34 projects that BEST Africa supports is the Women's
Initiative The Gambia (WIG), led by Isatou Ceesay. She and four other
women created a recycling centre in Gambia to help tackle the high
amounts of waste that accumulate in their community. It acted as a
catalyst for many other women to get involved, empowering them
through participation in a sustainable and profitable initiative.
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Sustainable Investment
SASB FN-CB-240a.1, FN-CB-240a.3, FN-CB-240a.4,
ESG in Wealth Management & Insurance
WMI SUSTAINBLE AuMs (€ BN)
Sustainability is shaping our future and driving the opportunities we
create for our clients. In 2021, we scaled up our push for
sustainability, building on our initial ESG strategy from 2019 to
become the best wealth and insurance manager in Europe and the
Americas. We set the ambitious goal to reach 100 billion euros in
1
sustainable AUM
by 2025, we created a global ESG strategy team to
coordinate the efforts of our three businesses and we strengthened
SAM's ESG dedicated team. We are deploying ESG training
programmes for all our teams, conscious that our employees’
engagement is crucial to the success of our strategy. We will
continue working with our stakeholders on building a sustainable
future through the strengthening of our ESG product offering across
our three businesses.
Santander Asset Management
2021 was a crucial year for SAM and its ESG and climate-related
commitments. In January, we joined Climate Action 100+, an
investor-led collaboration that promotes cooperative dialogue to
ensure the world's largest greenhouse gas emitters act on climate
change. In March, SAM became the first asset manager in Spain and
Latin America (minus Brazil) to sign up to the Net Zero Asset
Managers initiative, pledging to become net zero by 2050 and setting
the tentative goal of halving net emissions for 50% of our AUM
(within the scope of net zero2) by 2030.
c. 40%
CAGR
As member of the Institutional Investors Group on Climate Change
(IIGCC) and signatory to the Principles on Responsible Investment
(PRI), in SAM we continue to keep the highest standards in the
industry. We’re also proud to be the main sponsor of the Global PRI
event to be held in-person in Barcelona in September 2022.
A long-term commitment to sustainability and key achievements in 2021
1. AuMs classified as Article 8 and 9 funds (SFDR) from SAM, plus third-party funds and other ESG products according to the EU taxonomy from Private Banking. We apply
equivalent ESG criteria to SAM's funds in Latin America.
2. Assets within the net-zero scope are 54% of all SAM assets that currently have a net-zero methodology (of which nearly 50% have carbon measurement ratios). This target
could be scaled up as data becomes available.
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Our ESG product offering
We offer a full line of ESG products. We have 11 billion euros in AUM
in 29 ESG products and 80 mandates in six countries. We are focused
on maximizing the number of Article 8 and 9 funds under SFDR and
embedding ESG in our pension plans in Spain.
Team, methodology and policies
We are the first asset manager in Spain with a global team dedicated
to ESG investment and we continue to improve our ESG methodology
(also used by Private Banking and Insurance). Our database covers
25,000 companies and 190 governments, helping us rate SAM and
third-party funds and guiding our insurance partners (as asset
owners) in their investment mandates with ESG standards.
We also integrated ESG criteria into our stewardship activities by
increasing our focus and resources towards our engagement and
voting strategy, promoting our global bilateral action with companies
to increase their transparency and joining collaborative actions such
as Climate Action 100+. Our new voting policy is consistent with our
ESG principles. We aim to raise investors’ awareness on ESG through
our “Rethink invEStinG” publications.
During the past eight years our solidarity funds have donated 22.7
million euros to more than 25 NGOs and specific projects related to
social economy, training for employment, health and financial
education among other causes. Special donations have been done to
La Paz University Hospital in 2020 and Cruz Roja logistics centre in La
Palma in 2021. Our Santander Solidario 1 fund was awarded Spain’s
Best Solidarity Fund in 2021 by Expansion.
SAM ESG product offering
Best-in-class ESG products in our core geographies
San Sostenible RF 1-3
San Sostenible Bonos
3 Pension Funds
San Respons Solidario
Inveractivo Confianza
San Sostenible 1
San Sostenible 2
6 Pension Funds
San Sost. Acciones
San Equality Acciones
4 Pension Funds
80 Mandates
San Ethical Ações
Go Global Equity ESG
SAM RV Global ESG
SAM ESG
Acciones Global Desarrollado
San Sustentàvel
San Sostenible RF 1-3
Go Global Equity ESG
n Fixed income n Balanced n Equity n Portfolios
For more details on our performance on
ESG issues, see
www.santanderassetmanagement.com/
sustainability
For more details on our net zero
commitment, see
www.santanderassetmanagement.com/
content/view/6924/file/NETZERO
%20SAM_NOV21.pdf
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Private Banking
In 2021 we rounded off our proposition of impact solutions with
renewable energy funds, green bonds, social bonds and equity
options. Our sustainable assets (including SAM and third-party funds)
amounted to 18 billion euros by the end of the year. Additionally, we
provided our bankers with better ESG communications and learning
materials, we designated ESG experts in every country and we
improved ESG advisory products and services. We also included
sustainability topics in our Wealth Talks, our series of exclusive
conferences with clients.
Future Wealth, a thematic investment initiative we launched in
4Q’20, also considers the environment as part of its strategy to
complement traditional investments with innovative and sustainable
sources of growth and returns.
By 2022 we aim to offer sustainable portfolio management (with
ESG analysis and reporting) in all our geographies. In the coming
months, we will continue to make our list of funds under advice more
sustainable by increasing the number of article 8 and 9 funds
(according to SFDR).
Insurance
We are working on rolling out a sustainable insurance proposition in
all our markets by 2024. Based on our social responsibility and with
the aim of protecting families and businesses, we want our
proposition to focus on 3 dimensions:
• Protect assets classified as sustainable (electric vehicles, green
homes, etc.)
• Support types of insurance that contribute to the ESG dimensions
(microinsurance, health and life insurance designed for specific
target groups, etc.)
• Invest our insurance policies in sustainable assets (i.e. Life
savings AUM invested under ESG)
As part of our regular business, we will continue adopting the UN's
Principles for Sustainable Insurance (PSI) in all of our joint ventures.
For more details, see
www.santanderprivatebanking.com
1. AuMs classified as Article 8 and 9 funds (SFDR) from SAM, plus third-party funds
and other ESG products according to the EU taxonomy from Private Banking. We
apply equivalent ESG criteria to SAM's funds in Latin America.
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Support for higher education
and other local initiatives
GRI 203-1, 203-2 and 413-1
2021 progress and 2019-2021 commitments
ó
Support for higher education
ó
Community investment
106 million
euros invested
162,232
beneficiaries of scholarships,
internships and entrepreneurial
programmes
46 million
A
euros invested
2.1 million
people helped
Our 2019-2021 commitment
To finance 325.000 scholarships/internships and entrepreneur
B
programmes
Our 2019-2021 commitment
To help four million people through various social action
C
programmes
→ Results:
→ Results:
387,651
beneficiaries of scholarships, internships and
entrepreneurial programmes
6.1 million
people helped
ó
More than 150 million euros in total community
investment in 2021
A
Santander remains firmly committed to helping build an inclusive,
equitable and sustainable society, with a higher education
programme that we have been running through Santander
Universities for over 25 years.
So far, Santander Universities has helped more than 790,000
students, professionals, entrepreneurs and SMEs with over 2.1
billion euros and partnerships with more than 1,000 universities in
15 countries.
A. In addition, Banco Santander made two extraordinary donations in 2021 to Fundación Banco Santander of 55,750,000 Banco Santander shares as financial support for it to
bear (at least partially) the costs of fulfilling its founding purposes with the return on the shares. For more details, see 'Other community support programmes' in this
section. Santander Portugal created a new foundation that will promote programmes with a high social, economic and environmental impact. The bank made a EUR
22,500,000 donation that will help the foundation begin operations, consolidate its financial base and cover the costs it will incur in pursuit of its founding purpose in the
coming years. In the US, Santander Holdings USA, Inc. donated USD 50 million to Santander Consumer USA Foundation so it can fulfil its founding purpose in the coming
years by working with, and investing in, organizations and other entities that make a positive social and cultural difference in the communities we serve.
B. The initial target set for the period 2019-2021 was 200,000 beneficiaries of scholarships, grants and entrepreneurship programmes. At the beginning of 2021, and after
meeting the target a year early, Santander Universities committed to grant an additional 125,000 scholarships and grants.For more details on the calculation methodology,
see "Support for higher education" in this section.
C. For more details on the calculation methodology, see "Other programmes to support communities" in this section.
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Support for higher education
106
millions of euros to
universities
997
partner universities and
institutions in 15 countries
A
162,232
beneficiaries of
scholarships, internships
and entrepreneurial
A
programmes
A. This figure only includes universities that have an agreement with Santander Universities. Adding Universia
and Fundación Universia´s data, the total figure is 1,415 universities and academic institutions in 28 countries.
We have been committed to higher education for 25 years. Santander Universities is
a unique global programme that supports education, entrepreneurship and
employability. We focus on three areas:
ó
Education
ó
Entrepreneurship
ó
Employability
We support access to higher
education and academic mobility
and encourage excellence and
equal opportunity.
We support emerging ventures
through access to world-class
resources such as training, visibility
and funding.
We offer internships, training
programmes and upskilling/
reskilling grants for students and
professionals.
40,632
educational scholarship beneficiaries
23,120
entrepreneurship beneficiaries
98,480
employment, upskilling and reskilling
scholarships beneficiaries
Commitment
Progress
We believe education provides the basis for a fair society and strong
economy. Through Santander Universities, we aim to award
325,000 scholarships, internships and entrepreneurship
programmes between 2019 and 2021.B
Scholarships, internships
and entrepreneurship programmes
C,D
.
2019
387,651
325,000
2021
B. The initial target set for the period 2019-2021 was 200,000 beneficiaries of scholarships, grants and entrepreneurship programmes. At the start of 2021, and after
meeting the target one year ahead, Santander Universities is committed to awarding a further 125,000 scholarships and grants.
C. Beneficiary measurement methodology, with procedures that are consistent with Banco Santander’s global reporting system in order to determine the reach and intensity
of Santander Universities’ sponsorship policy in its areas of activity (e.g. education, employment and entrepreneurship). It provides a detailed view of the extent of
Santander Universities’ sponsorship and a final number of its beneficiaries. It also is the basis for Santander Universities’ social impact assessment model.
D. The covid-19 pandemic changed our roadmap for 2020 and 2021. Many traditional (face-to-face) and mobility grants were replaced by online grants with a much broader
scope.
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Santander Scholarships
We continued to deliver on our commitment to train people by
helping them access higher education and academic mobility,
boosting their employability and accompanying them in their lifelong
learning, as well as encouraging excellence and equal opportunity.
In 2021, we expanded our scholarships to include programmes open
to all profiles and ages, paying special attention to new market
needs. That's why we're adding two more concepts to our
scholarship programmes:
-Reskilling: Helping participants acquire new knowledge and skills in
different areas, enhancing their professional versatility and
increasing their career change options.
-Upskilling: Providing training in soft and hard skills to drive more
efficient adaptation to current roles at a time of deep transformation
and digitalization within companies.
Santander Scholarships has seven categories:
→ Santander Tech to promote learning about computer
programming, blockchain, machine learning, cloud & DevOps and
product design strategies.
→ Santander Skills to help develop the fundamental soft skills
needed in today's workplace.
→ Santander Women to prepare women with career development,
leadership training and negotiation skills.
→ Santander Studies to help students complete their studies with
special aid to promote equal opportunity and academic excellence
among low-income students.
→ Santander Language for professional foreign language training.
→ Santander Internship for university students' job training to
provide recent graduates with quality entry-level job opportunities.
→ Santander Research to provide undergraduates, graduates and
PhD students with material and financial support to start or
continue their research.
Scholarship platform
The many scholarships we offer alongside universities and
institutions around the world can be found on www.becas-
santander.com, which closed the year with nearly 2,5 million
registered users. Here are a few examples:
Santander Scholarships Women | W50 Leadership -
LSE & Santander Women | Emerging Leaders - LSE
In both programmes, developed with LSE, we continued to mould
women leaders. W50 is intense training for women with leadership
skills and the ambition to be top-level executives. Emerging Leaders
is for the next generation of leading women.
Santander Scholarships Tech | Digital Business -
The University of Chicago
To celebrate the 25th anniversary of Santander Universities, we
worked with University of Chicago to create a special scholarship to
teach new technologies and digital management models in highly
competitive professional settings.
Santander Scholarships Language I English for
Professional development - University of Pennsylvania
Language skills are a springboard to the international market. This
programme, developed with University of Pennsylvania, gave
participants the opportunity to explore their career path and improve
their command of English to accomplish professional objectives.
Santander Scholarships Studies |
Santander Graduação
A leading programme in Brazil, it targets underserved university
students to provide them with financial aid to continue their studies
(e.g. payment of enrolment fees, learning materials, food, transport
and other costs).
Santander Scholarships Studies | Erasmus
The core purpose is to promote academic excellence through
international experiences, equal opportunity, inclusion and
recognition for young people. In its third year, it awarded 2,152
scholarships for courses at educational institutions in the EU, as well
as international internships.
Pamela Riquelme, beneficiary of Santander Scholarships
Women | W50 Leadership - LSE
“I not only felt closeness and support from professors and
mentors at such a top-level school as the London School of
Economics, but also joined a global, diverse network of
exceptional women who shared, reflected and grew
professionally and as women during the programme”.
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Entrepreneurship
Santander Universities supports emerging ventures, through
Santander X (www.santanderx.com), by providing training and
connecting them with the resources they need to grow and prosper.
Global initiatives
In 2021 we set global challenges, ran another two Explorer
programme´s editions and launched ´Santander X 100´, our global
community of selected startups and scaleups from Santander X
programmes that promotes innovation as a driver of productivity,
economic growth and employment.
Global Challenges
We launched three global challenges to support the most promising
solutions that can scale up globally and foster innovation with
visibility and training.
Santander X Environmental Challenge
An initiative to support innovative companies worldwide and
promote a low-carbon economy. It has two categories which
encompass multiple challenges related to climate change. Over 350
startups from all over the world entered.
The winners of the Scaleup Category were:
→ Whyline (Argentina/US), a customer relationship management
(CRM) service and marketing channel that clears sources of traffic
and data for faster experiences with daily tasks.
→ Alyne (Germany), a cyber-security and regulatory compliance
solution that uses artificial intelligence.
Santander X Global Challenge | Finance For All
A new global challenge for startups and scaleups to submit
innovative solutions with growth potential that enable all members
of society to obtain banking products and services. Six companies
emerged victorious from the over 250 that took part.
The winners of the Startup Category were:
→ SympliFi (UK), which enables immigrants to help their unbanked
family members in their home country access financing.
→ Mosabi (US), an e-learning business platform for better financial
health.
The winners of the Be Mindful Category (to raise awareness about
the importance of a small environmental footprint) were:
→ Lana (Spain), an app that helps self-employed workers grow their
business.
The winners of the Scaleup Category were:
→ True Financial Link (US), a platform that empowers a trustworthy
relative to protect family members from unwanted transactions.
→ Bankuish (EEUU), which gives freelancers and gig workers easy
access to pre-approved loans.
→ Coinscrap Finance (Spain), which enables banks and insurers to
understand their customers better and open up new sources of
revenue.
Francisco Benedito, CEO of ClimateTrade
Winner of Santander X Environmental Challenge in the Be
Sustainable Category
“Top professionals from Banco Santander helped us develop
and expand our green economy project. Initiatives such as
the Santander X Environmental Challenge are, without a
doubt, vital to promote and support green
entrepreneurship".
→ Xilinat (Mexico), whose sustainable processes turn farm waste into
a natural sweetener.
→ Plastecowood (UK), which turns mixed plastic waste into durable
and environmentally friendly plastic wood planks.
→ Breeze Technologies (Germany), which enables companies to
monitor, manage and optimize air quality indoors, in cities and in
industrial facilities.
The winners of the Be Sustainable Category (to promote green
finance and investment) were:
→Cogo Connecting Good (UK), an app that shows consumers and
companies their carbon footprint’s impact in real-time as well as
how to reduce it.
→ ClimateTrade (Spain), a carbon-offset marketplace where
companies looking to become carbon neutral choose green
projects to invest carbon credits in.
→ Scoobic Urban Mobility (Spain), sustainable urban transport in the
form of last-mile vehicles.
Santander X Global Challenge | Helping Businesses Prosper
We called upon startups and scaleups to submit innovative, scalable
solutions that will help SMEs make the digital transition and be more
efficient. Close to 500 companies took part.
The winners of the Startup Category were:
→ Privasee (UK), a data protection platform that uses data mapping
and self-updating privacy policies.
→ Social Piper (Mexico), a social media marketing solution for SMEs
that uses artificial intelligence.
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Santander X 100
We launched 'Santander X 100', our global community of selected
startups and scaleups from Santander X programmes that promotes
innovation as a driver of productivity, economic growth and
employment.
Explorer
In 2021, we launched two new editions of Explorer programme in
Spain to help turn business ideas into projects and solutions. It also
touched down in Argentina, Brazil, Chile, Mexico and Portugal for the
first time (in an online format).
So far, we’ve given over 10,000 young entrepreneurs the tools to
turn their ideas into viable and sustainable solutions.
It's a new way for top, advanced-stage projects from different
countries to network and access advice, training, capital, clients,
talent and other valuable resources they need to keep growing.
Current members of Santander X 100 are from Argentina, Brazil,
Chile, Germany, Mexico, Spain, the UK and the US.
Local initiatives
The Santander X local awards recognize and promote the best
university entrepreneurial ventures in two categories: ´Launch´, for
projects preparing to go to market; and ´Accelerate´, for high-impact
startups preparing for accelerated and sustainable growth. The
winning teams represented their countries and universities at the
Santander X Global Awards.
We held awards contests in Argentina, Brazil, Chile, Mexico, Spain
and the UK, with almost 800 projects submitted.
Santander X Argentina Award | Emprendedor X
Santander X Mexico Award
Santander X Brazil Award
Santander X Spain Award
Santander X Chile Award | Ideas X
Santander X Entrepreneurship Awards
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Universia
Universia is the world's largest university network, with over 862
affiliated universities in 22 countries. It connects institutions,
companies and talented people to create a large collaborative
community that offers the best training and employability
opportunities.
Employability
Universia aims to support talented young people through these three
pillars:
- Guidance: Personalized support for students that offers career and
training advice to boost their employability.
- Training: Opportunities to undertake courses (bootcamps and
postgraduate studies) and training programmes that teach key job
skills, with access to scholarships, discounts, ISAs, loans and other
funding.
- Employment: Connection with professional (internships or
employment) and networking opportunities with companies through
competitions, fairs and other events.
The Universia Jobs platform (https://jobs.universia.net/) has more
than 9,000 registered companies and 139 universities with a
combined 2 million enrolled students.
In 2021, the first Universia Virtual Employability Fair was held in
Spain and Portugal, with 59 stands where companies and academic
institutions promoted their job and learning opportunities.
We received more than 6,700 registrations for the event, which
brought together talented people, instructors and employers to
engage in direct dialogue through 22 separate talks.
Universia also organised the Universia STEAM+: eSports
Competition, where Banco Santander, Atresmedia, Iberdrola, Indra,
Naturgy, Nestlé and Securitas Direct were able to unearth fresh
talent by testing the digital and interpersonal skills of almost 1,600
young people in an innovative environment.
For more details, visit www.universia.net
Fundación Universia
At Fundación Universia we focus on inter-university communities;
diversity, inclusion and equity; and new models of responsible
financing for access to education.
We are a leader in qualified employment and diverse talent
development in companies that support inclusive, responsible and
sustainable growth. At Banco Santander, we also act as a lever for
cultural transformation, contributing to the inclusion of people with
disabilities in education and employment.
Since 2021, Fundación Universia has promoted alternative
responsible financing models through Plan Circular and bootcamps
that use experiential and digital learning to facilitate access to the
most in-demand professions.
Its strategic focus is centred on these UN Sustainable Development
Goals (SDGs): Quality Education; Decent Jobs and Economic Growth;
and Partnerships for the Goals.
Digital transformation in universities
In just three years, MetaRed (which is supported by the Fundación
Universia) has become the largest university network of information
and communications technology (ICT) managers, counting over
1,500 professionals and 1,100 universities from 14 countries in
Ibero-America.
It has facilitated training for more than 500 intermediate profiles,
held over 75 top-level webinars and assessed the digital skills of
some 20,000 university professors.
Elianni Agüero, a story of progress
Elianni Agüero is 26 years old. She’s from Cuba but lives in Madrid.
After learning to walk again, adapting to living and studying in
another country with a distinct culture, earning a technical degree
and making it to Santander, “Overcoming” became her maxim at
work and in life.
A computer programming engineer with a master’s in Data mining
and business intelligence from Universidad Complutense de Madrid,
Elianni started as an intern on the Santander Start programme in
2021.
By July, she was signing a contract to join Data Analytics in the
Strategy & People Insight function of Santander's Human Resources
Division.
Fundación Universia supported Elianni in her job search and career
development, while enabling Santander to attract the best talent.
For more details, visit www.fundacionuniversia.net
420 scholarships 148 people 6,820 people
for university students with
disabilities
with disabilities hired in
companies
benefiting from Fundación
Universia's support
71social
ISAs under Plan Circular
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Other community
support programmes
46
million euros in social
investment
+1,400
joint initiatives with NGOs
and social enterprises
2.1
million people helped
A. For more details on volunteering, see 'Talented and motivated team' in this chapter.
+28,000
A
volunteers
We promote several initiatives and programmes that improve people's access to
education and foster culture and well-being within our communities. We focus on:
ó
Support for
childhood education
ó
Support for
social welfare
ó
Support for
the arts and science
+790k
children and young people helped to attain
a well-rounded, quality education.
+1.3mn
people helped amid the risk of social
exclusion or vulnerability.
We promote greater access for people to
cultural events and programmes.
Our commitment
Our progress
We believe we can play a major role in improving the lives of the
communities where we operate, and aim to help four million
people through our community programmes between 2019
and 2021.B
.
People helped
through community programmes (millions)
.
2019
C
6.1mn
4mn
2021
B. Santander has a corporate approach tailored to its requirements and special model to contribute to society. Reviewed by an external auditor, it consists of principles,
definitions and standards to track the people who have benefited from our community investment programmes. It does not count those who have benefited from art and
cultural initiatives.
C. Cumulative figure since 2019.
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Highlighted initiatives by country
Latin America
• TECHO: Together with TECHO Chile, we support the thousands of
families that still live in slums in our country, and projects that are
in line with the education and progress of the people: a) TECHO
Para Aprender: during 2021 the headquarters number 30 was
inaugurated. In these places children and adolescents find safe
spaces to develop in educational issues (complementary to school).
These spaces are self-managed by the community and supported
by the Bank and the Foundation.
• Belén Educa: for 21 years, we worked together Fundación Belén
educa to support the children and adolescents from educational
institutions through transversal academic programs. In 2021.
• Capacitaciones de oficio: through the donation of training hours
from the bank, courses for adults are carried out together with a
certified educational institution.
• Compromiso País: Santander has been part of this government
initiative since 2018, whose objective is to reduce the high number
of adults who have not completed their basic education.
In 2021, we helped over 230,000 people in more than 40 community
job and digital training programmes.
• Education scholarships: We supported the scholarship
programmes of Cáritas, Cimientos, Fundación León, Voy con Vos,
Reciduca and other organizations. They help children, young people
and families on their educational journey. 458 people benefited
from Santander’s support in 2021.
• Centro Educativo Pescar: We helped 40 young people aged 18 to
24 seeking support and opportunity get personal development and
job skills training.
We maintained our actions to support society and continued with our
private social investment strategy with our programs to support
children, teenagers, the elderly and entrepreneurs.
• In the 19th edition of the Amigo de Valor Program, we raised R$
19.8 MM to support 100 initiatives throughout the country,
benefiting over 12 thousand people.
• Campanha Brasil sem Fome (Brazil without Hunger Campaign): we
accounted for the donation of 200,351 baskets of staple food.
In total, we accounted for 542.545 thousand people impacted by our
social actions, such as the Amigo de Valor, Parceiro do Idoso, Blood
Donation Campaign and Volunteer Program.
• Teletón is a flagship community support and social responsibility
project that organizes fundraisers. Over 70% of civil servants take
part in them to foster a culture of solidarity. In 2021, we raised over
186,000 euros, the highest of any company (for the second time).
• Food drive: Through NGO Redalco, we donated 26,483 meals to the
people who needed them most due to the food crisis brought on by
the pandemic.
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Europe
• Alzheimer’s Society. From 2019 – 2021 we focused on how to
better support customers with dementia as we aim to become the
UK’s best dementia-friendly bank. During 2021, we improved 16
Santander UK products and services, including creating a series of
videos to help people affected by dementia understand
complicated financial topics. Internally, we encouraged our
colleagues to take our Dementia Friends e-training, fulfilling our
guarantee that at least 50% of our employees are equipped to
understand dementia. Our fundraising for Alzheimer’s Society also
continues through charitable activities, raising over £2million.
• Age UK. Since 2016, we’ve worked together with Age UK to
increase the financial independence of older people. We’ve
developed multiple initiatives such as awareness sessions to help
prevent frauds and scams, delivered in local Age UK centres, as
well as a programme to help older people learn and develop digital
skills to make their lives easier and enable them to do more online.
• Santander Foundation. During 2021 we launched our new strategy
for 2021 to 2024, helping people to become digitally and
financially empowered. We want to provide grants to organisations
in the UK, and support them in delivering digital and financial
empowerment to people over the next three years.
• Double the power to help”. Together with the Santander Bank
Polska Foundation, we organised a collection to support the mental
health of children and young people affected by the pandemic. PLN
2 million was donated to 16 hospitals.
• "Memory Gym". We supported the Shipyard Foundation's "Memory
Gym" project by co-financing the printing of a mind training for
seniors guide. It comprises activities, exercises and worksheets for
conducting cognitive function training for the elderly. It also
includes educational material on online and mobile banking for
seniors. This programme has helped 3280 people.
• "Finansiaki". we support the development of competencies in the
area of finance and entrepreneurship. The internet portal https://
finansiaki.pl/ includes materials containing ideas for building
knowledge through playing with children and spending time
together. The "Finansiaki" programme also includes lessons carried
out by volunteers in schools and kindergartens. In 2021, 228
children participated in seven such meetings.
• "Here I live, here I change EKO”. Santander Bank Polska S.A.
Foundation´s grant programme enables local communities to
change their environment with parks, gardens, plant murals,
"green" bus stops and other eco-projects. Out of 1,062
organisations that applied the competition, 58 projects were
selected and co-financed with a total amount of PLN 300 thousand.
• We support Asociación Española Contra el Cancer (The Spanish
association against cancer or "AECC") on its Mayores y Cáncer
("Senior citizens and cancer") initiative that promotes a
comprehensive care model for patients over 65 and their families.
• We help Banco de Alimentos (Spain's food bank) deliver food to
vulnerable groups. Employees volunteer as part of its annual Gran
Recogida de Alimentos ("great food drive") campaign.
• Fundación Banco Santander works to build a more equitable,
inclusive and sustainable society. We develop projects that cover:
culture, environment and research and social action. We help over
200 NGOs a year with digitalization, training and funding for
projects aimed at those most affected by the pandemic. We also
launched our new Santander for the Seas project, which funded
marine biodiversity initiatives with 450,000 euros.
The foundation is also in charge of preserving and publicizing the
Banco Santander Collection. It is expected to play a part in
operating the Pereda Building, our iconic headquarters that will
soon become a modern space for culture and innovation following
its refurbishment (now under way).
In 2021, Santander made two extraordinary donations to
Fundación Banco Santander for a total of 55,750,000 Banco
Santander shares. Those donations are intended as financial
support for the Foundation, so that the return on the shares allows
it to bear (at least partially) the costs of fulfilling its founding
purposes.
We also continue to support the Best for Africa programme (see
more information in the Financial Empowerment section).
For more details visit www.fundacionbancosantander.com
• #TodosJuntos campaign, to raise funds to give access to food and
medicine to vulnerable people. €250.000 raised and 74,000 people
helped.
• Café Joyeux Portugal. This initiative, developed by Associação
VilacomVida, aims to promote the employability and certified
professional training of people with intellectual and
developmental difficulties.
• Santander Participatory Donation 2021: Santander employees
chose 16 social and environmental institutions to be supported by
the Bank.
• “Santander Mais Comunidade” Prize. This prize aims to reward and
recognize the work of social and environmental organizations
chosen by the public, via Santander Portugal’s website.
• Partnership with the Portuguese Rugby Federation - social
inclusion initiatives through Rugby have been developed with
children and teenagers.
• 21 Associação Sara Carreira Scholarships. This Association’s
purpose is to support children and young people with limited
resources, by granting them access to education.
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North America
Santander’s charitable giving is focused on supporting not-for-profit
organizations which help people prosper. 2021 contribution
included:
More than 16 years ago we started fundraising campaigns
throughout our ATM network to support social and environmental
causes. Some of them are:
• $9 million to 207 nonprofit organizations focused on financial
empowerment, through programming and services for financial
education, workforce development, and career readiness for youth,
students and adults
• $4 million to 116 nonprofit organizations supporting small
businesses and entrepreneurship, through programming and
services providing technical assistance, business coaching and
mentorship, education and capital grants
• $5 million to 243 nonprofit organizations that increase access to
affordable housing and create healthier neighbourhoods through
programming and services providing education, housing
preservation, and support to individuals and families lacking
housing stability
Charitable giving is a pillar of our Inclusive Communities Plan, an $11
billion, five-year commitment of lending, investments, and charitable
contributions that began in 2017 and culminates at the end of this
year.
• UNICEF. To protect children's rights and the right to quality
education. In 2021, we raised $1,240,075 to help 12,807
indigenous children. We also made a LikeU seed donation of
$1,000,000 that benefited 1,569 children to meet their educational
needs after schools closed because of the pandemic.
• Fideicomiso Por los Niños de México, Todos en Santander. We
support children who are in a vulnerable economic and social
condition by financing education, health and nutrition projects for
them. In 2021, $12,526,750 were donated via 85 projects that
helped 13,683 children and teenagers.
• Reforestamos ("We reforest"). In 2021 we raised $1,233,940 at
ATMs, benefiting 6,800 people. The LikeU seed donation was
$200,000 and benefited 102 people.
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Key metrics
Employees
GRI 102-7, 102-8, 102-41, 202-1, 202-2, 401-1, 403-9, 403-10, 404-1, 405-1, 405-2 and G4-FS6
SASB FN-AC-330a.1, FN-IB-330a.1, FN0102-06
employees
A
1. EMPLOYEES BY GEOGRAPHIES AND GENDER
0
N
2021
26,249
52,041
9,950
9,518
8,525
25,957
4,818
17,578
15,024
14,270
13,140
197,070
Geographies
SpainB
BrazilC
Chile
Poland
Argentina
MexicoD
PortugalB
UKB
USA
SCF
Others
Total
2020
29,504
42,767
10,491
10,388
9,058
21,572
6,015
20,945
15,677
13,359
11,413
191,189
% men
2021
50
43
45
32
52
46
53
44
42
47
57
46
2020
52
46
46
31
53
45
54
43
42
47
53
46
% women
2021
50
57
55
68
48
54
47
56
58
53
43
54
2020
48
54
54
69
47
55
46
57
58
53
47
54
% graduates
2021
67
62
42
86
39
38
63
17
12
27
47
47
2020
69
66
41
85
53
56
57
18
11
31
49
51
A. Data at year end. The employee data presented is broken down according to the criteria of legal entities, and is therefore not comparable to that found in the Auditors'
report and annual consolidated accounts, which are presented by management criteria.
B. The decrease in headcount in these geographies is due to the restructuring processes carried out in 2021.
C. The increase in the number of employees in Santander Brazil was due to the high number of new hires, particularly in technology jobs.
D. The increase in the number of employees in Santander Mexico was due to the integration of outsourcing as the Bank's own staff.
A
2.1 FUNCTIONAL DISTRIBUTION BY GENDER 2020
Europe
North America
South America
Senior managers
Other managers
Other employees
Men
Women
Total
Men
Women
Total
Men
Women
Total
1,115
75.3%
365
24.7%
1,480
7,350
63.1%
4,290
36.9% 11,640
32,937
44.0%
41,998
56.1%
74,935
228
319
82.0%
76.0%
50
18.0%
24.1%
278
420
956
67.9%
453
32.2%
1,409
15,816
43.1%
20,875
56.9%
36,691
3,247
59.0%
2,257
41.0%
5,504
26,614
45.2%
32,218
54.8%
58,832
Group total
1,662
76.3%
23.7%
2,178
11,553 62.3%
7,000 37.7% 18,553
75,367
44.2% 95,091
55.8% 170,458
A
2.2 FUNCTIONAL DISTRIBUTION BY GENDER 2021
B
Senior managers
Other managers
Other employees
Men
Women
Total
Men
Women
Total
Men
Women
Total
1,039
72.7%
390
27.3%
1,429
6,865
63.6%
3,926
36.4% 10,791
29,934
44.2%
37,773
55.8%
67,707
223
318
78.8%
73.4%
60
21.2%
26.6%
283
433
1,181
67.0%
583
33.0%
1,764
18,299
44.1%
23,226
55.9%
41,525
2,955
60.4%
1,934
39.6%
4,889
29,137
42.7%
39,112
57.3%
68,249
Europe
North America
South America
Group total
1,580
73.7%
26.3%
2,145
11,001
63.1%
6,443
36.9% 17,444
77,370
43.6% 100,111
56.4% 177,481
A. Data at year end.
B. The higher number of women classified as Senior Managers is the result of the progress made on the public commitment of Responsible Banking on women in senior
positions, which aims for 30% of senior managers to be women by 2025.
Annual report 2021 117
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3.1. WORKFORCE DISTRIBUTION BY AGE BRACKET 2020
Number and % of total
A
Europe
North America
South America
Group total
aged <= 25
aged 26 - 35
aged 36 - 45
aged 46 - 50
age over 50
4,871
4,704
4,141
13,716
5.53%
12.26%
6.39%
7.17%
17,996
15,597
29,498
63,091
20.44%
40.64%
45.55%
33,00%
31,827
9,317
20,796
61,940
36.14%
24.28%
32.11%
32.40%
13,484
3,279
5,072
21,835
15.31%
8.54%
7.83%
11.42%
19,877
5,481
5,249
30,607
22.57%
14.28%
8.11%
16.01%
3.2. WORKFORCE DISTRIBUTION BY AGE BRACKET 2021
Number and % of total
AB
Europe
North America
South America
Group total
aged <= 25
aged 26 - 35
aged 36 - 45
aged 46 - 50
age over 50
3,764
5,320
10,989
20,073
4.71%
12.21%
14.94%
10.19%
15,659
17,817
29,107
62,583
19.59%
40.89%
39.56%
31.76%
29,730
10,942
22,378
63,050
37.20%
25.11%
30.42%
31.99%
13,316
3,505
5,616
22,437
16.66%
8.04%
7.63%
11.39%
17,458
5,988
5,481
28,927
21.84%
13.74%
7.45%
14.68%
A. Data at year end.
B. The <25 age group increase due to the incorporation of a company in the Group's perimeter with a high number of employees in this age group.
4.1. DISTRIBUTION BY TYPE OF CONTRACT 2020
A
Europe
North America
South America
Group total
Europe
United Kingdom
South America
Group total
Permanent / Full time
Permanent / Part-time
Men
Women
Total
Men
Women
Total
39,325 50.9%
37,957 49.1%
16,681 44.9%
20,500 55.1%
29,927 46.9%
33,861 53.1%
77,282
37,181
63,788
874 11.7%
6,576 88.3%
7,450
135 24.9%
232 25.6%
499 78.7%
676 74.4%
634
908
85,933 48.2%
92,318 51.8%
178,251
1,241 13.8%
7,751 86.2%
8,992
Temporary / Full time
Temporary / Part-time
Men
Women
Total
Men
Women
Total
992 37.4%
1,658 62.6%
2,650
211 31.4%
462 69.0%
673
184 32.7%
379 67.3%
21 35.0%
39 65.0%
563
60
0
0
0%
0%
0
0
0%
0%
0
0
1,197 36.6%
2,076 63.4%
3,273
211 31.4%
462 69.0%
673
4.2. DISTRIBUTION BY TYPE OF CONTRACT 2021
A,B
Europe
North America
South America
Group total
Europe
United Kingdom
South America
Group total
Permanent / Full time
Men
Women
35,465 51.0%
34,119 49.0%
19,222 45.5%
23,031 54.5%
31,510 45.1%
38,398 54.9%
Total
69,584
42,253
69,908
Permanent / Part-time
Men
Women
Total
826 12.6%
5,706 87.4%
119 21.0%
448 79.0%
853 23.8%
2,725 76.2%
6,532
567
3,578
86,197 47.4%
95,548 52.6%
181,745
1,798 16.8%
8,879 83.2%
10,677
Temporary / Full time
Temporary / Part-time
Men
Women
Total
Men
Women
Total
1,398 42.0%
1,933 58.0%
3,331
149 31.0%
332 69.2%
480
362 48.1%
390 51.9%
47 55.3%
38 44.7%
752
85
0
0
0.0%
0.0%
0
0
0.0%
0.0%
0
0
1,807 43.4%
2,361 56.6%
4,168
149 31.0%
332 69.2%
480
A. Data at year end.
B. The increase in part-time permanent employees in South America is due to the addition of a company in the Group's perimeter with a high number of part-time
permanent employees.
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5. ANNUAL RATE OF CONTRACTS BY GENDER
Employees with permanent /full time contract
Employees with permanent/part-time contracts
Employees with temporary/full-time contracts
Employees with temporary/part-time contracts
Group Total
Men
2021
Women
Total
Men
2020
Women
Total
84,724
92,308
177,033
85,796
94,435
180,231
1,776
1,158
165
9,502
1,776
292
11,277
2,934
456
1,155
1,441
211
7,717
2,291
470
8,872
3,732
681
87,822
103,878
191,700
88,603
104,913
193,516
6.1. ANNUAL RATE OF CONTRACTS BY AGE BRACKET 2020
Employees with permanent /full time contract
Employees with permanent/part-time contracts
Employees with temporary/full-time contracts
Employees with temporary/part-time contracts
Group Total
aged <= 25
aged 26-35
aged 36-45
aged 46-50
aged over 50
10,668
58,474
1,099
1,001
209
2,360
1,621
252
59,343
2,426
652
143
20,825
887
159
26
30,922
2,100
298
51
12,977
62,707
62,564
21,898
33,370
6.2. ANNUAL RATE OF CONTRACTS BY AGE BRACKET 2021
Employees with permanent /full time contract
Employees with permanent/part-time contracts
Employees with temporary/full-time contracts
Employees with temporary/part-time contracts
Group Total
7. ANNUAL RATE OF CONTRACT BY CATEGORY
Employees with permanent /full time contract
Employees with permanent/part-time contracts
Employees with temporary/full-time contracts
Employees with temporary/part-time contracts
Total Grupo
aged <= 25
aged 26-35
aged 36-45
aged 46-50
aged over 50
10,725
2,641
800
150
56,373
2,923
1,299
159
60,418
2,733
541
82
21,699
924
137
13
27,818
2,055
157
52
14,317
60,754
63,774
22,772
30,083
2021
2020
Senior
Senior
Other
Other
Managers Managers employees
17,194
165
81
13
17,454
2,118
5
16
1
2,141
157,720 177,033
11,277
2,934
456
172,105 191,700
Other
Total Managers Managers Employees
159,169
8,711
3,636
665
172,182
18,911
154
83
16
19,164
2,150
7
13
0
2,170
11,107
2,836
442
Other
Total
180,231
8,872
3,732
681
193,516
Total
177,033
11,277
2,934
456
191,700
Total
180,231
8,872
3,732
681
193,516
8. EMPLOYEES WHO WORK IN THEIR HOME COUNTRY
%
A,B
Europe
North America
South America
Group total
Managers
2021
87.26
91.52
91.46
88.67
2020
88.45
91.01
91.19
89.30
Other employees
Total
2021
95.76
99.74
98.22
97.57
2020
95.38
99.75
98.25
97.24
2021
95.61
99.69
98.18
97.47
2020
95.27
99.69
98.21
97.15
A. Data at year end.
B. Data from US is not included as it is confidential information.
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9.1 DIFFERENTLY-ABLED EMPLOYEES RATIO BY REGION
%
A,B
Europe
North America
South America
Group total
A,B
9.2. DIFFERENTLY-ABLED EMPLOYEES
Number of employees
Spain
Rest of the Group
Total Group
2021
1.74
0.24
3.07
1.90
2021
408
3,295
3,703
2020
1.64
0.21
3.27
1.90
2020
386
3,191
3,577
A. Data at year end.
B. Data from Mexico not included as it is confidential information.
10. COVERAGE OF THE WORKFORCE BY COLLECTIVE AGREEMENT
A
Countries
Spain
Brazil
Chile
Poland
Argentina
Mexico
Portugal
UK
US
B
SCF
Other business units
Total Group
2021
%
99.92
98.66
100.00
0.00
73.78
30.94
99.42
100.00
0.00
51.73
59.60
70.75
0
N
Employees
26,228
51,345
9,950
0
6,290
8,031
4,790
17,578
0
7,382
7,832
139,426
2020
%
99.80
99.19
100.00
0.00
72.64
30.34
99.14
100.00
0.00
56.89
60.01
71.57
0
N
Employees
29,444
42,422
10,491
0
6,580
6,544
5,963
20,945
0
7,600
6,849
136,838
A. Data at year end.
B. SCF data for 2020 recalculated to consider its US-based employees not covered by the collective bargaining agreement.
11.1. DISTRIBUTION OF NEW HIRES BY AGE BRACKET 2020
% of total
Europe
North America
South America
Group total
aged <= 25
25.93
36.49
19.67
28.84
aged 26-35
39.57
39.29
50.67
42.05
aged 36-45
23.55
14.75
22.18
19.58
aged over 45
6.13
4.50
3.97
4.95
aged > 50
4.82
4.97
3.51
4.58
11.2. DISTRIBUTION OF NEW HIRES BY AGE BRACKET 2021
% of total
A
Europe
North America
South America
Group total
aged <= 25
27.57
30.77
32.33
30.84
aged 26-35
40.68
41.13
46.57
43.24
aged 36-45
21.92
17.65
16.68
18.00
aged over 45
5.84
4.78
2.61
4.09
aged > 50
3.98
5.67
1.80
3.82
A. The increase in new hires in South America was mainly due to the high number of new hires in Santander Brazil, especially in technology positions.
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11.3. DISTRIBUTION OF NEW HIRES BY GENDER
Europe
North America
South America
Group total
Men
8.16%
36.95%
22.63%
19.68%
2021
Women
7.34%
32.88%
17.04%
16.76%
Total
7.73%
34.72%
19.50%
18.09%
Men
7.79%
18.14%
9.03%
10.20%
2020
Women
6.24%
19.55%
3.98%
8.25%
Total
6.97%
18.92%
6.34%
9.15%
12. DISTRIBUTION OF DISMISSALS
A,C
by gender
Senior managers
Other managers
Other employees
Total Group
2021
B
%
Women
4.87%
6.54%
9.50%
9.05%
18
341
9,237
9,596
Men
77
719
7,348
8,144
B
%
3.19%
5.29%
9.23%
8.96%
Total
95
1,060
16,585
17,740
B
%
4.43%
6.08%
9.34%
9.00%
Men
30
470
4,267
4,767
2020
B
%
Women
1.81%
4.07%
5.66%
5.38%
4
225
5,466
5,695
B
%
0.78%
3.21%
5.75%
5.55%
Total
34
695
9,733
10,462
B
%
1.56%
3.75%
5.71%
5.47%
by age
aged <=25
aged 26-35
aged 36-45
aged 46-50
aged >50
Total Group
Men
737
1,961
1,828
743
2,875
8,144
2021
Women
1,149
2,535
2,770
863
2,279
9,596
Total
1,886
4,496
4,598
1,606
5,154
17,740
Men
342
1,502
1,286
499
1,137
4,766
2020
Women
363
1,878
1,932
553
970
5,696
Total
705
3,380
3,218
1,052
2,107
10,462
A. Dismissal: unilateral termination decided by the company of an employment contract not subject to term expiration. The concept includes encouraged redundancies
within the context of restructuring processes.
B. Percentage expressing the number of dismissals over the total number of employees in each group.
C. Dismissals increased due to restructuring in some of the Group's subsidiaries in 2021.
13. EXTERNAL TURNOVER RATE BY GENDER
A,B
% of total
Europe
North America
South America
Group total
Men
17.62
25.49
21.03
20.53
2021
Women
17.32
24.54
18.94
19.51
Total
17.46
24.97
19.86
19.97
Men
8.71
19.92
14.54
12.77
2020
Women
9.46
16.88
14.11
12.51
A. Excludes temporary leaves of absence and transfers to other Group companies.
B. The rate of rotation increased due to restructuring in some of the Group's subsidiaries in 2021.
A
2020
14.1 EXTERNAL TURNOVER RATE BY AGE BRACKET
% of total
Europe
North America
South America
Group total
aged <= 25
26.36
32.53
15.50
aged 26-35
10.58
17.52
14.15
aged 36-45
6.17
14.91
12.96
aged 46-50
5.48
13.45
12.91
aged over 50
10.58
16.38
20.88
25.20
13.83
9.76
8.40
13.38
A. Excludes temporary leaves of absence and transfers to other Group companies.
Total
9.11
18.22
14.31
12.63
Total
9.11
18.22
14.31
12.63
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2021
14.2. EXTERNAL TURNOVER RATE BY AGE BRACKET
% of total
Europe
North America
South America
Group total
aged <= 25
38.63
51.03
25.73
34.87
aged 26-35
18.70
26.06
20.87
21.67
aged 36-45
11.04
17.22
16.90
14.18
aged 46-50
8.62
16.03
13.51
11.00
aged over 50
29.27
18.02
21.36
25.45
Total
17.46
24.97
19.86
19.97
A. Excludes temporary leaves of absence and transfers to other Group companies.
15. REMUNERATION BY FUNCTION, GENDER AND REGION
A
Senior managers B
Other managers C
Men
289,263
690,088
377,932
427,242
Women
191,317
445,220
219,080
265,458
GPG ratio
D
(Median)
GPG-SAB
ratio
E
(Median)
26.5%
18.4%
30.3%
29.3%
21.1%
5.5%
17.3%
21.6%
Men
90,895
233,580
76,807
128,859
Women
63,950
196,908
69,465
100,224
GPG ratio
D
(Median)
GPG-SAB
ratio
E
(Median)
31.5%
5.6%
(4.4%)
13.9%
26.5%
1.8%
(2.2%)
12.1%
384,971
415,975
(7.5)%
118,633
107,477
10.4%
Other employees C
Men Women
38,065
33,121
17,094
29,717
49,648
44,960
23,510
40,244
Ratio GPG
D
(Median)
GPG-SAB
ratio
E
(Median)
19.4%
23.3%
16.8%
25.9%
18.0%
14.7%
22.9%
27.0%
34,352
34,602
(0.7)%
Men Women
40,052
38,344
18,511
33,350
57,269
64,777
29,080
53,785
53,785
55,151
33,350
34,476
(2.5) %
(3.3) %
GPG Ratio
D
(Median)
GPG-SAB
ratio
E
(Median)
19.1%
26.2%
25.7%
30.0%
30.0%
20.9%
29.7%
19.4%
32.3%
32.3%
31.7%
2.0 %
Total
employees
47,596
49,975
23,210
42,628
42,628
43,867
(2.8) %
aged <= 25
aged 26-35
aged 36-45
aged 46-50
aged over 50
11,819
16,140
(26.8) %
23,394
26,943
(13.2) %
42,250
47,253
(10.6) %
59,824
64,868
(7.8) %
66,958
69,482
(3.6) %
Total
42,628
43,867
(2.8) %
Europe
North America
South America
Group total
A
Total remuneration (average)
Group Total 2020
Variation 2021 vs 2020 (%)
Europe
North America
South America
Group total
A
Total remuneration (average)
Group Total 2020
Variation 2021 vs 2020 (%)
By Age Brackets
A
Total remuneration (average)
Group Total 2020
Variation 2021 vs 2020 (%)
A. Data at 2021 year-end. Employees' average total remuneration includes their annual base salary, pensions and variable remuneration paid in the year.
B. Includes group sr. executive vp, executive vp and vice-president.
C. The variation includes the effect of internal reclassification between employee categories in different geographies.
D. GPG Ratio (median) includes annual base salary and variable remuneration paid in the year.
E. GPG Ratio - SAB (median) includes annual base salary paid in the year.
16. AVERAGE REMUNERATION SENIOR OFFICERS
Thousands euros
A
Executive officers
Non-executive officers
Senior officers
Diff. Male vs Female
Men
Women
Total
1
7
12
1
5
3
2
12
15
Men
10,724
363
4,758
2021
Women
13,752
293
1,597
(66.4)%
Total
12,238
334
4,126
Men
6,247
239
3,610
2020
Women
7,239
207
2,288
(36.6)%
Total
6,743
227
3,362
A. Sergio Rial excluded from the calculation of executive directors
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16.1 RATIO BETWEEN THE BANK’S MINIMUM ANNUAL SALARY AND THE LEGAL
MINIMUM ANNUAL SALARY BY COUNTRY AND GENDER 2020
% Legal Minimum Wage
Germany
Argentina
Brazil
Chile
US
Spain
Mexico
Poland
Portugal
UK
Men
100.32%
380.69%
178.62%
179.14%
236.45%
175.29%
160.09%
101.54%
188.98%
176.26%
Women
100.32%
380.69%
178.62%
144.15%
236.45%
175.29%
160.09%
100.00%
188.98%
176.26%
% legal
minimum wage
100.32%
380.69%
178.62%
161.64%
236.45%
175.29%
160.09%
100.77%
188.98%
176.26%
16.2 RATIO BETWEEN THE BANK’S MINIMUM ANNUAL SALARY AND THE LEGAL
MINIMUM ANNUAL SALARY BY COUNTRY AND GENDER 2021
% Legal Minimum Wage
Germany
Argentina
Brazil
Chile
US
Spain
Mexico
Poland
Portugal
UK
17. TRAINING
Total hours of training
A
% employees trained
Total attendees
Hours of training per employeeA
Total investment in training
Investment per employee
Cost per hour
% female participants
% of e-learning training attendees
% of e-learning hours
Employee satisfaction (up to 10)
Men
205.45%
375.62%
185.62%
177.16%
259.78%
132.72%
165.01%
100.00%
181.95%
206.58%
Women
205.45%
375.62%
185.62%
145.36%
262.31%
155.44%
165.01%
100.00%
181.95%
158.56%
% legal
minimum wage
205.45%
375.62%
185.62%
161.26%
261.04%
144.08%
165.01%
100.00%
181.95%
182.57%
2021
2020
6,030,787.47
99.05
5,578,255
30.60
75,138,476
381.28
12.46
53.39
91.42
76.22
8.46
5,913,435.04
100.00
5,939,158
30.93
61,304,729
320.65
10.37
53.66
91.97
48.06
8.18
A. Calculated considering the staff at the end of each year. The incorporation of both employees and entities to
the Group at the end of 2021 fiscal year has a signification impact on the result of this indicator in
comparison to 2020.
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2020
Hours
65,274
940,619
4,907,542
5,913,435
Average
29.97
50.7
28.79
30.93
18. HOURS OF TRAINING BY CATEGORY
2021
Hours
Average
28.35
39.86
29.72
30.6
Senior officers
ManagersA
Other employees
Group total
60,804
695,353
5,274,630
6,030,787
A. Fewer training hours due to downsizing.
19. HOURS OF TRAINING BY GENDER
2021
Average
32.75
28.8
30.6
2020
Average
31.76
30.21
30.93
Men
Women
Group total
20. ABSENTEEISM BY GENDER AND REGION
A,B ,C
Europe
North America
South America
Group total
Men
2.50
0.93
1.50
1.83
2021
Women
5.12
1.75
2.92
3.63
Total
3.90
1.38
2.27
2.80
Men
2.60
0.81
2.07
2.08
2020
Women
5.00
1.56
3.99
3.97
Total
3.89
1.23
3.12
3.11
A.Days missed due to occupational accidents. non-work related illness and non-work related accident for every 100 days worked.
B. Santander UK does not count hours not worked due to covid-19 as absences so they will not affect the remuneration objectives set prior to the health crisis.
C. Banco Santander Brazil only considers the accidents that after an internal specialist investigation were recognized as work-related and had a Communication of work-
related accident ("CAT") registered in the Brazilian Social Security in 2021. Likewise, this indicator only considers the cases that had 15 or more days of absence due to
non-work-related accidents or common illness.
21. ACCIDENT RATE
%
A,B
Europe
North America
South America
Group total
Men
0.04
0.00
0.01
0.02
2021
Women
0.10
0.02
0.02
0.05
Total
0.07
0.01
0.02
0.04
Men
0.04
0.01
0.02
0.03
2020
Women
0.12
0.02
0.05
0.07
Total
0.08
0.01
0.04
0.05
A. Hours missed due to occupational accident involving leave between the number of total hours worked. The hours worked are theoretical hours. This includes accidents in
Itinere.
B. Banco Santander Brazil only considers the accidents that after an internal specialist investigation were recognized as work-related and had a Communication of work-
related accident ("CAT") registered in the Brazilian Social Security in 2020Banco Santander Brazil only considers the accidents that after an internal specialist investigation
were recognized as work-related and had a Communication of work-related accident ("CAT") registered in the Brazilian Social Security in 2021
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22. OCCUPATIONAL HEALTH AND SAFETY
A,B
Frequency rateC
D
Severity rate
No. of fatal occupational accidents
E
Work related illness
F
Total number of accidents
Men
1
0.03
0
0
183
2021
Women
1
0.08
0
0
388
Total
1
0.06
0
0
571
Men
1
0.03
1
0
197
2020
Women
2
0.1
0
0
475
Total
2
0.07
1
0
672
A. Occupational injuries that can be documented are reported, without exception for serious injuries.
B. Banco Santander Brazil only considers the accidents that after an internal specialist investigation were recognized as work-related and had a Communication of work-
related accident ("CAT") registered in the Brazilian Social Security in 2021.
C. Number of accidents at work with leave for every 1,000 hours worked. The hours worked are theoretical hours. In itinere accidents are included.
D. Days not worked due to work accident with leave for every 1,000 hours worked. The hours worked are theoretical hours. In itinere accidents are included.
E. No member of the group's staff is exposed to occupational diseases, given that the activity carried out by Santander professionals and the sector in which they operate is
not recognized in Royal Decree 1299/2006.
F. Refers to occupational accidents with sick leave. Including accidents on the way to and from work.
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Customers
A
23. GROUP CUSTOMERS
Europe
Spain
Portugal
United Kingdom
Poland
Others Europe
B,C
South America
D
Brazil
Chile
Argentina
E
Others South America
North America
México
F
United States
Others North AmericaC,G
Digital Consumer Bank
H
Santander Consumer Bank
Openbank
Total
2021
2020
45,899,479
13,571,008
3,060,473
23,569,326
5,430,274
268,398
63,031,232
53,445,934
4,113,888
4,152,335
1,319,075
24,494,428
19,592,102
4,731,155
171,171
19,436,550
17,857,599
1,578,951
47,122,309
13,970,512
3,047,020
24,516,785
5,213,476
374,516
57,208,967
48,347,665
3,605,104
3,913,086
1,343,112
24,314,248
18,898,106
5,136,495
279,647
19,610,511
18,237,909
1,372,602
152,861,690
148,256,035
var.
(3)%
(3)%
—%
(4)%
4%
(28)%
10%
11%
14%
6%
(2)%
1%
4%
(8)%
(39)%
(1)%
(2)%
15%
3%
A. Figures corresponding to total customers, understood as the first holder of at least one product or service with a
current contract. 2020 data has been redefined to accommodate 2021 reporting segments.
B. Rest of Europe: BP Rest (Bahamas and Switzerland), SCIB (not included individually in each country) and PagoNxt.
C. The changes in customers in these segments are due to changes in the scope of consolidation.
D. Brazil: Private Banking: Decision groups; Santander Financiamiento: Financeira's exclusive customer data.
E. Rest of South America: Uruguay (including customers of Paganza, Creditel and Retop), Peru, Colombia and PagoNxT.
F. US includes BPI Miami
G. Rest of North America: PagoNxT
H.SCF includes customers in all European countries, including the UK.
24. DIALOGUE BY CHANNEL
Branches
Number of branches
Digital banking
A
B
Users
2021
2020
Var .2021/2020 %.
9,879
11,236
47.44
42.36
(12.1) %
12.0 %
A. Santander Consumer Finance not included.
B. Counts once for users of both Internet and mobile banking.
Annual report 2021 126
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25. CUSTOMER SATISFACTION
2018
2019
2020
2021
Argentina
BrazilA
Chile
Uruguay
Spain
Poland
Portugal
UK
Mexico
USA
Group
83
80
86
95
87
98
91
97
98
83
89
86
86
86
94
86
98
86
96
95
88
90
90
89
87
93
87
99
86
94
95
87
91
91
n/a
90
96
84
96
90
95
94
88
92
A. In 2021 Brazil has not measured the customer satisfaction indicator. It will measure it again in 2022.
26. TOTAL COMPLAINTS RECEIVED
A
Spain
Portugal
United Kingdom
Poland
B
Brazil
Mexico
Chile
C
Argentina
US
SCF
2021
2020
120,953
150,298
3,570
20,069
5,179
195,340
82,033
8,009
5,013
3,205
4,036
22,625
6,057
146,067
80,031
8,328
3,512
4,292
2019
91,046
4,655
30,298
6,193
133,841
75,459
6,474
4,106
4,097
35,215
39,064
30,535
A. Compliance metrics according to group-wide criteria, which may not match local criteria such as that
of the UK's Financial Conduct Authority (FCA) or in Brazil.
B. Increase in Brazil due to the inclusion of claims that were handled independently last year and to the
government’s enhancement of official channels.
C. Increase in Argentina mainly due to fraudulent online purchases amid growing e-commerce since the
outbreak of the pandemic.
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27. Equator Principles
Category
TOTAL
Sector
Infrastructure
Oil & gas
Energy
Region
Americas
United States
Chile
Mexico
Brazil
Europe
Spain
United Kingdom
France
Portugal
Germany
Italy
Poland
Type
Designated countriesA
Non-designated countries
Independent review
Yes
No
Project Finance
B
A
56
1
0
0
1
0
0
0
0
0
0
0
0
0
0
1
1
0
1
0
3
2
51
18
1
1
1
23
3
1
0
1
2
3
52
4
55
1
C
6
3
1
2
0
0
0
0
1
0
0
3
0
1
0
5
1
3
3
A. In accordance with the definition of designated countries included in the Equator
Principles, i.e, those considered to have a solid framework of environmental and
sociaI governance, legislation and institutional capacity to protect their
inhabitants and the environment.
28. Country by country report
According GRI 207-4 TAX a country-by-country report of financial, economic, and tax-related information for each jurisdiction in which Santander
operates is required. The information of profit/loss before tax, corporate income tax paid on a cash basis and number of employees, as well as
the basis of calculation of this number, is already included in the appendix VI of the consolidated financial statements (Annual Banking Report):
EUR million
Jurisdiction
Germany
Argentina
Austria
Bahamas
Belgium
D
Brazil
Canada
Chile
Revenues from
third-party salesA
1,720
1,366
180
7
77
10,742
61
2,424
2021
Revenues from intra-group
transactions with other
A
tax jurisdictions
Tangible assets
other than cash
B
and cash equivalents
Corporate income tax
C
accrued on profit/loss
-56
-2
-3
-2
1
-158
-6
-13
2,015
640
13
1
5
1,621
1
389
184
75
17
0
8
1,710
5
13
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China
Colombia
United Arab Emirates
E
Spain
United States
Denmark
Finland
France
Greece
Hong Kong
India
Ireland
Isle of Man
Italy
Jersey
Luxembourg
Mexico
Norway
The Netherlands
Peru
Poland
Portugal
Puerto Rico
United Kingdom
Singapore
Sweden
Switzerland
Uruguay
Total Consolidated Group
22
49
0
6,448
7,481
180
82
818
0
104
0
107
2
510
-9
175
3,613
240
97
112
1,935
1,381
4
5,809
12
180
133
342
46,404
0
2
3
1,137
-54
-4
36
6
0
-10
1
-144
13
-2
51
3
-32
15
-2
-2
10
6
0
-10
0
0
6
-3
787
4
3
0
12,312
14,732
36
49
89
1
5
0
970
2
32
7
49
1,425
15
5
3
256
653
0
1,985
0
7
52
38
37,415
-1
3
0
66
391
25
13
90
0
4
0
1
1
71
2
56
181
37
51
17
95
113
-1
518
1
12
7
34
3,799
A. The figure of revenues from intra-group transactions with other tax jurisdictions includes interest income, interest expenses, commission income and commission expenses
for transactions between Group companies with residence in different tax jurisdictions, as well as intra-group income which elimination is reflected in the total income of the
consolidated income statement as the counterparty expense is recorded in another item of the consolidated income statement not included in total income.
B. Tangible assets: Composed by Tangible assets and Non-current assets held for sale, as well as Inventories.
C. The accrued corporate income tax is current year expense, not including deferred taxes.
D. Including the information relating to a branch in the Cayman Islands with Corporate income tax accrued of EUR 97 million.
E. Includes Corporate Center.
Reasons for the difference between corporate income tax accrued on profit/loss and the tax due if the statutory tax rate is applied to profit/loss
before tax are mainly due the criteria for calculating taxes, which establishes temporary or permanent restrictions on the deduction of expenses,
exemptions, etc., generating the corresponding differences between tax and accounting result. Thus, in addition to the temporary differences
that generate deferred taxes, as main adjustments to the taxable income it should be noted the monetary correction in Chile and Mexico, the
hyperinflation adjustments in Argentina, the deduction of juros and taxes on margins in Brazil and in some cases, such as in Poland, permanent
adjustments due to non-deductible expenses like Bank Levy or some recognized provisions; with the rest of the Group's relevant jurisdictions at
rates close to their nominal rates.
Annual report 2021 129
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Environment and climate change
GRI 301-1, 301-2, 301-3, 302-1, 302-2, 302-3, 303-1, 303-3, 303-5, 305-1, 305-2, 305-3, 305-4, 306-2, 306-3, 306-4 and 306-5
A
29. ENVIRONMENTAL FOOTPRINT 2020-2021
B
Consumption
3
Water (m
3
Water (m
C
)
/employee)
Normal electricity (millions of kwh)
Green electricity (millions of kwh)
Total electricity (millions of kwh)
D
Total internal energy consumption (GJ)
Total internal energy consumption (GJ/employee)
E
Total paper (t)
Recycled or certified paper (t)E
Total paper (t/employee)
Waste
Paper and cardboard waste (kg)
Paper and cardboard waste (kg/employee)
F,G
Greenhouse gas emissions
H,I
Direct emissions (CO2 teq)
Indirect electricity emissions (CO2 teq)-MARKET BASED
J
Indirect electricity emissions (CO2 teq)-LOCATION BASED
Indirect emissions from displacement of employees (CO2 teq)
Total emissions (CO2 teq)- MARKET BASED
Total emissions (CO2 teq/employee)
Average number of employees
J,K
L,M
2021
2020
Var. 2020-2021 (%)
1,808,668
9.76
227
676
903
3,714,227
20.04
7,345
6,020
0.04
6,323,866
34.11
25,672
57,425
269,615
35,420
118,517
0.64
185,379
2,064,113
11.07
395
526
920
3,758,183
20.16
8,966
7,336
0.05
5,926,139
31.79
24,818
128.633
282.216
40,708
194,159
1.04
186,429
-12.4
-11.9
-42.6
28.5
-1.9
-1.2
-0.6
-18.1
-17.9
-17.6
—
6.7
7.3
—
3.4
-55.4
-4.5
-13.0
-39.0
-38.6
-0.6
A. The scope of information includes the main countries of operation: Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, United Kingdom and United States
(excluding Puerto Rico and Miami).
B. The decrease in consumption levels was partly due to the extension of the pandemic situation during the year, which has kept the occupancy of offices and branches at
low levels throughout 2021, in contrast to the previous year, 2020, which recorded normal occupancy levels during the first months of that year. This was also the result
of the Group's efforts to promote savings in the consumption of resources, especially paper.
C. Information is provided exclusively on water withdrawal from the public network.
D. It is also reported that the external energy consumption resulting from employee travel and business trips has been: 500,311GJ in 2021 and 579,155 GJ in 2020.
E. The figure for total paper and certified or recycled paper for 2020 has been recalculated from that published in 2020 report, based on information provided by the USA.
F. The data for 2019 and 2020 do not include waste from the commercial network in Brazil. The amount of paper and cardboard waste reported is managed in its entirety by
authorised waste managers and is collected separately, which guarantees its proper recycling. Grupo Santander will work in the near future to ensure that all this waste
undergoes recycling operations.
G. The increase in managed paper and board waste is mainly a consequence of the branch concentration process carried out in the Spanish branch network in 2021.
H. These emissions include those derived from the direct consumption of energy (natural gas and diesel, and additionally, in the particular case of Mexico, gasoline and
diesel for automobiles and LPG) and correspond to scope 1, defined by the GHG Protocol standard. To calculate these emissions, the emission factors DEFRA 2021 for
2021 and DEFRA 2020 for 2020 were applied
I. The slight increase between 2020 and 2021 is mainly due to the implementation of measures to increase air recirculation in offices and branches in the context of the
Covid-19 pandemic situation.
J. These emissions include those derived from electricity consumption and correspond to the scope 2 defined by the GHG Protocol standard. In both 2021 and 2020 the IEA
(International Energy Agency) emission factors for 2017 have been used.
- Indirect Electricity Emissions - Market-based: zero emissions have been considered for green electricity consumed in Germany, Spain, Mexico, Portugal and UK; also, it
has been considered that in Argentina, Brazil, Chile, Poland and USA, part of electricity consumption is green energy. This altogether has meant a reduction of 212,190
tons of CO2 equivalent in 2021 and 153,582 in 2020. For the rest of the electrical energy consumed, the emission factor of the IEA corresponding to each country has been
applied.
- Indirect emissions of electricity - Location-based: the emission factor of the IEA corresponding to each country has been applied to the total electricity consumed,
regardless of its source (renewable or non-renewable).
K. The reduction in indirect electricity emissions has been mainly due to the increase in the purchase of green energy in 2021 in the countries that make up the G10
L. These emissions include emissions from employees travelling from central services in each country to their workplaces by individual car, collective vehicle and rail, and
from employees' business travel by air and car. The distribution of employees by type of travel has been made on the basis of surveys or other estimates. The conversion
factors DEFRA 2021 for 2021 and DEFRA 2020 for 2020 were used to calculate emissions from employee travel. - The number of employees travelling to work in their
own vehicles was estimated taking into account only the number of parking spaces in the central services buildings in each country and the diesel/petrol consumption mix
of the vehicle fleet in each country. Data on employee travel by individual vehicle from Argentina, Poland and the United Kingdom are not reported, as the information is
not available. - Employees' journeys in collective vehicles were calculated on the basis of the average distance travelled by the vehicles rented by Grupo Santander for
collective transport of its employees in the following countries: Germany, Brazil, the US, Spain, Mexico, Poland, Consumer and Portugal, and within the central services of
Spain (CGS) - Data on business trips by car from USA Consumer are not reported, as the information is not available. - Emissions derived from the use of courier services
are not included, nor are those derived from the transport of funds, nor those from any other purchase of products or services, nor those indirect ones caused by the
financial services provided.
M. Indirect emissions from displacement of employees have suffered a significant decrease. The main factors for this decrease are the reduction in mobility because of the
covid-19 pandemic, in contrast to 2020, where the number of displacement of employees remained at normal levels at the beginning of the year. The reduced
occupancy levels in 2021 have also contributed to the lower GHG emissions recorded.
Annual report 2021 130
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Non-financial information
Law content index
Equivalent table of legal disclosure requirements under Spanish law 11/2018
0.
General
Information
Description of the metric/concept included in the 11/2018
Law to be disclosed
Short description of the Group’s business model (it will include
its business environment, its organization and structure, the
markets in which it operates, its objectives and strategies, and
the main factors and trends that may affect its future
performance).
A description of the policies that the Group applies, which will
include: the due diligence procedures applied for the
identification, assessment, prevention and mitigation of risks
and significant impacts and of verification and control,
including the measures in which they have been adopted):
The results of these policies, including key indicators of
relevant non-financial results that allow the monitoring and
evaluation of progress and that favour the comparability
between companies and sectors, in accordance with national,
European or international frameworks of reference used for
each matter.
The main risks related to these matters associated with the
Group's activities (business relationships, products or services)
that may have a negative effect in these areas, and how the
Group manages these risks, explaining the procedures used to
detect and assess them in accordance with national, European
or international frameworks of reference for each matter. It
must include information about the impacts that have been
detected, offering a breakdown, in particular of the main risks
in the short, medium and long term.
Chapters/section of the Consolidated
directors report where the info is available
Correspondence
with GRI
indicators/Other
regulations
GRI 102-1
GRI 102-2
GRI 102-3
Business model and strategy (p. 6), What our GRI 102-4
stakeholders tell us (p. 24).
GRI 102-6
GRI 102-7
GRI 102-14
GRI 102-15
Governance (p. 29). Conduct and ethical
behaviour (p. 37) (Environmental and social
risk analysis section).
Inclusive and sustainable growth (p. 71).
A talented and motivated team (p. 44).
Governance (p. 29). Acting responsibly
towards customers (p. 61).
GRI 103-2
GRI 103-3
GRI 103-2
GRI 103-3
Supporting the green transition (p. 72).
Acting responsibly towards customers (p.
61). Conduct and ethical behaviour (p. 37)
(Environmental and social risk analysis
section). Risk management and compliance
chapter (p. 430).
GRI 102-15
GRI 102-30
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Description of the metric/concept included in the 11/2018
Law to be disclosed
Chapters/section of the Consolidated
directors report where the info is available
Detailed information on the current and foreseeable effects of
the activities of the company in the environment and, where
appropriate, health and safety, environmental evaluation or
certification procedures; the resources dedicated to the
prevention of environmental risks; the application of the
principle of caution, the amount of provisions and guarantees
for environmental risks.
Supporting the green transition (p. 72).
Supporting the green transition (p. 72)
(Environmental footprint section).
Conduct and ethical behaviour (p. 37)
(Environmental and social risks analysis
section).
At the end of the 2021 financial year, no
significant account is presented in the
Consolidated Annual Accounts of the Group
that should be included in this chapter
regarding environmental provisions or
guarantees.
Correspondence
with GRI
indicators/Other
regulations
GRI 102-29
GRI 102-31
GRI 201-2
GRI 103-2 (GRI of
environmental
dimension)
GRI 102-11
GRI 102-29
GRI 102-11
GRI 102-11
Contamination:
Measures to prevent, reduce or repair CO2 emissions that
seriously affect the environment, taking into account any form
of air pollution, including noise and light pollution.
Circular economy and waste prevention and management:
Supporting the green transition (p. 72)
(Environmental footprint section).
GRI 103-2 (GRI 302
y 305)
Waste prevention measures, waste recycling measures, waste
reuse measures; other forms of waste recovery and reuse;
actions against food waste.
Supporting the green transition (p. 72)
(Environmental footprint section).
1.
Environmental
Information
Sustainable use of resources:
Use and supply of water according to local limitations
Consumption of raw materials and measures taken to improve
the efficiency of its use.
Energy: direct and indirect consumption, measures taken to
improve energy efficiency, use of renewable energies
Climate change:
Supporting the green transition (p. 72)
(Environmental footprint section). Key
metrics (p. 117).
Supporting the green transition (p. 72)
(Environmental footprint section). Key
metrics (p. 117).
Supporting the green transition (p. 72)
(Environmental footprint section). Key
metrics (p. 117).
Important elements of greenhouse gas emissions generated
as a business activity (including goods and services produced)
Supporting the green transition (p. 72)
(Environmental footprint section). Key
metrics (p. 117).
Measures taken to adapt to the consequences of climate
change
Supporting the green transition (p. 72)
(Environmental footprint section).
Reduction targets voluntarily established in the medium and
long term to reduce greenhouse gas emissions and means
implemented for this purpose.
Protection of biodiversity:
Measures taken to preserve or restore biodiversity
Impacts caused by the activities or operations of protected
areas
GRI 103-2
(GRI 306)
GRI 301-2
GRI 306-3
GRI 303-5
GRI 103-2
(GRI 301)
GRI 301-1
GRI 301-2
GRI 103-2
(GRI 302)
GRI 302-1
GRI 302-3
GRI 103-2
(GRI 305)
GRI 305-1
GRI 305-2
GRI 305-3
GRI 305-4
GRI 103-2
(GRI 305)
GRI 201-2
GRI 103-2
(GRI 305)
Supporting the green transition (p. 72)
(Environmental footprint section).
The impacts caused by the direct activities of
Banco Santander on biodiversity are not
material due to the financial activity carried
out by the entity.
GRI 103-2
(GRI 304)
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Employment:
Chapters/section of the Consolidated
directors report where the info is available
Total number and distribution of employees by gender, age,
country and professional classification
Key Metrics (p. 117).
Total number and distribution of contracts modes and annual
average of undefined contracts, temporary contracts, and part-
time contracts by: sex, age and professional classification.
Number of dismissals by: gender, age and professional
classification.
Average remuneration and its progression broken down by
gender, age and professional classification
Key Metrics (p. 117).
Key Metrics (p. 117).
Key Metrics (p. 117).
Salary gap and remuneration of equal or average jobs in
society
A talented and motivated team (p. 44)
(Diversity and Inclusion section).
Average remuneration of directors and executives (including
variable remuneration, allowances, compensation, payment to
long-term savings forecast systems and any other payment
broken down by gender)
Key Metrics (p. 117).
2.
Social
Implementation of work disconnection policies
Employees with disabilities
Organization of work:
Organization of work time
Number of absent hours
Measures designed to facilitate work-life balance and
encourage a jointly responsible use of said measures by
parents
Health and safety:
Conditions of health and safety in the workplace
Occupational accidents, in particular their frequency and
severity, as well as occupational illnesses. Broken down by
gender.
Social relations:
Organization of social dialogue (including procedures to
inform and consult staff and negotiate with them)
A talented and motivated team (p. 44) (The
way we work section).
Key metrics (p. 117).
A talented and motivated team (p. 44) (The
way we work section).
Key Metrics (p. 117). A talented and
motivated team (p. 44) (Our wellbeing
section).
A talented and motivated team (p. 44) (The
way we work section).
GRI 103-2
(GRI 401)
A talented and motivated team (p. 44) (Our
wellbeing section).
Key Metrics (p. 117). A talented and
motivated team (p. 44) (Our wellbeing
section)
What our stakeholders tell us (p. 24). A
talented and motivated team (p. 44) (Social
dialogue and restructuring section). Acting
responsibly towards customers (p. 61).
Percentage of employees covered by collective bargaining
agreements by country
Key Metrics (p. 117).
Balance of the collective bargaining agreements (particularly
in the field of health and safety in the workplace)
Training:
A talented and motivated team (p. 44) (Our
wellbeing section)
The policies implemented in the field of training
A talented and motivated team (p. 44)
(Talent management section).
Total number of hours of training by professional categories.
Accessibility:
Key Metrics (p. 117).
Universal accessibility of people
A talented and motivated team (p. 44)
(People with disabilities section). Acting
responsibly towards customers (p. 61).
Support to higher education and other local
initiatives (p. 107) (Fundación Universia
section).
Correspondence
with GRI
indicators/Other
regulations
GRI 103-2
(GRI 401)
GRI 102-8
GRI 405-1
GRI 102-8
GRI 405-1
GRI 401-1
GRI 405-2
GRI 103-2
(GRI 405)
GRI 405-2
GRI 102-35
GRI 102-36
GRI 103-2
(GRI 405)
GRI 103-2
(GRI 401)
GRI 405-1
GRI 103-2
(GRI 401)
GRI 403-9
GRI 103-2
(GRI 403)
GRI 403-9
GRI 403-10
GRI 103-2
(GRI 402)
GRI 102-41
GRI 403-1
GRI 403-4
GRI 103-2
(GRI 404)
GRI 404-2
GRI 404-1
GRI 103-2
(GRI 405)
Annual report 2021 133
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Description of the metric/concept included in the 11/2018
Law to be disclosed
Chapters/section of the Consolidated
directors report where the info is available
Correspondence
with GRI
indicators/Other
regulations
2.
Social
Equality:
Measures taken to promote equal treatment and opportunities
between women and men, Equality plans (Chapter III of
Organic Law 3/2007, of 22 March, for the effective equality of
women and men), measures taken to promote employment,
protocols against sexual and gender-based harassment, Policy
against all types of discrimination and, where appropriate,
integration of protocols against sexual and gender-based
harassment and protocols against all types of discrimination
and, where appropriate, management of diversity
Application of due diligence procedures in the field of Human
Rights
Prevention of the risks of Human Rights violations and, where
appropriate, measures to mitigate, manage and repair any
possible abuses committed
3.
Human Rights
Complaints about cases of human rights violations
Promotion and compliance with the provisions of the
fundamental conventions of the International Labour
Organization regarding respect for freedom of association and
the right to collective bargaining.
A talented and motivated team (p. 44)
(Diversity and Inclusion section).
GRI 103-2 (GRI 405
and 406)
Support to higher education and other local
initiatives (p. 107).
Governance (p. 29). Conduct and ethical
behaviour (p. 37) (Environmental and social
risk analysis section). Responsible
Procurement (p. 68).
Governance (p. 29). Conduct and ethical
behaviour (p. 37) (Environmental and social
risk analysis section). Responsible
Procurement (p. 68).
A talented and motivated team (p. 44)
(Speaking up, active listening and taking
action section)
GRI 102-16
GRI 102-17
GRI 103-2
(GRI 412)
GRI 410-1
GRI 412-1
GRI 412-3
GRI 406-1
A talented and motivated team, Social
dialogue and restructuring section
GRI 103-2
(GRI 406)
Elimination of discrimination in respect of employment and
occupation; elimination of forced or compulsory labour; and
the effective abolition of child labour.
Conduct and ethical behaviour (p. 37)
(Environmental and social risk analysis
section)
GRI 103-2
(GRI 406)
Measures taken to prevent corruption and bribery
4.
Fight against
corruption
Measures to combat money laundering
Contributions to non-profit foundations and entities
Governance (p. 29). Risk management and
compliance chapter (p. 430) (7.2 Compliance
and conduct risk management section)
GRI 102-16
GRI 102-17
GRI 103-2
Governance (p. 29). Risk management and
(GRI 205)
compliance chapter (p. 430) (7.2 Compliance GRI 205-1
and conduct risk management section)
GRI 205-2
GRI 205-3
Support to higher education and other local
initiatives (p. 107).
GRI 413-1
Annual report 2021 134
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Description of the metric/concept included in the 11/2018
Law to be disclosed
Commitments of the company to sustainable development:
Chapters/section of the Consolidated
directors report where the info is available
The impact of the company’s activity on employment and local
development
Support to higher education and other local
initiatives (p. 107). Financial inclusion and
empowerment (p. 96). Conduct and ethical
behaviour (p. 37) (Environmental and social
risk analysis).
The impact of the company’s activity on local towns and
villages and in the country.
Support to higher education and other local
initiatives (p. 107). Financial inclusion and
empowerment (p. 96).
Relations maintained with the representatives of local
communities and the modalities of dialogue with them.
Association or sponsorship actions
Outsourcing and suppliers:
What our stakeholders tell us (p. 24).
Support to higher education and other local
initiatives (p. 107).
Inclusion of social, gender equality and environmental issues
in the procurement policy
Responsible procurement (p. 68).
5.
Information on
the company
Consideration in relations with suppliers and subcontractors of
their responsibility
Responsible procurement (p. 68).
Supervision and audit systems and resolution thereof
Responsible procurement (p. 68).
Consumers:
Measures for the health and safety of consumers
Systems for complaints received and resolution thereof
Tax information:
The profits obtained country by country
Taxes on benefits paid
Public grants received
Acting responsibly towards customers (p.
61). Risk management and compliance
chapter (p. 430) (7.2 Compliance and
conduct risk management section)
Acting responsibly towards customers. (p.
61)
Key metrics (p. 117). Risk management and
compliance chapter, section 7.2 Compliance
and conduct risk management.(p. 489) GRI
content index.
Auditor's report and 2021 annual consolidate
accounts (p. 512). Annex VI Annual banking
report and Auditor's Report and 2020 annual
consolidate accounts, Annex VI Annual
banking report
Conduct and ethical behaviour (p. 37) (Tax
contribution section)
GRI content index (p. 144).
6.
Other relevant
information
EU Taxonomy
Information related to article 8 of EU
Taxonomy
Correspondence
with GRI
indicators/Other
regulations
GRI 103-2
(GRI 203)
GRI 203-1
GRI 203-2
GRI 411-1
GRI 413-1
GRI 103-2
(GRI 203)
GRI 203-1
GRI 203-2
GRI 413-1
GRI 102-43
GRI 413-1
GRI 102-12
GRI 102-13
GRI 103-2 (GRI
204, 308 and 414)
GRI 102-9
GRI 103-2 (GRI 204,
308 and 414)
GRI 204-1
GRI 308-1
GRI 414-1
GRI 103-2
(GRI 204)
GRI 103-2 (GRI 416,
417 and 418)
GRI 416-1
GRI 417-1
G4-FS15
GRI 102-17
GRI 103-2 (GRI 416,
417 and 418)
GRI 416-2
GRI 417-2
GRI 418-1
GRI 103-2
(GRI 207)
GRI 201-4
EU Regulation
2020/852 and
Commission
Delegated
Regulations
2021/2139 of 4
June and
2021/2178 of 6
July
*NB: The data to report this indicator could be quantitative or qualitative
In addition to the contents mentioned in the previous table, the consolidated non-financial information statement of Banco Santander includes
the following contents: 102-5, 102-9, 102-10, 102-12, 102-13, 102-18, 102-19, 102-20, 102-21, 102-22, 102-23, 102-24, 102-25, 102-26,
102-27, 102-28, 102-32, 102-33, 102-34, 102-37, 102-40, 102-42, 102-43, 102-44, 102-45, 102-46, 102-47, 102-48, 102-49, 102-50,
102-51, 102-52, 102-53, 102-54, 102-55, 102-56, 201-1, 201-3, 202-1, 202-2, 203-1, 203-2, 206-1, 207-1, 207-2, 207-3, 207-4, 302-1,
302-3, 303-1, 306-1, 306-2, 306-4, 306-5, 307-1, 308-2, 401-2, 402-1, 403-2, 403-3, 403-5, 403-8, 404-3, 405-2, 414-2, 415-1, 417-3,
419-1.
Annual report 2021 135
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
UNEP FI Principles for Responsible Banking
reporting index
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Principle 1: Alignment
We will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable
Development Goals, the Paris Climate Agreement and relevant national and regional frameworks.
1.1. Describe (high-level) your bank's business
model, including the main customer segments
served, types of products and services
provided, the main sectors and types of
activities, and where relevant the technologies
financed across the main geographies in which
your bank has operations or provides products
and services.
1.2. Describe how your bank has aligned and/or
is planning to align its strategy to be consistent
with and contribute to society's goals, as
expressed in the Sustainable Development
Goals (SDGs), the Paris Climate Agreement, and
relevant national and regional frameworks.
Santander is a retail bank operating in 3 geographies (Europe, North
America and South America) and in 10 main markets. Furthermore, we
have global businesses like Santander Corporate & Investment Banking;
Wealth Management & Insurance; or Santander Global Platform.
Our purpose as a company is to help people and businesses prosper.
Our aim is to be the best open financial services platform, by acting
responsibly and earning the lasting loyalty of our people, customers,
shareholders and communities.
To this end, we integrate environmental, social and corporate governance
(ESG) criteria into our business model.
Our business model is based on three pillars:
◦ Customer focus: Deepening the relationships with our customers
through a simpler value proposition, superior customer experience and
our digital proposition
◦ Our scale: Local scale and leadership.
◦ Diversification. Our geographic and business diversification allow us to
overcome regional challenges in our footprint and business lines.
Building on our technology to further strengthen our customers’ loyalty.
Our value proposition includes a broad variety of solutions. Products and
services are tailored to meet the needs of our customers, taking
advantage of global best practices, but adapted to local singularities.
We strive to exceed our stakeholders´ expectations and carry out our
activity in a responsible way.
Our activity allow us to contribute to several of the UN Sustainable
Development Goals and support the Paris Agreement to fight climate
change.
In order to contribute effectively to their achievement, we have carried
out an analysis to identify and align our strategy with the SDGs on which
Banco Santander has the greatest impact. This analysis has highlighted
the most relevant goals for Grupo Santander, both in terms of its activity,
commitments and strategic focus, as well as the different external
factors considered. We have identified three SDGs in which the Group has
the greatest impact (8, 13 and 16) and eight more to which we also make
a very significant contribution through our activity and our social
programmes (1, 4, 5, 7, 10, 11, 12, 13 y 17)
Tackling climate change is a key objective at Santander. We support the
Paris Agreement goals and our ambition is to be net zero carbon
emissions by 2050. Our main lines of action are: a) align our portfolio
with the Paris Agreement Goals and set sector portfolio alignment
targets in line with the NZBA and with the NZAMi; b) help customers
transition to a low-carbon economy; c) reduce our impact on the
environment by remaining carbon neutral and sourcing all our electricity
from renewable energy; d) embed climate in risk management;
understand and manage the sources of climate change risks in our
portfolios.
Corporate website:
www.santander.com
• About us
• Our approach
Digital Annual review
2021
2021 Annual Report:
• Our approach
• Business model and
strategy
Other references:
Corporate website:
• Financial report 2021
• 2021 Earnings
Presentation
Corporate website:
www.santander.com
• Our approach - Our
contribution to SDGs
2021 Annual Report:
• Helping society tackle
global challenges:
2030 agenda
Annual report 2021 136
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Principle 2: Impact and Target Setting
We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment
resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.
2.1. Impact Analysis:
Show that your bank has identified the areas in
which it has its most significant (potential)
positive and negative impact through an impact
analysis that fulfills the following elements:
a) Scope: The bank’s core business areas,
products/services across the main geographies
that the bank operates in have been as
described under 1.1. have been considered in
the scope of the analysis.
b) Scale of Exposure: In identifying its areas of
most significant impact the bank has
considered where its core business/its major
activities lie in terms of industries, technologies
and geographies.
c) Context & Relevance: Your bank has taken
into account the most relevant challenges and
priorities related to sustainable development in
the countries/regions in which it operates.
d) Scale and intensity/salience of impact: In
identifying its areas of most significant impact,
the bank has considered the scale and
intensity/salience of the (potential) social,
economic and environmental impacts resulting
from the bank’s activities and provision of
products and services.
(your bank should have engaged with relevant
stakeholders to help inform your analysis
under elements c) and d))
Show that building on this analysis, the bank
has:
• -identified and disclosed its areas of most
significant (potential) positive and negative
impact.
• - identified strategic business opportunities in
relation to the increase of positive impacts /
reduction of negative impacts.
2021 Annual Report-
Responsible banking
chapter
• What our stakeholders
tell us
• ESG priorities
• Supporting green
transition
• Environmental and
social risk analysis
2021 Annual Report
Risk management and
compliance chapter
• 1.2 Santander Top and
emerging risks
Other references:
A
• Climate finance report
A. (This report is produced
after the Annual Report
and will be available
throughout the month of
July 2022 on our
corporate website
(currently available report
2020-June 2021)
Our in-depth materiality review included direct stakeholder input
(internal and external interviews and surveys on the bank’s ESG
priorities), in line with best practice. Following the proposed
Corporate Sustainability Reporting Directive (CSRD) and leading ESG
reporting standards, we applied the principle of double materiality:
(1) financial materiality (how ESG issues impact financial
performance); and (2) environmental and social materiality (how ESG
action impacts society and the environment).
Our materiality assessment identified 15 ESG topics we should focus on.
Classified in crucial, major and relevant issues. Among crucial topics are:
• Customer experience and satisfaction. Supporting customers and local
economies with products and services that meet their needs. Giving
them services and products that are Simple, Personal and Fair.
Innovating and using digital technologies to maximize access to
products and services
• Financial inclusion and empowerment. Designing, developing and
delivering products and services that ensure access to the financial
system and meet credit needs. Building resilience through financial
education.
• Green finance. Supporting our customers in their transition to a low
carbon economy by embedding environmental factors in products and
risk analyses, and by supporting the growth of sustainable financial
product markets
• ESG in risk management, embedding climate. Ensuring our risk
management framework incorporates customers’ and operations’
environmental (e.g. climate) and social (e.g. human rights) risks, and
outlining them in policies and procedures
• Culture, conduct & ethical behaviours. Ensuring exemplary conduct by
everybody: being Simple, Personal & Fair in all we do; and embedding
Risk Pro, ethical channels and best-in-class policies and controls on
employees’ internal conduct, transparency towards customers and
ethical behaviour.
This annual report discloses information on progress and plans relating
to addressing these and other topics.
In particular, in 2021:
• We committed to net zero emissions by 2050. We become founding
member of UNEP FI’s Net Zero Banking Alliance. And first
decarbonization targets set.
• We develop our Sustainable finance classification system setting the
criteria to offer, manage and report sustainable financing.
• We mobilized more than 32bn in green finance, and launched our third
green bond raised EUR 1 billion in an eight-year non-preferred senior
debt issue that will finance wind and solar power projects.
• We ranked in the Top 3 in NPS in 8 markets, up from 6 in 2020.
• We strengthen Santander Finance for all programme. Santander Chile,
Santander Colombia and Santander Perú launched new microfinance
programmes for entrepreneurs, while we continued to expand
Prospera in Brazil and TUIIO in Mexico. In addition Santander
Universities launched the Santander X Global Challenge | Finance For
All to find innovative solutions that ensure access to banking products
and services.
•
Annual report 2021 137
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reporting and Self-Assessment
Requirements
Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Impact Analysis.
High-level summary of bank’s response
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
We will continue to improve our materiality analysis and while further exploring and integrating recognised impact methodologies as started this year
for our infrastructure operations.
2.2. Target Setting
Show that the bank has set and published a
minimum of two Specific, Measurable (can be
qualitative or quantitative), Achievable,
Relevant and Time-bound (SMART) targets,
which address at least two of the identified
“areas of most significant impact”, resulting
from the bank’s activities and provision of
products and services.
Show that these targets are linked to and drive
alignment with and greater contribution to
appropriate Sustainable Development Goals,
the goals of the Paris Agreement, and other
relevant international, national or regional
frameworks. The bank should have identified a
baseline (assessed against a particular year)
and have set targets against this baseline.
Show that the bank has analysed and
acknowledged significant (potential) negative
impacts of the set targets on other dimensions
of the SDG/climate change/society’s goals and
that it has set out relevant actions to mitigate
those as far as feasible to maximize the net
positive impact of the set targets.
2021 Annual Report-
Responsible Banking
chapter
-2021 Overview
- ESG priorities
-Supporting the green
transition
To meet the identified challenges, we have set 11 targets which reflect
our commitment to building a more responsible bank.
• To be Top 10 company to work for in at least 6 countries
• To have between 40-60% of women on our board by 2021
• To have at least 30% of women in senior positions by 2025.
• To eliminate the equal pay gap by 2025.
• To facilitate the mobilization of €120 billion of green finance between
2019 and 2025
• To financially empower 10 million people between 2019 and 2025
through increasing microfinance activities, financial education
programmes and other tools that give access to financial services.
• To be carbon neutral in our own operation by 2020
• To use 100% of our electricity from renewable sources in all countries
by 2025.
• To eliminate unnecessary single-use plastics in corporate buildings and
branches
• To fund 200,000 scholarships, internships and entrepreneur
programmes between 2019 and 2021.
• To help 4 million people through our community programmes between
2019 and 2021.
Additionally we updated our climate strategy, committing to: i) aligning
our power generation portfolio with the Paris Agreement by 2030; ii) stop
providing financial services to power generation customers with a
revenue dependency on coal of over 10% in 2030; iii) reduce our
worldwide exposure to coal mining production to zero by 2030; iv) and
the ambition to be net zero carbon emissions by 2050.
In 2021, we met (or exceeded) all our commitments for 2019-2021 and
made progress on all our targets. Our new public commitments include
initial decarbonization targets for the power industry for 2025 and 2030,
which measure emission intensity.
• Thermal coal-related power & mining phase out
• Reduce emissions intensity of our power generation portfolio from
0.23 tCO2e/MWh to 0.18 tCO2e/MWh by 2025, and to 0.11 tCO2e/
MWh by 2030
• Sustainable investment: 100 billion euros in assets under management
with ESG criteria by 2025.
We'll continue to set decarbonization targets for the other sectors.
Together with the targets for 2019-2025, they will form part of our new
public commitments in the 2022-2025 agenda.
Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Target Setting.
The bank has a set of SMART objectives focused on the areas where it can generate the most impact, in accordance with materiality analysis mentioned
in the previous section.
2.3 Plans for Target Implementation and
Monitoring
Show that your bank has defined actions and
milestones to meet the set targets.
Show that your bank has put in place the
means to measure and monitor progress
against the set targets. Definitions of key
performance indicators, any changes in these
definitions, and any rebasing of baselines
should be transparent.
The responsible banking forum and the Group's responsible banking,
sustainability and culture committee are responsible for monitoring
compliance with public commitments, together with other management
and performance indicators in the area of responsible banking and
sustainability.
Commitments are embedded and part of the Group financial planning,
which a three year plan with yearly forecast.
The Responsible Banking unit and its network, in collaboration with the
remaining areas and local units, defines short, medium and long term
action plans to achieve the objectives.
In addition, the Bank's Management Control function has been involved
to increase monitoring and quality of public commitments. This function
is responsible for ensuring the consistency of information and provides
regular monitoring of the various commitments.
2021 Annual Report-
Responsible Banking
chapter
- 2021 overview
- Governance
Annual report 2021 138
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Plans for Target Implementation and Monitoring.
Grupo Santander has defined at corporate and local level, various action plans to boost our commitments.
2.4. Progress on Implementing Targets
For each target separately:
Show that your bank has implemented the
actions it had previously defined to meet the
set target.
Or explain why actions could not be
implemented / needed to be changed and how
your bank is adapting its plan to meet its set
target.
Report on your bank’s progress over the last 12
months (up to 18 months in your first reporting
after becoming a signatory) towards achieving
each of the set targets and the impact your
progress resulted in. (where feasible and
appropriate, banks should include quantitative
disclosures)
2021 Annual Report-
Responsible Banking
chapter
- 2021 Overview
Grupo Santander regularly reports on the achievements and scope of its
responsible banking strategy and targets.
In 2021, we met (or exceeded) all our commitments for 2019-2021 and
made progress on all our targets.
Targets achieved:
• To be one of the top 10 companies to work for in at least six of the core
geographies where we operate by 2021. In 2021: Top 10 in 6
geographies.
• To have between 40-60% women on our board by 2021. In 2021: 40%
• Carbon neutral in our own operations in 2020. In 2021 we have
continued to implement measures to reduce our CO2 emissions, and
have offset the remaining emissions.
• To eliminate unnecessary single use plastic in our branches and
corporate buildings by 2021. In 2021: 100% of reduction.
• To fund 325,000 scholarships, internships and entrepreneur
programmes between 2019 and 2021. Since 2019: 387,651
scholarships (+19% target)
• To help four million people through our community programmes
between 2019 and 2021. Since 2019: 6.1 million (+53% target
Targets in progress:
• To have 30% women in our senior positions by 2025. In 2021: 26.3%
• To eliminate the equal pay gap by 2025. In 2021: 1%
• To finance or facilitate mobilization of €120 billion between 2019 and
2025 to tackle climate change. Since 2019: 65.7 billion
• To financially empower 10 million people between 2019 and 2025.
Since 2019: 7.5 million
• To use 100% of our electricity from renewable sources in our buildings
by 2025. In 2021: 75%
Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Progress on Implementing Targets
In 2021, we met (or exceeded) all our commitments for 2019-2021
and made progress on all our targets.
Annual report 2021 139
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Principle 3: Clients and Customers
We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared
prosperity for current and future generations.
3.1.Provide an overview of the policies and
practices your bank has in place and/or is
planning to put in place to promote responsible
relationships with its customers. This should
include high-level information on any
programmes and actions implemented (and/or
planned), their scale and, where possible, the
results thereof.
3.2. Describe how your bank has worked with
and/or is planning to work with its clients and
customers to encourage sustainable practices
and enable sustainable economic activities.
This should include information on actions
planned/implemented, products and services
developed, and, where possible, the impacts
achieved.
Being responsible means offering our customers products and services
that are Simple, Personal and Fair.
Our product, service and consumer protection framework sets out the
principles that promote a strong SPF relationship with customers and
establishes the basics for managing and mitigating conduct risk in design,
sales, post-sales and services.
The Compliance and conduct function abides by our Consumer protection
policy, which sets out the highest ethical standards we expect our teams
to uphold towards customers. We report on our consumer protection
principles in all our geographies to make sure we embed them in our
day-to-day. We use our customers’ voice and business indicators to spot
unsatisfactory customer service, fee-related issues, incidents at ATMs
and other areas for improvement, and to come up with plans to address
them.
Our product governance forum ensures the products and services that we
market meet the needs of identified target segments and are reasonably
and clearly priced. In 2021, we enhanced our ESG product validation and
finally, 9 proposals were validated with impact on this matter
That's why all our employees undertake a mandatory, annual course on
the management of conduct risks in sales and consumer protection. We
run special training programmes for our sales teams to arm them with
the knowledge and skills that will enable them to sell our products and
services effectively.
In 2021, we worked on an instruction manual about our vulnerable
customer and special case management model, and set a roadmap for its
roll-out among subsidiaries, therefore ensuring a consistent, group-wide
approach to identifying and managing vulnerable customers in such
high-impact procedures as collections and fraud management
In 2021, we continued to focus on resolving complaints at the first point
of contact with customers and on opening digital channels for quicker,
alternative access to feedback mechanisms. We heightened the
monitoring and reporting of customer issues in areas that are considered
critical due to the knock-on effects of the pandemic.
All our activity is guided by policies, principles and frameworks to ensure
we behave responsibly in everything we do.
• The general sustainability policy sets out principles and commitments
focused on adding value to our main stakeholders.
• The environmental, social and climate change risk management policy
details how we identify and manage risks, in oil and gas, energy, mining
and metals, and in soft commodities.
• The sensitive sectors policy establishes guidelines for the evaluation
and decision making on participation of the Group in certain sectors,
which could lead to reputational risks.
We developed our sustainable finance classification system (SFCS), which
sets out sustainable finance definition in the group. Consistent with this,
we have a catalogue of sustainable products and a green book.
We are a leader in renewable energy financing, and have a strong
financial empowerment strategy - Santander Finance for All.
We issued our third EUR 1 billion green bond to finance and refinance
renewable wind and solar power.
We're expanding our range of ESG products in Wealth Management. As
of December 2021, we had over €27bn AuM.
Corporate website
www.santander.com
• Policies
Annual report 2021 -
Responsible banking
chapter
• What our stakeholders
tell us
• Governance
• Acting responsible
towards customers
• Support to the green
transition
• Financial inclusion and
empowerment
• Sustainable
investment
Annual report 2021 140
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Principle 4: Stakeholders
We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.
4.1. Describe which stakeholders (or groups/
types of stakeholders) your bank has consulted,
engaged, collaborated or partnered with for
the purpose of implementing these Principles
and improving your bank’s impacts. This should
include a high-level overview of how your bank
has identified relevant stakeholders and what
issues were addressed/results achieved.
Our strategy is based on a virtuous circle centred on trust and loyalty of
our employees, customers, shareholders and communities. To achieve
this we promote the active listening of our stakeholders. Listening,
analysing, assessing and responding to their opinions and concerns we
not only identify issues, we also spot opportunities, which allows us to
guarantee our activity and to maintain the right functioning of the entire
value chain.
In addition, we also regularly analyse the most relevant environmental,
social and governance issues demands of analysts and investors. And we
continuously monitor the emergence of new standards and good practice
at international level. Actively participating in the consultation processes
of both authorities and sectoral associations and other organizations that
influence the development of relevant policies on the sustainable
development agenda.
We have followed closely the adoption of the Taxonomy Regulation that
sets the criteria for classifying economic activities as environmentally
sustainable. It also dictates the information that financial and non-
financial companies will have to disclose about the environmental impact
of their activities.
As a result, we have published our banking products' eligibility under the
EU Taxonomy. We also designed our Sustainable Finance Classification
System to make classifying, monitoring and reporting on sustainable
financing easier. It also guides our development of sustainable products
and services fully in the line with our customers' expectations and the
strictest market standards.
We are part of the main and most important local and global initiatives to
support the inclusive and sustainable growth. Some examples are:
UNEP FI. We are a founding signatory to the United Nations Principles for
Responsible Banking. In 2021, we continued participating in Phase III of
the UNEP FI project on the TCFD's recommendations for banks.
World Business Council for Sustainable Development (WBCSD).
Banking Environment Initiative (BEI);
UN Global Compact,
CEO Partnership for Financial Inclusion; or
Equator Principles.
In 2021, in support of our Net Zero ambition, we joined the Glasgow
Financial Alliance for Net Zero, Net Zero Asset Management and were co-
founders to the Net Zero Banking Alliance. Within GFANZ, we co-led the
Net Zero Public Policy and their call to action launched in October.
Our performance is also assessed by leading analysts and ESG indices
(DJSI, MSCI, CDP, sustainalytics, ). Participating in these indices and trying
to improve our position in them helps us to continuously improve our
processes. In 2021 we have improved our positioning in all of them.
Finally, as a consequence of our commitment to transparency, we closely
monitor all developments in ESG disclosure. In January 2021 we were
one of the companies committed to implementing the World Economic
Forum's Stakeholder Capitalism Metrics, and as a result this year we have
taken this standard into account for the first time in the preparation of
our Responsible banking chapter (Consolidated Statement of Non-
Financial Information).
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Annual report 2021 -
Responsible banking
chapter
• What our
stakeholders tell us
• Partnership to
promote our agenda
• Shareholder value -
ESG indices and
analyst
• Supporting the green
transition - Sustainable
finance classification
system (SFCS)
• Supporting the green
transition - Our
banking products'
eligibility under the EU
Taxonomy
• Stakeholder Capitalism
Metrics content index
Annual report 2021 -
Economic and financial
review
• Economic, regulatory
and competitive
context
Annual report 2021 141
Contents
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Corporate website:
www.santander.com
-About us
-Our approach
2021 Annual Report-
Responsible Banking
chapter
-What our stakeholders
tell us
-Governance
-A strong and inclusive
culture
2021 Annual Report,
Corporate Governance
chapter
-Responsible Banking,
sustainability and
culture, Committee
activities report
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Principle 5: Governance & Culture
We will implement our commitment to these Principles through effective governance and a culture of responsible banking
All our activity is guided by policies, principles and frameworks to ensure
we behave responsibly in everything we do.
The responsible banking, sustainability and culture committee (RBSCC)
assists the board of directors in fulfilling its oversight responsibilities with
respect to the Group's responsible banking strategy, sustainability and
culture issues.
The committee is supported by the RB forum, that executes the
responsible banking agenda across the Group, drives decision-making on
responsible banking issues and, ensures the execution of any mandates
from the RBSCC, other Board committees and the board of directors. It
also ensures alignment on key issues, including the review and escalation
of reports to the RBSCC.
To complete this corporate governance and drive progress on the
responsible banking agenda, there is a Responsible Banking unit
supported by a senior advisor on responsible business practices reporting
directly to the Group's executive chairman.
The culture and sustainability local units coordinate and foster their
sustainable banking agenda, ensuring that they are aligned with the
corporate strategy and policies. Likewise, each subsidiary has appointed
a senior responsible for the sustainable banking function.
Created in 2021, our new Responsible banking framework's establishes
common principles, roles and responsibilities, key processes and
governance drive us towards a more sustainable business model that
delivers on our purpose to help people and businesses prosper. It also
reinforces our commitment to Agenda 2030: the UN Sustainable
Development Goals (SDGs), the Paris Agreement and the Principles for
Responsible Banking.
The Group's policies and guidance set the standard for all units. We
systematically review the scope of policies relating to the integration of
ESG criteria to ensure compliance with international best practice. In
2021, the Responsible Banking function was made part of the policy
approval process to embed sustainability criteria in all policies.
Our strong corporate culture, The Santander Way, is fully aligned to our
corporate strategy. It includes our purpose, our aim, and how we conduct
business. It is the bedrock of our bank, a responsible bank.
5.1. Describe the relevant governance
structures, policies and procedures your bank
has in place/is planning to put in place to
manage significant positive and negative
(potential) impacts and support effective
implementation of the Principles.
5.2. Describe the initiatives and measures your
bank has implemented or is planning to
implement to foster a culture of responsible
banking among its employees. This should
include a high-level overview of capacity
building, inclusion in remuneration structures
and performance management and leadership
communication, amongst others.
5.3 Governance Structure for Implementation
of the Principles
Show that your bank has a governance
structure in place for the implementation of the
PRB, including:
a) target-setting and actions to achieve targets
set
b) remedial action in the event of targets or
milestones not being achieved or unexpected
negative impacts being detected.
Please provide your bank’s conclusion/ statement if it has fulfilled the requirements regarding Governance Structure for Implementation of the
Principles.
The Group has a solid and well-structured responsible banking governance model to meet future challenges and implement
necessary measures that allow us to develop our activity in a responsible and sustainable way.
Annual report 2021 142
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Reporting and Self-Assessment
Requirements
High-level summary of bank’s response
Reference(s)/
Link(s) to bank’s full
response/ relevant
information
Principle 6: Transparency & Accountability
We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our
positive and negative impacts and our contribution to society’s goals.
6.1 Progress on Implementing the Principles
for Responsible Banking
Show that your bank has progressed on
implementing the six Principles over the last 12
months (up to 18 months in your first reporting
after becoming a signatory) in addition to the
setting and implementation of targets in
minimum two areas (see 2.1-2.4).
Show that your bank has considered existing
and emerging international/regional good
practices relevant for the implementation of
the six Principles for Responsible Banking.
Based on this, it has defined priorities and
ambitions to align with good practice.
Show that your bank has implemented/is
working on implementing changes in existing
practices to reflect and be in line with existing
and emerging international/regional good
practices and has made progress on its
implementation of these Principles.
2021 Annual Report,
Responsible Banking
chapter
The Responsible Banking chapter of our 2021 Annual report is our
consolidated non-financial information statement. This is the eighteenth
annual document the Santander Group publishes to disclose its
sustainability commitments. This chapter includes information for the
period: from 1 January to 31 December 2020.
This chapter has been verified by PricewaterhouseCoopers Auditores, S.L.,
the independent firm which also audited the Group´s annual financial
statements for the year.
Santander has relied on internationally recognized standards such as the
Global Reporting Initiative (GRI) and Sustainability Accounting Standards
Board (SASB) in its preparation. And for the first time, also considering the
WEF Stakeholder Capitalism Metrics. This chapter has been prepared in
accordance with the GRI Standards: Comprehensive option.
Additionally, in this chapter detailed information is provided to respond to
the Law 11/2018, which transposes to the Spanish legal system the
Directive 2014/95/ EU of the European Parliament and of the Council of
22 October 2014 amending Directive 2013/34/ EU as regards disclosure
of non-financial and diversity information.
We actively participate and we are part of the main initiatives and
working groups that foster responsible business practices at local and
international level. Some examples are:
• UNEP FInance initiative. We are one of the founding signatories to the
he UN Principles for Responsible Banking. We have also continued our
participation in the TCFD Pilot II following the first pilot which started
back in 2017.
• World Business Council for Sustainable Development (WBCSD). We are
part of the Future of Work, which supports companies in adapting their
own business and human resources strategy to evolve in line with the
digital age.
• Banking Environment Initiative (BEI). We participate in two initiatives
related to climate, the Soft Commodities Compact and the new Bank
2030 initiative.
• CEO Partnership for Financial Inclusion. We are part of the private
sector partnership for financial inclusion.
• Equator Principles. We analyse the environmental and social risks of all
our funding transactions that fall under the scope of the Equator
Principles.
Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Progress on Implementing the Principles for
Responsible Banking
Through the responsible banking chapter of the Annual Report we give accounts of all our commitments related sustainability and responsible banking.
We participate actively and we are part of the main initiatives and working groups that foster responsible business practices at local and international
level.
Annual report 2021 143
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Global Reporting Initiative
(GRI) content index
GRI 102-55
GRI Standards: GENERAL DISCLOSURES
Disclosure
GRI Standard
GRI 101: FOUNDATION
GRI 102: GENERAL DISCLOSURES
Page
Omission
102-1 Name of the organization
Business model and strategy (p. 6).
102-2 Activities, brands, products, and
services
102-3 Location of headquarters
102-4 Location of operations
102-5 Ownership and legal form
102-6 Markets served
102-7 Scale of the organization
ORGANIZATIONAL
PROFILE
102-8 Information on employees and other
workers
102-9 Supply chain
102-10 Significant changes to the
organization and its supply chain
102-11 Precautionary Principle or approach
102-12 External initiatives
102-13 Membership of associations
102-14 Statement from senior decision-
maker
102-15 Key impacts, risks, and opportunities
102-16 Values, principles, standards, and
norms of behaviour
102-17 Mechanisms for advice and concerns
about ethics
STRATEGY
ETHICS AND
INTEGRITY
Business model and strategy (p.6).
Business model and strategy (p. 6).
Business model and strategy (p. 6).
Business model and strategy (p. 6).
Business model and strategy (p.6).
Business model and strategy (p. 6). Key Metrics (p. 117).
Key metrics (p. 117).
Responsible procurement (p. 68).
Responsible procurement (p. 68).
Conduct and ethical behaviour (p. 37). (Environmental and social risk
management policy section)
Governance (p. 29) (Joint initiatives to promote our agenda section).
Shareholder value (p. 69) (ESG indices and analysts section).
Santander participates in industry associations representing
financial activity in the countries where it operates, as the AEB in the
case of Spain
What our stakeholders tell us (p. 24) (Governance section).
A strong and inclusive culture: The Santander Way (p. 34) (Active
listening section). What our stakeholders tell us (p. 24). Supporting
the green transition (p. 72) (Risk management section). Risk
management and compliance chapter (p. 430).
Governance (p. 29). A strong and inclusive culture: The Santander
Way (p. 34). Acting responsibly towards customers. (p. 61).
A talented and motivated team (p. 44) (section 1. Speaking up, active
listening and taking action) Risk management and compliance (p.
430).
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
-
Annual report 2021 144
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standard
Disclosure
102-18 Governance structure
102-19 Delegating authority
102-20 Executive-level responsibility for
economic, environmental, and social topics
Page
Omission
Corporate Governance chapter of the annual report. (p. 179).
Corporate Governance chapter of the annual report (p. 179).
Corporate Governance chapter of the annual report (p. 179).
102-21 Consulting stakeholders on economic,
environmental, and social topics
Corporate Governance chapter of the annual report (p. 179).
Auditor's report and annual consolidated accounts (p. 512). What
our stakeholders tell us (p. 24).
102-22 Composition of the highest
governance body and its committees
102-23 Chair of the highest governance body Corporate Governance chapter of the annual report. (p. 179).
Auditor's report and consolidated annual accounts (p. 512).
Corporate Governance chapter of the annual report (p. 179).
102-24 Nominating and selecting the highest
governance body
102-25 Conflicts of interest
102-26 Role of highest governance body in
setting purpose, values, and strategy
102-27 Collective knowledge of highest
governance body
102-28 Evaluating the highest governance
body’s performance
GOVERNANCE
102-29 Identifying and managing economic,
environmental, and social impacts
Corporate Governance chapter of the annual report (p. 179).
Auditor's report and consolidated annual accounts (p. 512).
What our stakeholders tell us (p. 24). Corporate Governance
chapter of the annual report (p. 179). Auditor's report and
consolidated annual accounts (p. 512).
Shareholder value (p. 69). Corporate Governance chapter of the
annual report (p. 179). Auditor's report and consolidated annual
accounts (p. 512).
Shareholder value (p. 69). Corporate Governance chapter of the
annual report (p. 179). Auditor's report and consolidated annual
accounts (p. 512).
Shareholder value (p. 69). Corporate Governance chapter of the
annual report (p. 179). Auditor's report and consolidated annual
accounts (p. 512).
Auditor's report and consolidated annual accounts (p. 512). Risk
management and compliance (p. 430). Supporting the green
transition (p. 72) (Risk management section).
102-30 Effectiveness of risk management
processes
Supporting the green transition (p. 71) (Risk management section).
Risk management and compliance chapter (p. 430).
102-31 Omission of economic,
environmental, and social topics
Governance (p. 29).Risk management and compliance chapter (p.
430). Auditor's report and consolidated annual accounts (p. 512).
102-32 Highest governance body’s role in
sustainability reporting
Santander´s Board approved this report on February, 24th 2022
related to the 2021 period, and the Corporate Governance Chapter
of the Annual Report published in 2022.
102-33 Communicating critical concerns
Auditor's report and consolidated annual accounts (p. 512).
102-34 Nature and total number of critical
concerns
Governance (p. 29). Acting responsibly towards customers (p. 61)
(Complaints management section).
102-35 Remuneration policies
102-36 Process for determining
remuneration
102-37 Stakeholders’ involvement in
remuneration
102-38 Annual total compensation ratio
102-39 Percentage increase in annual total
compensation ratio
A talented and motivated team (p. 44). (Diversity and inclusion
section, equal pay subsection) Corporate Governance chapter of the
Annual Report (p. 179).
What our stakeholders tell us (p. 24). Shareholder's value (p. 69).
Corporate Governance Chapter of the Annual Report (p. 179). Risk
supervision, regulation and compliance committee activities in 2021
(p. 234).
What our stakeholders tell us (p. 24). Shareholder's value (p. 69).
Corporate Governance Chapter of the Annual Report (p. 179). Risk
supervision, regulation and compliance committee activities in 2021
(p. 234).
–
–
-
-
-
-
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-
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-
-
-
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2
2
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standard
STAKEHOLDER
ENGAGEMENT
REPORTING
PRACTICE
Page
Disclosure
102-40 List of stakeholder groups
102-41 Collective bargaining agreements
What our stakeholders tell us (p. 24).
102-42 Identifying and selecting stakeholders What our stakeholders tell us (p. 24).
102-43 Approach to stakeholder engagement What our stakeholders tell us (p. 24).
102-44 Key topics and concerns raised
What our stakeholders tell us (p. 24).
What our stakeholders tell us (p. 24).
102-45 Entities included in the consolidated
financial statements
Further information section of this chapter (p. 131). Auditor's report
and consolidated annual accounts (p. 512).
102-46 Defining report content and topic
Boundaries
102-47 List of material topics
102-48 Restatements of information
102-49 Changes in reporting
102-50 Reporting period
102-51 Date of most recent report
102-52 Reporting cycle
Our approach (p. 23). Further information section of this chapter (p.
131).
What our stakeholders tell us (p. 24).
About this chapter (p. 16).
About this chapter (p. 16).
About this chapter (p. 16).
About this chapter (p. 16).
About this chapter (p. 16).
102-53 Contact point for questions regarding
the report
General information chapter (p. 808).
102-54 Claims of reporting in accordance
with the GRI Standards
102-55 GRI content index
102-56 External assurance
About this chapter (p. 16).
GRI Content Index. (p. 144).
About this report (p. 16). Independent verification report(p. 175).
Omission
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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Annual report 2021 146
Contents
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standards: Topic-specific disclosures
Material
aspect
boundary
Identified
material aspect
ECONOMIC STANDARDS
ECONOMIC PERFORMANCE
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
nternal and
I
xternal
e
GRI Standard
Disclosure
Page
Scope
Omission
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
GRI 201:
ECONOMIC
PERFORMANCE
201-1 Direct economic
value generated and
distributed
-
-
-
-
-
-
What our stakeholders tell us (p. 24). "Material
aspect boundary" of GRI Content Index
Governance (p. 29). "Page" of the GRI 201:
Economic Performance"
Governance (p. 29)."Page" of the GRI 201:
Economic Performance"
€ million
1
Economic value generated
Gross income
Net loss on discontinued operations
Gains/(losses) on disposal of assets not
classified as non-current held for sale
Gains/(losses) on disposal of assets not
classified as discontinued operations
Economic value distributed
Dividends
2021
46,414
46,404
0
53
-43
24,541
836
7,443
Other administrative expenses (except
taxes)
Personnel expenses
Income tax and other taxes2
CSR investment
Economic value retained (economic value
generated less economic value
distributed)
1. Gross income plus net gains on asset disposals.
2. Only includes income tax on profits accrued and
11,216
4,894
21,873
152
Group
-
taxes recognised during the period. Tax
contribution section (Conduct and ethical
behaviours) provides additional information on
the taxes paid.
201-2 Financial
implications and other
risks and opportunities
due to climate change
201-3 Defined benefit
plan obligations and
other retirement plans
201-4 Financial
assistance received
from government
Supporting the green transition (p. 72). 10. Climate
and environmental risk section (p. 499) on Risk
management and compliance chapter.
Group
The liability for provisions for pensions and similar
obligations at 2021 year-end amounted to EUR
3,185 million. Endowments and contributions to
the pension funds in the 2021 financial year have
amounted to EUR 359 million. The detail may be
consulted in Auditor´s report and annual
consolidated accounts.
The Bank has not received significant subsidies or
public aids during 2020 and 2021. The detail may
be consulted in Auditor´s report and annual
consolidated accounts.
Group
Group
-
-
-
Annual report 2021 147
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standard
Disclosure
Page
Scope Omission
Material
aspect
Identified
material aspect boundary
MARKET PRESENCE
Attracting and
retaining talent /
Diversity /
Community
investment
Internal
INDIRECT ECONOMIC IMPACT
Community
investment
External
GRI 103:
MANAGEMENT
APPROACH
GRI 202:
MARKET
PRESENCE
GRI 103:
MANAGEMENT
APPROACH
GRI 203:
INDIRECT
ECONOMIC
IMPACT
PROCUREMENT PRACTICES
Ethical
behaviour and
risk
management
External
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
202-1 Ratios of
standard entry level
wage by gender
compared to local
minimum wage
202-2 Proportion of
senior management
hired from the local
community
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
203-1 Infrastructure
investments and
services supported
203-2 Significant
indirect economic
impacts
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A strong and inclusive culture:
The Santander Way (p. 34). Column “Page” of the
GRI 201: Economic Performance.
A strong and inclusive culture:
The Santander Way (p. 34). Column “Page” of the
GRI 201: Economic Performance.
-
-
-
Key metrics (p. 117).
Group
Key metrics (p. 117). The Group Corporate Human
Resources Model aims to attract and retain the best excluding
professionals in the countries in which it operates.
Group
USA
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Financial inclusion and empowerment (p. 96).
Support to higher education and other local
initiatives (p. 107).
Financial inclusion and empowerment (p. 96).
Support to higher education and other local
initiatives (p. 107).
Support to higher education and other local
initiatives (p. 107).
Support to higher education and other local
initiatives (p. 107).
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Responsible procurement (p. 68).
Responsible procurement (p. 68).
-
-
-
Group
Group
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ethical
behaviour and
risk
management
External
GRI 204:
PROCUREMENT
PRACTICES
204-1 Proportion of
spending on local
suppliers
Responsible procurement (p. 68).
Group
3
Annual report 2021 148
Contents
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
Identified
material aspect boundary
ANTI-CORRUPTION
GRI Standard
Disclosure
Page
Scope Omission
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes /
Corporate
governance-
transparency
Internal and
External
GRI 103:
MANAGEMENT
APPROACH
GRI 205: ANTI-
CORRUPTION
ANTI-COMPETITIVE BEHAVIOR
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
205-1 Operations
assessed for risks
related to corruption
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34).
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34).
-
-
-
Risk management and compliance chapter (p. 430). Group
Conduct and ethical behaviour (p. 37) (Finance
crime compliance section). Risk management and
compliance chapter (p. 430).
205-2 Communication
and training about
anti-corruption
policies and
procedures
205-3 Confirmed
incidents of corruption channel section). Risk management and
and actions taken
Conduct and ethical behaviour (p. 37) (Ethical
compliance chapter (p. 430).
Group
Group
4
-
-
-
-
-
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). Column “Page”
of the GRI 206: Anti-competitive Behaviour.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). Column “Page”
of the GRI 206: Anti-competitive Behaviour.
-
-
-
-
-
-
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
Internal and
external
GRI 206: ANTI-
COMPETITIVE
BEHAVIOUR
206-1 Legal actions for
anti-competitive
behaviour, anti-trust,
and monopoly
practices
The Italian Competition Authority (“ICA”) has
imposed Banca PSA Italia a fine of EUR 6,077,606
as part of an investigation against the Captive
Banks for running an unlawful cartel from 2003 to
April 2017, aimed at exchanging sensitive
commercial information in the car financing market
in Italy, in order to restrict competition for the sale
of financed cars, in violation of Article 101 TFEU.
Decision was appealed before the administrative
court in 2019. On 21 October 2020, the
administrative court of Lazio has annulled in its
entirety the ICA´s decision about the car financing
cartel. As a result of this judgement, the decision is
annulled in its entirety, and all charges against PSA
and against SCF Italy are no longer valid. ICA has
appealed before the Consiglio di Stato. It is
expected that the appeal will be resolved by Q1
2022.
On 23 September 2020 the UOKiK (Office of
Competition and Consumer Protection in Poland)
published its decision in which a clause used by
Santander Bank Poland in annexes to agreements
on residential mortgage loans indexed to foreign
currencies, was declared abusive. The clause
relates to FX exchange rate (method of its
determination). Fine: EUR 5,2 million. Santander
Bank Poland has appealed the decision.
Pending of the first hearing.
Group
5
Annual report 2021 149
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Identified
material aspect
Material
aspect
boundary
GRI Standard
Compliance and
risk
management /
Ethical
behaviour
Internal and
external
GRI 103:
MANAGEMENT
APPROACH
GRI 207: TAX
ENVIRONMENTAL STANDARDS
MATERIALS
Internal
environmental
footprint
Internal and
external
GRI 103:
MANAGEMENT
APPROACH
Internal
environmental
footprint
Internal and
external
GRI 301:
MATERIALS
ENERGY
Internal
environmental
footprint
Internal and
external
GRI 103:
MANAGEMENT
APPROACH
GRI 302:
ENERGY
Page
Scope Omission
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). Column “Page”
of the GRI 207: Tax.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). Column “Page”
of the GRI 207: Tax.
207-1 Approach to tax
Conduct and ethical behaviour (p. 37) (Principles of
action in tax matters)
Conduct and ethical behaviour (p. 37) (Principles of
action in tax matters)
Conduct and ethical behaviour (p. 37) (Principles of
action in tax matters)
Group
Disclosure
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
207-2 Tax governance,
control, and risk
management
207-3 Stakeholder
engagement and
management of
concerns related to tax
207-4 Country-by-
country reporting
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
Key metrics (p. 117) (country-by-country report)
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint).
301-1 Materials used
by weight or volume
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
301-2 Recycled input
materials used
301-3 Reclaimed
products and their
packaging materials
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
302-1 Energy
consumption within
the organization
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117)
(Environmental footprint).
Not applicable due to the type of Group financial
activity.
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
Key metrics (p. 117).
302-2 Energy
consumption outside
of the organization
302-3 Energy intensity Key metrics (p. 117).
302-4 Reduction of
energy consumption
An specific analysis of cause and effect relation for
the implemented measures and of the obtained
reduction is not available.
302-5 Reductions in
energy requirements
of products and
services
Not applicable due to the type of Group financial
activity.
Group
-
-
-
Group
Group
-
-
-
-
Group
Group
Group
-
-
-
Group
Group
Group
Group
-
-
-
-
-
-
-
-
-
-
6
6
-
-
-
-
6
6
6
-
-
Annual report 2021 150
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
WATER AND EFFLUENTS
Internal
environmental
footprint
Internal and
external
BIODIVERSITY
Biodiversity
Internal and
external
GRI Standard
Disclosure
Page
Scope Omission
GRI 103:
MANAGEMENT
APPROACH
GRI 303: WATER
AND EFFLUENTS
GRI 103:
MANAGEMENT
APPROACH
GRI 304:
BIODIVERISTY
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
303-1 Interactions
with water as a shared
resource
303-2 Management of
water discharge-
related impacts
303-3 Water
withdrawal
303-4 Water
discharge
303-5 Water
consumption
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
304-1 Operational
sites owned, leased,
managed in, or
adjacent to, protected
areas and areas of high
biodiversity value
outside protected
areas
304-2 Significant
impacts of activities,
products, and services
on biodiversity
304-3 Habitats
protected or restored
304-4 IUCN Red List
species and national
conservation list
species with habitats
in areas affected by
operations
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint).
-
-
-
Banco Santander manages its water consumption
and supply following local limitations.
Group
Not applicable due to the type of Group financial
activity.
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117)
Not applicable due to the type of Group financial
activity.
Supporting the green transition (p. 72)
(Environmental footprint).
Group
Group
Group
Group
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Context Index.
Conduct and ethical behaviour (p. 37)
(Environmental and social risk management).
Conduct and ethical behaviour (p. 37)
(Environmental and social risk management).
-
-
-
Not applicable due to the type of Group financial
activity.
Group
Not applicable due to the type of Group financial
activity.
Group
-
-
-
-
-
6
-
6
-
-
-
-
-
Conduct and ethical behaviour (p. 37)
(Environmental and social risk management)
Group
9
Not applicable due to the type of Group financial
activity.
Group
-
Annual report 2021 151
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
EMISSIONS
GRI Standard
Disclosure
Page
Scope Omission
-
-
-
Group
Group
Group
Group
Group
Group
Internal
environmental
footprint
Internal and
external
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
What our stakeholders tell us (p. 24) . Column
"Material aspect boundary" of GRI Content Index.
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint).
305-1 Direct (Scope 1)
GHG emissions
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
Internal
environmental
footprint
Internal and
external
GRI 305:
EMISSIONS
WASTE
Internal
environmental
footprint
Internal and
external
GRI 103:
MANAGEMENT
APPROACH
GRI 306:
WASTE
305-2 Energy indirect
(Scope 2) GHG
emissions
305-3 Other indirect
(Scope 3) GHG
emissions
305-4 GHG emissions
intensity
305-5 Reduction of
GHG emissions
305-6 Emissions of
ozone-depleting
substances (ODS)
305-7 Nitrogen oxides
(NOX), sulfur oxides
(SOX), and other
significant air
emissions
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
306-1 Waste
generation and
significant waste-
related impacts
306-2 Management of
significant waste-
related impacts
306-3 Waste
generated
306-4 Waste diverted
from disposal
306-5 Waste directed
to disposal
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
Key metrics (p. 117).
An specific analysis of cause and effect relation for
the implemented measures and of the obtained
reduction is not available.
Not applicable due to the type of Group financial
activity.
Not applicable due to the type of Group financial
activity.
Group
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint).
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
Supporting the green transition (p. 72)
(Environmental footprint). Key metrics (p. 117).
(Environmental footprint).
-
-
-
Group
Group
Group
Key metrics (p. 117) (Environmental footprint).
Group
Key metrics (p. 117).
Group
-
-
-
6
6
6
6
-
-
-
-
-
-
-
-
-
6
6
Annual report 2021 152
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
ENVIRONMENTAL COMPLIANCE
GRI Standard
Disclosure
Page
Scope Omission
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
GRI 103:
MANAGEMENT
APPROACH
Internal and
external
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A strong and inclusive culture:
The Santander Way (p. 34)
A strong and inclusive culture:
The Santander Way (p. 34)
-
-
-
-
-
-
GRI 307:
ENVIRONMENT
AL COMPLIANCE
307-1 Non-
compliance with
environmental laws
and regulations
The Bank has not received final sanctions for this
concept. In addition, information on litigation and
other Group contingencies can be found in
Auditor’s report and annual consolidated accounts.
Group
5
SUPPLIER ENVIRONMENTAL ASSESSMENT
Ethical
behaviour and
risk
management
Internal and
external
SOCIAL STANDARDS
EMPLOYMENT
Attracting and
retaining talent /
Diversity
nternal
I
GRI 103:
MANAGEMENT
APPROACH
GRI 308:
SUPPLIER
ENVIRONMENT
AL ASSESSMENT
GRI 103:
MANAGEMENT
APPROACH
GRI 401:
EMPLOYMENT
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
308-1 New suppliers
that were screened
using environmental
criteria
308-2 Negative
environmental
impacts in the supply
chain and actions
taken
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
401-1 New employee
hires and employee
turnover
401-2 Benefits
provided to full-time
employees that are
not provided to
temporary or part-
time employees
401-3 Parental leave
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Responsible procurement (p. 68).
Responsible procurement (p. 68).
-
-
-
-
-
-
Responsible procurement (p. 68).
Group
3
Responsible procurement (p. 68).
Group
7
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A talented and motivated team (p. 44) (Talent
attraction section).
A talented and motivated team (p. 44) (Talent
attraction section).
-
-
-
A talented and motivated team (p. 44) (Talent
attraction section). Key metrics (p. 117).
Group
Benefits detailed in "A talented and motivated
team"(p. 44), section "Corporate benefits" are
regarding only full-time employees.
Group
Information breakdown is not available, work is
under way to present this information.
Group
-
-
-
-
-
-
Annual report 2021 153
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
LABOUR/MANAGEMENT RELATIONS
GRI Standard
Disclosure
Page
Scope Omission
GRI 103:
MANAGEMENT
APPROACH
Attracting and
retaining talent /
Diversity
Internal
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Column "Page" of the GRI 402: Labour/
Management relations"
Column "Page" of the GRI 402: Labour/
Management relations"
-
-
-
GRI 402: LABOR/
MANAGEMENT
RELATIONS
402-1 Minimum
notice periods
regarding operational
changes
Santander Group has not established any minimum
period to give prior notice relating to organizational
changes different from those required by law in
each country.
Group
OCCUPATIONAL HEALTH AND SAFETY
Attracting and
retaining talent /
Diversity
Internal
GRI 103:
MANAGEMENT
APPROACH
Attracting and
retaining talent /
Diversity
Internal
GRI 403:
OCCUPATIONAL
HEALTH AND
SAFETY
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
403-1 Occupational
health and safety
management system
403-2 Hazard
identification, risk
assessment, and
incident investigation
403-3 Occupational
health services
403-4 Worker
participation,
consultation, and
communication on
occupational health
and safety
403-5 Worker training
on occupational health
and safety
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A talented and motivated team (p. 44). Column
"Page" of the GRI 403: Occupational Safe and
Safety.
A talented and motivated team (p. 44). Column
"Page" of the GRI 403: Occupational Safe and
Safety.
Banco Santander has occupational health and
safety management systems in place in all the
geographies in which it operates, complying with
the legal requirements of each country regarding
occupational risk prevention.
A talented and motivated team (p. 44) (Employee
wellbeing section).
A talented and motivated team (p. 44) (Employee
wellbeing section).
At Banco Santander SA, the percentage of
Representation in the Security Committee is 100%.
A talented and motivated team (p. 44) (Employee
wellbeing section).
403-6 Promotion of
worker health
A talented and motivated team (p. 44) (Employee
wellbeing section).
-
-
-
Group
Group
Group
Banco
Santande
r S.A. and
SCF
Group
Group
-
-
-
-
-
-
-
-
-
-
-
-
-
Not applicable due to the type of Group financial
activity.
Group
403-7 Prevention and
mitigation of
occupational health
and safety impacts
directly linked by
business relationships
403-8 Workers
covered by an
occupational health
and safety
management system
100% of Banco Santander employees are covered
by health and safety management systems at
work.
403-9 Work-related
injuries
A talented and motivated team (p. 44) (Employee
wellbeing section). Key metrics (p. 117).
403-10 Work-related
ill health
Key metrics(p. 117).
Group
Group
Group
1
1
1
Annual report 2021 154
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standard
Disclosure
Page
Scope Omission
Material
aspect
Identified
boundary
material aspect
TRAINING AND EDUCATION
Attracting and
retaining talent /
Diversity
Internal
GRI 103:
MANAGEMENT
APPROACH
GRI 404:
TRAINING AND
EDUCATION
DIVERSITY AND EQUAL OPPORTUNITY
Attracting and
retaining talent /
Diversity /
Incentives tied
to ESG criteria
Internal
GRI 103:
MANAGEMENT
APPROACH
Attracting and
retaining talent /
Diversity /
Incentives tied
to ESG criteria
Internal
GRI 405:
DIVERSITY AND
EQUAL
OPPORTUNITIES
NON-DISCRIMINATION
GRI 103:
MANAGEMENT
APPROACH
Internal and
external
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
404-1 Average hours
of training per year per
employee
404-2 Programs for
upgrading employee
skills and transition
assistance programs
404-3 Percentage of
employees receiving
regular performance
and career
development
omissions.
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
405-1 Diversity of
governance bodies and
employees
405-2 Ratio of basic
salary and
remuneration of
women to men
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
GRI 406: NON-
DISCRMINATION
406-1 Incidents of
discrimination and
corrective actions
taken
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A talented and motivated team (p. 44). “Page” of
the GRI 404: Training and education.
A talented and motivated team (p. 44). “Page” of
the GRI 404: Training and education.
-
-
-
A talented and motivated team (p. 44) (Talent
attraction section). Key metrics (p. 117).
Group
Banco Santander offers management programmes
and continuous training skills that foster the
employees´ employability and that, sometimes,
help them manage the end of their professional
careers. A talented and engaged team (p. 44)
(Learning and development section).
A talented and motivated team (p. 44)
(Performance review and remuneration section).
Regular performance and career development are
received by the 100% of the employees.
Group
Group
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A talented and motivated team (p. 44) (Diversity
and Inclusion section).
A talented and motivated team (p. 44) (Diversity
and Inclusion section).
-
-
-
A talented and motivated team (p. 44) (Diversity
and Inclusion section). Key metrics (p. 117).
Corporate governance chapter of the Annual Report
(p. 179).
Group
A talented and motivated team (p. 44) (Diversity
and Inclusion section). Key metrics (p. 117).
Group
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
A talented and motivated team (p. 44) (Diversity
and Inclusion section).
A talented and motivated team (p. 44) (Diversity
and Inclusion section).
-
-
-
A talented and motivated team (p. 44) (Active
listening section). Risk management and
compliance chapter (p. 430).
Group
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Annual report 2021 155
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
GRI Standard
Disclosure
Not material
Not
applicable
CHILD LABOR
Not material
Not
applicable
GRI 103:
MANAGEMENT
APPROACH
GRI 407:
FREEDOM OF
ASSOCIATION
AND
COLLECTIVE
BARGAINING
GRI 103:
MANAGEMENT
APPROACH
GRI 408: CHILD
LABOR
FORCED OR COMPULSORY LABOR
GRI 103:
MANAGEMENT
APPROACH
GRI 409:
FORCED OR
COMPULSORY
LABOR
Not material
Not
applicable
SECURITY PRACTICES
GRI 103:
MANAGEMENT
APPROACH
Internal and
external
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
GRI 410:
SECUTIRY
PRACTICES
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
407-1 Operations and
suppliers in which the
right to freedom of
association and
collective bargaining
may be at risk
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
408-1 Operations and
suppliers at significant
risk for incidents of
child labor
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
409-1 Operations and
suppliers at significant
risk for incidents of
forced or compulsory
labor
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
410-1 Security
personnel trained in
human rights policies
or procedures
Page
Not material
Not material
Not material
Scope Omission
-
-
-
Not material
Group
Not material
Not material
Not material
Not material
Not material
Not material
Not material
-
-
-
Group
-
-
-
Conduct and ethical behaviour (p. 117)
(Environmental and social risk management)
Group
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Column "Page" of the GRI 410: Security Practices.
Column "Page" of the GRI 410: Security Practices.
-
-
-
Santander requires to its Safety Services suppliers
during the hiring process compliance with Human
Rights Regulations
Banco
Santande
r S.A.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Annual report 2021 156
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
RIGHTS OF INDIGENOUS PEOPLES
GRI Standard
Disclosure
Page
Scope Omission
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
GRI 411: RIGHTS
OF INIDGENOUS
PEOPLE
411-1 Incidents of
violations involving
rights of indigenous
people
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Column "Page" of the GRI 411: Rights of Indigenous
People
Column “Page” of the GRI 411: Rights of Indigenous
People.
The Bank ensures, through social and
environmental risk assessments in their financing
operations under the Equator Principles, that no
violations of the indigenous peoples’ rights occur in
such operations. In 2020, a total of 68 operations
were evaluated in this respect.
-
-
-
-
-
-
Group
8
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
External
HUMAN RIGHTS ASSESSMENT
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
Ethical
behaviour and
risk
management /
Compliance and
adapting to
regulatory
changes
External
GRI 103:
MANAGEMENT
APPROACH
External
GRI 412:
HUMAN RIGHTS
ASSESSMENT
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
412-1 Operations that
have been subject to
human rights
Omissions or impact
assessments
412-2 Employee
training on human
rights policies or
procedures
412-3 Significant
investment
agreements and
contracts that include
human rights clauses
or that underwent
human rights
screening
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Column "Page" of the GRI 412: Human Rights
assessment
Column "Page" of the GRI 412: Human Rights
assessment
All the Bank’s financing operations under the
Equator Principles are subject to social and
environmental risk assessments (which includes
human rights aspects). In 2020, a total of 68
operations were evaluated in this respect.
-
-
-
Group
Conduct and ethical behaviours (p. 37) (Human
rights protection).
Group
-
-
-
8
9
All of Banco Santander's significant investment
agreements and contracts made within the
framework of the Equator Principles are subject to
a social and environmental risk assessment
(including HR aspects).
Group
8
Annual report 2021 157
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
LOCAL COMMUNITIES
GRI Standard
Disclosure
Page
Scope Omission
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
GRI 413: LOCAL
COMMUNITIES
413-1 Operations with
local community
engagement, impact
assessments, and
development
programs
Community
investment
External
413-2 Operations with
significant actual and
potential negative
impacts on local
communities
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
414-1 New suppliers
that were screened
using social criteria
414-2 Negative social
impacts in the supply
chain and actions
taken
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
SUPPLIER SOCIAL ASSESSMENT
GRI 103:
MANAGEMENT
APPROACH
GRI 414:
SUPPLIER
SOCIAL
ASSESSMENT
GRI 103:
MANAGEMENT
APPROACH
Control and
management of
risks, ethics and
compliance
Internal and
external
PUBLIC POLICY
Ethical
behaviour and
risk
management /
Compliance and external
adapting to
regulatory
changes
Internal and
GRI 415: PUBLIC 415-1 Political
contributions
POLICY
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Group
Financial inclusion and empowerment (p. 96).
Support to higher education and other local
initiatives (p. 107) (Community investment
section). Supporting the green transition (p. 72).
Financial inclusion and empowerment (p. 96).
Support to higher education and other local
initiatives (p. 107) (Community investment
section). Supporting the green transition (p. 72).
Financial inclusion and empowerment (p. 96)
(Finance section), Support to higher education and
other local initiatives (p. 107).
The Santander Group has several programmes in
its ten main countries aim to encourage
development and participation of local
communities, in which it is carried out an
assessment on people helped, scholarships given
through agreement with Universities, among
others. Moreover, in the last years the Group has
developed different products and services offering
social and/or environmental added value adapted
to each country where Santander develops its
activities.
Group
Group
Group
Conduct and ethical behaviour (p. 37)
(Environmental and social risk analysis section).
Group
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Responsible procurement (p. 68).
Responsible procurement (p. 68).
Responsible procurement (p. 68).
Responsible procurement (p. 68).
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content In
dex.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). A talented and
motivated team (p. 44). Governance (p. 29). “Page”
of the GRI 415: Public Policy.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). A talented and
motivated team (p. 44). Governance (p. 29). “Page”
of the GRI 415: Public Policy.
The ties, membership or collaboration with political
parties or with other kind of entities, institutions or
associations with public purposes, as well as
contributions or services to them, should be done
in a way that can assure the personal character and
that avoids any involvement of the Group, as
indicated in Santander Group General Code of
Conduct
-
-
-
Group
Group
-
-
-
Group
-
-
-
-
-
-
-
-
3
7
-
-
-
-
Annual report 2021 158
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standard
Disclosure
Page
Scope Omission
Material
aspect
Identified
material aspect
boundary
CUSTOMER HEALTH SAFETY
Products and
services that are
transparent and
fair
GRI 103:
MANAGEMENT
APPROACH
GRI 416:
CUSTOMER
HEALTH AND
SAFETY
MARKETING AND LABELING
Products and
services that are
transparent and external
fair
Internal and
GRI 103:
MANAGEMENT
APPROACH
Products and
services that are
transparent and external
fair
Internal and
GRI 417:
MARKETING
AND LABELING
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
416-1 Assessment of
the health and safety
impacts of product and
service categories
416-2 Incidents of
non-compliance
concerning the health
and safety impacts of
products and services
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
417-1 Requirements
for product and service
information and
labeling
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Acting responsibly towards our customers (p.
61)(Product governance and consumer protection
section).
Acting responsibly towards our customers (p.
61)(Product governance and consumer protection
section).
Responsible business practices. The
Commercialization Committee evaluates potential
impact of all products and services, previously they
are launched onto the market. These impacts
include, among others, clients security and
compatibility with other products.
The Bank has not received final sanctions for this
concept. In addition, information on litigation and
other Group contingencies can be found in
Auditor’s report and annual consolidated accounts.
-
-
-
Group
-
-
-
-
Group
5
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Acting responsibly towards our customers (p.
61)(Product governance and consumer protection
section).
Acting responsibly towards our customers (p.
61)(Product governance and consumer protection
section).
-
-
-
Responsible business practices. The
Commercialization Committee evaluates
potential impact of all products and
services, previously they are launched onto
the market. These impacts include, among
others, clients security and compatibility
with other products. In addition, the Bank
is member of the Association for
Commercial Self- Regulation (Autocontrol)
assuming the ethical commitment to be
responsible regarding the freedom of
commercial communication
Group
-
-
-
-
417-2 Incidents of
non-compliance
concerning product
and service
information and
labeling
Sanction resolution (€300.000) notified by the
Spanish National Securities Market Commission,
notified on 22 December 2020, for violation of the
provisions foreseen in article 214 of the Spanish
Securities Market Act, in relation to the information
collected from retail clients for the suitability
assessment. An appeal has been filed before the
Administrative Contentious Court.
Sanctioning resolution from Junta de Andalucía
notified on June 23 2021 (€1,03 million), in relation
to the inclusion of abusive clauses in contracts.
Group
5
On December 30, 2021 the President UOKIK
(Office of Competition and Consumer Protection in
Poland) issued a decision against Santander
Consumer Bank Poland (SCB Poland) in the
proceedings regarding individual offers and
insurance, which states that SCB Poland uses
practices that violate collective consumer interests.
The decision imposes fines that amount to €9.8
million. SCB Poland will appeal UOKIK´S decision.
417-3 Incidents of
non-compliance
concerning marketing
communications
The Bank hasn't received any sanctions concerning
this matter. Additional information about Group's
litigation and other risks can be found at the
Auditor's report and 2021 consolidated annual
accounts.
Group
5
Annual report 2021 159
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
boundary
Identified
material aspect
CUSTOMER PRIVACY
Measures taken
for customer
satisfaction
Internal and
External
GRI Standard
Disclosure
Page
Scope Omission
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
418-1 Substantiated
complaints concerning
breaches of customer
privacy and losses of
customer data
GRI 103:
MANAGEMENT
APPROACH
GRI 418:
CUSTOMER
PRIVACY
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
Acting responsibly towards our customers (p. 61).
Acting responsibly towards our customers (p. 61).
-
-
-
-
-
-
The Bank has not received final sanctions for this
concept. In addition, information on litigation and
other Group contingencies can be found in
Auditor’s report and annual consolidated accounts.
Group
5
Annual report 2021 160
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
aspect
Identified
material aspect boundary
SOCIOECONOMIC COMPLIANCE
GRI Standard
Disclosure
Page
Scope Omission
GRI 103:
MANAGEMENT
APPROACH
103-1 Explanation of
the material topic and
its boundary
103-2 The
management
approach and its
components
103-3 Evaluation of
the management
approach
419-1 Non-
GRI 419:
SOCIOECONOMI compliance with laws
C COMPLIANCE and regulations in the
social and economic
area
Products and
services that are
transparent and
fair / Ethical
behaviour and
risk
management
Internal and
external
-
-
-
-
-
-
Group
5
What our stakeholders tell us (p. 24). Column
"Material aspect boundary" of GRI Content Index.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). A talented and
motivated team (p. 44). Acting responsibly towards
customers (p. 61). Column “Page” of the GRI 419:
Socioeconomic Compliance.
2021 overview (p. 18). A strong and inclusive
culture: The Santander Way (p. 34). A talented and
motivated team (p. 44). Acting responsibly towards
customers (p. 61). Column “Page” of the GRI 419:
Socioeconomic Compliance.
On 16 July 2021, the Territorial Delegation for
Health and Families in Córdoba rendered a
resolution against Openbank for the inclusion of
allegedly abusive terms in mortgage loan contracts
during the period 2017-2019. The Territorial
Delegation alleges that the inclusion of these
abusive terms may result in a serious infringement
of the Defense and Protection of Consumers and
Users Act 13/2003 of Andalucía. Fine: €235.000.
Openbank filed an administrative appeal. The
proceeding is pending to final resolution.
In 2018, the Massachusetts Supreme Court ruled
that Notices of Intention to repossess or auction of
a repossessed vehicles (NOIs) must expressly
describe that any outstanding balance would be
reduced by the “fair market value” of the vehicle;
Santander Consumer USA (SC) revised its MA NOIs
in September 2019.
On February 2021, SC reached an agreement to
resolve a putative class action filed in June 2019
alleging SC’s MA NOIs failed to expressly reference
“fair market value” for $5.6 million, which was
approved by the Court on 16 December. The
Yunker class action settlement is limited to MA
borrowers who did not have arbitration provisions
in their contracts.
On 4 June 2021, the Massachusets Attorney
General issued a Civil Investigative Demand (CID) to
SC seeking all NOIs provided to Massachusets
residents from 30 March 2017 to the present. The
parties reached an agreement in principle to
resolve the matter for $5.6 million. SC expects to
reach a definitive agreement, including the
issuance of an Assurance of Discontinuance in the
first quarter of 2022.
Sanctioning procedure received from Junta de
Andalucía, alledging the establishment of abusive
clauses in the contracts. SCF received the
resolution on 21st of April 2021 imposing a fine of
235.000 million euros. Resolution has been
appealed, and decision is pending.
In addition, information on litigation and other
Group contingencies can be found in Auditor’s
report and annual consolidated accounts.
Annual report 2021 161
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
GRI Standards - Financial services sector disclosures
Material
Identified material aspect
aspect
FINANCIAL SERVICES SECTOR DISCLOSURES
PRODUCT PORTFOLIO
boundary
G4 Standard
Ethical behaviour
and risk
management /
Compliance and
adapting to
regulatory
changes / Products
and services that
are transparent
and fair / Products
and services
offering social and
environmental
added value
Internal and
external
FS1
FS2
FS3
FS4
FS5
FS6
FS7
FS8
Disclosure
Page
Scope Omission
Policies with specific
environmental and
social components
applied to business
lines
Procedures for
assessing and
screening
environmental and
social risks in
business lines
Governance (p. 29)., Supporting the green
transition (p. 72) (Corporate governance section).
Conduct and ethical behaviour (p. 37)
(Environmental and social risks analysis section)
Governance (p. 29)., Supporting the green
transition (p. 72) (Corporate governance section).
Conduct and ethical behaviour (p. 37)
(Environmental and social risks analysis section)
Supporting the green transition (p. 72)
(Management and staff training section).
Governance (p. 29)., Supporting the green
transition (p. 72). Conduct and ethical behaviour
(p. 37) (Environmental and social risks analysis
section)
Processes for
monitoring clients´
implementation of
and compliance with
environmental and
social requirements
included in
agreements of
transactions
Process(es) for
improving staff
competency to
implement the
environmental and
social policies and
procedures as
applied to business
lines
Interactions with
clients/ investees/
business partners
regarding
environmental and
social risks and
opportunities
Percentage of the
portfolio for business Acting responsibly towards customers (p. 61).
lines by specific
region, size (e.g.
micro/ SME/large)
and by sector
A strong and inclusive culture: The Santander
Way (p. 34)(Cultural transformation: an ongoing
journey). 2021 overview (p. 18). Governance (p.
29) (Joint initiatives to promote our agenda
section). Shareholder value (p. 69).Risk
management and compliance chapter (p. 430).
Governance (p. 29) (Helping society tackle global
challenges: 2030 agenda section). Key metrics
(p. 117)
Monetary value of
products and
services designed to
deliver a specific
social benefit for
each business line
broken down by
purpose
Monetary value of
products and
services designed to
deliver a specific
environmental
benefit for each
business line broken
down by purpose
Financial inclusion and empowerment (p. 96)
(Access and Promoting financial education
sections). Sustainable Investment (p. 104).
Supporting the green transition (p. 72).
Sustainable Investment (p. 104).
Group
Group
Group
Group
Group
Group
Group
Group
-
-
-
-
-
-
-
-
Annual report 2021 162
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Material
Identified material aspect
aspect
AUDIT
boundary
G4 Standard
Disclosure
Page
Scope Omission
Ethical behaviour
and risk
management /
Compliance and
adapting to
regulatory changes
Internal and
external
FS9
ACTIVE OWNERSHIP
Coverage and
frequency of audits
to assess
implementation of
environmental and
social policies and
risk assessment
procedures
Every two years, the Group’s Internal audit
function reviews the corporate Responsible
banking function's governance, materiality
analyses, control, procedures and risk culture. If
it spots areas for improvement, it will give
recommendations to mitigate any operational
risks from the Responsible banking function's
procedures. The last audit in 2021 ended with an
overall rating of “acceptable”.
Group
-
Ethical behaviour
and risk
management /
Compliance and
adapting to
regulatory
changes / Products
and services that
are transparent
and fair / Products
and services
offering social and
environmental
added value
Internal
FS10
FS11
FS12
FS13
FS14
FS15
FS16
(Environmental and social risks analysis section)
Percentage and
number of
companies held in
the institution´s
portfolio with which Conduct and ethical behaviour (p. 37)
the reporting
organization has
interacted on
environmental or
social issues
Percentage of assets
subject to positive
and negative
environmental or
social screening
Voting policy(ies)
applied to
environmental or
social issues for
shares over which
the reporting
organization hold
the right to vote
shares or advises on
voting
The Santander Group has no voting policies
relating to social and/or environmental matters
for entities over which acts as an advisor. The
Santander Employees Pension Fund does have a
policy of formal vote in relation to social and
environmental aspects, for shareholder
meetings of the entities over which it has voting
rights
Conduct and ethical behaviour (p. 37)
(Environmental and social risks analysis section)
Financial inclusion and empowerment (p. 96).
Access points in low-
populated or
economically
disadvantaged areas
by type
Initiatives to improve Financial inclusion and empowerment (p. 96)
access to financial
services for
disadvantaged
people
Policies for the fair
design and sale of
financial products
and services
Initiatives to enhance
financial literacy by
type of beneficiary
(Access section). A talented and motivated team
(p. 44) (People with disabilities section). Acting
responsibly towards customers (p. 61)
(Vulnerable customers section).
Acting responsibly towards customers (p. 61)
(Product and services design section)..
Financial inclusion and empowerment (p. 96)
(Promoting financial education section).
Group
8
Group
8
Group
Group
Group
Group
Group
-
-
-
-
-
1.Only information regarding owned employees is disclosed. 2. The indicator is not reported because it is confidential information. 3. Data refers exclusively to centralised
purchases data in Aquanima. 4. Information is provided on the total number of complaints related to gifts and invitations/corruption and bribery. 5. Information is
provided for claims of any type and over €60,000 that may have a significant reputational impact on the Group and/or that there is an accounting provision because it may
materialize in the short, medium or long term. 6. The scope and limitations of this indicator are described on Key Metrics. 7. Only top-200 risk suppliers are reported. 8.
Information is only provided on the number of project finance deals of Santander’s Bank, which have been analysed regarding social and environmental risks in Equator
Principles’ frame. 9. Only qualitative information is disclosed. 10. Information is provided on programmes and their direct impacts of the ten main countries of the
Group, instead on centres.
Annual report 2021 163
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Sustainability Accounting Standards
Board (SASB) content index
This is the second year in which Santander has decided to report in
accordance with the Sustainability Accounting Standards Board
(SASB), following its Industry Standards Version 2018-10 issue.
The relevant standards disclosed in this section have been selected
according to a materiality-driven analysis, focusing on the industries
that are most closely aligned with our businesses within the
“Financials sector”: Asset Management & Custody Activities (FN-AC),
Commercial Banks (FN-CB), Consumer Finance (FN-CF), Investment
Banking & Brokerage (FN-IB).
Acknowledging that SASB has a US-based approach, we have done
our best efforts for translating it to our European standards.
Currently, we do not disclose all metrics included in the
aforementioned industry standards, but we will continue to evaluate
additional metrics in the future, enhancing our reporting under SASB
framework for meeting the needs of our growing base of
stakeholders and investors.
Unless otherwise is noted, all data and descriptions are reported for
the Santander Group, if applicable, on a consolidated basis, and not
just the segments relevant to the particular industry. The information
will refer to the 2021 fiscal year, unless otherwise is specified.
Sustainability Accounting Metrics
Topic
Data Security
Industry
Commercial
Banks
Consumer
Finance
Commercial
Banks
Consumer
Finance
Financial Inclusion Commercial
& Capacity Building Banks
Commercial
Banks
Commercial
Banks
Commercial
Banks
Commercial
Banks
Incorporation of
Environmental,
Social, and
Governance Factors Commercial
in Credit Analysis
Banks
Accounting Metric
(1) Number of data
breaches, (2) percentage
involving personally
identifiable information (PII),
(3) number of account
holders affected.
Description of approach to
identifying and addressing
data security risks.
(1) Number and (2) amount
of loans outstanding
qualified to programs
designed to promote small
business and community
development.
(1) Number and (2) amount
of past due and nonaccrual
loans qualified to programs
designed to promote small
business and community
development.
Number of no-cost retail
checking accounts provided
to previously unbanked or
underbanked customers.
Number of participants in
financial literacy initiatives
for unbanked, underbanked,
or underserved customers.
Commercial and industrial
credit exposure, by industry.
Description of approach to
incorporation of
environmental, social,and
governance (ESG) factors in
credit analysis.
Code
FN-CB-230a.1
FN-CF-230a.1
Response
Refer to ‘Litigation and other matters‘ in the note 25 of the
Consolidated accounts in the Auditor's report and
consolidated financial statements (p. 512).
FN-CB-230a.2
FN-CF-230a.3
Refer to ‘Risk Pro’ in section 'A strong and inclusive culture'
of this chapter (p. 34).; and to ‘Relevant mitigation actions’
in section 6.2 of 'Risk management and compliance
chapter' (p. 430).
FN-CB-240a.1
FN-CB-240a.2
Refer to ‘Acting responsibly towards customers‘ section of
this chapter (p. 61).
For more detail see note 10. ‘Loans and advances to
customers´ in the Auditor's report and consolidated
financial statements (p. 512).
Additionally, all the information related to microfinance
programmes are available on the ‘Financial inclusion and
empowerment‘ section of this report (p. 96).
Refer to ‘Amounts past due‘ and ‘Impairment of financial
assets‘ in 3.3 'Key metrics' section of the Risk management
and compliance chapter. (p. 430).
Also refer to notes 2.g and 10.d of the consolidated
accounts in the Auditor's report and consolidated financial
statements (p. 512).
FN-CB-240a.3
Refer to ‘Financial inclusion and empowerment‘ section of
this chapter (p. 96).
FN-CB-240a.4
FN-CB-410a.1
FN-CB-410a.2
In 2021, Grupo Santander has financially empowered 3.1
million people.
For further information refer to ‘Financial inclusion and
empowerment‘ section of this chapter (p. 96).
Refer to ‘Concentration risk‘ in section 3.5 'Other credit risk
details' of the Risk Management and compliance chapter
(p. 430).
Refer to the ‘Environmental and social risk analysis’ section
on Conduct and ethical behaviour (p. 37), and the ‘Climate
and environmental risk‘ (p. 499).section of the Risk
management and compliance chapter
For further information see our ‘General Sustainability
Policy and our ‘Environmental, social & climate change risk
management Policy’, both available on our corporate
website.
Annual report 2021 164
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Topic
Incorporation of
Environmental,
Social, and
Governance Factors
in investment
Banking &
Brokerage
Activities
Industry
Investment
Banking &
Brokerage
Investment
Banking &
Brokerage
Business Ethics
Systemic Risk
Management
Code
FN-IB-410a.2
Response
Refer to ‘Supporting the green transition’ section of this
chapter (p. 72).
Accounting Metric
(1) Number and (2) total
value of investments and
loans incorporating
integration of
environmental, social, and
governance (ESG) factors, by
industry.
Refer to ‘Supporting the green transition‘ section of this
chapter (p. 72).
For further information see our ‘General Sustainability
Policy‘, and our ‘Environmental, social & climate change
risk management policy‘, both available on our corporate
website.
FN-AC-510a.1
FN-CB-510a.1 anticompetitive behaviour, anti-trust, and monopoly
FN-IB-510a.1
Refer to GRI 206-1 discloses legal actions for
practices.
For further information, refer to ’Litigation and other
matters’ section on the Auditor's report and consolidated
financial statements (p. 512).
FN-IB-410a.3
Description of approach to
incorporation of
environmental, social, and
governance (ESG) factors in
investment banking and
brokerage activities.
Total amount of monetary
losses as a result of legal
proceedings associated with
fraud, insider trading, anti-
trust, anti-competitive
behavior,market
manipulation, malpractice,
or other related financial
industry laws or regulations.
Description of whistleblower FN-AC-510a.2
Refer to ‘Ethical Channels’ in the section 'A talented and
FN-CB-510a.2 motivated team' of this chapter (p. 44).
FN-IB-510a.2
For further information, see our ‘General Code of Conduct’,
available on our website.
FN-CB-550a.1.
FN-IB-550a.1.
According to the ‘2021 list of global systemically
important banks (G-SIBs)’ released by the Financial
Stability Board, Santander´s G-SIB buffer is 1.0 %. (G-SIBs
as of November 2021)
According to the G-SIB Scores Dashboard from the Basel
Committee on Banking Supervision (BCBS), Santander
Group´s scores are (end-2020 data):
• Score: 192
• Complexity: 106
• Cross-jurisdictional: 469
• Interconnectedness: 149
• Size: 183
• Substitutability: 56
FN-CB-550a.2.
FN-IB-550a.2.
Refer to ‘Capital planning and stress tests’ in the section
3.5 'Capital management and adequacy' (p. 353) of the
Economic and Financial chapter.
Asset
Management &
Custody
Activities
Commercial
Banks
Investment
Banking &
Brokerage
Asset
Management & policies and procedures.
Custody
Activities
Commercial
Banks
Investment
Banking &
Brokerage
Commercial
Banks
Global Systemically
Important Bank (G-SIB)
score, by category
Investment
Banking &
Brokerage
Commercial
Banks
Investment
Banking &
Brokerage
Description of approach to
incorporation of results of
mandatory and voluntary
stress tests into capital
adequacy planning, long-
term corporate strategy, and
other business activities
Employee Diversity Commercial
& Inclusion
Banks,
Investment
Banking &
Brokerage
Activity metrics
Commercial
Banks
Commercial
Banks
Percentage of gender and
racial/ethnic group
representation for (1)
executive management, (2)
non-executive management,
(3) professionals, and (4) all
other employees
FN-AC-330a.1 FN- Refer to ‘Key metrics’ section of this chapter (p. 117).
For further information, refer to ‘Diversity & Inclusion’
IB-330a.1
section of ‘A talented and motivated team’ this chapter (p.
44).
For further information about our diversity and inclusion
principles, see our ‘Corporate Culture Policy’, available on
our corporate website.
(1) Number and (2) value of
checking and savings
accounts by segment: (a)
personal and (b) small
business.
(1) Number and (2) value of
loans by segment: (a)
personal, (b) small business,
and (c) corporate.
FN-CB-000.A
Refer to ‘Consolidated annual accounts‘ in Auditor's report
and consolidated financial statements (p. 512).
FN-CB-000.B
Refer to ‘Consolidated annual accounts‘ in Auditor's report
and consolidated financial statements (p. 512).
Annual report 2021 165
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Stakeholder Capitalism Metrics
content index
Stakeholder Capitalism Metrics
Theme
Metric
Response
Principles of governance
Governing Purpose
Quality of Governing
Body
Our Business model and strategy (p. 6) chapter
reflects how we help people and businesses prosper
whilst adopting ESG practices, and how we integrated
ESG criteria on our 3 key priorities for profitable
growth.
Additionally, in Our approach (p. 23) section on the
Responsible Banking chapter, we detail in deep how
we work to be a more sustainable bank.
Refer to the Board of directors section on our
Corporate Governance chapter (p. 179).
Refer to ´2021 Overview´ (p. 18) and Our ESG
priorities (p. 27) sections on our Responsible Banking
chapter
1. Refer to ´Performance review and remuneration´ in
A talented and engaged team section on Responsible
chapter
2. Refer to ´Remuneration´ section (p. 249) in
Corporate Governance chapter.
Setting Purpose: The company’s stated purpose, as
the expression of the means by which a business
proposes solutions to economic, environmental, and
social issues. Corporate purpose should create value
for all stakeholders, including shareholders.
Purpose-led management: How the company’s
stated purpose is embedded in company strategies,
policies, and goals.
Governing Body Composition: Composition of the
highest governance body and its committees by:
competencies relating to economic, environmental,
and social topics; executive or non-executive;
independence; tenure on the governance body;
number of each individual’s other significant positions
and commitments, and the nature of the
commitments; gender; membership of under-
represented social groups; stakeholder
representation.
Progress against strategic milestones: Disclosure of
the material strategic economic, environmental, and
social milestones expected to be achieved in the
following year, such milestones achieved from the
previous year, and how those milestones are expected
to or have contributed to long-term value.
Remuneration:
1. How performance criteria in the remuneration
policies relate to the highest governance body’s and
senior executives’ objectives for economic,
environmental and social topics, as connected to the
company’s stated purpose, strategy, and long-term
value.
2. Remuneration policies for the highest governance
body and senior executives for the following types of
remuneration: Fixed pay and variable pay, including
performance-based pay, equity-based pay, bonuses,
and deferred or vested shares, Sign-on bonuses or
recruitment incentive payments, termination
payments, clawback and retirement benefits.
Annual report 2021 166
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Metric
Anti-corruption:
1. Total percentage of governance body members,
employees and business partners who have received
training on the organization’s anti-corruption policies
and procedures, broken down by region.
2. (a) Total number and nature of incidents of
corruption confirmed during the current year but
related to previous years and
(b) Total number and nature of incidents of corruption
confirmed during the current year, related to this year.
3. Discussion of initiatives and stakeholder
engagement to improve the broader operating
environment and culture, in order to combat
corruption.
Protected ethics advice and reporting mechanisms: A
description of internal and external mechanisms for:
1. Seeking advice about ethical and lawful behaviour
and organizational integrity
2. Reporting concerns about unethical or unlawful
behaviour and organizational integrity
Monetary losses from unethical behaviour: Total
amount of monetary losses as a result of legal
proceedings associated with: fraud, insider trading,
anti-trust, anti-competitive behaviour, market
manipulation, malpractice, or violations of other
related industry laws or regulations.
Alignment of strategy and policies to lobbying: The
significant issues that are the focus of the company’s
participation in public policy development and
lobbying; the company’s strategy relevant to these
areas of focus; and any differences between its
lobbying positions, purpose, and any stated policies,
goals, or other public positions.
Integrating risk and opportunity into business
process: Company risk factor and opportunity
disclosures that clearly identify the principal material
risks and opportunities facing the company
specifically (as opposed to generic sector risks), the
company appetite in respect of these risks, how these
risks and opportunities have moved over time and the
response to those changes. These opportunities and
risks should integrate material economic,
environmental, and social issues, including climate
change and data stewardship.
Material issues impacting stakeholders: A list of the
topics that are material to key stakeholders and the
company, how the topics were identified, and how the
stakeholders were engaged.
Response
1. Refer to Financial Crime Compliance on 7.2
Compliance and conduct risk management section (p.
489) in the Risk management and compliance chapter
All our employees receive mandatory training on the
GCC on an annual basis.
2. Refer to ‘Litigation and other matters‘ in the note
25.e (p. 647) of the consolidated accounts
3. Refer to Financial Crime Compliance on 7.2
Compliance and conduct risk management section (p.
489) in the Risk management and compliance chapter
Refer to pages 13-14 in our Code of Conduct
(available in our corporate website)
In addition see ´7.2 Compliance and conduct risk
management´ (p. 489) in the Risk and compliance
management section of our Risk management and
compliance chapter. And ´Ethical channels´ on
´Conduct and ethical behaviour´ section (p. 37) of our
Responsible Banking chapter
Refer to ‘Litigation and other matters‘ in the note 25.e
(p. 647) of the consolidated accounts
Refer to ´Principles of action in our relationship with
political parties´ in the Conduct and ethical behaviour
section on Responsible banking chapter (p. 37)
Our Financing of political parties policy is available on
our corporate website
Refer to Risk management and Compliance chapter (p.
430).
In addition, we report our progress in implementing
TCFD recommendations (including Risk management)
on Responsible Banking chapter (p. 72)
Our Environmental, social and climate change risk
policy is available at our corporate website.
Refer to What our stakeholder tell us section on
Responsible Banking chapter (p. 24).
Refer also to Our ESG priorities (p. 27).
Theme
Ethical Behavior
Risk and Opportunity
Oversight
Stakeholder
Engagement
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Theme
Planet
Climate Change
Fresh water
availability
Nature Loss
Single-use plastics
Metric
Response
Greenhouse Gas (GHG) emissions: For all relevant
greenhouse gases (e.g. carbon dioxide, methane,
nitrous oxide, F-gases etc.), report in metric tonnes of
carbon dioxide equivalent (tCO₂e) GHG Protocol Scope
1 and Scope 2 emissions. Estimate and report material
upstream and downstream (GHG Protocol Scope 3)
emissions where appropriate.
TCFD implementation: Fully implement the
recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD). If necessary,
disclose a timeline of at most three years for full
implementation. Disclose whether you have set, or
have committed to set GHG emissions targets that are
in line with the goals of the Paris Agreement — to
limit global warming to well-below 2°C above pre-
industrial levels and pursue efforts to limit warming
to 1.5°C — and to achieve net-zero emissions before
2050.
Paris-aligned GHG emissions targets: Define and
report progress against time-bound science-based
GHG emissions targets that are in line with the goals
of the Paris Agreement — to limit global warming to
well-below 2°C above pre-industrial levels and pursue
efforts to limit warming to 1.5°C. This should include
defining a date before 2050 by which you will achieve
net-zero greenhouse gas emissions and interim
reduction targets based on the methodologies
provided by the Science Based Targets initiative if
applicable.
Water consumption and withdrawal in water-
stressed areas: Report for operations where material,
mega litres of water withdrawn, mega litres of water
consumed and the percentage of each in regions with
high or extremely high baseline water stress
according to WRI Aqueduct water risk atlas tool.
Estimate and report the same information for the full
value chain (upstream and downstream) where
appropriate.
Land use and ecological sensitivity: Report the
number and area (in hectares) of sites owned, leased
or managed in oradjacent to protected areas and/or
key biodiversity areas (KBA).
Report wherever material along the value chain:
estimated metric tonnes of single-use plastic
consumed.
Disclose the most significant applications of single-
use plastic identified, the quantification approach
used and the definition of single-use plastic adopted.
Refer to ´Table 28. Environmental footprint
2020-2021´ in the Key metrics section of the
Responsible Banking chapter (p. 117).
• Total emissions (market based): 118.517 T CO2 teq
• Scope 1: 25,672 CO2 teq
• Scope 2 – market based: 57,425 T CO2
• Scope 2 – location based: 269,615 T CO2 teq
• Scope 3: 35,420 T CO2 teq
Refer to Supporting the green transition section of the
Responsible Banking chapter (p. 72), were we report
our progress in implementing TCFD
recommendations.
In 2020, we became carbon neutral on our own
operations. In 2021, we set our commitment to be
net-zero in carbon emissions by 2050, and we set our
first decarbonization targets.
in addittion, refer to Climate and environmental risk
section (p. 499) of the Risk management and
compliance chapter.
Refer to Supporting the green transition section (p.
72). of the Responsible Banking chapter.
We set our first decarbonization targets. We're
committed to aligning our power generation portfolio
with the Paris Agreement by 2030. We are also
ending financial services to power generation clients
by 2030 if over 10% of their revenue depends on
thermal coal.
Refer to Key metrics section on Responsible Banking
chapter (p. 117).
In 2021, Santander consumed 1,808,668 m3 from the
public network, equaling a consumption of 9.76 m3/
employee. (Information is provided exclusively on
water withdrawal from the public network).
We do not disclose data on water stress, due to our
financial activities generating negligible impacts.
Not identified as a material aspect for the bank and its
activity.
Refer to 2021 Overview section (p. 18) on Responsible
Banking chapter.
In 2021 we have met our goal of eliminating
unnecessary single-use plastics from our buildings
and branches.
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Theme
Prosperity
Employment and
wealth generation
Metric
Response
Absolute number and rate of employment:
1. Total number and rate of new employee hires
during the reporting period, by age group, gender,
other indicators of diversity and region.
2. Total number and rate of employee turnover during
the reporting period, by age group, gender, other
indicators of diversity and region.
Refer to Key metrics section on the Responsible
Banking chapter (p. 117).
1. See:
• Table 11.2. Distribution of new hires by age bracket
2021
• Table 11.3. Distribution of new hires by gender
2. See:
• Table 13. External turnover rate by gender
• Table 14.2. External turnover rate by age bracket
2021
Economic Contribution:
1. Direct economic value generated and distributed
(EVG&D) — on an accrual basis, covering the basic
components for the organization’s global operations,
ideally split out by:
1. Refer to Global Reporting Initiative (GRI) content
index on the Responsible banking chapter, and more
specifically to GRI 201.1 Direct economic value
generated and distributed (p. 144).
• Economic value generated in 2021: EUR 46,414
a. Revenue
b. Operating Costs
c. Employee wages and benefits
d. Payments to providers of capital
e. Payments to government
f. Community Investment.
2. Financial assistance received from the government.
Total monetary value of financial assistance received
by the organization from any government during the
reporting period.
Wealth creation and
Employment
Financial investment contribution disclosure:
1. Total capital expenditures (CapEx) minus
depreciation supported by narrative to describe the
company’s investment strategy.
2. Share buybacks plus dividend payments supported
by narrative to describe the company’s strategy for
returns of capital to shareholders.
Community and
social vitality
Additional tax
remitted
Total tax paid: The total global tax borne by the
company, including corporate income taxes, property
taxes, non- creditable VAT and other sales taxes,
employer-paid payroll taxes and other taxes that
constitute costs to the company, by category of taxes.
The total additional global tax collected by the
company on behalf of other taxpayers, including VAT
and employee-related taxes that are remitted by the
company on behalf of customers or employees, by
category of taxes.
million
• Economic value distributed: EUR 24,541 million
• Economic value retained EUR 21,873 million
1.a Revenue: EUR 46,404 million
1.b Operating cost: EUR 21,415 million
1.c Employee wages and benefits: EUR 11,216 million
1.d Payments to providers of capital: N/A
1.e Payments to government: EUR 7,617 million (total
taxes)
1.f Community investment: EUR 152 million
Further detail for 1a-c refer to Group financial
performance section on Economic and financial
review chapter (p. 327).
Further detail for 1d refer to 3.3 Dividends in
Shareholders section on Corporate governance
chapter (p. 196).
Further detail for 1e refer to "Tax contribution" section
on Conduct and ethical behaviour on Responsible
banking chapter (p. 37).
2. Grupo Santander did not receive public subsidies in
2021. Refer to Annual banking report, e) (p. 804).
1.Refer to note 16.b Tangible assets – For own use
section on the Auditor's report consolidated financial
statements (p. 621).
Additionally, refer to
- Operating expenses data on the Economic and
financial review chapter (p. 320).
- Note 47. Other general administrative expenses of
consolidated annual accounts (p. 701).
2. Refer to Shareholder value section on Responsible
Banking chapter (p. 69). and 3. Shareholders.
Engagement and general meeting section on
Corporate Governance chapter (p. 179).
Refer to "Tax contribution" on Conduct and ethical
behaviour of the Responsible Banking chapter (p. 37).
Further detailed information see Annual banking
report (p. 804).
Refer to 'Tax contribution' in the Conduct and ethical
behaviour section of the Responsible Banking chapter
(p. 37).
Further detailed information see Annual banking
report (p. 804).
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Theme
Total tax paid by
country for
significant locations
Metric
Total tax paid and, if reported, additional tax remitted,
by country for significant locations.
Innovation in better
products and services
Total R&D expenses ($): Total costs related to
research and development.
People
Dignity and equality
Diversity and inclusion (%): Percentage of employees
per employee category, per age group, gender and
other indicators of diversity (e.g. ethnicity).
Pay equality: Ratio of the basic salary and
remuneration for each employee category by
significant locations of operation for priority areas of
equality: women to men; minor to major ethnic
groups; and other relevant equality areas.
Wage level (%):
1. Ratios of standard entry-level wage by gender
compared to local minimum wage
2. Ratio of CEO’s total annual compensation to median
total annual compensation of all employees
(excluding the CEO)
Risk for incidents of child, forced or compulsory
labor: An explanation of the operations and suppliers
considered to have significant risk for incidents of
child labor, forced or compulsory labor. Such risks
could emerge in relation to type of operation (such as
manufacturing plant) and type of supplier; or
countries or geographic areas with operations and
suppliers considered at risk.
Response
Refer to 'Tax contribution' in the Conduct and ethical
behaviour section of the Responsible Banking chapter
(p. 37).
Further detailed information see Annual banking
report (p. 804).
Innovation and technological development are
strategic pillars of Grupo Santander. We aim to
respond to fresh challenges that emanate from digital
transformation, focusing on operational excellence
and customer experience
As in previous years, the latest European Commission
ranking (2021 EU Industrial R&D Investment
Scoreboard, based on 2020 data) ranked our
technological effort first among Spanish companies
and we are the second global bank for investment in
R&D.
The equivalent investment in R&D&I to that
considered in this ranking amounted to EUR 1,325
million.
Refer to Research, development and innovation
(R&D&I) section on Economic and financial review (p.
410).
Additional information refer to note 18 on the Audit's
report and consolidated financial statements (p. 627)
Refer to Key metrics section of the Responsible
Banking chapter (p. 117).
Additional information on how we promote D&I refer
to ´Diversity and inclusion´ in A talented and
motivated team section on Responsible Banking
chapter (p. 44).
In 2021 our equal pay gap declined to 1% from 1.5%
in 2020. We set up fair pay programmes to reduce the
equal pay gap. They include systematic reviews tied to
remuneration cycles (merit-based promotions and
bonuses), work reorganization and career
development plans to recruit, engage, and retain
diverse talent.
Refer to ´Equal pay´ in A talented and motivated team
section on Responsible Banking chapter (p. 44).
1. Refer to Key metrics section on Responsible
banking chapter (p. 117).
Table ´16.2 Ratio between the Bank’s minimum
annual salary and the legal minimum annual salary
by country and gender 2021´
We take as a reference the Bank’s minimum annual
salary in each country.
2. Refer to 6. Remuneration section on Corporate
Governance chapter (p. 179).
Refer to ´Protecting human rights´ in "Environmental
and social risk analysis" on Conduct and ethical
behaviour of the Responsible banking chapter (p. 37).
We have zero tolerance towards employee, customer
and supplier discrimination, forced labour and child
exploitation. We respect the provisions of the ILO
convention and the legal minimum working aged
established in countries.
Further detail on our Human rights policy, available at
our corporate website.
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Theme
Health and well
being
Skills for the future
Metric
Discrimination and Harassment Incidents (#) and the
Total Amount of Monetary Losses ($): Number of
discrimination and harassment incidents, status of the
incidents and actions taken and the total amount of
monetary losses as a result of legal proceedings
associated with (1) law violations and (2) employment
discrimination.
Freedom of Association and Collective Bargaining at
Risk (%):
1. Percentage of active workforce covered under
collective bargaining agreements
2. An explanation of the assessment performed on
suppliers for which the right to freedom of association
and collective bargaining is at risk including measures
taken by the organization to address these risks.
Health and Safety (%):
1. The number and rate of fatalities as a result of
work-related injury; high-consequence work-related
injuries (excluding fatalities); recordable work-related
injuries, main types of work- related injury; and the
number of hours worked.
2. An explanation of how the organization facilitates
workers’ access to non-occupational medical and
healthcare services and the scope of access provided
for employees and workers.
Training provided (#, $):
1. Average hours of training per person that the
organization’s employees have undertaken during the
reporting period, by gender and employee category
(total number of trainings provided to employees
divided by the number of employees).
2. Average training and development expenditure per
full time employee.
Response
Refer to ‘Litigation and other matters‘ in note 25.e of
the Auditor's report and consolidated financial
statements (p. 647).
1. Refer to Key metrics section on Responsible
banking chapter (p. 117).
- Table 10. Coverage of the workforce by collective
agreement
1. Refer to Key metrics section on the Responsible
Banking chapter (p. 117).
• Table 21. Accident rate
• Table 22. Occupational health and safety
2. Refer to Our wellbeing in A talented and motivated
team section on Responsible banking chapter (p. 44).
Refer to Key metrics section on the Responsible
Banking chapter (p. 117).
• Table 17. Training
• Table 18. Hours of training by category
• Table 19. Hours of training by gender
• 30,60 hours per employee
• EUR 381.28 of investment per employee.
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SDGs contribution
content index
We have identified eleven SDGs and associated targets on which
we have the greatest impact.
Summary of SDG target
Relevant reference in the 2021 ESG Report and appendix
SDG 1
1.2 Reduce at least by half the proportion of men, women and
children of all ages living in poverty in all its dimensions
1.4 Ensure that all men and women, in particular the poor and the
vulnerable, have equal rights to economic resources, as well as
access to basic services
1.5 Build the resilience of the poor and those in vulnerable
situations and reduce their exposure and vulnerability to climate-
related extreme events and other economic, social and
environmental shocks and disasters
SDG 4
4.3 Ensure equal access for all to affordable and quality technical,
vocational and tertiary education, including university.
4.4 Substantially increase the number of young people and adults
with technical and vocational skills to access quality employment
and entrepreneurial opportunities.
4.5 Eliminate gender disparities in education and ensure equal
access to all levels of education and vocational training for persons
with disabilities, indigenous populations and vulnerable children,
among others.
4.6 Substantially increase the scholarships available to developing
countries for enrolment in higher education, including vocational
training and ICT, technical, engineering and scientific programmes
SDG 5
5.1. End all forms of discrimination against all women and girls
everywhere.
5.5 Ensure women’s full and effective participation in, and equal
opportunities for, leadership at all levels of decision making
• Support for higher education and other local initiatives. Other
community support programmes (p.107)
• Acting responsibly towards customers. Product Governance and
consumer protection. Sales processes. Vulnerable customers (p. 61)
• Financial inclusion and empowerment (p. 96)
• Financial inclusion and empowerment (p. 96)
• Support for higher education and other local initiatives. Support for
higher education (p. 107)
• Support for higher education and other local initiatives. Support for
higher education (p. 107)
• Support for higher education and other local initiatives. Support for
higher education (p. 107)
• Support for higher education and other local initiatives. Other
community support programmes (p. 107)
• Financial inclusion and empowerment (p. 96)
• A talented and engaged team. A diverse and inclusive workplace.
Gender equality (p. 44)
• A talented and engaged team. A diverse and inclusive workplace.
Gender equality (p. 44)
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SDG 7
7.1 Ensure universal access to affordable, reliable and modern
energy services
7.b Expand infrastructure and improve technology to provide
modern and sustainable energy services
SDG 8
8.3 Promote development-orientated policies that support
production, job creation, entrepreneurship, creativity and
innovation, and promote the start-up and growth of micro, small
and medium-sized enterprises through access to financial services
and other means.
8.5 Secure wholesome and productive employment and decent
work for all - most notably young people and persons with
disabilities - and equal pay for work of equal value.
8.6 Substantially reduce the proportion of youth not in
employment, education or training
8.8 Protect labour rights and promote safe and secure working
environments for all workers, including migrant workers, in
particular women migrants, and those in precarious employment
8.10 Strengthen the capacity of domestic financial institutions to
encourage and expand access to banking, insurance and financial
services for all
SDG 10
10.2 Strengthen and promote social, economic and political
inclusion for all
• Supporting the green transition. Supporting our customers in the
green transition. Corporate and Investment Banking. Financing
renewable energies (p. 72)
• Supporting the green transition. Supporting our customers in the
green transition. Retail and commercial banking (p. 72)
• Supporting the green transition. Supporting our customers in the
green transition. Corporate and Investment Banking. Financing
renewable energies (p. 72)
• Financial inclusion and empowerment (p. 96)
• Support for higher education and other local initiatives. Support for
higher education. Entrepreneurship (p. 107)
• Supporting the green transition. Environmental footprint (p. 72)
• A talented and engaged team. A diverse and inclusive workplace.
Gender equality (p. 44)
• A talented and engaged team. A diverse and inclusive workplace.
People with disabilities (p. 44)
• Support for higher education and other local initiatives. Support for
higher education. Fundación Universia (p. 107)
• Support for higher education and other local initiatives. Support for
higher education (p. 107)
• Conduct and ethical behaviour. Ethical channel (p. 37)
• A talented and motivated team. A diverse and inclusive workplace.
Employee wellbeing. Employee wellbeing (p. 44)
• A talented and motivated team. Work-life balance and job efficiency.
Social dialogue and restructuring (p. 44)
• Financial inclusion and empowerment (p. 96)
• Financial inclusion and empowerment (p. 96)
• Support for higher education and other local initiatives. Other
community support programmes (p. 107)
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SDG 11
11.1 Ensure access for all to adequate, safe and affordable housing
and basic services and upgrade slums
11.4 Strengthen efforts to protect and safeguard the world’s
cultural and natural heritage
11.6 Reduce the adverse per capita environmental impact of cities,
including by paying special attention to air quality and municipal
and other waste management
SDG 12
12.2 Achieve the sustainable management and efficient use of
natural resources
12.5 Substantially reduce waste generation through prevention,
reduction, recycling and reuse
12.6 Achieve full and productive employment and decent work for
all women and men, including for young people and persons with
disabilities, and equal pay for work of equal value
SDG 13
13.1 Strengthen resilience and adaptive capacity to climate-related
hazards and natural disasters in all countries
SDG 16
16.5 Considerably reduce corruption and bribery in all their forms.
16.6 Develop effective, accountable and transparent institutions at
all levels
16.7 Ensure responsive, inclusive, participatory and representative
decision-making at all levels
SDG 17
• Financial inclusion and empowerment (p. 96)
• Conduct and ethical behaviour. Environmental and social risk
management (p. 37)
• Support for higher education and other local initiatives. Other
community support programmes (p. 107)
• Supporting the green transition. Environmental footprint (p. 72)
• Supporting the green transition. Environmental footprint (p. 72)
• Supporting the green transition. Environmental footprint (p. 72)
• see Responsible Banking chapter [p. 15]
• Supporting the green transition. Our approach (p. 72)
• Supporting the green transition. Risk management (p. 72)
• Conduct and ethical behaviour. General code of conduct (p. 37)
• Conduct and ethical behaviour. Financial Crime Compliance (p. 37)
• About this report (p. 16)
• Shareholder value. Communication with shareholder, investors and
analysts (p. 69)
• Shareholder value. ESG indices and analysts(p. 69)
• Further information (p. 131)
• What our stakeholders tell us (p. 24)
• What our stakeholders tell us (p. 24)
• Governance. Partnerships to promote our agenda (p. 29)
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Independent verification
report
GRI 102-56
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1. 2021 Overview
182
5. Management team
Statement from Bruce Carnegie-Brown, lead
independent director
1.1 Board skills and diversity
1.2 Board effectiveness
1.3 Alignment of executive compensation with
group strategy, investors and long term
sustainability
1.4 Engagement with our shareholders in 2021
1.5 Achievement of our 2021 goals
1.6 Priorities for 2022
2. Ownership structure
2.1 Share capital
2.2 Authority to increase capital
2.3 Significant shareholders
2.4 Shareholders' agreements
2.5 Treasury shares
2.6 Stock market information
3. Shareholders. Engagement
and general meeting
3.1 Shareholder communication and
engagement
3.2 Shareholder rights
3.3 Dividends and shareholder remuneration
3.4 2021 AGM
3.5 Our next AGM in 2022
4. Board of directors
4.1 Our directors
4.2 Board composition
4.3 Board functioning and effectiveness
4.4 Executive committee activities in 2021
4.5 Audit committee activities in 2021
4.6 Nomination committee activities in 2021
4.7 Remuneration committee activities in 2021
4.8 Risk supervision, regulation and
compliance committee activities in 2021
4.9 Responsible banking, sustainability and
culture committee activities in 2021
4.10 Innovation and technology committee
activities in 2021
4.11 International advisory board
4.12 Related-party transactions and conflicts
of interest
182
182
183
184
184
185
188
188
188
189
189
190
192
193
193
195
196
197
199
200
201
209
215
221
222
226
230
234
238
242
244
244
6. Remuneration
6.1 Principles of the remuneration policy
6.2 Remuneration of directors for supervisory
and collective decision-making duties: policy
applied in 2021
6.3 Remuneration of directors for executive
duties
6.4 Directors' remuneration policy for 2022, 2023
and 2024 submitted to a binding shareholder
vote
6.5 Preparatory work and decision-making
process in relation to the remuneration
polity, with a description of the participation
of the remuneration committee
6.6 Remuneration of non-director members of
senior management
6.7 Prudentially significant disclosures
document
7. Group structure and internal governance
7.1 Corporate centre
7.2 Internal governance
8. Internal control over financial reporting
(ICFR)
8.1 Control environment
8.2 Risk assessment in financial reporting
8.3 Control activities
8.4 Information and communication
8.5 Monitoring
8.6 External auditor report
9. Other corporate governance information
9.1 Reconciliation with the CNMV's corporate
governance report model
9.2 Statistical information on corporate
governance required by the CNMV
9.3 Table on compliance with or explanations of
recommendations on corporate governance
9.4 Reconciliation to the CNMV's remuneration
report model
9.5 Statistical information on remuneration
required by the CNMV
247
249
249
249
252
262
270
271
272
273
273
273
276
276
277
278
279
280
280
284
284
288
308
310
311
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Structure of our corporate governance report
On 12 June 2018, the CNMV (Spanish stock market authority) approved new models for
annual reports on corporate governance and remuneration, allowing companies to draft
them in an open format.
Thus, our corporate governance report (comprising this chapter) follows since then an
open format. This includes:
→ Legally-required content for the corporate governance report.
→ Reports on the activities of board committees. See sections 4.4 to 4.10.
→ Annual report on directors’ remuneration, which we are required to prepare and submit
to a non-binding vote at our 2022 annual general meeting. See section 6.
'Remuneration'.
→ Directors’ remuneration policy. See section 6.4 'Directors’ remuneration policy for 2022,
2023 and 2024 submitted to a binding shareholder vote'.
→ Cross references to find the information for each section of the corporate governance
and remuneration reports in the CNMV's required format in this and other chapters of
the annual report. See sections 9.1 'Reconciliation with the CNMV’s corporate
governance report model' and 9.4 'Reconciliation with the CNMV’s remuneration report
model'.
→ Cross references to find the information supporting each response to all
recommendations in the CNMV'S Good Governance Code for Listed Companies (Spanish
Corporate Governance Code) in the 2021 corporate governance and other chapters of
this annual report. See section 9.3 'Table on compliance with and explanations of
recommendations on corporate governance'.
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1. 2021 Overview
'The continuing impact of the global pandemic on our business, on our customers and on
our employees, taken together with an uncertain economic and geopolitical environment,
reinforces the need for Banco Santander board of directors’ constant vigilance of the
management and oversight of its operations. We do this through a commitment to strong
and effective governance processes to ensure that the board and management are directing
Santander Group and its operations in the best interests of all our stakeholders, including
shareholders, customers, employees, regulators and the communities in which we work
around the world. We are also committed to playing our part in helping decarbonize the
physical environment around us and reach net zero by 2050.
Santander’s sophisticated governance model is designed to ensure that it can deliver its
strategic plans, while ensuring that appropriate checks and balances are in place, so that
the business is, at all times, resilient and sustainable in the face of a rapidly changing set of
challenges and aligned with our values. During 2021, we devoted time to reviewing the
roles and responsibilities of the most senior executives, including those of the executive
chair and the CEO; and the independence, integrity and robustness of Banco Santander´s
control functions. Details of the governance reviews conducted in that regard are outlined
in the nomination committee report. Succession planning for our board members and senior
managers remains a priority and will enable us to attract and retain the diverse range of
highly talented colleagues we need to lead Banco Santander.
Notwithstanding the strong performance of Santander in 2021, it is important that we are
never complacent and that we continue to challenge ourselves and look to improve our
governance where possible'.
Bruce Carnegie-Brown, Lead independent director
1.1 Board skills and diversity
The board’s composition did not change in 2021, after three years in
which 47% of its members were renewed in order to boost diversity
and expertise. 40% of board members are women, in line with its
even representation target (of 40-60%) of both genders; and 66.67%
are independent directors.
The changes in recent years have strengthened its banking, financial,
technological and digital prowess; made it more diverse in terms of
regional origin; and, overall, given it the right composition to lead the
Group in pursuit of its strategy now and in the future.
On 24 February 2022, the board of directors nominated Germán de la
Fuente Escamilla to be made a new independent director at the
annual general meeting called for 31 March on first call or on 1 April
on second call (2022 AGM), and fill the vacancy left by Álvaro
Cardoso de Souza, who had announced he would effectively step
down once a nomination was approved. See section 3.5 'Our next
AGM in 2022'.
Germán de la Fuente has a solid background in auditing, accounting
and the banking industry, and held senior positions at Deloitte for
over 30 years.
Changes to the director category
Sergio Rial has changed his classification from executive to other
external (non-executive or independent) having ceased his executive
functions as CEO of Banco Santander (Brazil), S.A. and regional head
of South America of the Group.
Board committees
The board made the following changes to the composition of its
committees to further enhance their operations and support in their
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areas of expertise, according to best international practice and
internal regulation:
• Nomination committee: Gina Díez Barroso joined the committee on
22 December 2021, raising the number of committee members
from three to four.
• Risk supervision, regulation and compliance committee: Belén
Romana García was appointed chair of the committee on 1 April
2021, replacing Álvaro Cardoso, who stepped down on the same
date and was replaced by Pamela Walkden on 1 May 2021.
1.2 Board effectiveness
Covid-19 and after the pandemic
In 2020, the pandemic’s unprecedented effect on health and the
global economy required a rapid, coordinated and sustained
response from Santander to safeguard business continuity and tackle
challenges effectively. In 2021, the board and its committees carried
on that effort amid recovery from the crisis.
Banco Santander’s Special situations global office (SSGO) reviewed
Covid-19 management to recognize strengths in special situation
governance, as well as opportunities to improve it. The board
received its findings (based on feedback from core functions and
external agents) and approved the improvements being made.
The exercise recognized the good practices adopted and rapid
reaction capacity adopted by Banco Santander. In this sense, our
management of the crisis has been recognised both externally
(Euromoney award “Excellence in leadership” as best bank in the
management of the crisis) and internally (95% of employees
consider the crisis management to be very good). In addition, the
review highlighted some areas of improvement: the relevance of the
early and forward-looking threat identification, the speed-up of
decision-making process and the coordination across the Group.
In addition to reviewing the special situation governance system, the
board oversaw the measures taken for our stakeholders:
• Employees: reorganization of the way of working (promoting the
remote working) and implemented protocols and preventive
measures with the aim of protecting the health of all the Group's
employees.
• Customers: revamp the digital and remote channels with multiple
customised solutions to help retail customers and businesses;
relaxing loan conditions for people and businesses hit by the
pandemic (payment holidays, grace periods); or swiftly facilitating
government-backed lines of credit and other public assistance
measures.
• Shareholders: hybrid and remote general meetings that
shareholders could attend in person or online, and revision of the
shareholder remuneration policy according to ECB
recommendations.
• Society: engagement with governments and institutions to aid
recovery from the crisis, including donations of urgent health
equipment and supplies.
Group and subsidiary board relations
Strengthening the ties between the Group's and the subsidiaries'
boards of directors is key to effective oversight of policies, controls
and corporate culture. In the last two years, the global pandemic
heightened the need for the effective cross-border cooperation that
our proven Group Subsidiary Governance Model (GSGM) facilitates.
That governance model is strengthened by the presence of a number
of Group non-executive directors on our subsidiary boards: Luis Isasi
at Santander España; Álvaro Cardoso at Banco Santander (Brasil),
S.A.; Homaira Akbari at Santander Consumer USA Holdings Inc.; and
Pamela Walkden at Santander UK plc and Santander UK Group
Holdings plc (having replaced Bruce Carnegie-Brown in 2021). See
section 7. 'Group structure and internal governance'.
In 2021 we also continued to hold committee chair conventions
across the Group. They reinforced our coordination and accentuated
the benefits of cross-border cooperation.
Specifically, conventions of the audit and responsible banking,
sustainability and culture committees chairs were held at the
Santander Headquarters in Boadilla del Monte. The conventions
aimed to foster further collaboration between countries, raise
awareness about global initiatives and expectations, collectively
debate current affairs and relevant operational matters, as well as
encouraging networking among attendees.
Both events were successful and productive, with universal positive
feedback received from participants. Our approach to holding such
conventions will continue in 2022 and beyond.
Board assessment and actions to continuously improve its
functioning
Corporate governance is a key priority for Santander. Our governance
model has consistently received strong support from shareholders,
as evidenced by their high participation in general meetings and
strong percentage of approval for corporate management and the re-
election of the executive chair and other directors. As we are aware
that governance arrangements need to adapt to contingent and
forward-looking business and strategy needs, we must continuously
monitor and enhance the functioning of our governance bodies.
While we are confident of the effectiveness of Santander’s
governance model, we regularly assess our governance framework
with the support of external advisers as required. We also review
individual and collective skills to ensure the board’s competence and
diversity are sufficient for it to function effectively and hold
management to account through constructive challenge.
In 2020 we asked Egon Zehnder to conduct an effectiveness review
of the board of directors and its committees in line with our policy to
have an external party assess their annual effectiveness every three
years. Egon Zehnder concluded that Santander’s board is highly
effective, with recent changes in its composition resulting in a stellar
set of diverse and outstanding individuals and that its governance
model with the current individuals in key roles, is well designed and
effectively implemented with demonstrable outcomes, as shown in
the performance of Banco Santander and high satisfaction of the
board members.
In addition, in 2021 we asked another external firm to execute a
broader review of our governance arrangements with the aim of
assessing its overall functioning and adherence of Santander’s
governance model to regulations, supervisors’ expectations, and
industry best practice. After an in-depth analysis, the external firm
came to the conclusion that Santander has implemented a
sophisticated governance model that suits its group-wide
characteristics and requirements. The external firm highlighted that
Santander's corporate governance is a key tool to drive the Group
towards the implementation of its medium and long-term strategy,
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while managing the BAU operations and keeping a strong control on
risks. They also acknowledged the high profile of Santander’s board
members as well as the diversity of board in terms of gender,
geography, age and background.
Both external firms identified some areas for further improvement
that contributed to an internal discussion led by the nomination
committee and its chair, our lead independent director.
In view of the conclusions of both reviews, in December 2021 the
board of directors approved an action plan that will further align our
corporate governance arrangements with supervisors’ expectations
and best industry practices. It revolves around these objectives:
• Ensuring continued clarity of the role and the responsibilities of the
most senior executives, including the executive chair and CEO;
• Ensuring that checks and balances remain appropriate and
effective; and
• Ensuring that the independence of control functions remains fully
preserved.
The plan will be executed in 2022 under the coordination of the
general secretary and with oversight of the nomination committee
and its chair.
In addition to the above-mentioned structured reviews and resultant
action plan, we encourage an environment of ongoing feedback and
suggestions from the board members focused on continuous
improvement. In 2021, the non-executive directors, under the
leadership of the lead independent director, identified the following
areas for improvement:
• Optimizing board time spent together and the strategic areas of
board focus; and increasing engagement with the executive and
younger talent pools;
• Increasing board visibility of customers' and branches' needs and
circumstances;
• Striking the right balance between holding the executive to account
and engaging with the future talent pipeline;
• Optimizing the materials delivered to the board and its
committees, ensuring the right balance between content and
length;
• Continued focus on effective coordination between the board and
its committees, ensuring an appropriate distribution of workload;
and
• Reviewing scalable processes that could be applied across the
Group more effectively, while understanding the changes required
for the Group’s strategic direction being more effective.
We are confident these actions will have a lasting positive impact on
our effective corporate governance. In the future, according to our
commitment to continuous improvement, we will review our
corporate governance arrangements on an ongoing basis, so as to
ensure that they remain fully effective.
1.3 Alignment of executive compensation with the
Group's strategy, investors and long-term
sustainability
Following the entry into force of the Capital Requirements Directive
(CRD V), the board revised the remuneration scheme after five years
to align it with strategy, investors’ interests and long-term
sustainability.
We took action to:
• Introduce stock options as part of variable pay, for greater
alignment with shareholder returns;
• Update long-term compensation metrics, prioritizing:
• Profitability and long-term value creation for Santander, applying
return on tangible equity (RoTE);
• Consistent total shareholder return (TSR), albeit raising the
threshold above which executives begin to receive compensation
for this metric from 33% to 40%; and
• Sustainability, embedding an ESG metric that comprises five sub-
metrics related to our Responsible Banking agenda.
• Reduce the short-term corporate bonus metrics from four to three:
customers (30%), RoRWA (40%) and RoTE (30%) to sharpen focus
on the Group’s strategic priorities of customer and profitability; and
• Make these amendments to match the Group’s strategic priorities:
• Executive directors’ compensation as board members of PagoNxt
to be paid in PagoNxt capital instruments.
• Scope of the Digital Incentive widened to include a PagoNxt
component that encourages non-PagoNxt executives to work
together towards its success, and the strategic initiatives of the
Digital Consumer Bank and One Santander in Europe.
1.4 Engagement with our shareholders in 2021
In 2021, Banco Santander interacted with shareholders under
conditions still marked by the covid-19 health crisis. Combining
traditional communication channels with virtual meetings and
special campaigns was fundamental to remain aligned with their
interests and keep their loyalty. By digitalizing to stay at the forefront
of both our core activity and shareholder and investor relations, we
helped some four million shareholders from all over the world
engage Grupo Santander.
We focused our efforts on explaining our governance and
sustainability strategy in detail. Because we understand investors are
more considerate of ESG performance and the impact our operations
can have on society and the environment, we give detailed
explanations about how we are helping tackle inequality, climate
change and other global challenges. We also engaged in open and
constructive dialogue with analysts who provide investors with
information about sustainability and assess our risks, actions and
impact relating to ESG. We were proactive in sharing developments
in our responsible banking agenda, particularly regarding climate
change, and considering their feedback in our materiality analysis
and work to introduce ESG into our remuneration scheme. By doing
things responsibly and creating long-term environmental and social
solutions to support inclusive and sustainable growth, we are able to
create value for shareholders and earn their lasting loyalty.
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As regards the engagement of the shareholders in our corporate
governance, in the light of attendance at the entirely virtual general
meeting we held in 2020, we repeated the same format in 2021
according to all company obligations and without compromising
shareholders’ rights. By facilitating remote attendance through a live
online broadcast of the general meeting, we ensure shareholders can
fully exercise their rights to attend, participate, cast votes, make
remarks, make proposals and send messages to the notary public
that has been proved fundamental. Figures from the 2021 annual
general meeting reveal that participation under this format is very
similar to that in hybrid general meetings (see section 3.4 '2021
AGM').
We are convinced that our virtual general meetings provide
shareholders the same opportunity to participate as in-person
1.5 Achievement of our 2021 goals
meetings. We proposed to shareholders at the general meeting an
amendment to our by-laws to sanction entirely virtual general
meetings. The new by-law provides even more extensive protections
than the law, as it allows shareholder requests to be addressed
(where possible) during general meetings or posted on the corporate
website for the general public if they are addressed on a later date.
All over the world, shareholders vastly supported making our
regulations on general meetings more flexible. Now, they will not
need to travel in order to take part in meetings (see section 3.4 '2021
AGM').
The 2020 annual report disclosed our corporate governance goals and priorities for 2021. The following chart describes how we delivered on
each priority.
2021 goals
How we delivered
Long-term shareholder value
Focusing on long-term shareholder value as
well as supervising and supporting the
management team in implementing our
strategy, so that shareholder returns
appropriately reflect the group's solvency,
results, corporate culture and sustainable
growth.
Covid-19 crisis governance
Overseeing our response to the pandemic and
our risk management of the economic crisis. It measures to mitigate its impact.
will prioritize the wellbeing of our employees,
customers and shareholders by supporting
our communities and continuing to build
trust, underpinned by the strength of our
business model, our strategy and the robust
leadership of our teams.
In 2021 we created value for our shareholders by focusing on delivering profitable growth
in a responsible way. Our approach to ESG is embedded in all we do. In 2021 we
generated more than EUR 2 billion in underlying profit every quarter and increased
shareholder profitability compared to pre-pandemic levels. A key driver of this
performance is our business model, customer focus, global scale and diversification.
Since the covid-19 crisis began, the Group has focused on devising and implementing
The Group updated its Special Situations and Resolution rule map with a revised corporate
framework that the subsidiaries’ boards had adopted in December 2021. The new rules
emphasize pre-emptive management of events and streamlined escalation. In particular,
we tightened centralized monitoring and oversight of subsidiaries to coordinate their
decisions with the Group effectively.
We launched several initiatives to financially support customers affected by the pandemic
and to safeguard our customers’ and employees' health while guaranteeing normal
services. To fight the pandemic in the countries where we operate, we took several social
actions, such as providing essential health equipment and supplies. See subsection
'Covid-19 and after the pandemic' in section 1.2.
Because of the Group and its subsidiaries’ robust financial situation, we were able to
maintain stable business levels and appropriate capital, liquidity and risk profile levels.
We executed our risk management and control processes correctly, and our governing
bodies heard regularly about the pandemic’s impact and the measures each subsidiary
was taking.
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2021 goals
How we delivered
Strategic growth initiatives
Working on the Group’s strategic growth
priorities, which are critical to becoming the
world’s best open financial services platform.
Our aim to become the world's best open financial services platform, building on our
technology to earn customers’ lasting loyalty, was helped by the progress we made with
three strategic initiatives in 2021: One Santander, PagoNxt and Digital Consumer Bank.
Our initiatives include One Santander, which
is a common operational and business model
created to transform the way we serve our
customers, providing a simpler and enhanced
customer experience; PagoNxt, which is an
autonomous global payment platform to
combine our payments businesses and banks
around the world, accelerating the
deployment of payment solutions to our
customers globally, and is critical to building
One Santander; and the Digital Consumer
Bank, integrating our fast-growing consumer
lending business, Santander Consumer
Finance (SCF), with Openbank to transform
our digital proposition.
Responsible Banking – embedding ESG in all we do
Driving Santander’s efforts to deliver profit
with a clear purpose, to help people and
businesses prosper in the years ahead, and to
build a more responsible bank.
Overseeing the implementation of our
decisions to support the objectives of the
Paris Agreement and focusing on fulfilling our
commitment to raising and facilitating EUR
120 billion in green finance and to achieving
the financial inclusion of 10 million people by
2025.
High governance standards
Maintaining high standards of governance to
fulfil our strategy and ensure long-term
success. This will help ensure our ongoing
effectiveness and alignment with best
practice.
In particular, it will continue to instil strong
governance disciplines as a key enabler to
effective oversight and control across the
group, making sure our corporate governance
framework takes into account supervisory
body recommendations as well as national
and international guidelines.
We laid the foundations of our transformation in Europe (One Santander), with greater
connection between customer segments and higher business activity that resulted in
steady growth. In 2022, we will focus on harnessing our scale to roll out a common
operational and business model.
PagoNxt also became a global payment platform for all Santander customers and the
open market. Its acquiring solution is already running in 6 markets, serving 1.2 million
merchants; its international trade solution is already in 8 markets. Also, we launched the
Payments Hub to support all our customers’ payments.
Digital Consumer Bank also registered strong financial performance and significantly
increased its customer base in its push to become the largest digital consumer credit
bank.
We met or exceeded all our 2019-2021 commitments and continued our efforts to make
progress on our commitments for 2025.
On climate change, we set a goal to achieve net-zero CO2 emissions by 2050 and created
our first decarbonization targets for exposures to thermal carbon and electric power
generation. We became founder members of the Net Zero Banking Alliance and
Santander Asset Management was the first fund manager in Spain to join the Net Zero
Asset Managers Initiative with a commitment to reducing emissions from assets under
management by 50% by 2030. We also issued our third green bond in the amount of EUR
1 billion to finance wind and solar power projects, and expanded our range of ESG wealth
management products.
Through Santander finance for all program, we’ve financially empowered more than 7
million people since 2019.
Euromoney named us “Best Bank for Sustainable Finance in Latin America” and “Best ESG
Private Bank” and “Best Bank for Financial Inclusion”. Furthermore, Great Place To Work
recognized us, for the third time, as one of the top 25 companies to work for. We were
also the world's highest scoring bank and the second highest-scoring company in gender
equality and diversity according to the Bloomberg Gender-Equality Index (the 2022 index
includes 418 companies from 45 countries).
For more details, see 'Responsible banking' chapter.
In 2021, an in-depth review by an external adviser indicated that Banco Santander’s
corporate governance is consistent with regulation, industry best practice and the Group’s
structure, conducive to effective management to implement strategy and sustain sound
risk control.
Our high rankings by ESG analysts who reviewed our performance in 2021 speak to our
commitment to the highest governance standards. Banco Santander also received the
highest score in the Spanish Association for Standardisation and Certification's (AENOR)
new Good Corporate Governance Index, which checks board structure and dynamics,
transparency, sustainability and ESG oversight.
As always, this year we followed the recommendations and instructions of supervisors
and national and international bodies. We reviewed the EBA’s new guidelines on internal
governance and remuneration and joint guidelines with the ESMA on the assessment of
the suitability of members of the management body and key function holders (released in
July 2021) and are taking the measures needed to accommodate them.
In 2021 we fully complied with the total 61 recommendations that apply to us in the
CNMV’s Code of Good Governance (see section '9.3 Table on compliance with, or
explanations of, recommendations on corporate governance').
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1.6 Priorities for 2022
Our board’s priorities for 2022 are:
• Developing strategic initiatives: One Santander, PagoNxt and
Digital Consumer Bank
Overseeing those three strategic initiatives we launched in 2020 to
help achieve our aim to be the world’s best open financial services
platform, acting responsibly and earning the trust of our
employees, customers, shareholders and broader society:
• One Santander: A common operational and business model
created to transform the way we serve our customers and
provide a simpler and more enhanced customer experience;
• PagoNxt: This autonomous global payment platform to integrate
all Santander customers with open market includes the
Payments Hub and our acquiring and international trade
businesses. It will roll out payment solutions globally to our
customers faster, which is critical to building One Santander; and
• Digital Consumer Bank: Integrating Santander Consumer
Finance (SCF) and our fast-growing auto and consumer finance
businesses with Santander's digital native bank, Openbank, to
boost the technological transformation of the consumer finance
business and ensure profitability and growth.
• Ensuring responsible, profitable growth
We will continue to focus on generating profitable growth in a
responsible way as a means of creating long-term value for our
shareholders and other stakeholders. We will oversee the
fulfilment of our ESG commitments to reach net zero emissions by
2050; raise 120 billion euros in green financing by 2025 and 220
billion euros by 2030; and financially empower 10 million people
by 2025.
In 2022, we will set new short- and medium-term climate change
objectives that will help us meet our long-term climate
commitment.
• Strengthening governance to ensure we fulfil our long-term
vision
We will continue to bolster our corporate governance by taking the
improvement measures we identified in the 2021 review and
enhancing our management bodies' operations to make sure we
continue to adhere to national and international best practices and
to supervisors' expectations.
• Maintaining capital discipline and creating shareholder value
In 2022, we will prioritize organic growth as part of our capital
management, focusing on businesses with high returns on risk-
weighted assets (RoRWA) and shareholder remuneration.
Our shareholder remuneration policy aims to pay out 40% of 2022
underlying profit, split in approximately equal measure between a
cash dividend and a share buyback.
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2. Ownership structure
→ Broad and balanced shareholder base
→ A single class of shares
→ Authorised capital in line with best practices providing the necessary flexibility
2.1 Share capital
Our share capital is represented by ordinary shares, each with a par
value of EUR 0.50. All shares belong to the same class and carry the
same rights, including voting and dividends.
There are no bonds or securities that can be converted into shares
other than contingent convertible preferred securities (CCPS), which
are mentioned in section 2.2 'Authority to increase capital'.
NUMBER OF SHARES
1-3,000
3,001-30,000
30,001-400,000
Over 400,000
Total
% of share capital
8.57 %
17.30 %
12.01 %
62.11 %
100 %
At 31 December 2021, Banco Santander had a share capital of EUR
8,670,320,651 represented by 17,340,641,302 shares.
2.2 Authority to increase capital
In 2021, share capital did not change.
At the 2022 AGM, the board of directors submitted three capital
reduction resolutions to cancel the shares that were or will be
acquired through the two announced share buyback programmes; as
well as those that will be acquired as part of any new buyback
programmes that the board may initiate or by other means legally
permitted. See sections 3.3 'Dividends and shareholder
remuneration' and 3.5 'Our next AGM in 2022'.
We have a broad and balanced shareholder structure. At 31
December 2021, Banco Santander had 3,936,922 shareholders,
distributed by type of investor, geographic region and number of
shares as follows:
TYPE OF INVESTOR
A
Board
Institutional
Retail
Total
% of share capital
1.05 %
39.63 %
59.32 %
100 %
A. Shares owned or represented by directors. For further details on shares owned
and represented by directors, see 'Tenure and equity ownership' in section 4.2
and subsection A.3 in section 9.2 'Statistical information on corporate governance
required by the CNMV'.
CONTINENT
Europe
Americas
Rest of the world
Total
% of share capital
76.09 %
22.44 %
1.47 %
100 %
Under Spanish law, only shareholders at the general meeting have
the authority to increase share capital. However, they may delegate
the authority to approve or execute capital increases to the board of
directors. Our By-laws are fully aligned with Spanish law and do not
establish any different conditions for share capital increases.
As of 31 December 2021, our board of directors had received
authorization from shareholders to approve or carry out the
following capital increases:
• Authorized capital to 2023: at our April 2020 AGM, the board was
authorised to increase share capital on one or more occasions by up
to EUR 4,154,528,645.50 (50% of capital at the time of the April
2020 AGM or approximately 8.3 billion shares representing
47.86% of the share capital at 31 December 2021). The board was
granted this authorization for three years (until 3 April 2023).
Consequently, the board can issue shares for cash consideration
with or without pre-emptive rights for shareholders, and for capital
increases to back any convertible bonds or securities issued under
its authority granted by the April 2020 AGM.
Shares without pre-emptive rights under this authority can be
issued up to EUR 830,905,729 (10% of capital at the time of the
April 2020 AGM or approximately 1,661 million shares
representing 9.57% of the share capital at 31 December 2021).
However, when Law 5/2021 of 12 April, amending the revised
Spanish Companies Act and other financial regulation in regard to
the fostering of long-term shareholder engagement by listed
companies (Act 5/2021) came into force, this limit on issuing
shares without pre-emptive rights does not apply to capital
increases to convert CCPS (which shall be converted into newly-
issued shares when the CET1 ratio falls below a predetermined
threshold). To date, this authorization has been used for the three
CCPS issues executed in 2021.
The board of directors is proposing to have this authority renewed
at our 2022 AGM. See section 3.5 'Our next AGM in 2022'.
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• Capital increases approved for contingent conversion of CCPSs:
we issued contingent convertible preferred securities that qualify
as regulatory Additional Tier 1 (AT1) instruments and would be
converted into newly-issued shares if the CET1 ratio fell below a
predetermined threshold. Each issue is therefore backed by a
capital increase approved under the authorization granted to the
board by shareholders. The chart below shows the outstanding
CCPSs at the time of this report, with details about the capital
increase resolutions that back them. These capital increases are
therefore contingent and have been delegated to the board of
ISSUES OF CONTINGENT CONVERTIBLE PREFERRED SECURITIES
directors. The board of directors is authorised to issue additional
CCPSs and other convertible securities and instruments in
accordance with the annual general meeting held on 12 April 2019
resolution that allows convertible instruments and securities to be
issued for up to EUR 10 billion or an equivalent amount in another
currency (three issues were executed in 2021 under this
authorization, as shown in the table below). Any capital increase to
allow any such CCPS or other convertible instruments or securities
to be converted would be approved under the authority which each
issue was executed.
Date of
issuance
25/04/2017
29/09/2017
19/03/2018
08/02/2019
14/01/2020
06/05/2021
06/05/2021
21/09/2021
Nominal amount
EUR 750 million
EUR 1,000 million
EUR 1,500 million
USD 1,200 million
EUR 1,500 million
USD 1,000 million
EUR 750 million
EUR 1,000 million
Discretionary remuneration per annum
6.75% for the first five years
5.25% for the first six years
4.75% for the first seven years
7.50% for the first five years
4.375% for the first six years
4.75% for the first six years
4.125% for the first seven years
3.625% for the first eight years
Conversion
If, at any time, the CET1 ratio of
Banco Santander or the Group is
less than 5.125%
A
Maximum number
of shares in case
of conversion
207,125,103
263,852,242
416,666,666
388,349,514
604,594,921
391,389,432
352,278,064
498,007,968
A. The figure corresponds to the maximum number of shares that could be required to cover the conversion of these CCPS, calculated as the quotient (rounded off by default) of
the nominal amount of the CCPS issue divided by the minimum conversion price determined for each CCPS (subject to any antidilution adjustments and the resulting
conversion ratio).
2.3 Significant shareholders
At 31 December 2021, no shareholder held more than 3% of Banco
Santander’s total share capital (which is the threshold generally
provided under Spanish regulations for a significant holding in a
listed company to be disclosed). Even though at 31 December 2021,
certain custodians appeared in our shareholder registry as holding
more than 3% of our share capital, we understand that those shares
were held in custody on behalf of other investors, none of whom
exceeded that threshold individually. These custodians were State
Street Bank (13.35%), Chase Nominees Limited (9.15%),The Bank of
New York Mellon Corporation (5.21%), Citibank New York (3.74%)
and EC Nominees Limited (3.34%).
On 24 October 2019 BlackRock Inc., asset manager, reported to the
CNMV its significant holding of voting rights in Banco Santander
(5.426% of share capital at 24 October 2019). It also specified that it
was holding shares on behalf of a number of funds or other
investment entities, none of which exceeded 3% individually. In
addition, on 21 February 2022, Amundi, S.A., another asset manager,
reported to the CNMV its significant holding of voting rights in Banco
Santander (3.007% of share capital), while it specifies that the
corresponding shares are held by investment funds managed by
management entities controlled by Amundi, S.A., none of which
exceeds 3% individually. No other changes have been communicated
since 31 December 2021. There may be some overlap in the holdings
declared by the above mentioned custodians and asset managers.
At 31 December 2021, neither our shareholder registry nor the
CNMV's registry showed any shareholder residing in a non-
cooperative jurisdictions with a shareholding equal to, or greater
than, 1% of our share capital (which is the other threshold applicable
under Spanish regulations).
Our Bylaws and the Rules and regulations of the board of directors
lay down an appropriate system for analysing and approving related-
party transactions with significant shareholders. See section 4.12
'Related-party transactions and conflicts of interest'.
2.4 Shareholders’ agreements
In February 2006, various persons linked to the Botín-Sanz de
Sautuola y O’Shea family entered into a shareholders’ agreement
that set up a syndicate for their shares in Banco Santander. CNMV
was informed of this agreement and the subsequent amendments
the parties made. This information can be found on the CNMV
website.
The main provisions of the agreement are:
• Transfer restrictions: except when the transferee is also a party to
the agreement or the Fundación Botín, any transfer of Banco
Santander shares expressly included in the agreement requires
prior authorization from the syndicate meeting, which can freely
authorise or reject it. These transfer restrictions apply to the shares
they expressly cover under the agreement and to shares
subscribed for, or acquired by, syndicate members in exercising any
subscription, bonus share, grouping or division, replacement,
exchange or conversion rights that pertain or are attributed to, or
derive from, those syndicated shares.
• Syndicated voting: under the agreement, the parties will syndicate
and pool the voting rights attached to all their shares in Banco
Santander, so that syndicate members may exercise them and, in
general, act towards Banco Santander in a concerted manner, in
accordance with the instructions and indications and the voting
criteria and orientation established by the syndicate. This covers
the shares subject to the transfer restrictions mentioned above as
well as any voting rights attached to any other Banco Santander
shares held either directly or indirectly by the parties to the
agreement, and any other voting rights assigned to them by virtue
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of usufruct, pledge or any other contractual title, for as long as they
hold those shares or are assigned those rights. For this purpose,
representation of the syndicated shares is attributed to the chair of
the syndicate, who will be the chair of the Fundación Botín
(currently, Javier Botín, one of our directors and our Group
executive chair's brother).
The agreement initially terminates on 1 January 2056, but will be
automatically extended for additional 10-year periods unless one of
the parties notifies of their intention not to extend six months before
the initial term or extension period ends. The agreement may only be
terminated early if all the syndicated shareholders agree
unanimously.
At 31 December 2021, the parties to the shareholders' agreement
held 100,784,838 shares in Banco Santander (0.58% of its capital),
which were therefore subject to the voting syndicate. They include
80,355,819 shares (0.46% of its capital) that are also subject to the
transfer restrictions.
Subsection A.7 of section 9.2 'Statistical information on corporate
governance required by the CNMV' contains the list of parties to the
shareholders´ agreement and the relevant information filed with
CNMV.
2.5 Treasury shares
Shareholder approval
The acquisition of treasury shares was last authorized at our April
2020 AGM, for five years and subject to the following provisions:
• Treasury shares held at any time cannot exceed 10% of Banco
Santander's share capital, which is the legal limit set under the Ley
de Sociedades de Capital (Spanish Companies Act).
• The purchase price cannot be lower than the nominal value of the
shares nor exceed 3% of the last trading price in the Spanish
market for any trades in which Banco Santander does not act on its
own behalf.
• The board may establish the purposes for and the procedures
through which the authorization may apply.
Treasury shares policy
On 27 October 2020, the board approved the current treasury shares
policy, which dictates that treasury share transactions may be carried
out for these purposes:
• Provide liquidity or supply of securities in the market for Banco
Santander shares, which gives this market depth and minimizes
any temporary imbalances in supply and demand.
• Take advantage for the benefit of all shareholders of weakness in
the share price in relation to its medium-term outlook.
• Meet our obligations to deliver shares to our employees and
directors.
• Serve any other purpose authorized by the board within the limits
set at the general meeting.
Among other things, the policy also provides for:
• The principles to uphold in treasury share trades, which include
protecting financial markets' integrity and prohibiting market
manipulation and insider trading.
• The operating rules on how treasury share trades must be carried
out, unless in exceptional circumstances as per the policy. These
rules include:
• Responsibility for execution of these trades, which falls on the
Investments and Holdings department, kept separate from the
rest of Santander.
• Venues and types of trades. Trades must generally be carried
out in the orders market of the mercado continuo (continuous
market) of Spanish stock exchanges.
• Volume limits, which in general must not exceed 15% of the
average daily trading volume for Banco Santander shares in the
previous 30 sessions in the mercado continuo.
• Price limits. In general, (a) buy orders should not exceed the
greater of the price of the last trade in the market between
independent parties or the highest price in a buy order in the
order book and (b) sell orders should not be lower than the lesser
of the price of the last trade in the market by independent parties
and the lowest price in a sell order in the order book.
• Time limits, including a 15-day black-out period that applies
before each quarterly results presentation.
• Disclosure to the markets of treasury shares trading.
The policy applies to the discretionary trading of treasury shares. It
does not apply to transactions in Banco Santander shares carried out
to hedge market risks or provide brokerage or hedging for customers.
The full treasury shares policy is at Banco Santander's corporate
website.
First Buyback Programme
On 28 September 2021, the board resolved to execute a treasury
shares buyback programme (First Buyback Programme) worth up to
841 million euros (20% of the Group’s underlying profit in H1 2021)
according to the treasury shares policy and 2021 shareholder
remuneration policy. It had based its decision on authorization by the
ECB, and by shareholders at the April 2020 AGM.
In the First Buyback Programme (from 6 October to 25 November
2021), we acquired 259,930,273 treasury shares —1.499% of Banco
Santander’s share capital— at a weighted average price per share of
3.2355 euros.
The purpose of the First Buyback Programme was to reduce Banco
Santander’s share capital by cancelling the repurchased shares,
which the board put to a vote at the 2022 AGM. See section 3.5 'Our
next AGM in 2022'.
Second Buyback Programme
Under the same AGM approval, on 24 February 2022 the board
resolved that it would execute a new share buyback programme
worth 865 million euros (approximately 20% of the Group’s
underlying attributable profit in H2 2021) as shareholder
remuneration charged against 2021 results once it had obtained the
required regulatory authorization (Second Buyback Programme).
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The purpose of the Second Buyback Programme is to reduce Banco
Santander’s share capital by cancelling purchased shares (up to the
agreed maximum), for which the board submitted a resolution for a
vote at the 2022 AGM. See section 3.5 'Our next AGM in 2022'.
As of 31 December 2021, Banco Santander and its subsidiaries held
277.591.940 shares, which represented 1.601% of share capital
(compared to 28.439.022 at 31 December 2020, then representing
0.164% of share capital).
Activity in 2021
The chart below summarizes the monthly average proportion of treasury shares to share capital throughout 2021 and 2020.
MONTHLY AVERAGE OF DAILY POSITIONS IN TREASURY SHARES
% of Banco Santander’s share capital at month end
January
February
March
April
May
June
July
August
September
October
November
December
2021
0.16%
0.18%
0.17%
0.17%
0.18%
0.19%
0.19%
0.05%
0.05%
0.27%
1.08%
1.90%
2020
0.09%
0.06%
0.11%
0.17%
0.17%
0.15%
0.15%
0.17%
0.17%
0.18%
0.17%
0.16%
In 2021, the Group's treasury share trades consisted of the following values:
ACQUISITIONS AND TRANSFERS OF TREASURY SHARES IN 2021
EUR (except
number of
shares)
Discretionary
trading
Client
induced
C
trading
Santander
share buy-
back
Total
Acquisitions
Transfers
Number of
shares Total par value
Total cash
amount
Average
purchase
price
Number of
shares
Total par
value
Total cash
amount
Average
purchase
price
Profit (loss)
net of taxes
68,493,750
34,246,875
198,647,885
2.90
79,271,105
A
39,635,553
A
248,288,885
A
B
3.13
23,270,000
B
195,888,825
97,944,413
605,336,429
3.09
195,888,825
97,944,413 605,336,429
3.09
0
259,930,273
524,312,848
840,999,994
129,965,137
262,156,424 1,644,984,308
3.235
3.08
N/A
N/A
N/A
N/A
N/A
275,159,930
A
137,579,966
A
853,625,314
A
B
3.11
23,270,000
B
A. Includes two extraordinary donations totalling 55,750,000 treasury shares to Fundación Banco Santander. For more details, see 'Other programs to support communities' in
section 'Support to higher education and other local initiatives' of the ‘Responsible banking’ chapter.
B. Excluding the donations mentioned in footnote A above.
C. Transactions in Banco Santander shares carried out to hedge market risks or provide brokerage or hedging for customers.
The chart below shows significant changes in treasury shares that required disclosure to the CNMV in the year. Companies must report to the
CNMV when purchases of treasury shares exceed 1% of the total voting rights (without discounting sales or transfers) or there is a change in the
number of total voting rights.
SIGNIFICANT CHANGES IN TREASURY SHARES IN 2021
A
% of voting rights represented by shares
held at
reference date
of notice
acquired since
last notice
transferred
since last notice
0.185%
0.96%
0.916%
0.146%
0.163%
1.001%
1.017%
1.001%
0.156%
0.197%
0.298%
1.153%
Reported on
B
17/03/2020
14/06/2021
20/10/2021
19/11/2021
A. Percentages calculated with share capital at the date of disclosure.
B. This notice was corrected by disclosure dated 18 March 2021. Data shown as
corrected.
Transactions with financial instruments
Below are the details of the transactions we carried out of our own
accord for a purpose similar to discretionary treasury share
management and with Banco Santander shares as the underlying
asset in 2021:
• In Q4, we took an investment position with a Delta (i.e. net
exposure to share price changes) equalling 8,000,000 shares worth
a total 22,600,000 euros. That was the final position at year end.
• The instruments used were Total Return Equity Swaps, payable
exclusively as a cash settlement.
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2.6 Stock market information
Markets
Banco Santander shares are listed on Spanish stock exchanges
(Madrid, Barcelona, Bilbao and Valencia, under the trading symbol
'SAN'), the New York Stock Exchange (NYSE) as American Depositary
Shares (ADS) under the trading symbol 'SAN' (each ADS represents
one Banco Santander share), the London Stock Exchange as Crest
Depositary Interests (CDI) under trading symbol 'BNC' (each CDI
represents one Banco Santander share), the Mexican Stock Exchange
under the trading symbol 'SAN', and the Warsaw Stock Exchange
under the trading symbol 'SAN'.
Market trends
The global economy came back strong. Vaccination programmes
enabled a return to economic activity and mobility amid excess
liquidity and expansionary fiscal policies. Despite uncertainties due to
the surge of new covid-19 variants, positive trends drove a rise in
commodity prices and inflationary pressures, which rebounded to the
highest levels in a decade in the US and the eurozone.
Central banks in developed economies began a widespread
withdrawal of monetary stimulus. The Bank of England raised
interest rates to 0.25% on the back of a strong jobs market and high
inflation. The US Federal Reserve announced its intention to start
raising rates no later than mid-2022. The ECB is limiting the
withdrawal of stimulus to liquidity by scaling back its purchase
programmes.
Major global equity indices ended 2021 with significant aggregate
gains. The banking industry registered better performance owing to
the lifting of restrictions on dividend payments, favourable results of
US bank stress tests, and better outlooks for most European banks.
The IBEX 35 in Spain increased 7.9%; the DJ Stoxx 50 in Europe by
22.8%; DJ Banks by 34.0%; and the MSCI World Banks by 22.7%.
Market capitalization and trading
By 31 December 2021, Banco Santander’s market capitalization of
EUR 50,990 million was the second largest in the eurozone and 24th
largest in the world among the financial institutions.
13,484 million Banco Santander shares traded in the year for an
effective value of EUR 41,195 million and a liquidity ratio of 78%.
THE BANCO SANTANDER SHARE
Shares (million)
Price (EUR)
Closing price
A
Change in the price
Maximum for the period
Date of maximum for the period
A
Minimum for the period
Date of minimum for the period
A
Average for the period
A
End-of-period market capitalization (EUR
million)
Trading
Total volume of shares traded (million)
Average daily volume of shares traded
(million)
Total cash traded (EUR million)
Average daily cash traded (EUR million)
2021
2020
17,340.6
17,340.6
2.941
16%
2.538
-29%
3.509
3/6/2021
2.375
28/1/2021
3.055
50,990
3.799
17/2/2020
1.439
24/9/2020
2.288
44,011
13,484
52.7
41,195
160.9
19,080
74.2
45,034
175.2
A. Data adjusted to the December 2020 capital increase.
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3. Shareholders. Engagement
and general meeting
→ One share, one vote, one dividend
→ No takeover defences in our Bylaws
→ High participation and engagement of shareholders in our general meetings
3.1 Shareholder communication and engagement
Policy on communication and engagement with
shareholders and investors
Banco Santander aims to ensure its interests are in line with
shareholders’, long-term share value and the long-term confidence
of investors and society. We provide information to shareholders and
investors that satisfies their expectations and upholds our culture
and values. We also communicate and engage with them regularly
so that their views will be considered by senior managers and
governance bodies.
The principles of Santander’s policy on communication and
engagement with shareholders and investors are:
• Protection of rights and lawful interests of all shareholders. We
facilitate their rights to be exercised, provide them with
information and give them opportunities to be involved in our
corporate governance effectively.
• Equal treatment and non-discrimination. We treat investors
equally in accordance with status.
• Fair disclosure. We make sure our disclosure of information in
interactions with investors is transparent, truthful and
symmetrical. Any inside or relevant information given to investors
will have been previously disclosed except when applicable
regulation provides otherwise.
• Appropriate disclosure of information. We report the right
information to meet our investor’s needs and expectations. We
make sure to give investors clear, concise and reliable information
in a way that is tailored to shareholders.
• Compliance with our Bylaws and corporate governance rules, as
well as the principles of cooperation and transparency with the
competent regulators and supervisors, in accordance with internal
guidelines. We adhere closely to the laws and regulations on
insider and price-sensitive information in addition to our own Code
of Conduct in Securities Markets, the General Code of Conduct and
the Rules and regulations of the board of directors.
The policy further describes:
• The roles and responsibilities of Banco Santander’s main bodies
and functions involved in communication and engagement with
shareholders and investors.
• The channels for disclosing information and communicating with
shareholders and investors.
• The ways Banco Santander engages with shareholders and
investors, which are covered below.
Furthermore, the policy applies to relations with the financial,
environmental, social and corporate governance analysts, proxy
advisers, rating agencies and other agents whom our shareholders
and investors consult and we consider essential.
Our policy on communication and engagement with shareholders
and investors can be found in the corporate website.
In addition, Banco Santander has board-approved frameworks on
brand and communications, and accounting and financial information
and management. They set out the general principles, roles and key
processes on the communication of economic-financial, non-
financial and corporate information, helping ensure that all our
shareholders and other stakeholders are properly informed about
our strategy, goals and results, as well as about our culture and
values, maximizing the disclosure and quality of the information
available to the market.
Engagement with shareholders in 2021
In keeping with our policy, we engaged with our shareholders as
follows:
• The annual general meeting. The annual general meeting is our
most important annual event for our shareholders. We strive to
encourage all our shareholders to be informed, attend and
participate. See 'Participation of shareholders at general meetings'
and 'Right to receive information' in section 3.2.
At the annual general meeting, the chair reports on the year’s most
significant changes to the Group’s corporate governance,
supplementing the corporate governance report. She also
addresses any questions raised by shareholders about the matters
included in the agenda and the relevant information disclosed to
the market since the last general meeting.
The CEO presents on the Group’s business landscape, strategy
execution and performance (overall and by region, country and
business) and the main priorities for the following year.
Furthermore, the chairs of the audit, nomination and remuneration
committees also report to the annual general meeting on their
operations and elaborate on the related information provided in
this chapter.
Our 2021 AGM was fully virtual to protect the health of our
shareholders and everyone who organized it. Our general meeting
attendance app enables shareholders to exercise their rights to
attend and participate in real time and remotely. They can watch
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the entire meeting through a live feed, vote, make remarks,
propose resolutions and contact the notary public. Such high
shareholder turnout and meeting participation proved our remote
communication systems are effective.
The outstanding quorum and voting results in our 2021 AGM show
the importance we put on shareholder engagement through the
annual general meetings. See section 3.4 '2021 AGM'.
shareholder value, better governance and remuneration schemes,
and sustainability matters.
In 2021 Shareholder and Investor Relations engaged 942 times
(mostly virtually) with 469 institutional investors from 136
locations. 85 of those meetings focused on environmental, social
and governance aspects. It engaged with 40% of share capital,
which is over 67% of the capital held by institutional investors.
Banco Santander's management system for the 2021 AGM
received AENOR certification for sustainable events in compliance
with the UNE-ISO 20121:2013.
We issued over 800 communications in 2021 to increase dialogue
and transparency with shareholders and investors about the
group’s performance, results and the Banco Santander share.
• Quarterly results presentations. Every quarter we present our
• Interaction with retail shareholders. We also offer other special
results on the same day we make them public. Our presentation
can be followed live, via conference call or webcast. We release the
related financial report and presentation material before market
open. During the presentation, questions can be asked or emailed
to: investor@gruposantander.com.
Our most recent event was our 2021 Results Presentation on 2
February 2022. In 2021, we gave our first, second and third quarter
results presentations on 28 April, 29 July and 27 October,
respectively.
• Investor and strategy days. We also organise investor and strategy
days, where senior managers explain our strategy for investors and
stakeholders in a broader context than in results presentations.
Investors can also directly interact with senior managers and some
directors, which is increasingly important and attests to our strong
governance. As recommended by the CNMV, we publish
announcements about meetings with analysts and investors and
related documentation in advance. We held our last Investor Day
on 3 April 2019 in London. The information made available during
the investor day is not incorporated by reference in this annual
report nor considered part of it.
• Meetings and conferences. Our Shareholders and Investors
Relations team discusses financial and other issues at meetings
with investors at conferences organised by third parties.
Notwithstanding the principle of equal treatment and non-
discrimination, we have learned that one size does not fit all when
engaging with investors. Therefore, we tailor the following
engagements to meet the needs and expectations of especially our
institutional investors, but also fixed-income investors, analysts and
rating agencies, as well as retail shareholders:
• Lead independent director engagement with key investors. Our
lead independent director, Bruce Carnegie-Brown, is regularly in
contact with investors in Europe and North America, particularly in
the months prior to the annual general meeting. We gather their
insights and form an opinion about their concerns, especially
regarding our corporate governance. In 2021 and early 2022, he
met with 20 investors, who accounted for approximately 30% of
share capital. In our annual board assessment, board members
highly value Mr Carnegie-Brown's role in integrating new
international best practices in corporate governance, fostering
tailored relations with our institutional investors. The nomination
committee considers the feedback received from investors.
• Investor roadshows. Our Shareholders and Investors Relations
department is constantly in direct contact with institutional
investors and analysts to promote all-round discussion on
means of communication for retail shareholders regardless of the
size of their stake. In 2021 the Shareholders and Investors
Relations team organized 116 events with retail shareholders: 94
virtually; 20 in-person; and two in hybrid format. 5,027 people
accounting for 332,063,674 shares (4% of our retail shareholders’
capital in Spain) attended. Shareholders engaged with the chief
financial officer (CFO) at several events.
The team also responded to 139,301 queries received via our
shareholder and investor helplines, mailboxes, WhatsApp and
bilateral meetings on the Virtual Customer Channel. Satisfaction
surveys revealed 96% would recommend the attention service.
Lastly, we received 18,695 shareholder and investor opinions
through quality surveys and studies.
Communication with proxy advisors and other analyst and
influencers
We have always recognised the value our investors place on open
and proactive dialogue with proxy advisors, ESG analysts, and other
influential entities. We make sure they understand our corporate
governance, responsible banking and sustainability priorities and
messages in order to convey them properly to the investors.
In 2021, through our continuous engagement with the main proxy
advisers, we duly reported on and explained proposed resolutions
submitted for the 2021 AGM so they could make voting
recommendations.
Corporate website
Our corporate website enables an effective communication with
shareholders and all our global stakeholders. Its design enables us to
be transparent and improves the experience of users in obtaining
quality information about Santander.
Our corporate website includes information on corporate governance
as required by law. In particular, (i) the key internal regulations of
Banco Santander (Bylaws, Rules and regulations of the board, Rules
and regulations for the general meeting, etc.); (ii) information on the
board of directors and its committees as well as directors’
professional biographies and (iii) information on general meetings.
The address of our information on corporate governance is: https://
www.santander.com/en/shareholders-and- investors/corporate-
governance. (It is included for reference purposes only. The content
of our corporate website is not incorporated by reference in this
annual report or otherwise considered part of it).
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Other channels
According to good governance guidelines, we have an app for
Android and iOS with vast insight into the Group so all shareholders
and investors can stay well informed.
• Act 10/2014, of 26 June, on the organization, supervision and
solvency of credit institutions (articles 16 to 23) and its
implementing regulation, Spanish Royal Decree 84/2015, of 13
February.
We also post information about Banco Santander regularly on our
official Twitter and LinkedIn accounts.
3.2 Shareholder rights
Our Bylaws provide for only one class of share (ordinary shares) and
grants all shareholders the same rights. Each Banco Santander share
entitles holders to one vote.
Banco Santander’s Bylaws do not have any defensive mechanisms
and fully conform to the notion of one share, one vote, and one
dividend.
This section highlights certain key rights our shareholders have.
No restrictions on voting rights or the free transfer of
shares in our Bylaws
The law and the Bylaws only place restrictions on voting rights as a
result of violation of regulations, as indicated below.
There are no non-voting or multiple-voting shares, shares giving
preferential treatment in dividend pay-outs, shares limiting the
number of votes a single shareholder can cast, or quorum
requirements or qualified majorities other than those the law
dictates.
There are no restrictions on the free transfer of shares other than
those the law dictates, as indicated further in this section.
Neither our Bylaws nor any laws or regulations restrict the
transferability of shares. Our Bylaws also do not restrict voting rights
(except if they were acquired in violation the law or regulations).
Furthermore, our Bylaws do not include any neutralization provisions
as defined in the Ley del Mercado de Valores (Spanish Securities
Market Act), which would apply in tender offers or takeover bids.
Please note that the shareholders’ agreement mentioned in section
2.4 'Shareholders' agreements' contains transfer and voting
restrictions on shares that are subject to it.
Legal and regulatory restrictions on the acquisition of
significant holdings
There are legal and regulatory provisions applicable to the Banco
Santander because the banking activity is a regulated sector, which
involves that the acquisition of significant holdings or influence is
subject to regulatory approval or non-objection. As Banco Santander
is a listed company, a tender offer or a takeover bid for its shares
must be launched to acquire control and for other similar
transactions.
The acquisition of significant ownership interests is regulated mainly
by:
• Regulation (EU) 1024/2013 of the Council of 15 October 2013,
conferring specific tasks on the ECB relating to the prudential
supervision of credit institutions.
• Spanish Securities Market Act.
The acquisition of a significant stake in Banco Santander may also
require approval by (i) other domestic and foreign regulators with
supervisory powers over Banco Santander or its subsidiaries'
operations, shares listings or other actions concerning such
regulators or subsidiaries and (ii) other authorities pursuant to
foreign investment regulations (including those imposed due to
covid-19) in Spain or other countries where we operate.
Shareholder participation at general meetings
All registered holders of shares found on record at least five days
prior to the day of general meetings are entitled to attend. Banco
Santander allows shareholders to exercise their rights to attend,
delegate, vote and participate in general meetings using remote
communications systems.
Shareholders can attend general meetings remotely. They can watch
it through a live feed, vote, make remarks, propose resolutions and
contact the notary public.
The electronic shareholders’ forum is another communications
channel available on Banco Santander’s website at the time of the
meeting. Shareholders can post items they propose to add to the
agenda in the meeting notice, requests for support for their
proposals, initiatives to reach the percentage required to exercise
minority shareholder rights legally, as well as offers or requests to
act as a voluntary proxy.
Supplement to the annual general meeting notice
Shareholders representing at least 3% of share capital may request
the publication of a supplement to the annual general meeting notice
stating the names of shareholders exercising this right, the number
of shares they hold, as well as any items to be added to the agenda
with an explanation or substantiated proposal for resolutions and any
other relevant documentation.
Shareholders representing at least 3% of share capital may also
propose reasoned resolutions about any matters that have been, or
should be, added to the agenda of a called annual general meeting.
To exercise these rights, shareholders must send a certified notice to
Banco Santander’s registered office within five days after the annual
general meeting announcement notice is posted.
Any shareholder can also request that the meeting address non-
agenda items for which the law does not require a minimum
percentage of share capital for a resolution to be put to a vote (the
removal of directors or bringing corporate liability action against any
of them).
Right to receive information
From the time the general meeting notice is posted until the fifth day
before the general meeting date on first call, shareholders can
submit written requests for information or clarification, or any
written questions they deem relevant to the items on the meeting
agenda. In addition, within the same period, shareholders can submit
written requests for clarification about price-sensitive information
Banco Santander has furnished for the CNMV since the last general
meeting or about auditor’s reports. Banco Santander posts any
information or answers it provides on its corporate website.
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Shareholders may also exercise their right to receive information at
the meeting. Even if it cannot be asserted in the course of the
meeting, or requests are made by shareholders attending remotely,
they will be given the appropriate information in writing within seven
days after the general meeting.
Quorum and majorities for passing resolutions at general
meeting
The quorum and majorities set out in our Bylaws and Rules and
regulations for general meeting in order to hold a valid meeting and
adopt corporate resolutions is according to Spanish law.
On first call, shareholders representing at least 25% of subscribed
share capital with voting rights must be in attendance (except for
certain matters mentioned subsequently). If a sufficient quorum
cannot be constituted, general meetings will be held on second call,
which does not require a quorum.
In accordance with our Rules and regulations for general meeting,
shareholders voting by mail or electronically before the meeting are
counted as present in order to determine the general meeting
quorum.
With the exception of certain matters mentioned below, general
meeting resolutions pass when shareholders in attendance or by
proxy cast more votes in favour than against.
The quorum and majorities required to amend the Bylaws, issue
shares and bonds, make structural changes and vote on other
significant resolutions permitted by law are set out below.
Furthermore, laws applying to credit institutions dictate that, if over
50% of the share capital is present at general meetings, a qualified
two-thirds majority is required to raise the proportion of variable
remuneration components to fixed components for executive
directors and other top executives above 100% (up to 200%);
otherwise, a three-quarters majority will be necessary.
Our Bylaws do not require shareholder approval at general meetings
for any decisions about acquiring core assets, selling them off or
transferring them to another company or similar corporate
transactions, unless it is required by law.
Rules for amending our Bylaws
The general meeting is the competent body to approve any
amendment to the Bylaws. However, only the board can decide to
change the registered office within Spain.
The board or, where appropriate, the shareholders who have drafted
a proposed amendment to the Bylaws must write it out completely,
in addition to a report justifying it; and provide them to shareholders
at the time the meeting to debate proposed amendment is
announced.
The general meeting notice must clearly state the items to be
amended as well as the rights of all shareholders to examine the full
text of a proposed amendment and the related report at Banco
Santander’s registered office, and order these documents delivered
or sent to them free of charge.
If shareholders are convened to debate amendments to the Bylaws,
the quorum on first call will be constituted if 50% of subscribed share
capital with voting rights is present. If a sufficient quorum cannot be
constituted, the general meeting will be held on second call, where
25% of subscribed share capital with voting rights must be present.
When less than 50% of subscribed share capital with voting rights
are present, resolutions on amendments to the Bylaws can only be
validly adopted if two-thirds of shareholders attending the meeting
in person or by proxy vote for them. However, when 50% or more of
subscribed share capital with voting rights is present, resolutions
may validly pass with an absolute majority.
Resolutions to amend the Bylaws that involve new obligations for
shareholders must be accepted by those affected.
The Single Supervisory Mechanism (SSM) must authorise us to
amend our Bylaws. However, amendments that are exempt from
authorization but must still be reported to the SSM include any to
change the registered office within Spain, raise share capital, add
imperative or prohibitive laws or regulations to the wording of the
Bylaws, or change the wording in order to comply with court or
administrative rulings and any others the SSM has declared exempt
due to a lack of materiality in response to prior consultations.
3.3 Dividends and shareholder remuneration
Distribution charged against 2021 results
ECB Recommendation of 15 December 2020, which asked banks not
to pay out dividends charged against 2021 results (ECB
Recommendation III), was in force for over half of 2021.
On 23 July 2021, the ECB believed the reasons underpinning ECB
Recommendation III to limit dividend payouts were no longer valid
and, thus, repealed it effectively on 30 September 2021.
On 28 September 2021, the board announced its 2021 shareholder
remuneration policy to pay out an interim distribution from
approximately 40% of the Group's underlying profit (half through a
cash dividend and half through a shares buyback).
• Interim remuneration. Accordingly, it authorized the payment of
an interim dividend of 4.85 euro cents per share (i.e. 20% of the
Group's underlying profit in H1'21), in cash and charged against
2021 profits; it was paid on 2 November 2021. The board also
voted to launch the First Buyback Programme worth 841 million
euros (20% of the Group's underlying profit in H1'21) once the ECB
approved it on 28 September 2021 (see in 'First Buyback
Programme' in section 2.5).
• Final remuneration. On 24 February 2022, within the 2021
shareholder remuneration policy, the board of directors voted to:
• submit a resolution at the 2022 AGM to approve a final cash
dividend in the gross amount of 5.15 eurocents per share, worth
approximately 865 million euros (approximately 20% of the
Group’s underlying profit in H2 2021). If approved at the AGM,
the dividend would be payable from 2 May 2022. The estimate of
865 million euros is based on the assumption that, once the
Second Buyback Programme has taken place, the number of
outstanding shares entitled to receiving dividends will be
16,804,353,202. Therefore, the total dividend may be higher if
fewer shares than anticipated are acquired in the Second
Buyback Programme; otherwise, it will be lower.
• implement a Second Buyback Programme worth 865 million
euros (approximately 20% of the Group’s underlying profit in H2
2021), once the necessary regulatory authorization has been
obtained. For more details on the programme, see section 2.5
'Treasury shares'.
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If shareholders approve the dividend payout resolution and the ECB
authorizes the Second Buyback Programme, it will result in a payout
of approximately 40% of the Group’s underlying attributable profit
for 2021. If the buyback reaches the maximum within the
programme period, remuneration will be split equally between cash
dividends and shares buybacks. This final remuneration will enable
Santander to meet the target set in the shareholder remuneration
policy disclosed to the market on 28 September 2021.
Shareholder remuneration policy for 2022 results
For the 2022 results the shareholder remuneration policy that the
board intends to apply is a total remuneration of approximately of
c.40% of the group's underlying profit, split in approximately equal
parts between cash dividends and share buybacks, thus continuing
the policy applied with respect to 2021 results.
The implementation of the shareholder remuneration policy is
subject to future corporate and regulatory decisions and approvals.
3.4 2021 AGM
On 26 March 2021, we held our annual general meeting. In light of
Covid-19, it was exclusively virtual. Because of the means
shareholders were provided to attend remotely, the meeting had a
quorum of 67.674%, just 0.8 percentage points below our highest-
ever general meeting quorum in 2019.
Quorum and attendance
The quorum (among shareholders present and represented) was
67.674% broken down as follows:
QUORUM BREAKDOWN
In person and virtual attendance
By proxy
Cast by post or direct delivery
By electronic means
Remote voting
Cast by post or direct delivery
By electronic means
Total
0.062 %
6.586 %
58.438 %
0.547 %
2.041 %
67.674 %
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Voting results and resolutions
All items on the agenda were approved. Votes in favour of the board’s proposals averaged 98.31%. 99.57% of votes approved corporate
management for 2020 and 91.59% of votes approved the 2020 annual report on directors' remuneration. None of the agenda items listed in the
notice convening the meeting received more than 9.53% of votes against.
The following chart summarizes the resolutions approved and voting results:
1. Annual accounts and corporate management
1A. Annual accounts and directors’ reports for 2020
1B. Consolidated statement of non-financial information for 2020
1C. Corporate management 2020
2. Application of results
3. Appointment, re-election or ratification of directors
3A. Setting of the number of directors
3B. Ratification of the appointment of Gina Lorenza Díez Barroso
3C. Re-election of Homaira Akbari
3D. Re-election of Álvaro Antonio Cardoso de Souza
3E. Re-election of Javier Botín-Sanz de Sautuola y O'Shea
3F. Re-election of Ramiro Mato García-Ansorena
3G. Re-election of Bruce Carnegie-Brown
4. Re-election of the external auditor for Financial Year 2021
5. Amendment of the Bylaws
5A. Relating to the issuance of non-convertible debentures
5B. Relating to the powers of the general shareholders’ meeting (share-based compensation)
5C. Relating to the shareholders’ participation at the general shareholders’ meeting
5D. Relating to attending the meeting from a distance by remote means of communication
6. Amendment of the Rules and regulations of the general meeting
6A. Relating to the powers of the shareholders at a general meeting (issuance of debentures)
6B. Relating to the powers of the shareholders at a general meeting (share-based
compensation)
6C. Relating to proxy representation at a general meeting
6D. Relating to the means for distance voting
6E. Relating to publication of the resolutions approved at the general meeting
8. Delegation to the board of the power to issue all kinds of fixed-income securities, preferred
interests or similar debt instruments (including warrants) that are not convertible
8. Directors' remuneration policy
9. Maximum total annual remuneration of directors in their capacity as directors
10. Maximum ratio of fixed and variable components in executive directors' total remuneration
11. Remuneration plans that include the delivery of shares or share options:
11A. Deferred multiyear objectives variable remuneration plan
11B. Deferred conditional variable remuneration plan
11C. Digital Transformation Award
11D. Group buy-out policy
11E. Plan for employees of Santander UK Group Holdings and other companies of the Group in
the UK
12. Authorization to implement the resolutions approved
13. Annual directors' remuneration report
E
14. Corporate action to demand director liability
F
15 to 29. Dismissal and removal of directors
A
VOTES
B
C
Blank
Against
0.26
0.29
0.43
0.54
0.36
0.38
0.61
0.60
2.95
0.37
1.64
0.36
0.77
1.08
0.78
9.53
0.04
0.04
0.04
0.04
0.05
0.05
0.05
0.05
0.04
0.05
0.05
0.04
0.05
0.04
0.04
0.04
B
For
99.74
99.71
99.57
99.46
99.64
99.62
99.39
99.40
97.05
99.63
98.36
99.64
99.23
98.92
99.22
90.47
Abstention
C
Quorum
D
2.96
2.83
3.04
2.84
2.87
2.89
2.91
2.88
2.87
2.87
2.87
2.83
2.89
2.90
2.85
2.83
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.67
99.23
0.77
0.04
2.87
67.67
98.94
99.64
98.51
99.71
96.89
93.26
98.35
99.33
96.61
97.66
99.51
98.98
99.01
99.56
91.59
0.00
1.06
0.36
1.49
0.29
3.11
6.74
1.65
0.67
3.39
2.34
0.49
1.02
0.99
0.44
8.41
100.00
0.00
100.00
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.00
0.00
2.86
2.86
2.83
2.84
2.85
2.89
2.87
2.86
2.86
2.86
2.86
2.91
2.84
2.82
2.88
0.09
0.09
67.67
67.67
67.67
67.67
67.67
67.67
67.67
67.50
67.67
67.67
67.67
67.67
67.67
67.67
67.67
65.09
65.09
A. Each Banco Santander share grants one vote.
B. Percentage of votes for and against.
C. Percentage of share capital present and attending by proxy at the 2021 AGM.
D. Percentage of Banco Santander's share capital on the date of the 2021 AGM.
E. Item not included on the agenda.
F. Items 15 to 29 (not included on the agenda) were put to a separate vote. Each item refers to the proposal to dismiss and remove each acting director at the 2021 AGM.
The full texts of the resolutions passed at the 2021 AGM can be found on our corporate website and on the CNMV’s website, as they were filed
as other relevant information on 26 March 2021.
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3.5 Our next AGM in 2022
The board of directors agreed to call the 2022 AGM for 31 March on
first call or on 1 April on second call, with the following proposed
resolutions.
• Annual accounts and corporate management. For approval of:
• The annual accounts and the directors’ reports of Banco
Santander and its consolidated Group for the financial year ended
on 31 December 2021. For more details, see 'Consolidated
financial statements'.
• The consolidated non-financial statement for the financial year
ended on 31 December 2021that is part of this consolidated
directors' report. See the 'Responsible banking' chapter.
• The corporate management for the financial year 2021.
• The application of results obtained during financial year 2021.
See section 3.3 'Dividends and shareholder remuneration'.
• Appointment of directors.
• Setting the number of directors at 15, within the maximum and
minimum limits set in the Bylaws.
• Appointing Germán de la Fuente as independent director (see
section 1.1 'Board skills and diversity') and re-electing José
Antonio Álvarez, Belén Romana, Henrique de Castro, Luis Isasi
and Sergio Rial for a three-year period. See section 4.1 'Our
directors'.
• External auditor. Re-electing the firm PricewaterhouseCoopers
Auditores, S.L. as external auditor for financial year 2022. See
'External auditor' in section 4.5.
• Bylaws. Approve certain amendments to the Bylaws to:
• Introduce refinements based on the amended Spanish
Companies Act as relates to final beneficiary identification and
new share transfers before a capital increase is filed with the
Registro Mercantil (Commercial Registry).
• Round off the capital reduction rules to reflect other aims that
the law allows.
• Clarify the powers of the general meeting regarding the issuance
of convertible securities.
• Add technical refinements to the rules on holding general
meetings.
• Allow the board of directors to designate more than one vice-
secretary.
• Contemplate that executives other than the executive chair can
have direct reporting lines to the board or its committees.
• Adapt the audit committee’s authority regarding the
management report and related-party transactions and increase
its coordination with the responsible banking, sustainability and
culture committee.
• Adapt the Bylaws on directors’ remuneration to the recent
amendments to the Spanish Companies Act.
• Add technical regulatory refinements regarding dividend payouts
in forms other than cash or own funds instruments.
• Rules and regulations of the general meeting. Approve the
amendment to the Rules and regulations of the general meeting to
fully adapt the rule on remote general meeting attendance to the
Bylaws; contemplate that more than one vice-secretary may be
designated; and include technical refinements regarding
resolutions proposed and remarks made by shareholders.
• Authority to increase share capital. To authorize the board of
directors to increase share capital once or several times over the
course of three years. See section 2.2 'Authority to increase share
capital'.
• Share capital reduction for the following purposes:
• Cancelling the 259,930,273 treasury shares from the First
Buyback Programme.
• Cancelling a maximum of 1.730.000.000 treasury shares
purchased under the Second Buyback Programme.
• Cancelling a maximum of 1.734.064.130 treasury shares,
acquired through one or more share buyback programmes or by
other means legally permitted, whereby the board of directors
will be authorized to cancel them on one or several occasions in a
maximum timescale of one year or by the date of the next annual
general meeting.
See section 2.5 'Treasury shares'.
• Remuneration policy. Approving the director remuneration policy
for 2022, 2023 and 2024. For further information, see section 6.4
'Directors’ remuneration policy for 2022, 2023 and 2024 submitted
to a binding shareholder vote'.
• Director remuneration. Approving director’s fixed annual
remuneration. See section 6.4 'Directors’ remuneration policy for
2022, 2023 and 2024 submitted to a binding shareholder vote'.
• Variable remuneration. Approving a maximum ratio of 200% of
variable components to fixed components of total remuneration
for executive directors and certain employees belonging to
professional categories that have a material impact on the Group’s
risk profile. For more details, see section 6.4 'Directors’
remuneration policy for 2022, 2023 and 2024 submitted to a
binding shareholder vote'.
• Remuneration plans for executive directors. Approving
remuneration plans for executive directors that involve the delivery
of shares or share options or are share-value based. For more
details, see section 6.4 'Directors’ remuneration policy for 2022,
2023 and 2024 submitted to a binding shareholder vote'.
• Annual directors’ remuneration report. Holding a non-binding vote
on the annual directors’ remuneration report. For more details, see
section 6. 'Remuneration'.
The related documents and information are available for consultation
on our corporate website on the date the meeting notice is published.
We will also broadcast our 2022 AGM live, as was done for the 2021
AGM.
Since attendance at the general meetings is not paid, a general policy
in this regard is not necessary. However, Banco Santander offers
shareholders that participate in our general meeting a
commemorative courtesy gift, as has been tradition for decades.
Annual report 2021 199
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4. Board of directors
A balanced and diverse board
→ 15 directors, including 12 non-executive and 3 executive
→ Majority of independent directors (66.67%)
→ Balanced presence of women and men (40%-60%)
Effective governance
→ Specialised committees advising the board
→ The responsible banking, sustainability and culture committee
shows the board's commitment to this matter
→ Complementary functions and effective controls: executive
chair, CEO and lead independent director
Javier Botín
Member
Non-
executive
director
Álvaro Cardoso
Member
Non-executive
director
(independent)
Ÿ
R Martín
Chávez
Member
Non-executive
director
(independent)
¢¢ppP
Homaira Akbari
Member
Non-executive
director
(independent)
òpŸ
Jaime Pérez
Renovales
General
secretary and
secretary of the
board
Sol Daurella
Member
Non-executive
director
(independent)
¢¢Ÿ
Luis Isasi
Member
Non-
executive
director
ò¢p
José Antonio
Álvarez
Vice chair and
CEO
Executive
director
òp
Ana Botín
Executive
chair
Executive
director
òPp
Gina Díez
Member
Non-executive
director
(independent)
¢
Sergio Rial
Member
Non-
executive
director
Belén Romana
Member
Non-executive
director
(independent)
òòpPpŸ
Henrique
de Castro
Member
Non-executive
director
(independent)
ò¢p
Ramiro Mato
Member
Non-executive
director
(independent)
òòpŸP
Pamela
Walkden
Member
Non-executive
director
(independent)
òPŸ
Bruce
Carnegie-
Brown
Vice chair and
lead
independent
director
Non-executive
director
(independent)
ò¢P¢Pp
ò Executive committee
ò Audit committee
¢ Nomination committee
¢ Remuneration committee
p Risk supervision, regulation and compliance committee
p Innovation and technology committee
Ÿ Responsible banking, sustainability and culture committee
P Chair of the committee
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4.1 Our directors
Ana
Botín-Sanz de Sautuola y O’Shea
GROUP EXECUTIVE CHAIR
Executive director
José Antonio
Álvarez Álvarez
VICE CHAIR & CHIEF EXECUTIVE OFFICER
Executive director
Ms Botín joined the board in 1989.
Mr Álvarez joined the board in 2015.
Nationality: Spanish. Born in 1960 in Santander, Spain.
Nationality: Spanish. Born in 1960 in León, Spain.
Education: Degree in Economics from Bryn Mawr College
(Pennsylvania, United States).
Education: Degree in Economics and Business Administration. MBA
from the University of Chicago.
Experience: José Antonio Álvarez joined Santander in 2002 and was
appointed senior executive vice president of the Financial
Management and Investor Relations division in 2004 (Group chief
financial officer). He served as director at SAM Investments Holdings
Limited, Santander Consumer Finance, S.A. and Santander Holdings
US, Inc. He also sat on the supervisory boards of Santander Consumer
AG, Santander Consumer Bank GmbH and Santander Bank Polska,
S.A. He was a board member of Bolsas y Mercados Españoles, S.A.
Positions in other Group companies: Mr Álvarez is non-executive
director of Banco Santander (Brasil) S.A. and PagoNxt, S.L.
Membership of board committees: Executive committee, and
innovation and technology committee.
Skills and competencies: Mr Álvarez is a highly qualified and
talented leader with a distinguished career in banking. He brings
significant strategic and international management expertise, in
particular financial planning, asset management and consumer
finance. He has vast experience and an established reputation with
such key stakeholders as regulators and investors.
Experience: Ms Botín joined Banco Santander, S.A. after working at JP
Morgan (New York, 1980-1988). In 1992, she was appointed senior
executive vice-president. Between 1992 and 1998, she led
Santander’s expansion into Latin America. In 2002, she was
appointed executive chair of Banco Español de Crédito, S.A. Between
2010 and 2014, she was chief executive officer of Santander UK plc
and she has been non-executive director until April 2021. She has
also been non-executive director of Santander UK Group Holdings plc
(2014-2021). In 2014 she was appointed executive chair of
Santander.
Other positions of note: Ms Botín is a member of the board of
directors of The Coca-Cola Company and president of the European
Banking Federation. She is also founder and chair of the CyD
Foundation (which supports higher education) and the Empieza por
Educar Foundation (the Spanish subsidiary of the international NGO,
Teach for All), and sits on the advisory board of the Massachusetts
Institute of Technology (MIT).
Positions in other Group companies: Ms Botín is a chair of PagoNxt,
S.L, Universia España Red de Universidades, S.A. and Universia
Holding, S.L; and a non- executive director of Santander Holding USA,
Inc., Santander Bank, N.A.
Membership of board committees: Executive committee (chair), and
innovation and technology committee.
Skills and competencies: Extensive international experience in
banking, having held the highest executive roles. She has also led the
transformational, strategic and cultural change of Grupo Santander.
Moreover, she has shown an ongoing commitment to sustainable
and inclusive growth, as demonstrated by her philanthropic activities.
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Bruce
Carnegie-Brown
VICE CHAIR & LEAD INDEPENDENT DIRECTOR
Non-executive director (independent)
Homaira
Akbari
Non-executive director (independent)
Joined the board in 2015.
Ms Akbari joined the board in 2016.
Nationality: British. Born in 1959 in Freetown, Sierra Leone.
Nationality: American and French. Born in 1961 in Tehran, Iran.
Education: Master of Arts in English Language and Literature from
the University of Oxford.
Education: PhD in Experimental Particle Physics from Tufts University
and MBA from Carnegie Mellon University.
Experience: Mr Carnegie-Brown was non-executive chair of
Moneysupermarket.com Group plc (2014-2019), non-executive
director of Jardine Lloyd Thompson Group plc (2016-2017), non-
executive director of Santander UK plc and of Santander UK Group
Holdings plc (2019-2021) and non-executive chair of AON UK Ltd
(2012-2015). He was the founder and managing partner of the
quoted private equity division of 3i Group plc, and president and chief
executive officer of Marsh Europe, S.A. He was also lead independent
director at Close Brothers Group plc (2006-2014) and Catlin Group
Ltd (2010-2014). He previously worked at JP Morgan Chase for 18
years and Bank of America for four years.
Other positions of note: Mr Carnegie-Brown is the non-executive
chair of Lloyd’s of London and of Cuvva Limited, member of the
Investment Committee of Gresham House plc and chair of
Marylebone Cricket Club (MCC).
Membership of board committees: Executive committee,
nomination committee (chair), remuneration committee (chair), and
innovation and technology committee.
Skills and competencies: Mr Carnegie-Brown has a lengthy
background in banking (particularly investment banking) and
considerable expertise in insurance. He also possesses significant
international experience in top management positions in Europe (UK),
the Middle East and Asia. His top-management insight provides the
board with know-how in regard to remuneration, appointments and
risk. As lead independent director, he has also gained an excellent
understanding of investors’ expectations, as well as managing
relations with them and financial entities.
Experience: Homaira Akbari was non-executive director of Gemalto
NV and Veolia Environment, S.A. She was chair and CEO of SkyBitz,
Inc., managing director of TruePosition Inc., non-executive director of
Covisint Corporation and US Pack Logistics LLC. She has also held
various posts at Microsoft Corporation and Thales Group and she was
non-executive chair of WorkFusion, Inc.
Other positions of note: Ms Akbari is chief executive officer of
AKnowledge Partners, LLC and an independent director of Landstar
System, Inc. and Temenos, AG.
Positions in other Group companies: Ms Akbari is non-executive
director of Santander Consumer USA Holdings Inc. and PagoNxt, S.L.
Membership of board committees: Audit committee, innovation and
technology committee, and responsible banking, sustainability and
culture committee.
Skills and competencies: Ms Akbari brings significant executive
experience from technology companies. Her knowledge about digital
transformation challenges is an asset to the board. She also has
extensive experience in diverse regions and knowledge of water,
energy and waste management and treatment, which are of
particular value to the Group's sustainability policy.
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Javier
Botín-Sanz de Sautuola y O’Shea
Non-executive director
Álvaro
Cardoso de Souza
Non-executive director (independent)
Mr Botín joined the board in 2004.
Mr de Souza joined the board in 2018.
Nationality: Spanish. Born in 1973 in Santander, Spain.
Nationality: Portuguese. Born in 1948 in Guarda, Portugal.
Education: Degree in Law from the Complutense University of
Madrid.
Experience: Javier Botín founded JB Capital Markets, Sociedad de
Valores, S.A.U in 2008 and has been its executive chair ever since. He
was co-founder and executive director of the equities division of M&B
Capital Advisers, S.V., S.A. (2000-2008). Previously, he had been a
legal adviser within the International Legal Department of Banco
Santander, S.A. (1998-1999).
Other positions of note: In addition to the financial sector, Mr Botín
works with several not-for-profit organizations. He has been chair of
the Botín Foundation since 2014 and is also a trustee of the Princess
of Girona Foundation.
Skills and competencies: Mr Botín brings international and
managerial expertise to the board, particularly in finance and
banking. He also brings a deep understanding of Grupo Santander, its
operations and its strategy from his tenure as a non-executive
director.
Education: Degree in Economics and Business Administration from
Pontificia Universidade Católica de São Paulo, MBA-Management
Program for Executives from the University of Pittsburgh, and a
graduate of the Investment Banking Marketing Program at Wharton
Business School.
Experience: Álvaro Cardoso has held various roles in Citibank Group,
including CEO of Citibank Brazil, as well as senior roles in the US
relating to consumer finance, private banking and Latin America. He
was a board member at AMBEV. S.A., Gol Linhas Aéreas, S.A. and
Duratex, S.A. He was chair of WorldWildlife Group (WWF) Brazil, a
board member at WWF International and chair and member of the
audit and asset management committees of FUNBIO (Fundo
Brasileiro para a Biodiversidade). In addition, he has been non-
executive chair of Banco Santander (Brasil) S.A. since 2017 until
2021.
Membership of board committees: Responsible banking,
sustainability and culture committee.
Skills and competencies: Mr de Souza possesses broad international
experience in banking, particularly in Brazil. He has a solid
understanding of strategy and risk management. In addition, his
active involvement with several environmental foundations and
NGOs brings with him very useful knowledge about sustainability.
Annual report 2021 203
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Sol
Daurella Comadrán
Non-executive director (independent)
Henrique
de Castro
Non-executive director (independent)
Ms Daurella joined the board in 2015.
Joined the board in 2019.
Nationality: Spanish. Born in 1966 in Barcelona, Spain.
Nationality: Portuguese. Born in 1965 in Lisbon, Portugal.
Education: Degree in Business and MBA from ESADE.
Experience: Sol Daurella Comadrán served on the board of the
Círculo de Economía and was an independent non-executive director
at Banco Sabadell, S.A., Ebro Foods, S.A. and Acciona, S.A. She has
also been the honorary consul-general of Iceland in Barcelona since
1992.
Other positions of note: Ms Daurella is chair of Coca-Cola Europacific
Partners plc and executive chair of Olive Partners S.A. She also holds
several roles at Cobega Group companies and is chair of the board of
trustees of the FERO Oncology Research Foundation and vice-
president of Instituto de la Empresa Familiar.
Membership of board committees: Nomination committee,
remuneration committee, and responsible banking, sustainability and
culture committee.
Skills and competencies: Ms Daurella brings to the board excellent
strategy and high-level management skills from her international
top-executive experience at listed and large privately-held entities,
particularly distributors. She has vast knowledge of corporate
governance as the former chair of several boards. She also possesses
audit experience, having served on several audit committees. In
addition, as a trustee at various health, education and environmental
foundations, Ms Daurella contributes responsible business and
sustainability insight to the board.
Education: Degree in Business Administration from the Lisbon School
of Economics & Management (Portugal) and MBA from the University
of Lausanne (Switzerland).
Experience: Henrique de Castro was an independent director at First
Data Corporation and chief operating officer at Yahoo. Previously, he
had been the manager of worldwide devices, media and platforms at
Google, European sales and business development manager at Dell
Inc. and a consultant at McKinsey & Company.
Other positions of note: Mr de Castro is an independent director of
Fiserv Inc.
Positions in other Group companies: Mr de Castro is a non-executive
director of PagoNxt, S.L.
Membership of board committees: Audit committee, remuneration
committee, and innovation and technology committee.
Skills and competencies: Due to his executive roles in the world’s top
technology companies, Mr de Castro brings valuable experience in
technological and digital strategy from a wide range of geographies.
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Gina
Díez Barroso
Non-executive director (independent)
Luis
Isasi Fernández de Bobadilla
Non-executive director (*)
Ms Díez joined the board in 2020.
Mr Isasi joined the board in 2020.
Nationality: Mexican. Born in 1955 in Mexico City, Mexico.
Nationality: Spanish. Born in 1956 in Jerez de la Frontera, Spain.
Education: Degree in Design from Centro de Diseño, Mexico City.
Experience: She has over 20 years' experience in the real estate and
education sectors. Until April 2020, she was an independent director
of Banco Santander México, S.A. and several Grupo Santander
companies in Mexico. She has been member of the board of directors
of Americas Society and Council of the Americas, Laurel Strategies
and Qualitas of Life Foundation. She has also been a founder and a
trustee of the Pro-Educación Centro and Diarq foundations.
Other positions of note: She is the founder and president of Grupo
Diarq, S.A. de C.V. and Centro de Diseño y Comunicación, S.C.
(Universidad Centro). In addition, she is a member of the board of
Dalia Women, S.A.P.I de C.V. (Dalia Empower), member of Comité de
200 (C200) and represents Mexico at the W20, the G20 womens'
initiative.
Membership of board committees: Nomination committee.
Skills and competencies: Ms Díez possesses vast experience in the
real estate and education sectors, and has extensive knowledge of
responsible business and sustainability as a result of having been a
charter member and trustee of foundations focusing on education,
gender diversity and social support.
Education: Degree in Economics and Business Administration and
MBA from Columbia Business School.
Experience: With broad experience in the financial and securities
market sectors, Mr Isasi began his career at Abengoa, before holding
various executive positions at JP Morgan in New York and First
National Bank of Chicago in London. In 1987, he joined Morgan
Stanley as managing director of investment banking for Europe and,
from 1997 to February 2020, held the role of chair and country head
for Spain. He is now a senior adviser there. He has also been director
of Madrileña Red de Gas, S.A. and Sociedad Rectora de la Bolsa de
Madrid, S.A., as well as an independent director of Grifols, S.A.
Other positions of note: Mr Isasi is a non-executive chair of
Santander España and an independent director of Compañía de
Distribución Integral Logista Holdings, S.A. (Logista).
Membership of board committees: Executive committee,
remuneration committee, and risk supervision, regulation and
compliance committee.
Skills and competencies: Mr Isasi has vast experience in a wide range
of sectors and international markets (in particular, finance and
investment banking) as well as a strong institutional network within
Spain.
(*) In the opinion of nomination committee and board of directors, Mr Isasi meets the requirements to be considered independent, despite being categorized as other external
based on a standard of prudence. For more information, see subsection 'Other external directors', section 4.2.
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Ramiro
Mato García-Ansorena
Non-executive director (independent)
R Martín
Chávez Márquez
Non-executive director (independent)
Mr Mato joined the board in 2017.
Mr Chávez joined the board in 2020.
Nationality: Spanish. Born in 1952 in Madrid, Spain.
Education: Degree in Economics from the Complutense University of
Madrid and graduate of Harvard Business School’s Management
Development Programme.
Nationality: American. Born in 1964 in Alburquerque, New Mexico
(US).
Education: A.B. magna cum laude in Biochemical Sciences and
Master of Computer Science from Harvard University. PhD in Medical
Information Sciences from Stanford University.
Experience: Ramiro Mato held several roles in Banque BNP Paribas,
including chair of BNP Paribas Group in Spain. Previously, he had held
several top roles in Argentaria. He sat on the board of the Spanish
Banking Association (AEB, representing Banque BNP Paribas) and
Bolsas y Mercados Españoles, S.A. (BME), and was a member of the
board of trustees of Fundación Española de Banca para Estudios
Financieros (FEBEF).
Other positions of note: Mr Mato is chair of Ansorena, S.A. and vice-
chair of the board of trustees of Fundación Esperanza y Alegría.
Membership of board committees: executive committee, audit
committee, risk supervision, regulation and compliance committee,
and responsible banking, sustainability and culture committee
(chair).
Skills and competencies: Mr Mato has had an extensive career in
banking and capital markets. He has held senior executive and non-
executive roles and brings considerable expertise in top
management, audit, risk and strategy, mainly within the financial
sector. He has also been active on the boards of trustees of several
education foundations.
Experience: Mr Chávez was Chief technology officer (CTO) and co-
founder of Quorum Software Systems (1989-1993), global head of
energy derivatives at Credit Suisse Financial Products (1997-2000)
and CEO and co-founder of Kiodex (2000-2004). In 2005, he joined
Goldman Sachs, where he was a partner from 2006 to 2019 and
where he held various executive positions, including global co-head
of the securities division, Chief information officer (CIO) and CFO. He
was also member of the management committee from 2012 until
2019, when he left the firm. Furthermore, he has been director of
PNM Resources, Inc., the International Swaps and Derivatives
Association (ISDA) of The Santa Fe Opera, of Mount Sinai Genomics,
Inc. DBA Sema4 and of Paige.AI, Inc., as well as member of the
Harvard University Board of Overseers and member of the board of
trustees of amfAR (the Foundation for AIDS Research) and of the
Institute for Advanced Study of Princeton (New Jersey).
Other positions of note: Mr Chávez is senior executive vice-chair of
Sixth Street Partners Management Company, L.P. and non-executive
chair of Recursion Pharmaceuticals, Inc. He is also member of the
board of trustees of the Los Angeles Philharmonic and member of
the Stanford University School of Medicine Board of Fellows.
Likewise, he is a senior advisor of Cambrian Biopharma, Earli,
Block.one, Ketch Kloud and Abacus.AI.
Positions in other Group companies: Mr Chávez is a non-executive
director of PagoNxt, S.L.
Membership of board committees: Nomination committee,
remuneration committee, risk supervision, regulation and
compliance committee and innovation and technology committee
(chair).
Skills and competencies: Mr Chávez brings extensive experience in
the global financial and IT sectors, which will enhance the board's
digital capabilities. His membership on the governing and advisory
bodies of prestigious academic institutions and healthcare entities
will contribute considerable value to the Group’s sustainability
strategy development .
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Sergio
Rial
Non-executive director (*)
Belén
Romana García
Non-executive director (independent)
Mr Rial joined the board in 2020.
Belén Romana joined the board in 2015.
Nationality: Spanish and Brazilian. Born in 1960 in Rio de Janeiro,
Brazil.
Nationality: Spanish. Born in 1965 in Madrid, Spain.
Education: Degree in Law and Economics and postgraduate studies
from the Instituto Brasileiro do Mercado de Capitais, Insead, Harvard
Business School and Wharton Business School.
Experience: Mr Rial joined the Group as chair of the board of Banco
Santander (Brasil) S.A. in 2015, a position he held until 2016, and has
been serving as chief executive officer (CEO) and vice-chair of the
board from 2016 to 2021. He has also been regional head for South
America of the Group (2019–2021). He held various executive
positions at ABN Amro group between 1982 and 2004, including CEO
for Asia and member of the global ExCo. He also held various
executive positions at Cargill Inc. between 2004 and 2012, including
executive vice-chair, member of the board of directors and global
CFO. He has also been CEO at Seara Foods and Marfrig Global Foods
and a director of Mosaic Fertilizers and non-executive director of SAM
Investment Holding, S.L., Banco Santander International (USA) and
PagoNxt, S.L.
Other positions of note: Mr Rial is an independent director of Delta
Airlines Inc. and non-executive chair of Ebury Partners Limited.
Positions in other Group companies: Mr Rial is the non-executive
chair of Banco Santander (Brasil) S.A.
Skills and competencies: Mr Rial brings extensive executive
experience in banking and finance. He also has a deep understanding
of Latin American markets, especially Brazil. His previous experience
in multinational groups across geographical areas and sectors
increases the board’s diversity and gives it a valuable perspective on
environmental and social issues.
Education: Degree in Economics and Business Administration from
Universidad Autónoma de Madrid and State Economist.
Experience: Belén Romana was formerly senior executive vice-
president of Economic Policy, director-general of the Treasury of the
Spanish Ministry of Economy, and director at Banco de España and
the CNMV. She was also a director at the Instituto de Crédito Oficial
and other entities on behalf of the Spanish Ministry of Economy. She
served as a non-executive director at Banco Español de Crédito, S.A.
and as executive chair of Sociedad de Gestión de Activos Procedentes
de la Reestructuración Bancaria, S.A. (SAREB).
Other positions of note: Non-executive director of Aviva plc, London
and independent director of SIX Group AG and Bolsas y Mercados
Españoles, Sociedad Holding de Mercados y Sistemas Financieros,
S.A.U. Furthermore, she is co-chair of the Global Board of Trustees of
the Digital Future Society and member of the advisory board of
Rafael del Pino Foundation, of Inetum and of TribalData and senior
advisor of Artá Capital.
Membership of board committees: Executive committee, audit
committee, risk supervision, regulation and compliance committee
(chair), innovation and technology committee, and responsible
banking, sustainability and culture committee.
Skills and competencies: Given her background as a government
economist and overall executive and non-executive experience in
finance (particularly from serving on the audit committees of listed
companies), Ms Romana is a recognised financial expert. Having held
key positions in credit institutions and the regulatory and supervisory
bodies of the financial industry and securities markets in Spain, she
also provides strategic insights into banking, financial regulations and
government relations in Spain and Europe.
(*) Until 31 December 2021 as executive director. See section 4.2 'Board composition'.
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Pamela
Walkden
Non-executive director (independent)
Jaime
Pérez Renovales
General secretary and secretary of the board
Mrs Walkden joined the board in 2019.
Jaime Pérez Renovales joined the group in 2003.
Nationality: British. Born in 1960 in Worcester, England.
Nationality: Spanish. Born in 1968 in Valladolid, Spain.
Education: Degree in Law and Business Administration from
Universidad Pontificia de Comillas (ICADE E-3) and state attorney.
Experience: Jaime Pérez Renovales was director of the office of the
second deputy prime minister for Economic Affairs and Minister of
Economy, deputy secretary to the Spanish Prime Minister, chair of the
Spanish State Official Gazette and the committee for Government
Reform. Previously, he had been vice general counsel and vice-
secretary of the board. He was also head of Grupo Santander’s legal
department, general counsel and secretary of the board at Banco
Español de Crédito, S.A. and deputy director of legal services at the
CNMV. He is the representative of Banco Santander in the Board of
Trustees the Foundation Princess of Asturias and member of the jury
of the Social Sciences Awards of the Foundation and chair of the
ICADE Business Club.
Mr Pérez is the secretary of all board committees.
Education: Master's Degree in Economics from Cambridge University.
Experience: Pamela Walkden has had an extensive career in banking.
She has served in a number of senior management positions at
Standard Chartered Bank, including as Group Head of Human
Resources, Chief Risk Officer, Group Treasurer, Group Head of Asset
and Liability Management and Regional Markets, Group Head of
Internal Audit, Group Head of Corporate Affairs and Group Manager
of Investor Relations. In addition, she served as an independent
member of the UK Prudential Regulation Authority (PRA) Regulatory
Reform Panel as member of the European Banking Authority
Stakeholder Group and a lay member of the Welfare and Ethics
Committee of the Royal Veterinary College.
Other positions of note: Mrs Walkden is a member of the advisory
board of JD Haspel Limited.
Positions in other Group companies: She is an independent non-
executive director of Santander UK plc and of Santander UK Group
Holdings plc.
Membership of board committees: Audit committee (chair) and risk
supervision, regulation and compliance committee.
Skills and competencies: Ms Walkden is a recognised financial expert
in view of her broad, international experience in banking and auditing.
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4.2 Board composition
Size
At 31 December 2021, the board of directors was made up of the 15
members whose profile and background are described in section 4.1
'Our directors'. The Bylaws allow it to have between 12 and 17
members.
Composition by type of director
The composition of the board of directors is balanced between
executive and non-executive directors, most of whom are
independent. Each director’s status has been verified by the
nomination committee and submitted to the board.
Executive directors
• Ana Botín, Group Executive Chair
• José Antonio Álvarez, Group Vice-Chair and Chief Executive Officer
Section 4.3 provides a more detailed description of their roles and
duties under 'Group executive chair and chief executive officer'.
Independent directors
• Bruce Carnegie-Brown (lead independent director)
• Homaira Akbari
• Álvaro Cardoso
• R. Martín Chávez
• Sol Daurella
• Henrique de Castro
• Gina Díez
• Ramiro Mato
• Belén Romana
• Pamela Walkden
Every year, the nomination committee verifies the independence of
the board members in this category and informs the board of its
findings. It takes all pertinent circumstances into account, particularly
possible significant business relations that could affect their
independence. This analysis is described further in section 4.6
'Nomination committee activities in 2021' and in subsection C.1.3 in
section 9.2 'Statistical information on corporate governance required
by the CNMV'.
Independent non-executive directors account for 66.7% of board
members. This conforms to best corporate governance practices as
well as the board’s Rules and regulations, which require that the
board be predominantly made up of non-executive directors with at
least 50% independent directors.
At the end of 2021, the average term of independent non-executive
directors was 4.05 years.
TERM OF INDEPENDENT DIRECTORS
Other external directors
• Javier Botín
• Luis Isasi
• Sergio Rial
These directors cannot be classified as independent directors for the
following reasons:
• Mr Botín has been director for over 12 years.
• Mr Isasi as, although the nomination committee and the board
believe that he meets the requirements to be classed as an
independent director - in view of his remuneration as non-
executive chair of Santander España, his entitlements as a director
and the special nature of this body as supervisor of a business unit
without its own corporate identity separate to Banco Santander,
under prudent criteria it is considered preferable to classify him as
an external director.
• Mr Rial, as a former executive director of Banco Santander as CEO
of Banco Santander (Brasil) S.A. and Regional head of South
America until 31 December 2021.
OUR BOARD COMPOSITION
Annual report 2021 209
3.03.43.013.563.423.024.052015201620172018201920202021Independentdirectors66.67%Executivedirectors13.33%Other externaldirectors20.00%
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TENURE AND EQUITY OWNERSHIP
Board of directors
A
Executive chair
Ana Botín
Tenure
Banco Santander shareholding
D
Date of first
appointment
04/02/1989
B Date of last
appointment
03/04/2020
C
End date
03/04/2023
Direct
Indirect
1,395,980 29,112,074
Shares
represented
Total
30,508,054
% of
share
capital
0.176%
Vice chair and chief
executive officer
Vice chair
Members
José Antonio Álvarez
25/11/2014
12/04/2019
12/04/2022
1,984,677
1,984,677
0.011%
Bruce
Carnegie-Brown
Homaira Akbari
Javier Botín
Álvaro Cardoso
R. Martín Chávez
Sol Daurella
Henrique de Castro
Gina Díez
Luis Isasi
Ramiro Mato
Sergio Rial
Belén Romana
Pamela Walkden
Total
25/11/2014
26/03/2021
26/03/2024
59,940
59,940
0.000%
27/09/2016
25/07/2004
23/03/2018
27/10/2020
25/11/2014
12/04/2019
22/12/2020
03/04/2020
28/11/2017
03/04/2020
22/12/2015
29/10/2019
26/03/2021
26/03/2021
26/03/2021
27/10/2020
03/04/2020
12/04/2019
22/12/2020
03/04/2020
26/03/2021
30/05/2020
12/04/2019
03/04/2020
26/03/2024
26/03/2024
26/03/2024
27/10/2023
03/04/2023
12/04/2022
03/04/2023
03/04/2023
26/03/2024
03/04/2023
12/04/2022
03/04/2023
67,826
113,739
476,837
45,913
E
5,502,083 19,468,444 154,412,223
0.001%
179,382,750 1.034%
0.000%
0.000%
0.004%
0.000%
0.000%
0.000%
0.001%
0.001%
0.000%
0.000%
9,659,060 49,103,272 154,412,223 182,666,501 1.052%
0
0
149,483
2,982
0
0
256,860
236,413
208
2,608
0
0
626,320
2,982
0
0
256,860
236,413
212
2,608
4
General secretary and
secretary of the board
Jaime Pérez
Renovales
A. Figures from 31 December 2021.
B. The date of first appointment referred herein may not match with the date of acceptance of the position.
C. For more details, see 'Election, renewal and succession' in section 4.2. The periods provided do not take into account the additional period that may apply under article 222 of
the Spanish Companies Act nor the annual renewal of one-third of the board established in article 55.1 of the Bylaws.
D. Banco Santander’ shareholding policy aims to align our executive directors and shareholders’ long-term interests. It includes the obligation for each executive director to
maintain a significant investment in Banco Santander's shares while performing executive duties, equivalent to twice their annual salary. Executive directors have five years
from the time they were appointed to reach the required level of investment. Until they do so, any shares they receive as remuneration are subject, in addition to the
regulatory obligation not to sell them for one year from delivery, which applies to all cases, to a mandatory three-year holding period from their date of delivery, unless they
already hold the mentioned investment equivalent.
E. Includes shares owned by Fundación Botín (chaired by Javier Botín) and syndicated shares. It includes shares corresponding to Ana Botín that are also included within their
direct or indirect shareholdings, but excluding Javier Botín's syndicated shares. In subsection A.3 of section 9.2 'Statistical information on corporate governance required by
the CNMV', we adapted this information to the CNMV’s format and, therefore, added all the syndicated shares as Javier Botín’s shareholdings. See 2.4 'Shareholders’
agreements'.
For more details, see section 9.2 'Statistical information on corporate governance required by the CNMV'.
Diversity
A diverse board of directors is essential to its effectiveness. The
combination of skills and experiences creates an environment with
varied points of view that improves the quality of decision-making.
Thus, we seek to achieve a sound balance of technical skills, expertise
and points of view.
Our policy on the selection, suitability assessment and succession of
directors helps make our board more diverse from different
perspectives, for instance, in terms of gender, age, geographical
provenance, experience and knowledge. It was amended in July 2018
in line with European legislation on the disclosure of non-financial
and diversity information and the European Banking Authority (EBA)
and the European Securities and Markets Authority (ESMA) joint
guidelines on suitability assessments of board members and key
functions holders.
In 2019, the new gender equality target of 40%-60% representation
of either gender in the board, was included. The policy was later
amended in April 2020, at the time of the general review of the
succession process for directors and other executive positions, and in
December 2020, after the CNMV amended the Spanish Corporate
Governance Code in June 2020 to include age diversity as a factor to
take into account. Banco Santander applies this policy to select
candidates for any vacancy on the board.
Our selection policy aims to diversify the board of directors in
different terms. In particular:
• Country of origin or international education: selection considers
cultural diversity and international education and experience,
especially in the Group's main geographies.
• Gender equality: the nomination committee and the board of
directors understand the importance of fostering equal opportunity
between men and women as well as the need for women board
members who possess the necessary skills, suitability and
commitment to the role. They make a conscious effort to find
women candidates with the required profile. Our policy fosters a
selection of directors which maintains a balanced presence of
women and men on the board.
On 26 February 2019, the board changed its minority gender
target, set at 30% in 2016 by the nomination committee, to a
gender target in the board by 2021, which implies a minimum and
maximum representation of either gender of 40% to 60%. By
November 2019, the board met this target and, at year-end,
women already accounted for 40% of board members.
Annual report 2021 210
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The board’s number of women members is above the average for
large listed companies in Spain and Europe. According to figures
published by the CNMV in May 2021, based on the annual
corporate governance reports for 2020, the percentage of female
directors in IBEX 35 companies in Spain was on average 31.26%.
Furthermore, according to the last Gender Diversity Index Report
published by European Women on Boards (an association which
cooperates with the European Commission) in October 2021 the
percentage of female directors in large listed companies was, on
average, 35%.
• Age: the selection policy on the selection, suitability assessment
and succession of directors also considers that selection processes
must promote age diversity. There are no age limits for becoming a
director or holding any role on the board, including the chair and
the chief executive officer.
• Education and career: selection ensures that candidates are
qualified and suitable to understand our Group’s businesses,
structure and geographies individually and collectively; and that
they fit within the Santander culture. The appointment process
ensures that candidates will have skills and expertise in such areas
deemed important for the Group. It takes into account education
and work experience. In addition to professional experience, it
considers their academic education.
• Our policy has no implicit bias that could lead to discrimination due
to race, disability and/or ethnicity.
Board skills and diversity matrix
The board’s skills matrix reflects the balance of the knowledge, skills,
qualifications, diversity and experience required to design and pursue
our long-term strategy in an ever-changing market.
We updated it in 2018 to make it simpler, more transparent and
comprehensive. It contains more information for our investors and
other stakeholders, who demand that certain skills be more visible
on our board. We also took into account recommendations from the
EBA and ESMA guidelines on the suitability assessment of board
members and key functions holders, and also ECB Guide to fit and
proper assessments. It has been further updated in October 2020 to
disclose information on board's diversity in terms of age, on the back
of the CNMV's approval of the revised version of the Spanish
Corporate Governance Code.
This year's matrix (below) follows the structure introduced last year:
• We distinguish thematic and horizontal skills.
• We include a separate diversity section that details diversity in
terms of gender, country of origin and/or education abroad, and
age. Finally, we also show board tenure.
In line with last year, the skills matrix discloses each board member's
skills and competence as a sign of our commitment to transparency.
Section 4.1 'Our directors' includes a paragraph on each director's
skills and competence to more clearly substantiate the matrix.
We also include an additional chart (entitled 'Committees skills and
diversity matrix') that shows the balanced diversity of skills on the
board as a whole and on each board committee. That enables the
board committees' overall effectiveness to be evaluated as it refers
to the significant presence of the skills relevant to each committee's
scope.
This year's matrix (below) shows that there are no substantial gaps
with regard to the qualitative composition of the board and its
committees, although we remain focused on ensuring a robust board
skills diversity. In particular, the ongoing need for coverage of
strategic markets for Banco Santander as well as for technology,
digital strategy, banking, finance and regulatory and ethics
experience and expertise remains important, as evidenced by our
most recent board appointments. The appropriateness of board
skills and diversity will continue to be monitored on an ongoing basis.
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BOARD SKILLS AND DIVERSITY MATRIX
Executive
Independent
Other external
José Antonio
Álvarez
(vice chair -
CEO)
Ana Botín
(chair)
Bruce
Carnegie-Brown
(vice chair and
lead independent
director)
Homaira
Akbari
R. Martín
Chávez
Sol
Daurella
Henrique
de Castro
Álvaro
Cardoso
Gina
Díez
Barroso
Ramiro
Mato
Belén
Romana
Pamela
Walkden
Javier
Botín
Luis
Isasi
Sergio
Rial
SKILLS AND EXPERIENCE
THEMATIC SKILLS
Banking (93.3%)
Other financial services (66.7%)
Accounting, auditing and financial literacy (100%)
Retail (86.7%)
Digital & information technology (53.4%)
Risk management (86.7%)
Business strategy (100%)
Responsible business & sustainability (80%)
Human resources, culture, talent & remuneration (93.3%)
Legal and regulatory (13.3%)
Governance and control (86.7%)
International experience
Continental Europe (80%)
US/UK (93.3%)
Latam (73.3%)
Others (46.7%)
HORIZONTAL SKILLS
Top management (100%)
Government, regulatory and public policy (6.7%)
Academia and education (46.7%)
Significant directorship tenure (86.7%)
DIVERSITY
Female (40%)
Continental Europe (60%)
US/UK (80%)
Latam (20%)
Others (6.7%)
Less than 55 (6.7%)
From 55 to 65 (73.3%)
More than 65 (20%)
Country of origin /
international education
Age (years old)
BOARD TENURE
0 to 3 years (46.7%)
4 to 11 years (40%)
12 years or more (13.3%)
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COMMITTEES SKILLS AND DIVERSITY MATRIX
SKILLS AND EXPERIENCE
THEMATIC SKILLS
Banking
Other financial services
Accounting, auditing and financial literacy
Retail
Digital and information technology
Risk management
Business strategy
Responsible business and sustainability
Human resources, culture, talent and remuneration
Legal and regulatory
Governance and control
Continental Europe
US/UK
LatAm
Others
Continental Europe
US/UK
Latam
Others
Less than 55
From 55 to 65
More than 65
International experience
HORIZONTAL SKILLS
Top management
Government, regulatory and public policy
Academia and education
Significant directorship tenure
DIVERSITY
Female
Country of origin / international
education
Age (years old)
BOARD TENURE
0 to 3 years
4 to 11 years
12 years or more
Contents
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Executive
committee
Audit
committee
Nomination
committee
Remuneration
committee
Risk supervision,
regulation and
compliance committee
Innovation and
technology
committee
Responsible banking,
sustainability and
culture committee
100 %
100 %
100 %
100 %
66.7 %
100 %
100 %
83.3 %
100 %
16.7 %
100 %
100 %
100 %
66.7 %
33.3 %
100%
16.7%
50%
100%
33.3 %
83.3 %
100 %
–
–
–
83.3 %
16.7 %
16.7 %
66.7 %
16.7 %
80 %
60 %
100 %
100 %
60 %
80 %
100 %
60 %
100 %
20 %
80 %
80 %
100 %
60 %
60 %
100 %
20 %
40 %
80 %
60 %
60 %
80 %
–
20 %
–
80 %
20 %
40 %
60 %
–
100 %
50 %
100 %
50 %
50 %
75 %
100 %
100 %
100 %
25 %
75 %
75 %
75 %
50 %
75 %
100 %
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100 %
75 %
50 %
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75 %
25 %
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50 %
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40 %
100 %
80 %
60 %
80 %
100 %
60 %
100 %
20 %
80 %
100 %
100 %
60 %
80 %
100 %
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60 %
80 %
20 %
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60 %
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60 %
40 %
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100 %
60 %
100 %
80 %
40 %
100 %
100 %
60 %
100 %
40 %
100 %
80 %
100 %
60 %
60 %
100 %
20 %
40 %
60 %
40 %
60 %
100 %
–
–
–
80 %
20 %
60 %
40 %
–
85.7 %
71.4 %
100 %
85.7%
85.7 %
85.7 %
100 %
85.7 %
100 %
28.6 %
85.7 %
100 %
100 %
71.4 %
42.9 %
100 %
14.3 %
57.1 %
85.7 %
42.9 %
57.1 %
85.7 %
–
14.3 %
–
100 %
–
28.6 %
57.1 %
14.3 %
100 %
60 %
100 %
100 %
40 %
100 %
100 %
100 %
100 %
20 %
100 %
80 %
100 %
60 %
40 %
100 %
20 %
60 %
100 %
60 %
60 %
80 %
20 %
20 %
–
60 %
40 %
20 %
80 %
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Annual report 2021 213
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governance
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financial review
Risk management
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Election, renewal and succession of directors
Election of directors
Our directors are appointed for three-year terms. However, one-third
of board members are renewed each year in order of their tenure,
based on when they were appointed. Outgoing directors may be re-
elected. Each appointment, re-election and ratification is submitted
to a separate vote at the general meeting.
Procedures for appointing, re-electing, evaluating and removing
directors
Our internal policy for the selection, suitability assessment and
succession of directors dictates standards for the board’s quantitative
and qualitative composition, how it is revised and how new
candidates are identified, selected and appointed.
Shareholders appoint and re-elect directors at the general meeting. If
directors step down during the term of office, the board of directors
may provisionally designate another director by co-option until the
general meeting confirms or revokes the appointment at the earliest
subsequent meeting.
The nomination committee must issue a report and a reasoned
opinion in advance of any proposal the board will make to
shareholders to appoint, re-elect and ratify any category of director,
as well as in advance of any board resolution about co-option.
Proposals must include a duly substantiated report prepared by the
board containing an assessment of the qualifications, experience and
merits of the proposed candidate. Re-election and ratification
proposals will provide an assessment of the work and dedication to
the position during the last period in which the proposed director
held office. If the board disregards the nomination committee's
opinion, it must explain its decision and record its reasons in meeting
minutes.
Directors must meet specific requirements dictated by laws for credit
institutions and our Bylaws. Upon taking office, they must formally
undertake to fulfil the obligations and duties prescribed therein and
in the Rules and regulations of the board.
Our directors must be of renowned business and professional
integrity, and have the knowledge and experience needed to perform
their role and exercise good governance. Director candidates will also
be selected on the basis of their professional contribution to the
entire board.
For more details, see section 4.1 'Our directors' and the 'Board skills
and diversity matrix' in section 4.2.
The board of directors will endeavour to have significantly more
external or non-executive directors than executive directors, and for
the number of independent directors to make up at least half of all
members.
Our directors shall cease to hold office when the term for which they
were appointed ends (unless they are re-elected); when the general
meeting so resolves; or when they resign. When a director ceases to
hold office prior to the end of his or her term (i.e. by general meeting
resolution or by resignation), the director shall sufficiently explain the
reasons for the resignation or, in the event of non-executive directors,
their opinion on the reasons for their cessation in office by the
general meeting in a letter to the other board members. In addition,
when appropriate, Banco Santander will publicly disclose the
cessation in office, including sufficient information on the director's
reasons or circumstances provided by the director.
Directors must tender their resignation to the board and formally
step down from their position if the board, on recommendation of
the nomination committee, deems it appropriate in cases that may
adversely affect the board's functioning or Banco Santander’s
credibility or reputation. In particular, they must resign if they find
themselves in a circumstance of ineligibility or prohibition provided
by law, irrespective of Royal Decree 84/2015, which implements Act
10/2014 on the organization, supervision and solvency of credit
institutions, and on the honourability requirements for directors and
the consequences of directors who subsequently fail to meet them.
Directors must notify the board, as soon as possible, of any
circumstances affecting them (whether or not they are related to
their performance in Banco Santander) that might damage
Santander's credibility or reputation, especially when under criminal
investigation; and of the developments of any criminal proceedings.
When the board is informed, or becomes aware in another way, of
any such situations, it will examine them as soon as possible and,
based on the particulars, will decide, following a report from the
nomination committee, any measures to adopt, such as opening an
internal investigation, calling on directors to resign or proposing their
dismissal.
Proprietary non-executive directors must also tender their
resignation when the shareholder they represent sells off or
significantly reduces its equity holding.
Succession planning
Succession planning is a key element of our good governance as it
ensures orderly role transitions, as well as board continuity and
stability and its adequate refreshment and independence. It is a
yearly cycle with a well-defined methodology and timelines, and a
clear allocation of responsibilities. Our aim is to boost diverse talent
pipelines across functions.
Santander’s policy on director selection, suitability assessment and
succession focuses on:
• Quantitative and qualitative board and committee composition
criteria that are set by the Bylaws, the Rules and regulations of the
board of directors and the board itself and include suitability and
diversity standards and targets.
• A periodic review of the quantitative and qualitative composition of
the board of directors and its committees that includes an overall
suitability assessment of the board.
• Identification of potential candidates to join the board of directors.
• A robust board member selection, suitability and nomination
process.
This policy has specific core performance indicators, reviewed each
year, for such aspects as succession effectiveness (replacements
fulfilled by identified candidates); the number of internal and
external candidates immediately available to succeed executive
directors; training and development plans for potential candidates to
succeed executive directors in one to three years; gender diversity
and country of origin or international education; updated board
member tenure; the strength of the list of successors to executive
directors, committee chairs and the lead independent director; and
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Risk management
and compliance
the percentage of candidates to succeed directors who are
immediately available (or candidates for a one-to-three year period).
The nomination committee and the board prioritize member
succession planning, with sound and appropriate plans in place that
are regularly revisited. Given the importance that the Group places in
succession planning, in 2020 an external opinion was sought in
relation to our succession policy and associated succession processes
concluding that our succession arrangements and framework meet
regulatory requirements and align with industry best practice.
• Group executive chair and chief executive officer, who are the
most senior executives in the Group’s strategic and ordinary
management, which the board is responsible for overseeing,
ensuring that their roles are clearly separated and complementary.
The respective roles and responsibilities have been updated as at
the date of this report. Further details are shown below.
• A lead independent director who is responsible for coordinating
non-executive directors effectively and making sure they serve as
an appropriate counter- balance to executive directors.
• A board committee structure, which supports the board in:
4.3 Board functioning and effectiveness
• Managing Group by exercising decision-making powers in the
The board is the highest decision-making body and
focuses on supervision
Banco Santander’s board of directors is our highest decision-making
body, except in matters reserved to shareholders at the general
meeting. It performs its duties with unity of purpose and
independent judgement.
The board’s policy is to designate executive bodies and managers to
run Group’s day-to-day operations and apply its strategy. It focuses
on general supervision and other functions it cannot delegate by law,
under the Bylaws and the Rules and regulations of the board,
including:
• General policies and strategies (including capital and liquidity, new
products, operations and services; culture and values including
policies on responsible business and sustainability, in particular, on
environmental and social matters; risk control; remuneration
policy; and compliance).
• Financial and non-financial reporting, and information reported to
shareholders, investors and the general public, as well as the
processes and controls that ensure full disclosure.
• Policies on reporting and communication with shareholders,
markets and public opinion, and supervision of the disclosure of
information and communications about Group.
• Internal audit plan.
executive committee.
• Formulating strategy for core areas in the responsible banking,
sustainability and culture committee, and in the innovation and
technology committee.
• In supervision and taking important decisions the audit,
nomination, remuneration and risk supervision, regulation and
compliance committees.
• A board secretary, who supports the board, its committees and
our chair, and is also general secretary of the Group.
Rules and regulations of the board
The board is governed by the rules set out in the Bylaws and the
Rules and regulations of the board, both of which are available at our
corporate website.
• Bylaws. Dictate the basic rules that apply to the composition and
operation of the board and its members' duties and are
supplemented and implemented by the Rules and regulations of
the board. They can be amended only by the general meeting. See
'Rules for amending our Bylaws' in section 3.2.
• Rules and regulations of the board. Set the rules for running and
internally organizing the board of directors and its committees
through the development of applicable laws and Bylaws'
provisions. They set out the principles governing the actions of the
board and its committees and the duties of its members.
• Selection, succession and remuneration of directors, senior
management and other key positions.
In 2021 the board amended its Rules and regulations on two
occasions:
• Effectiveness of the group’s corporate and internal governance
system.
• Significant corporate transactions and investments.
• Calling the general shareholders’ meeting.
On 27 April, to allow the possibility to appoint more than one vice-
secretary of the board to assist with the duties of the secretary of the
board and, where appropriate, to replace him in the event of absence,
inability to act or illness. This possibility was subject to the Bylaws so
providing, so their amendment will be proposed for approval at the
next 2022 AGM. See section 3.5 'Our next AGM in 2022'.
• Governance-related matters in general (including the approval of
non-delegable related-party transactions, which are not subject to
the general meeting's authority).
On 27 July, to adapt them to, and ensure their consistency with Act
5/2021 and to make technical improvements and other minor
changes. The main amendments adapting to Act 5/2021 were to:
• Banco Santander and Group’s corporate and internal governance,
• In relation to the approval and oversight of related-party
including the GSGM, corporate frameworks and internal
regulations.
transactions:
Structure of the board
The board’s governance structure ensures that it discharges its duties
effectively. This section provides further details about this structure,
which can be split into four dimensions:
• Introduce the delegation of the board's power to approve
related-party transactions and an internal reporting and
regular control procedure for any transactions that it has
delegated its power to approve.
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• Lay out the audit committee’s report about related-party
transactions that will be subject to approval at the general
meeting or by the board, as well as its duties in overseeing the
procedure for reporting on, and regularly controlling, any
transactions the board has delegated.
• Align the internal rules for related-party transactions to the
new legal provisions.
•
In relation to the directors' remuneration scheme:
• Adapt the rules on approval, entry into force and maximum
duration of the directors’ remuneration policy to the new legal
provisions.
• Amend the minimum content of the remuneration policy to the
Spanish Companies Act.
• Clarify that, if the annual remunerations report is rejected at
the general meeting, the policy in force can only apply until the
next annual general meeting.
Lastly, on 24 February 2022 the board changed its Rules and
regulations to introduce fundamentally technical amendments and:
• Acknowledge that the board may establish that executives other
than the chair report directly to the board or its committees. In this
connection, on 24 February 2022 the board established that the
chief executive officer will report exclusively to the board in line
with governance best practice as further described below.
• Bolster coordination mechanisms between the audit and the
responsible banking, sustainability and culture committees.
• Coordinate the wording of the Rules and regulations with the
wording of the Bylaws provisions which amendment is proposed
to the 2022 AGM.
The Rules and regulations of the board adhere to all legal
requirements as well as the principles set out in the Spanish
Corporate Governance Code, revised in June 2020; Corporate
Governance Principles for Banks of the Basel Committee on Banking
Supervision of July 2015; and the guidelines established by the EBA in
Guidelines on internal governance that came into force on 31
December 2021.
Our rules on the audit committee also adhere to the
recommendations and good operating practices established in
Technical Guide 3/2017 of the CNMV, on Audit Committees of Public
Interest Entities. It also complies with the US regulations because our
shares are listed as ADS on the NYSE, in particular, with Rule 10A-3
under the Securities Exchange Act (SEA) on standards relating to
audit committees pursuant to the Sarbanes-Oxley act of 2002 (SOX).
Our rules on the nomination and the remuneration committees also
adhere to the recommendations and good operating practices set out
in the CNMV’s Technical Guide 1/2019 on Nomination and
Remuneration Committees.
Group executive chair and chief executive officer
Our executive chair is Ana Botín and our chief executive officer is José Antonio Álvarez. Their respective roles and responsibilities were updated as
at the date of this report in order to accelerate the execution of the Group´s strategy and operations and to align with governance best practices.
The roles of our Group executive chair and chief executive officer are clearly separated, and can be summarized as follows:
ROLES OF THE EXECUTIVE CHAIR AND THE CHIEF EXECUTIVE OFFICER
Executive chair
• The chair is the highest-ranking executive in Grupo Santander
and its main representative with regulators, authorities and other
major stakeholders.
• The chair is responsible for the long-term strategy of the Group,
including new tech digital growth engines, namely PagoNxt and
the Digital Consumer Bank.
• The chair is also responsible for other corporate functions and
units that help drive the Group´s long-term strategy and
transformation, comprising Technology and Data & Architecture,
Human Resources (including Talent), Financial Accounting &
Control, Strategy and Corporate Development, General
Secretariat and Communications & Corporate Marketing.
• Risk, Compliance and Internal Audit functions have free and
unfettered access to the board and its committees in order to
preserve their full independence, without prejudice to the regular
reporting lines to the chair and chief executive officer of the CAE
and CRO.
• The chair also leads the appointment and succession planning of
the senior management of Santander Group, to be submitted for
approval to the nomination committee and board.
Chief executive officer
• The chief executive officer is entrusted with the day-to-day
management of the business with the highest executive
functions and exclusively reports to the board in this regard.
• Accordingly, the chief executive officer’s direct reports are the
senior managers in charge of the business units such as the
regional heads (Europe, North America and South America) and
those in charge of the global businesses (Wealth Management &
Insurance, Corporate & Investment Banking, Cards & Digital
Solutions), encompassing the relevant support & control
functions.
• As responsible for day-to-day management, the CFO and
Investment Platforms & Corporate Investments also report to the
CEO.
• Additionally, the chief executive officer is responsible for
Regulatory & Supervisory Relations and for embedding the
sustainability policy of the Group in the day-to-day management
of Group businesses and the support & control functions.
The duties of the group executive chair, the chief executive officer,
the board, and its committees are clearly separated. Various checks
and balances properly balance Grupo Santander’s corporate
governance structure. In particular:
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Risk management
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• The board and its committees supervise both the group executive
chair and the chief executive officer.
• The board of directors has delegated all its powers to the executive
chair and the chief executive officer, except for those that cannot be
delegated by law and under the Bylaws and the Rules and
regulations of the board. The board directly exercises those powers
to perform its general supervisory function.
• The lead independent director leads the group executive chair’s
succession and appointment.
• The audit committee is chaired by an independent director who is
considered a ‘financial expert’ as defined in Regulation S-K of the
Securities and Exchange Commission (SEC).
• The group executive chair may not simultaneously act as Banco
Santander’s chief executive officer.
• The corporate risk, compliance and internal audit functions report
as independent units to a committee or a member of the board of
directors, and have direct, unfettered access to the board.
Lead independent director
The role of the lead independent director is key to our governance and makes sure that non-executive directors serve as an appropriate counter-
balance to the executive directors.
The following chart illustrates the functions and their application of the lead independent director in 2021:
DUTIES OF THE LEAD INDEPENDENT DIRECTOR AND ACTIVITIES DURING 2021
Duties
Facilitate discussion and open dialogue among independent
directors, including coordinating private meetings of non-executive
directors without the executive present; and proactively engage
with them to consider their views and opinions.
Activities in 2021
Held eight meetings with non-executive directors without
executive directors present, where they were able to voice views
and opinions. The meetings were also a valuable opportunity to
discuss other matters such as, among others, board training topics,
executive director and key management performance; reflections
on areas for continuous improvement with regard to the operation
of the board and its committees; and progress with externally
facilitated Governance and Effectiveness reviews.
Direct the periodic evaluation of the chair of the board of directors
and coordinate her succession plan.
Engagement with shareholders and other investors with the
purpose of gathering information on their concerns, in particular,
with regard to Banco Santander´s corporate governance.
Replace the chair in the event of absence with key rights such as
the ability to call board meetings under the terms set down in the
Rules and regulations of the board.
Request that a meeting of the board of directors be called or that
new items be added to the agenda for a meeting of the board.
Led the annual evaluation of the chair in order to determine her
variable pay. Furthermore, played a key coordination role with
regard to ongoing succession planning activity, as additionally
facilitated through his chairmanship of the nomination committee.
See section 3.1 'Shareholder communication and engagement' for
full details of the lead independent director’s activities.
Although lead independent director did not have to replace the
chair of the board in any board meetings he remained fully
committed with its proper functioning.
While the lead independent director did not need to request
additional board meetings to be called, he remained fully engaged
and informed on board meeting agendas and encouraged
constructive challenge on the same.
The board currently has seven committees and one international advisory board with the following characteristics:
Mandatory committees
(required by Law, under Bylaws or under the Rules and regulations of the board)
Voluntary committees
Decision-making
powers
Supervision, information advice and recommendations
regarding functions in risk, financial reporting and audit,
nomination and remuneration matters
Audit
committee
Nomination
committee
Support and proposal
in strategic areas
Responsible banking,
sustainability and
culture committee
Board
committees
Executive
committee
External
advisory
board
Risk supervision,
regulation and
compliance committee
Remuneration
committee
Innovation and
technology committee
International advisory board
(members are non-directors)
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Secretary of the board
Jaime Pérez Renovales is the secretary of the board. He assists the
chair and ensures the formal and substantial legality of all the
board’s actions. He also makes sure good governance
recommendations and procedures are observed and regularly
reviewed.
The board’s secretary is also general secretary of Banco Santander.
He acts as the secretary of all board committees and thus facilitates a
fluid and effective relationship between the committees and the
different units of the Group that must collaborate with them. It is not
necessary to be a director to be secretary.
The nomination committee must issue an opinion before submitting
proposals to appoint or remove the secretary to the board.
The board has three vice-secretaries. They assist the secretary with
his duties on the board and its committees, and replace him in the
event of absence, inability to act or illness. In April 2021, the board of
directors appointed F. Javier Illescas Fernández-Bermejo (head of
Group Corporate Legal), Julia Bayón Pedraza (head of Group Business
Legal) and Adolfo Díaz-Ambrona Moreno (general secretary of
Santander España) as vice-secretaries, replacing Óscar García
Maceiras (who left the Group in March).
Board meetings
The board of directors held 15 meetings in 2021, including 13
ordinary meetings and 2 extraordinary meetings. The Rules and
regulations of the board dictate that it must hold at least nine annual
ordinary meetings and one quarterly meeting.
Although board meetings follow an annually set calendar and a
provisional agenda of items to discuss, new items can be added to
the agenda and additional meetings can be called in accordance with
new business needs. Directors may also propose items to be added
to the agenda and are duly informed of changes to the calendar and
meeting agendas.
The board also keeps a formal list of matters only it can address. It
prepares a plan to distribute them among the ordinary meetings
scheduled in the provisional calendar it has approved.
Directors are given relevant documents sufficiently in advance of
each meeting of the board. This information sent to them via secure
electronic means is specifically for preparing meetings and, in the
board’s opinion, it is thorough and sent sufficiently in advance.
The Rules and regulations of the board of directors also expressly
recognise directors’ right to request and obtain information on
anything related to Banco Santander and its domestic and foreign
subsidiaries. They also recognise their right to inspect the books, files,
documents and any other records of corporate transactions, in
addition to premises and facilities. Furthermore, directors can
request and obtain any information and advice they deem necessary
from the secretary in order to perform their duties.
The board meets at the chair’s discretion or at the request of at least
three directors.
The lead independent director is also authorised to request a board
meeting or that new items be added to the agenda for a meeting that
has already been called.
checks that no less than 75% of directors attend board and
committee meetings. For further information, see 'Board and
committee attendance' in this section 4.3.
If directors are unable to be present at meeting, they can designate
another director as their special proxy for each meeting in writing to
act on their behalf. Proxies are granted with instructions. Non-
executive directors may only be represented by other non-executive
directors. One director can hold more than one proxy.
The board may meet in various rooms at the same time, provided
that interactivity and communication among them in real time can be
secured by audio-visual means or by telephone to hold the meeting
concurrently.
Board meetings are validly quorate when more than half of its
members attend in person or by proxy.
Resolutions are adopted by absolute majority of directors in
attendance. The chair has the casting vote in the event of a tie. The
Bylaws and the Rules and regulations of the board only require
qualified majorities according to the law.
The board secretary keeps the board’s documents on file. He records
the content of meetings in meeting minutes. Meeting minutes of the
board and committees include statements members expressly
request to be put on record.
The board may hire legal, accounting or financial advisers and other
experts at Banco Santander’s expense for assistance with their duties.
The board should encourage communication between its
committees, especially the risk supervision, regulation and
compliance committee and the audit committee. It should also
promote dialogue between the risk supervision, regulation and
compliance committee and the remuneration committee and the
responsible banking, sustainability and culture committee, given the
relevance of their respective work with each other.
Some committees hold joint meetings throughout the year. Although
they cannot vote, any director can attend and participate in meetings
of committees on which they do not serve if invited by the chair of the
board and the chair of the respective committee, after having asked
the chair of the board. Furthermore, all board members who are not
executive committee members may attend executive committee
meetings at least twice a year, for which they are to be called by the
chair.
A
COMPARISON OF NUMBER OF MEETINGS HELD
Santander
Average
Spain
US
average
UK
average
Board
Executive committee
Audit committee
Nomination committee
Remuneration
committee
Risk supervision,
regulation and
compliance committee
15
40
14
12
12
6
12.8
10.7
8.8
7
7
9.4
—
8.4
4.7
6.2
11.6
—
5.5
4.3
5.5
NA
NA
NA
Directors must attend meetings in person and make sure to limit
absences to cases of absolute necessity. The nomination committee
A. Source: Spencer Stuart Board Index 2021 (Spain, United States and
United Kingdom).
NA: Not available.
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The following chart shows the board’s approximate time allocation to
each function in 2021.
APPROXIMATE ALLOCATION OF THE BOARD’S TIME IN 2021
Committee meetings
Board committees follow a meetings calendar that includes at least
four meetings (except for the innovation and technology committee,
which holds at least three meetings) and an annual work plan
established yearly. Each committee meets as often as is required to
fulfil its duties.
Committee meetings will be quorate if more than half of committee
members are present in person or by proxy. Committee resolutions
pass with a simple majority of votes. In the event of a tie, the
committee chair has the casting vote. Committee members may
grant a proxy to another member; however, non-executive directors
can only be represented by other non-executive directors.
Committee members are given relevant documents sufficiently in
advance of each meeting to ensure effectiveness.
Committees have the authority to summon executives, who will
appear at meetings at the invitation and under the terms dictated by
the chair. Furthermore, committees may also submit a request to the
general secretary to hire legal, accounting or financial advisers or
other experts to assist with their duties at Banco Santander’s
expense.
The role of committee secretary is non-voting and falls on the
general secretary and secretary of the board. This fosters a fluid and
efficient relationship with the units that must work with, and report
to, committees.
Committee chairs report on committees’ meetings and activities at
all board meetings. Furthermore, all board members are given a copy
of committees’ meeting minutes and all documents provided for
meetings.
Board and committee attendance
The table below shows the attendance rate of board and committee meetings.
ATTENDANCE TO THE BOARD AND COMMITTEE MEETINGS IN 2021
Committees
Directors
Average attendance
Individual attendance
Ana Botín
José Antonio Álvarez
Bruce Carnegie-Brown
Homaira Akbari
Javier Botín
A
Álvaro Cardoso
R Martin Chávez
Sol Daurella
Henrique de Castro
B
Gina Díez
Luis Isasi
Ramiro Mato
Sergio Rial
C
Belén Romana
D
Pamela Walkden
Board
99%
Executive
94%
Audit
100%
Nomination
97%
Remuneration
98%
15/15
15/15
15/15
15/15
15/15
13/15
14/15
15/15
15/15
15/15
15/15
15/15
15/15
15/15
15/15
39/40
40/40
32/40
_
_
_
_
_
_
_
39/40
40/40
_
35/40
_
_
_
_
14/14
_
_
_
_
14/14
_
_
14/14
_
14/14
14/14
_
_
12/12
_
_
_
11/12
12/12
_
_
_
_
_
_
_
_
_
12/12
_
_
_
11/12
12/12
12/12
_
12/12
_
_
_
_
Risk
supervision,
regulation
and
compliance
96%
Innovation
and
technology
96%
Responsible
banking,
sustainability
and culture
100%
_
_
_
_
_
4/4
15/16
_
_
_
15/16
16/16
_
16/16
10/11
4/4
4/4
3/4
4/4
_
_
4/4
_
4/4
_
_
_
_
4/4
_
_
_
_
6/6
_
6/6
_
6/6
_
_
_
6/6
_
6/6
_
Note: The table details directors' attendance whenever they personally attended meetings of the board or its committees. For this purpose, absent directors who were
represented are not counted among attendees. The nomination committee was informed of, and declared its satisfaction with, directors’ reasons for not being present
A. Stepped down as chair and member of the risk supervision, regulation and compliance committee on 1 April 2021.
B. Member of the nomination committee since 22 December 2021.
C. Appointed chair of the risk supervision, regulation and compliance committee on 1 April 2021.
D. Member of the risk supervision, regulation and compliance committee since 1 of May 2021.
Annual report 2021 219
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This table shows the average dedication of our directors to the board
and committees:
AVERAGE DEDICATION OF DIRECTORS TO THE
BOARD AND COMMITTEES
Meetings per
year
Average of
hours per
A
member
Average of
hours per
A
chair
Board
Executive
committee
Audit committee
Nomination
committee
Remuneration
committee
Risk supervision,
regulation and
compliance
committee
Responsible
banking,
sustainability and
culture committee
Innovation and
technology
committee
15
40
14
12
12
16
6
4
B
156
200
140
48
48
B
312
400
280
96
96
160
320
30
16
60
32
A. Includes hours of meeting preparation and attendance.
B. Of the 13 ordinary meetings held.
On average, each director dedicated approximately 58 days per year
to their role (including their participation in committees), and 5 days
to each board meeting, working 8 hours daily.
Directors must report any professional activity or post for which they
will be nominated to the nomination committee so it can assess the
time commitment to the group and check for possible conflicts of
interest.
The annual suitability reassessment our nomination committee
conducts every year (see in section 4.6 'Nomination committee
activities in 2021') allows us to keep all information on the estimated
time dedicated by directors to other roles and/or professional
activities up to date and confirm their capacity to exercise good
governance as directors of Banco Santander. Therefore, any
necessary travel time taken to attend in-person board meetings is
considered for reference purposes.
Overall, Banco Santander is able to verify compliance with the
maximum number of company boards on which the law allows our
directors to serve at once (i.e., up to one executive and two non-
executive roles, or four non-executive roles; roles in the same group
are considered a single role and roles in not-for-profit or non-
commercial organizations are not included).
Director training and induction programmes
The board promotes its directors’ continued training through an
annual board training programme. Its contents are chosen by the
board based on its performance reviews as well as technological, risk
management and regulatory issues.
In 2021, programme workshops (held, as usual, after board
meetings) addressed these topics:
• Regulatory compliance regarding conflicts of interest, market
abuse, competitors and other types of risk.
• Risk Appetite Statement annual review covering material risks,
calibration of limits and implementation across the Group and
future enhancements proposed for 2022.
• Credit risk management regarding provisions calculations (e.g.
covid-19 overlay, scenarios and impacts, and management of
vulnerable industries).
• The transition from the IBOR to alternative benchmark rates as well
as identification of key risks (especially legal, business, financial
and accounting risks).
• Regulatory requirements regarding financial crime and best
practice guidance (including anti money laundering and sanctions).
• The building and measurement of risk regulatory models.
• New special situations and resolution framework and governance
bodies’ roles and responsibilities in special situations.
• Cloud migration, system changes and expectations for 2022.
In addition, the board has sound induction and development
programmes so new directors can better understand Santander’s
business and governance rules. They normally run for six to twelve
months from the time the board appoints a new director. They
involve key group managers who provide detailed information on
their areas of responsibility, and address the special needs found in a
director’s suitability assessment.
In 2021, these directors completed induction programmes with
additional areas of focus:
• R Martín Chávez, who attended specific deep-dive workshops on
the Single Supervisory Mechanism (SSM) and on Spain’s regulatory
framework because he had developed his career in the US. Mr
Chávez’s induction plan ended in January 2021.
• Gina Díez, who attended additional deep-dive workshops on and on
the Single Supervisory Mechanism (SSM) and regulatory
framework because she had developed her career in Mexico. Also,
she received additional training in auditing, accounting and
financial risk management. Ms Díez’s induction plan ended in July
2021.
Those programmes were tailored to their experience and particular
induction needs found in their suitability assessments
Board assessment in 2021
The board undergoes a yearly assessment of its performance and
effectiveness, composition, quality of its work and individual
performance of its members. The assessment includes its
committees and is conducted at least every three years by an
external independent consultant, whose independence is assessed
by the nomination committee. In 2020, the assessment was
conducted by an external independent expert and complemented by
a wider external review of our governance arrangements in 2021,
with the aim of assessing its overall functioning and adherence to
regulations, supervisors’ expectations, and industry best practice. In
addition to the above-mentioned structured reviews, we conducted
an internally facilitated review of the effectiveness of our board
practices. For more details, see 'Board assessment and actions to
continuously improve its functioning' in section 1.2.
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The resultant actions and associated outcomes of the reviews have
been the subject of further work in 2021 and have supported our
continued priority focus on effective governance.
4.4 Executive committee activities in 2021
Composition
Position
Chair
Members
Secretary
Ana Botín
José Antonio Álvarez
Bruce Carnegie-Brown
Luis Isasi
Ramiro Mato
Belén Romana
Jaime Pérez Renovales
Category
Executive
Executive
Independent
Other external
Independent
Independent
Appointed on
A
11/12/1989
03/01/2015
12/02/2015
20/05/2020
28/11/2017
01/07/2018
A. Committee chair since 10 September 2014.
Functions
The executive committee is a key governance body in Banco
Santander and the Group. The board delegated to it all its powers
except those that cannot be delegated by the law or under the
Bylaws and Rules and regulations of the board. The executive
committee generally meets once a week to ensure key decision-
making in a timely and efficient manner, so the board can focus on
general supervision. It regularly reports to the board on its core
matters, providing all directors with the minutes and documents
from its meetings.
Committee performance
The board, supported by its nomination committee, sets the
executive committee's size and qualitative composition, focused on
overall effectiveness while keeping with the board composition
guidelines. Although the executive committee does not exactly
mirror the qualitative composition of the board of directors, it is
consistent with an external director majority, including three
independent directors. This composition ensures a balance of
opinions as well as internal and external perspectives. It also
complies with Recommendation 37 of the Spanish Corporate
Governance Code, which recommends to have at least two non-
executive directors, including one independent director. The secretary
of the board is also the secretary of the executive committee.
The executive committee can meet as many times as its chair
convenes it, however, it generally meets once a week.
Main activities in 2021
In 2021, the executive committee addressed a breadth of matters
relating to the business of the Group and its main subsidiaries, risk
management, corporate transactions and main proposals
subsequently submitted to the board of directors.
The key topics covered in the year were:
• Results: The committee was kept up to date on the Group´s results
and their impact on investors and analysts.
• Business performance: The committee was kept continuously and
fully informed of the performance of the Group’s business areas,
through management reporting or reports on specific matters.
• Information reported by the chair: The board´s chair, who also
chairs the executive committee, regularly reported on key matters
relating to the Group´s management, strategy and institutional
issues.
• Information reported by the CEO: The CEO reported on key
matters relating to the Group´s performance, budget and strategic
business plans execution.
• Corporate transactions: The committee analysed and (where
appropriate) approved some corporate transactions (e.g.
investments and divestments, joint ventures and capital
transactions).
• Covid-19: The committee was kept informed of the pandemic and
was active in decision-making to mitigate its impact on the Group
and the global economy, to preserve the health of employees and
customers and to provide healthcare and financial resources to
public and private institutions fighting the pandemic.
• Risks: The committee was regularly informed about the risks facing
the Group. Within the framework of the risk governance model, it
made decisions about transactions that it had to approve due to
their materiality. It was also kept informed on specific risk matters
such as the Group’s leveraged finance, distribution risk and credit
evolution in certain industries.
• Subsidiaries: The committee received reports on the performance
of the various units and business lines. In particular, it was kept
duly informed about Santander España´s headcount and
distribution model restructuring, specific regional projects (such as
the One Europe App), strategic initiatives the board had approved
during the year affecting subsidiaries and the appointments of key
positions there.
• Capital and liquidity: The committee reviewed regulatory plans
and exercises (e.g. EBA stress test) and received regular reports on
capital ratios and the measures taken to optimize them; pricing
(originations) and portfolio profitability.
• Supervisors and regulatory matters: The committee was regularly
informed of regulatory developments, the supervisory agenda for
the year and projects to ensure compliance with supervisory
recommendations and regulatory changes.
• Governance models: The committee discussed the new
governance and strategy models for new units (such as the
Investment Platforms) before they were submitted to the board for
approval.
• Issuances: By virtue of the board's delegation, the committee
issued non-convertible debentures.
In 2021, the executive committee held 40 meetings. 'Board and
committee attendance' in section 4.3 provides information on
members’ meeting attendance and the estimated average time each
one spent on preparing for and participating in meetings.
2022 priorities
• Ensuring at all times the committee’s effectiveness with
consideration for all areas for continuous improvement and an
overall review of its operations.
• Continuing to ensure proper coordination with the board and its
committees (including other executive committees.)
• Monitoring the performance of strategic initiatives that affect the
Group’s many global businesses and subsidiaries.
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4.5 Audit committee activities in 2021
'Our fundamental responsibility is the effective oversight of
the financial information process and internal controls,
ensuring the effectiveness of our internal audit function and
maintaining a professional and open relationship with the
external auditors. We must remain flexible and adapt
priorities to the new challenges that may not have been
foreseen at the beginning of the year. 2021 proved no
different as we faced the second year of managing through
a global pandemic, supporting our customers and staff,
while maintaining the appropriate controls.
The committee benefited from a good mix of experience and
skills of our members. Each provided appropriate advice and
challenge to the management. We also took views from all
three key lines of defence (management, risk and audit) to
oversee the progress in key global initiatives.
Communication with executives and non-executives
globally became even more important, given the travel
restrictions around the world, as it allowed us to share with
them our concerns and thoughts with them.
In the coming year, we will progress some exciting and
large strategic projects in which we will try to strike the
delicate balance of supporting management and ensuring
an appropriate level of control for a Group of our size'.
Pamela Walkden
Chair of the audit committee
This section is the report the audit committee prepared on 21
February 2022 regarding its activities. The board of directors
approved it on 24 February 2022.
Composition
Position
Chair
Members
Secretary
Pamela Walkden
Homaira Akbari
Henrique de Castro
Ramiro Mato
Belén Romana
Jaime Pérez Renovales
A. Committee chair since 26 April 2020.
Category
Independent
Independent
Independent
Independent
Independent
Appointed on
A
29/10/2019
26/06/2017
21/10/2019
28/11/2017
22/12/2015
The board of directors appointed the committee’s members based on
their expertise, skills and experience regarding the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board skills and
diversity matrix' and 'Committees skills and diversity matrix' in
section 4.2.
According to SEC Regulation S-K, committee chair, Pamela Walkden
is considered a financial expert based on her training and experience
in accounting, auditing and risk management, her past leadership
positions at entities where accounting expertise and risk
management were essential, and her international experience -
primarily in the UK and Asia.
External auditor
Our external auditor is PricewaterhouseCoopers Auditores, S.L.
(PwC). Its registered office is at Paseo de la Castellana, 259 B,
Madrid, and its Tax ID Code is B-79031290. It is registered with the
Registro Oficial de Auditores de Cuentas (Official Registry of Account
Auditors) of the Instituto de Contabilidad y Auditoría de Cuentas
(Accounting and Audit Institute or ICAC) of the Ministry of Economic
Affairs and Digital Transformation under number S0242.
Lead partner Julián González, assumed Alejandro Esnal's role in
2021. Mr González has experience as a global groups' audit partner
(mainly in Spain and the UK) and a strong background in the Spanish
financial sector. He also participates in various international banking
supervisory and regulatory forums.
Report on the independence of the external auditor
The audit committee verified the external auditor's independence, on
21 February 2022 and prior to the issuance of the 2021 auditor’s
report on the financial statements in line with the terms established
under section 4.f) of Article 529 quaterdecies of the Spanish
Companies Act, and Article 17.4.c) (iii) of the Rules and regulations of
the board, concluding that, in its opinion, it had no objective reason to
question the external auditor's independence.
In assessing the auditor's independence the committee considered
personal circumstances and the financial relationship the auditor or
persons performing the audit have with the Group; analysed possible
threats; and established the appropriate safeguarding measures.
The committee also considered the information included in
subsection 'Duties and activities in 2021' in section on the auditor’s
remuneration for audit and other services as well as written
confirmation from the external auditor regarding its independence
from Banco Santander in accordance with European and Spanish law,
SEC rules and the rules of the Public Company Accounting Oversight
Board (PCAOB).
Proposed re-election of the external auditor for 2022
As indicated in section 3.5 'Our next AGM in 2022', the board of
directors will submit a resolution to re-elect PwC as external auditor
for 2022 at our 2022 AGM, following the proposal the audit
committee had issued in November 2021. If PwC is re-elected, Mr
González will continue as lead partner in auditing the accounts in
accordance with the Spanish Account Auditing Act.
Time allocation
In 2021, the audit committee held 14 meetings. 'Board and
committee attendance' in section 4.3 provides information on
members’ attendance and the estimated average time each one
spent on preparing for and participating in meetings.
Annual report 2021 222
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The chart below shows the committee’s approximate time allocation
to each function in 2021.
Duties and activities in 2021
This section summarizes the audit committee’s activities in 2021.
Actions taken
Duties
Financial statements and other financial and non-financial information
Review the financial
statements and other
financial and non-financial
information
• Reviewed the individual and consolidated financial statements and the 2021 directors' reports and
submitted it prior to their approval by board of directors, monitoring compliance with legal requirements and
the proper application of accounting principles and that the external auditor issued the corresponding report
with regard to the effectiveness of the Group’s system of internal control over financial reporting (ICFR).
• Reviewed quarterly financial information (dated 31 December 2020, 31 March, 30 June and 30 September
2021, respectively), prior to its approval by the board of directors, and they were subsequently released to
the market and supervisory bodies.
• Reviewed other financial information such as: the annual corporate governance report; shares registration
document filed with the CNMV; Form 20-F with 2020 the financial information, filed with SEC; the half-
yearly financial information filed with CNMV and with SEC as Form 6-K.
• Oversaw and assessed the preparation and reporting of non-financial information in accordance with
applicable regulations and international benchmarks. In particular, reviewed the annual 'Green Bond' report
that covers the investments for each green bond issuance before the board approved it.
• Received information on the tax policies applied, in compliance with the Code of Good Tax Practices; and
submitted it to the board of directors, clearly stating that, as part of the cooperation the code advocates, the
Tax transparency report for the 2020 fiscal year had been filed with the Agencia Estatal de Administración
Tributaria (Spanish Tax Authority or "AEAT").
Report to the board about
applied tax policies
Relations with the external auditor
Receive information on the
audit plan
audit.
• Obtained confirmation from the external auditor that it had full access to all information to conduct the
• Discussed improvements to financial reporting in light of new accounting standards and best international
practices.
• Received information on the planning, progress and execution of the audit plan.
• Analysed audit reports about the annual financial statements before the external auditor submitted them to
the board of directors.
Relations with the external
auditor
• The external auditor attended all committee meetings held in 2021, serving as a channel of communication
between the external auditor and the board.
• The committee met with the external auditor two times in 2021 to discuss the audit work without the
Assessment of the auditor’s
performance
presence of the executives.
• Oversaw the change of the lead partner during 2021 and made certain that rotation rules were followed.
• Performed the external auditor's final evaluation and its contribution to financial reporting integrity on
account of its work and the opinions of units and the audit committees chairs of Group's entities. During that
assessment, the auditor informed the committee of the findings of regulators’ inspections of PwC, which the
committee analysed along with details about any relevant investigations involving PwC.
Annual report 2021 223
Internal Audit52%Annual accounts,interim financialstatements andexternal auditor26%Internal ControlSystems 15%Others 7%
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Duties
Actions taken
External auditor's independence
PwC’s remuneration for
audit and non- audit
services
• Monitored PwC’s remuneration, including these fees for audit and non-audit services provided to the Group:
EUR million
Audit
Audit-related services
Tax advisory services
Other services
Total
2021
103.7
6.0
0.7
2.4
2020
99.4
6.0
0.8
1.2
2019
102.4
7.8
0.7
2.3
112.8
107.4
113.2
The 'Audit' heading mainly includes audit fees for the individual and consolidated financial statements of
Banco Santander, S.A., and of some of its subsidiaries; the integrated audits prepared in order to file Form 20-F
for the annual report with the SEC in the US regarding any entities subject to it; the internal control audit (SOx)
for Group's entities subject to it; the audit of the consolidated financial statements as of 30 June; and the
regulatory auditor’s reports on Grupo Santander’s geographies.
Tax advisory services provided by PwC totalled EUR 75,840 for Spain and EUR 575,122 for other Group
subsidiaries.
The main fees under 'Audit-related services' include, amongst others, comfort letters, verifying financial and
non-financial information (as required by regulators), and reviews of the documents to be submitted to
domestic or foreign securities market authorities that due to their nature are provided by the external auditor.
The 'Audit fees' and 'Audit-related fees' caption includes the fees corresponding to the audit for the year,
regardless of the date on which the audit was completed. In the event of subsequent adjustments, which are
not significant in any case, and for purposes of comparison, they are presented in note 47.b) in the 'Notes to
the consolidated financial statements' in the year to which the audit relates. The rest of the services are
presented according to their approval by the audit committee.
The fees paid for non-audit services and their proportion to all fees invoiced to Banco Santander and/or its
group are as follows:
Amount of non-audit work (thousands of EUR)
Amount of non-audit work as a % amount of audit work
Company
556
0.5%
Group
companies
2,567
2.5%
Total
3,123
3.0%
In 2021, Santander arranged for services provided by audit firms other than PwC EUR 263.8 million (EUR
172.4 and 227.6 million in 2020 and 2019, respectively).
• Reviewed services rendered by PwC and confirmed its independence. For those purposes, it:
• Verified that all services rendered by the Group’s auditor, including audit and audit-related services, tax
advisory services (mainly on tax and compliance tax advice and tax compliance services ) and other services
detailed in the section above, met the independence requirements set out in the applicable regulation.
• Verified the 2021 ratio non-audit services fees to total fees received by the auditor for all services provided
to the Group, with stood at 3.0%.
• Average fees paid to auditors in 2021 for non-audit and related services account for 8% of total fees paid
as a benchmark according to available information on the leading listed companies in Spain.
• Verified the ratio of fees paid for all items relating to the services provided to the Group to total fees
accrued in 2021 by PwC as a firm. The Group’s total fees paid are less than 0.30% of PwC’s total revenue
worldwide.
• Reviewed banking transactions performed with companies related to PwC and concluded that none that
could compromise PwC’s independence have been detected.
• Since the publication of the (EU) Regulation 537/2014 of the European Parliament and of the Council of 16
April 2014 on specific requirements regarding statutory audit of public-interest entities, Banco Santander
meets the requirement that, for three or more consecutive years, total fees received for non-audit services
do not exceed 70% of the average fees paid in the last three consecutive years for the audit of the Group's
entities.
Non-audit services. Assess
threats to the
independence and
protective measures
External auditor
independence report
• After considering the information above, the committee issued its 'Report on the independence of the
external auditor', which is described at the beginning of this section 4.5.
Re-election of the external auditor
Re-election of the external
auditor
• Proposed to the board, for subsequent submission to the 2022 AGM, the re-election of PwC as the external
auditor of Banco Santander and its consolidated Group for 2022.
Annual report 2021 224
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties
Internal audit function
Oversight of the Internal
audit function
Internal control systems
Monitoring of the
evaluation of the internal
control systems
Whistleblowing channel
(Canal Abierto)
Actions taken
• Supervised the internal audit function and ensured its independence and effectiveness in 2021.
• Continued monitoring Covid-19's impact on internal audit activities on a regular basis.
• Reported on progress made with the internal audit plan, with exhaustive control over internal audit
recommendations and ratings of corporate units and functions. The chief audit executives (CAEs) of the core
corporate units and divisions reported at least once to the committee in 2021.
• Held its meetings in 2021 with the CAE and representatives of the Internal Audit division in attendance; and
held private meetings with the CAE without other executives or the external auditor present.
• Proposed the 2021 Internal audit function budget, ensuring that it had the physical and human resources
needed to perform its function effectively; and was kept apprised of the progress and timetable of the Audit
hubs being created, as well as of digital initiatives relating to the Internal Audit division.
• Reviewed the strategic audit plan for 2021-2024 based on a comprehensive risk assessment and submitted
it to the board for approval.
• Received regular information on the internal audit activities carried out in 2021, highlighting an overall
improvement in audit ratings, in part, due to continued focus on building a stronger control environment;
and conducted an additional review of issued audit reports, requiring that relevant business areas present
action plans.
• Increased first-line management's involvement in internal audit recommendations and related documents
about 2021.
• Received holistic reviews of internal audit coverage of key topics to ensure proper oversight, with second line
of defence representatives invited to provide it with additional feedback.
• Reviewed and recommended to the board the 2021 objectives for the CAE; and assessed the Internal audit
function's preparedness and effectiveness when fulfilling its duty, as well as the CAE’s performance in 2021
(which was reported to the remuneration committee and the board to determine his variable remuneration).
• Required that an external assessment of the Internal audit function be performed in 2022 according to the
best practices of International Internal Audit Standard 1312 to ensure compliance with regulation and
international practices.
• Received information on the evaluation and certification the Group’s internal risk control system (IRCS) for
2020 and assessed its effectiveness, in compliance with regulatory requirements with from the CNMV (ICFR-
Internal Control over Financial Reporting) and the SEC Sarbanes-Oxley Act (SOx). Its main priority was the
reduction of risk in the risk control system and actions in certain geographies.
• Received the annual update about Canal Abierto (the whistleblowing channels in the Group) in a joint
meeting with risk supervision, regulation and compliance committee, helping ensure that the Group´s
culture is embedded in the working environment is conducive to employees' talking straight and being truly
listened to.
Coordination with Risk
• Developed different activities to ensure that the internal audit plan is properly coordinated with the Group's
relevant risks.
• Held three joint meetings with the risk supervision, regulation and compliance committee in order to share
information and discuss topics of mutual interest including the group risk control environment assessment,
model risk, financial crime compliance, whistleblowing and third-party supplier risk management.
• Held monthly meetings with the chairs of both the audit committee and the risk supervision, regulation and
compliance committee. As detailed in section 1.1 'Board skills and diversity', Pamela Walkden was
appointed to the risk supervision, regulation and compliance committee. The CRO was also invited to all
2021 committee’s meetings.
Other activities
• Was engaged in the appointment of any new CAE at subsidiaries in line with Group’s internal regulation
ensuring their proper oversight and control.
• Continued its collaboration with the responsible banking, sustainability and culture committee to supervise
and evaluate the preparation of non-financial information.
Related-party and corporate transactions
Creation of special-purpose
vehicles or entities based in
countries considered non-
cooperative jurisdictions
Approval and oversight of
related party transactions
• Was informed by the head of Tax of the Group’s offshore entities in accordance with Spanish regulations. See
note 3.c) in the 'Notes to the consolidated financial statements'.
• Reviewed transactions carried out by Banco Santander to ensure they satisfied the Rules and regulations of
the board and relevant legislation in relation to related parties and seeking board approval where required.
The committee has examined the financial statements in regard to regarding related party transactions. See
section 4.12 'Related-party transactions and conflicts of interest'.
• Was informed of the amendments on related-party transactions in the Spanish Companies Act through Act
5/2021 and informed the board of its endorsement of the recommendation that it delegate to competent
bodies, committees, proxies and executives approval of their own related-party transactions in the ordinary
course of business; approval of the internal disclosure; and regular control of any transactions it has
delegated to the committee to approve.
• Reviewed the corporate transactions that the Group planned in 2021 prior to the submission to the board of
directors, analysing their economic conditions, accounting and internal audit impact.
Transactions involving
structural or corporate
changes
Annual report 2021 225
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governance
Economic and
financial review
Risk management
and compliance
Duties
Information for general meetings and corporate documents
Shareholders information
Actions taken
• At our 2021 AGM (held remotely), board secretary Jaime Pérez Renovales, and substituting Pamela Walkden
as committee chair, reported to shareholders on the matters and activities within the committee's scope in
2020.
Corporate documents for
2021
• Prepared this report on its activities in 2021, which includes a performance review of its assigned functions
and key priorities for 2022 based on the assessment of the effectiveness of the board and its committees.
Annual assessment of the committee and its achievement
of 2021 objectives
In 2021, to follow up on the external review in 2020, an internal
effectiveness review of our board practices was conducted and areas
for improvement were identified. For more details about the internal
review and its findings see 'Board assessment in 2021' in section 4.3.
The committee took the actions planned for 2021. In particular, it:
• Reinforced the coordination and sharing of information with other
committees, especially with the risk supervision, regulation and
compliance committee. The audit committee chair was appointed
as member of the latter. In addition, the Group CRO was invited to
all committee meetings in 2021 and three joint meetings were
held to ensure ongoing coordination and raise awareness of
mutual areas of interest.
• Strengthened coordination and information exchange with the core
units and divisions through the reciprocal participation of the
committee chair in the meetings of the audit committees of the
different countries and the chairs of the audit committees of the
different countries at committee meetings.
• Held another Audit Committee Chairs Convention to raise
awareness of global initiatives and expectations and to create an
opportunity to collectively discuss relevant issues, putting the
focus on key areas: model risk, climate change and trends in non-
financial information, compliance and financial crime, provision of
credit risk and areas for improvement, among others.
• Reviewed a committee activity interim report to ensure that the
committee’s responsibilities were being adequately fulfilled and
that the expectations of the committee members were met,
compliance with the applicable rules and alignment of meeting
planning with business needs and promotion of a continuous
feedback environment.
• Remained focused on, and debated, such critical aspects as the
supervision of the internal audit function and the internal control
systems and, in particular, control environment risk assessment,
execution of the internal audit plan, model management, anti
money laundering and relationships with third party suppliers.
• Promoted a greater presence of the first line of defence, for which
it required the presence of the country head/local CEO during the
local CAE’s updates on internal audit on a significant number of
occasions.
2022 priorities
The committee set these priorities for 2022:
• Continuing to focus on its size and composition, particularly
regarding the accounting, financial, risk management and audit
expertise it needs, as well as any other areas that will enhance its
effectiveness.
• Continuing to focus on key judgements that are made in preparing
the Group's financial statements.
• Monitoring internal audit plan execution, especially in terms of
how management identifies and measures emerging risks from
the covid-19 crisis and overseeing the Group’s response to its
environmental ambitions.
Annual report 2021 226
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Time allocation
In 2021, the nomination committee held 12 meetings. 'Board and
committee attendance' in section 4.3 provides information on
members’ attendance and the estimated average time each one
spent on preparing for and participating in meetings.
The chart below shows the committee’s approximate time allocation
to each function in 2021.
4.6 Nomination committee activities in 2021
'The committee continued its work on overseeing the
process on key appointments to the board and senior
management roles, supported by its work on robust
succession planning. Focus remained on the collective skills
and experience of the board and ensuring that gender and
broader diversity remain front of mind in our succession
planning.
Given our commitment to continuous improvement and to
fully adhering to the best industry standards, evolving
supervisory expectations and to stakeholders' best interests
(clients, employees, shareholders and, more generally, the
community in which Banco Santander operates), we
continued our work on improving our overall effectiveness
through commissioning an external evaluation to
holistically review our governance model.
An appropriate mix of members’ skills, further reinforced by
the appointment of Gina Díez as a member, helped the
committee to address these tasks and to operate
effectively, offering appropriate challenge and support to
management'.
Bruce Carnegie-Brown
Chair of the nomination committee
This section is the report the nomination committee prepared on 21
February 2022 regarding its activities. The board of directors
approved it on 24 February 2021.
Composition
Position
Category
Appointed on
Chair
Bruce Carnegie-Brown
Independent
Members
R Martín Chávez
Sol Daurella
Gina Díez Barroso
Independent
Independent
Independent
12/02/2015A
22/12/2020
23/02/2015
22/12/2021
Secretary
Jaime Pérez Renovales
A. Committee chair since 12 February 2015.
The board of directors appointed the committee’s members based on
their expertise, skills and experience regarding the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board skills and
diversity matrix' and 'Committees skills and diversity matrix' in
section 4.2.
The only change in the committee composition in 2021, was Gina
Díez appointment on 22 of December 2021.
Annual report 2021 227
Key roles suitabilityassessments 8%Board and boardcommitteescomposition,successionplanning30%Governance43%Senior management,succession planning andeffectiveness monitoring,talent and related activities19%
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties and activities in 2021
This section summarizes the nomination committee’s activities in 2021.
Duties
Composition of the board and its committees
Actions taken
Selection, suitability
assessment and succession
policy and renewal of the
board and its committees
• Ensured board member selection procedures guaranteed directors’ individual and collective suitability;
fostered diversity of gender, experience and skills; and conducted the necessary analysis of the required
expertise, skills and time commitment for effective board membership.
• Continued playing a leading role in the appointment of board and committee members and senior
managers, and planning their succession.
• Assessed the composition of the board committees and the international advisory board in order to ensure
they had the right skills and experience to perform their duties successfully.
• Continued monitoring the board of directors’ overall skills and competencies, including the need to cover
Banco Santander’s strategic markets and such areas as technology, digital strategy, banking, finance,
regulation and ethics.
• Continuously oversaw appointments of key positions and the regular strategic review of leadership
succession plans.
• Ensured candidate pool selection for any nomination, interviews and appointment decisions actively took
into account diversity in its broadest sense.
Appointment, re-election,
confirmation and removal of
directors and committee
members
• Verified that the overall composition and skills of the board of directors and its committees are appropriate
and identified, utilizing the skills matrix and the 2020 board effectiveness review, desired areas of expertise
and experience in recruitment.
• Recommended the board nominate Germán de la Fuente as a new board member for subsequent approval
at the AGM. He will contribute significant auditing, accounting and technical banking expertise.
• Submitted proposals to the board to make changes to certain committees’ composition in order to
strengthen their performance and support to the board in their areas of authority.
• Gina Díez was appointed a new committee member 12 months after being appointed a board member in
December 2020. She had been nominated to join the committee in consideration of her skills, qualifications
and experience (especially in corporate governance, strategic analysis and evaluation of human resources,
selection of senior officers, the performance of senior management duties, and other tasks the committee
usually discharges).
• Reviewed the information it received regularly on senior executive succession planning (which included key
positions in subsidiaries) and made sure it is being implemented to ensure the orderly succession of senior
managers through a rigorous, transparent, merit-based and objective process, that promotes diversity in its
broadest sense.
• Reviewed an external expert’s report that concluded Banco Santander’s succession arrangements and
framework for the board and critical roles throughout the Group are consistent with regulatory
requirements and best industry practice.
Succession planning
Succession planning for
executive directors and
senior managers
Director status verification
Annual verification of the
status of directors
• Verified each director category (i.e. executive, independent and other external) and submitted its proposal to
the board of directors that it be confirmed or revised in the annual corporate governance report and at the
AGM. See section 4.2 'Board composition'.
• Assessed directors’ independence, verifying no significant business ties between the Group and companies in
which they are or have been significant shareholders or directors, in particular regarding financing extended
by the Group to such companies. In all cases, the committee concluded that the existing ties were not
significant because (i) financing (a) did not create economic dependence for such companies because it could
be replaced by different bank-based or other sources of funding, and (b) was consistent with the Group’s
share of the relevant market; and because (ii) business ties did not reach comparable materiality thresholds
used in other jurisdictions as benchmarks (e.g. NYSE, Nasdaq and Canada’s Bank Act), among other reasons.
Regular assessment
Annual suitability
assessment of directors and
key officers
Directors' potential conflicts
of interest and other
professional activities
• Assessed the suitability of the members of the board, senior management members, those responsible for
internal control functions and those holding key positions of the Group, ensuring their business and
professional probity and appropriate knowledge and experience to perform their duties.
• Concluded that board members can carry out good governance of Banco Santander after reviewing board
meeting attendance and noting that, on average, directors attend 98.67% of board meetings and that it was
not compelled to take any action against any director for under 75% attendance.
• During 2021,the committee, based on the information it had received from the directors, was not aware of
any circumstance or situation that could harm the Group’s credibility and reputation.
• Examined the information the directors had given about their other professional activities or positions to
which they had been proposed and the related time commitment; and concluded those commitments did
not interfere with that required of them as Banco Santander directors and did not put them in any conflict of
interest.
Annual report 2021 228
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties
Board assessment
Actions taken
• Oversaw the holistic review of our governance model by an external adviser to determine if it
accommodated the characteristics of our global operations, supervisors' expectations and industry best
practice.
• Reviewed the 2022 action plan to address the areas for improvement revealed in the 2020 and 2021 board
effectiveness reviews.
Senior management
Appointment of key officers
Talent and director training
• Issued favourable opinions on the following appointees, approved by the board:
• Carlos Rey as new regional head for South America to replace Sergio Rial, who assumed the non-executive
chair role at Santander Brazil with effect from 1 January 2022.
• Nathan Bostock as head of Investment Platforms.
• Javier Roglá as new chief talent officer to replace Roberto di Bernardini.
• Issued favourable opinions on directors and members of senior management appointments at the Group’s
core subsidiaries.
• Received information about the initiatives in Human Resources to make Santander an employer of choice in
three ways: by putting the employee at the centre of everything we do; by securing the right talent and
skills; and by aligning with the business to deliver value and our strategy.
• Reviewed the Group’s director induction, information, training, development and knowledge refreshment
programmes in line with the Rules and regulations of the board, the ESMA and EBA’s joint guidelines, and
the Spanish Governance Code so that they would be designed according to each director’s own
circumstances and needs.
• Assessed the Group’s director induction and training programmes and recognized areas for improvement.
Internal governance and corporate governance
Internal governance
oversight
• Assessed the suitability of certain nominees at the subsidiaries subject to the Group’s appointments and
suitability procedure; and oversaw subsidiary board composition to ensure a consistent selection and
suitability approach across the Group.
Corporate governance
• Received explanations regularly about new governance regulation, trends, best practices and implications
for the Group; closely reviewed amendments to Act 5/2021 (especially in regard to new related-party
regulation); and amendments to corporate governance codes that apply to the Group and subsidiaries.
• Verified that subsidiary boards, committees and their duties aligned governance structures were consistent
with the Group-Subsidiary Governance Model (GSGM) guidelines and best practice; and tracked subsidiaries’
actions and progress in implementing internal regulation dictated by the Group.
• Endorsed lead director nominations for subsidiary boards to ensure board members representing the Group
as significant shareholder are appropriate and will correctly perform their duties.
• Received an overview of the highlights and results from the 2021 AGM, especially, its virtual only nature.
• Reviewed the joint work of the lead independent director and the Shareholder and Investor Relations team
and investors' and shareholders' feedback on the Group's corporate governance arrangements.
• Reviewed the independence of the external advisers hired by the nomination and remuneration committees
in 2021 in line with the CNMV Technical Guide 1/2019 on nomination and remuneration committees,
analysing, inter alia, the services the advisers provided and the amounts they received.
• Reviewed the annual corporate governance report to verify that information to be published conforms to the
law and that the corporate governance system promotes corporate interests and considers the legitimate
interests of all stakeholders.
Information for general meetings and corporate documents
Shareholders information
• At our 2021 AGM (held remotely), board secretary Jaime Pérez Renovales, substituting Bruce Carnegie-
Brown as committee chair, reported to shareholders on the matters and activities within the committee's
scope in 2020.
Corporate documents for
2021
• Prepared this report on its activities in 2021, which includes a performance review of its assigned functions
and key priorities for 2022 based on the assessment of the effectiveness of the board and its committees.
Annual assessment of the committee and its achievement
of 2021 objectives
In 2021, to follow up on the external review in 2020, an internal
effectiveness review of our board practices was conducted and areas
for improvement were identified. For more details about the internal
review and its findings see ´Board assessment in 2021' in section 4.3.
The committee took the actions planned for 2021. In particular, it:
• Reviewed information it received regularly on senior executives
succession planning (which included key positions in subsidiaries);
ensured plans were in place for the orderly succession of senior
management positions and that there was a rigorous and
transparent procedure based on merit and objective criteria and
that promotes diversity in its broadest sense; and reviewed an
external expert’s report that concluded Banco Santander’s overall
succession arrangements and framework for the board and critical
roles throughout the Group are consistent with regulatory
requirements and best industry practice.
• Monitored the skills and training needs of the Group’s directors and
reviewed an overview of the Group’s director induction and training
programmes at the subsidiaries to coordinate them across the
Group. The committee’s review showed subsidiaries’ high level of
adherence to the GSGM. All GSGM subsidiaries have induction and
training programmes and offer structured programmes for
directors to develop and enhance skills, when needed.
Annual report 2021 229
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Corporate
governance
Economic and
financial review
Risk management
and compliance
• Oversaw the holistic reviews by external advisers of our
governance model and functioning. When Egon Zehnder
conducted an effectiveness review of the board of directors and its
committees in 2020, its report concluded that Banco Santander’s
board is highly effective. When another external adviser performed
a holistic review of our governance arrangements to assess its
functioning and conformity with regulations, supervisors’
expectations and industry best practices in 2021, it concluded
Banco Santander has a sophisticated governance model that suits
its group-wide characteristics and requirements and acknowledged
our board members’ high profile and diversity of the board in terms
of gender, national origin, age and background.
• Reviewed the action plan for such key governance objectives as
ensuring continued clarity of the role and the responsibilities of the
most senior executives (including the executive chair and CEO); that
checks and balances remain appropriate and effective; and that the
independence of control functions remains fully preserved
according to the external reports' findings and our commitment to
constant improvement.
• Focused on reviewing corporate governance matters and reports
and oversaw engagement with shareholders and investors about
governance.
2022 priorities
The committee set these priorities for 2022:
• Continuing to focus on the review of the senior executive and board
member succession plans according to the Group’s current and
future strategy and to potential challenges the business may face
when identifying future leadership needs.
• Continuing to ensure that gender and broader diversity remains a
key priority in our succession policy, appreciating that a more
diverse and inclusive workforce is critical to a sustainable and
successful business.
• Continue to monitor board members’ skills and experience, in
particular, training needs and ongoing training and development
for the whole board.
• Ensuring the actions recommended in external advisers’
governance reviews are introduced into the action plan and
correctly executed.
• Keeping the corporate governance arrangements under constant
review to make sure it continues to consider all stakeholders’
interests with strategic relevance for the Group by closely
monitoring shareholder engagement and, together with the lead
independent director, by taking into account their feedback and
insight.
4.7 Remuneration committee activities in 2021
'In 2021, we maintained oversight of the application and
implementation of remuneration policies and frameworks
for the Group and focused on simplifying executive
remuneration within regulatory parameters. This included
shaping compensation schemes consistent with the Group’s
values of 'Simple, Personal and Fair', meeting stakeholders'
expectations. In particular, the committee conducted a
comprehensive review of the Group’s long term variable
compensation which has been in place for five years, to see
what enhancements could be implemented, and proposed
simplifying the metrics, amending the key metrics to align
with the Group’s evolving strategy and introducing an ESG
metric for the first time. This review included consultation
with the Group’s significant institutional shareholders.
We addressed the importance of the gender pay gap and
equal pay by overseeing the implementation of the diversity
and inclusion strategy on remuneration, including progress
against gender targets, acknowledging diversity as a key
pillar for succeeding in the Group’s long-term strategy.
An appropriate mix of committee members’ skills helped
the committee address those tasks and operate effectively,
offering appropriate challenge and support to management.
We also made sure we coordinated with our core
subsidiaries’ remuneration committees constantly and were
aware of subsidiary teams’ point of view so corporate
remuneration policies would be applied consistently'.
Bruce Carnegie-Brown
Chair of the remuneration committee
This section is the report the remuneration committee prepared on
21 February 2022 regarding its activities. The board of directors
approved it on 24 February 2022.
Composition
Position
Chair
Members
Secretary
Bruce Carnegie-Brown
R. Martín Chávez
Sol Daurella
Henrique de Castro
Luis Isasi
Jaime Pérez Renovales
A. Committee chair since 12 February 2015.
Appointed on
A
Category
Independent
12/02/2015
27/10/2020
Independent
23/02/2015
Independent
Independent
29/10/2019
Other external 19/05/2020
The board of directors appointed the committee’s members based on
their expertise, skills and experience regarding the matters it
handles.
Annual report 2021 230
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
For more details, see section 4.1 'Our directors' and 'Board skills and
diversity matrix' and 'Committees skills and diversity matrix' in
section 4.2.
Time allocation
In 2021, the remuneration committee held 12 meetings. 'Board and
committee attendance' in section 4.3 provides information on
members’ attendance and the estimated average time each one
spent on preparing for and participating in meetings.
The chart below shows the committee’s approximate time allocation
to each function in 2021.
Duties and activities in 2021
This section summarizes the remuneration committee’s activities in 2021.
Actions taken
Duties
Remuneration of directors, senior management and other key executives
Individual remuneration of
directors in their capacity as
such
• Analysed and proposed adjustments to the remuneration of directors in their capacity as such, based on the
positions they held on the collective decision-making body, their membership on and attendance at the
meetings of the committees, and any other objective circumstances evaluated by the board.
Individual fixed
remuneration for executive
directors
Individual variable
remuneration for executive
directors
Share plans
Propose the annual
directors' remuneration
report to the board
• Reviewed the adequacy of executive directors' fixed remuneration to market rates and their responsibilities,
which resulted in no quantity adjustments.
• Proposed to the board immediately payable and deferred amounts of variable remuneration of the
preceding year.
• Submitted a proposal, as part of the directors' remuneration policy, on the annual performance indicators
and targets used to calculate 2022 variable remuneration, subject to board approval.
• Proposed the achievement scales and weightings for annual and multi-year performance targets.
• Submitted a proposal to the board, for vote at the 2021 AGM, regarding the approval of remuneration plans
that involve the delivery of shares or share options (deferred multiyear targets variable remuneration plan;
deferred and conditional variable remuneration plan; application of the Group’s buy-out policy).
• Analysed and submitted to the board a proposal, for approval at the AGM, regarding the 2021 Digital
Transformation Award, which was designed and implemented to attract and retain key talent to drive long-
term share value creation through the achievement of key digital milestones.
• Drafted and proposed to the board the annual directors' remuneration report for an advisory vote at the
2021 AGM.
• Assisted the board of directors in overseeing compliance with the director remuneration policy.
• Received information from the lead independent director about engagement with key shareholders and
proxy advisers regarding executive director remuneration issues.
• Held a joint session with the risk supervision, regulation and compliance committee to verify that
remuneration schemes factor in risk, capital and liquidity, and do not offer incentives to assume risks that
exceed Banco Santander's tolerance, thus promoting and being compatible with adequate and effective risk
management.
Annual report 2021 231
Governance / Others14%Remunerationof directors4%Remuneration ofsenior managementand other keyexecutives38%Remunerationschemes andpolicies44%
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties
Remuneration policy for
senior management and
other key executives
Actions taken
• Focused on simplifying executive remuneration, shaping remuneration schemes consistent with Banco
Santander's Simple, Personal and Fair values, and including long term ESG related metrics in coordination
with the responsible banking, sustainability and culture committee.
• Proposed to the board the global annual variable remuneration for 2020 payable immediately and the
deferred remuneration of the main executive segments, in line with the achievement of previously set
quantitative and qualitative targets; proposed to the board the individual remuneration of members of
senior management, based on each one’s achievement of the annual performance targets and their
weightings as set by the board.
• Reviewed the results of top executives’ performance review calibration in coordination with non-executive
directors for the executive chair, the executive directors and the chief financial officer; the risk supervision,
regulation and compliance committee for the chief risk officer and chief compliance officer; and the board
audit committee for the chief audit executive.
• Submitted proposals to the board to determine or amend the annual fixed and variable remuneration of
certain senior management members.
• Established the annual performance indicators to calculate variable remuneration for 2022 in order to
simplify the bonus pool scorecard, with a focus on customers, risk, capital and profitability.
• Set the achievement scales for the annual and multi-year performance targets and weightings for
submission to the board.
Remuneration of other executives whose activities may have a significant impact on the Group’s risk profile (Identified Staff)
Remuneration for other
executives who are
Identified Staff but not
senior management
• Reviewed the fixed and variable remuneration ratios for control functions to ensure consistency with
• Set key remuneration components for Identified Staff (Material Risk Takers) in coordination with the risk
regulation and their control objectives.
supervision, regulation and compliance committee.
• Maintained close coordination with the board and its committees to ensure that risks are correctly controlled
and mitigated.
• Submitted a proposal to the board, for subsequent submission to the 2021 AGM, regarding the approval of
maximum variable remuneration of up to 200% of the fixed component for Group employees whose
activities have a material impact on Banco Santander or the Group’s risk profile, including executive
directors.
• Reviewed certain remuneration schemes to support the attraction and retention of key talent to help drive
digitalization, the application of incentives implemented in the Group, and the achievement of the long-term
metrics associated with deferred remuneration.
• Reviewed director remuneration schemes to ensure they considered the Group’s results, culture and risk
appetite, and that there were no incentives to assume risks that exceed Banco Santander’s tolerance, thus
promoting effective risk management.
• Informed the board of a report issued by an external adviser that assessed the remuneration policy
according to Ley 10/2014, CRD IV and EBA guidelines, which establish that credit institutions’ remuneration
policies will be subject to a central and independent internal assessment to verify compliance with the
remuneration guidelines and procedures adopted by the board of directors as part of its supervisory
function. The review concluded that the Group's policies, procedures and practices comply with the
prudential requirements applicable to credit institutions.
• Reviewed Group remuneration policies and practices and assessed their effectiveness prior to their review by
the board of directors.
• Reviewed and favourably assessed the simplification of the remuneration policy, to facilitate its effective use
and understanding as well as the inclusion of CRD V amendments (i.e. gender neutrality, ESG objectives, use
of variable remuneration instruments, adjustments in criteria for identifying MRTs, minimum deferral period
of four years and an amendment to the limitations on business objectives for control functions according to
regulation).
• Continued to monitor application of diversity policies, including the achievement of targets to reduce gender
pay gap and equal pay gap.
• Reviewed gender pay gap data in absolute terms and regarding “equal pay for equal work” in the Group;
compared them to the previous year and to targets; and focused on measures to enhance them in every
country.
• Monitored the actions subsidiaries took to reduce their board members’ remuneration in line with the
initiative of the Group’s board in light of the pandemic.
• Took up certain remuneration oversight tasks for Santander London Branch according to requirements from
the UK’s Prudential Risk Authority (PRA) which expects “third-country branches” in the UK to have
independent oversight.
Assist the board of directors
in supervising compliance
with remuneration policies
Gender and equal pay
Governance
Governance
Information for general meetings and corporate documents
Reporting to shareholders
• At our 2021 AGM (held remotely), board secretary Jaime Pérez Renovales, and substituting Bruce Carnegie-
Brown as committee chair, reported to shareholders on the matters and activities within the committee's
scope in 2020.
Corporate documents for
2021
• Prepared this report on its activities in 2021, which includes a performance review of its assigned functions
and key priorities for 2022 based on the assessment of the effectiveness of the board and its committees.
Annual report 2021 232
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Annual assessment of the committee and its achievement
of 2021 objectives
In 2021, to follow up on the external review in 2020, an internal
effectiveness review of our board practices was conducted and areas
for improvement were identified. For more details about the internal
review and its findings see 'Board assessment in 2021' in section 4.3.
The committee took the actions planned for 2021. Among the salient
actions, it:
• Kept incentives under regular review to ensure they continue to
align with our strategy and drive the right culture and behaviours;
and made changes to simplify remuneration schemes to ensure
they are effective and fair within regulation.
• Reviewed proposals to continue to enhance our employee value
proposition to attract and retain key talent, maintaining strong
shareholder support as well as investors and proxy agencies’
appreciation for our thorough approach and disclosures.
• Strengthened coordination and communication with the
remuneration committees of the Group’s subsidiaries, monitoring
the application of corporate remuneration policies to ensure a
consistent approach. The presentations from Santander UK and
Santander Brasil’s Human Resources functions provided the
committee with an overview of local market practices and
challenges.
• Prioritized gender pay measurement across the Group and how it
compared to the previous year and set targets; and reviewed
internal tools to calculate the gender equality metrics more
accurately and action plans to reduce the gender pay gap for the
Group and its core subsidiaries.
The director remuneration policy report
Pursuant to section 2 of Article 529 novodecies of the Spanish
Companies Act, the remuneration committee issues this report on
the resolution regarding the directors' remuneration policy for 2022,
2023 and 2024 that will be submitted by the board of directors at the
2022 AGM as a separate item on the agenda and is an integral part of
this report. See section 6.4 'Directors' remuneration policy for 2022,
2023 and 2024 submitted to a binding shareholder vote' and section
6.5 'Preparatory work and decision-making for the remuneration
policy; remuneration committee involvement'.
Banco Santander’s Remuneration function prepares the directors'
remuneration policy based on requests, observations and
suggestions it receives from the human resources committee,
remuneration committee, board of directors and external advisers
throughout the year (the policy for 2022, 2023 and 2024 includes
suggestions from Willis Towers Watson). The remuneration
committee receives a first draft of the policy every January to review
and debate. During the meeting, it considers the inputs the chair and
lead independent director receive through shareholder and
stakeholder engagement during the year. It also considers any
recommendations from regulators, legal requirements or regulation
that has come to light since the last time the policy was submitted
for approval at the annual general meeting. The committee also
makes sure the policy is consistent with the Group's culture and
Simple, Personal and Fair values. The Remuneration function then
prepares the final draft for the remuneration committee to submit to
the board of directors for approval in February.
The remuneration committee believes the directors' remuneration
policy for 2022, 2023 and 2024 included under section 6.4 is
consistent with the Group's remuneration policy and with the
remuneration scheme in the Bylaws.
The directors’ remuneration policy has been reviewed, introducing
several new features. It includes share options as variable
remuneration instruments (along with shares) to align executive pay
with shareholders’ interests. It has updated long term metrics to
cover ESG aspects, RoTE and relative TSR (which was already
included, but increasing the minimum threshold for pay) to be
consistent with best practice and our shareholders’ and investors’
interests. Furthermore, it has reduced our annual pool metrics from
four to three (i.e. customers, RoRWA and RoTE), with qualitative
adjustments for risk, capital adequacy, competitor analysis,
sustainable results and responsible banking commitments to
sharpen our strategic focus.
2022 priorities
The committee set these priorities for 2022:
• Keeping incentive measures under continuous review to ensure
they continue to align with our strategic aims, focus on customers
and sustainable profitability and drive the right culture and
behaviours, balancing the needs of our people, customers,
communities, shareholders and regulators.
• Continuing to enhance our employee value proposition with a view
to attracting and retaining key talent for the Group, ensuring
meritocracy through a proper correlation between pay and
performance, and considering the changing environment, new
ways of working and the digital transformation.
• Keeping the focus on the continuous improvement and
simplification of our variable remuneration schemes to maintain
strong shareholder support and investors’ and proxy advisers’
appreciation.
• Increasing its coordination with the Group subsidiaries’
remuneration committees and HR teams to ensure the consistent
application of corporate policies as well as mutual awareness of
the Group's trends and challenges.
• Continue focusing on accelerating pay equality across the Group.
Annual report 2021 233
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Time allocation
In 2021, the committee held 16 meetings including one strategy
session in June. 'Board and committee attendance' in section 4.3
provides information on members’ attendance and the estimated
average time each one spent on preparing for and participating in
meetings.
The chart below shows the committee’s approximate time allocation
A
.
to each function in 2021
A. All regulatory and supervisory relations matters discussed in 2021 are included
in each relevant category in the above chart.
4.8 Risk supervision, regulation and compliance
committee activities in 2021
021 was a challenging year in terms of risks. Because of
'2
the challenges posed by covid-19 and the uncertain
macroeconomic conditions, the committee closely oversaw
the actions to manage and mitigate them. The committee
also closely monitored both everyday and more strategic,
non-traditional emerging risks in all subsidiaries, in full
coordination with the board and other committees.
Inspired by our previous chair, we remain focused on long-
term strategic risks that could ultimately compromise Banco
Santander's business and risk profile. The second strategy
meeting we held in June 2021 served as another forum to
examine and debate such relevant emerging risks as crypto
assets, new areas of business, and property and other
market segments in the wake of the pandemic. The
committee will pay close attention those risks and remain
closely vigilant of any that emerge in the future to ensure
they are properly and evenly managed in daily operations'.
Belén Romana
Chair of the risk supervision, regulation and compliance
committee
This section is the report the risk supervision, regulation and
compliance committee prepared on 18 February 2022 regarding its
activities. The board of directors approved it on 24 February 2022.
Composition
Position
Chair
Members
Secretary
Belén Romana
R. Martín Chávez
Luis Isasi
Ramiro Mato
Pamela Walkden
Jaime Pérez Renovales
A. Committee chair since 1 April 2021.
Category
Independent
Independent
Other external
Independent
Independent
Appointed on
A
28/10/2016
27/10/2020
19/05/2020
28/11/2017
01/05/2021
The board of directors appointed the committee's members based on
their expertise, skills and experience regarding the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board skills and
diversity matrix' and 'Committees skills and diversity matrix' in
section 4.2.
On 1 April 2021 Álvaro Cardoso stepped down as the risk committee
chair and member, being replaced by Belén Romana.
Annual report 2021 234
Capital & Liquidity 9%Complianceand Conduct26%Governance5%Risk60%
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties and activities in 2021
This section summarizes the risk supervision, regulation and compliance committee's activities in 2021.
Duties
Risk
Assist the board in (i)
defining the Group's risks
policies, (ii) determining the
risk appetite strategy and
culture and (iii) supervising
their alignment with the
Group’s corporate values
Risk management and
control
Supervise the risk function
Collaboration to establish
rational remuneration
policies and practices
Actions taken
• Carried out an overview of the Group's risks, conducted specific analyses by unit and risk type; assessed
proposals, issues and projects relating to risk management and control and received updates on risks from
the Group's main subsidiaries and businesses.
• Discussed the regular monitoring of the risk appetite and its metrics, and reviewed the annual risk appetite
statement proposal (including an analysis of new metrics proposed and any breaches occurred throughout
the year) before it was submitted to the board for approval. Checked compliance with risk appetite limits
every quarter and reviewed new proposed metrics and any breach in the year.
• Reviewed compliance with the new EBA Guidelines 2021/05 on internal governance.
• Oversaw the update of our social and environmental policies (in coordination with the responsible banking,
sustainability and culture committee), which set out the financing criteria and prohibited actions in specific
industries such as energy, mining and soft commodities.
• Reviewed the 2021 recovery plan, assessed the Group's resilience to severe stress scenarios and submitted
it to the board of directors for approval.
• Reviewed and challenged the key processes of the Group, such as the internal capital adequacy assessment
process (ICAAP) and internal liquidity adequacy assessment process (ILAAP), the Strategic Plan, the 3-year
strategic financial plan, the annual budget and the Recovery and Resolution plans. Reviewed and challenged
the identified risks and mitigating factors associated with those key processes, their consistency, and their
overall alignment to the Group' risk appetite.
• Received regular updates on the top risks under management and the appropriateness of mitigating
controls.
• Reviewed the robustness of the Group's risk control management, most notably the risk profile assessment
(RPA), and the risk control self-assessment (RCSA), two of the main tools for risks control.
• Conducted regular reviews of the Group’s risks as well as the specific reviews by units and risk types.
Assessed proposals, issues and projects relating to risk management and control.
• Analysed risks and opportunities associated with emerging risks and how they affect the different
geographies and businesses.
• Supervised the risks associated with the main corporate transformation programmes and their risk
mitigation measures. In particular, it monitored the risks and controls associated with PagoNxT and
Openbank, among others.
• Supported the board in conducting stress tests of Banco Santander through the assessment of scenarios and
assumptions, analysing the results and the measures proposed by the Risk function. Ensured that the stress
test programme was aligned with the EBA Guidelines 2018/04 on institutions' stress testing.
• Continued to focus on non-performing loans and non-performing assets performance during 2021, in
particular considering the evolution of the portfolios under moratoria and their effect on credit provisions.
• Received and challenged periodic market and structural risk updates and counterparty risk reviews.
• Engaged on non-financial risks including legal risk, environmental and social risks (including climate), and
vendor risk management, which remained key areas of focus.
• Monitored, in full coordination with the innovation and technology committee, risks stemming from
technological obsolescence and cybersecurity. Received reports on major IT developments and projects.
• Monitored the post-Brexit situation including its risk effects over the UK and the Group, and the status of
preparedness to reduce and mitigate such risks.
• Reviewed, supervised and challenged any strategic project before its submission to the board of directors.
• Coordinated with the responsible banking, sustainability and culture committee in the supervision and
evaluation of (i) the alignment of risk appetite and limits with corporate culture and values; and (ii) the non-
financial risks.
• Ensured the independence and efficacy of the Risk function.
• Assessed the Risk function (including its staffing and resourcing suitability) as well as the performance of the
CRO in coordination with the remuneration committee, with the purpose of informing the board in order to
set his variable pay.
• Reviewed new appointments for key positions for the Group and relevant subsidiaries for the Risk and
Compliance and Conduct functions, in coordination with the nomination committee.
• Reviewed and supervised the annual Group CRO objectives.
• Held a joint session with the remuneration committee to confirm that remuneration schemes factor in risk,
capital and liquidity, and do not offer incentives to assume risks that exceed the level tolerated by Banco
Santander in line with appropriate and effective risk management. The joint session also assessed the
performance of the CRO and CCO.
• Analysed the factors used to determine the ex-ante risk adjustment of total variable remuneration assigned
to the units, based on how previously assessed risks actually materialized, in conjunction with the
remuneration committee.
• Reviewed the 2021 bonus pool and results of the exercise carried out annually to identify employees whose
professional activities had a material impact on the Group´s risk profile.
Annual report 2021 235
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties
Capital and liquidity
Assist the board in
reviewing and approving
capital and liquidity
strategies and supervising
their implementation
Compliance and conduct
Supervise the Compliance
and conduct function
Regulatory compliance
Actions taken
• Reviewed and challenged the annual ICAAP prepared by the Finance department and challenged by the Risk
function in accordance with industry best practices and supervisory guidelines and submitted this report to
the board for approval. Drew up a capital plan according to the scenarios envisaged over a three-year period.
• Endorsed the Pillar III disclosures report, which was submitted to the board for approval. The report
described various aspects of the Group’s management of capital and risk and provided an overview of the
function; base capital and prescribed capital requirements; policies for managing the various risks
undertaken by Banco Santander in regard to capital consumption; composition of the Group’s portfolio and
its credit quality (measured in terms of capital) and the roll-out of advanced internal models.
• Reviewed and challenged the ILAAP, developed in line with the Group’s business model and submitted to the
board for approval.
• Performed continuous monitoring of capital levels, and capital management and tools, including the 2021
securitizations plan and the analysis of the portfolio profitability versus the risk undertaken.
• Ensured the independence and efficacy of the Compliance and conduct function.
• Assessed the Compliance and conduct function (including its staffing and resourcing suitability) as well as
the performance of the CCO (in coordination with the remuneration committee) to inform the board in order
to set her variable pay.
• Reviewed and supervised the annual CCO objectives.
• Reviewed and followed up on the 2021 Compliance programme, including efforts to continuously improve
the Compliance and conduct function.
• Reviewed and challenged the status of the compliance and conduct strategy.
• Received monthly reports on compliance and conduct matters as part of the risk and compliance monthly
report, which cover regulatory issues, product governance and consumer protection, reputational risk,
internal and external events, notifications and inspections by supervisors, updates on the One Financial
Crime Compliance (One FCC) programme, among other matters.
• Held bi-annual specific private sessions with the CCO (in addition to other informal meetings) to discuss
strategic compliance topics as well as to report independently and directly to the committee on any material
issue relating to the compliance and conduct function, if needed.
• Monitored compliance with regulatory requirements regarding:
• The Dodd Frank Title VII update.
• Adaptation of the Volcker Rule compliance programme in line with recent amendments introduced,
continuing the oversight of this regulation.
• The status of data protection under the GDPR, the contribution to determining the Euribor and the Code of
Conduct.
Supervise the whistle-
blowing channel (Canal
Abierto)
Financial crime compliance
(FCC)
• Received, in a joint meeting with the audit committee, the annual report on Canal Abierto, Santander’s
ethical channel model that helps consolidate the Group's “Speak up” culture through a work environment
where employees can talk straight without fear of reprisal.
• Oversaw the Group´s observance with FCC regulations as well as the activities carried out by the function. In
particular:
• Provided a quarterly update on progress with One FCC implementation strategy in Banco Santander and its
Product governance and
consumer protection
Governance
Corporate governance and
internal governance
subsidiaries.
• Received recommendations and observations stemming from the annual independent expert report on
Banco Santander in accordance with the Spanish Law 10/2010 and Royal Decree 304/2014 (on anti-money
laundering and terrorism financing).
• Received an update on the status of customers’ complaints and associated action plans in place to address
identified deficiencies.
• Reviewed an update about progress made on subsidiary action plans for internal sales force pay in the Group
and a general overview of conduct risk from the external sales force, at a joint meeting with the
remuneration committee.
• Received information on risk management and main risks identified, concerns, priorities and actions taken by
the Product Governance and Consumer Protection (PGCP) function regarding the management and
mitigation of conduct risk with retail customers, including product governance activity.
• Received quarterly updates on the matters discussed at the responsible banking, sustainability and culture
committee by the chair of this committee. Furthermore, the CRO provided updates on the work of the risk
control committee in his capacity as chair of that committee.
• In a joint session with the audit committee, reviewed the status of the internal audit plan and of the main
recommendations of Santander, and an update on the internal audit works performed in relation to the risk
corporate division.
Regulators and supervisors
Regulatory and supervisory
relations
• Received regular updates on regulatory and supervisory relations and maintained focus on the most relevant
developments related to the SSM, the Single Resolution Board (SRB), the supervisors of all the Group’s
subsidiaries and the Supervisory Review and Evaluation Process (SREP).
Annual report 2021 236
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties
Information for general meetings and corporate documents
Reporting to shareholders
Actions taken
• At our 2021 AGM (held remotely), board secretary Jaime Pérez Renovales, and substituting Alvaro Cardoso
de Souza as committee chair, reported to shareholders on the matters and activities within the committee's
scope in 2020.
Corporate documents for
2021
• Prepared this report on its activities in 2021, which includes a performance review of its assigned functions
and key priorities for 2022 based on the assessment of the effectiveness of the board and its committees.
Annual assessment of the committee and its achievement
of 2021 objectives
In 2021, to follow up on the external review in 2020, an internal
effectiveness review of our board practices was conducted and areas
for improvement were identified. For more details about the internal
review and its findings see 'Board assessment in 2021' in section 4.3.
The committee took the actions planned for 2021. Among the salient
actions, it:
• Prioritized oversight of the Group's top risks, impacts and
mitigation actions to ensure risks were appropriately managed and
would remaining within the board-approved risk appetite limits.
• Examined emerging and non-traditional risks to anticipate key
strategic changes in the business as discussed at its strategic
meeting held in June 2021.
• Contributed to the role the Group played in proactively supporting
economic recovery after the covid- 19 crisis, by overseeing the
Group's credit - related policies to help our customers, while
maintaining the strength of Banco Santander's capital and liquidity.
• Supervised core business units, geographies and new businesses
(including new digital platforms), with an additional focus on
emerging business that are relevant for the Group's strategy.
2022 Priorities
The committee set these priorities for 2022:
• Continuing to monitor the post-covid-19 landscape, especially
macroeconomic conditions and their effect on loans, provisions and
conduct or reputational risk.
• Overseeing the risks associated with certain strategic projects,
especially ones relating to financial crime and money laundering
prevention, cyber security, climate change, model risk, PagoNxt,
Investment Platforms, Digital Consumer Bank and One Santander.
• Continuing to monitor the Group’s top risks, early warning
indicators, and mitigation actions in order to ensure risks are
appropriately managed according to the Group's risk profile and
remain with the board-approved risk appetite limits.
• Continuing to identify emerging and non-traditional risks in order
to anticipate potential impacts on our business model. Those risks
will be a topic of debate at the committee’s annual strategic
meeting, which follows up on its strategic meetings in 2020 and
2021.
• Maintaining close coordination with the board and its committees
to ensure that risks are closely controlled and mitigated.
• Continuing to work on the committees' effectiveness to make sure
• Heightened coordinated action with other board committees to
it is discharging its duties with utmost efficacy.
examine matters that concerned them holistically.
• Checked that the Risk and Compliance and conduct functions had
effective and appropriately resources.
Annual report 2021 237
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Composition
Position
Chair
Members
Secretary
Ramiro Mato
Homaira Akbari
Álvaro Cardoso
Sol Daurella
Belén Romana
Jaime Pérez Renovales
A. Committee chair since 1 July 2018.
Category
Independent
Independent
Independent
Independent
Independent
Appointed on
A
01/07/2018
01/07/2018
24/07/2018
01/01/2018
01/07/2018
The board of directors appointed the committee’s members based on
their expertise, skills and experience regarding the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board skills and
diversity matrix' and 'Committees skills and diversity matrix' in
section 4.2.
Time allocation
In 2021, the responsible banking, sustainability and culture
committee held six meetings. 'Board and committee attendance' in
section 4.3 provides information on members’ attendance and the
estimated average time each one spent on preparing for and
participating in meetings.
The chart below shows the committee’s approximate time allocation
to each ESG criteria in 2021.
Responsible banking, sustainability and culture
4.9
committee activities in 2021
'The committee continued to drive the responsible banking
agenda in 2021 by assisting the board with oversight of
strategy in sustainability.
In 2021 the committee assisted the board with setting the
climate change strategy, a key enabler to achieve the net
zero carbon strategy ambition by 2050. The committee
continued to monitor Banco Santander’s response to
covid-19, focusing on the social impact of the pandemic and
supporting employees, customers (especially the most
vulnerable) and society as a whole.
Sustainable finance and the green agenda remained key
topics for the committee, which reviewed the measures
being taken by Santander’s main regions and businesses.
The committee continued to oversee the core initiatives,
targets and proposed metrics to drive the commitments on
diversity and inclusion, ethical behaviour and responsible
supplier practices. It revised environmental and risk
management policies and standards on financing sensitive
industries. It devoted time to reviewing annual report
documents on responsible banking; revised ESG metrics
proposals for the long-term incentives programme, LTIP;
and made progress with the development of an internal
taxonomy and data quality.
To improve awareness and effective execution of global
initiatives, the Group held an inaugural responsible banking
chairs’ Convention in 2021 for the subsidiaries’ responsible
banking committee chairs to collaborate and share thoughts
with a view to driving local traction on action plans aligned
with Group expectations and goals. The Convention focused
specifically on our ambition to be net zero in carbon
emissions by 2050.
The committee has continued to work closely with the
board of directors and main board committees to ensure
that its work was fully coordinated and effective. I would
like to take this opportunity to thank the committee
members for their invaluable contributions during the year'.
Ramiro Mato
Chair of the responsible banking, sustainability
and culture committee
This section is the report the responsible banking, sustainability and
culture committee prepared regarding its activities on 21 February
2022. The board of directors approved it on 24 February 2022.
Annual report 2021 238
Governance (G)16%Environmental (E)52%Social (S)32%
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Duties and activities in 2021
This section summarizes the responsible banking, sustainability and culture committee’s activities in 2021 based on ESG criteria.
Duties
Environmental (E)
Sustainable banking
Environmental and climate
change
Green finance
Internal Emission Offsetting
Project
Regulatory landscape
Social (S)
Inclusive banking
Sustainable finance
Actions taken
• Considered the Group's climate change strategy in terms of how Banco Santander would deliver on its
external commitments to align its portfolio with the Paris Agreement. Reviewed the proposed alignment of
the electric power generation portfolio, the thermal coal targets and the proposed approach to creating a
net zero carbon roadmap.
• Challenged the Group's public commitment to be net zero carbon by 2050. Reviewed progress made on
climate projects, including the ambition to be net zero by 2050 and participation in the Net Zero Banking
Alliance.
• Received presentations on the Climate Finance Report from the regional heads for Europe, North America
and South America and from Santander Consumer Finance, Santander Wealth Management & Insurance and
Santander Corporate Investment Banking (SCIB). The report, published in July 2021, highlighted key
milestones and progress with the Group’s climate ambitions.
• Reviewed and made observations on business proposals on climate change submitted by our entities in
Europe, North America and South America and by Santander Consumer Finance, Santander Wealth
Management & Insurance and Santander Corporate Investment Banking (SCIB).
• Reviewed the green finance strategy and challenges and opportunities in Europe, North America and South
America. Green finance is the increase in financial flows (banking, micro-credit, insurance and investment)
from the public, private and not-for-profit sectors to address sustainable development priorities. Aligned
business strategies with objectives, commitments and regulatory requirements focusing on aiding
customers' transition to carbon neutrality.
• Endorsed the main priorities for 2021, including our ambitions to be net zero, aid our customers’ green
transition and promote a green culture.
• Monitored the green bond issuances, the annual disclosure requirements regarding the use of proceeds and
impacts achieved from assigned projects and endorsed the Banco Santander´s 2020 Green Bond Report.
• Reviewed the 2021 emissions´ offsetting corporate plan which enables the Group to continue being a carbon
neutral organization through the offsetting of the emissions caused by its own activity.
• Monitored the carbon footprint compensation projects being implemented across the Group to ensure
alignment with agreed commitments.
• Continued to monitor the main regulatory initiatives of the sustainable finance framework that are relevant
to Banco Santander, with a particular focus on Europe, due to heightened regulatory activity. The European
sustainable finance framework has evolved rapidly in recent years to drive funds and investment to support
the transition to a low carbon economy in 2050 and increase transparency on corporate business models
and activities.
• Provided feedback on the Sustainable Finance Classification System to identify, measure and manage the
volume of sustainable green and social financing activities. The Sustainable Finance Classification System
aligns with regulatory reporting requirements. Approved guidelines for its implementation within the
business.
• Reviewed SCIB´s sustainable finance proposition, business opportunities and challenges, for customers
interested in financing green and social projects. The significant progress on sustainable finance and notable
transactions for SCIB were reviewed.
Support for higher education
• Reviewed the strategy, objectives and KPIs relating to Banco Santander' support for education,
employability and entrepreneurship at universities. Banco Santander has become a leader in supporting
higher education and intends to continue making it its flagship programme for investing in communities.
Governance (G)
Responsible banking strategy
Governance
• To ensure effective controls will be in place to mitigate risks and enhance opportunities regarding
sustainability and responsible banking practices, the committee reviewed with other board committees
matters concerning the corporate culture and values, responsible banking practices and sustainability within
the board-approved guiding principles of responsible banking governance.
• Provided through regular read-outs an overview of the responsible banking agenda to other committees
(like the board risk supervision, regulation and compliance committee) and to the board.
• Received regular updates on the responsible banking agenda from several units and corporate functions, to
improve communication and ensure best practices are shared on a global basis.
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governance
Economic and
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Duties
Materiality assessment and
Responsible Banking
commitments
Responsible Banking
initiatives
Culture and values
Corporate culture
SPF with employees
Actions taken
• Considered the outcomes of the 2021 ESG Materiality assessment, an annual assessment conducted by the
Responsible Banking team in coordination with other teams and an external consultant, that helps identify
the most relevant ESG topics for the Group. Its results will ensure consistency between the Group's
responsible banking priorities and public commitments.
• Continued to monitor developments in the Amazon and the associated actions being taken by the Group to
mitigate negative environmental consequences therein.
• Reviewed the proposed responsible banking agenda for 2022-2025 and the associated commitments for
2025, to ensure they remain aligned with expectations.
• Oversaw the restructuring of One Santander in Europe, so subsidiaries could share best responsible banking
practices in downsizing.
• Monitored and assessed the Group´s progress on its 11 public commitments to ensure that its KPIs remained
relevant and aligned with committee expectations.
• Monitored and challenged ESG and responsible banking metrics in coordination with the remuneration
committee to ensure alignment with market practice and increasing shareholder interest. Assisted the board
in making sure the responsible banking objectives, metrics and commitments were embedded in the
Group's remuneration schemes.
• Coordinated with the remuneration committee on its review of the alignment of remuneration schemes with
corporate culture and values.
• With the risk supervision, regulation and compliance committee, supervised and assessed (i) the alignment
of risk appetite and limits with corporate culture and values and (ii) non-financial risks.
• Reviewed The Santander Way, which is our global culture approved by the board in January 2015, aligned
with the Group’s strategy and complementing Banco Santander's ambition to build a more responsible bank.
Since 2015, a common language and behaviour has translated into our values of Simple, Personal and Fair
(SPF) shared by all units. Our corporate policy is an important factor in developing consistent initiatives and
enabling us to measure our values impact. Significant progress continues both globally and locally, with
tangible results for our people, customers, shareholders and communities.
• Assisted the board in promoting and embedding corporate culture and values across the Group, monitoring
adherence and ensuring that the corporate culture is consistent with the Group's purpose and values.
• Worked with the remuneration committee to advise the board on the design and implementation of the
responsible banking scorecard (which forms part of the qualitative assessment of the bonus pool) to ensure
that responsible banking targets, metrics and commitments were effectively embedded across the Group.
• Considered the Group´s diversity and inclusion strategy and initiatives, together with the related targets for
2025 and discussed the action plan and approach towards each of the diversity dimensions relevant to the
Group and provided feedback on Banco Santander's position in global rankings.
• Received an update on the talent management programme and wellbeing of employees throughout the
Group.
• Ensured an overview of the 2021 global engagement survey included recommended actions. The purpose of
the survey, now in its seventh year, is to garner employees' opinions on the best things about working at
Banco Santander and areas of improvement. It enables the Group to draw up actions and initiatives to
improve Banco Santander´s employee engagement and ways of working.
SPF with customers
• Received an update on the social impact of covid-19 on the Group´s key stakeholders, especially its
SPF with suppliers
SPF with general society
vulnerable customers. Considered the potential reputational risks associated to covid-19 and the proposed
recommendations for dealing with customers.
• Reviewed the supplier action plan to include ESG standards in hiring procedures.
• Monitored the progress made with responsible banking communications and determined whether the four
key responsible banking communication pillars of diversity and inclusion, financial empowerment, climate
change and Santander Universities remained relevant. Shared priorities and analysed a common responsible
banking approach. Considered opportunities to expand sustainable finance activities, with a strong focus on
financial inclusion.
Ethical considerations
• Reviewed and provided feedback on the proposed definition and scope of ethical behaviour within the Group
to ensure ongoing fair business conduct.
• Agreed an action plan to ensure continuous improvement of our ethical behaviour governance and the
application of best practices in our internal processes.
• Monitored the status of Canal Abierto whistleblowing channel, which contributes to the Group's cultural
transformation by providing an anonymous way for employees to speak up, thus promoting our corporate
behaviours. Canal Abierto (or a similar anonymous channel) is available in all Group units.
• Reviewed the internal artificial intelligence (AI) ethical principles which aim to foster using AI responsibly in
a Simple, Personal and Fair way, ensuring the Group has common guidelines to abide by.
Policies and frameworks
• Reviewed the environmental, social and climate change risk management policy, the general sustainability
policy and other relevant responsible banking policies.
• Reviewed and endorsed a new responsible banking corporate framework for board approval that was
established to promote a consistent approach across the Group.
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Duties
Stakeholder engagement
Non-financial information
Actions taken
• Coordinated with the audit committee on its supervision and assessment of the preparation and
presentation of non-financial information according to the applicable regulations and leading international
standards.
• Reviewed the 2021 Group´ statement of non-financial information, including the independent expert's
report, which can be found in the 'Responsible banking' chapter of this annual report.
Stakeholder engagement -
indexes and ratings
• Considered Banco Santander´s positioning in global sustainability indexes.
• Challenged the strengths, gaps and focus points in relation to Banco Santander´s ranking with ESG rating
providers. Reviewed the action plan after engaging with investors on ESG matters.
Information for general meetings and corporate documents
Corporate documents for
2021
• Prepared this report on its activities in 2021, which includes a performance review of its assigned functions
and key priorities for 2022, based on the assessment of the effectiveness of the board and its committees.
Annual assessment of the committee and its achievement
of 2021 objectives
In 2021, to follow up on the external review in 2020, an internal
effectiveness review of our board practices was conducted and areas
for improvement were identified. For more details about the internal
review and its findings see 'Board assessment in 2021' in section 4.3.
The committee took the actions planned for 2021. In particular, it:
• Assisted the board in setting the climate change strategy, by
endorsing a net zero carbon ambition for 2050, and continued to
monitor risks and opportunities to develop sustainable finance
proposals for a low-carbon economy.
• Continued to oversee responses to the covid-19 crisis, including
the status of payment holidays upon expiry, vulnerable customers
and the Recovery and collection functions, ensuring responsible
banking practices were embedded in Banco Santander´s customer-
centric strategy.
• Continued to monitor and provide feedback on the initiatives,
targets and metrics to fulfil the public commitments on diversity
and inclusion, financial inclusion, talent management and ethical
behaviour.
• Focused on promoting diversity and inclusion and continued to
oversee how Banco Santander´s culture, including SPF values,
were embedded throughout the Group.
• Monitored the announcements of the Group's progress and
achievements that enhance our reputation as one of the world's
most sustainable banks.
2022 Priorities
The committee set these priorities for 2022:
• Continuing to advise the board on the climate change strategy and
Banco Santander’s ambition to be net zero by 2050. The
committee will oversee the proposed actions to align with the
Task Force on Climate - Related Financial Disclosure (TCFD)
recommendations, including the introduction of targets to reduce
its exposure to certain climate-intensive industries and the
decarbonization strategy and commitments.
• Maintaining assistance to the board in monitoring the
development of green and sustainable finance propositions across
the Group, aiding our customers’ transition to a low-carbon
economy and helping fulfil our public responsible banking
commitments and regulatory requirements.
• Continuing to assist the board in monitoring the development of
the Banco Santander Finance for All proposition, which aims to
foster financial empowerment among the unbanked, underbanked
and vulnerable customers.
• Overseeing the implementation of the strategic diversity and
inclusion plan; progress with embedding our culture across the
Group; and improvements in conduct, ethical behaviour, customer
experience and satisfaction.
• Continuing to assist the board in monitoring the implementation of
enablers to further embed ESG in the business and business-as-
usual, including Banco Santander's performance of our public
responsible banking commitments and KPIs.
• Focusing on ensuring the new corporate Responsible Banking
framework is effectively embedded throughout the Group.
• Overseeing the work undertaken with regulators on the stress test
exercises relevant to the committee’s remit especially climate risk.
• Becoming leaders in ESG to support our customers in the
transformation to a more sustainable business model.
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The board of directors appointed the committee’s members based on
their expertise, skills and experience regarding the matters it
handles.
For more information, see section 4.1 'Our directors' and 'Board skills
and diversity matrix' and 'Committees skills and diversity matrix' in
section 4.2.
Time allocation
In 2021, the innovation and technology committee held four
meetings. 'Board and committee attendance' in section 4.3 provides
information on members’ attendance and the estimated average
time each one spent on preparing for and participating in meetings.
The chart below shows the committee’s approximate time allocation
to each function in 2021.
4.10 Innovation and technology committee activities
in 2021
'Throughout 2021, the committee oversaw the IT Strategy,
which aims to integrate key digital capabilities in a new
operating model based on global products definition and a
common architecture. Its main focus has been to ensure
that the strategy enables business initiatives by partnering
with global businesses and supporting functions, reducing
risks and improving cost efficiency.
Cybersecurity strategy has also remained a top priority for
the committee, covering Banco Santander's cyber progress
and position, key trends and threat horizon and key
strategic cyber-security pillars and initiatives for the Group,
which gained significance due to the pandemic and
emerging cyber trends.
Additionally, the committee oversaw the update on the
Models & Data unit, in order to maximize the potential from
information with advanced analytics models to generate
business value, manage risks and support innovation across
the Group in a responsible way'.
R Martín Chávez
Chair of the innovation and technology committee
This section is the report on the activities of the innovation and
technology committee, as approved by the board of directors on 24
February 2022.
Composition
Position
Chair
Members
Secretary
R Martín Chávez
Ana Botín
Homaira Akbari
José Antonio Álvarez
Bruce Carnegie-Brown
Henrique de Castro
Belén Romana
Jaime Pérez Renovales
A. Committee chair since 22 December 2020.
Category
Independent
Executive
Independent
Executive
Independent
Independent
Independent
Appointed on
A
27/10/2020
23/04/2007
27/09/2016
23/02/2015
23/02/2015
23/07/2019
19/12/2017
Annual report 2021 242
Digital & innovation13%Cybersecurity25%Technology (incl. operations)43%Data Management12%Others7%
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Duties and activities in 2021
This section summarizes the innovation and technology committee’s activities in 2021.
Duties
Innovation
Innovation framework
Cybersecurity
Cybersecurity
Digital
Digital
Actions taken
• Reviewed the implementation of the Group's strategic technology plan and innovation agenda; and
identified the Group's main challenges and capabilities in innovation.
• Identified opportunities for faster innovation across the Group and increased the likelihood of success in new
business models, technologies, systems and platforms.
• Supervised defences against the increasing threat environment, reviewed security controls and automated
security processes.
• Analysed the high-profile cyber incidents in Banco Santander and other well-known companies.
• Received quarterly updates on cybersecurity risks, with a special focus on internal data leakage protection
and such external threats as ransomware, in coordination with both the board of directors and the risk
supervision, regulation and compliance committee. Assisted the board in the supervision of technological
risks and cybersecurity.
• Reviewed Santander’s cyber vision for 2025, focusing on three pillars, namely: levelling the “cyber
battlefield” with criminals through deterrence, offensive disruption and deception techniques; defending the
hyper-connected bank of the future to protect the distributed digital platforms and ecosystems; and
generating value and trust for stakeholders, customers and society through commercial cyber solutions,
customer engagement and collective response.
• Analysed the systems supporting core financial crime compliance processes to satisfy new regulation and
align them with Banco Santander´s business strategy based on best practices and standards.
• Received updates about employee training, internal and external cyber awareness campaigns and other
related key areas.
• Boosted collaboration between subsidiaries, business units and the Technology and Operations (T&O)
function on digital initiatives, which it oversaw.
• Monitored metrics in connection with the digital evolution and associated transformation, as operations
outflows, cost-to-income ratio, number of applications, cost per transaction, digital technical transaction,
machine learning impact, number of application programming interfaces (BaaS APIs) and tech talent.
• Reviewed core digital strategies to transform business and accelerate the growth of new businesses.
Technology and operations
Technology and operations
• Reviewed the global technology strategy plan and reported to the board on technology and operations
Data management
Data management
(T&O) planning and activities.
• Endorsed the Group's core strategic technology priorities, especially in terms of 'agile', cloud, core system
evolution, deep technology skills (APIs, AI, and other matters); oversaw the roll-out of a new operating
model and a common architecture, and reduced technology risk.
• Ensured T&O strategy properly focused on the Group's relevant issues and priorities.
• Received updates on the international advisory board's deliberations about technological, innovation, cyber,
talent and new financial trends.
• Received updated information on the Models & Data unit's priorities for the year, to stay fully appraised on
the models and data value chain for business growth and customer experience, risk control improvement,
model and data development and data and artificial intelligence ethical principles definition and use.
• Assessed the adequacy of the resources of the Data function and possible new regulations, validating their
appropriateness and readiness for the Group and at local level.
Annual assessment of the committee and its achievement
of 2021 objectives
In 2021, to follow up on the external review in 2020, an internal
effectiveness review of our board practices was conducted and areas
for improvement were identified. For more details about the internal
review and its findings see 'Board assessment in 2021' in section 4.3.
• Continue to strengthen response measures and innovation to react
to an environment of ever-changing threats.
• Reviewed and discussed new trends and regulations on data
management and analytical capabilities in the Group's businesses,
based on the international advisory board's feedback.
The committee took the actions planned for 2021. Among the salient
actions, it:
2022 Priorities
The committee set these priorities for 2022:
• Continuously reviewed the Group’s innovation strategy, especially
in regard to a business-oriented T&O transformation model.
• Prioritized digital strategy through the implementation of
multidisciplinary projects for the Group.
• Assisting the board of directors with the Group's innovation
strategy, and with trends arising from new business models,
technology and products.
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• Reviewing the effectiveness of data management and analytics, as
enablers for the Group to fulfil strategic priorities.
• Supervising activities to continue strengthening the Group's cyber
response and constant innovation to manage the changing threats.
Rationale
The international advisory board affords the Group structured and
recurrent insights from international leaders who, due to other
commitments, are not able to support it as board members.
• Continuing to assess and provide suggestions on initiatives, targets,
commitments, KPIs, and proposed metrics on cross-projects
relating to the Group's digital strategy, which will remain a key
priority.
4.12 Related-party transactions and conflicts
of interest
Related-party transactions
4.11 International advisory board
Members
The members are all external and not members of the board.
Composition
Chair
Larry Summers
Sheila C. Bair
Mike Rhodin
Positions
Former Secretary of the US Treasury
and president emeritus of Harvard
University
Former chair of the Federal Deposit
Insurance Corporation and former
president of Washington College
Supervisory board member of
TomTom and director of HzO. Former
IBM Watson senior vice president
Francisco D’Souza Director of General Electric. Former
CEO of Cognizant
James Whitehurst Special advisor to IBM. Former chair
Members
George Kurtz
Nadia Schadlow
Andreas Dombret
and CEO of Red Hat, former chief
operating officer of Delta Air Lines and
former partner of The Boston
Consulting Group
CEO and co-founder of CrowdStrike.
Former chief technology officer of
McAfee
Former deputy National Security
Advisor for Strategy and former
Assistant to the President of the
United States
Former board member of Deutsche
Bundesbank, former vice chair of Bank
of America in Europe and former
director of Bank for International
Settlements
Secretary
Jaime Pérez Renovales
Functions
Banco Santander’s international advisory board was formed in 2016
to provide strategic insight into future challenges and opportunities
for the group’s businesses, particularly in respect of innovation,
digital transformation, cybersecurity and new technologies, capital
markets, corporate governance, brand and reputation and regulation
and compliance.
Its members are prominent and respected leaders who possess
extensive experience with strategic challenges and opportunities,
particularly in terms of innovation, digital transformation and the US
and European markets.
Meetings
The international advisory board meets at least twice a year. In 2021,
it met in February, May and October.
Directors, senior managers and significant shareholders
This subsection includes the report on related-party transactions
mentioned under recommendation six of the Spanish Corporate
Governance Code.
On 27 July 2021, the board amended the Rules and regulations of the
board to adapt them to the new provisions on related-party
transactions in Act 5/2021, of 12 April, (amended text of the Spanish
Companies Act). See 'Rules and regulations of the board' in section
4.3.
Pursuant to the Rules and regulations of the board (as adapted to the
new legal regime), the following bodies must authorise transactions
between Banco Santander, S.A. or its subsidiaries and directors;
shareholders who hold at least 10% of voting rights or sit on the
board; and with other parties considered 'related parties' under the
International Financial Reporting Standards:
• The general meeting, in regard to related-party transactions that
amount to 10% or more of the assets listed on the last
consolidated balance sheet.
• The board of directors, in regard to the other types of related-party
transactions.
However, on 27 July 2021, the board of directors (on the audit
committee’s recommendation) voted to delegate to executive bodies,
committees and competent proxies the approval of related-party
transactions that simultaneously meet these legal requirements:
• are carried out under agreements with basic standard terms that
usually apply to customers contracting the product or service in
question;
• are entered into prices or rates set by the party acting as supplier of
the goods or service in question, or arm’s length terms and
conditions for commercial relations with similar customers, where
the goods or services are not subject to set rates that already exist;
and
• they do not exceed 0.5% of Banco Santander’s net annual income
as appears in the last consolidated annual accounts approved at
the general shareholders’ meeting.
Likewise, the board approved an internal authorization, reporting and
regular monitoring procedure, involving the audit committee, to
confirm that transactions approved by virtue of the board’s
delegation are fair and transparent and meet the standards that
apply in the above-mentioned exceptions. The procedure requires a
permanently up-to-date list of natural and legal persons concerned
in related-party transactions.
Lastly, the board also approved certain categories of related-party
transactions and established ideal conditions to protect company and
shareholder interests. Related-party transactions will be assessed to
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make sure they are fair and reasonable to Banco Santander and all
shareholders but the related party.
same as for transactions with customers to make sure they are
conducted at market prices and conditions.
If a related-party transaction must be approved at the general
meeting or by the board, the audit committee must issue a
preliminary report about it in accordance with the law. That
preliminary report will not be necessary for related-party
transactions approved by virtue of the board's delegation.
Board members must refrain from deliberating and voting on
resolutions with which they or their related parties have a direct or
indirect conflict of interest.
In 2021, following due diligence, no director or any other related
parties according to International Financial Reporting Standards
carried out transactions deemed “significant” (i.e. material to
Santander and the related party) or under non-market conditions.
The audit committee confirmed that all related-party transactions in
2021 were performed correctly, after reviewing whether they
complied with the law, the Rules and regulations of the board and
with the conditions set forth by the board, as mentioned in the audit
committee activities report under section 4.5 'Audit committee
activities in 2021'.
Banco Santander also has a policy for the admission, authorisation
and monitoring of loans, credits and guarantees for directors and
senior managers. It sets out the procedure in place for risk
transactions of which they or their related parties like spouse or other
person with similar relationship; minor children or those of legal age
who are economically dependent; or companies controlled by
directors or senior managers whose activity is limited to the mere
holding of assets and the management of personal or family assets.
Furthermore, it outlines general rules in terms of maximum
borrowing, interest rates and other similar conditions to those that
apply to other employees. In accordance with this policy and with
banking regulations, the policy provides that loans, credits or
guarantees to be granted to Banco Santander's directors and senior
managers (or to their related parties) must be authorised by the
board and subsequently by the ECB, except in the cases listed below:
• Transactions are subject to a collective agreement signed by Banco
Santander, with similar conditions to those of transactions granted
to any employee.
• Transactions are carried out under agreements with standard
conditions that generally apply to a large number of customers,
provided that the amount granted to the beneficiary or its related
parties does not exceed EUR 200,000.
Note 5.f of the 'consolidated financial statements' lists the Grupo
Santander's direct risks in the form of loans, credits and guarantees
extended to directors in the ordinary course of business as of 31
December 2021. The terms and conditions of these transactions are
the same as those performed under market conditions or applied to
other employees, and the corresponding benefits in kind are imputed
to them, where applicable.
Intra-group transactions
Under new laws, Banco Santander's transactions with its direct or
indirect wholly-owned subsidiaries and with other subsidiaries or
investees will not be considered related-party transactions provided
that no related party holds an interest in them. The rules, approval
bodies and procedures that apply to intragroup transactions are the
Therefore, Santander maintains control of any subsidiaries or
investees that might be affected by potential related-party
transactions.
Note 52 ('Related parties') in the consolidated financial statements
and note 47 ('Related parties') in the individual financial statements
specify the amounts of the transactions with other Group entities
(subsidiaries, associates and jointly-held entities), directors, senior
managers and related parties.
Conflicts of interest
Banco Santander has standards and procedures to prevent conflicts
of interest resulting from our activities and functions, or between us
and our directors and senior managers. We also have an internal
policy that provides the Grupo Santander’s employees, directors and
entities with criteria to prevent and manage conflicts of interest
resulting from their activities.
Directors and senior managers
Our directors must adopt the necessary measures to avoid situations
in which their direct or indirect interests may enter into conflict with
corporate interests or their obligation towards Banco Santander.
Directors’ duty to avoid conflicts of interest requires them to fulfil
certain obligations, and they must refrain from using the Banco
Santander name or their role to exert undue influence on private
transactions. They cannot use corporate assets and confidential
information for private purposes, nor take advantage of Banco
Santander’s business opportunities. Moreover, they are barred from
obtaining benefits or remuneration (other than courtesies) from third
parties in connection with their role; or carrying out activities, on their
own behalf or that of others, that place them in a situation of
effective or potential competition or permanent conflict with Banco
Santander.
Directors must report direct or indirect conflicts of interest they or
their related parties may have with Banco Santander to the board.
Such conflicts will be disclosed in the financial statements.
In 2021, no director reported having any conflict of interest with the
Group, even though these 39 abstentions occurred in votes on
matters deliberated at board and committee meetings. In 12
instances, directors abstained owing to resolutions to appoint or re-
elect directors, or to be appointed them to board committees or to
the boards of Santander companies. In 13 instances, the matter
under consideration related to remuneration, loans or credits. In 4
instances, the matter was a transaction between Banco Santander
and a company related to a director. In 9 instances, directors
abstained regarding the annual verification of their status and
suitability. In one instance, the director’s position at the meeting
meant he was unable to take part in deliberations.
As directors and senior managers are subject to the Policy on
conflicts of interest and the Code of Conduct in Securities Markets,
they must provide the Compliance function with a statement on any
relations they hold, which they must keep up to date. Directors and
senior managers must also report any potential conflict of interest
owing to their relations or any other reason to the Compliance
function. Furthermore, where a conflict does exist, they must abstain
from making decisions or casting votes, in addition to notifying
anyone who is to take the respective decision.
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The chief officer of the area in question is responsible for resolving
conflicts of interest. Conflicts that involve several areas must be
resolved by the common senior officer. However, if none of the
foregoing rules apply, the Compliance function will designate
someone to resolve the conflict. In the event of doubt, the
Compliance function is consulted.
The Code of Conduct in Securities Markets describes control
mechanisms and bodies for resolving conflicts of interest related to
securities markets. This code can be found on the Grupo Santander’s
corporate website. It dictates that directors, senior managers or
related parties may not carry out (i) counter-transactions on Grupo
Santander ’s securities within 30 days from the time they are
acquired or sold; or (ii) transactions on Grupo Santander securities 30
days before the quarterly, half-year or annual results are announced
and until they are published.
Group companies
Because Banco Santander is the only group company listed in Spain,
no mechanisms must be in place to resolve conflicts of interest with
subsidiaries listed in Spain.
If such conflicts do arise, Banco Santander, as the parent company,
must consider the interests of all its subsidiaries and how they
contribute to the long-term interest of the entire group. Subsidiaries
should also consider the interests of Grupo Santander examine how
the decisions they take may affect the Group.
Banco Santander, as the parent company of Grupo Santander,
structures the governance of the Group through a system of rules
that guarantees the existence of rules of governance and an
adequate control system, as described in section 7. 'Group structure
and internal governance'.
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5. Management team
The table below shows the profiles (Senior Executive Vice President —SEVP—) of the Banco Santander’s senior managers (other than the
executive directors described in section 4.1 ‘Our directors’) as of 31 December 2021.
Alexandra Brandão
GLOBAL HEAD OF HUMAN
RESOURCES
Juan Manuel Cendoya
GROUP HEAD OF
COMMUNICATIONS,
CORPORATE MARKETING AND
RESEARCH
José Doncel
GROUP HEAD OF ACCOUNTING
AND FINANCIAL CONTROL -
GROUP CHIEF ACCOUNTING
OFFICER
Keiran Foad
GROUP CHIEF RISK OFFICER
José Antonio García Cantera GROUP CHIEF FINANCIAL
OFFICER
Born in 1978, Alexandra Brandão joined Grupo Santander in 2003 as head of
Products and Services for Individuals at Santander Totta. From 2012 to 2016,
she was global head of Knowledge and Development at the Grupo Santander
Corporate Centre; head of Human Resources from 2016 to 2018; and head of
Commercial Management and Segments at Santander Portugal from 2019 to
2020. Since February 2021, she has been global head of Human Resources.
Born in 1967, Juan Manuel Cendoya joined Banco Santander in July 2001 as
group senior executive vice-president and head of the Communications,
Corporate Marketing and Research division. In 2016, Mr Cendoya was
appointed vice-chair of the board of directors and head of Institutional and
Media Relations of Santander España. He is also a member of the board of
directors of Universia España Red de Universidades, S.A. Previously, he had
been head of the legal and tax department of Bankinter, S.A. He is a state
attorney and a non-executive director at Arena Communications Network, S.L.
Born in 1961, José Doncel joined Grupo Santander in 1989 as head of
Accounting. Previously, he had served as head of accounting and financial
management at Banco Español de Crédito, S.A. (Banesto) (1994-2013). Mr
Doncel was appointed senior executive vice-president and head of the
Internal Audit division in 2013 and group head of Accounting and Financial
Control - group chief accounting officer - in 2014.
Born in 1968, Keiran Foad joined Grupo Santander in 2012 as deputy chief risk
officer at Santander UK. Previously, he held risk and corporate leadership
roles at Barclays Bank plc (1985-2011) and served as chief risk officer at
Northern Rock plc. In 2016, he was appointed senior executive vice-president
and deputy chief risk officer of Banco Santander until his appointment in 2018
as group chief risk officer.
Born in 1966, José Antonio García joined Grupo Santander in 2003 as senior
executive vice-president of Global Wholesale Banking of Banco Español de
Crédito, S.A. (Banesto). In 2006, he was appointed chief executive officer of
Banesto. Previously, Mr García had served on the executive committee of
Citigroup EMEA, as well as the board of directors of Citigroup Capital Markets
Int, Ltd. and Citigroup Capital Markets UK. In 2012, he was appointed senior
executive vice-president of Global Corporate Banking. In 2015, he was
appointed group chief financial officer.
Juan Guitard
GROUP CHIEF AUDIT EXECUTIVE Born in 1960, Juan Guitard joined Grupo Santander in 1997 as head of Human
Resources at Santander Investment, S.A. Previously, he had been general
counsel and secretary of the board of Santander Investment, S.A. and Banco
Santander de Negocios, S.A. In 2013, Mr Guitard was head of Banco
Santander’s Risk division. In November 2014, he was appointed head of the
Internal Audit division - group chief audit executive. He is also a state
attorney.
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José María Linares
GLOBAL HEAD OF CORPORATE &
INVESTMENT BANKING
Mónica López-Monís
GROUP HEAD OF SUPERVISORY
AND REGULATORY RELATIONS
Javier Maldonado
GROUP HEAD OF COSTS
Born in 1971, José María Linares joined Grupo Santander in 2017 as senior
executive vice-president and global head of Corporate and Investment
Banking. Previously, he served as an equity analyst at Morgan Stanley & Co.
New York (1993-1994). He worked as senior vice-president and senior Latin
America telecom equity analyst at Oppenheimer & Co. New York
(1994-1997), as well as senior director Latin America TMT equity analyst at
Société Générale, New York & São Paolo (1997-1999). Mr Linares joined J.P.
Morgan in 1999 and was subsequently appointed managing director and
head of Global Corporate Banking at J.P. Morgan Chase & Co. (2011-2017).
Born in 1969, Mónica López-Monís joined Grupo Santander in 2009 as
general counsel and secretary of the board of Banco Español de Crédito, S.A.
(Banesto). Previously, she had been general counsel at Aldeasa, S.A. and
Bankinter, S.A., as well as independent director at Abertis Infraestructuras,
S.A. In 2015, Ms López-Monís was appointed senior executive vice-president
of Santander and group chief compliance officer until her appointment in
2019 as group head of Supervisory and Regulatory Relations. She is a state
attorney.
Born in 1962, Javier Maldonado joined Grupo Santander in 1995 as head of
the International Legal division of Banco Santander de Negocios, S.A. Mr
Maldonado held several roles at Santander UK and in 2014 was appointed
senior executive vice-president of Santander and head of Coordination and
Control of Regulatory Projects until his appointment in 2015 as group head of
Costs.
Dirk Marzluf
GROUP HEAD OF TECHNOLOGY Born in 1970, Dirk Marzluf joined Grupo Santander in 2018 as senior
AND OPERATIONS
executive vice-president and head of IT and Operations. Previously, he had
served as CIO at AXA Group since 2013, leading the insurance group’s
technology and information security transformation and co-sponsoring its
digital strategy. Mr Marzluf also held global roles at Accenture, Daimler
Chrysler and Winterthur Group.
Víctor Matarranz
GLOBAL HEAD OF WEALTH
MANAGEMENT & INSURANCE
José Luis de Mora
Jaime Pérez Renovales
António Simões
GROUP HEAD OF STRATEGY
AND CORPORATE
DEVELOPMENT AND OF
CONSUMER FINANCE
(SANTANDER CONSUMER
FINANCE)
GROUP HEAD OF GENERAL
SECRETARIAT
REGIONAL HEAD OF EUROPE
AND COUNTRY HEAD OF
SANTANDER ESPAÑA
Marjolein van Hellemondt-
Gerdingh
GROUP CHIEF COMPLIANCE
OFFICER
Born in 1976, Víctor Matarranz joined Grupo Santander in 2012 as head of
Strategy and Innovation at Santander UK. In 2014, he was appointed senior
executive vice-president and head of the Executive Chairman’s Office and
Strategy until his appointment in 2017 as global head of Wealth
Management & Insurance. Previously, Mr Matarranz had held several roles at
McKinsey & Company, where he had become partner.
Born in 1966, José Luis de Mora joined Grupo Santander in 2003. Since then,
he has been in charge of the group’s Strategic Plan Development and
Acquisitions. In 2015, he was appointed group senior executive vice-president
and group head of Financial Planning and Corporate Development. He was
appointed head of Santander Consumer Finance on 1 January 2020 and CEO
of the same entity on 17 December 2020.
See profile in section 4.1 'Our directors'.
Born in 1975, António Simões joined Grupo Santander in 2020 as regional
head of Europe and he was appointed country head of Santander España in
2021. He was previously at HSBC, where he held roles including chief
executive officer of global private banking, member of the group
management board and group executive committee, and chief executive of
HSBC Bank plc and chief executive of Europe, encompassing all UK and
European operations for HSBC Group.
Born in 1964, Marjolien van Hellemondt-Gerdingh joined Santander Group in
2019 as senior executive vice-president and chief compliance officer.
Previously, she had been chief compliance officer of several banking and
financial entities such as NN Group, Zurich Insurance Company and De Lage
Landen International B.V.
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6. Remuneration
Sections 6.1, 6.2, 6.3, 6.5,6.6, 6.7, 9.4 and 9.5 comprise the annual
report on directors’ remuneration that must be prepared and
submitted to the consultative vote of the general shareholders'
meeting.
In addition, section 6.4 y 6.5 sets out the directors' remuneration
policy for 2022, 2023 and 2024, which is to be put to a vote at the
general shareholders' meeting, which is binding.
The annual report on directors' remuneration and the directors'
remuneration policy for 2022, 2023 and 2024 were approved by our
board of directors on 24 February 2022. All directors were present at
the time of vote casting and voted in favour.
The remuneration policy for directors in force as of the date of this
report is available on our corporate website (2020 Annual Report,
Corporate Governance, chapter 6: Remuneration).
6.1 Principles of the remuneration policy
Director remuneration in their capacity as such
The board of directors sets the individual remuneration of directors
(including executive directors) for the performance of supervisory
and collective decision-making duties within the amount fixed by
shareholders and commensurately with the roles they perform on
the collective decision-making body, their committee membership
and attendance, and other objective circumstances the board might
consider.
Remuneration of directors for executive duties
Banco Santander’s remuneration policy for executive duties (which
also generally applies to Banco Santander employees) dictates that:
1. Remuneration must be in line with shareholders' interests,
conducive to creating long-term value and compatible with our
rigorous risk management, long-term strategy and values.
2. Fixed remuneration must make up a significant proportion of total
compensation.
3. Variable remuneration must reward individuals for their role in
achieving set goals within the framework of prudent risk
management.
4. The global remuneration package and its structure must be
competitive in order to attract and retain talent.
5. Remuneration decisions must be free of conflicts of interest and
discrimination of any kind different from that based on the
performance assessment of objectives and corporate behaviours.
Remuneration must be free of gender-based bias and help
eliminate inequalities that could result from it.
The remuneration elements the policy lays down include
necessary mechanisms to ensure remuneration will be conducive
to achieving strategic and long-term sustainability objectives of the
Bank.
Accordingly, it bases executive directors and senior managers’
variable pay on pre-determined, specific and quantifiable financial,
sustainability-based and value-creation targets that are consistent
with Banco Santander’s interests, including in regard to
environmental, social and governance matters.
For more details, see section 6.3. about the policy's application in
2021 and section 6.4 about the remuneration policy for 2022 and
subsequent years.
Lastly, the remuneration committee and the board enlisted the
assistance of Willis Towers Watson to:
• Compare markets and entities similar to the Group in size,
characteristics and operations using relevant data for setting
remuneration.
• Analyse and confirm compliance with certain quantitative metrics
required to evaluate accomplishment of objectives.
• Estimate the fair value of variable remuneration linked to long-
term objectives.
• Advise in the update to the remuneration policy described in
section 6.4.
6.2 Remuneration of directors for supervisory
and collective decision-making duties: policy applied
in 2021
A. Composition and limits
According to our Bylaws, the remuneration of directors in their roles
consists of a fixed annual amount set at the general shareholders'
meeting. This amount remains in effect until shareholders vote to
amend it, even though the board may reduce it in the years it deems
appropriate. At the annual general shareholders' meeting,
remuneration for 2021 was set at EUR 6 million, which included (a)
annual allotment and (b) attendance fees.
Santander has taken out a civil liability insurance policy for directors
subject to usual terms proportionate to its circumstances.
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Directors can receive shares, share options or other forms of share-
based compensation, subject to prior approval at the general
meeting. Directors can also receive other compensation following a
proposal made by the remuneration committee and upon resolution
by the board of directors, as may be deemed appropriate, in
consideration for the performance of other duties in Banco
Santander, whether they are executives duties or not, in addition to
their oversight and collective decision-making as board members.
Non-executive directors do not have the right to receive any benefit
on the occasion of their removal from office.
B. Annual allotment
Each director received the amounts for serving on the board and its committees and positions held in them included in the chart below for 2020
and 2021.
As regards 2020, on 5 May 2020, as a gesture of responsibility in view of the situation created by the health emergency, the board of directors
agreed to reduce their allotments by 20% for the balance of 2020, with effect from 1 April 2020, and propose that amounts saved thereby be
used to finance the initiatives of Banco Santander to fight against the covid-19 pandemic.
In accordance with the remuneration policy approved at the general shareholders' meeting on 26 March 2021, the amounts for serving and
holding roles on the board and committees was the same amount as initially approved for 2020, adding that the innovation and technology
committee began to be remunerated, with its members receiving EUR 25,000 and its Chair, an additional EUR 70,000. Applicable amounts were:
Amount per director in euros
Members of the board of directors
Members of the executive committee
Members of the audit committee
Members of the appointments committee
Members of the remuneration committee
Members of the risk supervision, regulation and compliance committee
Members of the responsible banking, sustainability and culture committee
Members of the innovation and technology committee
Chairman of the audit committee
Chairman of the appointments committee
Chairman of the remuneration committee
Chairman of the risk supervision, regulation and compliance committee
Chairman of the responsible banking, sustainability and culture committee
Chairman of the innovation and technology committee
A
Lead director
Non-executive vice chairmen
2021
1 Jan to 31 Mar
1 Apr to 31 Dec
2020
90,000
170,000
40,000
25,000
25,000
40,000
15,000
25,000
70,000
50,000
50,000
70,000
50,000
70,000
110,000
30,000
22,500
42,500
10,000
6,250
6,250
10,000
3,750
—
17,500
12,500
12,500
17,500
12,500
—
27,500
7,500
49,500
93,500
22,000
13,750
13,750
22,000
8,250
—
38,500
27,500
27,500
38,500
27,500
—
60,500
16,500
A. Since 2015, Bruce Carnegie-Brown has been allocated EUR 700,000 in minimum total annual pay (including annual allowances and attendance fees) for his services to the
board and its committees, particularly as chair of the nomination and remuneration committees and as lead independent director; and for the required time and dedication to
perform these roles. However, in line with the board of directors' decision (shared by Bruce Carnegie-Brown) to reduce their allotments and fees from 1 April 2020 to 31
December, the same reduction was applied to that amount. Accordingly, his allotment for 2020 was EUR 595,000.
C. Attendance fees
Pursuant to resolutions approved by the board on the remuneration committee’s recommendations, attendance fees for board and committees
meetings (not including the executive committee, for which no fees are set) totalled the amounts included in the chart below for the last two
years.
As regards 2020, on 5 May 2020, as a gesture of responsibility in view of the situation created by the health emergency, the board of directors
agreed to reduce their attendance fees by 20% for the balance of 2020, with effect from 1 April 2020, and propose that the amounts saved
thereby be used to finance the initiatives of Banco Santander to fight against the covid-19 pandemic. For 2021, in the same manner as with the
annual allotment, the board voted to keep the same amounts set out in the 2020 policy before the exceptional decision above, and, as foreseen
in the remuneration policy approved at the general shareholders' meeting on 26 March 2021, attendance fees for innovation and technology
committee members were added.
Attendance fees per director per meeting in euros
Board of directors
Audit committee and risk supervision, regulation and compliance committee
Other committees (excluding executive committee)
2020
2021 1 Jan to 31 Mar
1 Apr to 31
Dec
2,600
1,700
1,500
2,600
1,700
1,500
2,080
1,360
1,200
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D. Breakdown of bylaw-stipulated emoluments
Total director bylaw-stipulated emoluments and attendance fees received in 2021 amounted to EUR 4,8 million (EUR 4,1 million in 2020). This is
20% less than the amount approved at the general meeting. Each director earned the following amounts for these items:
Execu
tive
Non-
execu
tive
—
BoardM
90,000
EC
170,000
—
90,000
170,000
AC
—
—
275,500
170,000
— 75,000 75,000
Amount in euros
2021
Annual allotment
ASC
—
RC
—
RSRCC
—
RBSCC
ITC
— 25,000
2020
Board and
committee
attendance
fees
Total
Total by-law
stipulated
emoluments
and
attendance
fees
285,000
45,000
330,000
288,970
—
—
—
—
— 25,000
285,000
45,000
330,000
269,620
— 25,000
620,500
79,500
700,000
595,000
Directors
Ana Botín
José Antonio
Álvarez
Bruce
Carnegie-
Brown
Homaira
Akbari
Javier Botín
A
Álvaro
CardosoB
R.Martín
ChávezC
Sol Daurella
Henrique de
D
Castro
E
Gina Díez
F
Luis Isasi
Ramiro
Mato
Sergio Rial
G
Belén
Romana
Pamela
Walkden
H
Rodrigo
EcheniqueI
Ignacio
BenjumeaJ
Guillermo
de la
DehesaK
Esther
Giménez-
L
Salinas
I
I
N
I
I
I
I
I
N
I
—
I
I
N
N
N
I
90,000
90,000
90,000
90,000
90,000
90,000
90,000
—
—
—
—
—
—
—
90,000
170,000
40,000
—
—
—
—
—
—
—
—
— 15,000 25,000
170,000
77,800
247,800
202,290
—
—
27,500 15,000
—
—
90,000
39,000
129,000
121,220
132,500
49,600
182,100
243,170
— 25,000 25,000
40,000
— 95,000
275,000
99,400
374,400
37,453
— 25,000 25,000
— 15,000
—
155,000
84,000
239,000
213,670
40,000
— 25,000
—
—
685
—
— 25,000
—
—
40,000
—
—
90,000
170,000
40,000
90,000
—
—
90,000
170,000
40,000
90,000
— 110,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 25,000
180,000
86,800
266,800
216,790
—
—
—
—
90,685
325,000
39,000
81,000
129,685
4,053
406,000
203,027
405,000
93,900
498,900
430,410
90,000
39,000
129,000
62,800
40,000 65,000
—
—
92,500 15,000 25,000
432,500
99,900
532,400
417,274
26,667
—
—
—
—
—
—
—
—
—
—
—
—
—
—
226,667
76,400
303,067
214,594
—
—
—
—
—
—
—
—
—
155,501
—
173,473
—
107,747
—
191,405
1,535,500 1,020,000 270,000 125,685 175,000 266,667 125,000 245,000 3,762,852 1,035,300
4,798,152 4,148,467
A. All amounts received were reimbursed to Fundación Botín.
B. Director since 1 April 2018.
C. Director since 27 October 2020.
D. Director since 17 July 2019.
E. Director since 22 December 2020.
F. Director since 19 May 2020
G. Executive director since 30 May 2020
H. Director since 29 October 2019.
I. Stepped down as executive director on 30 April 2019. Non-executive director from 1 May 2019 to 22 December 2020
J. Stepped down as director on 5 May 2020.
K. Stepped down as director on 3 April 2020.
L. Stepped down as director on 27 October 2020
M. Also includes emoluments for other roles in the board.
P: Proprietary I: Independent N: Non-external (neither proprietary nor independent).
EC: Executive committee AC: Audit committee ASC: Appointments committee RC: Remuneration committee
RSRCC: Risk supervision, regulation and compliance committee. RBSCC: Responsible Banking, sustainability and culture committee. ITC: Innovation and technology committee.
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6.3 Remuneration of directors for executive duties
The policy on directors’ remuneration for executive duties in 2021
was approved by the board of directors and put to a binding vote at
the 2021 general shareholders' meeting, with 93.26% votes in
favour. The table below summarizes the policy and its
implementation for Ana Botín and José Antonio Álvarez.
In the case of Sergio Rial, he has qualified as an executive director
since his appointment as director became effective on 30 May 2020,
pursuant to section 529 duodecies of the Spanish Companies Act (Ley
de Sociedades de Capital) because of his role as CEO and vice-chair
of Banco Santander (Brasil) S.A. (Santander Brasil). In 2021 he
received as fixed pay for his role as Regional head for South America,
the EUR 750 thousand that had been approved at the 2021 general
shareholders meeting as part of the 2021 remuneration policy. He
has not received any other remuneration for executive functions in
Banco Santander, S.A. On 31 December 2021, Mr Rial has stepped
down as CEO and vice-chair of Santander Brasil and as Regional head
for South America. Accordingly, he is not considered as an executive
director since that date.
Component
Gross annual
salary
Type
Fixed
Variable
remuneration
Variable
Pension scheme
Other
remuneration
Fixed
Variable
Fixed
Shareholding
policy
N/A
qualitative assessment on account of individual performance. • See section 6.3 B iv for details on long-term
Policy
• Paid in cash on a monthly basis.
• Individual benchmark reference.
• Calculated against annual quantitative metrics and a
• 50% of each payment is shares. The number of shares is set
at the time of the award.
• 40% paid in 2022;
• 60% deferred in five years.
◦ 24% paid in equal parts in 2023 and 2024.
◦ 36% paid in equal parts in 2025, 2026 and 2027, provided
certain long-term objectives are met (2021-2023).
Effective in 2021
• Ana Botin: EUR 3,176 thousand.
• José Antonio Álvarez: EUR 2,541 thousand.
• See section 6.3 B ii for details on annual metrics
and assessment.
metrics.
• See section 6.3 B iii for details on individual
variable pay.
• Annual contribution of 22% of base salary.
• No change since 2018
• Annual contribution of 22% of 30% of the average of variable • See section 6.3 C for details on annual
remuneration in the last three years
contributions and pension balance.
• Includes life, accident and medical insurance, and other in-
kind compensation.
• Payment for non-compete commitment
• No change for Ana Botín or José Antonio Álvarez
since 2018.
• No change.
• Executive directors also have the obligation to hold them for
three years from their award date, unless the director already
holds shares for an amount equivalent to 200% of their net
annual salary (calculated on the basis of their gross annual
salary). In such case, the regulatory obligation to hold shares
is for one year from their grant date.
• Policy updated during 2020 to assure
compliance with recommendation 62 to the
Good Governance Code for Listed Companies of
the CNMV. Ana Botín and José Antonio Álvarez
both maintain an amount in shares higher than
200% of their fixed pay.
A. Gross annual salary
The board resolved to maintain the same gross annual salary for Ana
Botín and José Antonio Álvarez for 2021 as in 2020.
It also maintained the fixed pension contribution of 22% of gross
annual salary it had agreed in 2020 for 2021.
Executive directors’ gross annual salary and fixed annual contribution
to pensions for 2021 and 2020 were as follows:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
Fixed annual
pension
contribution
699
559
1,258
Gross annual
salary
3,176
2,541
5,717
Total
3,875
3,100
6,975
Gross annual
salary
3,176
2,541
5,717
2020
Fixed annual
pension
contribution
699
559
1,258
Total
3,875
3,100
6,975
Sergio Rial also received EUR 750 thousand as remuneration for his
role as Regional Head for South America in 2021.
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B. Variable remuneration
i) General policy for 2021
The board approved the executive directors’ variable remuneration
on the remuneration committee’s recommendation, according to the
policy approved at the general shareholders' meeting:
• Variable components
(including the variable part of the
22
contributions to the benefit systems) of executive directors’ total
remuneration in 2021 should amount to less than 200% of fixed
components, as established by resolution of the general
shareholders' meeting on 26 March 2021.
• At the beginning of 2022, on the remuneration committee’s
recommendation, the board approved the final amount of the 2021
incentive, based on the set bonus pool in accordance with the
directors' remuneration policy approved at the general
shareholders' meeting on 26 March 2021, in consideration of:
• Short-term quantitative metrics measured against annual
objectives.
• A qualitative assessment that cannot adjust the quantitative
result by more than 25 percentage points upwards or
downwards.
• Any exceptional adjustment that must be supported by evidence.
• The final figure is adjusted to executive directors’ individual
variable remuneration benchmark according to the current
model and (i) their individual objectives (which generally match
the Group’s and cover financial, risk management and capital
adequacy metrics as well as the three pillars the Group's strategy
stands on: One Santander, PagoNxt and Digital Consumer Bank;
and (ii) how they achieve them in consideration of how they
manage employees and demonstrated the corporate values.
The payment schedule of the incentive is illustrated below.
Individual
benchmark
variable
remuneration
Quantitative
metrics and
qualitative
assessment
A
Individual
performance
Final
individual
variable
remuneration
A. Any exceptional adjustment supported by evidence
Quantitative metrics and qualitative assessment aspects are
described below.
• Payment of the approved incentive is split equally into cash and
shares. 40% is paid in 2022, once the final amount has been set.
The remaining 60% will be deferred in equal parts over five years
(subject to long-term metrics) as follows:
• The deferred amount payable in 2023 and 2024, (24% of the
total) will be paid if none of the malus clauses described below
are triggered.
• The deferred amount payable in 2025, 2026 and 2027, (36% of
the total) will be paid if the malus clauses are not triggered and
the multi-year targets described below are reached. These
targets can only reduce these amounts and the number of
deferred shares (which can be lower but not higher).
• When the deferred amount is paid in cash, the beneficiary may be
paid the amount adjusted for inflation up to the date of payment.
• All payments in shares are subject to a three years retention
period, unless the director already holds shares for an amount
equivalent to twice his/her annual fix remuneration, in which
case the shares would be subject only to the regulatory one year
retention period obligation.
• The hedging of Santander shares received during the retention
and deferral periods is expressly prohibited. The sale of shares is
also prohibited for one year from time they are received.
Immediately
following
performance year
Deferred (malus)
Long-term performance deferral
Cash
Shares
Total
40%
24%
36%
2022
2023
2024
2025
2026
2027
100%
All deferred payments can be subject to malus, even if they are not
subject to long-term objectives. Similarly, Santander can claw back
paid incentives in the scenarios and for the period dictated in the
group’s malus and clawback policy.
ii) Quantitative metrics and qualitative assessment for 2021
Executive directors’ variable remuneration for 2021 has been based
on the corporate centre executives' common bonus pool, which
calculation comes from the quantitative and qualitative metrics
approved by the board at the beginning of 2021 on the remuneration
committee’s recommendation. This also takes into account the input
received from the human resources committee, which for these
purpose counts on the participation of the senior management in
charge of the group's risk, compliance, audit, human resources and
legal and financial accounting and control functions, who among
others provided input on risk, solvency, liquidity, results' quality and
22
As indicated in the first chart in section 6.3 pension contributions include both fix and variable components, the latter of which also form part of total variable remuneration.
Annual report 2021 253
Component
Evaluation of the
effective
satisfaction of
objectives
regarding
customers
conduct risk
Appropriate
management of
risk appetite and
operational risk
Risks culture and
employee
awareness
Efficient capital
adequacy
management:
Sustainable
capital
contribution
Capital strategy
planning and
execution
Ideal business
growth from the
previous year in
view of market
conditions and
competition (net
profit and profit
margin after
provisions)
Sustainable and
sound results,
efficient cost
management and
cost-to-income
objectives
Progress in public
commitments on
responsible
banking
(especially
financial
inclusion, green
finance and
diversity-based
targets)
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recurrence, and compliance and control. The quantitative and
qualitative results for the bonus pool resulting from the process
above, which are considered by the board, upon recommendation
from the remunerations committee, are included in the chart below.
Quantitative metrics
Qualitative
Category
and (weight)
Metrics
Customers
(20%)
Net
Promoter
Score (NPS)C
%
Achieveme
nt over
target
Target:
TOP3 in 6
countries.
Achieved:
TOP3 in 8
countriesD
Weighted
A
Assessment assessment
109.3 %
21.86 %
Risk - Cost of
credit ratio
(IFRS9)
(10%)
% Target:
1.18%
% Achieved:
0.77%
134.97 %
13.50 %
Capital ratio
(CET1) (20%
% Target:
11.90%
% Achieved:
12.35%E
280.0 %
56.00 %
Assessment
+3.40% - Strengthened product governance
and made progress with customer conduct risk
management, especially to further embed it in
the first lines of defence.
+1.42 % - Considerable progress in our risk
management and control environment
underpinned by the advances in our cutting
edge technology (machine learning, AI and
robotics), the definition of new target operating
models for financial crime, as well as the
successful implementation of our Risk Strategy.
+ 3.34% - Positive Evolution of CET1 ratio with
active management of regulatory and markets
(e.g. available for sale portfolios) headwinds
throughout the year.
Total
weighted
B
score
25.26 %
14.92 %
59.34 %
Profitability -
Return on
tangible
equity
(RoTE) (50%)
Target:
9.50%
Result:
11.96%
125.84 %
62.92 %
Shareholders
(80%)
Exceptional
adjustment
TOTAL
-2% - Growth in a complex landscape,
influenced by our competitors’ management of
pandemic-related provisions. While Santander
leads its peers in revenue generation, it has
released less provisions in 2021.
+ 1.17% - Total net operating income growth
year-on-year (+6%) provided by our geographic
and business diversification and efficiency ratio
of 46.2%, having improved 0.8 pp on 2020 and
2019. The Group remained one of the most
efficient global banks in the world.
+ 4.17% - Good progress made with selected
commitments on the Responsible banking
agenda, especially in: (i) women in senior
leadership positions (the ratio increased by 260
bps from 23.7% in 2020 to 26.3% in 2021. The
target was 26.2% in 2021 and the public
commitment is 30% by 2025); (ii) financially
empowered people (7.5 million people since
2019, including 2.5 million in 2021. The 2021
target was to reach 7.0 million and the public
commitment is 10 million people between
2019 and 2025); (iii) green finance (of the EUR
120 billion committed from 2019 to 2025 and
EUR 66 billion have been reached so far (EUR 51
billion was the target for close of 2021).
66.26 %
(14.54) %
151.23 %
Elements (non-exhaustive) under
consideration: macro-economic
environment, general control
environment, compliance with internal
and external regulations, prudent and
efficient liquidity and capital planning
management.
Although the underlying business performance resulted in a bonus
calculus of 165.77%, there has been a management proposal,
supported by the remuneration committee and approved by the
Board of Directors, to exercise downward discretion to the 2021
variable remuneration to align with the ongoing uncertainty about
the covid-19 health crisis in the Group’s markets and its impact on
shareholder returns.
A. The weighted assessment is the result of multiplying each objective’s assessment by its weighting per category. Each qualitative component under the RoTE category has
same weighting.
B. Result of adding or subtracting the qualitative assessment to/from the weighted assessment.
C. The net promoter core (NPS) measures customers' willingness to recommend Santander. The assessment is based on the number of the group's core markets where
Santander’s NPS scores in the top 3, as well as on its performance against competitors.
D. The achievement amount is calculated by adding the weight each country where the target is met has over the total of Santander Group clients.
E. For this purpose, CET1 phased-in metric has been adjusted by the board, following a proposal from the remuneration committee, due to inorganic transactions, material
changes to the Group’s composition or size or other extraordinary circumstances which have affected the suitability of the metric and achievement scale established,
resulting in an impact not related to the performance of the executive directors and executives being evaluated.
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The following section details the individual variable remuneration
approved by the board.
proposed to reduce their total 2020 compensation (salary and bonus)
by 50%.
iii) Determination of the individual variable remuneration for
executive directors set in 2021
The board approved executive directors’ variable remuneration on
the remuneration committee’s recommendation based on the policy
mentioned in the paragraphs above and the result of the quantitative
metrics and qualitative assessment described above.
The board also verified that none of the following circumstances
have occurred:
• The Group’s ONP
for 2021 was not more than 50% less than for
23
2020. Otherwise, variable remuneration would not have been
greater than 50% of the benchmark incentive.
• The Group’s ONP was not negative. Otherwise, the incentive would
have been zero.
The board voted to maintain the same benchmark incentive for Ana
Botín and José Antonio Álvarez in 2021 as in 2020.
Variable contributions to pensions were not modified in 2021, so the
amounts are the 22% of the 30% of the last three assigned bonus'
average.
Breakdown of immediately payable and deferred remuneration
Comparing with the previous year, it should be mentioned that amid
the covid-19 health crisis in 2020, Ana Botín and José Antonio Álvarez
To achieve the 50% reduction compared to 2019, the board of
directors decided to apply an additional adjustment to Ana Botín’s
and José Antonio Alvarez’s variable compensation, reducing the
variable compensation by 74% in the case of Ana Botín and 79% in
the case of José Antonio Álvarez.
In 2021, the good business performance (which enabled Banco
Santander to reach a 12.73% underlying RoTE, above 2019), the
excellent execution of our strategy (with the highest underlying
attributable profit of the last 12 years), and efficient capital
management, have improved substantially the bonus pool results,
and thus the variable remuneration of corporate centre employees,
including the executive directors.
The immediately payable variable remuneration in deferred amounts
not contingent on long-term metrics and variable remuneration
deferred and contingent on long-term objectives approved by the
board of directors, following a proposal by the remuneration
committee resulting from the aforementioned process are:
IMMEDIATELY PAYABLE AND DEFERRED (NOT LINKED TO LONG-TERM OBJECTIVES) VARIABLE REMUNERATION
EUR thousand
Ana Botín
José Antonio Álvarez
Total
In cash
2,941
1,985
4,926
2021
In shares
2,941
1,985
4,926
Total
5,883
3,970
9,853
In cash
534
290
824
2020
In shares
534
290
824
Total
1,068
580
1,648
A. The share amounts in the foregoing table correspond to a total of 1,587 thousand shares in Banco Santander (307 thousand shares in 2020).
The following chart states deferred variable remuneration at fair value, which will only be received in 2025, 2026 and 2027, provided that long-
term multi-year targets are met (see section 6.3 B iv)), beneficiaries continue to be employed at Grupo Santander, in accordance with the terms
approved in the general shareholders' meeting, and no circumstances triggering malus clauses occur
24
:
DEFERRED VARIABLE REMUNERATION LINKED TO LONG-TERM OBJECTIVES (FAIR VALUE)
EUR thousand
Ana Botín
José Antonio Álvarez
Total
In cash
1,158
782
1,940
2021
In shares
1,158
782
1,940
Total
2,316
1,563
3,880
In cash
210
114
324
2020
In shares
210
114
324
Total
420
228
648
A. The number of shares in the table total 625 thousand shares in Banco Santander (121 thousand shares in 2020).
Fair value has been determined on the grant date based on the
valuation report of an independent expert, Willis Towers Watson.
Based on the design of the plan for 2021 and success levels of similar
plans at peer entities, the expert found a range of 60%-80%
reasonable to estimate the initial success ratio. Therefore, fair value
was considered to be 70% of the maximum value.
23
24
For this purpose, ONP is attributed ordinary net profit, adjusted upwards or downwards for transactions the board believes have an impact not connected to the performance
of evaluated directors, for which extraordinary profit, corporate transactions, impairments, or accounting or legal adjustments that may occur during the year are evaluated.
The exclusion in the calculation for these purposes of goodwill impairments is aligned with the supervisors' criteria on their recommendations on dividend distributions.
Corresponds to the fair value of the maximum amount to be received over a total of 3 years, subject to continued service -with certain exceptions-, non- applicability of malus
clauses and compliance with set goals. Fair value was estimated at the plan award date on account of several scenarios for the variables in the plan during the measurement
periods.
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The maximum number of shares to be delivered under the plan
(2,480 thousand shares not adjusted for fair value) is within the limit
of 3,705 thousand shares authorised in the 2021 AGM for executive
directors. This limit was calculated with the weighted average daily
volume of weighted average listing prices of Santander shares in the
15 trading sessions prior to the Friday (not inclusive) before 1
February 2022 (the date on which the board approved the 2021
bonus for executive directors), which was EUR 3.104 per share.
iv) Multi-year targets linked to the payment of deferred amounts
in 2025, 2026 and 2027
The multi-year targets linked to the payment of the deferred
amounts payable in 2025, 2026 and 2027 are:
A
B
C
Metrics
Earnings per share (EPS) growth in 2023 vs
2020
A
in
Relative Total Shareholder Return (TSR)
2021-2023 within a peer group
Fully loaded target common equity Tier 1 ratio
(CET1)B
for 2023
Weight
33 %
33 %
33 %
Target and compliance scales (metrics ratios)
If EPS in 2023 (% vs.2020) ≥ 125%, then metric ratio is 1.5
C
If EPS in 2023 (% vs.2020) ≥ 100% but < 125%, then metric ratio is 1 – 1.5
C
If EPS in 2023 (% vs. 2020) ≥ 70% but < 100%, then metric ratio is 0 – 1
If EPS in 2023 (% vs. 2020) < 70%, ratio is 0
If ranking of Santander above percentile 66, then metric ratio is 1
If ranking of Santander between percentiles 33 and 66, then ratio is 0 – 1
If ranking of Santander below percentile 33, then metric ratio is 0
If CET1 is ≥ 12%, then metric ratio is 1
E
If CET1 is ≥ 11% but < 12%, then metric ratio is 0 – 1
If CET1 is < 11%, then metric ratio is 0
D
A. TSR refers to the difference (%) between the final and initial values of capital invested in ordinary shares of Banco Santander. The final value is calculated based on the
dividends or other similar concepts (such as the Santander Scrip Dividend programme) shareholders receive for this investment during the corresponding period -as if they
had invested in more shares of the same type at the first date on which the dividend or similar concept was payable to shareholders- and the weighted average share price at
that date. To calculate TSR, the weighted average daily volumes of the weighted average listing prices for the fifteen trading sessions prior to 1 January 2021 (exclusive) is
considered (to calculate the initial value) and the fifteen trading sessions prior to 1 January 2024 (exclusive) (to calculate the final value). The peer group consists of BBVA,
BNP Paribas, Citi, Crédit Agricole, HSBC, ING, Itaú, Scotia Bank and Unicredit.
B. To check success in terms of this objective, possible increases in CET1 resulting from capital increases will be disregarded (except in relation to the Santander Scrip Dividend
programme). Furthermore, the CET1 ratio at 31 December 2023 could be adjusted to factor out the impact of any new regulations on its calculation up to that date.
C. Linear increase in the EPS ratio based on the specific EPS growth rate in 2023 in respect of 2020 within this bracket of the scale.
D. Proportional increase in the TSR ratio based on the number of positions moved up in the ranking.
E. Linear increase in the CET1 ratio as a function of the CET1 ratio in 2023 within this bracket of the scale.
To determine the annual amount of the deferred portion linked to
objectives corresponding to each board member in 2025, 2026 and
2027, the following formula shall be applied to each of these
payments ('Final annuity') without prejudice to any adjustment
deriving from the malus clauses:
• 'B' is the TSR ratio according to the scale in the table above,
according to the relative performance of Banco Santander’s TSR
within its peer group in 2021-2023.
• 'C' is the CET1 ratio according to compliance with the CET1 target
Final annuity = Amt. x (1/3 x A + 1/3 x B + 1/3 x C)
for 2023 described in the table above.
where:
• 'Amt.' is one third of the variable remuneration amount deferred
conditional on performance (i.e. Amt. will be 12% of the total
variable pay set in early 2022).
• 'A' is the EPS ratio according to the scale in the table above, based
on EPS growth in 2023 vs 2020.
• In any event, if the result of (1/3 x A + 1/3 x B + 1/3 x C) is greater
than 1, the multiplier will be 1.
v) Malus and clawback
Deferred amounts (whether or not contingent on multi-year targets)
25
,
will be earned if the beneficiary continues to work with the group
and none of the circumstances triggering the malus clause arise
before each payment, according to the section on malus and
clawback clauses in the remuneration policy.
25
When the beneficiary’s relationship with Banco Santander or another group entity terminates because of retirement, early retirement or pre-retirement; a dismissal ruled by
the courts to be wrongful; unilateral withdrawal for good cause by an employee (which includes the situations set forth in article 10.3 of Royal Decree 1382/1985, of 1
August, governing the special relationship of senior management, for the persons subject to these rules); permanent disability or death; mandatory redundancy; or because
an employer other than Banco Santander ceases to belong to Santander Group, the right to receive shares and deferred amounts in cash and any amounts of the deferred
amounts in cash adjusted for inflation will remain under the same conditions in force as if none of such circumstances had occurred. In the case of death, the right will pass to
the beneficiary’s heirs.
In cases of justified temporary leave due to temporary disability, suspension of contract due to maternity or paternity leave, or leave to care for children or a relative, there will
be no change in the beneficiary’s rights. If the beneficiary goes to another group company (even through international assignment and/or expatriation), these rights will
likewise not change. If the relationship terminates by mutual agreement or because the beneficiary obtains a leave not mentioned above, the terms of the termination or
temporary leave agreement will apply.
None of those circumstances attach the right to receive the deferred amount in advance. If beneficiaries or their heirs maintain the right to receive deferred pay in shares and
cash and any deferred amounts in cash adjusted for inflation, it will be delivered within the periods and under the terms dictated by the rules for the plans.
None of the above circumstances shall give the right to receive the deferred amount in advance. If the beneficiary or the successors thereof maintain the right to receive the
deferred remuneration in shares and cash and, where applicable, the amounts arising from the adjustment for inflation of the deferred amounts in cash, it shall be delivered
within the periods and under the terms provided in the rules for the plans.
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Similarly, Banco Santander can clawback any paid variable amounts
in the scenarios and for the period dictated by the terms and
conditions in the said policy.
Variable remuneration for 2021 can be clawed back until the
beginning of 2028.
Malus and clawback clauses are triggered by poor financial
performance of Banco Santander, a division or area, or exposures
from staff as a result of an executive(s)’s management of, at least,
one of these factors:
Category
Factors
Risk
Capital
Regulation and
internal codes
Conduct
Significant failures in risk management by Banco
Santander, or by a business or risk control unit.
An increase in capital requirements at the Banco
Santander or one of its business units not planned
at the time that exposure was generated.
Regulatory penalties or legal convictions for
events that might be attributable to the unit or
staff responsible for them. In addition, failure to
comply with Banco Santander’s internal codes of
conduct.
Improper conduct, whether individual or
collective. Negative effects deriving from the
marketing of unsuitable products and the liability
of persons or bodies making such decisions will
be considered especially significant.
The application of malus or clawback clauses for executive directors
shall be determined by the board of directors, at the proposal of the
remuneration committee, and cannot be proposed once the retention
period for the final payment in shares under the plan has elapsed in
early 2028. Therefore, the board determines the specific deferred
incentive amount to be paid as well as any amount that could be
subject to clawback, upon on the remuneration committee’s
recommendation and depending on the level of compliance with the
conditions for applying malus clauses, .
recognized when the previous pension commitments had been
transferred to the new pension scheme.
Every year since 2013, Banco Santander has been contributing to the
pension scheme for executive directors and senior executives in
proportion to their pensionable bases until their departure from the
group, retirement, death or disability (even during pre-retirement).
The pensionable base for executive directors is the sum of fixed
remuneration plus 30% of the average of their last three variable
remuneration amounts. Contributions will be 22% of pensionable
bases in all cases.
Pursuant to remuneration regulations, contributions calculated on
the basis of variable remuneration are subject to the discretionary
pension benefits scheme. Therefore, under the policy, malus and
clawback clauses can be enforced on them in place at any given time
and during the same period in which variable remuneration is
deferred. Furthermore, these contributions must be invested in
shares in Banco Santander for five years from the date of the
executive director's retirement, or from the date on which executive
directors leave the group. Once that period has elapsed, the amount
invested in shares will be paid to them or their beneficiaries if some
contingency covered by the pension scheme was happened or will be
added to the remainder of their cumulative balance until their
retirement age when the total amount will be paid.
The benefit plan is outsourced to Santander Seguros y Reaseguros,
Compañía Aseguradora, S.A. The economic rights of the directors
previously mentioned belong to them even if they are not active at
Banco Santander at the time of their retirement, death or disability.
Their contracts do not stipulate any severance payment outside the
extent of the law for termination of contract or the aforementioned
annual allowance for pre-retirement.
The provisions recognised in 2021 for retirement pensions
amounted to 1,825 thousand euros (2,019 thousand euros in 2020),
as broken down below.
C. Main features of the benefit plans
Executive directors participate in the defined contribution pension
scheme created in 2012, which covers contingencies due to
retirement, disability and death.
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
1,041
783
2020
1,155
864
1,825
2,019
José Antonio Álvarez's contract has been updated in 2020 so that he
has ceased to have the right to early retirement in case of
termination of his contract. Ana Botín has ceased to have the right to
voluntary early retirement, keeping this right if Banco Santander
terminates her contract before 31 August 2022, after which early
retirement will no longer be available. As long as she retains that
right, she is entitled to an annual allotment equal to her total fixed
remuneration, plus 30% of the average of up to her last three
variable pays.
According to the 2012 system, contracts for executive directors (and
other senior managers) with defined benefit pension obligations
were transformed into a defined contribution system. The new
system gives executive directors the right to receive benefits upon
retirement, even if they are not active at Banco Santander at the time,
based on contributions to the system. It also replaces their previous
right to receive a pension supplement in the event of retirement.
The initial amount for each executive director in the new defined
contribution pension scheme corresponded to the market value of
the assets for which the provisions for due obligations were
These are the amounts corresponding to each executive director as of
31 December 2021 and 2020 in the pension scheme:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
48,075
18,821
66,896
2020
49,444
18,082
67,526
D. Other remuneration
Grupo Santander also takes out insurance policies for life, health and
other contingencies for its executive directors. This other
remuneration component includes the fixed supplement approved
for Ana Botín and José Antonio Álvarez to replace the supplementary
benefits from the pension scheme eliminated in 2018, in addition to
the cost for insuring death or disability until they retire. Executive
directors are also covered under the group’s civil liability insurance
policy.
Note 5 to the group’s consolidated financial statements describes
other benefits received by executive directors in detail.
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E. Shareholdings
In 2016, on the remuneration committee’s recommendation, the
board of directors approved a shareholding policy to better align
executive directors with shareholders’ long-term interests.
According to this policy, in addition to the executive directors’
commitment to maintaining a significant holding of shares in the
group for as long as they have their role, executive directors active on
1 January 2016 would have five years to demonstrate that their
personal assets include shares in Banco Santander that amount (net
of taxes) to twice their gross annual salary on that date. Executive
directors have complied with this policy. The following table show
the ratio, with a share price at 31 December 2021 of 2.94 euros:
2021
Gross
annual number of
shares
salary
(thousand)
(thousand)
2020
Gross
annual number of
shares
salary
(thousand)
(thousand)
X
X
Chair
CEO
3,176
2,541
25,365
23.5
1,985
2.3
3,176
2,541
24,608 22.8
1,821
2.1
Likewise, in addition to the regulatory obligation for executive
directors not to sell the shares they receive as remuneration for a
year from their award, which is included in the shareholding policy,
and will apply to all cases, this policy has also been updated to
include the obligation for executive directors not to sell the shares
they receive as remuneration for a period of three years from their
award date, unless the executive director already holds Banco
Santander shares for an amount equivalent to twice his/her fix
annual remuneration.
F. Remuneration of Sergio Rial in Santander Brasil
In addition to the EUR 750 thousand Sergio Rial received as Regional
head for South America, he was paid the following amounts as CEO
of Santander Brasil:
2021
Base salary
Other fixed benefits
Pensions
Variable remuneration immediately
payable and deferred (not linked to
long-term objectives)
Total 2021
Total 2020
BRL thousand
EUR thousand
12,645
47
7,350
26,600
46,642
37,079
1,985
7
1,153
4,018
7,163
6,378
His variable remuneration is subject to the same policy principles,
deferrals, multi-year targets linked to the payment of deferred
amounts and malus and clawback principles described under section
B above (but in relation to the subsidiary where he was the CEO until
31 December 2021).
The following table shows the variable remuneration deferred and
contingent on long-term objectives (with a fair value applied of 70%):
Deferred and linked to long-term objectives variable remuneration
2021
In shares Total
2020
In cash In shares
In cash
Total
Sergio Rial
791
791 1,582
655
655
1,311
G. Remuneration of board members as representatives of
Banco Santander
The executive committee has resolved that the remuneration
received by directors who represent Banco Santander on boards of
companies where it owns equity and were appointed after 18 March
2002 will accrue to the group. No executive director received
remuneration for this type of representation in 2021 or 2020.
However, in their personal capacity, in 2021 Álvaro Cardoso was paid
BRL 2,130 thousand (EUR 334 thousand) as non-executive chair of
Banco Santander Brasil, S.A., Homaira Akbari was paid USD 190
thousand (EUR 161 thousand) as member of the board of Santander
Consumer USA (SCUSA) and EUR 52 thousand as member of the
Board of PagoNxt, and Henrique de Castro and R.Martín Chávez were
each paid the same EUR 52 thousand as members of the board of
PagoNxt. Likewise, Pamela Walkden was paid GBP 31 thousand (EUR
36 thousand) as member of Santander UK plc and Santander UK
Group Holdings boards.
Likewise, Luis Isasi was paid EUR 1,000 thousand for his roles as non-
executive chair and for board and committees meetings (amount
included in the chart below as "other remuneration" as it is paid by
Banco Santander, S.A.).
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H. Individual remuneration of directors for all items
in 2021
Below is a breakdown of each director’s short-term salary (payable
immediately) and deferred remuneration not based on long-term
performance for 2021 and 2020. Note 5 to the group’s consolidated
financial statements contains disclosures on shares delivered in 2021
under the deferred remuneration schemes of previous years where
conditions for their delivery were met in the related years.
An additional column for 2019 is included for comparison purposes,
being 2019 a more representative year due to the aforementioned
extraordinary reduction in the variable remuneration applied in 2020.
Total remuneration rose 15% for the Chair and 11% for the chief
executive officer compared to 2019, as attributable profit grew 25%
from 2019 to 2021. Underling RoTE in 2021 was 12.73% (11.79% in
2019), TSR 18.58% (-4% in 2019).
Bylaw-stipulated
emoluments
Board and
board
committees
annual
allotment
Board and
committee
attendance
fees
285
285
620
170
90
133
275
155
180
91
325
405
90
433
227
—
—
—
—
3,764
3,081
3,770
45
45
80
78
39
50
99
84
87
39
81
94
39
100
76
—
—
—
—
1,036
1,066
1,094
Directors
Ana Botín
José Antonio Álvarez
Bruce Carnegie-Brown
Homaira Akbari
Javier Botín
A
B
Álvaro Cardoso
C
R.Martín Chávez
Sol Daurella
D
Henrique de Castro
E
Gina Díez
F
Luis Isasi
Ramiro Mato
G
Sergio Rial
Belén Romana
H
Pamela Walkden
I
Rodrigo Echenique
J
Ignacio Benjumea
K
Guillermo de la Dehesa
L
Esther Giménez-Salinas
Total 2021
Total 2020
Total 2019
EUR thousand
2021
Salary and bonus of executive directors
Immediate Deferred
payment
bonus
(50% in
shares)
2,206
1,488
payment
bonus
(50% in
shares)
3,676
2,482
Fixed
Salary
3,176
2,541
Pension
Contributi
on
1,041
783
Total
9,058
6,511
Other
remuneration
1,006
1,536
Total
11,435
9,160
—
—
—
—
—
—
—
—
—
—
750
—
—
—
—
—
—
6,467
5,717
6,317
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,158
1,029
5,146
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,694
617
3,087
—
—
—
—
—
—
—
—
—
—
750
—
—
—
—
—
—
16,319
7,363
14,550
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,824
2,019
2,003
—
—
—
—
—
—
—
—
1,000
—
—
—
—
—
—
—
—
3,542
5,537
5,770
700
248
129
183
374
239
267
130
1,406
499
879
533
303
—
—
—
—
26,485
—
—
2020
2019
Total
6,818
6,018
595
202
122
243
37
214
217
4
943
430
63
417
214
1,955
275
108
191
—
19,066
Total
9,954
8,270
700
226
137
276
—
240
86
—
—
500
—
525
34
4,874
524
399
228
—
—
27,187
A. All amounts received were reimbursed to Fundación Botín.
B. Director since 1 April 2018.
C. Director since 27 October 2020.
D. Director since 17 July 2019.
E. Director since 22 December 2020.
F. Director since 19 May 2020
G. Executive director since 30 May 2020
H. Director since 29 October 2019.
I.Stepped down as executive director on 30 April 2019. Non-executive director from 1 May 2019 to 22 December 2020
J. Stepped down as director on 5 May 2020.
K.Stepped down as director on 3 April 2020.
L. Stepped down as director on 27 October 2020.
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J. Comparative analysis of directors' remuneration,
company performance and average remuneration of
employees
This chart summarizes directors’ compensation (short-term
remuneration, deferred variable remuneration and/or deferred
variable remuneration linked to multi-year targets) for executive
duties in relation to underlying attributable profit. The weight of
executive directors’ remuneration relative to underlying attributable
profit continues to decline since 2013.
RATIO OF EXECUTIVE DIRECTOR REMUNERATION TO UNDERLYING
ATTRIBUTABLE PROFIT
The following table provides each executive director’s salary
contingent on multi-year targets. It is only paid if they remain active
in the group, malus clauses do not apply and set multi-year targets
are achieved (as depending on their achievement the amounts will be
reduced, or even be cero if the related minimum thresholds are not
achieved).
Ana Botín
José Antonio Álvarez
Total
EUR thousand
2021
A
(50% in shares)
2020
A
(50% in shares)
2,316
1,563
3,880
420
228
648
A. Fair value of the maximum amount receivable over a total of 3 years (2025, 2026
and 2027), which was estimated when the plan was granted, based on several
scenarios relating to variables in the plan during the measurement periods.
I. Ratio of variable to fixed pay components in 2021
At the 2021 AGM, shareholders approved a maximum ratio of 200%
of variable to fixed components in executive directors’ pay.
The table below shows the ratio of variable components to fixed
components for each executive director’s total pay in 2021. This ratio
increased from 2020 by 142 pp for Ana Botín and by 104 pp for José
Antonio Álvarez due to the exceptional reduction of their
remuneration in 2020 amid the covid-19 health crisis mentioned in
subsection B, iii) above.
Executive directors
Ana Botín
José Antonio Álvarez
Sergio Rial
For these purposes:
Variable Components /
fixed components (%)
182 %
128 %
161 %
• Variable components include all items of this nature, such as any
contributions to the pension scheme calculated on directors’
variable pay.
• Fixed components consist of the other items each director receives
for executive duties, including contributions to pension schemes
calculated on the basis of fixed remuneration and other benefits,
as well as all bylaw-stipulated emoluments that the director is
entitled to receive in his or her capacity as such.
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Compared to 2019 as a more representative year, due to the aforementioned extraordinary reduction in the variable remuneration applied in
2020, total remuneration rose 15% for the Chair and 11% for the chief executive officer, as attributable profit grew 25% from 2019 to 2021.
Underling RoTE in 2021 was 12.73% (11.79% in 2019), TSR 18.58% (-4% in 2019).
The following chart shows the comparative analysis between the directors' remuneration, the company performance (underlying profit
attributable to the Group, audited profit before taxes and ordinary ROTE) and the average remuneration of Santander employees in the last
5 years:
1
(EUR thousand)
Directors' remuneration
• Executive Directors
Ana Botín
José Antonio Álvarez
A
Sergio Rial
• Non-Executive Directors
Bruce Carnegie-Brown
B
2
Javier Botín
Sol Daurella
Belén Romana
C
Homaira Akbari
D
E
Ramiro Mato
F
Álvaro Cardoso
G
Henrique de Castro
H
Pamela Walkden
I
Luis Isasi
J
R. Martín Chávez
Gina Díez
K
Company’s performance
Underlying profit attributable to the Group (EUR mn)
3
Consolidated results of the Group
Ordinary RoTE
(EUR mn)
4
Employees' average remuneration
(EUR)
% var.
19/18
2018
% var.
18/17
2017
2021
% var.
21/20
11,435
9,160
879
68%
52%
—
2020
6,818
6,018
63
700
129
239
533
248
499
183
267
303
1,406
374
130
18%
6%
12%
28%
23%
16%
(25)%
23%
42%
49%
911%
—
595
122
214
417
202
430
243
217
214
943
37
4
% var.
20/19
(32)%
(27)%
—
(15)%
(11)%
(11)%
(21)%
(11)%
(14)%
(12)%
152%
529%
—
—
—
2019
9,954
8,270
—
700
137
240
525
226
500
276
86
34
—
—
—
(5)%
(4)%
—
(4)%
13%
12%
27%
14%
11%
86%
—
—
—
—
—
10,483
8,645
—
732
121
215
414
199
450
148
—
—
—
—
—
8,654
14,547
12.73%
55,673
70%
—
71%
18%
5,081
(2,076)
7.44%
47,130
(38)%
—
(37)%
(12)%
8,252
12,543
11.79%
53,832
2%
(12)%
(2)%
2%
8,064
14,201
12.08%
52,941
(1)%
(3)%
—
—
(2)%
4%
39%
25%
—
—
—
—
—
—
—
7%
17%
2%
(5)%
10,582
8,893
—
731
124
207
297
159
36
—
—
—
—
—
—
7,516
12,091
11.82%
55,484
1. Deferred variable remuneration linked to long-term objectives not included.
2. Non-executive directors' remuneration fluctuations are caused by joining or leaving the Board of Directors and the difference in the amount of meetings they assist during the
year. Hence there is no correlation between their remuneration and the company performance.
3.Group operating profit/(loss) before tax.
4. Employee average remuneration includes all concepts, including other remuneration. Full-time equivalent data. The percentage of variable remuneration over fixed
remuneration in an average employee is lower than that of the executive directors. Variable remuneration data accrued in the current year, both for employees and executive
directors. Evolutive data also impacted by exchange rate performance in the group's geographies.
A. Executive director since 30 May 2020.
B. All amounts received were reimbursed to Fundación Botín.
C. Director since 22 December 2015.
D. Director since 27 September 2016.
E. Director since 28 November 2017.
F. Director since 23 March 2018.
G. Director since 17 July 2019.
H. Director since 29 October 2019.
I. Director since 19 May 2020.
J. Director since 27 October 2020.
K.Director since 22 December 2020.
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J. Summary of link between risk, performance and remuneration
Banco Santander's remuneration policy and its application in 2021 have promoted sound and effective risk management, at the same time as
supported the fulfilment of long-term business objectives.
The key elements of the remuneration policy for executive directors making alignment between risk, performance and reward in 2021 were as
follows:
Key words
Metrics balance
Financial thresholds
Long-term objectives
Aspect aligning risk, performance and remuneration
The balance of quantitative metrics and qualitative assessments, including customer, risk, capital and profitability
in relation to risk, used to determine the executive directors’ variable remuneration.
The adjustment to variable remuneration if certain financial thresholds are not reached, which may limit the
variable remuneration to 50% of the previous year's amount or lead to it not being awarded at all.
The long-term objectives linked to the last three portions of the deferred variable remuneration. These objectives
are directly associated with return to shareholders relative to a peer group, earnings per share and maintaining a
sound capital base.
Individual performance
Variable remuneration cap
The discretion of the board to consider the performance of each executive director in the award of their individual
variable remuneration.
200% of fixed remuneration.
Control functions involvement
The work undertaken by the human resources committee aided by senior managers leading Control functions in
relation to the analysis of quantitative metrics information and undertaking qualitative analysis
Malus and clawback
Payment in shares
Malus can be applied to unvested deferred pay and clawback can be applied to vested or paid compensation under
the conditions dictated by the group’s remuneration policy.
At least 50% of variable pay is in shares and subject to retention for at least one year from their delivery.
6.4 Directors' remuneration policy for 2022, 2023 and
2024 submitted to a binding shareholder vote
Remuneration policy principles and remuneration system
A. Directors’ remuneration in their capacity as such
Director’s remuneration is regulated by article 58 of Banco
Santander’s bylaws and article 33 of the Rules and regulations of the
board of directors. For 2022, 2023 and 2024, no changes to the
principles and composition of directors’ remuneration for supervisory
and collective decision-making duties are planned with respect of
those in 2021. They are described in sections 6.1 and 6.2.
B. Executive directors' remuneration
Executive directors are entitled to be paid the remuneration (e.g.,
salaries, incentives, bonuses, severance payments for early
termination from such duties, and amounts to be paid by Banco
Santander for insurance premiums or contributions to savings
schemes) deemed appropriate for performing executive functions
following a proposal from the remunerations committee and by
resolution of the board of directors, subject to the limits set by law.
For 2022, 2023 and 2024, several changes to the principles of
executive directors’ remuneration for executive duties are planned
( sections 6.1 and 6.3).
First, to simplify the variable remuneration scheme, the proposal is to
reduce the number of metrics in the bonus scorecard from the four
applied in 2021 to three (30% for customers; 40% for RoRWA; and
30% for RoTE) to focus more on the Group's strategic priorities of
customers and profitability, assuring adequate risk management and
efficient use of capital.
The qualitative assessment for the scorecard will be conformed by
the same metrics as in 2021, but adding CET1, to acknowledge the
importance of having sufficient capital to support the bank’s strategy
even in the event of severe stress.
Second, to create a stronger alignment with shareholder returns, it is
proposed to introduce options as a remuneration instrument.
Accordingly, the variable remuneration of Banco Santander's
identified staff would be 50% in cash, 25% in shares and 25% in
share options, instead of 50% in cash and 50% in shares under the
current scheme. Executive directors would also be allowed to choose
to receive only options, so their variable remuneration would be 50%
in cash and 50% in share options.
Options will not include any premium, as they will be valued at fair
market price at the moment when they are awarded. So the
executives' exposure to shareholders' return is amplified by the effect
of the evolution of the share price both positively and negatively.
Third, it is proposed to update the long-term performance metrics
according to market best practice and our stakeholders’ preferences,
prioritising shareholder returns and the Group's profitability in the
long-term, as well as sustainability of the balance sheet and its
activities and how they are carried out. Therefore:
• Relative performance of Banco Santander's total shareholder
return (TSR) compared to our peer group will remain; however, the
threshold at which executives begin to accrue remuneration is
increased from 33% to 40%. Its weight will be 40% of the total.
• Return on tangible equity (RoTE), as an indication of long-term
value creation. Its weight will be 40% of the total.
• Five ESG (environmental, social and governance) metrics linked to
the progress we make on our commitments to implement the
Group's Responsible banking agenda. Their weight will be 20% of
the total. For additional details about our public commitments,
please see Responsible banking section.
As shown below in the 'Deferred variable remuneration linked to
long-term objectives' section, the maximum achievement ratio is also
increased from 100% to 125% so executives have the incentive to
exceed their targets; however, the maximum achievement ratio for
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effectively paid remuneration will not exceed the thresholds
approved at the AGM.
Additionally, with the aim of providing a strong alignment with
PagoNxt's success, the executive Chair and the chief executive officer
will be able to receive restricted share units (RSUs) of PagoNxt, S.L.
The RSUs will substitute part of their Santander variable pay
instruments without increasing their total pay and will not represent
more than 10% of their variable pay.
Specifically, as regards 2022, Ana Botín would receive the equivalent
of EUR 608 thousand in RSUs, and José Antonio Álvarez would receive
the equivalent of EUR 410 thousand in RSUs, under PagoNxt, S.L.'s
long term incentive plan. Each RSU would grant the right to a share in
PagoNxt, S.L. or the holding entity of its group (or its equivalent in
cash) at the moment when, according to such plan, a liquidity event,
a repurchase or a liquidation of such instruments takes place.
This plan is subject to the same principles of risk alignment, variable
remuneration caps, deferrals and malus and clawback as the
incentive which applies to executive directors described herein, but
with payment being done in PagoNxt instruments. It is also subject to
specific objectives of PagoNxt, the main of which is the completion of
its corporate restructuring for 2022.
Finally, every year, Banco Santander conducts a comparative analysis
of total compensation for executive directors and other senior
executives. For 2022, the analysis will consist of a 'peer group' made
up by BBVA, BNP Paribas, Citi, Crédit Agricole, HSBC, ING, Itaú, Scotia
Bank and Unicredit.
Principle of equal pay for equal work and equal employment
conditions for Santander executives and employees
Santander applies the equal pay principle in the Corporate
remuneration policy of Grupo Santander for executive directors and
employees alike, which forbids any type of differential treatment that
is not exclusively based on an assessment of performance results
and corporate behaviours, and promotes equal pay for men and
women.
Furthermore, our remuneration framework rewards Santander
employees for their contribution based on such common principles
as:
• Meritocracy: Non-discrimination based on sex, age, culture, religion
or ethnicity.
• Consistency: Remuneration consistent with the level of
responsibility, leadership and performance within the Group, to
promote retention of key professionals and attract the best talent.
• Sustainability: A remuneration framework that is sustainable in
terms of associated costs, cost control, and related objectives (as
described in the policy) that ensure variable remuneration is
commensurate with the Group's performance, disincentivize short-
term commitment and promote long-term sustainability. The
remuneration scheme for the c. 1,000 identified staff also includes
deferral of up to 60% of variable remuneration, its payment 25% in
Santander shares and 25% in Santander share options (also subject
to one-year retention), and malus and clawback clauses.
Also, performance objectives for annual variable remuneration
have included since 2020 ESG components aligned with our
Responsible banking commitments. From 2022, with the purpose
of increasing focus on the group's Responsible banking agenda and
highlight sustainability as a core long-term strategy, five new ESG
metrics are included (described in the next section) for the last
deferred variable remuneration payments.
• Social responsibility: Employees’ pay cannot be lower than the
legal minimum wage or the living wage in the country where they
work. Additionally, in order to give our social responsibility
prominence in remuneration, the Group’s Responsible banking
objectives for employee remuneration include the people
financially empowered metric.
• Performance-based pay: Variable remuneration is subject to the
achievement of (i) annual objectives (set out in section 6.4.B.ii.B),
which reflect customer and profitability strategy, promote proper
risk management and cost-effective capital allocation, and
discourage short-term management focus; and (ii) long-term
objectives (set out in section 6.4.B.ii.B), which support a sustainable
balance sheet, shareholder return, the Group’s profitability and
sustainability of the Group's activities and the way they are carried
out.
Directors’ remuneration for 2022
A. Directors' remuneration in their capacity as such
In 2022, directors, in their capacity as such, will receive remuneration
for supervisory and collective decision-making duties for a total of up
to 6 million euros as authorised by the shareholders at the April 2021
AGM (which will again be put to a vote at the 2022 AGM). It consists
of:
• annual allocation; and
• attendance fees.
The amounts agreed for 2022 are the same as initially established for
2021 (disclosed in section 6.2.B and C above), with the exception of
the annual board member allotment (which is to increase from EUR
90,000 to EUR 95,000).
The specific amounts and the form of payment are determined by the
board of directors in the manner described in section 6.2 above,
based on the objective circumstances of each director.
Additionally, as indicated in the description of the director
remuneration system, Banco Santander will pay its directors’ the
corresponding civil liability insurance premium in 2022. The related
policy is common to all executives and was taken out under usual
market condition, proportionate to Banco Santander's situation.
B. Executive directors' remuneration for the performance of
executive duties
i) Fixed remuneration components
A) Gross annual salary
On the remuneration committee’s recommendation, the board
resolved that Ana Botín and José Antonio Álvarez’s gross annual
salaries would be the same for 2022 as in 2021.
Their gross annual salary amounts may increase owing to
adjustments made to the fixed remuneration mix based on the
criteria approved by the remuneration committee, provided this does
not entail any cost increase for Banco Santander.
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regulations on remuneration, certain variable components can be
excluded.
A. Variable remuneration benchmark
Variable remuneration for executive directors in 2022 will be set
based on a standard benchmark contingent upon the full
achievement of their set individual targets, which for 2022 among
others include, both for the executive chair and the CEO, increasing
CET1 and sustainability targets.
The board of directors may revise the variable pay benchmark on the
remuneration committee’s recommendation and following market
and internal contribution criteria.
B. Setting of final variable remuneration based on yearly results
Based on that standard benchmark, 2022 variable remuneration for
executive directors will be based on the corporate bonus pool, and
set according to:
• Short-term quantitative metrics for annual objectives, which
reduce from the four used in 2021 to three (customers, RoTE and
RoRWA) to reflect strategic priorities regarding customers and
profitability.
• A qualitative assessment that cannot raise or lower the quantitative
result by more than 25%, which among other elements includes
metrics on capital and progress on ESG commitments.
• An exceptional adjustment that must be supported by duly
substantiated evidence and may involve changes owing to control
and/or risk deficiencies, negative assessments from supervisors or
unexpected material events.
Capital continues to be an important part of key employees´
remuneration (including executive directors), due to the
management of RWA (RoRWA metric weights 40%), the inclusion
of CET1 in the qualitative assessment below and also the individual
targets of the executive chair, the CEO and all executives running
businesses.
B) Other fixed remuneration components
• Benefit systems: defined contribution schemes as set out in
section 'Pre-retirement and benefit schemes'
26
.
• Supplement to fixed salary: Ana Botín will receive the fixed salary
supplement for an amount of EUR 525 thousand in 2022, and José
Antonio Álvarez, EUR 710 thousand, that was approved in 2018
when the supplementary death and disability pension schemes
were eliminated.
• Social welfare benefits: executive directors will also receive social
welfare benefits such as life insurance premiums, medical
insurance and the allocation of remuneration to employee loans,
in accordance with Banco Santander’s general policy for senior
management, and in the same terms as the rest of employees.
Likewise, the Bank makes available to directors the human and
material means required or considered appropriate for carrying
out their duties (including any travel required for the exercise of
their role). Any eventual private use of these means by the
executive directors is duly paid by them under the terms and
conditions approved by the board of directors upon proposal from
the remuneration committee. This information can also be found
under the 'Pre-retirement and benefit plans' section
ii) Variable remuneration components
The board approved the policy on executive directors’ variable
remuneration for 2022 on the remuneration committee's
recommendation, based on the remuneration policy principles
described under section 6.3.
Executive directors’ variable remuneration consists of a single
incentive scheme, linked to the achievement of short-and long-term
objectives. It is structured as follows:
• The final amount of variable remuneration will be set at the start of
the following year (2023) based on the benchmark amount and
subject to compliance with the annual objectives described under
section B) below.
• 40% of the incentive will be paid immediately once the final
amount has been set, and 60% will be deferred in equal parts paid
out over five years and subject to long-term metrics:
• The amount deferred over the first two years (24% of the total)
will be paid in 2024 and 2025 on the condition that no malus
clauses described under section 6.3 B vi) are triggered.
• The amount deferred over the next three years (36% of the total)
will be paid in 2026, 2027 and 2028, on the condition that no
malus clauses are triggered and long-term targets –described in
section D) Deferred incentive subject to long-term performance
objectives– are met.
The Group can claw back incentives already paid in the cases and
during the term set out in its malus and clawback policy, described
under section 6.3 B vi).
Exceptionally, when a new executive director joins Banco Santander,
his/her variable pay may include a sign-on bonus and/or buyouts.
Variable components in executive directors’ total remuneration for
2022 cannot exceed the limit of 200% of fixed components
submitted for approval to the 2022 AGM. However, under EU
26
As indicated in the next section, executive directors contribution to the benefit systems includes both fixed and variable components
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The new scorecard below provides the proposed quantitative
metrics, qualitative assessment factors and weightings:
approved by the board of directors to comply with applicable
regulations and regulatory recommendations.
Category and
weighting
Quantitative
metrics
Customers
(30%)
NPSA
and total
customers and
loyal customers
Qualitative assessment
Customer conduct Risk.
Measurement of additional
customer satisfaction metrics,
such as easy access to service or
response time
CET1 - Efficient capital adequacy
management
Shareholders
(70%)
Return - RoTE:
return on tangible
equityB
(30%)
Appropriate management of
operational risk, risk appetite and
recorded breaches
B
(Return on
RoRWA
risk weighted
assets)(40%)
Sustainable and sound results
and efficient cost management
Suitability of business growth
compared to the previous year in
view of market conditions and
competition
Annual progress on Responsible
banking commitments (as shown
in Section D below for 2022)
A. Net promoter score.
B.For this purpose, these metrics may be adjusted upwards or downwards by the
board, following a proposal from the remuneration committee, when inorganic
transactions, material changes to the Group’s composition or size or other
extraordinary circumstances (such as impairments, share buybacks, legal changes
or restructuring procedures) have occurred which affect the suitability of the
metric and achievement scale established in each case and resulting in an impact
not related to the performance of the executive directors and executives being
evaluated.
Lastly, as additional conditions for determining the incentive, the
following circumstances must be confirmed to set variable pay:
• If the Group’s ONP for 2022 were 50% less than in 2021, variable
pay would in no case exceed 50% of the benchmark incentive for
2022.
• If the Group’s ONP were negative, the incentive would be zero.
When setting individual bonuses, the board will also consider
restrictions to the dividend policy imposed by supervisors.
C) Forms of payment of the incentive
Variable remuneration will be 50% in cash, 25% in shares and 25% in
share options. One portion is paid in 2023 and the other is deferred
for five years and subject to long-term metrics:
a) 40% of variable remuneration is paid in 2023 net of tax, with 50%
in cash, 25% in shares and 25% in share options.
b) 60% paid, if applicable, in five equal parts in 2024, 2025, 2026,
2027 and 2028 (net of tax), with 50% in cash, 25% in shares and
25% in share options under the conditions stipulated in section E).
The final three payments will also be subject to long-term objectives
described in section D) below.
Shares shall be subject to a three-years retention period, unless the
executive directors already hold shares for an amount equivalent to
200% of their fix annual remuneration -in which case the regulatory
one year retention period will apply. For share options, the retention
period applied will be in accordance with the rules of the plan
Options will not include any premium, as they will be valued at fair
market price at the moment when they are awarded. They may be
exercised from the moment they are delivered to the executive, in
accordance with the deferral calendar above, and until the tenth
anniversary of the date when they are delivered.
D) Deferred variable pay subject to long-term objectives
As indicated above, the amounts deferred in 2026, 2027 and 2028
will be paid on the condition that the group achieves its long-term
targets for 2022-2024, in addition to the terms described in section
E).
As advanced in section B) on the principles of the remuneration
policy, the new long-term targets are:
a. Banco Santander’s consolidated Return on tangible equity (RoTE)
target in 2024. The RoTE ratio for this target is obtained as
follows:
RoTE in 2024 (%)
≥ 15%
≥ 12% but < 15%
< 12%
‘RoTE Ratio'
1.5
A
0 – 1.5
0
A. Straight-line increase in the RoTE ratio based on the percentage of specific
RoTE in 2024 within this bracket of the scale.
To verify compliance with this objective, the board, following a
proposal from the remuneration committee, may adjust it to remove
the effects of any regulatory change to its calculation rules or any
extraordinary circumstances (such as impairments, corporate
transactions, share buybacks or restructuring procedures) that have
occurred which affect the suitability of the metric and achievement
scale established in each case and resulting in an impact not related
to the performance of the executive directors and executives being
evaluated.
b. Relative performance of Banco Santander's total shareholder
return (TSR) in 2022-2024 in respect of the weighted TSR of a
peer group comprising 9 credit institutions, with the appropriate
TSR ratio based on the group’s TSR among its peers.
th
Ranking of Santander TSR
percentile
th
The100
Between the 75
(not inclusive)
Between the 40
inclusive)
Less than the 40th percentile
and 100
and 75
th
th
'TSR Ratio'
1.5
th
A
percentiles 1 – 1.5
A
percentiles (not 0.5 - 1
0
A. Increase in the TSR ratio proportional to the number of positions moved up in the
ranking.
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27
measures the return on shareholders’ investment. It is the sum
TSR
of the change in share price plus dividends and other similar items
(including the Santander Scrip Dividend programme) shareholders
can receive during the period.
The peer group comprises BBVA, BNP Paribas, Citi, Credit Agricole,
HSBC, ING, Itaú, Scotiabank and Unicredit.
c. ESG (environmental, social and governance) metrics.
Achievement of this target will depend on the progress made on the
Group's responsible banking commitments (described below):
1.Target for women in senior leadership positions by the end of
2024:
B
(%)
Women in senior leadership positions
≥ 30.5%
≥ 30% but < 30.5%
≥ 28% but < 30%
< 28%
Coefficient
1.25
1 – 1.25A
A
0 – 1
0
A. Increase of the coefficient is proportional to its position on this line of the scale.
B. Senior leadership positions make up 1% of the total workforce
2. Financially empowered people target between 2019 and 2024:
B
Financially empowered people
(million)
≥ 14
≥ 13 but < 14
≥ 9 but < 13
< 9
Coefficient
1.25
1 – 1.25A
A
0 – 1
0
A. Increase of the coefficient is proportional to its position on this line of the scale.
B.Unbanked, underbanked or financially vulnerable individuals receive tailored
finance solutions and can increase their knowledge and resilience through
financial education.
More ambitious target than the public commitment announced due to the good
performance of this metric.
Furthermore, our financial inclusion target will always conform to the Group’s
credit risk policy without altering loanbook performance.
The public commitment is measured with cumulative data since 2019 to align
with our 2019-2025 responsible banking public commitments.
3.Green finance raised and facilitated target between 2019 and
2024:
B
Green Finance
(EUR Bn)
≥ 170
≥ 160 but < 170
≥ 120 but < 160
< 120
Coefficient
1.25
1 – 1.25A
A
0 – 1
0
A. Increase of the coefficient is proportional to its position on this line of the scale.
B. Includes Grupo Santander's contribution to green finance: project finance;
syndicated loans; green bonds; capital finance; export finance, advisory services,
structuring and other products, to help customers transition to a low-carbon
economy. Includes the public commitment and the launch of new products and
green retail volumes.
The public commitment is measured with cumulative data since 2019 to align
with our 2019-2025 responsible banking public commitments.
4.Setting decarbonisation targets across the business following
NZBA:
Sectors with decarbonisation targets (number)
≥ 11
=10
≥ 0 but <10
Coefficient
1.25
1
A
0 – 1
A. Increase of the coefficient is proportional to its position on this line of the scale.
The Group is working on aligning our climate-material portfolios with
the goals of the Paris Agreement. In 2021, we set decarbonization
targets for the coal and electricity generation industries, based on our
ambition to be net zero by 2050. In February, we made our
decarbonization targets public with a view to end financing for
electricity-generating customers if the source of over 10% of their
revenue is thermal coal; and to eliminating our exposure to coal
mining entirely by 2030. In July 2021, we announced a new
decarbonization target to reduce the emissions intensity of our
electricity generation portfolio. As part of the NZBA, we have the
obligation to set and announce interim emissions-related targets for
2030 (or sooner) regarding these ten industries by March 2024:
electricity generation; coal; oil and gas, transport; iron and steel;
aluminium; cement; mortgage lending; property; and agriculture
(subject to the availability of data and methodologies, in line with our
commitment to NZBA). To meet NZBA guidelines, we must disclose,
at least, one target for portfolios of each of those ten industries.
5.Meeting the decarbonisation target set for Santander Power
Generation Portfolio:
Emission intensity reduction of our power
generation portfolio (%)
≥ 18.75%
≥ 15% but < 18.75%
B
but < 15%
≥ 0%
Coefficient
1.25
1 – 1.25A
A
0 – 1
A. Increase of the coefficient is proportional to its position on this line of the scale.
B. In case emission intensity increase, the coefficient would be 0.
This commitment aims to make sure we succeed in lowering the
emissions intensity of our electricity generation portfolio from 0.23
tCO2e/MWh (2019) to 0.18 tCO2e/MWh by 2025 and 0.11 tCO2e/
MWh by 2030, in accordance with the “IEA – Net Zero emissions”
scenario. From the 2019 baseline scenario of 0.23, a 21.7%
emissions reduction is necessary to reach the 2025 target of 0.18.
Cutting emissions from 2019 by between 15% and 18.75% will put
us on the right path with momentum to reach the targets for our
electricity generation portfolio by 2025 and 2030.
Each of the five Responsible banking commitments have the same
weighting and this formula to calculate them:
C = (1/5 x Coefficient 1 + 1/5 x Coefficient 2 + 1/5 x Coefficient 3
+1/5 x Coefficient 4 +1/5 x Coefficient 5 )
27
TSR refers to the difference (%) between the final and initial values of capital invested in ordinary shares of Banco Santander. The final value is calculated based on the
dividends or other similar concepts (such as the Santander Scrip Dividend programme) shareholders receive for this investment during the corresponding period -as if they
had invested in more shares of the same type at the first date on which the dividend or similar concept was payable to shareholders- and the weighted average share price at
that date. To calculate TSR, the weighted average daily volumes of the weighted average listing prices for the fifteen trading sessions prior to 1 January 2022 (exclusive) is
considered (to calculate the initial value) and the fifteen trading sessions prior to 1 January 2025 (exclusive) (to calculate the final value).
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The following formula will be used to set the annual amount of
performance-based deferred variable remuneration in 2026, 2027
and 2028 ('Final annuity'), without prejudice to any adjustment
deriving from the application of the malus policy (see section 6.3 B
vi):
Santander shares for an amount equivalent to twice his/her annual
salary. For share options, the retention period applied will be in
accordance with the rules of the plan approved by the board of
directors to comply with applicable regulations and regulatory
recommendations.
Final annuity = Amt. x (2/5 x A + 2/5 x B + 1/5 x C)
Directors’ remuneration for 2023 and 2024
where:
• 'Amt.' is one third of variable remuneration deferred conditional on
performance (i.e. Amt. will be 12% of the total incentive set in
early 2023).
• ‘A' is the RoTE coefficient according to the scale in the table above,
based on RoTE at year-end 2024.
• 'B' is the TSR ratio calculated as the scale in the table above,
according to the relative performance of Banco Santander’s TSR
within its peer group in 2022-2024.
• ‘C’ is the coefficient resulting from the sum of weighted
coefficients for each of the five Responsible banking commitments
for 2024 (see section (c) above).
• In any event, if the result of (2/5 x A + 2/5 x B +1/5 x C) is greater
than 1.25, the multiplier will be 1.25.
The estimated maximum amount to be delivered in shares or share
options to executive directors is 11.5 million euros.
E) Other terms of the incentive
Payment of the deferred amounts (including those linked to long-
term targets) if they remain in the group and none of the
circumstances triggering malus clauses arising (as per the malus and
clawback section in the group’s remuneration policy) under terms
similar to those indicated for 2021. Furthermore, the group can claw
back paid incentives under the scenarios, period and terms and
conditions set out in the remuneration policy.
Hedging the value of Santander shares or share options received
during the retention and deferral periods is expressly prohibited.
The effect of inflation on the deferred amounts in cash may be offset.
Selling shares is also prohibited for at least one year since the
delivery. Shares received by the exercise of options, as well as cash
proceeds deriving from exercise by differences, will be in accordance
with the rules of the plan approved by the board of directors. .
The remuneration committee may propose to the board adjustments
in variable remuneration under exceptional circumstances owing to
internal or external factors, such as requirements, orders or
recommendations issued by regulatory or supervisory bodies. Such
adjustments will be described in detail in the report on the
remuneration committee and the annual report on directors’
remuneration put to a non-binding vote at the annual general
meeting.
iv. Shareholdings
As described in section 6.3.E, in addition to the regulatory obligation
not to sell shares they receive as remuneration for a year since from
their award date, in order to comply with recommendation 62 of the
Spanish Corporate Governance Code, the policy on shareholdings
includes the obligation for executive directors not to sell the shares
they receive as variable remuneration for a period of three years from
their award date, unless the executive director already holds Banco
A. Directors’ remuneration
For 2023 and 2024, no changes to directors’ remuneration are
planned for 2022. However, shareholders at the 2023 or 2024
annual general meeting could approve an amount higher than the six
million euros currently in force, or the board could approve an
alternative allocation of that amount to directors in accordance with
article 58.2 of Banco Santander’s Bylaws (duties and responsibilities;
positions held on the board; their membership and attendance at
committee meetings; and other objective circumstances).
B. Directors' remuneration for the performance of executive duties
Executive directors’ remuneration will conform to principles similar
to those applied in 2022, with the following changes.
i. Fixed components of remuneration
A) Gross annual salary
Executive directors’ annual gross fixed pay may be adjusted each year
based on the criteria approved by the remuneration committee at any
given time. For 2023 and 2024, it may not increase above 5% of their
annual gross salary in the previous year. It could also increase over
that threshold owing to adjustments made to the fixed remuneration
mix based on standards approved by the remuneration committee, as
long as it will not increase the Group’s costs.
The 5% increase mentioned above may be higher for one or several
directors provided that, when applying the rules or requirements or
supervisory recommendations that may be applicable, and if so
proposed by the remuneration committee, it is appropriate to adjust
their remuneration mix and, in particular, their variable
remuneration, in view of the functions they perform.
This should not increase executive directors’ total remuneration.
Otherwise, it must be disclosed in the report on the remuneration
committee and the annual report on director's remuneration put to a
non-binding vote at annual general meeting.
B) Other fixed remuneration components
No changes planned in respect of the terms for 2022.
ii) Variable remuneration components
The policy on executive directors’ variable remuneration for 2023 and
2024 will be based on the same principles as in 2022, following the
same single-incentive scheme described above, and subject to the
same rules of operation and limitations.
A) Setting variable remuneration
Executive directors’ variable remuneration for 2023 and 2024 will be
set based on the corporate bonus pool and a benchmark approved for
each year which takes into account:
• a set of short-term quantitative metrics measured against annual
objectives and aligned with the group’s strategic plan. These
metrics will also cover, at least, shareholder return targets, capital
and customers. They can be measured at group level and, where
applicable, at division level, for a specific business division headed
by an executive director. The results of each metric can be
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contrasted with the budget for the financial year, as well as with
growth from the previous year.
• a qualitative assessment that cannot raise or lower the quantitative
result by more than 25%. It will be conducted for the same
categories as the quantitative metrics, including shareholder
returns, risk and capital management and customers.
• an exceptional adjustment that must be duly substantiated and
may involve changes owing to control and/or risk shortfalls,
negative assessments from supervisors or unexpected material
events.
The quantitative metrics, qualitative assessment and potential
extraordinary adjustments will ensure main objectives are considered
from the perspective of the various stakeholders and that the
importance of risk and capital management is factored in.
Once the corporate bonus pool is fixed according to the criteria
above, the board of directors, further to a proposal from the
remunerations committee, decides on the individual bonus, taking
into consideration the level of achievement of their individual
objectives, which in general terms coincide with the bonus pool
metrics (60%) and their compliance with corporate values (40%).
Lastly, the following circumstances must be confirmed to set variable
remuneration:
• If ONP does not reach a certain compliance threshold, the incentive
cannot exceed 50% of the year’s incentive benchmark.
• If the group’s ONP were negative, the incentive would be zero.
• When setting individual variable pay, the board will also consider
restrictions to the dividend policy imposed by supervisors.
B) Forms of payment of the incentive
No changes to pay forms are planned in respect of the terms in place
for 2022.
It is also envisaged that for 2023 and 2024 Ana Botín would receive
the equivalent of EUR 500 thousand in RSUs, and José Antonio
Álvarez would receive the equivalent of EUR 410 thousand in RSUs,
under PagoNxt, S.L.'s long term incentive plan. Each RSU would grant
the right to a share in PagoNxt, S.L. or the holding entity of its group
(or its equivalent in cash) at the moment when, according to such
plan, a liquidity event, a repurchase or a liquidation of such
instruments takes place.
The RSUs will substitute part of their Santander variable pay
instruments without increasing their total pay and will not represent
more than 10% of their variable pay.
C) Deferred variable remuneration subject to long-term objectives
The last three annual payments of each deferred variable
remuneration amount will be made in accordance with the terms
described under section E) above and if the Group fulfils long-term
objectives for at least three years. This may confirm, reduce or
increase payment amounts and the number of deferred shares.
Long-term metrics will, at least, cover value creation and shareholder
returns as well as capital and sustainability over a minimum period of
three years. They will be aligned with the group’s strategic plan and
main priorities towards its stakeholders. They can be measured for
the entire group or by country or business, when appropriate, and
subsequently compared to a group of peers.
The portion paid in shares cannot be sold until one year has elapsed
since delivery. For share options, the retention period applied will be
in accordance with the rules of the plan approved by the board of
directors.
D) Other terms of the incentive
No changes to the continuity, malus and clawback clauses of the
remuneration policy for 2022 described in section E are expected.
Furthermore, no changes are planned in respect of the clauses on
hedging shares or the deferred amounts in cash adjusted for
inflation.
iii) Shareholdings
The policy on shareholdings approved in 2016, with the amendment
introduced in 2020 relating to not selling the shares they receive as
variable remuneration for a period of three years detailed in section
6.3.E above will apply in 2023 and 2024, unless the remuneration
committee proposes it be amended to the board in light of
exceptional circumstances (regulations, orders or recommendations
from regulators or supervisors). Such amendments would be
described in detail in the report on the remuneration committee and
the annual report on director’s remuneration put to a non-binding
vote at the annual general meeting.
iv) Principle of equal pay
The same principle of equal pay that applies for executive directors
and any other Santander employee described in respect of 2022
applies for 2023 and 2024.
Terms and conditions of executive directors’ contracts
Executive directors’ terms of service are governed by board-approved
contracts they sign with Banco Santander. The basic terms and
conditions, besides those relating to the remuneration mentioned
above, are the ones described herebelow.
A. Exclusivity and non-competition
Executive directors may not contract with other companies or entities
to perform services, unless expressly authorised by the board of
directors. In all cases, they are bound by a duty of non-competition in
relation to companies and activities similar in nature to Banco
Santander and its consolidated group.
In addition, executive director contracts impose prohibitions on
competing and attracting customers, employees and suppliers,
which can be enforced for two years after their termination in their
executive duties for reasons other than a breach by Banco Santander.
In regard to Ana Botín and José Antonio Álvarez, the compensation to
be paid by Banco Santander for this duty of non-competition is twice
the amount of the fixed remuneration.
B. Code of Conduct
Executive directors are obliged to adhere strictly to the group’s
General Code and the Code of Conduct in Securities Markets,
especially in terms of confidentiality, professional ethics and conflicts
of interest.
C. Termination
The length of executive directors' contract is indefinite. Contracts do
not provide for any severance payment upon termination apart from
what the law provides.
If Ana Botín’s contract is terminated by Banco Santander, she must
remain available to the group for four months in order to ensure
proper transition (6 months from the moment pre-retirement
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provisions are taken out). During this period, she would continue to
receive her gross annual salary.
D. Pre-retirement and benefit plans
The board of directors has approved in 2020, an amendment to the
contracts of the executive directors whereby:
available to directors the human and material means required or
considered appropriate for carrying out their duties (including any
travel required for the exercise of their role). Any eventual private use
of these means by the executive directors is duly paid by them under
the terms and conditions approved by the board of directors upon
proposal from the remuneration committee.
• Ana Botín ceases to have the right to pre-retire if she leaves Banco
Santander out of her own volition, keeping this right in case of
termination by Banco Santander until 31 August 2022. After this
date, she does not have the right to pre-retire. While she keeps this
right she will be entitled to an annual allotment equal to the sum
of her fixed remuneration and 30% of the average amount of her
last variable remuneration, to a maximum of three. This allotment
is subject to the malus and clawback provisions in place for a period
of five years.
• José Antonio Álvarez ceases to have the right to pre-retire in case of
termination of his contract.
They both participate in the defined contribution scheme created in
2012, which covers the contingencies of retirement, disability and
death. Banco Santander makes annual contributions to executive
directors’ benefit plans schemes. Annual contributions are calculated
in proportion to executive directors’ pensionable bases, and the group
will continue to make them until the executive directors’ leave the
group or until their early retirement within the group, their death or
disability (including during pre-retirement). The pensionable base of
executive directors’ annual contributions is their fixed remuneration
plus 30% of the average of their last three variable remuneration
amounts. Contributions will be 22% of pensionable bases.
The pension amount that corresponds to contributions linked to
variable remuneration will be invested in Santander shares for five
years from the earlier of the date of retirement or cessation. It will be
paid in cash after the five years have elapsed or on the retirement
date (if later). Moreover, the malus and clawback clauses for variable
remuneration contributions will apply for the same period as the
related bonus or incentive.
This benefit plan is outsourced to Santander Seguros y Reaseguros,
Compañía Aseguradora, S.A. Executive directors’ economic rights
under the scheme belong to them even if they are not active in the
group at the time of their retirement, death or disability. Their
contracts do not provide for any severance pay upon termination
apart from what the law provides and in the case of pre-retirement,
the aforementioned annual allotment.
E. Insurance and other remuneration and benefits in kind
Ana Botín and José Antonio Álvarez will receive the supplement to
their fixed remuneration approved when the supplementary life and
health benefits were eliminated in 2018. It will be paid in 2022, 2023
and 2024 in the same amount and continue to be paid until they
reach retirement age (even if they are still active).
The group has life and health insurance policies taken out for
directors. Insurance premiums for 2022 include standard life
insurance and the life insurance cover with the supplement to their
fixed remuneration mentioned above. In 2023 and 2024, premiums
could vary if directors’ fixed pay or actuarial circumstances change.
Furthermore, executive directors are covered by Banco Santander’s
civil liability insurance policy and may receive other benefits in kind
(such as employee loans) pursuant to the group’s general policy and
subject to the corresponding tax treatment. Likewise, the Bank makes
F. Confidentiality and return of documents
Directors are bound to a strict duty of confidentiality during their
relationship and subsequent to termination. Executive directors are
required to return any documents and items relating to their
activities and in their possession to Banco Santander.
Agreements with non-executive members of the board
Sergio Rial signed an agreement (effective on 1 January 2022) as
strategic adviser to Grupo Santander for providing specific advisory
services on strategic and digital transformation, including also
business development in the Asian markets and other strategic
matters. He will receive fixed remuneration of EUR 2.1 million and
variable pay of EUR 1 million, subject to the achievement of
objectives. The agreement is for an indefinite term. It also includes a
one year non-compete commitment which would entitle him to
receive EUR 2 million if he complies with this commitment.
Luis Isasi has a contract since 4 April 2020 to act as non-executive
chair of the board of Santander España (for which he receives EUR
925,000 a year) and to serve as a member of the board of Santander
España (for which he receives EUR 75,000 a year). His contract is
permanent and does not entitle him to any compensation if
terminated.
Appointment of new executive directors
The components of remuneration and basic structure of the
agreements described in this remunerations policy will apply to any
new director that is given executive functions at Banco Santander,
notwithstanding the possibility of amending specific terms of
agreements so that, overall, they contain conditions similar to those
previously described.
Directors’ total remuneration for executive duties cannot exceed the
highest remuneration received by the group’s current executive
directors under the remuneration policy approved by shareholders.
The same rules apply if a director assumes new duties or becomes an
executive director.
If a director takes up executive functions in a specific division or local
unit, the board of directors, on the remuneration committee's
recommendation, can adapt the metrics for setting and paying
incentives to take that division or local unit into account in addition to
the group.
Remuneration paid to directors in that capacity will be included
within the maximum amount set by shareholders to be distributed by
the board of directors in the terms described above.
A new director coming from an entity outside Santander Group could
be paid a buyout to offset any variable remuneration foregone for
having accepted a contract with the group; and/or a sign-on bonus
for leaving to join Banco Santander.
This compensation could be paid fully or partly in shares and share
options, depending on the delivery limits approved at the annual
general shareholders' meeting. Authorization is expected to be
sought at the next general shareholders’ meeting in order to deliver a
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maximum number of shares and share options to any new executive
directors or employees to whom buyout regulations apply.
Furthermore, sign-on bonuses can only be paid once to new
executive directors, in cash or in shares, and in each case they will not
exceed the sum of the maximum variable remuneration awarded for
all executive directors.
In 2021, no executive director appointments could trigger buy outs,
sign-on bonuses or any other form of remuneration.
Temporary exceptions to the remuneration policy
According to section 6 of Article 529 novedecies of the Spanish
Companies Act, specific exceptions may apply to components in the
remuneration policy, based on particular business needs or
macroeconomic context in the Group's geographies , provided that
they are required to serve the long-term interests and sustainability
of the entity; ensure its viability; and require to be adopted urgently.
Such exceptions include:
• Complex macroeconomic scenarios where the ordinary course of
the business is severely impacted.
• The appointment of a new executive chair or chief executive officer,
or the need to retain an executive director to avoid a vacancy at the
head of the Group (vacatio regis) during especially complex times
for the business.
• The need to adapt to regulatory change.
To apply, exceptions must be supported by:
• a reasoned remuneration committee proposal; and
• board of directors analysis and approval.
Any applied exception will be explained in the Annual report on
directors' remuneration.
6.5 Preparatory work and decision-making for the
remuneration policy; remuneration committee
involvement
Section 4.7 'Remuneration committee activities for 2021', (the report
on the remuneration committee) states:
• Pursuant to Banco Santander’s bylaws and the Rules and
regulations of the board of directors, the duties relating to the
remuneration of directors performed by the remuneration
committee.
• How the remuneration committee is composed on the date the
report is approved.
• The number of meetings it had in 2021, including joint sessions
with the risk, compliance and regulation supervision committee.
• The date of the meeting in which the report was approved.
• The 2020 annual report on directors’ remuneration was approved
by the board of directors and put to a binding vote at the 2021
AGM, with 91.6% of the votes in favour. The tally of the votes was:
Votes
Votes for
B
B
Votes against
C
Blank
Abstentions
C
Number
11,397,073,138
Number
10,434,787,981
957,730,594
4,554,563
338,103,702
% of total
A
97.12 %
91.59
%
%
8.41 %
%
0.04
2.88 %
A. Percentage on total valid votes and abstentions.
B. Percentage of votes for and against.
C. Percentage of share capital present and attending by proxy at the Ordinary
Shareholders’ Meeting.
Decision process for the development, review and
application of the policy
Pursuant to Article 529 novodecies of the Spanish Companies Act, the
remuneration committee issues the report on the proposed
remuneration policy for 2022, 2023 and 2024 herein. The board of
directors then submits it to the 2022 AGM as a separate item on the
agenda and an integral part of this text. See section 6.4 'Directors'
remuneration policy for 2022, 2023 and 2024 submitted to a binding
shareholder vote'.
Banco Santander’s Compensation function prepares the
remuneration policy with the suggestions, requests and comments
received during the year from the human resources committee,
remuneration committee and the board of directors. A first draft of
the policy is submitted to the remuneration committee for review
every January. The review considers the suggestions, requests and
comments the chair and lead director receive through shareholder
and stakeholder engagement during the year on our corporate
governance and our remuneration structures. Regulators’
recommendations and legal requirements that may have come to
light since the last time the director remuneration policy was
submitted for approval by the annual general meeting are also
considered.
The committee also makes sure the policy is consistent with the
Group's culture and our Simple, Personal and Fair values. The
Compensation function then prepares the final draft for the
remuneration committee to submit to the board of directors for
approval in February.
Based on the analysis carried out in the context of the 2021 annual
remuneration report elaboration and its continued supervision of the
remuneration policy, the remuneration committee believes the
director remuneration policy for 2022, 2023 and 2024 which is
included in section 6.4 above is consistent with the principles of
Banco Santander’s remuneration policy and its remuneration scheme
set out in the Bylaws.
As detailed herein, the policy considers (i) further simplifying our
executive remuneration scheme by reducing the four metrics relating
to annual results to three (i.e. customers, RoRWA and RoTE) and
combining more simplicity with our key strategic pillars of customers
and profitability, without losing sight of proper risk and capital
management, which is also added as qualitative element for the
result,; (ii) introducing share options as part of variable pay, with the
aim of creating a greater alignment with shareholder returns; and (iii)
updating the metrics linked to the achievement of multi-year
objectives, maintaining total shareholder return (TSR) and
introducing RoTE and ESG-related metrics related to our Responsible
banking commitments, in order to adhere to best market practice and
our stakeholders’ preferences, prioritizing long-term profitability for
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shareholders and Santander, as well as a stable and sustainable
balance sheet and operations.
In 2021, no deviations from, or temporary exceptions to, the
application of the remuneration policy occurred.
6.6 Remuneration of non-director members of senior
management
2021 variable remuneration was approved by the board of directors
on 1 February 2022 in view of the recommendation the
remuneration committee of 31 January 2022. It was set according to
Banco Santander’s general remuneration policy as well as specific
details pertaining to senior management.
In general, senior management variable remuneration packages
were calculated with the quantitative metrics and qualitative
assessment used for executive directors (see section 6.3 B ii).
Some senior managers’ contracts were amended in 2018 in the same
manner described under 6.3.C and D in respect of Ana Botín and José
Antonio Alvarez, with a pension scheme of 22% of their pensionable
bases, the elimination of supplementary benefits, an increase of the
insured sum of life insurance and a supplement to fixed
remuneration in cash which is included under "Other remuneration".
The following table shows the amounts of short term remuneration
(immediately payable) and deferred remuneration (not linked to
multi year targets) for senior management as of 31 December 2021
and 2020, excluding those of executive directors. This amount has
been reduced by 33% compared to that reported in 2014 (EUR
80,792 thousand):
Short-term and deferred salary remuneration
EUR thousand
Immediately
Year
2021
2020
Number of
people
15
18
Fixed
19,183
21,642
receivable variable Deferred variable
remuneration
B
(50% in shares)
remuneration
(50% in shares)A
16,804
Pension
contributions
Other
C
remuneration
11,479
7,296
4,941
5,542
6,039
5,055
6,312
D
Total
53,880
50,413
A. The amount immediately payable in shares in 2021 was 2,707 thousand Santander shares (2,136 thousand Santander shares in 2020).
B. The amount of deferred shares in 2021 was 1,175 thousand Santander shares (919 thousand Santander shares in 2020).
C. Includes life insurance premiums, health insurance and relocation packages and other remuneration items.
This table breaks down remuneration linked to multi-year targets for
senior management (excluding executive directors) at 31 December
2021 and 2020, which they will only receive if they meet the terms
of continued service; non-applicability of malus clauses; and long-
term goals are met during deferral periods.
Thousands of euros
Year
2021
2020
Number of
people
15
18
Deferred variable remuneration
subject to long-term
B
metricsA
(50% in shares)
7,660
5,188
A. In 2021, this corresponds to the fair value of maximum annual payments for
2025, 2026 and 2027 in the sixth cycle of the plan for deferred variable
remuneration linked to multi-year targets. In 2020, this corresponds to the
estimated fair value of maximum annual payments for 2024, 2025 and 2026 in
the fifth cycle of the plan for deferred variable pay linked to multi-year targets.
Fair value in the plan was determined on the authorization date based on the
valuation report of independent expert Willis Towers Watson. Based on the plan
for 2021 and success levels of similar plans at peer entities, the expert found a
range of 60%-80% reasonable to estimate the initial success ratio. Therefore, fair
value was considered to be 70% of the maximum value.
B. The number of shares in Santander as deferred variable pay subject to long-term
metrics shown in the table above was 1,234 thousand in 2021 (965 thousand
shares in Santander in 2020).
The long-term goals are the same as those for executive directors.
They are described in section 6.3 B iv).
Senior executives who stepped down from their roles in 2021
consolidated salary remuneration and other remuneration until the
cessation of their duties for a total amount of EUR 5,294 thousand
during the year (EUR 5,984 thousand for those who stepped down
from their roles in 2020). They also have the right to receive, in total,
55 thousand euros in variable pay subject to long-term targets (EUR
133 thousand for those who stepped down from their roles in 2020).
At our 2021 AGM, shareholders approved the 2021 Digital
Transformation Incentive, a variable remuneration scheme that
delivers Santander shares and share options if the group hits major
milestones on its digital roadmap, and is aimed at a group of up to
250 employees whose functions are deemed essential to
Santander’s growth. No senior executives are included within this
plan in 2021.
The 2020 Digital Transformation Incentive, which terms are
substantially the same as those of the 2021 one, included three
senior executives, who may receive a total of EUR 1,700 thousand.
See Note 46 to the 2021 Group's consolidated financial statements
for further information on the Digital Transformation Incentive.
In 2021, the ratio of variable to fixed pay components was 125% of
the total for senior managers, well within the maximum limit of
200% set by shareholders.
See note 5 of the group’s 2021 consolidated financial statements for
further details.
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6.7 Prudentially significant disclosures document
On the remuneration committee’s recommendation, the board
approves the key remuneration elements of managers or employees
who, while not belonging to senior management, take on risks, carry
out control functions (i.e. internal audit, risk management and
compliance) or who receive global remuneration that places them in
the same remuneration bracket as senior management and
employees who take on risk. These are typically those whose
professional activities may have an important impact on the Group's
risk profile (all of these, together with the senior management and
Banco Santander's board of directors form the so called 'Identified
Staff' or 'Material Risk Takers')
Every year, the remuneration committee reviews and, if applicable,
updates identified staff in order to include individuals within the
organization who qualify as such. The Remuneration Policies chapter
in the 2021 Pillar III disclosures report
explains the criteria and regulations followed to identify such staff.
of Banco Santander, S.A.
28
At the end of 2021, 1,018 group executives (including executive
directors and non-director senior managers) were considered
identified staff (1,394 in 2020), which accounts for 0.52% of the total
final workforce (0.73% in 2020).
Identified staff have the same remuneration standards as executive
directors (see sections 6.1 and 6.3), but not:
• Category-based deferral percentages and terms.
• The possibility in 2021 of certain manager categories of only
having deferred variable pay subject to malus and clawback
clauses (and not to long-term targets).
• The portion of variable remuneration paid or deferred as shares for
group executives in Brazil, Chile and Poland that can be delivered in
shares or similar instruments of their own listed entities (as in
previous years).
In 2022, on top of the inclusion of share options, described in section
6.4 above, the board will maintain its flexibility to determine full or
partial payment in shares or similar instruments of Banco Santander
and its subsidiaries in the proportion it deems appropriate (according
to the maximum number of Santander shares allocated at the
general meeting and to any regulatory restrictions in each
jurisdiction), in addition to the aforementioned introduction of share
options in the executive pay of Banco Santander, S.A.
The aggregate amount of variable remuneration for identified staff in
2021, the amounts deferred in cash and shares, and the ratio of the
variable to fixed remuneration components are explained in the
remuneration policies chapter of Banco Santander’s Pillar III
disclosures report for 2021.
28
The 2021 Pillar III disclosures report can be found on our corporate website.
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7. Group structure
and internal governance
Grupo Santander is structured into legally independent subsidiaries
whose parent company is Banco Santander, S.A. Its registered office
is in Santander (Cantabria, Spain), while its corporate centre is
located in Boadilla del Monte (Madrid, Spain). It has a Group-
Subsidiary Governance Model (GSGM) and good governance
practices in place for its core subsidiaries. Any references to
subsidiaries in this section are to the group’s most prominent entities.
The key features of the GSGM are:
• Sharing best practices in global connectivity, commercial initiatives
and digitalization.
7.2 Internal governance
Grupo Santander’s internal governance model outlines a set of
principles that regulate three types of relationships with its
subsidiaries:
• The subsidiaries’ governing bodies must ensure their rigorous and
prudent management and economic solvency while pursuing the
interests of their shareholders and other stakeholders.
• The subsidiaries are managed locally by teams that possess
extensive knowledge on, and experience with, their customers and
markets, while benefiting from the synergies and advantages of
belonging to the Group.
• The subsidiaries’ governing bodies are subject to the group’s rules
and procedures for structuring, forming and running boards of
directors and audit, nomination, remuneration and risk
committees, according to international standards and good
governance practices. This includes embedding other group rules
and regulations on the suitability, appointment, remuneration and
succession plans of governing body members, which fully comply
with local regulations and supervisory standards.
• The subsidiaries are subject to local authority regulation and
supervision, although the ECB supervises the Group overall.
• The relationship between regional and country heads and the
group CEO.
• Customer funds are secured by the deposit guarantee schemes in
the subsidiaries’ countries and are subject to local laws.
The subsidiaries finance their own capital and liquidity. The group’s
capital and liquidity are coordinated by corporate committees. Intra-
group risk transactions are limited, transparent and carried out under
market conditions. Grupo Santander retains a controlling interest in
subsidiaries listed in certain countries.
Each subsidiary runs independently and has its own recovery plan,
limiting the contagion of risk between them and reducing systemic
risk.
7.1 Corporate Centre
Banco Santander’s GSGM is supported by a corporate centre, which
brings control and support units together with functions such as
strategy, risk, compliance, auditing, finance, accounting, technology
and operations, human resources, legal services, internal
governance, communications and marketing. It adds value to the
Group by:
• Enhancing governance under robust corporate frameworks,
models, policies and procedures to implement strategies and
ensure effective Group oversight.
• Making the group’s units more efficient through cost management
synergies, economies of scale and a common brand.
• The relationship between local and global heads of key control
positions, following a three lines of defence model: chief officers
for risk (CRO), compliance (CCO), audit (CAE), finance (CFO) and
accounting (CAO), as well as other key support and business
functions (Technology and Operations, HR, General Counsel, Legal
Services, Marketing, Communications, Strategy, SCIB, and Wealth
Management & Insurance).
The group has three regional heads who report to the group CEO and
are responsible for consolidating and streamlining the management
and coordination of its core countries in the three geographic areas
where it operates: Europe, South America and North America. Their
key responsibilities must be undertaken in compliance with European
Union and country-specific laws and regulations, ensuring that the
country heads' role and accountability (including regulatory
responsibilities) are not compromised.
Since 2020, the Europe region (Spain, Portugal, Poland and UK) has
the mandate to execute a pan-European operating model to deliver
benefits of scale and efficiency that leverage common product and
regional management structures in the countries. Specific
coordination elements and organizational structures were defined to
ensure the effective discharge of the Europe regional head's
responsibilities, fully respecting local governance. Business and
functional roles were also created to support and control those
responsibilities.
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The GSGM dictates rules for appointing those officers, setting their
objectives (weighted 50% local and 50% group/regional) and
variable pay, assessing their performance and planning their
succession. It also explains how group officers should coordinate and
interact with their subsidiary counterparts.
approach ensures consistency throughout the Group. Every year an
assessment is conducted by the Functions on the effective
embedding of the contents of the group's internal regulation at local
level. This information is presented by the internal governance office
to the board of directors.
Grupo Santander has corporate frameworks for matters considered
to have a material impact on its risk profile, covering risk, capital,
liquidity, compliance, financial crime, technology, auditing,
accounting, finance, strategy, human resources, outsourcing,
cybersecurity, special situations management, and communications
and brand. In 2021 a new Responsible Banking Corporate Framework
was approved by the board. They also specify:
• How the Group should supervise and exert control over
subsidiaries; and
• The group’s involvement in subsidiaries’ decision-making (and vice
versa).
Banco Santander board of directors approves the GSGM and
corporate frameworks for the subsidiary governing bodies to
formally adhere to them. They take local requirements for
subsidiaries into account, and are revised each year as required by the
group’s board and adapted to new legislation and international best
practices.
The functions draw on corporate frameworks to prepare internal
regulatory documents that are given to subsidiaries as a reference for
implementing those frameworks effectively, cohesively and in
compliance with local laws and supervisory requirements. This
The group’s internal governance office and subsidiary general
counsels are responsible for embedding the governance model and
corporate frameworks. Every year, the group assesses their
performance in reports sent to governing bodies.
Since 2019, a policy for the governance of non-GSGM subsidiaries ,
completes and enhances the governance and control system that has
been applied to those companies thus far.
Since 2020, PagoNxt, a wholly-owned subsidiary of Banco Santander
that is structured as a dedicated holding company with a set of key
initiatives on digitalizing the group's financial services, with
payments at the core has its own governance model. This model
defines an organizational and governance framework for PagoNxt
and its subsidiaries in the context of the group-wide arrangements. It
specifically covers the scope, principles, roles and responsibilities, key
processes and governance bodies that should be in place to ensure
that PagoNxt is managed in alignment with group, legal and
supervisory expectations.
Also since 2020, Santander Corporate and Investment Banking (SCIB)
and Wealth Management and Insurance have specific governance
models to ensure robust, group-wide oversight of those businesses,
as set out in the GSGM.
The following charts show the three levels of the GSGM, as well as the main actions to ensure an effective relationship and solid internal
governance system for the Group.
Group
Board of directors
Group executive chairA
Group CEO
B
Regional heads
C
Subsidiaries
Board of directors
The GSGM enhances control and
oversight through:
Presence of Group Santander on the
subsidiaries' boards of directors,
establishing guidelines for board
structure, dynamics and effectiveness.
CEO /
Country head
Reporting of the CEO/country heads to
the Group CEO /regional heads and
group executive committee.
Control management and business
functionsD
Control management and business
functionsD
Interaction between the Group and
subsidiaries control, management and
business functions.
A. First executive.
B. Second executive.
C. Europe, North America and South America, reporting to Group CEO.
D. Audit, Risk, Compliance, Finance, Financial Accounting & Control, IT & Operations, Human Resources, General Secretariat, Marketing, Communications, Strategy, Santander
Corporate & Investment Banking and Wealth Management & Insurance.
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Best practices and talent sharing
across the whole Group and between
subsidiaries is key to our success.
Multiple point of entry structure that
has proved to be a key resilience
instrument and is a result of our
diversification strategy.
Continuous collaboration and daily
interaction between local and
corporate teams.
A common set of corporate
frameworks and policies across the
Group adapted to local market
conditions.
Identifying synergies and economies
of scale across the Group.
Definition and implementation of new
group-wide and local initiatives to
keep developing our management and
control model.
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8. Internal control over financial
reporting (ICFR)
This section describes the key aspects of Grupo Santander's ICFR in
respect of financial reporting, including:
• Control activities and control environment.
• Risk assessment in financial reporting.
• Reporting and communication.
• System monitoring.
• The external auditor’s report.
The head of the financial accounting and control function (the CAO),
which has the following functions concerning the generation of
financial information, amongst others:
• Integrating the group's corporate accounting policies into its
management and adapting them to local needs.
• Ensuring that appropriate organizational structures are in place to
carry out the tasks assigned, as well as suitable hierarchical-
functional structure.
• Running critical procedures (control models), based on corporate
8.1 Control environment
technology.
Governance and control bodies
The board of directors approves the financial reports Banco
Santander must publicly disclose as a listed company. It is the body
that oversees and guarantees the integrity of the Group’s systems for
internal communication, operational and financial control,
accounting, financial reporting and legal compliance.
The board of directors has an audit committee that assists with
supervising the group’s financial reporting and internal control
systems (see section 4.5 'Audit committee activities in 2021').
The audit committee works with the external auditor to address
every aspect with impact in the ICFR identified in audits. It also
makes sure the external auditor issues a report on the group’s
system for ICFR.
Responsibilities, General Code of Conduct,
whistleblowing channel and training
Responsibility functions
Grupo Santander, through its corporate organization functions, in
countries and businesses, defines, implements and maintains the
unit's organizational structures, catalogue of roles and size. The
corporate organization function defines and documents the
corporate model for managing structures and templates which is
used as a reference across the group.
The organizational units are in charge of identifying and defining the
main functions under the responsibility of each structural unit,
ensuring that the organization has a solid ICFRS model.
Grupo Santander has a responsibility scheme to identify potential
risks and their mitigating controls under a three-pronged defence
model that establishes lines of authority and accountability including:
• Implementing the corporate accounting and management
information systems and adapting them to the specific needs of
each unit.
In order to preserve its independence, each controller reports
hierarchically to the head of the entity or country in which it exercises
its responsibilities (country head) and functionally to the head of the
group's Financial Accounting and Control division.
The non-financial risk control function is responsible for:
• Establishing and circulating the methodology for documenting the
group's Internal Risk Control System (IRCS) and IRCS evaluation
and certification, which covers the ICFRS, amongst other
regulatory and regulatory requirements. Grupo Santander's IRCS
means the process carried out by the board of directors, senior
managers and other group staff to provide reasonable assurance
that their objectives will be achieved.
• Encouraging documentation maintenance to adapt it to
organizational and regulatory changes and, along with the
Financial Accounting and Control division, and, where applicable,
representatives of the divisions and/or companies involved, to
present the IRCS evaluation outcome to the audit committee.
Similar functions in each unit that reports to the corporate non-
financial risk control area.
General Code of Conduct (GCC)
The group’s GCC sets out the guidelines, principles and rules
approved by the board of directors to govern Grupo Santander
employees’ conduct and ethics. Furthermore, it dictates guidelines in
relation to accounting standards and financial reporting. The GCC can
be viewed on our corporate website.
All of the group’s employees, including members of its governance
bodies, sign the Code of Conduct, even though some are also bound
to the Code of Conduct in Securities Markets and other codes of
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conduct specific to the area or business in which they work.
Employees have access to e-learning courses on the Code and can
consult the compliance and conduct function to address any queries
about its application.
The Financial Accounting and Control division promotes, designs and
oversees these programmes and courses. It has with support from
the corporate learning and career development unit under the
Human Resources division.
The GCC is a fundamental resource of the compliance function. It
explains the duties of the group’s governance bodies, units and areas
required to implement it together with the compliance function.
If anyone violates the code, the human resources function adopts
disciplinary measures and recommends corrective action (including
work sanctions), irrespective of any related administrative or criminal
sanctions.
The board of directors adapted the GCC in 2021 to forbid board
members and employees from releasing external communications
on Banco Santander's behalf or from acting as its representatives and
employees if such communications could undermine the Group's
neutrality by showing political or ideological bias. See the on the
information on 'General Code of Conduct' section 'Conduct and
ethical behaviour' in the 'Responsible banking' chapter.
Whistleblowing channel
Banco Santander’s whistleblowing channel is called Canal Abierto. It
is a confidential and anonymous means for employees to report
unlawful acts, violations of the GCC and other behaviour contrary to
corporate values. The channel enable communications by other
people related to Banco Santander other than employees, such as
shareholders, customers, suppliers and other third parties, ensuring
that they are treated confidentially and anonymously.
It can also be used to report claims of accounting or auditing
irregularities under SOX to the compliance and conduct function,
which will elevate them to the audit committee for appropriate
measures to be taken.
The channel does not require whistleblowers to give personal
information in order to keep reports confidential before they the
audit committee can review them. Only certain compliance and
conduct function officers analyse reports to determine if matters
pertain to accounting or auditing in order to submit them to the audit
committee.
Canal Abierto is supervised jointly by the audit committee and the risk
supervision, regulation and compliance committee depending on the
subject of the complaint. The SOX attributes the authority to
supervise the whistleblowing channel in matters that fall under the
remit of the audit committee (specifically financial and accounting,
including those related to the audit), while the supervision of reports
of breaches of regulatory requirements for corporate behaviours or
the internal governance system are the responsibility of the risk,
regulation and compliance committee. The channel can be viewed on
our corporate website.
For more information on the number of complaints filed on the
channel and their typology, see the on the information on 'Ethical
Channels' section 'A talented and motivated team' in the 'Responsible
banking' chapter, for additional information.
Training
Group employees who help prepare or analyse financial information
take part in training programmes and regular refresher courses
specifically designed to teach them the concepts and skills they
require to discharge their duties properly.
Training takes the form of both e-learning and on-site sessions
monitored and overseen by the corporate learning and career
development unit to guarantee that employees duly complete them
and assimilate concepts properly.
Training programmes and refresher courses taught in 2020 focused
on matters directly and indirectly related to the financial reporting.
These subjects include: (i) risk analysis and management; (ii)
accounting and financial statement analysis; (iii) the business,
banking and the financial environment; (iv) financial management,
costs and budgeting; (v) numerical skills; and (vi) calculations and
statistics.
31,373 employees in the all of the group’s markets were involved in
training programmes. Over 545,459 training hours were spent at the
corporate centre in Spain and remotely via e-learning. Furthermore,
local units develop their own training programmes based on the
parent’s.
8.2 Risk assessment in financial reporting
The Group has a specific process to identify the companies that must
be included in its scope of consolidation. The Financial Accounting
and Control division and the General Secretariat division oversee this
approach.
This process enables us to identify the entities the Grupo Santander
controls through the voting rights that grant direct or indirect
ownership of its capital and other entities controlled by others such
as mutual funds, securitization funds and structured entities;
analyses whether the group has control over an entity, whether it has
rights to the variable returns of the entity or is exposed to them, and
whether it can influence the amount of such variable returns. If the
group is considered to have control, the entity is included in the scope
of consolidation and is consolidated using the global integration
method.
Otherwise, we analyse whether there is significant influence or joint
control. If so, the entity is also included in the scope of consolidation
and it is measured using the equity method.
For entities with the greatest impact on the preparation of the
group's financial information, we implement an IRCS using a
homogeneous methodology to make sure that relevant controls are
included and all significant risks to financial reporting are covered.
The group's IRCS complies with the strictest international standards,
particularly the guidelines of the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) within its last
published Internal Control framework in 2013 which covers control
targets for the effective and efficient operations, reliable financial
reporting and regulatory compliance.
The risk identification process takes into account all the group's
activities, the scope of which is greater than all the risks directly
related to the preparation of the group's financial information.
The identification of potential risks that must necessarily be covered
by the IRCS is based on management's knowledge and
understanding of the business and its operations relative to the
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importance and qualitative criteria associated with the type,
complexity or structure of the business.
to correctly record, evaluate, present and breakdown financial
information.
Banco Santander ensures there are controls to cover risks of errors
and fraud in financial reporting, such as (i) the existence of assets,
liabilities and transactions at the relevant date; (ii) the items are
assets or rights or liabilities and obligations of the group; (iii) timely
and correct recording and adequate valuation of assets, liabilities and
transactions; and (iv) correct application of accounting principles and
rules, as well as appropriate breakdowns.
The main features of the group's IRCS are as follows:
• It is a corporate model that involves the entire organizational
structure through a direct set of individual responsibilities.
• Management of the IRCS documents is decentralized to the
various units, while coordination and monitoring falls to the non-
financial risk control area, which provides general criteria and
guidelines to standardize procedure documents, control
assessment, criteria for classifying potential deficiencies and
regulatory adaptations.
• It is a global model primarily aimed at documenting activities to
produce consolidated financial information and other procedures
carried out by each entity's support areas that, without having a
direct impact on the accounts, could lead to possible losses or
contingencies in the event of incidents, errors, breaches of
regulations and/or fraud.
• It is dynamic and constantly updated in order to reflect the reality
of the group's business, risks and controls to mitigate them.
• It produces comprehensive documents on the processes within its
scope and includes detailed descriptions of operations,
assessment criteria and reviews.
All IRCS documents of the Group's companies are compiled on a
corporate IT application that is used by employees of different levels
of responsibility in the assessment and certification of the group's
internal control system.
The audit committee is responsible for supervising Banco Santander
and the group's regulated financial information procedures and the
internal control systems.
8.3 Control activities
Revision and approval of financial information
The audit committee and the board of directors oversee the
preparation and submission of the financial information required of
Banco Santander and the Group, which includes the non-financial
information and its integrity. They also review compliance with
regulatory requirements, the scope of consolidation and the correct
application of accounting criteria, ensuring that this information is
permanently updated on the Banco Santander corporate's website.
The production, revision and approval of financial information and
the description of ICFR is documented in a corporate tool that
integrates the control model into risk management, including a
description of activities, risks, tasks and controls associated with all
operations that may have a significant effect on the financial
statements. This documentation covers recurrent banking operations
and one-off transactions (sale of investments, fixed assets
transactions, etc.) and aspects related to judgements and estimates,
The audit committee is responsible for reporting to the board on the
financial information that the group must regularly publish, ensuring
that it is prepared in accordance with the same principles and
practices as the annual accounts and is as equally reliable as the
financial statements for the board to adopt the corresponding
resolutions.
The most significant aspects when closing and reviewing relevant
judgements, estimates, measurements and projections are:
• Impairment losses on certain assets.
• The assumptions used in the actuarial calculation of post-
employment benefit liabilities and other obligations.
• The useful life of tangible and intangible fixed assets.
• The valuation of consolidation goodwill.
• The calculation of provisions and of contingent liabilities.
• The fair value of certain unquoted assets and liabilities.
• The recoverability of the tax assets.
• The fair value of acquired identifiable assets and the liabilities
assumed in business combinations.
The group CAO presents the financial information to the audit
committee for validation at least quarterly, giving explanations of the
main criteria used to make estimates, assessments and significant
judgements.
The information provided to directors prior to meetings, including
relevant judgements, estimates and projections is specifically
prepared for these sessions.
The group also has a corporate accounting and financial
management information committee, which is responsible for
governing and supervising accounting, financial management and
control, and ensuring that these matters are disclosed in accordance
with law and such disclosure is fair, accurate and not misleading.
To verify that the IRCS operates correctly, the group conducts an
annual pyramid assessment and certification, identifying and
analysing the criticality of risks and the effectiveness of controls. This
begins with an assessment of control activities by those responsible
for them, which is then challenged and ratified through the
organization's different hierarchy, so that, the CEO, the CFO and the
CAO can certify the effectiveness of the IRCS.
The Non-Financial Risk Control area prepares a report that includes
the main conclusions from the units' certifications reflecting the main
deficiencies identified during the year and indicating whether they
have been appropriately resolved or what plans are in place for
satisfactory resolution as well as supporting evidence for the
signatures of the CEO, CFO and CAO.
The Non-Financial Risk Control area presents the conclusions of these
assessments to the audit committee alongside with the Financial
Accounting and Control division and, where applicable, the
representatives of the divisions and/or companies in question, prior
to submission to the risk supervision, regulation and compliance
committee.
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The Group also has a forum to oversee internal control. It is chaired
by the heads of the Risk and Financial Accounting & Control divisions
and continuously monitors the Group's control environment and ICFR
strategy and operations.
• The external suppliers must undergo an approval process to ensure
that the relevant risks associated with the services they provide
remain within acceptable levels, in accordance with the group's risk
appetite.
Internal control policies and procedures for IT systems
The Technology and Operations division draws up the group’s
corporate policies on IT systems involved directly or indirectly with
the financial statements. These systems implement special internal
controls to prepare and post financial information correctly.
The group reviews estimates internally according to its control model
guidelines. It will hire the services of a third party to help with specific
matters upon confirming their expertise and independence and
approving their methods and rationale of its assumptions though
relevant procedures.
The internal control policies on the following aspects are of particular
importance:
• Updated and divulged internal policies and procedures for system
security and access to applications and computer systems
according to functions and ratings of each unit/role.
Furthermore, the group’s controls make sure information for external
suppliers of services that could affect the financial statements is
accurately and comprehensively detailed in service level agreements.
8.4 Information and communication
• The group's methodology, under which new applications are
developed and existing applications are maintained or adapted
through a circuit that formulates, develops and tests them so as to
treat financial information reliably.
Responsible for accounting policies
The Financial Accounting and Control division has an area called
'accounting policies', whose manager reports directly to the head of
the division, and has the following exclusive responsibilities:
• Once applications are developed according to regularly defined
requirements (detailed documentation of processes to be
implemented), they are run through comprehensive tests by a
specialist development laboratory.
• To define the accounting treatment of the transactions that
constitute Banco Santander's activity, in accordance with their
economic nature and the regulations governing the financial
system.
• Before they are rolled out, a complete software testing cycle is
run in a pre-production computerized environment that
simulates real situations. Testing includes technical and
functional tests, performance tests, user-acceptance tests and
pilot and prototype tests, which are defined by the entities.
• The group’s continuity plans for key functions in disasters or other
events that could suspend or disrupt operations, as well as highly
automated back-up systems that support critical systems and
require little manual intervention owing to redundant systems,
high availability systems and redundant communication lines.
Internal control policies and procedures for outsourced
activities and valuation services from independent
experts
The group’s action framework and specific policies and procedures
fittingly cover outsourcing risks. All group companies must adhere to
this framework, which meets the EBA's requirements for outsourcing
and risk management with third parties. It consists of:
• Tasks to initiate, record, process, settle, report and accounting for
transactions and asset valuations.
• IT support in terms of software development, infrastructure
maintenance, incident management, security and processing.
• Other material support services not directly related to financial
reporting, such as supplier management, property management,
HR management, etc.
Key control procedures include:
• Documenting relations between group companies with
comprehensive service agreements.
• Documentation and validation by the group’s service providers of
processes and controls for the services they perform.
• To define and keep up-to-date the group's accounting policies and
resolve any doubts or conflicts arising from their interpretation.
• Improve and standardize the group's accounting practices.
The corporate accounting and financial reporting and management
framework sets out the principles and guidelines to prepare
accounting, financial and management information that must apply
to all Grupo Santander entities as a key element of their good
governance. The group's structure makes it necessary to establish
these principles and standard guidelines for their application, and for
each of the group entities to have effective consolidation methods
and employ homogeneous accounting policies. The framework's
principles described in this framework are adequately reflected in the
group's accounting policies.
Accounting policies should be understood as a complement to local
financial and accounting rules. Their overarching aims are (i) that
statements and financial information made available to the
management bodies, supervisors or other third parties, provide
accurate and reliable information for decision-making in relation to
the group, and (ii) timely compliance by all group entities with their
legal obligations.
Accounting policies are revised at least once a year and when
relevant regulations are amended.
Every month, the Accounting Policies area publishes an internal
bulletin on new accounting regulation and their most significant
interpretations.
The Group entities, through their operations or accounting heads,
maintain open communication with the financial regulation and
accounting processes area, as well as with the other areas of the
Financial Accounting and Control division.
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8.5 Monitoring
2021 ICFR monitoring activities and results
The board of directors approved an Internal Audit framework for
Grupo Santander that defines the function and how it should conduct
its work.
Internal Audit is a permanent, independent function that guarantees
the quality and effectiveness of internal control, risk management
(current or emerging) and governance processes and systems, thus
contributing to the protection of the organization's value, solvency
and reputation as well as the board of directors and senior managers.
The internal audit function reports to the audit committee and
periodically, at least twice a year, to the board of directors. As an
independent unit, it also has direct access to the board when
required.
Internal audit assesses:
At its meeting of 19 February 2021, the audit committee reviewed
the 2021 audit plan, which was reported to and approved by the
board at its meeting of 22 February 2021.
Internal audit reports, as regards the review of the ICFR, mainly
aimed to:
• Verify compliance with the provisions contained in sections 302,
404, 406, 407 and 806 of the SOX Act.
• Check corporate governance with regard to information relating to
the internal control system for financial reporting, including the risk
culture.
• Review the functions performed by the internal control
departments and by other departments, areas or divisions involved
in ensuring compliance with the SOX Act.
• Make sure the supporting documentation relating to the SOX Act is
• The efficiency and effectiveness of the processes and systems
up to date.
referred to above.
• The compliance with applicable regulations and supervisory
requirements.
• The reliability and integrity of financial and operational
information.
• Asset integrity.
• Confirm the effectiveness of a sample of controls based on an
internal audit risk assessment methodology.
• Assess the accuracy of the unit's certifications, especially their
consistency of the certifications with respect to the observations
and recommendations made by Internal Audit, the external
auditors of the annual accounts or supervisors.
• Ratify the implementation of recommendations made in the audit
• Internal audit is the third line of defence, independent of the other
plan.
two. Its scope of action includes:
• All entities over which the group exercises effective control.
• Separated assets (for example, mutual funds) managed by the
entities mentioned in the previous section.
• Any entity (or separated assets) not included in the above points,
with which the group has entered into an agreement to provide
Internal Audit functions.
This subjective scope includes, in any case, the activities, businesses
and processes carried out (either directly or through outsourcing), the
organization and, where applicable, commercial networks. Internal
Audit may also conduct audits for other investees that are not
included in the preceding points when the group has reserved this
right as a shareholder, as well as on outsourced activities in
accordance with the established agreements.
The audit committee supervises the group's internal audit function.
See section 4.5 'Audit committee activities in 2021'.
As at 2021 year-end, Internal Audit had 1,212 employees, all
exclusively dedicated to this service. Of these, 269 were based at
Corporate Centre and 943 in the local units located in the main
geographies where the group is present.
Every year, Internal Audit prepares an audit plan based on a risk self-
assessment and is solely responsible for executing the plan. Reviews
may lead to audit recommendations, which are prioritized in
accordance with their relative importance, and are continuously
monitored until fully implemented.
In 2021, the audit committee and the board of directors were
informed of the Internal Audit unit's work, in accordance with its
annual plan, and of other matters related to this function. See section
4.5 'Audit committee activities in 2021'.
Detection and management of deficiencies
The audit committee oversees to supervise the financial reporting
process and the internal control systems. It is responsible for any
control deficiencies that could affect the reliability and accuracy of
the annual accounts. It may refer to the areas of the Group involved
in the process to obtain the necessary information and clarifications.
The committee also assesses the potential impact of any errors
detected in the financial information.
The audit committee is responsible for discussing any significant
weaknesses detected in the audit with the external auditor.
As part of its oversight, the audit committee assesses the results of
the work of the internal audit unit, and may take the necessary
measures to correct any deficiencies identified in the financial
information.
In 2021, the audit committee was informed of the IRCS evaluation
and certification for the 2019 financial year. See section 4.5 'Audit
committee activities in 2021'.
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8.6 External auditor report
The external auditor issued an independent reasonable assurance
report on the design and effectiveness of the ICFR and the description
on the ICFR that is provided in this section 8 of the annual corporate
governance report.
This report is included in the following pages.
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9. Other corporate
governance information
Since 12 June 2018 CNMV allows the annual corporate governance
and directors’ remuneration reports Spanish listed companies must
submit to be drafted in a free format, which is what we selected for
our corporate governance and directors’ remuneration reports since
2018.
The CNMV requires any issuer opting for a free format to provide
certain information in a format it dictates so that it can be aggregated
for statistical purposes. This information is included (i) for corporate
governance matters, under section 9.2 'Statistical information on
corporate governance required by the CNMV', which also covers the
section 'Degree of compliance with corporate governance
recommendations', and (ii) for remuneration matters, under section
9.5 'Statistical information on remuneration required by the CNMV'.
Some shareholders or other stakeholders may be used to the
formats of the corporate governance and directors' remuneration
reports set the by the CNMV. Therefore, each section under this
format in sections 9.1 'Reconciliation with the CNMV’s corporate
governance report model' and 9.4 'Reconciliation to the CNMV’s
remuneration report model' include a cross reference indicating
where this information may be found in the 2021 annual corporate
governance report (drafted in a free format) and elsewhere in this
annual report.
We have normally completed the 'comply or explain' section for all
recommendations in the Spanish Corporate Governance Code to
clearly show the ones we complied with, and explain the ones we
partially complied or failed to comply with. In section 9.3 'Table on
compliance with or explanations of recommendations in corporate
governance', we have included a chart with cross-references
showing where information supporting each response can be found
in this corporate governance chapter and elsewhere in this annual
report.
9.1 Reconciliation with the CNMV’s corporate governance report model
Section in the CNMV
model
A. OWNERSHIP STRUCTURE
Yes
A.1
Included in
statistical report
A.2
A.3
A.4
A.5
A.6
A.7
A.8
A.9
A.10
A.11
A.12
A.13
A.14
Yes
Yes
No
No
No
Yes
Yes
Yes
No
Yes
No
No
Yes
Comments
See sections 2.1 'Share capital', 3.2 'Shareholder rights' and 9.2 'Statistical information on corporate
governance as required by the CNMV'.
See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their
own account.
See 'Tenure and equity ownership' in section 4.2 and sections 6. 'Remuneration' and 9.2 'Statistical
information on corporate governance as required by the CNMV'.
See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their
own account so this section does not apply.
See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their
own account so this section does not apply.
See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their
own account so this section does not apply.
See sections 2.4 'Shareholders' agreements' and 9.2 'Statistical information on corporate governance as
required by the CNMV'.
Not applicable.
See section 2.5 'Treasury shares' and 9.2 'Statistical information on corporate governance as required by
the CNMV'.
See section 2.5 'Treasury shares'.
See section 9.2 'Statistical information on corporate governance as required by the CNMV'.
See section 3.2 'Shareholder rights'.
See section 3.2 'Shareholder rights'.
See section 2.6 'Stock market information'.
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Included in
model
statistical report
B. GENERAL SHAREHOLDERS’ MEETING
B.1
B.2
B.3
B.4
No
No
No
Yes
B.5
B.6
B.7
B.8
Yes
Yes
No
No
C. MANAGEMENT STRUCTURE
C.1 Board of directors
C.1.1
C.1.2
Yes
Yes
C.1.3
C.1.4
C.1.5
C.1.6
C.1.7
C.1.8
C.1.9
C.1.10
C.1.11
C.1.12
C.1.13
C.1.14
C.1.15
C.1.16
C.1.17
C.1.18
C.1.19
C.1.20
C.1.21
C.1.22
C.1.23
C.1.24
C.1.25
C.1.26
C.1.27
C.1.28
C.1.29
Yes
Yes
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
No
Yes
Comments
See 'Quorum and majorities for passing resolutions at general meeting' in section 3.2.
See 'Quorum and majorities for passing resolutions at general meeting' in section 3.2.
See 'Rules for amending our Bylaws' in section 3.2.
See 'Quorum and attendance' in section 3.4, in relation to financial year 2021, and section 9.2 'Statistical
information on corporate governance as required by the CNMV', in relation to the remaining financial
years.
See 'Voting results and resolutions' in section 3.4.
See 'Shareholder participation at general meetings' in section 3.2 and section 9.2 'Statistical information
on corporate governance as required by the CNMV'.
See 'Quorum and majorities for passing resolutions at general meeting' in section 3.2.
See 'Corporate website' in section 3.1.
See 'Size' in section 4.2.
See 'Tenure and equity ownership' in section 4.2, and section 9.2 'Statistical information on corporate
governance as required by the CNMV'.
See sections 2.4 'Shareholders' agreements', 4.1 'Our directors', 'Composition by type of director' in
section 4.2, 'Duties and activities in 2021' in section 4.6 and section 9.2 'Statistical information on
corporate governance as required by the CNMV'.
See 'Diversity' and 'Board skills and diversity matrix' in section 4.2, in relation to financial year 2021, and
section 9.2 'Statistical information on corporate governance as required by the CNMV', in relation to the
remaining financial years.
See 'Diversity' in section 4.2 and 'Duties and activities in 2021' in section 4.6.
See 'Diversity' in section 4.2, 'Duties and activities in 2021' in section 4.6 and, regarding top executive
positions, see 'Responsible banking' chapter.
See 'Diversity' in section 4.2. and 'Duties and activities in 2021' in section 4.6.
Not applicable, since there are no proprietary directors. See 'Composition by type of director' in section 4.2.
See 'Group executive chair and chief executive officer' in section 4.3 and 'Functions' in section 4.4.
See section 4.1 'Our directors'.
See sections 4.1 'Our directors' and 9.2 'Statistical information on corporate governance as required by the
CNMV'.
See 'Board and committees attendance' in section 4.3.
See sections 6 'Remuneration' and 9.2 'Statistical information on corporate governance as required by the
CNMV'. Additionally, see note 5 c) to our 'consolidated financial statements'.
See sections 5 'Management team' and 9.2 'Statistical information on corporate governance as required
by the CNMV'.
See 'Rules and regulations of the board' in section 4.3.
See 'Election, renewal and succession of directors' in section 4.2.
See 'Board assessment in 2021' in section 4.3, 'Annual assessment of the committee and its achievement
of 2021 objectives' in section 4.6 and 'Board assessment and actions to continuously improve its
functioning' in section 1.2.
See 'Board assessment in in 2021' in section 4.3.
See 'Director election, renewal and succession' in section 4.2.
See 'Board meetings' in section 4.3.
Not applicable since there are no specific requirements, other than those applying to directors generally,
to be appointed chair.
See 'Diversity' in section 4.2.
See 'Election, renewal and succession of directors' in section 4.2 and section 9.2 'Statistical information on
corporate governance as required by the CNMV'.
See 'Board meetings' in section 4.3.
See 'Lead independent director' and 'Board and committees attendance' in section 4.3, 'Duties and
activities in 2021' in sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10 and section 9.2 'Statistical information on
corporate governance as required by the CNMV'.
See 'Board and committees attendance' in section 4.3. and section 9.2 'Statistical information on corporate
governance as required by the CNMV'.
See section 9.2 'Statistical information on corporate governance as required by the CNMV'.
See 'Duties and activities in 2021' in section 4.5.
See section 4.1 'Our directors' and section 'Secretary of the board' in section 4.3.
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Section in the CNMV
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C.1.30
Included in
statistical report
No
C.1.31
C.1.32
C.1.33
C.1.34
C.1.35
C.1.36
C.1.37
C.1.38
C.1.39
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
C.2 Board committees
C.2.1
Yes
C.2.2
C.2.3
Yes
No
Comments
See section 3.1 'Shareholder communication and engagement' and 'Duties and activities in 2021' in
section 4.5
See 'External auditor' in section 4.5 and section 9.2 'Statistical information on corporate governance as
required by the CNMV's.
See 'Duties and activities in 2021' in section 4.5 and section 9.2 'Statistical information on corporate
governance as required by the CNMV'.
Not applicable.
See section 9.2 'Statistical information on corporate governance as required by the CNMV'.
See ‘Board meetings' and ‘Committee meetings' in section 4.3.
See 'Election, renewal and succession of directors' in section 4.2.
Not applicable. See 'Duties and activities in 2021' in section 4.6.
Not applicable.
See sections 6.4 'Directors' remuneration policy for 2022, 2023 and 2024 submitted to a binding
shareholder vote', 6.7 'Prudentially significant disclosure document' and 9.2 'Statistical information on
corporate governance as required by the CNMV'.
See 'Committee structure' and 'Committee meetings' in section 4.3, 'Duties and activities in 2021' in
sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10 and section 9.2 'Statistical information on corporate
governance as required by the CNMV'.
See section 9.2 'Statistical information on corporate governance as required by the CNMV'.
See 'Rules and regulations of the board' and 'Committee structure', 'Committee meetings' in section 4.3
and 'Duties and activities in 2020" in sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10.
D. RELATED PARTY AND INTRAGROUP TRANSACTIONS
D.1
D.2
D.3
D.4
D.5
D.6
D.7
No
Yes
Yes
Yes
Yes
No
Yes
E. CONTROL AND RISK MANAGEMENT SYSTEMS
No
E.1
See 'Related-party transactions' in section 4.12.
Not applicable. See 'Related-party transactions' in section 4.12.
Not applicable. See 'Related-party transactions' in section 4.12.
See section 9.2 'Statistical information on corporate governance as required by the CNMV'.
Not applicable. See 'Related-party transactions' in section 4.12.
See 'Conflicts of interests' in section 4.12
Not applicable. See section 2.3 'Significant shareholders' and 'Conflicts of interests' in section 4.12.
E.2
E.3
E.4
E.5
E.6
F. ICFRS
F.1
F.2
F.3
F.4
F.5
F.6
F7
No
No
No
No
No
No
No
No
No
No
No
No
See chapter 'Risk management and compliance', in particular section 2.'Risk management and control
model' and sections 'A strong and inclusive culture: The Santander Way' and 'Principles of action in tax
matters' in the 'Responsible banking' chapter.
See note 53 to our consolidated financial statements, section 2.3 'Risk governance' in the 'Risk
management and compliance' chapter, and sections 'A strong and inclusive culture: The Santander Way'
and 'Principles of action in tax matters'in the 'Responsible banking' chapter.
See sections 2.2'Risk factors', 3. 'Credit risk', 4. 'Market, structural and liquidity risk', 5. 'Capital risk', 6.
'Operational risk', 7. 'Compliance and conduct risk', 8 'Model risk' and 9. 'Strategic risk' in the 'Risk
management and compliance' chapter. See also the 'Responsible banking' chapter and, for our capital
needs, see section 3.5 'Capital management and adequacy. Solvency ratios' of the 'Economic and financial
review' chapter.
See section 2.4. 'Management processes and tools' in the Risk management and compliance chapter and
sections 'A strong and inclusive culture: The Santander Way' and 'Principles of action in tax matters' in the
'Responsible banking' chapter.
See 3. 'Credit risk', 4. 'Market, structural and liquidity risk', 5. 'Capital risk', 6. 'Operational risk', 7
'Compliance and conduct risk', 8 'Model risk', 9 'Strategic risk' and in 10.'Climate and environmental risk'
the 'Risk management and compliance' chapter. Additionally, see note 25e) to our consolidated financial
statements.
See sections 2.'Risk management and control model', 3. 'Credit risk', 4. 'Market, structural and liquidity
risk', 5. 'Capital risk', 6. 'Operational risk', 7. 'Compliance and conduct risk', 8. 'Model risk', 9. 'Strategic risk'
and 10.'Climate and environmental risk' in the 'Risk management and compliance' chapter.
See section 8.1 'Control environment'.
See section 8.2 'Risk assessment in financial reporting'.
See section 8.3 'Control activities'.
See section 8.4 'Information and communication'.
See section 8.5 'Monitoring'.
Not applicable.
See section 8.6 'External auditor report'.
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G. DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS
G
Included in
statistical report
Comments
Yes
See 'Degree of compliance with the corporate governance recommendations' in section 9.2 and section
9.3 'Table on compliance with or explanations of recommendations on corporate governance'.
H. OTHER INFORMATION OF INTEREST
H
No
Banco Santander also complies with the Polish Code of Best Practices, updated in 2021, except in areas
where regulation is different in Spain and Poland. In addition, see sections 'Conduct and ethical behaviour'
and 'Governance', in particular, 'Joint initiatives to promote our agenda', in the Responsible banking
chapter.
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9.2 Statistical information on corporate governance required by the CNMV
Unless otherwise indicated all data as of 31 December 2020.
A. OWNERSHIP STRUCTURE
A.1 Complete the following table on the company’s share capital:
Indicate whether company bylaws contain the provision of double loyalty voting:
No þ
Yes o
Date of last
modification
03/12/2020
Share capital
(euros)
8,670,320,651
Number of
shares
17,340,641,302
Number of voting rights
17,340,641,302
Indicate whether different types of shares exist with different associated rights:
No þ
Yes o
A.2 List the direct and indirect holders of significant ownership interests at year-end, including directors with a significant shareholding:
Name or corporate name of shareholder
BlackRock Inc.
Details of the indirect shares:
Name or corporate name of
the indirect shareholder
BlackRock Inc.
Name or
corporate name
of the direct
shareholder
Subsidiaries of
BlackRock Inc.
% of voting rights
attributed to shares
Direct
0
Indirect
5.08%
% of voting rights through
financial instruments
Indirect
Direct
3.46%
0
Total % of voting rights
5.43%
% of voting rights
attributed to shares
% of voting rights through
financial instruments
Total % of voting rights
5.08%
3.46%
5.43%
A.3 Give details of the participation at the close of the fiscal year of the members of the board of directors who are holders of voting rights
attributed to shares of the company or through financial instruments, whatever the percentage, excluding the directors who have been
identified in Section A2 above:
Name or corporate name of director
Ana Botín-Sanz de Sautuola y O’Shea
José Antonio Álvarez Álvarez
Bruce Carnegie-Brown
Homaira Akbari
Javier Botín-Sanz de Sautuola y O’Shea
Álvaro Cardoso de Souza
R. Martin Chávez Márquez
Sol Daurella Comadrán
Henrique de Castro
Gina Díez Barroso
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Sergio Rial
Belén Romana García
Pamela Walkden
% total voting rights held by the board of directors
% total voting rights represented on the board of directors
% of voting rights
attributed to shares
Direct
Indirect
% of voting rights
through financial
instruments
Direct
Indirect
Total %
of voting
rights
% of voting rights that
may be transferred
through financial
instruments
Direct
Indirect
0.01
0.01
0.00
0.00
0.03
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.17
0.00
0.00
0.00
0.11
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.18
0.01
0.00
0.00
0.14
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.34
0.71
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Details of the indirect holding:
Name or
corporate name of Name or corporate name
director
_
of direct owner
_
% of voting rights
attributed to shares
_
% of voting rights through
financial instruments
_
Total % of
voting rights
_
% of voting rights that
may be transferred
through financial
instruments
_
A.7 Indicate whether the company has been notified of any shareholders’ agreements pursuant to Articles 530 and 531 of the Spanish
Companies Act (LSC). Provide a brief description and list the shareholders bound by the agreement, as applicable:
Yes þ No o
Parties to the shareholders’ agreement
Javier Botín-Sanz de Sautuola y O’Shea
(directly and indirectly through Agropecuaria
El Castaño, S.L.U.)
Emilio Botín-Sanz de Sautuola y O’Shea,
Puente San Miguel, S.L.U.
Ana Botín-Sanz de Sautuola y O’Shea,
CRONJE, S.L.U.
Nueva Azil, S.L.
Carmen Botín-Sanz de Sautuola y O’Shea
Paloma Botín-Sanz de Sautuola y O’Shea
Bright Sky 2012, S.L.
% of share
capital affected Brief description of agreement
Expiry date, if
applicable
0.58%
Transfer restrictions and syndication of voting rights as described
under section 2.4 'Shareholders’ agreements' of the 'Corporate
governance' chapter in the annual report. The communications to
CNMV relating to this shareholders' agreement can be found in
material facts with entry numbers 64179, 171949, 177432,
194069, 211556, 218392, 223703, 226968 and 285567 filed in
CNMV on 17 February 2006, 3 August 2012, 19 November 2012,
17 October, 2013, 3 October 2014, 6 February 2015, 29 May
2015, 29 July 2015 and 31 December 2019, respectively.
01/01/2056
Indicate whether the company is aware of the existence of any concerted actions among its shareholders. Give a brief description as applicable:
Yes þ No o
Participants in the concerted action
Javier Botín-Sanz de Sautuola y O’Shea
(directly and indirectly through Agropecuaria
El Castaño, S.L.U.)
Emilio Botín-Sanz de Sautuola y O’Shea,
Puente San Miguel, S.L.U.
Ana Botín-Sanz de Sautuola y O’Shea,
CRONJE, S.L.U.
Nueva Azil, S.L.
Carmen Botín-Sanz de Sautuola y O’Shea
Paloma Botín-Sanz de Sautuola y O’Shea
Bright Sky 2012, S.L.
% of share
capital affected Brief description of concerted action
Expiry date, if
applicable
0.58%
Transfer restrictions and syndication of voting rights as described
under section 2.4 'Shareholders’ agreements' of the 'Corporate
governance' chapter in the annual report. The communications to
CNMV relating to this shareholders' agreement can be found in
material facts with entry numbers 64179, 171949, 177432,
194069, 211556, 218392, 223703, 226968 and 285567 filed in
CNMV on 17 February 2006, 3 August 2012, 19 November 2012,
17 October, 2013, 3 October 2014, 6 February 2015, 29 May 2015,
29 July 2015 and 31 December 2019, respectively.
01/01/2056
A.8 Indicate whether any individual or entity currently exercises control or could exercise control over the company in accordance with article 5
of the Spanish Securities Market Act. If so, identify them:
Yes o No þ
A.9 Complete the following tables on the company’s treasury shares:
At year end:
Number of shares held directly
259,930,273
Number of shares held indirectly (*)
17,661,667
% of total share capital
1.601%
(*) Through:
Name or corporate name of the direct shareholder
Pereda Gestión, S.A.
Banco Santander Río, S.A.
Banco Santander México, S.A.
Total:
A.11 Estimated free float:
Estimated free float
Number of shares held directly
13,680,000
975,238
3,006,429
17,661,667
%
91.92 %
A.14 Indicate whether the company has issued securities not traded in a regulated market of the European Union.
Yes þ No o
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B. GENERAL SHAREHOLDERS’ MEETING
B.4 Indicate the attendance figures for the general shareholders’ meetings held during the fiscal year to which this report relates and in the two
preceding fiscal years:
Date of General Meeting
12/04/2019
of which free float:
% attending in
person
0.77%
0.07%
% by proxy
Electronic means
65.31%
64.87%
0.96%
0.96%
Attendance data
% remote voting
Date of General Meeting
23/07/2019
of which free float:
% attending in
person
0.66%
0.02%
% by proxy
Electronic means
41.82%
41.32%
15.54%
15.54%
Attendance data
% remote voting
Date of General Meeting
03/04/2020
of which free float:
% attending in
person
0.09%
0.01%
% by proxy
Electronic means
62.60%
61.59%
1.71%
1.71%
Attendance data
% remote voting
Date of General Meeting
27/10/2020
of which free float:
% attending in
person
% by proxy
Electronic means
0.17%
0.11%
43.29%
42.27%
16.30%
16.30%
Attendance data
% remote voting
Other
1.47%
1.47%
Other
1.21%
1.21%
Other
0.60%
0.60%
Other
0.59%
0.59%
Total
68.51%
67.37%
Total
59.23%
58.09%
Total
65.00%
63.91%
Total
60.35%
59.27%
Date of General Meeting
26/03/2021
of which free float:
% attending in
person
0.06%
0.01%
% by proxy
Electronic means
65.02%
64.03%
2.04%
2.04%
Other
0.55%
0.55%
Total
67.67%
66.63%
Attendance data
% remote voting
B.5 Indicate whether in the general shareholders’ meetings held during the fiscal year to which this report relate there has been any matter
submitted to them which, for any reason, has not been approved by the shareholders:
Yes o No þ
B.6 Indicate whether the Bylaws require a minimum holding of shares to attend to or to vote remotely in the general shareholders’ meeting:
Yes o No
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C. MANAGEMENT STRUCTURE
C.1 Board of directors
C.1.1 Maximum and minimum number of directors provided for in the Bylaws:
Maximum number of directors
Minimum number of directors
Number of directors fixed by GSM
17
12
15
C.1.2 Complete the following table with the directors’ details:
Name or corporate
name of director
Ana Botín-Sanz de Sautuola y O’Shea
Representative
N/A
José Antonio Álvarez Álvarez
Bruce Carnegie-Brown
Homaira Akbari
N/A
N/A
N/A
Category of
director
Executive
Executive
Independent
Independent
Position in
the board
Chair
Date of first
appointment
04/02/1989
Chief executive
officer
Lead independent
director
Director
25/11/2014
25/11/2014
27/09/2016
Javier Botín-Sanz de Sautuola y O’Shea N/A
Other external
Director
25/07/2004
Álvaro Cardoso de Souza
R. Martín Chávez Márquez
Sol Daurella Comadrán
Henrique de Castro
Gina Díez Barroso
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Sergio Rial
Belén Romana García
Pamela Walkden
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Independent
Director
23/03/2018
Independent
Director
27/10/2020
Independent
Director
25/11/2014
Independent
Director
12/04/2019
Independent
Director
22/12/2020
Other external
Director
03/04/2020
Independent
Director
28/11/2017
Other external
Director
03/04/2020
Independent
Director
22/12/2015
Independent
Director
29/10/2019
Date of last
appointment Election procedure
03/04/2020 Vote in general
shareholders’ meeting
12/04/2019 Vote in general
shareholders’ meeting
26/03/2021 Vote in general
shareholders’ meeting
26/03/2021 Vote in general
shareholders’ meeting
26/03/2021 Vote in general
shareholders’ meeting
26/03/2021 Vote in general
shareholders’ meeting
27/10/2020 Vote in general
shareholders' meeting
03/04/2020 Vote in general
shareholders’ meeting
12/04/2019 Vote in general
shareholders’ meeting
22/12/2020 Vote in general
shareholders’ meeting
03/04/2020 Vote in general
shareholders' meeting
26/03/2021 Vote in general
shareholders´ meeting
03/04/2020 Vote in general
shareholders' meeting
12/04/2019 Vote in general
shareholders’ meeting
03/04/2020 Vote in general
shareholders' meeting
Total number of directors
15
Indicate any directors who have left during the fiscal year to which this report relates, regardless of the reason (whether for resignation or by
agreement of the general meeting or any other):
Name or corporate
name of director
N/A
Category of director at Date of last
the time he/her left
N/A
appointment
N/A
Date of leave
N/A
Board committees he or she was has left before the expiry
a member of
N/A
of his or her term
N/A
Indicate whether he or she
C.1.3 Complete the following tables for the directors in each relevant category:
EXECUTIVE DIRECTORS
Name or corporate name of director
Position held in the company
Profile
Ana Botín-Sanz de Sautuola y O’Shea
Executive chair
José Antonio Álvarez Álvarez
CEO
See section 4.1 'Our directors' in the 'Corporate governance' chapter
in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter
in the annual report.
Total number of executive directors
% of the Board
2
13.33%
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PROPRIETARY NON-EXECUTIVE DIRECTORS
Name or corporate name of director
N/A
Total number of proprietary non-executive directors
% of the Board
Name or corporate name of significant shareholder represented or having
proposed his or her appointment
N/A
Profile
N/A
INDEPENDENT NON-EXECUTIVE DIRECTORS
Name or corporate name of director
Bruce Carnegie-Brown
Homaira Akbari
Álvaro Cardoso de Souza
R. Martín Chávez Márquez
Sol Daurella Comadrán
Henrique de Castro
Gina Díez Barroso
Ramiro Mato García-Ansorena
Belén Romana Garcia
Pamela Walkden
Total number of independent directors
% of the Board
Profile
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
See section 4.1 'Our directors' in the 'Corporate governance' chapter in the annual report.
0
0%
10
66.67%
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Identify any independent director who receives from the company or its group any amount or perk other than his or her director remuneration
or who maintain or have maintained during the fiscal year covered in this report a business relationship with the company or any group
company, either in his or her own name or as a principal shareholder, director or senior manager of an entity which maintains or has maintained
such a business relationship.
In such a case, a reasoned statement from the Board on why the relevant director(s) is able to carry on their duties as independent director(s)
will be included.
Name or
corporate name Description of the rela
tionship
of director
Homaira Akbari Business
Sol Daurella
Financing
Henrique de
Castro
Business
Gina Díez
Financing
R. Martín Chávez Business
Belén Romana
Business
Reasoned statement
When conducting the annual verification of the independence of directors of this status, the nomination
committee analysed the business relationships between Grupo Santander and the companies in which they
are or have previously been principal shareholders, directors or senior managers.
The committee concluded that the business relationships maintained between Grupo Santander and the
company in which Homaira Akbari was a director in 2021 were not significant because, among other
reasons they did not reach certain comparable materiality thresholds used in other jurisdictions, e.g. NYSE
and Nasdaq.
When conducting the annual verification of the independence of directors of this status, the nomination
committee analysed the business relationships between Grupo Santander and the companies in which they
are or have previously been principal shareholders, directors or senior managers.
The committee concluded that the funding Grupo Santander granted to companies in which Sol Daurella
was a principal shareholder or director in 2021 was not significant because, among other reasons: (i) it did
not generate economic dependence on the companies involved in view of the substitutability of this funding
by other sources, whether banks or others, (ii) it aligned with Grupo Santander's share in the corresponding
market, and (iii) it did not reach certain comparable materiality thresholds used in other jurisdictions, e.g.
NYSE, Nasdaq and the Canadian Bank Act.
When conducting the annual verification of the independence of directors of this status, the nomination
committee analysed the business relationships between Grupo Santander and the companies in which they
are or have previously been principal shareholders, directors or senior managers.
The committee concluded that the business relationships maintained between Grupo Santander and the
company in which Henrique de Castro was a director in 2021 were not significant because, among other
reasons they did not reach certain comparable materiality thresholds used in other jurisdictions, e.g. NYSE
and Nasdaq.
When conducting the annual verification of the independence of directors of this status, the nomination
committee analysed the business relationships between Grupo Santander and the companies in which they
are or have previously been principal shareholders, directors or senior managers.
The committee concluded that the funding granted by Grupo Santander to the companies in which Gina
Díez was a principal shareholder and director in 2021 was not significant because, among other reasons: (i)
it did not generate a situation of economic dependence on the company involved in view of the
substitutability of this funding by other sources, whether banks or others, (ii) it aligned with Grupo
Santander's share in the corresponding market, and (iii) it did not reach certain comparable materiality
thresholds used in other jurisdictions, e.g. NYSE, Nasdaq and the Canadian Bank Act.
When conducting the annual verification of the independence of directors of this status, the nomination
committee analysed the business relationships between Grupo Santander and the companies in which they
are or have previously been principal shareholders, directors or senior managers.
The committee concluded that the business relationships maintained between Grupo Santander and the
company in which R. Martín Chávez was a director in 2021 were not significant because, among other
reasons they did not reach certain comparable materiality thresholds used in other jurisdictions, e.g. NYSE
and Nasdaq.
When conducting the annual verification of the independence of directors of this status, the nomination
committee analysed the business relationships between Grupo Santander and the companies in which they
are or have previously been principal shareholders, directors or senior managers.
The committee concluded that the business relationships maintained between Grupo Santander and the
companies in which Belén Romana was a director in 2021 were not significant because, among other
reasons they did not reach certain comparable materiality thresholds used in other jurisdictions, e.g. NYSE
and Nasdaq.
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Other external directors
Identify all other non-executive directors and explain why these cannot be considered proprietary or independent directors and detail their
relationships with the company, its executives or shareholders:
Name or corporate name of
director
Javier Botín-Sanz de Sautuola y
O’Shea
Luis Isasi Fernández de Bobadilla
Sergio Rial
Reasons
Given that Mr Botín has been director for over 12 years, Banco Santander, S.A.
pursuant to sub-section 4. i) of article 529 duodecies of
the Spanish Companies Act.
Company, manager or
shareholder to which or to
whom the director is
related
Under prudent criteria given his remuneration as non-
executive chair of Santander España’s body as
supervisor, unit without its own corporate identity
separate to Banco Santander, pursuant to sub-sections
2 to 4 of article 529 duodecies of the Spanish
Companies Act.
Given that Mr Rial, as a former executive director of
Banco Santander as CEO of Banco Santander (Brasil)
S.A. and Regional head of South America until 31
December 2021, pursuant to sub-section 4 a) of article
529 duodecies of the Spanish Companies Act.
Banco Santander, S.A.
Banco Santander, S.A.
Total number of other non-executive directors
% of the Board
Profile
See section 4.1 'Our
directors' in the Corporate
governance chapter in the
annual report.
See section 4.1 'Our
directors' in the Corporate
governance chapter in the
annual report.
See section 4.1 'Our
directors' in the Corporate
governance chapter in the
annual report.
3
20.00 %
List any changes in the category of a director which have occurred during the period covered in this report.
Name or corporate name of director
Sergio Rial
Date of change
31/12/2021
Previous category
Executive
Current category
C.1.4 Complete the following table on the number of female directors at the end of each the past four years and their category:
Number of female directors
Executive
Proprietary
Independent
Other external
Total:
FY 2021
1
—
5
—
6
FY 2020
1
—
5
—
6
FY 2019
1
—
5
—
6
FY 2018
1
—
4
—
5
% of total directors of each category
FY 2021
50.00 %
0.00 %
50.00 %
0.00 %
40.00 %
FY 2020
33.33 %
0.00 %
50.00 %
0.00 %
40.00 %
FY 2019
50.00 %
0.00 %
55.55 %
0.00 %
40.00 %
FY 2018
33.33 %
0.00 %
44.44 %
0.00 %
33.33 %
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C.1.11 List the positions of director, administrator or representative thereof, held by directors or representatives of directors who are members
of the company's board of directors in other entities, whether or not they are listed companies:
Identity of the director or
representative
Ana Botín-Sanz de Sautuola y O’Shea The Coca-Cola Company
Bruce Carnegie-Brown
Homaira Akbari
Sol Daurella Comadrán
Henrique de Castro
Gina Díez Barroso
Ramiro Mato García-Ansorena
R. Martín Chávez Márquez
Luis Isasi Fernández de Bobadilla
Sergio Rial
Belén Romana García
Javier Botín-Sanz de Sautuola y
O’Shea
Landstar System, Inc.
Lloyd's of London
Cuvva Limited
Company name of the listed or non-listed entity Position
Director
Chair
Chair
Director
Chief executive officer
Director
Chair
Representative of director
Director
Sole administrator
Representative of director
Sole administrator
Director
Director
Chair-chief executive officer
Director
Chair
Chair
Vice-president
Chair
AKnowledge Partners, LLC
Temenos AG
Coca-Cola Europacific Partners plc.
Cobega, S.A.
Equatorial Coca Cola Bottling Company, S.L.
Cobega Invest S.L.
Olive Partners, S.A.
Indau, S.A.R.L.
Fiserv Inc.
Stakecorp Capital, s.a.r.l.
Grupo Diarq, S.A. de C.V.
Dalia Women , S.A.P.I. de C.V.
Centro de Diseño y Comunicación, S.C.
Ansorena, S.A.
Sixth Street Partners Management Company, L.P.
Recursion Pharmaceuticals, Inc.
Remunerated YES/NO
YES
YES
YES
YES
YES
YES
YES
NO
YES
NO
NO
YES
YES
NO
NO
NO
NO
NO
YES
YES
Compañía de Distribución Integral Logista
Holdings, S.A.
Director
Agropecuaria Fuenfría, S.L.
Director
Santa Clara de C. Activos, S.L.
Director
Delta Airlines Inc
Director
Ebury Partners Limited
Chair
Aviva plc.
Director
Six Group AG
Director
Bolsas y Mercados Españoles, Sociedad Holding de Director
Mercados y Sistemas Financieros, S.A.
JB Capital Markets, Sociedad de Valores, S.A.U.
Inversiones Zulú, S.L.
Agropecuaria El Castaño, S.L.E
Inversiones Peña Cabarga, S.L.
Chair
Chair-chief executive officer
Joint and several administrator
Sole administrator
YES
NO
NO
YES
YES
YES
YES
YES
YES
NO
NO
NO
Indicate, where appropriate, the other remunerated activities of the directors or directors' representatives, whatever their nature, other than
those indicated in the previous table.
Identity of the director or representative
Bruce Carnegie-Brown
Belén Romana García
Pamela Walkden
Luis Isasi Fernández de Bobadilla
R. Martín Chávez Márquez
Other paid activities
Member of investment committee of Gresham House Plc
Member of the advisory board of Inetum
Senior advisor of Artá Capital, S.G.E.I.C., S.A
Member of the advisory board of JD Haspel Limited
Senior Advisor of Morgan Stanley
Senior advisor of Cambrian Biopharma
Senior advisor of Earli
Senior advisor of Block.one
Senior advisor of Ketch Kloud
Senior advisor of Abacus.AI
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C.1.12 Indicate and, if applicable explain, if the company has established rules on the maximum number of directorships its directors may hold
and, if so, where they are regulated:
Yes þ No o
The maximum number of directorships is established, as provided for in article 30 of the Rules and regulations of the board, in article 26 of
Spanish Law 10/2014 on the ordering, supervision and solvency of credit institutions. This rule is further developed by articles 29 and
subsequent of Royal Decree 84/2015 and by Rules 30 and subsequent of Bank of Spain Circular 2/2016.
C.1.13 Identify the following items of the total remuneration of the board of directors:
Board remuneration accrued in the fiscal year (EUR thousand)
Funds accumulated by current directors for long-term savings systems with consolidated economic rights (EUR thousand)
Funds accumulated by current directors for long-term savings systems with unconsolidated economic rights (EUR thousand)
Pension rights accumulated by former directors (EUR thousand)
26,485
66,896
0
49,778
C.1.14 Identify the members of the company’s senior management who are non executive directors and indicate total remuneration they have
accrued during the fiscal year:
Name or corporate name
Alexandra Brandão
Juan Manuel Cendoya Méndez de Vigo
José Francisco Doncel Razola
Keiran Paul Foad
José Antonio García Cantera
Juan Guitard Marín
José Maria Linares Perou
Mónica Lopez-Monís Gallego
Javier Maldonado Trinchant
Dirk Marzluf
Víctor Matarranz Sanz de Madrid
José Luis de Mora Gil-Gallardo
Jaime Pérez Renovales
Antonio Simões
Marjolein van Hellemondt-Gerdingh
Number of women in senior management
Percentage of total senior management
Total remuneration accrued by the senior
management (EUR thousand)
Position (s)
Head of Human Resources
Group head of Communications, Corporate Marketing and Research
Group head of Accounting and Financial Control - Group Chief Accounting Officer
Group Chief Risk Officer
Group Chief Financial Officer
Group Chief Audit Executive
Global head of Corporate & Investment Banking
Group head of Supervisory and Regulatory Relations
Group head of Costs
Group head of Technology and Operations
Global head of Wealth Management
Group head of Strategy and Corporate Development and Head of Consumer Finance (Santander
Consumer Finance)
Group head of General Secretariat
Head regional of Europe and Country head of Santander Spain
Group Chief Compliance Officer
3
20.00 %
53,880
C.1.15 Indicate whether any changes have been made to the board Rules and regulations during the fiscal year:
Yes þ No o
C.1.21 Indicate whether there are any specific requirements, other than those applying to directors generally, to be appointed chair:
Yes o No þ
C.1.23 Indicate whether the bylaws or the board Rules and regulations set a limited term of office (or other requirements which are stricter
than those provided for in the law) for independent directors different than the one provided for in the law.
Yes o No þ
C.1.25 Indicate the number of board meetings held during the fiscal year and how many times the board has met without the chair’s
attendance. Attendance will also include proxies appointed with specific instructions:
Number of board meetings
Number of board meetings held without the chair’s attendance
15
0
Indicate the number of meetings held by the lead independent director with the rest of directors without the attendance or representation of
any executive director.
Number of meetings
8
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Indicate the number of meetings of the various board committees held during the fiscal year.
Number of meetings of the audit committee
Number of meetings of the responsible banking, sustainability and culture committee
Number of meetings of the innovation and technology committee
Number of meetings of the nomination committee
Number of meetings of the remuneration committee
Number of meetings of the risk supervision, regulation and compliance committee
Number of meetings of the executive committee
C.1.26 Indicate the number of board meetings held during the fiscal year and data about the attendance of the directors:
Number of meetings with at least 80% of directors being present
% of votes cast by members present over total votes in the fiscal year
Number of board meetings with all directors being present (or represented having given specific instructions)
% of votes cast by members present at the meeting or represented with specific instructions over total votes in the fiscal year
14
6
4
12
12
16
40
15
98.66%
14
99.11%
C.1.27 Indicate whether the company´s consolidated and individual financial statements are certified before they are submitted to the board for
their formulation.
Yes þ No o
Identify, where applicable, the person(s) who certified the company’s individual and consolidated financial statements prior to their
formulation by the board:
Name
José Francisco Doncel Razola
Position
Group head of Accounting and Financial Control
C.1.29 Is the secretary of the board also a director?
Yes o No þ
If the secretary of the board is not a director fill in the following table:
Name or corporate name of the secretary
Jaime Pérez Renovales
Representative
N/A
C.1.31 Indicate whether the company has changed its external audit firm during the fiscal year. If so, identify the incoming audit firm and the
outgoing audit firm:
Yes o No þ
C.1.32 Indicate whether the audit firm performs non-audit work for the company and/or its group. If so, state the amount of fees paid for such
work and express this amount as a percentage they represent of all fees invoiced to the company and/or its group.
Yes þ No o
Amount of non-audit work (EUR thousand)
Amount of non-audit work as a % of amount of audit work
Company
556
0.5%
Group
companies
2,567
2.5%
Total
3,123
3.0%
C.1.33 Indicate whether the audit report on the previous year’s financial statements contains a qualified opinion or reservations. Indicate the
reasons given by the chair of the audit committee to the shareholders in the general shareholders meeting to explain the content and scope of
those qualified opinion or reservations.
Yes o No þ
C.1.34 Indicate the number of consecutive years during which the current audit firm has been auditing the financial statements of the company
and/or its group. Likewise, indicate for how many years the current firm has been auditing the financial statements as a percentage of the total
number of years over which the financial statements have been audited:
Number of consecutive years
Number of years audited by current audit firm/Number of years the company’s or its Group financial
statements have been audited (%)
Individual financial
statements
Consolidated financial
statements
6
6
Company
15.38%
Group
15.38%
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C.1.35 Indicate and if applicable explain whether there are procedures for directors to receive the information they need in sufficient time to
prepare for meetings of the governing bodies:
Yes þ No o
Procedures
Our Rules and regulations of the board stipulate that members of the board and committees are provided with the relevant documentation for each
meeting sufficiently in advance of the meeting date.
C.1.39 Identify, individually in the case of directors, and in the aggregate in all other cases, and provide detailed information on, agreements
between the company and its directors, executives and employees that provide indemnification, guarantee or golden parachute clause in the
event of resignation, unfair dismissal or termination as a result of a takeover bid or other type of transaction.
Number of beneficiaries
Type of beneficiary
Employees
21
Description of the agreement:
The Bank has no commitments to provide severance pay to directors.
A number of employees have a right to compensation equivalent to one to two years of their basic salary in the event of
their contracts being terminated by the Bank in the first two years of their contract in the event of dismissal on grounds
other than their own will, retirement, disability or serious dereliction of duties.
In addition, for the purposes of legal compensation, in the event of redundancy a number of employees are entitled to
recognition of length of service including services provided prior to being contracted by the Bank; this would entitle
them to higher compensation than they would be due based on their actual length of service with the Bank itself.
Indicate whether these agreements must be reported to and/or authorised by the governing bodies of the company or its group beyond the
procedures provided for in applicable law. If applicable, specify the process applied, the situations in which they apply, and the bodies
responsible for approving or communicating those agreements:
Body authorising clauses
Is the general shareholders’ meeting informed of such clauses?
Board of directors
√
General Shareholders’
Meeting
YES
√
NO
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C.2 Board committees
C.2.1 Give details of all the board committees, their members and the proportion of executive, independent and other external directors.
EXECUTIVE COMMITTEE
Name
Ana Botín-Sanz de Sautuola y O’Shea
José Antonio Álvarez Álvarez
Bruce Carnegie-Brown
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Belén Romana García
% of executive directors
% of proprietary directors
% of independent directors
% of other non-executive directors
AUDIT COMMITTEE
Name
Pamela Walkden
Homaira Akbari
Henrique de Castro
Ramiro Mato García-Ansorena
Belén Romana García
% of executive directors
% of proprietary directors
% of independent directors
% of other non-executive directors
Position
Chair
Member
Member
Member
Member
Member
Position
Chair
Member
Member
Member
Member
Type
Executive director
Executive director
Independent director
Other external director
Independent director
Independent director
Type
Independent director
Independent director
Independent director
Independent director
Independent director
33.33%
0.00%
50.00%
16.67%
0%
0%
100%
0%
Identify those directors in the audit committee who have been appointed on the basis of their knowledge and experience in accounting, audit or
both and indicate the date of appointment of the committee chair.
Name of directors with accounting or audit experience
Date of appointment of the committee chair for that position
Pamela Walkden
Belén Romana García
Homaira Akbari
Ramiro Mato García-Ansorena
Henrique de Castro
26 April 2020
NOMINATION COMMITTEE
Name
Bruce Carnegie-Brown
R. Martin Chávez Márquez
Sol Daurella Comadrán
Gina Díez Barroso
% of executive directors
% of proprietary directors
% of independent directors
% of other executive directors
Position
Chair
Member
Member
Member
Type
Independent director
Independent director
Independent director
Independent director
0%
0%
100%
0%
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REMUNERATION COMMITTEE
Name
Bruce Carnegie-Brown
R. Martín Chávez Márquez
Sol Daurella Comadrán
Henrique de Castro
Luis Isasi Fernández de Bobadilla
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
Position
Chair
Member
Member
Member
Member
Type
Independent director
Independent director
Independent director
Independent director
Other external director
RISK SUPERVISION, REGULATION AND COMPLIANCE COMMITTEE
Name
Belén Romana García
R. Martín Chávez Márquez
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Pamela Walkden
Position
Chair
Member
Member
Member
Member
Type
Independent director
Independent director
Other external director
Independent director
Independent director
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
RESPONSIBLE BANKING, SUSTAINABILITY AND CULTURE COMMITTEE
Name
Ramiro Mato García-Ansorena
Homaira Akbari
Álvaro Cardoso de Souza
Sol Daurella Comadrán
Belén Romana García
Position
Chair
Member
Member
Member
Member
Type
Independent director
Independent director
Independent director
Independent director
Independent director
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
INNOVATION AND TECHNOLOGY COMMITTEE
Name
R. Martín Chávez Márquez
Ana Botín-Sanz de Sautuola y O'Shea
José Antonio Álvarez Álvarez
Bruce Carnegie-Brown
Homaira Akbari
Henrique de Castro
Belén Romana García
Position
Chair
Member
Member
Member
Member
Member
Member
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
Type
Independent director
Executive director
Executive director
Independent director
Independent director
Independent director
Independent director
0%
0%
80%
20%
0%
0%
80%
20%
0%
0%
100%
0%
28.57%
0.00%
71.43%
0.00%
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C.2.2 Complete the following table on the number of female directors on the various board committees over the past four years.
Audit committee
Responsible banking, sustainability and culture
committee
Innovation and technology committee
Nomination committee
Remuneration committee
Risk supervision, regulation and compliance
committee
Executive committee
FY 2021
FY 2020
FY 2019
FY 2018
Number of female directors
Number
3
3
3
2
1
2
2
%
60.00 %
Number
3
60.00 %
— %
50.00 %
20.00 %
40.00 %
33.33 %
3
3
1
1
1
2
%
60.00%
60.00%
42.85%
33.33%
20.00%
20.00%
33.33%
Number
3
5
3
2
1
2
2
%
60.00%
62.50%
37.50%
40.00%
20.00%
40.00%
28.50%
Number
2
5
3
1
1
2
2
%
50.00%
62.50%
42.85%
25.00%
20.00%
33.30%
25.00%
D. RELATED-PARTY AND INTRAGROUP TRANSACTIONS
D.2 Give individual details of operations that are significant due to their amount or of importance due to their subject matter carried out
between the company or its subsidiaries and shareholders holding 10% or more of the voting rights or who are represented on the board of
directors of the company, indicating which has been the competent body for its approval and if any affected shareholder or director has
abstained. In the event that the board of directors has responsibility, indicate if the proposed resolution has been approved by the board
without a vote against the majority of the independents:
Not applicable.
D.3 Give individual details of the operations that are significant due to their amount or relevant due to their subject matter carried out by the
company or its subsidiaries with the administrators or managers of the company, including those operations carried out with entities that the
administrator or manager controls or controls jointly, indicating the competent body for its approval and if any affected shareholder or director
has abstained. In the event that the board of directors has responsibility, indicate if the proposed resolution has been approved by the board
without a vote against the majority of the independents:
Not applicable.
D.4 Report individually on intra-group transactions that are significant due to their amount or relevant due to their subject matter that have
been undertaken by the company with its parent company or with other entities belonging to the parent's group, including subsidiaries of the
listed company, except where no other related party of the listed company has interests in these subsidiaries or that they are fully owned,
directly or indirectly, by the listed company.
In any case, report any intragroup transactions carried out with entities in countries or territories considered to be tax havens.
Corporate name of
the group company
Banco Santander
(Brasil) S.A.
(Cayman Islands
Branch)
Brief description of the transaction and any other information necessary for its evaluation
This chart shows the transactions and the results obtained by the Bank at 31 December 2021 with Group
entities resident in countries or territories that were considered non-cooperative jurisdictions pursuant to
Spanish legislation, at such date (Law 11/2021 on measures to prevent and fight against tax fraud expands
the meaning of tax havens, which it renames “non-cooperative jurisdictions”).
These results, and the balances indicated below, were eliminated in the consolidation process. See note 3
to the 2021 Consolidated financial statements for more information on offshore entities.
The amount shown on the right corresponds to positive results relating to contracting of derivatives
(includes branches in New York and London of Banco Santander, S.A.).
The referred derivatives had a net positive market value of EUR 274 million in the Bank and covered the
following transactions:
- 91 Non Delivery Forwards.
- 251 Swaps.
- 65 Cross Currency Swaps.
- 12 Options.
- 44 Forex.
The amount shown on the right corresponds to negative results relating to short term deposits with the
New York branch of Banco Santander, S.A. (liability), all of them expired before 31 December 2021.
The amount shown on the right corresponds to positive results relating to deposits with the Hong Kong
branch of Banco Santander, S.A. (asset). These deposits had a nominal value of EUR 0.9 million at 31
December 2021.
The amount shown on the right corresponds to positive results relating to fixed income securities-
subordinated instruments (asset). This relates to the investment in November 2018 in two subordinated
instruments (Tier I Subordinated Perpetual Notes and Tier II Subordinated Notes due 2028) with an
amortised cost of EUR 2,228 million as at 31 December 2021.
The amount shown on the right corresponds to negative results relating to interests and commissions
concerning correspondent accounts (includes Hong Kong branch of Banco Santander, S.A.) (liability). This
relates to correspondent accounts with a credit balance of EUR 40 million at 31 December 2021.
Amount (EUR
thousand)
18,681
1,036
16
140,892
15
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D.5 Give individual details of the operations that are significant due to their amount or relevant due to their subject matter carried out by the
company or its subsidiaries with other related parties pursuant to the international accounting standards adopted by the EU, which have not
been reported in previous sections.
Not applicable.
G. DEGREE OF COMPLIANCE WITH THE CORPORATE
GOVERNANCE RECOMMENDATIONS
Indicate the degree of the company’s compliance with the
recommendations of the good governance code for listed companies.
Should the company not comply with any of the recommendations or
comply only in part, include a detailed explanation of the reasons so
that shareholders, investors and the market in general have enough
information to assess the company’s behaviour. General explanations
are not acceptable.
1. The bylaws of listed companies should not place an upper limit on
the votes that can be cast by a single shareholder, or impose other
obstacles to the takeover of the company by means of share
purchases on the market.
Complies þ Explain o
2. When the listed company is controlled, pursuant to the meaning
established in Article 42 of the Commercial Code, by another listed or
non-listed entity, and has, directly or through its subsidiaries,
business relationships with that entity or any of its subsidiaries (other
than those of the listed company) or carries out activities related to
the activities of any of them, this is reported publicly, with specific
information about:
a) The respective areas of activity and possible business relationships
between, on the one hand, the listed company or its subsidiaries and,
on the other, the parent company or its subsidiaries.
b) The mechanisms established to resolve any conflicts of interest
that may arise.
Complies o Partially complies o Explain o Not applicable þ
3. During the AGM the chair of the board should verbally inform
shareholders in sufficient detail of the most relevant aspects of the
company’s corporate governance, supplementing the written
information circulated in the annual corporate governance report. In
particular:
a) Changes taking place since the previous annual general meeting.
b) The specific reasons for the company not following a given Good
Governance Code recommendation, and any alternative procedures
followed in its stead.
Complies þ Partially complies o Explain o
4. The company should define and promote a policy for
communication and contact with shareholders and institutional
investors within the framework of their involvement in the company,
as well as with proxy advisors, that complies in full with the rules on
market abuse and gives equal treatment to shareholders who are in
the same position. The company should make said policy public
through its website, including information regarding the way in which
it has been implemented and the parties involved or those
responsible its implementation.
Further, without prejudice to the legal obligations of disclosure of
inside information and other regulated information, the company
should also have a general policy for the communication of
economic-financial, non-financial and corporate information through
the channels it considers appropriate (media, social media or other
channels) that helps maximise the dissemination and quality of the
information available to the market, investors and other
stakeholders.
Complies þ Partially complies o Explain o
5. The board of directors should not make a proposal to the general
meeting for the delegation of powers to issue shares or convertible
securities without pre-emptive subscription rights for an amount
exceeding 20% of capital at the time of such delegation.
And that whenever the board of directors approves an issuance of
shares or convertible securities without pre-emptive rights the
company immediately publishes reports on its web page regarding
said exclusions as referenced in applicable mercantile law.
Complies þ Partially complies o Explain o
6. Listed companies drawing up the following reports on a voluntary
or compulsory basis should publish them on their website well in
advance of the AGM, even if their distribution is not obligatory:
a) Report on auditor independence.
b) Reviews of the operation of the audit committee and the
nomination and remuneration committees.
c) Audit committee report on third-party transactions.
Complies þ Partially complies o Explain o
7. The company should broadcast its general meetings live on the
corporate website.
The company should have mechanisms that allow the delegation and
exercise of votes by electronic means and even, in the case of large-
cap companies and, to the extent that it is proportionate, attendance
and active participation in the general shareholders’ meeting.
Complies þ Explain o
8. The audit committee should strive to ensure that the financial
statements that the board of directors presents to the general
shareholders’ meeting are drawn up in accordance to accounting
legislation. And in those cases where the auditors includes any
qualification in its report, the chair of the audit committee should give
a clear explanation at the general meeting of their opinion regarding
the scope and content, making a summary of that opinion available to
the shareholders at the time of the publication of the notice of the
meeting, along with the rest of proposals and reports of the board.
Complies þ Partially complies o Explain o
9. The company should disclose its conditions and procedures for
admitting share ownership, the right to attend general meetings and
the exercise or delegation of voting rights, and display them
permanently on its website.
Such conditions and procedures should encourage shareholders to
attend and exercise their rights and be applied in a non-discriminatory
manner.
Complies þ Partially complies o Explain o
10. When a shareholder so entitled exercises the right to supplement
the agenda or submit new proposals prior to the general meeting, the
company should:
a) Immediately circulate the supplementary items and new
proposals.
b) Disclose the standard attendance card or proxy appointment or
remote voting form, duly modified so that new agenda items and
alternative proposals can be voted on in the same terms as those
submitted by the board of directors.
c) Put all these items or alternative proposals to the vote applying the
same voting rules as for those submitted by the board of directors,
with particular regard to presumptions or deductions about the
direction of votes.
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d) After the general meeting, disclose the breakdown of votes on such
supplementary items or alternative proposals.
a) In large cap companies where few or no equity stakes attain the
legal threshold for significant shareholdings.
Complies þ Partially complies o Explain o Not applicable o
11. In the event that a company plans to pay for attendance at the
general meeting, it should first establish a general, long-term policy
in this respect.
Complies o Partially complies o Explain o Not applicable þ
12. The board of directors should perform its duties with unity of
purpose and independent judgement, according the same treatment
to all shareholders in the same position. It should be guided at all
times by the company’s best interest, understood as the creation of a
profitable business that promotes its sustainable success over time,
while maximising its economic value.
In pursuing the corporate interest, it should not only abide by laws
and regulations and conduct itself according to principles of good
faith, ethics and respect for commonly accepted customs and good
practices, but also strive to reconcile its own interests with the
legitimate interests of its employees, suppliers, clients and other
stakeholders, as well as with the impact of its activities on the
broader community and the natural environment.
Complies þ Partially complies o Explain o
13. The board of directors should have an optimal size to promote its
efficient functioning and maximise participation. The recommended
range is accordingly between five and fifteen members.
Complies þ Explain o
14. The board of directors should approve a policy aimed at
promoting an appropriate composition of the board that:
a) is concrete and verifiable;
b) ensures that appointment or re-election proposals are based on a
prior analysis of the competences required by the board; and
c) favours diversity of knowledge, experience, age and gender.
Therefore, measures that encourage the company to have a
significant number of female senior managers are considered to
favour gender diversity.
The results of the prior analysis of competences required by the board
should be written up in the nomination committee’s explanatory
report, to be published when the general shareholders’ meeting is
convened that will ratify the appointment and re-election of each
director.
The nomination committee should run an annual check on
compliance with this policy and set out its findings in the annual
corporate governance report.
Complies þ Partially complies o Explain o
15. Proprietary and independent directors should constitute an ample
majority on the board of directors, while the number of executive
directors should be the minimum practical bearing in mind the
complexity of the corporate group and the ownership interests they
control.
Further, the number of female directors should account for at least
40% of the members of the board of directors before the end of 2022
and thereafter, and not less than 30% previous to that.
Complies þ Partially complies o Explain o
16. The percentage of proprietary directors out of all non-executive
directors should be no greater than the proportion between the
ownership stake of the shareholders they represent and the
remainder of the company’s capital.
This criterion can be relaxed:
b) In companies with a plurality of shareholders represented on the
board but not otherwise related.
Complies þ Explain o
17. Independent directors should be at least half of all board
members.
However, when the company does not have a large market
capitalisation, or when a large cap company has shareholders
individually or concertedly controlling over 30 percent of capital,
independent directors should occupy, at least, a third of board places.
Complies þ Explain o
18. Companies should disclose the following director particulars on
their websites and keep them regularly updated:
a) Background and professional experience.
b) Directorships held in other companies, listed or otherwise, and
other paid activities they engage in, of whatever nature.
c) Statement of the director class to which they belong, in the case of
proprietary directors indicating the shareholder they represent or
have links with.
d) Dates of their first appointment as a board member and
subsequent re-elections.
e) Shares held in the company, and any options on the same.
Complies þ Partially complies o Explain o
19. Following verification by the nomination committee, the annual
corporate governance report should disclose the reasons for the
appointment of proprietary directors at the urging of shareholders
controlling less than 3 percent of capital; and explain any rejection of
a formal request for a board place from shareholders whose equity
stake is equal to or greater than that of others applying successfully
for a proprietary directorship.
Complies o Partially complies o Explain o Not applicable þ
20. Proprietary directors should resign when the shareholders they
represent dispose of their ownership interest in its entirety. If such
shareholders reduce their stakes, thereby losing some of their
entitlement to proprietary directors, the number of the latter should
be reduced accordingly.
Complies þ Partially complies o Explain o Not applicable o
21. The board of directors should not propose the removal of
independent directors before the expiry of their tenure as mandated
by the bylaws, except where they find just cause, based on a proposal
from the nomination committee. In particular, just cause will be
presumed when directors take up new posts or responsibilities that
prevent them allocating sufficient time to the work of a board
member, or are in breach of their fiduciary duties or come under one
of the disqualifying grounds for classification as independent
enumerated in the applicable legislation.
The removal of independent directors may also be proposed when a
takeover bid, merger or similar corporate transaction alters the
company’s capital structure, provided the changes in board
membership ensue from the proportionality criterion set out in
recommendation 16.
Complies þ Explain o
22. Companies should establish rules obliging directors to disclose
any circumstance that might harm the organisation’s name or
reputation, related or not to their actions within the company, and
tendering their resignation as the case may be, and, in particular, to
inform the board of any criminal charges brought against them and
the progress of any subsequent trial.
When the board is informed or becomes aware of any of the
situations mentioned in the previous paragraph, the board of
directors should examine the case as soon as possible and, attending
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to the particular circumstances, decide, based on a report from the
nomination and remuneration committee, whether or not to adopt
any measures such as opening of an internal investigation, calling on
the director to resign or proposing his or her dismissal. The board
should give a reasoned account of all such determinations in the
annual corporate governance report, unless there are special
circumstances that justify otherwise, which must be recorded in the
minutes. This is without prejudice to the information that the
company must disclose, if appropriate, at the time it adopts the
corresponding measures.
Complies þ Partially complies o Explain o
23. Directors should express their clear opposition when they feel a
proposal submitted for the board’s approval might damage the
corporate interest. In particular, independents and other directors not
subject to potential conflicts of interest should strenuously challenge
any decision that could harm the interests of shareholders lacking
board representation.
When the board makes material or reiterated decisions about which a
director has expressed serious reservations, then he or she must draw
the pertinent conclusions. Directors resigning for such causes should
set out their reasons in the letter referred to in the next
recommendation.
The terms of this recommendation also apply to the secretary of the
board, even if he or she is not a director.
Complies þ Partially complies o Explain o Not applicable o
24. Directors who give up their position before their tenure expires,
through resignation or resolution of the general meeting, should
state the reasons for this decision, or in the case of non-executive
directors, their opinion of the reasons for the general meeting
resolution, in a letter to be sent to all members of the board.
This should all be reported in the annual corporate governance report,
and if it is relevant for investors, the company should publish an
announcement of the departure as rapidly as possible, with sufficient
reference to the reasons or circumstances provided by the director.
Complies þ Partially complies o Explain o Not applicable o
25. The nomination committee should ensure that non-executive
directors have sufficient time available to discharge their
responsibilities effectively.
The board rules and regulations should lay down the maximum
number of company boards on which directors can serve.
Complies þ Partially complies o Explain o
26. The board should meet with the necessary frequency to properly
perform its functions, eight times a year at least, in accordance with a
calendar and agendas set at the start of the year, to which each
director may propose the addition of initially unscheduled items.
Complies þ Partially complies o Explain o
30. Regardless of the knowledge directors must possess to carry out
their duties, they should also be offered refresher programmes when
circumstances so advise.
Complies þ Explain o Not applicable o
31. The agendas of board meetings should clearly indicate on which
points directors must arrive at a decision, so they can study the
matter beforehand or obtain the information they consider
appropriate.
For reasons of urgency, the chair may wish to present decisions or
resolutions for board approval that were not on the meeting agenda.
In such exceptional circumstances, their inclusion will require the
express prior consent, duly minuted, of the majority of directors
present.
Complies þ Partially complies o Explain o
32. Directors should be regularly informed of movements in share
ownership and of the views of major shareholders, investors and
rating agencies on the company and its group.
Complies þ Partially complies o Explain o
33. The chair, as the person responsible for the efficient functioning
of the board of directors, in addition to the functions assigned by law
and the company’s bylaws, should prepare and submit to the board a
schedule of meeting dates and agendas; organise and coordinate
regular evaluations of the board and, where appropriate, of the
company’s chief executive officer; exercise leadership of the board
and be accountable for its proper functioning; ensure that sufficient
time is given to the discussion of strategic issues, and approve and
review refresher courses for each director, when circumstances so
advise.
Complies þ Partially complies o Explain o
34. When a lead independent director has been appointed, the
bylaws or the Rules and regulations of the board of directors should
grant him or her the following powers over and above those
conferred by law: to chair the board of directors in the absence of the
chair or vice chair; to give voice to the concerns of non-executive
directors; to maintain contact with investors and shareholders to hear
their views and develop a balanced understanding of their concerns,
especially those to do with the company’s corporate governance; and
to coordinate the chair’s succession plan.
Complies þ Partially complies o Explain o Not applicable o
35. The board secretary should strive to ensure that the board’s
actions and decisions are informed by the governance
recommendations of the Good Governance Code of relevance to the
company.
Complies þ Explain o
36. The board in full should conduct an annual evaluation, adopting,
where necessary, an action plan to correct weakness detected in:
27. Director absences should be kept to a strict minimum and
quantified in the annual corporate governance report. In the event of
absence, directors should delegate their powers of representation
with the appropriate instructions.
a) The quality and efficiency of the board’s operation.
b) The performance and membership of its committees.
c) The diversity of board membership and competencies.
Complies þ Partially complies o Explain o
28. When directors or the secretary express concerns about some
proposal or, in the case of directors, about the company’s
performance, and such concerns are not resolved at the meeting, they
should be recorded in the minutes book if the person expressing them
so requests.
Complies þ Partially complies o Explain o Not applicable o
d) The performance of the chair of the board of directors and the
company’s chief executive.
e) The performance and contribution of individual directors, with
particular attention to the chair of board committees.
The evaluation of board committees should start from the reports
they send to the board of directors, while that of the board itself
should start from the report of the nomination committee.
29. The company should provide suitable channels for directors to
obtain the advice they need to carry out their duties, extending if
necessary to external assistance at the company’s expense.
Every three years, the board of directors should engage an external
facilitator to aid in the evaluation process. This facilitator’s
independence should be verified by the nomination committee.
Complies þ Partially complies o Explain o
Any business dealings that the facilitator or members of its corporate
group maintain with the company or members of its corporate group
should be detailed in the annual corporate governance report.
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The process followed and areas evaluated should be detailed in the
annual corporate governance report.
a) Investigate the issues giving rise to the resignation of the external
auditor, should this come about.
Complies þ Partially complies o Explain o
37. When there is an executive committee, there should be at least
two non-executive members, at least one of whom should be
independent; and its secretary should be the secretary of the board of
directors.
Complies þ Partially complies o Explain o Not applicable o
38. The board should be kept fully informed of the matters discussed
and decisions made by the executive committee. To this end, all board
members should receive a copy of the committee’s minutes.
Complies þ Partially complies o Explain o Not applicable o
39. All members of the audit committee, particularly its chair, should
be appointed with regard to their knowledge and experience in
accounting, auditing and risk management matters, both financial
and non-financial.
Complies þ Partially complies o Explain o
40. Listed companies should have a unit in charge of the internal audit
function, under the supervision of the audit committee, to monitor
the effectiveness of reporting and control systems. This unit should
report functionally to the board’s non-executive chair or the chair of
the audit committee.
Complies þ Partially complies o Explain o
41. The head of the unit handling the internal audit function should
present an annual work programme to the audit committee, for
approval by this committee or the board, inform it directly of any
incidents or scope limitations arising during its implementation, the
results and monitoring of its recommendations, and submit an
activities report at the end of each year.
Complies þ Partially complies o Explain o Not applicable o
42. The audit committee should have the following functions over
and above those legally assigned:
1. With respect to internal control and reporting systems:
a) Monitor and evaluate the preparation process and the integrity of
the financial and non-financial information, as well as the control
and management systems for financial and non-financial risks related
to the company and, where appropriate, to the group – including
operating, technological, legal, social, environmental, political and
reputational risks or those related to corruption – reviewing
compliance with regulatory requirements, the accurate demarcation
of the consolidation perimeter, and the correct application of
accounting principles.
b) Monitor the independence of the unit handling the internal audit
function; propose the selection, appointment and removal of the head
of the internal audit service; propose the service’s budget; approve or
make a proposal for approval to the board of the priorities and
annual work programme of the internal audit unit, ensuring that it
focuses primarily on the main risks the company is exposed to
(including reputational risk); receive regular report-backs on its
activities; and verify that senior management are acting on the
findings and recommendations of its reports.
c) Establish and supervise a mechanism that allows employees and
other persons related to the company, such as directors, sharehold
ers, suppliers, contractors or subcontractors, to report irregularities
of potential significance, including financial and accounting
irregularities, or those of any other nature, related to the company,
that they notice within the company or its group. This mechanism
must guarantee confidentiality and enable communications to be
made anonymously, respecting the rights of both the complainant
and the accused party.
d) In general, ensure that the internal control policies and systems
established are applied effectively in practice.
2. With regard to the external auditor:
b) Ensure that the remuneration of the external auditor, does not
compromise its quality or independence.
c) Ensure that the company notifies any change of external auditor
through the CNMV, accompanied by a statement of any
disagreements arising with the outgoing auditor and the reasons for
the same.
d) Ensure that the external auditor has a yearly meeting with the
board in full to inform it of the work undertaken and developments in
the company’s risk and accounting positions.
e) Ensure that the company and the external auditor adhere to current
regulations on the provisions of non-audit services, limits on the
concentration of the auditor’s business and other requirements
concerning auditor independence.
Complies þ Partially complies o Explain o
43. The audit committee should be empowered to meet with any
company employee or manager, even ordering their appearance
without the presence of another manager.
Complies þ Partially complies o Explain o
44. The audit committee should be informed of any structural
changes or corporate transactions the company is planning, so the
committee can analyse the operation and report to the board
beforehand on its economic conditions and accounting impact and,
when applicable, the exchange ratio proposed.
Complies þ Partially complies o Explain o Not applicable o
45. Risk control and management policy should identify or establish
at least:
a) The different types of financial and non-financial risk the company
is exposed to (including operational, technological, financial, legal,
social, environmental, political and reputational risks, and risks
relating to corruption), with the inclusion under financial or economic
risks of contingent liabilities and other off-balance-sheet risks.
b) A risk control and management model based on different levels, of
which a specialised risk committee will form part when sector regula
tions provide or the company deems it appropriate.
c) The level of risk that the company considers acceptable.
d) The measures in place to mitigate the impact of identified risk
events should they occur.
e) The internal control and reporting systems to be used to control
and manage the above risks, including contingent liabilities and off-
balance-sheet risks.
Complies þ Partially complies o Explain o
46. Companies should establish a risk control and management
function in the charge of one of the company’s internal department or
units and under the direct supervision of the audit committee or some
other specialised board committee. This internal department or unit
should be expressly charged with the following responsibilities:
a) Ensure that risk control and management systems are functioning
correctly and, specifically, that major risks the company is exposed to
are correctly identified, managed and quantified.
b) Participate actively in the preparation of risk strategies and in key
decisions about their management.
c) Ensure that risk control and management systems are mitigating
risks effectively in the frame of the policy drawn up by the board of
directors.
Complies þ Partially complies o Explain o
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47. Members of the nomination and remuneration committee-or of
the nomination committee and remuneration committee, if
separately constituted - should be chosen procuring they have the
right balance of knowledge, skills and experience for the functions
they are called on to discharge. The majority of their members should
be independent directors.
Complies þ Partially complies o Explain o
48. Large cap companies should have formed separate nomination
and remuneration committees.
Complies þ Explain o Not applicable o
49. The nomination committee should consult with the company’s
chair and chief executive, especially on matters relating to executive
directors.
When there are vacancies on the board, any director may approach
the nomination committee to propose candidates that it might
consider suitable.
Complies þ Partially complies o Explain o
50. The remuneration committee should operate independently and
have the following functions in addition to those assigned by law:
a) Propose to the board the standard conditions for senior officer
contracts.
b) Monitor compliance with the remuneration policy set by the
company.
c) Periodically review the remuneration policy for directors and senior
officers, including share-based remuneration systems and their
application, and ensure that their individual compensation is
proportionate to the amounts paid to other directors and senior
officers in the company.
d) Ensure that conflicts of interest do not undermine the
independence of any external advice the committee engages.
e) Verify the information on director and senior officers’ pay contained
in corporate documents, including the annual directors’ remuneration
statement.
Complies þ Partially complies o Explain o
51. The remuneration committee should consult with the company’s
chair and chief executive, especially on matters relating to executive
directors and senior officers.
Complies þ Partially complies o Explain o
52. The rules regarding composition and functioning of supervision
and control committees should be set out in the regulations of the
board of directors and aligned with those governing legally
mandatory board committees as specified in the preceding sets of
recommendations. They should include at least the following terms:
a) Committees should be formed exclusively by non-executive
directors, with a majority of independents.
b) They should be chaired by independent directors.
c) The board should appoint the members of such committees with
regard to the knowledge, skills and experience of its directors and
each committee’s terms of reference; discuss their proposals and
reports; and provide report-backs on their activities and work at the
first board plenary following each committee meeting.
d) They may engage external advice, when they feel it necessary for
the discharge of their functions.
e) Meeting proceedings should be minuted and a copy made available
to all board members.
Complies þ Partially complies o Explain o Not applicable o
53. The task of supervising compliance with the policies and rules of
the company in the environmental, social and corporate governance
areas, and internal rules of conduct, should be assigned to one board
committee or split between several, which could be the audit
committee, the nomination committee, a committee specialised in
sustainability or corporate social responsibility, or a dedicated
committee established by the board under its powers of self-
organisation. Such a committee should be made up solely of non-
executive directors, the majority being independent and specifically
assigned the following minimum functions.
Complies þ Partially complies o Explain o
54. The minimum functions referred to in the previous
recommendation are as follows:
a) Monitor compliance with the company’s internal codes of conduct
and corporate governance rules, and ensure that the corporate
culture is aligned with its purpose and values.
b) Monitor the implementation of the general policy regarding the
disclosure of economic-financial, non-financial and corporate
information, as well as communication with shareholders and
investors, proxy advisors and other stakeholders. Similarly, the way in
which the entity communicates and relates with small and medium-
sized shareholders should be monitored.
c) Periodically evaluate the effectiveness of the company’s corporate
governance system and environmental and social policy, to confirm
that it is fulfilling its mission to promote the corporate interest and
catering, as appropriate, to the legitimate interests of remaining
stakeholders.
d) Ensure the company’s environmental and social practices are in
accordance with the established strategy and policy.
e) Monitor and evaluate the company’s interaction with its
stakeholder groups.
Complies þ Partially complies o Explain o
55. Environmental and social sustainability policies should identify
and include at least:
a) The principles, commitments, objectives and strategy regarding
shareholders, employees, clients, suppliers, social welfare issues, the
environment, diversity, fiscal responsibility, respect for human rights
and the prevention of corruption and other illegal conducts.
b) The methods or systems for monitoring compliance with policies,
associated risks and their management.
c) The mechanisms for supervising non-financial risk, including that
related to ethical aspects and business conduct.
d) Channels for stakeholder communication, participation and
dialogue.
e) Responsible communication practices that prevent the
manipulation of information and protect the company’s honour and
integrity.
Complies þ Partially complies o Explain o
56. Director remuneration should be sufficient to attract and retain
directors with the desired profile and compensate the commitment,
abilities and responsibility that the post demands, but not so high as
to compromise the independent judgement of non-executive
directors.
Complies þ Explain o
57. Variable remuneration linked to the company and the director’s
performance, the award of shares, options or any other right to
acquire shares or to be remunerated on the basis of share price
movements, and membership of long-term savings schemes such as
pension plans, retirement accounts or any other retirement plan
should be confined to executive directors.
The company may consider the share-based remuneration of non-
executive directors provided they retain such shares until the end of
their mandate. The above condition will not apply to any shares that
the director must dispose of to defray costs related to their
acquisition.
Complies þ Partially complies o Explain o
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64. Termination payments should not exceed a fixed amount
equivalent to two years of the director’s total annual remuneration
and should not be paid until the company confirms that he or she has
met the predetermined performance criteria.
For the purposes of this recommendation, payments for contractual
termination include any payments whose accrual or payment
obligation arises as a consequence of or on the occasion of the
termination of the contractual relationship that linked the director
with the company, including previously unconsolidated amounts for
long-term savings schemes and the amounts paid under post-
contractual non-compete agreements.
Complies þ Partially complies o Explain o Not applicable o
List whether any directors voted against or abstained from voting on
the approval of this Report.
Yes o No þ
I declare that the information included in this statistical annex are the
same and are consistent with the descriptions and information
included in the annual corporate governance report published by the
company.
58. In the case of variable awards, remuneration policies should
include limits and technical safeguards to ensure they reflect the
professional performance of the beneficiaries and not simply the
general progress of the markets or the company’s sector, or
circumstances of that kind.
In particular, variable remuneration items should meet the following
conditions:
a) Be subject to predetermined and measurable performance criteria
that factor the risk assumed to obtain a given outcome.
b) Promote the long-term sustainability of the company and include
non-financial criteria that are relevant for the company’s long-term
value, such as compliance with its internal rules and procedures and
its risk control and management policies.
c) Be focused on achieving a balance between the achievement of
short, medium and long-term targets, such that performance-related
pay rewards ongoing achievement, maintained over sufficient time to
appreciate its contribution to long-term value creation. This will
ensure that performance measurement is not based solely on one off,
occasional or extraordinary events.
Complies þ Partially complies o Explain o Not applicable o
59. The payment of the variable components of remuneration is
subject to sufficient verification that previously established
performance, or other, conditions have been effectively met. Entities
should include in their annual directors’ remuneration report the
criteria relating to the time required and methods for such
verification, depending on the nature and characteristics of each
variable component.
Additionally, entities should consider establishing a reduction clause
(‘malus’) based on deferral for a sufficient period of the payment of
part of the variable components that implies total or partial loss of
this remuneration in the event that prior to the time of payment an
event occurs that makes this advisable.
Complies þ Partially complies o Explain o Not applicable o
60. Remuneration linked to company earnings should bear in mind
any qualifications stated in the external auditor’s report that reduce
their amount.
Complies þ Partially complies o Explain o Not applicable o
61. A major part of executive directors’ variable remuneration should
be linked to the award of shares or financial instruments whose value
is linked to the share price.
Complies þ Partially complies o Explain o Not applicable o
62. Following the award of shares, options or financial instruments
corresponding to the remuneration schemes, executive directors
should not be able to transfer their ownership or exercise them until a
period of at least three years has elapsed.
Except for the case in which the director maintains, at the time of the
transfer or exercise, a net economic exposure to the variation in the
price of the shares for a market value equivalent to an amount of at
least twice his or her fixed annual remuneration through the
ownership of shares, options or other financial instruments.
The foregoing shall not apply to the shares that the director needs to
dispose of to meet the costs related to their acquisition or, upon
favourable assessment of the nomination and remuneration
committee to address an extraordinary situation.
Complies þ Partially complies o Explain o Not applicable o
63. Contractual arrangements should include provisions that permit
the company to reclaim variable components of remuneration when
payment was out of step with the director’s actual performance or
based on data subsequently found to be misstated.
Complies þ Partially complies o Explain o Not applicable o
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9.3 Table on compliance with or explanations of recommendations
on corporate governance
Recommendation Comply / Explain
1
2
3
4
5
6
Comply
Not applicable
Comply
Comply
Comply
Comply
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
Comply
Comply
Comply
Comply
Not applicable
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Not applicable
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Information
See section 3.2 'Shareholder rights'.
See 'Conflicts of interest' in section 4.12. and section 2.3 'Significant shareholders'.
See section 3.1 'Shareholder communication and engagement'.
See section 3.1 'Shareholder communication and engagement'.
See section 2.2 'Authority to increase capital'.
See sections 4.5 'Audit committee activities in 2021', 4.6 'Nomination committee activities in 2021', 4.7
'Remuneration committee activities in 2021', 4.8 'Risk supervision, regulation and compliance committee
activities in 2021', 4.9 'Responsible banking, sustainability and culture committee activities in 2021', 4.10
'Innovation and technology committee activities in 2021' and 4.12 'Related-party transactions and conflicts of
interest'.
See 'Engagement with shareholders in 2021' in section 3.1, 'Shareholder participation at general meetings' in
section 3.2 and section 3.5 'Our next AGM in 2022'.
See 'Rules and regulations of the board' in section 4.3 and section 4.5 'Audit committee activities in 2021'.
See 'Participation of shareholders at the general meeting' in section 3.2.
See 'Supplement to the annual general meeting notice' in section 3.2.
See section 3.5 'Our next AGM in 2022'.
See section 4.3 'Board functioning and effectiveness'.
See 'Size' in section 4.2.
See 'Diversity' and 'Election, renewal and succession of directors' in section 4.2, 'Rules and regulations of the
board' in section 4.3, 'Duties and activities in 2021' in section 4.6, section 5 'Management team' and
'Responsible banking' chapter.
See section 4.2 'Board composition'.
See 'Composition by type of director' in section 4.2.
See 'Composition by type of director' and 'Election, renewal and succession of directors' in section 4.2.
See 'Corporate website' in section 3.1 and section 4.1 'Our directors'.
See 'Composition by type of director' and 'Tenure and equity ownership' in section 4.2.
See 'Election, renewal and succession of directors' in section 4.2.
See 'Election, renewal and succession of directors' in section 4.2.
See 'Election, renewal and succession of directors' in section 4.2, 'Rules and regulations of the board' in
section 4.3 and 'Duties and activities in 2021' in section 4.6.
See 'Election, renewal and succession of directors' in section 4.2.
See 'Election, renewal and succession of directors' in section 4.2, 'Rules and regulations of the board' in
section 4.3 and 'Duties and activities in 2021' in section 4.6.
See 'Board and committees attendance' in section 4.3 and 'Duties and activities in 2021' in section 4.6.
See 'Board meetings' and 'Board and committee attendance' in section 4.3.
See 'Board meetings' and 'Board and committee attendance' in section 4.3.
See 'Board meetings' in section 4.3.
See 'Board meetings' in section 4.3.
See 'Training of directors and induction programmes for new directors' in section 4.3.
See 'Board meetings' in section 4.3.
See section 3.1 'Shareholder communication and engagement' and 'Duties and activities in 2021' in section
4.6.
See section 4.3 'Board functioning and effectiveness'.
See 'Lead independent director' in section 4.3.
See 'Secretary of the board' in section 4.3.
See 'Board assessment in 2021' in section 4.3.
See 'Rules and regulations of the board' in section 4.3 and 'Composition' in section 4.4.
See 'Committee meetings' in section 4.3 and section 4.4 'Executive committee activities in 2021'.
See 'Rules and regulations of the board' in section 4.3 and 'Composition' in section 4.5.
See 'Duties and activities in 2021' in section 4.5 and section 8.5 'Monitoring'.
See 'Rules and regulations of the board' in section 4.3 and 'Duties and activities in 2021' in section 4.5.
See 'Rules and regulations of the board' in section 4.3 and 'Duties and activities in 2021' in section 4.5.
See 'Committee meetings' in section 4.3.
See 'Duties and activities in 2021' in section 4.5.
See 'Rules and regulations of the board' in section 4.3, 'Duties and activities in 2021' in section 4.5, 'Duties
and activities in 2021' in section 4.8 and the 'Risk management and compliance' chapter.
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Recommendation Comply / Explain
46
Comply
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Comply
Information
See 'Duties and activities in 2021' in section 4.5,'Duties and activities in 2021' in section 4.8 and the 'Risk
management and compliance' chapter.
See 'Composition' in section 4.6 and 'Composition' in section 4.7.
See 'Structure of board committees' in section 4.3.
See 'Duties and activities in 2021' in section 4.6.
See 'Duties and activities in 2021' in section 4.7.
See 'Duties and activities in 2021' in section 4.7.
See 'Rules and regulations of the board' and 'Committee meetings' in section 4.3 and sections 4.8 'Risk
supervision, regulation and compliance committee activities in 2021' and 4.9 'Responsible banking,
sustainability and culture committee activities in 2021'.
See 'Rules and regulations of the board' in section 4.3, 'Duties and activities in 2021' in section 4.6, 'Duties
and activities in 2021' in section 4.8 and 'Duties and activities in 2021' in section 4.9.
See 'Rules and regulations of the board' in section 4.3, 'Duties and activities in 2021' in section 4.6, 'Duties
and activities in 2021' in section 4.8 and 'Duties and activities in 2021' in section 4.9.
See 'Duties and activities in 2021' in section 4.9 and 'Responsible banking' chapter.
See sections 6.2 'Remuneration of directors for supervisory and collective decision-making duties: policy
applied in 2021', 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy
for 2022, 2023 and 2024 submitted to a binding shareholder vote'.
See sections 6.2 'Remuneration of directors for supervisory and collective decision-making duties: policy
applied in 2021', 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy
for 2022, 2023 and 2024 submitted to a binding shareholder vote'.
See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for
2022, 2023 and 2024 submitted to a binding shareholder vote'.
See section 6.3 'Remuneration of directors for executive duties'.
See section 6.3 'Remuneration of directors for executive duties'.
See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for
2022, 2023 and 2024 submitted to a binding shareholder vote'.
See 'Duties and activities in 2021' in section 4.7, section 6.3 'Remuneration of directors for executive duties'
and 6.4 'Directors' remuneration policy for 2022, 2023 and 2024 submitted to a binding shareholder vote'.
See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for
2022, 2023 and 2024 submitted to a binding shareholder vote'.
See sections 6.1 'Principles of the remuneration policy' and 6.3 'Remuneration of directors for executive
duties' and 6.4 'Directors' remuneration policy for 2022, 2023 and 2024 submitted to a binding shareholder
vote'.
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9.4 Reconciliation to the CNMV’s remuneration report model
Included in
• See section 6.4: A.1.1, A.1.2, A.1.3, A.1.4, A.1.5, A.1.6, A.1.7, A.1.8, A.1.9, A.1.10, A.1.11 (note 5), A.1.12.
Section in the statistical
CNMV model report
A. Remuneration policy for the present fiscal year
A.1
No
Further information elsewhere and comments
• See also sections 4.7 and 6.5 for A.1.1 y A.1.6.
• See 'Summary of link between risk, performance and reward' in section 6.3.
See section 6.4.
See section 6.4. See Introduction.
See section 6.5.
A.2
A.3
A.4
B. Overall summary of application of the remuneration policy over the last fiscal year
B.1
No
No
No
No
For B.1.1, see sections 6.1, 6.2. and 6.3.
For B.1.2 y B.1.3 (not applicable) see section 6.5
See 'Summary of link between risk, performance and reward' in section 6.3.
See sections 6.1, 6.2 and 6.3.
See section 6.5.
See section 6.2 and 6.3
See 'Gross annual salary' in section 6.3.
See 'Variable remuneration' in section 6.1, 6.2 and 6.3.
Not applicable.
See 'Main features of the benefit plans' in section 6.3.
See 'Other remuneration' in section 6.3.
See 'Terms and conditions of executive directors´ contracts' in section 6.4.
See section 6.3: "Remuneration of board members as representatives of Banco Santander"
See note 5 to the consolidated financial statements.
See 'Insurance and other remuneration and benefits in kind' in section 6.4.
See 'Remuneration of board members as representatives of the Bank' in section 6.3.
No remuneration for this component.
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
B.2
B.3
B.4
B.5
B.6
B.7
B.8
B.9
B.10
B.11
B.12
B.13
B.14
B.15
B.16
C. Breakdown of the individual remuneration of directors
Yes
C
Yes
C.1 a) i)
Yes
C.1 a) ii)
Yes
C.1 a) iii)
Yes
C.1 a) iii)
Yes
C.1 b) i)
No
C.1 b) ii)
No
C.1 b) iii)
No
C.1 b) iv)
Yes
C.1 c)
C.2
Yes
D. Other information of interest
No
D
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 9.5.
See section 4.7
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9.5 Statistical information on remuneration required by the CNMV
B. OVERALL SUMMARY OF HOW REMUNERATION POLICY WAS APPLIED DURING THE YEAR ENDED
B.4 Report on the result of the consultative vote at the General Shareholders’ Meeting on remuneration in the previous year, indicating the
number of votes in favour, votes against, abstentions and blank ballots:
Votes cast
Number
11,735,176,840
% of total
100.00 %
Votes in favour
Votes against
Blank
Abstentions
Number
10,434,787,981
957,730,594
4,554,563
338,103,702
% of votes cast
88.92 %
8.16 %
0.04 %
2.88 %
C. ITEMISED INDIVIDUAL REMUNERATION ACCRUED BY EACH DIRECTOR
Directors
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
Mr Bruce Carnegie-Brown
Ms Homaira Akbari
Mr Francisco Javier Botín-Sanz de Sautuola y O’Shea
Mr Álvaro Antonio Cardoso de Souza
Mr Ramón Martín Chávez Márquez
Ms Sol Daurella Comadrán
Mr Henrique Manuel Drummond Borges Cirne de Castro
Ms Gina Díez Barroso
Mr Luis Isasi Fernández de Bobadilla
Mr Ramiro Mato García-Ansorena
Mr Sergio Rial
Ms Belén Romana García
Mrs Pamela Ann Walkden
Type
Executive
Executive
Lead independent
director
Independent
Other external
Independent
Independent
Independent
Independent
Independent
Other External
Independent
Executive
Independent
Independent
Period of accrual in year 2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
From 01/01/2021 to 31/12/2021
Annual report 2021 311
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C.1 Complete the following tables on individual remuneration of each director (including the remuneration for exercising executive functions)
accrued during the year.
a) Remuneration from the reporting company:
i) Remuneration in cash (thousand euros)
Fixed
remune
ration
Per diem
allowances
Remuneration
for
membership
of Board's
committees
Short-term
variable
remuneration
Salary
90
90
275
90
90
90
90
90
90
90
90
90
90
90
90
—
—
—
—
45
45
80
78
39
50
99
84
87
39
81
94
39
100
76
—
—
—
—
195
3,176
2,941
195
345
80
—
43
185
65
90
1
235
315
—
343
137
—
2,541
1,985
—
—
—
—
—
—
—
—
—
—
750
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Name
Ms Ana Botín-Sanz de
Sautuola y O’Shea
Mr José Antonio Álvarez
Álvarez
Mr Bruce Carnegie-Brown
Ms Homaira Akbari
Mr Francisco Javier Botín-
Sanz de Sautuola y O’Shea
Mr Álvaro Antonio
Cardoso de Souza
Mr Ramón Martín Chávez
Márquez
Ms Sol Daurella
Comadrán
Mr Henrique Manuel
Drummond Borges Cirne
de Castro
Ms Gina Díez Barroso
Mr Luis Isasi Fernández de
Bobadilla
Mr Ramiro Mato García-
Ansorena
Mr Sergio Rial
Ms Belén Romana García
Mrs Pamela Ann Walkden
Mr Rodrigo Echenique
Gordillo
Mr Ignacio Benjumea
Cabeza de Vaca
Mr Guillermo de la
Dehesa Romero
Ms Esther Giménez-
Salinas i Colomer
Long-term
variable
remuneration
1 Severance
pay
561
375
—
—
—
—
—
—
—
—
—
—
—
—
—
292
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
grounds
Total
year
2021
Total
year
2020
525 7,533 5,352
710 5,941 4,370
—
—
700
248
595
202
—
129
122
—
183
243
—
374
37
—
239
214
—
—
267
130
217
4
1,000 1,406
943
—
—
—
—
499
879
533
303
430
63
417
214
—
292 2,369
—
275
—
108
—
191
Comments (Not included in the electronic submission to the CNMV)
1. Includes deferred amounts from the 2017 deferred and conditional variable remuneration plan subject to long term metrics for Ana Botín, José
Antonio Álvarez and Rodrigo Echenique.
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ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments
Name
Ms Ana
Botín-
Sanz de
Sautuola
y O’Shea
Name of Plan
2nd cycle of deferred variable remuneration
plan linked to multi-year targets (2017)
3rd cycle of deferred variable remuneration
plan linked to multi-year targets (2018)
4th cycle of deferred variable remuneration
plan linked to multi-year targets (2019)
5th cycle of deferred variable remuneration
plan linked to multi-year targets (2020)
6th cycle of deferred variable remuneration
plan linked to multi-year targets (2021)
Name
Name of Plan
Mr. José
Antonio
Álvarez
Álvarez
2nd cycle of deferred variable remuneration
plan linked to multi-year targets (2017)
3rd cycle of deferred variable remuneration
plan linked to multi-year targets (2018)
4th cycle of deferred variable remuneration
plan linked to multi-year targets (2019)
5th cycle of deferred variable remuneration
plan linked to multi-year targets (2020)
6th cycle of deferred variable remuneration
plan linked to multi-year targets (2021)
Financial instruments at start
of year 2021
Financial instruments granted
at start of year 2021
Financial instruments consolidated during 2021
Instruments
matured but
not exercised
Financial instruments at end
of year 2021
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares
No. of
equivalent
shares /
instruments handed over
No. of
Price of the
consolidated
shares
Net profit
from shares
handed over or
consolidated
financial
instruments
(EUR thousand)
No. of
instruments
No. of
instruments
No of
equivalent
shares
94,083
94,083
3.104
292
112,692
—
—
206,775
206,775
309,911
309,911
319,390
319,390
111,823
111,823
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,480,622
1,480,622
947,598
947,598
3.104
2,941
—
—
—
—
309,911
309,911
319,390
319,390
111,823
111,823
533,024
533,024
Financial instruments at start
of year 2021
Financial instruments granted
at start of year 2021
Financial instruments consolidated during 2021
Instruments
matured but
not exercised
Financial instruments at end
of year 2021
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares /
handed
over
Price of the
consolidated
shares
Net profit
from shares
handed over or
consolidated
financial
instruments
(EUR thousand)
No. of
instruments
No. of
instruments
No of
equivalent
shares
62,919
62,919
3.104
195
75,364
—
—
138,283
138,283
207,097
207,097
213,449
213,449
60,739
60,739
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
999,259
999,259
639,526
639,526
3.104
1,985
—
—
—
—
207,097
207,097
213,449
213,449
60,739
60,739
359,733
359,733
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Financial instruments at start
of year 2021
Financial instruments granted
at start of year 2021
Financial instruments consolidated during 2021
Instruments
matured but
not exercised
Financial instruments at end of
year 2021
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares /
handed
over
Price of the
consolidated
shares
Net profit
from shares
handed over or
consolidated
financial
instruments
(EUR thousand)
No. of
instruments
No. of
instruments
No of
equivalent
shares
107,764
107,764
164,462
164,462
98,092
98,092
—
—
—
—
—
—
49,033
49,033
3.104
152
58,731
164,462
164,462
98,092
98,092
Name
Name of Plan
Mr.
Rodrigo
Echenique
Gordillo
2nd cycle of deferred variable
remuneration
plan linked to multi-year targets (2017)
3rd cycle of deferred variable remuneration
plan linked to multi-year targets (2018)
4th cycle of deferred variable remuneration
plan linked to multi-year targets (2019)
Comments (Not included in the electronic submission to the CNMV)
After reviewing the results of the 2nd cycle of the deferred variable remuneration plan linked to multi-year targets (2017), the board of directors confirmed in 2021, upon recommendation from the remunerations committee, a
45.5% achievement of the long-term metrics of the plan (as the following level of achievement was met during 2017-2019 period: CET1 at 100% (the target was 11.30%); underlying EPS growth at 36.34% (the target was a
25% growth); and TSR metric at 0% (33% minimum target not reach), with a 33% weight each one; and the amounts of the pending deliveries for each executive director, payable in February 2021, 2022 and 2023 in connection
with this plan.
Annual report 2021 314
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iii) Long-term saving systems
Name
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
Remuneration from
consolidation of rights
to savings system
1,041
783
Contribution over the year from the company (EUR
thousand)
Savings systems with
consolidated
economic rights
Savings systems with
unconsolidated
economic rights
2021
2020
2021
2020
Amount of accumulated funds (EUR thousand)
2021
2020
Systems
with
Systems with
consolidated unconsolidated
economic
rights
economic
rights
Systems
with
Systems with
consolidated unconsolidated
economic
rights
economic
rights
1,041
1,155
783
864
—
—
—
—
48,075
18,821
—
—
49,444
18,082
—
—
Name
Ms Ana Botín-Sanz de
Sautuola y O’Shea
Mr José Antonio Álvarez
Álvarez
iv) Details of other items (Thousands of EUR)
Item
Name
Ms Ana Botín-
Life and accident insurance and
Sanz de Sautuola fixed remuneration supplement
y O’Shea
insurance
Other remuneration
Name
Mr José Antonio
Álvarez Álvarez
Item
Life and accident insurance and
fixed remuneration supplement
insurance
Amount
remunerated
459
22
Amount
remunerated
817
Other remuneration
7
b) Remuneration of the company directors for seats on the boards of
other group companies:
i) Remuneration in cash (Thousands of EUR)
Name
Ms Homaira Akbari
D. Álvaro Antonio Cardoso de
Souza
Mr. Ramón Martín Chávez
Márquez
D. Henrique Manuel
Drummond Borges Cirne de
Castro
Ms. Pamela Walkden
1
D. Sergio Rial
D.ª Gina Diez Barroso
Fixed
Per diem
remuneration allowances
—
213
Remuneration
for membership
of Board's
committees
—
Short-term
variable
remuneration
—
Salary
—
Long-term
variable Severance
pay
—
remuneration
—
Other
grounds
—
282
52
52
36
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,985
—
2,009
—
—
—
—
—
—
—
—
—
—
—
—
—
52
—
—
—
7
—
Total
year
2021
213
Total
year
2020
184
334
335
52
52
36
17
17
—
4,001
—
4,020
14
Comments (Not included in the electronic submission to the CNMV)
1. Long-term variable remuneration includes amounts since the appointment as director.
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ii) Table of changes in share/based remunerations schemes and
gross profit from consolidated shares of financial instruments
Financial instruments
at start of year 2021
Financial instruments
granted
at start of year 2021
Financial instruments consolidated during 2021
Instruments
matured but
not
exercised
Financial instruments
at end of year 2021
Name
Name of Plan
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares
No. of
instruments
Net proft
from shares
handed over
or
consolidated
fnancial
instruments
(EUR
thousand)
No. of
equivalent
shares /
handed
over
Price of
the
consolid
ated
shares
No. of
instruments
No. of
instruments
No of
equivalent
shares
Mr.
Sergio
Rial
5th cycle of
deferred
variable
remuneration
plan linked to
multi-year
targets (2020)
6th cycle of
deferred
variable
remuneration
plan linked to
multi-year
targets (2021)
472,500
472,500
—
—
—
—
—
—
—
—
—
—
—
472,500
472,500
—
—
—
625,000
625,000
— 400,000
400,000
5.022
2,009
—
—
—
225,000
225,000
Comments (Not included in the electronic submission to the CNMV)
After reviewing the results of the 2nd cycle of the deferred variable remuneration plan linked to multi-year targets (2017), the board of directors
confirmed in 2021, upon recommendation from the remunerations committee, a 45.5% achievement of the long-term metrics of the plan (as the
following level of achievement was met during 2017-2019 period: CET1 at 100% (the target was 11.30%); underlying EPS growth at 36.34% (the
target was a 25% growth); and TSR metric at 0% (33% minimum target not reach), with a 33% weight each one; and the amounts of the pending
deliveries for each executive director, payable in February 2021, 2022 and 2023 in connection with this plan.
iii) Long term saving systems
Name
Mr Sergio Rial
Remuneration from
consolidation of rights
to savings system
1,153
Contribution over the year from the company (EUR
thousand)
Savings systems with
consolidated
economic rights
Savings systems with
unconsolidated
economic rights
Name
Mr Sergio Rial
2020
1,153
2019
693
2020
—
2019
—
iv) Detail of other items (Thousands of EUR)
Name
Mr Sergio Rial
Item
Fundo de Pensão do
Governo
Other remuneration
Amount Remunerated
2021
159
7
c) Summary of remuneration (Thousands of EUR)
The summary should include the amounts corresponding to all the
items of remuneration included in this report that have been accrued
by the director, in thousand euros.
Amount of accumulated funds (EUR thousand)
2020
2019
Systems
with
consolidated
economic
rights
Systems
with
unconsolidat
ed economic
rights
Systems
with
consolidated
economic
rights
Systems
with
unconsolidat
ed economic
rights
5,202
—
3,900
—
Annual report 2021 316
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Remuneration accrued in the company
Remuneration accrued in group companies
Gross profit
on
consolidated
shares or
financial
1
instruments
Contributions
to the long- Remuneration
for other
term savings
plan
items
Total cash
1
remuneration
Total
2021
Total
2020
Total cash
remuneration
Gross profit
on
consolidated
shares or
financial
instruments
Contributions
to the long- Remuneration
for other
term savings
plan
items
Total
2021
Total
2020
7,533
3,233
1,041
481 12,288
8,090
5,941
2,180
783
824
9,728
6,877
700
248
129
183
374
239
267
130
1,406
499
879
533
303
292
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
152
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
700
248
595
202
129
122
—
183
243
334
374
37
239
214
52
—
267
217
52
—
—
—
213
—
—
—
130
4
1,406
943
499
879
430
63
533
417
303
214
444
2,595
—
—
—
275
108
191
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,001
2,009
1,153
—
36
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
—
—
—
—
—
—
7
—
—
—
213
—
—
—
184
—
—
334
335
52
—
52
—
—
—
17
—
17
14
—
—
7,170
6,558
—
36
—
—
—
—
—
—
—
—
—
—
7,857
7,125
Name
Ms Ana Botín-Sanz
de Sautuola y
O’Shea
Mr José Antonio
Álvarez Álvarez
Mr Bruce Carnegie-
Brown
Ms Homaira Akbari
Mr Francisco Javier
Botín-Sanz de
Sautuola y O’Shea
Mr Álvaro Antonio
Cardoso de Souza
Mr Ramón Martín
Chávez Márquez
Ms Sol Daurella
Comadrán
Mr Henrique
Manuel Drummond
Borges Cirne de
Castro
Ms Gina Díez
Barroso
Mr Luis Isasi
Fernández de
Bobadilla
Mr Ramiro Mato
García-Ansorena
Mr Sergio Rial
Ms Belén Romana
García
Mrs Pamela Ann
Walkden
Mr Rodrigo
Echenique Gordillo
Mr Ignacio
Benjumea Cabeza
de Vaca
Mr Guillermo de la
Dehesa Romero
Ms Esther Giménez-
Salinas i Colomer
Total
19,656
5,565
1,824
1,305 28,350 21,837
4,688
2,009
1,153
Comments (Not included in the electronic submission to the CNMV)
1. Includes deferred amounts from the 2017 deferred and conditional variable remuneration plan subject to long term metrics for Ana Botín, José
Antonio Álvarez and Rodrigo Echenique.
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C.2 Indicate the evolution in the last five years of the amount and percentage variation of the remuneration accrued by each of the directors of
the listed company who have held this position during the year, the consolidated results the company and the average remuneration on an
equivalent basis with regard to full-time employees of the company and its subsidiaries that are not directors of the listed company.
Directors' remuneration (EUR Thousand)
• Executive Directors
Ana Botín-Sanz de Sautuola y O’Shea
José Antonio Álvarez Álvarez
Sergio Rial
1
• External Directors
Bruce Carnegie-Brown
Francisco Javier Botín-Sanz de Sautuola y O’Shea
Sol Daurella Comadrán
Belén Romana García
Homaira Akbari
Ramiro Mato García-Ansorena
Álvaro Cardoso de Souza
Henrique Manuel Drummond Borges Cirne de
Castro
Pamela Ann Walkden
Luis Isasi Fernández de Bobadilla
Ramón Martín Chávez Márquez
Gina Díez Barroso
% var.
20/19
(19)%
(17)%
—
(15)%
(11)%
(11)%
(21)%
71%
(14)%
(14)%
172%
529%
—
—
—
2019
9,954
8,270
—
700
137
240
525
226
500
673
86
34
—
—
—
% var.
19/18
2018
% var.
18/17
2017
(10)%
(8)%
—
11,011
9,001
—
(4)%
13%
12%
27%
14%
11%
355%
—
—
—
—
—
732
121
215
414
199
450
148
—
—
—
—
—
4%
1%
—
—
(2)%
4%
39%
25%
—
—
—
—
—
—
—
10,582
8,893
—
731
124
207
297
159
36
—
—
—
—
—
—
2021
% var.
21/20
12,288
9,728
8,049
52%
41%
22%
2020
8,090
6,877
6,621
595
122
214
417
386
430
578
234
214
943
54
18
700
129
239
533
461
499
517
319
339
1,406
426
130
18%
6%
12%
28%
19%
16%
(11)%
36%
59%
49%
689%
622%
70%
—
71%
18%
Company’s performance
Underlying profit attributable to the Group (EUR mn)
2
Consolidated results of the Group
Ordinary RoTE
(EUR mn)
3
Employees' average remuneration
(EUR)
8,654
14,547
12.73%
55,673
5,081
(2,076)
7.44%
47,130
(38)%
—%
(37)%
(12)%
8,252
12,543
11.79%
53,832
2%
(12)%
(2)%
2%
8,064
14,201
12.08%
52,941
7%
17%
2%
(5)%
7,516
12,091
11.82%
55,484
1.Non-executive directors' remuneration fluctuations are caused by joining or leaving the Board of Directors and the difference in the amount of meetings they assist during the
year. Hence there is no correlation between their remuneration and the company performance.
2.Group operating profit/(loss) before tax.
3.Employee average remuneration includes all concepts, including other remuneration. Full-time equivalent data. The percentage of variable remuneration over fixed
remuneration in an average employee is lower than that of the executive directors. Variable remuneration data accrued in the current year. Evolutive data impacted by
exchange rate performance in the group's geographies.
(Notes not included in the electronic submission to the CNMV)
This annual report on remuneration has been approved by the board of directors of the company, at its meeting on 24 February 2022.
State if any directors have voted against or abstained from approving this report.
Yes o No þ
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1. Economic, regulatory and competitive context
2. Group selected data
3. Group financial performance
3.1 Situation of Santander
3.2 Results
3.3 Balance sheet
3.4 Liquidity and funding management
3.5 Capital management and adequacy. Solvency ratios
3.6 Special Situations and Resolution
4. Financial information by segments
4.1 Description of segments
4.2 Summary of the Group's main business areas' income statements
4.3 Primary segments
4.4 Corporate Centre
4.5 Secondary segments
4.6 Appendix
5. Research, development and innovation (R&D&I)
6. Significant events since year end
7. Trend information 2022
8. Alternative performance measures (APM)
322
325
327
327
329
342
346
353
365
368
368
370
372
390
392
401
410
412
413
421
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1. Economic, regulatory and
competitive context
In 2021, Santander operated in an environment marked by (i) fiscal
and monetary policies implemented to counter the adverse effects of
the covid-19 pandemic; (ii) the ongoing recovery from the pandemic,
which has been inconsistent across countries and sectors; (iii) new
covid-19 variants and significant outbreaks; and (iv) an upturn in
inflation in the second half of the year, which reached a three-decade
high in mature markets.
Inflationary pressures have intensified as a result of a number of
factors, including the renewed demand for consumer goods; labour
shortages; tensions in the supply chains of microchips and other key
items; transportation issues; and increases in energy, certain raw
materials and food prices.
Under these circumstances, withdrawal of the expansionary fiscal
and monetary policies implemented in response to the covid-19
pandemic began, especially in the last quarter of 2021, particularly in
countries that experienced the heaviest pressure on prices.
• Poland (GDP: 5.7% in 2021). The economy was remarkably
buoyant despite a relatively moderate decline in 2020. Inflation
ended the year at 8.6%, leading the central bank to raise the
official interest rate to 2.25%.
• United States (GDP: 5.7% in 2021). Fiscal impulses and the
reopening of the economy favoured a vigorous economic recovery
which was somewhat dampened by supply-side problems from
summer onwards. Supply chain and labour constraints pushed
inflation to 7.0%. Unemployment falling to 3.9% in November
drove the Federal Reserve (Fed) to start withdrawing monetary
stimulus.
• Mexico (GDP: 4.8% preliminary in 2021). Strong GDP growth,
partially reversing the decline in 2020. Inflation picked up
considerably (7.4%). Banco de México raised its official benchmark
from a low of 4.0% in the first half of 2021 to 5.5% at the end of
the year.
Economic performance by geography was as follows:
• Brazil (GDP: 4.6% estimated in 2021). Outstanding economic
recovery, especially since the drop in 2020 was lower than in the
region as a whole. However, growth stalled as the year progressed
due to the withdrawal of the 2020 fiscal stimulus and, in
particular, to the inflation upturn (10.1% in December) and the
consequent official interest rate hike, from 2% to 9.25% by the end
of 2021, and an additional hike in January 2022 to 10.75%.
• Chile (GDP: 12.0% estimated in 2021). Sharp GDP growth
stemmed from exceptional fiscal and monetary measures.
Inflation rebounded to 7.2%. Banco Central de Chile raised the
official interest rate from 0.5% to 4% by the end of 2021, with a
further increase to 5.5% in January 2022.
• Argentina (GDP: 10.0% estimated in 2021). Strong recovery after
recording one of the region's largest declines in 2020, driven by
the reopening of service sector activities and fiscal stimulus.
Inflation remained high at monthly rates of around 3%.
• Eurozone (GDP: 5.2% estimated in 2021). GDP growth was driven
by the lifting of lockdown measures and expansionary monetary
and fiscal policies. The ECB kept interest rates stable despite the
5.1% rise in inflation in January 2022. However, at the monetary
policy meeting held in February, the ECB showed more concern
and was less positive regarding the outlook for inflation. In
December 2021, the ECB had announced a reduction in its asset
purchases starting in spring 2022.
• Spain (GDP: 5.0% in 2021). Economic recovery continued in 2021,
a trend which is expected to return GCP to pre-pandemic levels in
2022. The labour market improved at a faster rate, with
employment exceeding pre-pandemic levels. Inflation reached
6.7% in December, largely due to energy prices.
• United Kingdom (GDP: 7.5% in 2021). Strong economic growth
offset the severe decline in 2020. Tensions in the labour market,
particularly in some sectors, posed a greater risk for higher
inflation (which exceeded 5% and is one of the main reasons
behind the Bank of England's interest rate hike from 0.1% to
0.25% at the end of the year) to take hold.
• Portugal (GDP: 4.9% in 2021). Economic recovery continued. The
labour market recovered quickly (unemployment at 6.5%) and
inflation jumped to 2.7% in December. The socialist party won the
country's parliamentary elections held in January 2022 with an
absolute majority, providing stability for the next 4 years.
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The exchange rates of our main currencies against the euro in 2021
and 2020 were:
Exchange rates: 1 euro/currency parity
US dollar
Pound sterling
Brazilian real
Mexican peso
Chilean peso
Argentine peso
Polish zloty
Average
2021
1.182
0.859
6.372
2020
1.140
0.889
5.814
Period-end
2021
2020
1.133
0.840
6.319
1.227
0.898
6.373
23.980
24.364
23.152
24.438
897.123
902.072
964.502
871.819
112.383
79.555
116.302
103.159
4.564
4.441
4.597
4.559
In mature markets, vaccination campaigns' favourable impact on the
recovery of international travel acted as a support lever for equities,
(especially in the US, where there was a strong fiscal impulse in
addition to monetary stimulus). Spain, however, lagged behind other
European countries and its stock market has not yet recovered pre-
covid levels.
Inflationary pressures built up by rising commodity prices and by
global supply chain bottlenecks due to a post-covid demand spike
(especially for goods) pushed up bond yields in early 2021. Inflation
is proving a more persistent problem than initially expected and
central banks have started to withdraw monetary stimulus. Long-
term debt yields remained subdued, as the withdrawal of stimulus is
perceived as a risk to medium-term growth and there is still some
uncertainty about the pandemic caused by new variants. German
bund yields remained negative. The US dollar appreciated against the
euro, boosted by the growth differential benefitting the US and
expectations that the Fed will be ahead of the ECB in normalizing
monetary policy.
Latin American countries' assets struggled amid heightened
uncertainty stemming from rising inflation and tightening financial
conditions, stimulus withdrawal in the US, the economic risk of new
covid-19 variants, and some political tensions. Uncertainty was
reflected in the fact that central bank interest rate hikes did not lead
to currency appreciation in the countries.
The international banking environment is entering a phase of
normalization and banks are gradually returning to their traditional
business. In general, as support measures helped cushion the blow
of the pandemic in the private sector, loan portfolios deteriorated
less initially forecasted. This, together with economic recovery, is
enabling banks to lower provisions, which improved profitability
relative to 2020.
We estimate that this, together with stronger solvency in 2021, will
leave the banking industry in a strong position to face a potential
economic slowdown, based on the stress tests carried out by the
main central banks.
Even so, global inflationary pressures and the consequent tightening
of monetary policy in most economies pose management challenges
for banks in the short term, particularly in developing markets with
high indebtedness.
The challenges faced by the banking industry (considered more
medium-term) have gained momentum in recent years and require
institutions to act swiftly. The digital transformation accelerated
during the pandemic, pushing entities to offer the best digital
customer experience in the wake of a surge in new competitors.
The climate transition also requires a significant effort as institutions
must develop new portfolio classification models to understand each
entity's exposure to the transitional and physical risks that companies
and households will face due to climate change in the coming years.
This will be reflected in the first climate change stress exercises that
the main central banks will conduct in 2022.
Regulatory environment
As in 2020, sustainability and digitalization took centre stage in a
regulatory landscape once again influenced by the covid-19
pandemic, with debates on key prudential topics, in view of the need
to ensure banks' ability to help keep the economy afloat during times
of crisis.
Prominent actions came in three areas:
• Prudential: the European Commission published its proposal to
implement the Basel III reform, which aims to reduce excessive
variability of risk-weighted assets and favour comparability among
banks.
• Sustainability: Europe continued to lead the way in talks on
sustainability. Of note was the adoption of the Taxonomy
Regulation that sets the criteria for classifying economic activities
as environmentally sustainable. It also dictates the information
that financial and non-financial companies will have to disclose
about the environmental impact of their activities. Furthermore,
the green asset ratio (GAR) is of utmost importance to the banking
industry as it will show the percentage of exposures aligned with
the EU Taxonomy.
• Digitalization: because covid-19 has sped up digitalization, the
authorities are keen to regulate platforms and risks associated
with new, private currencies that could enter into wide circulation
(e.g. stablecoins). Central banks continue to explore the possibility
of issuing digital currencies. A significant marker in the age of the
digital economy is the deal struck by the OECD to ensure that all
multinational enterprises pay tax wherever they earn profits,
regardless of physical presence.
For more details, see note 1.e to the consolidated financial
statements.
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Summary of Santander and public policy
Santander has always been highly supportive of robust, high-quality regulation that supports bank strength and solvency, underpins
robust consumer protection and market stability standards, and creates transparency on risk and resilience for investors and supervisors.
We are committed to engaging constructively and transparently with public policy makers and regulators on the aims, design and
implementation of banking rules and policy frameworks that impact our banks' or our customers' interests. All our public policy
engagements are oriented to providing decision-makers, mainly through official consultations, with valuable insights and data of the
banking industry with transparency and integrity.
Capital and bank resilience
We believe that the reforms of the last decade have made financial institutions more robust in terms of capital.
However, the covid-19 crisis which began in 2019 has raised some issues regarding the functioning of the regulatory
framework that need to be carefully assessed. Additionally, the EU still has work to do to build the foundations of a true
banking union. We continue to advocate for:
1
• An approach to continue working on the implementation of Basel III standards that does not materially increase
new post-crisis capital requirements and takes into account the demands of digitalization, the green
transformation and the post-covid recovery.
• Careful reflection on how aspects of the framework established after the 2009 crisis worked in the covid-19
context, for example, the capital buffers, as well as supervisory decisions taken during the crisis such as restrictions
on dividend payouts.
• Banking regulation needs to recognize some of the realities of banks with a global footprint, such as the
recognition of the Multiple Point of Entry resolution framework.
• A common deposit insurance scheme for EU banks that breaks the bank/sovereign loop.
Sustainability and sustainable finance
2
We believe that decarbonization is a first order social and environmental challenge in which banks have an important
role to play and are fully committed to the objectives. We continue to advocate for:
• A fair transition; in which the costs and impacts of change are anticipated and addressed proactively.
• International coordination on key policy frameworks to the greatest extent possible, especially on green
taxonomies, climate disclosures and climate-risk stress testing.
• Robust, credible and comparable ESG data availability as a key enabler to make informed decisions and particularly
to direct financial flows towards net zero emissions economies.
• A supervisory approach to climate-related risks in banking that avoids front-loading requirements faster than wider
regulatory reforms are consolidated.
The digital landscape
We believe digital transformation is a force for innovation and customer choice in banking. Banks have to be able to
compete under fair terms with any player providing financial services. We continue to advocate for:
• Ex ante competition rules that address the way in which gatekeepers could engage with business users and
consumers. For example, in order to ensure fair access to data and critical infrastructure.
3
• A level playing field based on the principle of "same rules, same risks, same regulation and same supervision" to
ensure that, when technology firms take on banking or payments activities and risks, they are regulated the same
as banks or incumbent payments providers.
• An open finance regime in the EU and elsewhere in which consumers and users are given true power over all their
relevant data, not just that held by banks, whose data is already open.
• A technology-neutral approach to regulation which allows banks to use technology (e.g. cloud, artificial
intelligence) under the same conditions as technology companies and other competitors.
• The direct supervision of technology providers such as cloud computing services that provide critical infrastructure
to the financial services sector.
• Discussions on Central Bank Digital Currencies should take into consideration the role the financial system plays in
financing the economy.
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2. Group selected data
BALANCE SHEET (EUR million)
Total assets
Loans and advances to customers
Customer deposits
Total funds A
Total equity
INCOME STATEMENT (EUR million)
Net interest income
Total income
Net operating income
Profit before tax
Profit attributable to the parent
EPS, PROFITABILITY AND EFFICIENCY (%)
C
EPS (euro)
RoE
RoTE
RoA
RoRWA
Efficiency ratio
D
D
(EUR million)
UNDERLYING INCOME STATEMENT
Net interest income
Total income
Net operating income
Profit before tax
Profit attributable to the parent
UNDERLYING EPS AND PROFITABILITY D
(%)
Underlying EPS (euro)
C
Underlying RoE
Underlying RoTE
Underlying RoA
Underlying RoRWA
2021
2020 % 2021 vs 2020
2019
1,595,835
1,508,250
972,682
918,344
916,199
849,310
1,153,656
1,056,127
97,053
91,322
5.8
6.2
8.1
9.2
6.3
1,522,695
942,218
824,365
1,050,765
110,659
2021
33,370
46,404
24,989
14,547
8,124
2021
0.438
9.66
11.96
0.62
1.69
46.2
2021
33,370
46,404
24,989
15,260
8,654
2021
0.468
10.29
12.73
0.65
1.78
2020 % 2021 vs 2020
B
31,994
44,279
23,149
(2,076)
(8,771)
4.3
4.8
7.9
—
—
2020 % 2021 vs 2020
—
(0.538)
(9.80)
1.95
(0.50)
(1.33)
47.0
E
2020 % 2021 vs 2020
31,994
44,600
23,633
9,674
5,081
4.3
4.0
5.7
57.7
70.3
2020 % 2021 vs 2020
79.1
0.262
5.68
7.44
0.40
1.06
2019
35,283
49,229
25,949
12,543
6,515
2019
0.347
6.62
11.44
0.54
1.33
47.0
2019
35,283
49,494
26,214
14,929
8,252
2019
0.449
8.38
11.79
0.65
1.61
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SOLVENCY (%)
Fully-loaded CET1 ratio
Fully-loaded total capital ratio
CREDIT QUALITY (%)
Cost of credit
NPL ratio
Coverage ratio
THE SHARE, MARKET CAPITALIZATION AND DIVIDEND
Number of shareholders
Shares (millions)
C
Share price (euro)
Market capitalization (EUR million)
Tangible book value per share (euro)
Price / Tangible book value per share (X)
C
CUSTOMERS (thousands)
Total customers
Loyal customers F
Loyal retail customers
Loyal SME & corporate customers
Digital customers G
Digital sales / Total sales (%)
2021
12.12
16.41
2021
0.77
3.16
71
2020
11.89
15.73
2020
1.28
3.21
76
2019
11.41
14.78
2019
1.00
3.32
68
2021
2020
% 2021 vs 2020
2019
3,936,922
4,018,817
(2.0)
3,986,093
17,341
2.941
50,990
4.12
0.71
17,341
2.538
44,011
3.79
0.67
0.0
15.9
15.9
2021
2020
% 2021 vs 2020
152,862
148,256
25,448
23,311
2,137
47,443
54
22,838
20,901
1,938
42,362
44
3.1
11.4
11.5
10.3
12.0
16,618
3.575
61,986
4.18
0.86
2019
144,795
21,556
19,762
1,794
36,817
36
OPERATING DATA
Number of employees
Number of branches
2021
197,070
9,879
2020 % 2021 vs 2020
191,189
11,236
3.1
(12.1)
2019
196,419
11,952
A. Includes customer deposits, mutual funds, pension funds and managed portfolios.
B. In constant euros: Net interest income: +7.1%; Total income: +7.7%; Net operating income: +12.0%; Profit before tax: -/+; Attributable profit: -/+
C. 2019 data adjusted for the capital increase in December 2020.
D. In addition to IFRS measures, we present non-IFRS measures including those which we refer to as underlying measures. These underlying measures allow in our view
a better year-on-year comparability as they exclude items outside the ordinary course of business which are grouped in the ‘net capital gains and provisions’ line and
are further detailed at the end of section 3.2 'Results' and in section 8 'Alternative Performance Measures' – of this chapter.
E. In constant euros: Net interest income: +7.1%; Total income: +6.9%; Net operating income: +9.4%; Profit before tax: +64.5%; Attributable profit: +77.8%.
F. Active customers who receive most of their financial services from the Group according to the commercial segment to which they belong. Various engaged customer
levels have been defined taking profitability into account.
G. Every physical or legal person, that, being part of a commercial bank, has logged into its personal area of internet banking or mobile phone or both in the last 30 days.
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3. Group financial performance
Santander follows IFRS to report its results (see note 1.b to the
consolidated financial statements). While the results generally guide
the overview of our financial situation in this consolidated directors’
report, we also use non-IFRS measures and Alternative Performance
Measures (APMs) to assess our performance (see section 8
'Alternative Performance Measures' of this chapter). Thus, the main
adjustments to our IFRS results consist of:
• Underlying results measures: we present what we call underlying
results measures which, in our view, provide a better year-on-year
comparison because they exclude items outside the ordinary
course of business that are grouped in the net capital gains and
provisions line, and are further detailed at the end of section 3.2
'Results' of this chapter.
We also present underlying results by business area in section 4
'Financial information by segment' in accordance with IFRS 8 and
reconcile them in aggregate terms to our IFRS consolidated results
in note 51.c to the consolidated financial statements.
• Local currency measures: we use certain non-IFRS financial
indicators in local currency to assess the ongoing operating
performance of our business. They include the results from our
subsidiary banks outside the eurozone (excluding the exchange
rate impact). Because changes in exchange rates have a non-
operating impact on results, we believe evaluating performance in
local currency provides management and investors an additional
and meaningful assessment of performance. Section 8 'Alternative
Performance Measures' of this chapter explains how we exclude
the exchange rate impact from financial measures in local
currency.
We have rounded certain figures in this consolidated directors’ report
to present them more clearly. Accordingly, in certain instances, the
amounts given in the totals columns and rows of tables may not
match the total figure given for that column or row.
3.1 Situation of Santander
Santander is one of the largest banks in the eurozone. At the end of
2021, we had EUR 1,595,835 million in assets, EUR 1,153,656
million in total funds and a market capitalization of EUR 50,990
million.
Our purpose is to help people and businesses prosper in a way that is
Simple, Personal and Fair. We do not merely meet our legal and
regulatory obligations, but also aspire to exceed expectations. We
focus on areas where our activity can have the greatest impact,
supporting economic growth in an inclusive and sustainable way.
We engage in all types of typical banking activities, operations and
services. Our track record, business model and strategic execution
drive our aim to be the best open digital financial services platform,
by acting responsibly and earning the lasting loyalty of our
stakeholders (customers, shareholders, people and communities).
In 2021, with the global economy and society still feeling the effects
of the covid-19 pandemic, we continued to play an active role in
economic recovery and continued to support our 153 million
customers and society.
Our priority for our 197,070 employees is to keep them safe and
healthy in line with local government recommendations and based
on three pillars: (i) development and implementation of health and
safety protocols; (ii) remote working where necessary; and (iii) track
and tracing (diagnostic tests, health apps and even vaccination
centres in our corporate buildings for employees and the general
public).
We are living in an increasingly digital world, and the covid-19
pandemic has spurred this transformation. As such, more than ever,
our aim is to continue to offer our customers digital products and
services that will meet their needs and support them in their digital
learning. However, Santander continues to invest in ensuring access
to financial services for our customers who are not digitally savvy, so
that no one is left behind.
We interact with our customers through several channels. We have
9,879 branches and in recent years, have worked and invested to
ensure our branches satisfy our customers' needs.
We have universal branches and specialist centres for certain
customer segments, such as businesses and universities. We are also
promoting new collaborative spaces with excellent digital
capabilities (e.g. Work Café, SmartBank and Ágil branches).
Additionally, our contact centres, which provide best-in-class service
quality, continue to serve our customers.
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In addition, and in order to achieve greater penetration, we have also
signed agreements with other companies and organizations, such as
Correos and MAPFRE in Spain, which allowed us to increase our
physical points of service by more than 7,000.
Through this process, while we enhance our branches, we are
continuously investing in our digital capabilities and technological
infrastructure to optimize our product and service proposition,
reducing our cost to serve while remaining among the top banks in
customer satisfaction in almost all our core markets.
As a result, the number of digital and loyal customers as well as
digital activity continued to increase. We have more than 25 million
loyal customers (+11% year-on-year), and have grown in both
individuals and companies. Digital customers rose 12% in the year,
exceeding 47 million. Similarly, digital sales accounted for 54% of
total sales (44% in 2020 and 36% in 2019).
The world is also increasingly aware of the different environmental,
social and corporate governance factors (most commonly known as
ESG). We focus on delivering profitable growth responsibly and
creating value for our 3.9 million shareholders. For more details, see
the 'Responsible banking' chapter.
Our strategic priorities are essential to increasing our core
businesses' profitability by offering simple, fair and innovative
products.
Our strategy is based on three strategic initiatives: One Santander,
Digital Consumer Bank and PagoNxt:
• One Santander: a global project encompassing the three regions
where we operate, that aims to sustainably create a bank that is
better for our customers and more profitable and efficient for our
shareholders. It consists of enhanced customer service, an omni-
channel strategy and a common operating model in each region,
enabling us to market simpler products.
• Digital Consumer Bank is the leading European bank in consumer
finance, created on the back of Santander Consumer Finance's
(SCF) scale and leadership position in the consumer business in
Europe and the business and technology of Openbank's digital
platform.
Its objectives include simplifying the legal and operating structure,
redefining the business platform (auto, consumer and retail) to
strengthen our leadership positions or grow faster with a fully-
digital approach and maintaining high profitability and efficiency.
• PagoNxt is our legally and operationally independent global
payments platform. It aims to bring together all of Santander's
most innovative payments assets under one roof.
Its strategy is to continue to expand our global platforms;
consolidate our retail leadership positions with Getnet; deploy One
Trade's international payments services; implementing the instant
functionality of Payments Hub in various markets; and continue to
gradually migrate our global payments services and financial
inclusion platform (Superdigital) in Latin America.
Santander also has two transversal global businesses: Santander
Corporate and Investment Banking (SCIB) and Wealth Management
and Insurance (WM&I), that add value to our local businesses.
SCIB integrates global corporate banking businesses for large
companies and financial institutions that require tailor-made services
and value-added wholesale products adapted to their complexity and
sophistication. It is a highly profitable business that has delivered
sustainable returns throughout the cycle. Its long-term strategy is to
become our clients' strategic advisor of choice. Its priorities are
expanding the content and products it offers to further transform us
into our clients' strategic advisors to make strategic decisions and
transform their businesses according to today’s demands for
sustainability and digitalization. In addition, we aim to improve our
position in the markets where we operate.
WM&I comprises our asset management, private banking and
insurance businesses. It is very capital efficient, with significant
growth potential and high returns. Our aim remains to become the
best responsible wealth and protection manager in Europe and Latin
America. That's why we continue to innovate and enhance our
product proposition (especially in terms of ESG products). We are
also increasing our sales through digital channels.
These strategic priorities, coupled with the pillars of our business
model (scale, geographical presence and business diversification)
will provide numerous opportunities for growth and greater
profitability, while we continue to act responsibly and earn the trust
of our stakeholders while generating more value for our
shareholders.
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3.2 Results
Executive summary
Profit (2021 vs 2020)
Strong profit growth across regions and businesses
Performance (2021 vs 2020). In constant euros
Strong underlying profit performance backed by total income,
cost control and lower provisions
Attributable profit
EUR 8,124 mn
-EUR 8,771 mn in 2020
Underlying attrib. profit
EUR 8,654 mn
EUR 5,081 mn in 2020
Total income
Costs
Provisions
+6.9%
+4.1%
-37.1%
Efficiency
The Group's efficiency ratio strengthened, mainly driven
by Europe
Group
46.2%
-0.8 pp vs 2020
Europe
51.0%
-5.4 pp vs 2020
Profitability
Higher profitability compared to 2020
RoTE
12.0%
+10.0 pp
Changes vs 2020
Underlying
RoTE
12.7%
+5.3 pp
RoRWA
1.69%
+3.0 pp
Underlying
RoRWA
1.78%
+0.7 pp
Condensed income statement
EUR million
Net interest income
Net fee income (commission income minus commission expense)
Gains or losses on financial assets and liabilities and exchange differences (net)
Dividend income
Income from companies accounted for using the equity method
Other operating income / expenses
Total income
Operating expenses
Administrative expenses
Staff costs
Other general administrative expenses
Depreciation and amortization
Provisions or reversal of provisions
Impairment or reversal of impairment of financial assets not measured at fair
value through profit or loss (net)
Impairment of other assets (net)
Gain or losses on non-financial assets and investments (net)
Negative goodwill recognized in results
Gains or losses on non-current assets held for sale not classified as discontinued
operations
Profit or loss before tax from continuing operations
Tax expense or income from continuing operations
Profit from the period from continuing operations
Profit or loss after tax from discontinued operations
Profit for the period
Profit attributable to non-controlling interests
Profit attributable to the parent
2021
2020 Absolute
% % excl. FX
2019
Change
33,370
31,994
1,376
10,502
10,015
1,563
2,187
513
432
24
391
(96)
(212)
487
(624)
122
528
236
46,404
44,279
2,125
(21,415)
(21,130)
(18,659)
(18,320)
(11,216)
(10,783)
(7,443)
(7,537)
(2,756)
(2,810)
(285)
(339)
(433)
94
54
(2,814)
(2,378)
(436)
(7,407)
(12,382)
4,975
(231)
(10,416)
10,185
53
—
114
8
(61)
4.3
4.9
7.1
8.1
35,283
11,779
(28.5)
(26.5)
1,531
31.2
31.5
533
324
(221)
49,229
(23,280)
(20,279)
(12,141)
(8,138)
—
—
7.7
3.1
3.6
5.8
0.5
(0.3)
(3,001)
22.9
(3,490)
(38.4)
(9,352)
(97.8)
(1,623)
(53.0)
1,291
—
—
4.8
1.3
1.9
4.0
(1.2)
(1.9)
18.3
(40.2)
(97.8)
(53.5)
(8)
(100.0)
(100.0)
—
(43)
(171)
128
(74.9)
(75.2)
(232)
14,547
(2,076)
16,623
—
—
12,543
(4,894)
(5,632)
738
(13.1)
(10.8)
(4,427)
9,653
(7,708)
17,361
—
—
—
9,653
(7,708)
17,361
(1,529)
(1,063)
(466)
8,124
(8,771)
16,895
—
—
—
43.8
—
—
—
—
8,116
—
8,116
47.7
(1,601)
—
6,515
Annual report 2021 329
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Risk management
and compliance
Main income statement items
Total income
Total income amounted to EUR 46,404 million in 2021, up 5% year-
on-year. If the exchange rate impact is excluded, total income
increased 8%, with growth in all regions and main country units,
except Mexico, highlighting our geographical and business
diversification. Net interest income and net fee income accounted for
95% of total income. By line:
Net interest income
Net interest income amounted to EUR 33,370 million, 4% higher than
in 2020.
The tables below show the average balances for each year,
calculated as the monthly average over the period (which we believe
should not differ materially from using daily balances), and
generated interest.
They also include the average balances and average interest rates in
2021 and 2020, based on the domicile of the entities at which the
relevant assets or liabilities are accounted for. Domestic balances
relate to our entities domiciled in Spain, reflecting our domestic
activity. International balances relate to those entities domiciled
outside of Spain (reflecting our foreign activity), and are divided into
mature markets (Europe, except Spain and Poland, and the US) and
developing markets (South America, Mexico and Poland).
Average balance sheet - assets and interest income
EUR million
Assets
Cash and deposits on demand and loans and advances to central
banks and credit institutions
Domestic
International - Mature markets
International - Developing markets
of which
Reverse repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Loans and advances to customers
Domestic
International - Mature markets
International - Developing markets
of which
Reverse repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Debt securities
Domestic
International - Mature markets
International - Developing markets
Hedging income
Domestic
International - Mature markets
International - Developing markets
Other interest
Domestic
International - Mature markets
International - Developing markets
Total interest-earning assets
Domestic
International - Mature markets
International - Developing markets
Other assets
Assets from discontinued operations
Average total assets
2021
2020
Average
balance
Interest
Average
rate
Average
balance
Interest
Average
rate
0.98 %
0.71 %
0.49 %
2.80 %
1.85 %
0.12 %
0.29 %
6.80 %
4.10 %
1.89 %
3.13 %
10.15 %
0.16 %
0.07 %
0.07 %
2.31 %
3.39 %
0.73 %
1.10 %
5.81 %
223,096
97,511
79,703
45,882
44,989
31,050
4,791
9,148
930,563
251,536
509,016
170,011
46,207
10,691
34,295
1,221
172,940
46,390
49,667
76,883
272,567
113,703
111,358
47,506
38,236
23,390
5,101
9,745
943,071
254,232
513,910
174,929
36,660
9,521
25,622
1,517
168,834
42,740
40,579
85,515
2,682
809
542
1,331
707
29
15
663
38,649
4,799
16,090
17,760
60
7
18
35
5,724
313
446
4,965
(723)
20
(91)
(652)
131
(29)
13
147
1.00 %
0.67 %
0.64 %
2.33 %
1.07 %
0.15 %
1.02 %
4.23 %
4.17 %
1.95 %
3.37 %
9.85 %
0.23 %
0.05 %
0.19 %
2.87 %
2.90 %
0.74 %
1.25 %
5.28 %
2,232
650
512
1,070
483
47
49
387
38,788
4,913
17,136
16,739
105
5
65
35
5,022
341
619
4,062
(343)
21
(116)
(248)
42
10
21
11
1,384,472
410,675
665,847
307,950
179,427
—
1,563,899
46,463
5,912
17,000
23,551
46,463
3.36 % 1,326,599
1.44 %
395,437
2.55 %
638,386
7.65 %
292,776
45,741
5,935
18,172
21,634
3.45 %
1.50 %
2.85 %
7.39 %
210,953
—
1,537,552
45,741
Annual report 2021 330
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and compliance
The average balance of interest-earning assets in 2021 was 4%
higher than in 2020. Domestic and mature markets grew 4% (mainly
in cash and demand deposits and in loans and advances to central
banks and credit institutions) and developing markets increased 5%
owing to volume growth in local currency in all country units.
The average return on interest-earning assets decreased from
3.45% in 2020 to 3.36% in 2021, with decreases in domestic (-6 bps)
and mature international markets (-30 bps) while developing
international markets increased 26 bps. By balance sheet item, cash,
demand deposits and loans and advances to central banks and credit
institutions fell 2 bps; and loans and advances to customers -7 bps,
primarily driven by interest rates even lower than 2020. Debt
securities rose 49 bps supported by developing markets.
The average balance of interest-bearing liabilities in 2021 was 4%
higher year-on-year, also spurred by overall growth in the three
markets (domestic: +6%; mature international: +2%; and developing
international: +4%), boosted by customer deposits and deposits from
central banks and credit institutions.
The average cost of interest-bearing liabilities fell 9 bps to 0.98%
owing to the domestic (-8 bps) and mature international (-33 bps)
markets while developing international markets were up 44 bps. By
balance sheet item, there were reductions in central banks and credit
institutions deposits (-27 bps); customer deposits (-6 bps); and
marketable debt securities (-1 bp).
The change in interest income/(expense) shown in the table below
was calculated as follows:
• To obtain the change in volumes we apply the interest rate of the
previous period to the difference between the average balances
from the current and previous periods.
• To obtain the change in interest rate we apply the difference
between the rates from the current and previous periods to the
average balance from the previous year.
Interest income grew in the year driven by higher volumes, as
interest rates had a negative impact. Interest expense dropped due to
lower interest rates.
As a result, net interest income increased 4% favoured by both
volumes and the interest rate effect, as shown in the table below
summarizing the performance of net interest income by market.
Excluding the exchange rate impact, growth was 7%.
This 7% increase in constant euros was due to higher credit and
deposit volumes and the lower cost of deposits, partially offset by
lower revenue due to even lower average interest rates in most of
our markets.
By country, and at constant exchange rates, net interest income in
the UK increased 22% due to the liability cost management and
greater volumes (mainly in mortgages), +13% in Brazil due to higher
volumes, +10% in Chile on the back of its margin and inflation
management, +4% in Poland due to the pick up in interest rates in
recent months, while in Spain there was a slight increase (+1%),
because of its spread management.
In the US, net interest income decreased slightly, affected by
disposals (Puerto Rico and the Bluestem portfolio). Excluding the
impact of these disposals, net interest income would have increased
5%. In Mexico, we saw a 2% decrease due to lower average interest
rates and ALCO portfolio sales in 2020 and there were also declines
in Portugal, driven by lower interest rates in 2021.
Annual report 2021 331
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2021
Interest
Average
rate
Average balance sheet - liabilities and interest expense
EUR million
Liabilities and stockholders’ equity
Deposits from central banks and credit institutions A
Domestic
International - Mature markets
International - Developing markets
of which
Repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Customer deposits
Domestic
International - Mature markets
International - Developing markets
of which
Repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Marketable debt securities B
Domestic
International - Mature markets
International - Developing markets
of which
Commercial paper
Domestic
International - Mature markets
International - Developing markets
Other interest-bearing liabilities
Domestic
International - Mature markets
International - Developing markets
Hedging expenses
Domestic
International - Mature markets
International - Developing markets
Other interest
Domestic
International - Mature markets
International - Developing markets
Total interest-bearing liabilities
Domestic
International - Mature markets
International - Developing markets
Other liabilities
Non-controlling interests
Shareholders' equity
Liabilities from discontinued operations
Average total liabilities and equity
Average
balance
197,997
97,257
61,999
38,741
28,763
12,316
1,252
15,195
889,041
287,525
410,695
190,821
41,475
7,918
19,311
14,246
234,887
104,602
102,330
27,955
17,794
12,247
4,582
965
7,944
4,146
1,948
1,850
1,329,869
493,530
576,972
259,367
139,757
10,140
84,133
—
1,563,899
1,750
376
227
1,147
703
18
8
677
5,452
282
706
4,464
520
—
6
514
4,838
1,538
1,670
1,630
135
22
59
54
216
70
30
116
(368)
(153)
(147)
(68)
1,205
306
109
790
13,093
2,419
2,595
8,079
13,093
0.88 %
0.39 %
0.37 %
2.96 %
2.44 %
0.15 %
0.64 %
4.46 %
0.61 %
0.10 %
0.17 %
2.34 %
1.25 %
0.00 %
0.03 %
3.61 %
2.06 %
1.47 %
1.63 %
5.83 %
0.76 %
0.18 %
1.29 %
5.60 %
2.72 %
1.69 %
1.54 %
6.27 %
Average
balance
187,128
90,747
61,877
34,504
34,160
13,765
6,377
14,018
837,397
269,979
385,956
181,462
38,641
4,116
18,063
16,462
247,284
99,466
116,411
31,407
19,825
13,813
4,729
1,283
10,650
6,331
2,245
2,074
2020
Interest
Average
rate
1.15 %
0.43 %
0.72 %
3.79 %
2.22 %
0.22 %
0.45 %
4.99 %
0.67 %
0.12 %
0.43 %
1.99 %
1.12 %
0.02 %
0.24 %
2.35 %
2.07 %
1.55 %
2.06 %
3.77 %
1.39 %
0.63 %
2.83 %
4.29 %
2.64 %
1.85 %
1.25 %
6.56 %
2,147
394
445
1,308
759
30
29
700
5,599
332
1,662
3,605
432
1
44
387
5,119
1,539
2,395
1,185
276
87
134
55
281
117
28
136
(294)
(37)
(205)
(52)
895
313
95
487
0.98 % 1,282,459
0.49 %
466,523
0.45 %
566,489
3.11 %
249,447
13,747
2,658
4,420
6,669
1.07 %
0.57 %
0.78 %
2.67 %
155,714
9,920
89,459
—
1,537,552
13,747
A. Interest includes expenses from assets reported in "Cash and deposits on demand and loans and advances to central banks and credit institutions" related to liquidity placed
at the European Central Bank.
B. Does not include contingently convertible preference shares and perpetual subordinated notes because they do not accrue interest. We include them under 'Other
liabilities'.
Annual report 2021 332
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Volume and profitability analysis
EUR million
Interest income
Cash and deposits on demand and loans and advances to central banks and credit
institutions
Domestic
International - Mature markets
International - Developing markets
of which
Reverse repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Loans and advances to customers
Domestic
International - Mature markets
International - Developing markets
of which
Reverse repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Debt securities
Domestic
International - Mature markets
International - Developing markets
Hedging income
Domestic
International - Mature markets
International - Developing markets
Other interest
Domestic
International - Mature markets
International - Developing markets
Total interest-earning assets
Domestic
International - Mature markets
International - Developing markets
2021 vs. 2020
Increase (decrease) due to changes in
Volume
Rate
Net change
325
113
173
39
20
(10)
3
27
706
52
163
491
(6)
(1)
(13)
8
348
(27)
(105)
480
(380)
(1)
25
(404)
89
(39)
(8)
136
125
46
(143)
222
204
(8)
(37)
249
(845)
(166)
(1,209)
530
(39)
3
(34)
(8)
354
(1)
(68)
423
—
—
—
—
—
—
—
—
450
159
30
261
224
(18)
(34)
276
(139)
(114)
(1,046)
1,021
(45)
2
(47)
—
702
(28)
(173)
903
(380)
(1)
25
(404)
89
(39)
(8)
136
1,088
98
248
742
(366)
(121)
(1,420)
1,175
722
(23)
(1,172)
1,917
Annual report 2021 333
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Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Volume and cost analysis
EUR million
Interest expense
Deposits from central banks and credit institutions
Domestic
International - Mature markets
International - Developing markets
of which
Repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Customer deposits
Domestic
International - Mature markets
International - Developing markets
of which
Repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Marketable debt securities
Domestic
International - Mature markets
International - Developing markets
of which
Commercial paper
Domestic
International - Mature markets
International - Developing markets
Other interest-bearing liabilities
Domestic
International - Mature markets
International - Developing markets
Hedging expenses
Domestic
International - Mature markets
International - Developing markets
Other interest
Domestic
International - Mature markets
International - Developing markets
Total interest-bearing liabilities
Domestic
International - Mature markets
International - Developing markets
2021 vs. 2020
Increase (decrease) due to changes in
Volume
176
Rate
(573)
Net change
(397)
27
1
148
23
(3)
(30)
56
314
21
100
193
(55)
—
3
(58)
(333)
77
(268)
(142)
(28)
(9)
(4)
(15)
(56)
(38)
(4)
(14)
(74)
(116)
58
(16)
310
(7)
14
303
337
(36)
(99)
472
(45)
(219)
(309)
(79)
(9)
9
(79)
(461)
(71)
(1,056)
666
143
(1)
(41)
185
52
(78)
(457)
587
(113)
(56)
(71)
14
(9)
(9)
6
(6)
—
—
—
—
—
—
—
—
(18)
(218)
(161)
(56)
(12)
(21)
(23)
(147)
(50)
(956)
859
88
(1)
(38)
127
(281)
(1)
(725)
445
(141)
(65)
(75)
(1)
(65)
(47)
2
(20)
(74)
(116)
58
(16)
310
(7)
14
303
(991)
(203)
(1,726)
938
(654)
(239)
(1,825)
1,410
Annual report 2021 334
Contents
Responsible
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Corporate
governance
Economic and
financial review
Risk management
and compliance
Net interest income. Volume, profitability and cost analysis summary
EUR million
Interest income
Domestic
International - Mature markets
International - Developing markets
Interest expense
Domestic
International - Mature markets
International - Developing markets
Net interest income
Domestic
International - Mature markets
International - Developing markets
Net interest income
EUR million
Net fee income
EUR million
2021 vs. 2020
Increase (decrease) due to changes in
Volume
1,088
98
248
742
337
(36)
(99)
472
751
134
347
270
Rate
(366)
(121)
(1,420)
1,175
(991)
(203)
(1,726)
938
625
82
306
237
Net change
722
(23)
(1,172)
1,917
(654)
(239)
(1,825)
1,410
1,376
216
653
507
+4% A
2021 vs 2020
+5% A
2021 vs 2020
A. Excluding exchange rate impact: +7%.
A. Excluding exchange rate impact: +8%.
Net fee income
EUR million
Asset management business, funds and insurance
Credit and debit cards
Securities and custody services
Account management and availability fees
Cheques and payment orders
Foreign exchange
Charges for past-due/unpaid balances and guarantees
Bill discounting
Other
Net fee income
2020 Absolute
2021
3,649
1,782
1,035
1,850
642
522
266
199
557
3,416
1,737
951
1,649
594
500
295
253
620
10,502
10,015
232
45
84
201
48
22
(29)
(54)
(63)
487
Change
%
6.8
2.6
8.9
12.2
8.1
4.4
(9.9)
(21.3)
(10.1)
4.9
%
excl. FX
9.3
6.8
12.6
16.0
12.3
8.9
(6.8)
(14.5)
2019
3,815
2,242
931
1,675
633
612
522
316
(8.5)
1,033
8.1
11,779
Annual report 2021 335
35,28331,99433,37020192020202111,77910,01510,502201920202021
Contents
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Corporate
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Net fee income
Santander's net fee income increased 5% compared to 2020,
reaching EUR 10,502 million. Excluding the exchange rate impact, it
was 8% higher, showing recovery quarter after quarter from the
second quarter lows in 2020, driven by the rebound in activity.
Broad-based increases, notably fees relating to card turnover and
points of sale (+26% and +38%, respectively). Fees from our asset
management and insurance business as well as SCIB increased at
double digits, demonstrating the strength of fees from value-added
products and services.
Specifically, Santander Corporate & Investment Banking increased
16% on the back of the strong growth in markets and investment
banking results. Wealth Management & Insurance grew 12%
including fees ceded to the branch network. Together, both
businesses accounted for close to 50% of the Group’s total (SCIB:
17%; WM&I: 32%).
By region, fees in Europe were up 9%, supported by growth in all
countries except the UK (mainly due to regulatory changes in April
2020 that affect overdrafts). In North America, they decreased 1%,
impacted by the disposals in the US; without them, growth in the
region and the US would have been 6%, the same as in Mexico. Net
fee income in South America was up 13% driven by all countries.
Gains or losses on financial assets and liabilities and exchange
differences (net)
Gains or losses on financial assets and liabilities and exchange
differences (net) accounted for 3% of total income. They were 29%
lower than the previous year at EUR 1,563 million (-27% excluding
the exchange rate impact) mainly due to decreases in Spain (-29%),
Mexico (-47%), Brazil (-12%), Chile (-25%) and the Corporate Centre.
This was due to the positive impact from FX hedging, portfolio sales
and higher market volatility in 2020.
Gains and losses on financial assets and liabilities stem from valuing
trading portfolio and marked-to-market derivative instruments,
which include spot market foreign exchange transactions, sales of
investment securities and liquidation of our hedging and other
derivative positions.
For more details, see note 43 to the consolidated financial
statements.
Exchange rate differences primarily show gains and losses from
foreign exchange and the differences that arise from converting
monetary items in foreign currencies to the functional currency, and
from selling non-monetary assets denominated in foreign currency
at the time of their disposal. Because Santander manages currency
exposures with derivative instruments, the changes in this line item
should be analysed together with Gains/(losses) on financial assets
and liabilities.
For more details, see note 44 to the consolidated financial
statements.
Dividend income
Dividend income was EUR 513 million, 31% higher than in 2020
(+32% excluding the exchange rate effect), recovering some income
that was affected by the decrease, delay or cancellation of dividend
payments due to the pandemic (especially in Europe).
Income from companies accounted for by the equity method
The income from companies accounted for by the equity method
climbed to EUR 432 million in 2021 (in contrast to -EUR 96 million in
2020) owing to the higher contribution from the Group's associated
entities.
Other operating income/expenses
Other operating income/expenses recorded a gain of EUR 24 million
compared to a loss of EUR 212 million in 2020 due to higher results
obtained in insurance and leasing. In 2021, contributions made to the
Single Resolution Fund (SRF) in the second quarter and to the Deposit
Guarantee Fund (DGF) in the fourth remained stable.
For more details, see note 45 to the consolidated financial
statements.
Operating expenses
EUR million
Staff costs
Other administrative expenses
Information technology
Communications
Advertising
Buildings and premises
Printed and office material
Taxes (other than tax on profits)
Other expenses
Administrative expenses
Depreciation and amortization
Operating expenses
2021
2020 Absolute
11,216
10,783
7,443
2,182
7,537
2,075
401
510
699
90
558
473
517
725
100
534
3,003
2,980
18,659
18,320
2,756
2,810
21,415
21,130
433
(94)
107
(72)
(7)
(26)
(10)
24
23
339
(54)
285
Change
%
4.0
(1.2)
5.2
% excl.
FX
5.8
0.5
4.9
(15.2)
(12.2)
(1.2)
(3.1)
0.0
3.6
0.7
3.6
(1.4)
(3.6)
(10.0)
4.5
0.8
1.9
(1.9)
1.3
2019
12,141
8,138
2,161
518
685
859
116
522
3,277
20,279
(0.3)
3,001
3.1
23,280
Annual report 2021 336
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Operating expenses
Operating expenses increased 1% from 2020 to EUR 21,415 million.
Excluding the exchange rate impact, costs rose 3% due to the general
increase in inflation in 2021 and investments in technological and
digital developments, including PagoNxt. However, in real terms
(excluding the impact of inflation), however, costs fell 2%.
With an efficiency ratio of 46.2% - a 0.8 pp improvement on 2020
and 2019 (mainly driven by Europe) - we remained one of the most
efficient global banks in the world.
We continue to make structural changes to reduce costs while
improving customer satisfaction. Some businesses are migrating to
regional platforms and simplifying products and services.
Efficiency ratio (cost to income)
%
-0.8 pp
2021 vs 2020
The trends by region and market in constant euros were as follows:
• In Europe, costs were down 0.2% in nominal terms, -3% in real
terms (excluding average inflation), as we continued with our cost
reduction plan. In real terms, costs in Spain were down 11%, -4%
in the UK and -6% in Portugal while costs in Poland increased 3%
due to greater personnel costs. As a result, the region's efficiency
ratio stood at 51.0%, a year-on-year decrease of 5.4 pp.
• In North America, costs increased 8%. In real terms, there was a
net increase of 3% due to investments in digitalization, the 3% rise
in the US and the 2% decrease in Mexico. The efficiency ratio was
45.2%.
• Soaring inflation in Argentina significantly distorted costs in South
America (+8%). In real terms, costs declined by 5% in the region:
Brazil, -8%, Chile, 0% and Argentina, -5%. The efficiency ratio in
South America was 35.0%, a 1 pp decline compared to 2020.
• Lastly, Digital Consumer Bank's costs were 3% higher mainly due
to perimeter effects and digital transformation investments. In
real terms, they were flat and efficiency was stable at 45.0%.
Provisions or reversal of provisions
Provisions (net of provisions reversals) amounted to EUR 2,814
million (EUR 2,378 million in 2020). They include the charges for
restructuring costs and charges related to Swiss franc mortgages in
Poland and Digital Consumer Bank (EUR 319 million in 2021).
For more details, see note 25 to the consolidated financial
statements.
Impairment or reversal of impairment of financial assets not
measured at fair value through profit or loss (net)
Impairment or reversal of impairment on financial assets not
measured at fair value through profit or loss (net) was EUR 7,407
million (EUR 12,382 million in 2020), a 40% decrease year-on-year in
euros and -38% in constant euros.
This decrease was mainly due to the elevated level of additional
loan-loss provisions recognized in 2020 based on the IFRS 9 forward-
looking view as well as the collective and individual assessments to
reflect expected credit losses arising from covid-19. In 2021,
approximately EUR 750 million of those provisions were released.
For more details, see section 3 'Credit risk' in the 'Risk management
and compliance' chapter.
Impairment of other assets (net)
The impairment of other assets (net) stood at -EUR 231 million,
compared to -EUR 10,416 million in 2020 due a -EUR 10,100 million
adjustment to the valuation of goodwill.
Gains or losses on non-financial assets and investments (net)
Net gains on non-financial assets and investments were EUR 53
million in 2021 (EUR 114 million in 2020).
For more details, see note 48 to the consolidated financial
statements.
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)
EUR million
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Impairment or reversal of impairment of financial assets not measured at fair value through
profit or loss and net gains and losses from changes
2021
19
7,388
2020
19
12,363
2019
12
9,340
7,407
12,382
9,352
Annual report 2021 337
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Impairment on other assets (net)
EUR million
Impairment of investments in subsidiaries, joint ventures and associates, net
Impairment on non-financial assets, net
Tangible assets
Intangible assets
Others
Impairment on other assets (net)
2021
—
231
150
71
10
231
2020
—
10,416
174
10,242
—
10,416
2019
—
1,623
45
1,564
14
1,623
Negative goodwill recognized in results
No negative goodwill was recorded in 2021 (EUR 8 million in 2020).
Gains or losses on non-current assets held for sale not classified as
discontinued operations
This item mainly includes impairment of foreclosed assets recorded
and the sale of properties acquired upon foreclosure. It totalled -EUR
43 million in 2021 (-EUR 171 million in 2020).
Profit or loss before tax from continuing operations
Profit before tax was EUR 14,547 million in 2021, compared to
-EUR 2,076 million in 2020 (affected by the adjustment in the
valuation of goodwill). The results in 2021 were supported by higher
income and lower provisions.
Tax expense or income from continuing operations
Total income tax was EUR 4,894 million (EUR 5,632 million in 2020,
which included the -EUR 2,500 million valuation adjustment to
deferred tax assets).
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests increased 44% year-
on-year (+48% excluding the exchange rate impact) to EUR 1,529
million, due to profit growth in countries with the highest minority
interest (mainly the US).
For more details, see note 28 to the consolidated financial
statements.
Profit attributable to the parent
Profit attributable to the parent amounted to EUR 8,124 million in
2021 (-EUR 8,771 million in 2020).
RoTE stood at 11.96% (1.95% in 2020), RoRWA at 1.69% (-1.33% in
2020) and earnings per share at EUR 0.438 (-EUR 0.538 in 2020), all
three showing an improvement on 2019 as well.
Profit attributable to the parent
EUR million
RoTE
%
-/+
2021 vs 2020
Annual report 2021 338
6,515-8,7718,12420192020202111.441.9511.96201920202021
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Earnings per share A
EUR
RoRWA
%
-/+
2021 vs 2020
A. 2019 data adjusted for the capital increase in December 2020.
Below is the condensed income statement adjusted to items beyond the ordinary course of business (included under the net capital gains and
provisions line) as described in note 51.c of the consolidated financial statements, where our segments' aggregate underlying consolidated
results are reconciled to the statutory consolidated results.
Condensed underlying income statement
EUR million
Net interest income
Net fee income
Gains (losses) on financial transactions and exchange differences
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Net capital gains and provisions
Profit attributable to the parent
Underlying profit attributable to the parent A
A. Excluding net capital gains and provisions.
2021
2020 Absolute
33,370
31,994
1,376
10,502
10,015
1,563
2,187
969
404
487
(624)
565
46,404
44,600
1,804
(21,415)
(20,967)
(448)
24,989
23,633
(7,436)
(12,173)
1,356
4,737
(2,293)
(1,786)
(507)
15,260
9,674
5,586
(5,076)
(3,516)
(1,560)
10,184
6,158
4,026
—
—
—
10,184
6,158
4,026
(1,530)
(1,077)
(453)
(530)
(13,852)
13,322
8,124
8,654
(8,771)
16,895
5,081
3,573
Change
% % excl.
FX
7.1
8.1
(26.5)
142.0
6.9
4.1
9.4
(37.1)
30.7
64.5
51.2
72.1
4.3
4.9
(28.5)
139.9
4.0
2.1
5.7
(38.9)
28.4
57.7
44.4
65.4
—
65.4
42.1
(96.2)
—
70.3
—
72.1
45.9
(96.2)
—
77.8
2019
35,283
11,779
1,531
901
49,494
(23,280)
26,214
(9,321)
(1,964)
14,929
(5,103)
9,826
—
9,826
(1,574)
(1,737)
6,515
8,252
Annual report 2021 339
0.347-0.5380.4382019202020211.33-1.331.69201920202021
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Underlying profit attributable to the parent
Profit attributable to the parent in 2021 and 2020 was affected by
the following results that are outside the ordinary course of business
and distort the year-on-year comparison:
Excluding these results from the income statement lines where they
are recorded, and incorporating them separately in the net capital
gains and provisions line, the adjusted or underlying profit
attributable to the parent was EUR 8,654 million in 2021 (greater
than the EUR 5,081 million 2020 and EUR 8,252 million in 2019).
• In 2021, -EUR 530 million for restructuring costs, fully recorded in
Q1'21, mainly in the UK and Portugal.
The Group’s cost of credit was 0.77%, a significant improvement
compared to 2020 and 2019 (1.28% and 1.00%, respectively).
• In 2020, -EUR 13,852 million from the valuation adjustment of
goodwill ascribed to various Group entities in the amount of -EUR
10,100 million, the valuation adjustment to deferred tax assets of
the Spanish consolidated fiscal group (-EUR 2,500 million) and -
EUR 1,252 million in restructuring costs (mainly in Spain and the
UK).
For more details, see note 51.c to the consolidated financial
statements.
This performance was better than expected in light of the lower
provisions in most of our markets in the year, particularly in the US,
the UK, Digital Consumer Bank and Chile, together with the release of
provisions recognized in 2020 at the end of 2021.
Net loan-loss provisions
EUR million
Cost of credit
%
A
-39%
2021 vs 2020
-0.51 pp
2021 vs 2020
A. Excluding exchange rate impact: -37%.
A
Underlying profit attributable to the parent
EUR million
Underlying earnings per share
EUR
A B
B
+70%
2021 vs 2020
+79%
2021 vs 2020
A. Excluding net capital gains and provisions.
B. Excluding exchange rate impact: +78%.
A. Excluding net capital gains and provisions.
B. 2019 data adjusted for the capital increase in December 2020.
Annual report 2021 340
1.001.280.772019202020219,32112,1737,4362019202020218,2525,0818,6542019202020210.4490.2620.468201920202021
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Before recording loan-loss provisions, Santander's net operating
1
income
(i.e. total income less operating expenses) was EUR 24,989
million, 6% higher year-on-year, +9% excluding the FX impact, as
follows:
By line:
• Total income increased mainly due to net interest income (+7%)
and net fee income (+8%) which continued to rebound.
By region:
• In Europe, net operating income increased 24% with better
performance in all markets.
• In North America, net operating income fell 4%. It increased 1% in
the US and was down by 9% in Mexico. Excluding the
aforementioned disposals, net operating income was 11% higher
in the US and +2% the region.
• Higher inflation drove costs up. In real terms, they were down
• In South America, we grew 13% with increases of 14% in Brazil,
(except in Poland and the US).
10% in Chile and 34% in Argentina.
• In Digital Consumer Bank, net operating income increased by 3%.
In 2021, the Santander’s underlying RoTE was 12.73% (7.44% in
2020), underlying RoRWA was 1.78% (1.06% in 2020) and
underlying earnings per share was EUR 0.468 (EUR 0.262 in 2020),
all three showing an improvement on 2019 as well.
A
Underlying RoTE
%
Underlying RoRWA
%
A
A. Excluding net capital gains and provisions.
A. Excluding net capital gains and provisions.
1. As described in note 51.c of the consolidated financial statements, net operating income is used for the Group’s internal operating and management reporting purposes but
is not a line item in the statutory consolidated income statement.
Annual report 2021 341
11.797.4412.732019202020211.611.061.78201920202021
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3.3 Balance sheet
Balance sheet
EUR million
Assets
Cash, cash balances at central banks and other deposits on demand
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Hedging derivatives
Changes in the fair value of hedged items in portfolio hedges of interest risk
Investments
Assets under insurance or reinsurance contracts
Tangible assets
Intangible assets
Tax assets
Other assets
Non-current assets held for sale
Change
2021
2020
Absolute
%
2019
210,689
153,839
56,850
37.0
101,067
116,953
114,945
5,536
4,486
2,008
1,050
1.7
108,230
23.4
4,911
15,957
48,717
(32,760)
(67.2)
62,069
108,038
120,953
(12,915)
(10.7)
125,708
1,037,898
958,378
79,520
8.3
995,482
4,761
410
7,525
283
33,321
16,584
25,196
8,595
4,089
8,325
1,980
7,622
261
32,735
15,908
24,586
11,070
4,445
(3,564)
(1,570)
(97)
(42.8)
(79.3)
(1.3)
22
586
676
610
8.4
1.8
4.2
2.5
7,216
1,702
8,772
292
35,235
27,687
29,585
(2,475)
(22.4)
10,138
(356)
(8.0)
4,601
Total assets
1,595,835 1,508,250
87,585
5.8 1,522,695
Liabilities and equity
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Hedging derivatives
Changes in the fair value of hedged items in portfolio hedges of interest rate risk
Liabilities under insurance or reinsurance contracts
Provisions
Tax liabilities
Other liabilities
Liabilities associated with non-current assets held for sale
Total liabilities
Shareholders' equity
Other comprehensive income
Non-controlling interest
Total equity
Total liabilities and equity
79,469
32,733
81,167
48,038
(1,698)
(2.1)
77,139
(15,305)
(31.9)
60,995
1,349,169 1,248,188
100,981
8.1 1,230,745
5,463
6,869
(1,406)
248
770
9,583
8,649
286
910
10,852
8,282
12,698
12,336
—
—
(38)
(140)
(1,269)
367
362
—
(20.5)
(13.3)
(15.4)
(11.7)
4.4
2.9
—
6,048
269
739
13,987
9,322
12,792
—
1,498,782 1,416,928
81,854
5.8 1,412,036
119,649
114,620
5,029
4.4
124,239
(32,719)
(33,144)
10,123
97,053
9,846
91,322
425
277
5,731
(1.3)
(24,168)
2.8
6.3
10,588
110,659
1,595,835 1,508,250
87,585
5.8 1,522,695
Annual report 2021 342
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Executive summary
A
Loans and advances to customers (excl. reverse repos)
Customer funds (deposits excl. repos + mutual funds)
High liquidity in the system drove credit normalization
following the uptick at the beginning of the pandemic
Strong increase in customer funds benefiting from the higher
propensity to save amid the health crisis
EUR 962 billion
+4%
EUR 1,070 billion
+7%
è By segment:
è By product:
Growth backed by individuals and large corporates
Of note were demand deposits (which account for 67% of
customer funds) and mutual funds
Individuals
+5%
SMEs and corporates CIB and institutions
-2%
+9%
Demand
+9%
Time
-5%
Mutual funds
+13%
A. 2021 vs 2020 changes in constant euros
Loans and advances to customers totalled EUR 972,682 million in
December 2021, up 6% compared to December 2020.
Santander uses gross loans excluding reverse repurchase
agreements (EUR 962,382 million) to analyse traditional retail
banking loans. To better assess management, the comments below
do not take into account the exchange rate impact, as usual.
• Europe: in Poland, they increased 6% driven by record mortgage
loan sales, SMEs and SCIB. In Portugal, they rose 3%, due to
mortgages and corporates (mainly SMEs). In the UK, they grew
slightly (+0.5%), driven by residential mortgages, but they
remained flat in Spain, with growth in individuals and institutions.
In 'Other Europe', they increased 25% owing mainly to SCIB.
Overall regional growth was 3%.
Gross loans and advances to customers, excluding the exchange rate
effect and reverse repos, increased 4%. In particular:
Loans and advances to customers
EUR million
Commercial bills
Secured loans
Other term loans
Finance leases
Receivable on demand
Credit cards receivable
Impaired assets
Gross loans and advances to customers (excl. reverse repos)
Reverse repos
Gross loans and advances to customers
Loan-loss allowances
Net loans and advances to customers
Change
2021
2020 Absolute
%
2019
49,603
37,459
12,144
32.4
37,753
542,404
503,014
39,390
269,526
269,143
38,503
36,251
10,304
7,903
20,397
19,507
31,645
30,815
383
2,252
2,401
890
830
962,382
904,092
58,290
7.8
0.1
6.2
513,929
267,154
35,788
30.4
7,714
4.6
2.7
6.4
23,876
32,543
918,757
33,264
35,702
(2,438)
(6.8)
45,703
995,646
939,794
55,852
5.9
964,460
22,964
23,595
(631)
(2.7)
22,242
972,682
916,199
56,483
6.2
942,218
Annual report 2021 343
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Gross loans and advances to customers
(excluding reverse repos)
EUR billion
Gross loans and advances to customers
(excluding reverse repos)
% of operating areas. December 2021
A
+6 %
2021 vs 2020
A. Excluding exchange rate impact: +4%.
• In North America, growth was 3% (+4% excluding the impact of
Bluestem portfolio disposal). In the US, they grew 2% (+3%
excluding disposal) propelled by auto financing. In Mexico, they
were up 8% with widespread rises across segments (except
SMEs).
• Growth in South America was 12%. In Argentina, lending increased
40% driven by individuals, SMEs and corporates. In Brazil, it
climbed 13% owing to positive performance in all segments. In
Chile, it was up 6% due to mortgages and SCIB. In Uruguay, it rose
14% backed by individuals.
• Digital Consumer Bank (DCB) declined 1%, as it continued to feel
the effects of the covid-19 pandemic. However, new lending rose
10%. Performance across countries was mixed, with growth
recorded in France and the UK. Openbank increased 48%.
By segment, gross loans and advances to customers excluding
reverse repos maintained a balanced structure: individuals (63%),
SMEs and corporates (22%) and SCIB and institutions (15%).
By the end of 2021, 40% of loans and advances to customers
maturing in more than a year had floating interest rates, while the
other 60% were fixed-rate:
• In Spain, 52% of loans and advances to customers had floating
rates and 48% were fixed-rate.
• Elsewhere, 37% of loans and advances to customers had floating
rates and 63% were fixed-rate.
For more details on the distribution of loans and advances to
customers by business line, see note 10.b to the consolidated
financial statements.
Tangible assets amounted to EUR 33,321 million in December 2021,
up EUR 586 million compared to December 2020 and largely driven
by the recorded rise in property, plant and equipment leased under
operating leases.
Intangible assets stood at EUR 16,584 million, of which EUR 12,713
million corresponds to goodwill (which increased EUR 242 million in
the year) and EUR 3,871 million to other intangible assets, mostly IT
developments (up EUR 434 million).
Loans and advances to customers with maturities exceeding one year at 2021 year end
EUR million
Fixed
Variable
TOTAL
Domestic
International
TOTAL
Amount
80,934
87,940
168,874
Weight as % of
the total
48 %
52 %
100 %
Amount
341,226
198,115
539,341
Weight as % of
the total
63 %
37 %
100 %
Amount
422,160
286,055
708,215
Weight as % of
the total
60 %
40 %
100 %
Annual report 2021 344
919904962201920202021Europe: 60%North America: 14%South America: 14%Digital Consumer Bank: 12%
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Total customer funds
EUR million
Demand deposits
Time deposits
Mutual funds A
Customer funds
Pension funds A
Managed portfolios A
Repos
Total funds
A. Including managed and marketed funds.
Change
2021
2020 Absolute
717,728
642,897
74,831
164,259
171,939
(7,680)
188,096
164,802
23,294
1,070,083
979,638
90,445
16,078
31,138
36,357
15,577
26,438
34,474
501
4,700
1,883
1,153,656 1,056,127
97,529
2019
180,405
588,533
196,921
%
11.6
(4.5)
14.1
9.2
3.2
17.8
5.5
38,911
9.2 1,050,765
965,859
30,117
15,878
In terms of liabilities, customer deposits grew 8% year-on-year to
EUR 918,344 million in December 2021.
Santander uses customer funds (customer deposits including mutual
funds but excluding repos) to analyse traditional retail banking funds,
which stood at EUR 1,070,083 million.
• Customer funds increased in all regions and most countries. Of
note was the 9% jump in South America (Argentina: +52%;
Uruguay: +15%; Chile: +11%; Brazil: +4%), and the 9% increase in
North America (the US: +10%). Growth in Europe was 6% (Poland:
+10%; Portugal and Spain: +8%; the UK was flat).
• Positive performance also in DCB, which rose 10%. Openbank
Customer funds, excluding the effect of exchange rate movements,
rose 7% in 2021 as follows:
grew 24%.
• By product, customer deposits excluding repos were up 6%.
Demand deposits grew 9% with rises in all markets, and time
deposits fell 5%, as declines in Europe and North America more
than offset growth in the main South American markets. Mutual
funds surged 13% underpinned by net inflows and market
recovery.
As a result, the weight of demand deposits as a percentage of total
customer funds was 67%, while time deposits accounted for 15% of
the total and mutual funds 18%.
In addition to capturing customer deposits, the Group, for strategic
reasons, maintains a selective policy on issuing securities in
international fixed income markets. We strive to adapt the frequency
and volume of market operations to each unit's structural liquidity
needs and to the receptiveness of each market.
For more details on debt issuances and maturities, see section 3.4
'Liquidity and funding management'.
Customer funds (excluding repos)
EUR billion
Customer funds (excluding repos)
% of operating areas. December 2021
A
+9%
+14%
+8%
■ Total
■ Mutual
fundsB
■ Deposits
excl. repos
2021 vs 2020
A. Excluding exchange rate impact: +7%.
B. Including managed and marketed funds.
Annual report 2021 345
7858158821801651889669801,070201920202021Europe: 66%North America: 13%South America: 16%Digital Consumer Bank: 5%
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3.4 Liquidity and funding management
Executive Summary
Regulatory ratios
The LCR and NSFR ratios amply exceed regulatory
requirements (both 100%)
Debt issuances in 2021
We issued EUR 52 bn of debt in 2021, diversified by
product, currency, country and maturity
EUR 29 bn
EUR 23 bn
Medium- and long-term debt
Securitizations
Comfortable and stable funding structure
High contribution of deposit funding
106%
LTD ratio
Liquidity management in Santander
Our structural liquidity management aims to optimize maturities and
costs, and to avoid undesired liquidity risks in funding Santander’s
recurrent activity.
It follows these principles:
• Decentralized liquidity model.
• Medium- and long-term (M/LT) funding needs must be covered by
medium- and long-term instruments.
• High contribution from customer deposits due to the retail nature
of the balance sheet.
• In-depth balance sheet analysis and liquidity risk measurement
that support decisions and control to ensure liquidity levels cover
short- and long-term needs with stable funding sources, as well as
minimize the impact of their cost on earnings.
Each geographic area has a conservative risk appetite framework,
(based in its commercial strategy) which sets out the liquidity risk
management framework. Subsidiaries must work within the
framework limits to achieve their strategic objectives.
• Liquidity management adapted to the needs of each business. We
develop a liquidity plan every year to achieve:
– a solid balance sheet structure, with a diversified footprint in
• Wholesale funding sources diversified by instrument and investor;
wholesale markets;
market and currency; and maturity.
• Limited recourse to short-term funding.
• Sufficient liquidity reserves (including standing facilities/discount
windows at central banks to be used in adverse situations).
• Group and subsidiary level compliance with regulatory liquidity
requirements, as a new factor conditioning management.
To apply these principles effectively across the Group, we developed
a unique management framework based on three fundamental
pillars:
• Tight organization and governance that involve subsidiaries’ senior
managers in decision-making and integrate them into our global
strategy. Decisions about structural risks, including liquidity and
funding risk, falls on the local asset and liability committees
(ALCOs), which coordinate with the global ALCO. The global ALCO
is empowered by the board of directors under the corporate Asset
and Liability Management (ALM) framework.
This enhanced governance model is included within our risk
appetite framework, which meets regulators and market’s
demands for stronger risk management and control systems, in
response to the financial crisis.
– stable liquidity buffers and limited asset encumbrance; and
– compliance with regulatory and other metrics included in each
entity’s risk appetite statement.
We monitor all of the plan's dimensions throughout the year.
Santander continues to carry out the Internal Liquidity Adequacy
Assessment Process (ILAAP). It is integrated into our other risk
management and strategic processes to measure liquidity in ordinary
and stressed scenarios. The quantitative and qualitative items we
consider are also inputs for the Supervisory Review and Evaluation
Process (SREP).
Once a year, we must submit to supervisors a board-approved ILAAP
assessment that shows our funding and liquidity structures will
remain solid in all scenarios and our internal processes will ensure
sufficient liquidity (based on analyses that each subsidiary conducts
according to our local liquidity management model).
Our governance structure is robust and suited to identify, manage,
monitor and control liquidity risks. It rests on common frameworks,
conservative principles, clearly defined roles and responsibilities, a
consistent committee structure, effective local lines of defence and
well-coordinated corporate supervision.
Annual report 2021 346
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We produce frequent, detailed liquidity monitoring reports for
management, control, reporting and steering purposes. We also
send the most relevant information regularly to senior managers, the
executive committee and the board of directors.
Over the last few years, Santander and each subsidiary have
developed a comprehensive special situations management
framework that centralizes our governance for such scenarios. It
contains contingency funding plans, that are integrated within our
governance model, with feasible, pre-assessed actions that follow a
defined timeline; are categorized and prioritized; and provide for
sufficient liquidity and execution time to mitigate stress scenarios.
Funding strategy and liquidity in 2021
Funding strategy and structure
Our funding strategy in recent years has focused on extending our
management model to all subsidiaries (including new additions).
It is based on a model of autonomous subsidiaries that are
responsible for covering their own liquidity needs. This structure has
enabled our solid retail banking model to maintain sound liquidity
positions in the Group and our core country units, even amid market
stress.
We have had to adapt funding strategies to commercial business
trends, market conditions and new regulatory requirements. In 2021,
we improved specific aspects, without significant changes in liquidity
management or funding policies and practices. This will enable us to
face 2022 from a strong starting point, with no growth restrictions.
In general, our subsidiaries continue to apply the same funding and
liquidity management strategies:
• maintaining sufficient and stable medium- and long-term
wholesale funding levels.
• ensuring the right volume of assets which can be discounted in
central banks as part of the liquidity buffer.
• generating liquidity from the retail business.
• Customer deposits are our main source of funding. They are highly
stable because they mainly arise from retail customer activity. At
the end of December 2021, they represented just over two-thirds
of net liabilities (i.e. of the liquidity balance sheet) and nearly 95%
of loans and advances to customers. Their weight (as a
percentage of loans and advances to customers) grew compared
to end 2020. For more details, see the ‘Liquidity in 2021' section.
Group's liquidity balance sheet
%. December 2021
■ Financial assets
■ Fixed assets
& other
■ Loans and
advances to
customers
■ ST funding
■ Equity and other
■ M/LT debt issuance
■ Securitizations
and others
■ Customer
deposits
• M/LT funding accounted for nearly 17% of net liabilities at the end
of 2021, similar to 2020. It amply covers the retail funding gap (i.e.
loans and advances to customers not funded by customer
deposits).
The outstanding balance of M/LT debt issued in the market (to third
parties) at the end of 2021 was EUR 173,652 million. Our maturity
profile is comfortable and well balanced by instruments and markets
with a weighted average maturity of 4.8 years (similar to the average
maturity of 4.7 years at the end of 2020).
These developments have strengthened Santander's funding
structure:
These tables show our funding by instrument over the last three
years and by maturity profile:
Annual report 2021 347
75%71%6%4%18%13%10%2%AssetsLiabilities
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Group. Medium- and long-term debt issuances
EUR million
A
Preferred
Subordinated
Senior debt
Covered bonds
Total
2021
10,238
16,953
104,553
41,908
173,652
2020
8,925
13,831
95,208
49,388
167,351
2019
9,411
12,640
107,166
50,847
180,064
A. Placed in markets. Does not include securitizations, agribusiness notes and real estate credit notes.
Group. Distribution by contractual maturity. December 2021
EUR million
A
0-1
month
1-3
months
3-6
months
6-9
months
9-12
months
12-24
months
2-5 more than
5 years
years
Preferred
Subordinated
Senior debt
Covered bonds
Total
—
—
3,033
104
3,137
49
—
3,734
1,695
5,478
—
—
2,918
2,087
5,006
—
129
1,097
1,850
3,076
—
—
4,169
1,090
5,260
A. If an issuance has a put option in favour of the holder, its maturity is considered (not the contractual maturity).
Note: There are no additional guarantees for any of the debt issued by the Group’s subsidiaries.
—
652
18,222
3,380
—
6,128
42,792
15,280
10,189
10,044
Total
10,238
16,953
28,586
104,553
16,421
41,908
22,255
64,200
65,240
173,652
The lower weight of covered bonds in recent years in favour of other
instruments is mainly due to the gradual construction of the MREL
and TLAC requirements, as instruments with loss-absorbing capacity
cannot have additional guarantees. Additionally, loan portfolios that
are currently being used as collateral in central bank funding cannot
be reused to issue secured instruments to the market.
In addition to the M/LT wholesale debt issuances, we have
securitizations placed in the market as well as collateralized and
other specialist funding totalling EUR 48,286 million (which includes
EUR 6,935 million in debt instruments placed with private banking
clients in Brazil). The average maturity is around 1.6 years.
This chart shows the similarity of the geographic breakdown of our
loans and advances to customers and M/LT wholesale funding across
our footprint. This distribution is almost identical to 2020 both in
loans and advances and M/LT wholesale funding.
Loans and advances to customers and M/LT wholesale funding
%. December 2021
Europe
North America
South America
DCB
Wholesale funding from short-term issuance programmes is a
residual part of Santander’s funding structure, which is related to
treasury activities and comfortably covered by liquid assets.
The outstanding short-term wholesale funding balance at the end of
2021 was EUR 27,296 million. 50% was in European Commercial
Paper, US Commercial Paper and domestic programmes issued by
Banco Santander, S.A.; 22% in certificates of deposit and commercial
paper programmes in the UK; 19% in Santander Consumer Finance
(SCF) commercial paper programmes; and 9% in issuance
programmes in other country units.
Liquidity in 2021
The key liquidity takeaways in 2021 are:
• Basic liquidity ratios remain at comfortable levels.
• Regulatory ratios were well above minimum requirements.
• Our use of encumbered assets in funding operations was
moderate.
In 2021, the transition back to business as usual began, after a 2020
marked by the frenetic activity of governments, regulators and
central banks following the World Health Organization’s declaration
of covid-19 as an epidemic and subsequently a pandemic.
At the end of 2021, central banks (albeit at different rates) began to
withdraw or think about how to withdraw some of the stimulus
measures (especially those relating to injecting liquidity into the
system), put in place during the most acute phase of the crisis,
without causing second-round effects.
With markets fully open in 2021, we regularly monitored our
liquidity position in the special situations committees and the
meetings held by the Group’s executive committee and board of
directors. We also supplied information to the ECB at the regular
monitoring meetings held by the Group during the supervisory
dialogue process.
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Our liquidity position has remained solid at all times. Moreover, the
commercial activity in the year (discussed below), contributed
liquidity in the year.
The table below shows the principal liquidity ratios of our main
country units as at the end of 2021:
i. Basic liquidity ratios at comfortable levels
At the end of 2021, Santander recorded:
• A stable credit to net assets ratio (i.e. total assets minus trading
derivatives and inter-bank balances) of 75%. Such a high level
compared to our competitors in Europe speaks to the retail nature
of our balance sheet.
• A net loan-to-deposit ratio (LTD) of 106%, a very comfortable level
(well below 120%) and down from the 108% in 2020. Lending
grew moderately in constant euros in almost all our markets
(except consumer businesses which were affected by the
semiconductor and supply chain problems). However, deposit
growth more than compensated the increase in lending.
• A customer deposits plus M/LT funding to net loans and advances
ratio of 117% (similar to last year).
• Limited recourse to short-term wholesale funding (just over 2% of
total funding) in line with previous years.
• Lastly, our structural surplus defined as the excess of structural
funding sources (deposits, M/LT funding and capital) against
structural liquidity needs from fixed assets and loans had an
average balance of EUR 207,233 million in the year.
Our consolidated structural surplus stood at EUR 208,540 million.
Fixed-income assets (EUR 149,057 million), equities (EUR 20,357
million) and net interbank deposits (EUR 60,423 million) were partly
offset by short-term wholesale funding (-EUR 27,296 million). This
totalled around 16% of our net liabilities (slightly up from the end of
2020).
This table shows Santander’s basic liquidity monitoring metrics in
recent years:
Group’s liquidity monitoring metrics
%
/ Net assets
to deposit ratio (LTD)
Loans A
Loans A
Customer deposits and medium and
long term funding / Loans A
Short term wholesale funding / Net
liabilities
Structural liquidity surplus (% of net
liabilities)
A. Loans and advances to customers.
2021
75%
2020
76%
2019
77%
106%
108%
114%
117%
116%
113%
2%
2%
3%
16%
15%
13%
Main country units’ liquidity metrics
%. December 2021
Spain
United Kingdom
Portugal
Poland
United States
Mexico
Brazil
Chile
Argentina
Digital Consumer Bank
Group
Deposits + M/
LT funding /
Loans A
149 %
107 %
115 %
130 %
111 %
126 %
118 %
100 %
178 %
77 %
117 %
LTD ratio
74 %
108 %
93 %
79 %
125 %
87 %
98 %
128 %
56 %
206 %
106 %
A. Loans and advances to customers
In 2021, the key drivers of Santander's and our subsidiaries' liquidity
(excluding the exchange rate impact) were:
• Recovery in lending, except for Digital Consumer Bank (DCB),
which remained stable, affected by the semiconductor crisis and
supply chain problems which slowed production of cars and
consumer goods. There was also generalized growth in customer
deposits. As a result, the retail funding gap provided liquidity in the
year.
• Issuances continued at a similar rate to the previous year and,
overall, were in line with our funding plan for the year. By region,
North America and DCB issued less than planned given business
performance, while South America was more active in capital
markets.
In 2021, Santander issued EUR 51,954 million in M/LT funding (at
year-average exchange rates).
By instrument, the stock of M/LT fixed income debt (i.e. covered
bonds, senior debt, subordinated debt and capital hybrid
instruments) decreased by around 5% to EUR 29,030 million at the
end of the year. The greater activity in senior, both preferred and
TLAC eligible bonds, and in hybrids was not enough to offset low
covered bond issuances. Securitizations and structured finance
totalled EUR 22,924 million in 2021, a 35% increase year-on-year.
By country unit, Spain and Brazil issued the most M/LT fixed income
debt (not including securitizations), followed by the UK. In the year,
the greatest absolute increases were recorded in by our units in Spain
and Brazil. The main year-on-year decreases occurred in the UK and
SCF.
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SCF and SC USA were the main issuers of securitizations.
The charts below provide show issuances by instrument and region:
Distribution by instrument and region
%. December 2021
Covered bonds issued in 2021 accounted for 1% of total issuances,
well below the 14% in 2020. Only Santander Brasil issued covered
bonds in 2021. The main issuers in previous years, Spain and the UK,
issued no covered bonds in 2021, for the reasons stated above
(regarding central bank collateral). Senior debt accounted for 45% of
total issuances, compared to 42% in 2020. The weight of TLAC
eligible senior debt compared to senior preferred debt was lower
than in 2020.
In 2021, the Group issued EUR 16,574 million in subordinated
instruments, including EUR 11,282 million in senior non-preferred
debt from Banco Santander, S.A. and senior preferred from the
holding in the UK; EUR 2,698 million in subordinated debt; and EUR
2,593 million in AT1 eligible hybrid instruments issued by the parent
bank.
In summary, we retained comfortable access to all our markets. In
2021, we issued and securitized debt in 17 currencies, involving 20
major issuers from 14 countries and an average maturity of 4.5 years
(slightly lower than 4.8 years in 2020).
ii. Compliance with regulatory ratios
Within the liquidity management model, over the last few years
Santander has been managing the implementation, monitoring and
compliance with the liquidity requirements established under
international financial regulations ahead of schedule.
Liquidity Coverage Ratio (LCR)
As the regulatory LCR requirement has been at the maximum level of
100% since 2019, we have set a risk appetite of 110% for the Group
and subsidiaries.
Our strong short-term liquidity base and our core subsidiaries’
autonomous management led to compliance levels above 100%
(both at Group and local level) throughout the year. Our LCR in
December 2021 was 163%, well above the regulatory requirement.
The table below shows that all our subsidiaries substantially
exceeded the required minimum in 2021 and the comparison versus
2020. Santander UK’s figures only include activities that the Financial
Services and Markets Act 2000 leaves within the Ring-Fenced Bank.
Liquidity Coverage Ratio (LCR)
%
Parent bank
United Kingdom
Portugal
Poland
United States
Mexico
Brazil
Chile
Argentina
Santander Consumer Finance
Group
December 2021 December 2020
151%
168%
138%
197%
150%
184%
141%
148%
258%
319%
163%
175%
152%
122%
187%
129%
207%
167%
155%
222%
314%
168%
NSFR (Net Stable Funding Ratio)
The final definition of the net stable funding ratio (NSFR) was
approved by the Basel Committee in October 2014 and transposed to
EU law in June 2019 when the Official Journal of the European Union
published the Regulation (EU) 2019/876 of the European Parliament
and of the Council of 20 May 2019 amending Regulation (EU)
No575/2013 as regards the leverage ratio, the net stable funding
ratio, requirements for own funds and eligible liabilities, counterparty
risk, market risk, exposures to central counterparties, exposures to
collective investment undertakings, large exposures, reporting and
disclosure requirements, and Regulation (EU) No 648/2012.
Accordingly, entities must have a net stable funding ratio, greater
than 100% from June 2021.
The NSFR is a structural measurement that gives banks an incentive
to ensure long-term stability and proper management of maturity
mismatches by funding long-term assets with long-term liabilities. It
is the quotient of available stable funding (ASF) and required stable
funding (RSF).
ASF comprises sources of funding (i.e. capital and other liabilities)
considered stable over one year. RSF primarily refers to any asset
deemed illiquid over one year, thus needing to be matched with
stable sources of funding.
Annual report 2021 350
Senior debt: 45%Securitizations andother: 44%Covered bonds: 1%Preferred: 5%Subordinated: 5%Europe: 43%North America: 32%South America: 11%DCB: 15%
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In 2021, we defined a risk appetite limit of 101.5% both at the
consolidated and subsidiary level.
The high weight of customer deposits (which are more stable);
permanent liquidity needs deriving from commercial activity funded
by medium- and long-term instruments; and limited recourse to
short-term funding help maintain our balanced liquidity structure as
reflected in our consolidated and subsidiary NSFRs above 100% in
December 2021.
The table below provides details by main subsidiary as well as a
comparison with 2020. Santander UK’s figures only include activities
that the Financial Services and Markets Act 2000 leaves within the
Ring-Fenced Bank. Additionally, note that 2020 figures were
calculated under the Basel methodology while 2021 calculations
incorporate requirements as transposed to European law.
Net Stable Funding Ratio
%
Parent bank
United Kingdom
Portugal
Poland
United States
Mexico
Brazil
Chile
Argentina
Santander Consumer Finance
Group
December 2021 December 2020
118%
138%
124%
156%
128%
134%
116%
124%
180%
115%
126%
116%
129%
123%
150%
120%
132%
119%
120%
174%
114%
120%
III. Asset Encumbrance
Santander’s use of assets as collateral in structural funding sources
of the balance sheet is moderate.
In keeping with the 2014 European Banking Authority (EBA)
guidelines on disclosure of encumbered and unencumbered assets,
the concept of asset encumbrance includes on-balance-sheet assets
pledged as collateral in operations to obtain liquidity, off-balance-
sheet assets received and reused for a similar purpose, and other
assets with liabilities for reasons other than funding.
The tables below show the asset encumbrance data we must submit
to the EBA as of December 2021:
Group. Disclosure on asset encumbrance as at December 2021
EUR billion
Assets
Loans and advances
Equity instruments
Debt instruments
Other assets
Carrying amount of
encumbered assets
365.1
262.8
8.4
61.0
32.9
Fair value of
encumbered assets
Carrying amount of
unencumbered assets
Fair value of
unencumbered assets
—
—
8.4
61.1
—
1,230.7
984.4
13.1
102.9
130.3
—
—
13.1
102.8
—
Group. Collateral received as at December 2021
EUR billion
Collateral received
Loans and advances
Equity instruments
Debt instruments
Other collateral received
Own debt securities issued other than own covered
bonds or ABSs
Fair value of encumbered collateral
received or own debt securities issued
Fair value of collateral received or own
debt securities issued available for
encumbrance
80.7
1.2
5.4
74.2
—
0.0
31.5
0.0
7.0
24.5
0.0
0.6
Group. Encumbered assets/collateral received and associated liabilities as at December 2021
EUR billion
Total sources of encumbrance (carrying amount)
325.2
445.9
Matching liabilities,
contingent liabilities
or securities lent
Assets, collateral received and own
debt securities issued other than
covered bonds and ABSs encumbered
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On-balance-sheet encumbered assets amounted to EUR 365.1
billion; 72% are loans and advances (e.g. mortgages and corporate
loans). Off-balance-sheet encumbrance stood at EUR 80.7 billion and
mainly relates to debt securities received as collateral in reverse
repurchase agreements and rehypothecated ("reused"). Both types of
encumbered assets amount to EUR 445.9 billion, giving rise to
associated liabilities of EUR 325.2 billion.
At the end December 2021, total asset encumbrance in funding
operations was 26.1% of the Group's extended balance sheet under
EBA criteria (total assets plus guarantees received: EUR 1,708.0
billion), lower than the 26.6% at the end of 2020 mainly due to
balance sheet growth.
Rating agencies
Rating agencies influence Santander’s access to wholesale funding
markets and the cost of its issuances.
The agencies listed below regularly review our ratings. Debt ratings
depend on several internal factors (business model, strategy, capital,
income generation capacity, liquidity, etc.) but also on external
factors related to economic conditions, the industry and sovereign
risk across our footprint.
Sometimes the methodology applied by the agencies limits ratings to
the sovereign's rating of country where the bank is headquartered.
However, as a testament of our financial strength and diversification,
Banco Santander, S.A. is still rated above the Kingdom of Spain's
sovereign rating (where it is headquartered) by Moody’s, DBRS and
Standard & Poor’s (S&P) and on par with it by Fitch.
At the end of 2021, the ratings from the main agencies were:
Rating agencies
DBRS
Fitch Ratings
Moody's
Standard & Poor's
Scope
JCR Japan
Long term
A (High)
Short term
R-1 (Middle)
A- (Senior A) F2 (Senior F1)
P-1
A-1
S-1+
A2
A+
AA-
A+
—
Outlook
Stable
Stable
Stable
Negative
Stable
Stable
In 2021, S&P upgraded the long-term rating to A+ due to a change in
its methodology. DBRS, Fitch, Moody's and JCR Japan confirmed their
ratings.
As for the outlook, Fitch changed from negative to stable due to the
stabilization of the operating environment in Santander's main
markets, while in December S&P, after having raised it in June,
downgraded it back to negative due to the worsening of the
sovereign's outlook, keeping Santander 1 notch above the Kingdom
of Spain.
Funding outlook for 2022
Despite some lingering uncertainties, Santander has begun 2022
with a comfortable liquidity position and a positive funding outlook
for the year.
We expect lending to rise moderately in all our core markets, coupled
with a solid performance in deposits leading to limited demand for
liquidity from our retail business. The largest liquidity needs will
come from our largest country units: Spain, Brazil and Digital
Consumer Bank.
The maturities in upcoming quarters are manageable, aided by
limited recourse to short-term funding and an expected medium-
and long-term issuance dynamic slightly greater than last year. We
will manage each country, optimizing liquidity to maintain a solid
balance sheet structure across our footprint.
Additionally, our funding plans take into account costs and
diversification by instrument, country and market as well as the
construction of liability buffers with loss-absorbing capacity in
resolution (whether capital eligible or not). They are designed to
ensure Santander and each subsidiary always satisfy regulatory
requirements and those stemming from our risk appetite framework.
For example, Banco Santander, S.A.'s 2022 funding plan is designed
to cover the greater TLAC/MREL requirements and pre-finance
issuances that lose loss-absorbing capacity, and to cover any needs
arising from potential increases in RWAs (which form the base for
both ratios). As such, the plan includes between EUR 9 billion and
EUR 10 billion of senior preferred and non-preferred debt, between
EUR 3 billion and EUR 3.5 billion of hybrid instruments (depending on
RWA growth to ensure the continued fulfilment of the 1.5% AT1 and
2% T2 buffers). The plan does not contemplate any covered bond
issuances.
With regard to the rest of the Group: Santander Consumer Finance,
plans to issue between EUR 5 billion and EUR 6 billion in senior
instruments, as well as the possibility of up to EUR 0.5 billion in
covered bonds; in the UK we expect to issue between EUR 3 billion
and EUR 4 billion in senior debt (either from the bank or from its
holding company) and between EUR 0.5 billion and EUR 0.75 billion
in covered bonds; and, lastly, Santander Holdings USA plans to issue
between EUR 2 billion and EUR 2.5 billion in senior debt.
Notwithstanding the above, Banco Santander, S.A. and the Group
remain alert to opportunities to optimize the cost of outstanding
issuances and may therefore decide to carry out additional issuances
or reduce them.
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3.5 Capital management and adequacy. Solvency ratios
Executive summary
Fully-loaded capital ratio
The fully-loaded CET1 reached 12%
Fully-loaded CET1
Strong organic generation driven by profit and RWA
management
Organic generation*
+118 bps
TNAV per share
The TNAV per share was EUR 4.12, +11% year-on-year
including dividends
* Includes negative impact from shareholder remuneration
The aim of capital management and adequacy at Santander is to
guarantee solvency and maximize profitability, while complying with
internal capital targets and regulatory requirements.
• assessing capital adequacy to ensure that the capital plan is also
consistent with our risk profile and risk appetite framework in
stress scenarios.
Capital management is a key strategic tool for decision-making at
both the local and corporate levels.
• developing the annual capital budget as part of the Group's
budgeting process.
At Santander, we have a common framework covering actions,
criteria, policies, functions, metrics and processes for capital
management.
• monitoring and controlling the budget execution at the Group and
country level and drawing up action plans to correct any deviations
from the budget.
Our most notable capital management activities are:
• integrating capital metrics into our business management to
• establishing capital adequacy and capital contribution targets
aligned with minimum regulatory requirements and internal
policies, to guarantee robust capital levels consistent with our risk
profile and efficient use of capital to maximize shareholder value.
ensure alignment with the Group's objectives.
• preparing internal capital reports, and reports for the supervisory
authorities and the market.
• planning and managing other loss absorbing instruments (MREL
• drawing up a capital plan to meet those objectives consistent with
our strategic plan. Capital planning is an essential part of executing
the three-year strategic plan.
and TLAC).
Santander's capital function is carried out on three levels:
Regulatory capital
→
→ Economic capital
→ Profitability and pricing
The first step in managing regulatory capital is to analyse the capital base, the capital adequacy ratios under the current
regulatory criteria and the scenarios used in capital planning to make the capital structure as efficient as possible, both in
terms of costs and compliance with regulatory requirements. Active capital management includes strategies for
allocation and efficient use of capital, together with securitizations, asset sales and issuances of equity instruments
(hybrid equity instruments and subordinated debt).
The objective of the economic capital model is to ensure that we adequately allocate our capital to cover all risks to which
we are exposed as a result of our activity and risk appetite. It also aims to optimize economic value added at the Group
and business unit level.
Creating value and maximizing profitability is one of Santander's main objectives, carefully selecting the most appropriate
markets and portfolios based on profitability, taking into account risk. Profitability and pricing are therefore integral parts
of the key capital model processes.
Annual report 2021 353
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The main measures we took in 2021 were:
Strengthen capital management culture
Issuances of capital hybrid and other loss-absorbing instruments
In 2021, Banco Santander, S.A. issued EUR 4,464 million in hybrid
instruments. This comprised EUR 1,852 million in T2 subordinated
debt and EUR 2,612 million in contingently convertible preferred
shares (CoCos). Part of these CoCos were intended to replace the
early amortization of a EUR 1,500 million issuance called in
September 2021.
Banco Santander, S.A. also issued EUR 7,934 million in senior non-
preferred debt.
Dividends and shareholder remuneration
On 28 September 2021, the board announced its 2021 shareholder
remuneration policy to pay out an interim distribution of
approximately 40% of the Group's underlying profit (half through a
cash dividend and half through a shares buyback).
• Interim remuneration. Accordingly, it authorized the payment of
an interim dividend of EUR 4.85 cents per share (i.e. 20% of the
Group's underlying profit for H1'21), in cash and charged against
2021 profits; it was paid on 2 November 2021. The board also
voted to launch the First Buyback Programme worth EUR 841
million (20% of the Group's underlying profit for H1'21) once the
ECB approved it on 28 September 2021. The number of shares
acquired (259,930,273 shares) makes up approximately 1.499% of
our share capital.
• Final remuneration. The board of directors voted to submit a
resolution at the 2022 AGM for the approval of a complementary
cash dividend of EUR 5.15 cents per share (gross), equalling an
approximate total of EUR 865 million; and a Second Buyback
Programme for EUR 865 million, to be approved by the ECB.
For more details, see section 3.3 ‘Dividends’ on the Corporate
governance chapter.
Focus ahead will remain on disciplined capital allocation and
shareholder remuneration while we maintain our fully-loaded CET1
target between 11%-12%.
The continuous improvement in the capital ratios reflects our
profitable growth strategy and a culture of active capital
management at all levels of the organization.
In order to have a more global vision and simplify our structure, we
created a new team, ‘Capital and Profitability Management’, in
charge of our capital analysis, adequacy and management,
coordination with subsidiaries in all matters related to capital and
monitoring and measuring returns.
All the countries and business units have drawn up individual capital
plans focused on achieving a business that maximizes the return on
equity.
Santander gives a significant weight to capital and incentives. Certain
aspects relating to capital management and returns are taken into
account when setting the variable remuneration payable to members
of senior management:
• The relevant metrics include our CET1 ratio, the county units'
capital contributions to the Group ratio, the return on tangible
equity (RoTE) and profit after tax.
• The qualitative aspects considered include the proper
management of regulatory changes affecting capital, effective
management of capital relating to business decisions, sustainable
capital generation over time and effective capital allocation.
Action plans
In addition, we have developed a three-year action plan for the
continuous improvement of infrastructures, processes and
methodologies that support all aspects related to capital, with the
aim of further enhancing active capital management, responding
more quickly to the numerous and increasing regulatory
requirements and efficiently carrying out all associated activities.
We continue to improve our processes and controls associated with
capital data quality. Additionally, we continuously develop risk
management initiatives at both the consolidated and local levels to
strengthen and fine-tune different activities.
Annual report 2021 354
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Fully-loaded CET1 ratio
%
Main capital data and solvency ratios
EUR million
Common equity (CET1)
Tier1 (T1)
Eligible capital
Risk-weighted assets
CET1 capital ratio
T1 capital ratio
Total capital ratio
Leverage ratio
Fully loaded
2021
A
Phased-in
2021
2020
70,208 66,783
79,939 75,510
95,078 88,368
2020
72,402 69,399
82,452 78,501
97,317 91,015
579,478 561,850 578,930 562,580
12.12% 11.89%
12.51% 12.34%
13.79% 13.44%
14.24% 13.95%
16.41% 15.73%
16.81% 16.18%
5.21%
5.13%
5.37%
5.33%
Regulatory phased-in CET1 ratio A
%
11.65
12.34
12.51
A. The phased-in ratios include the transitory treatment of IFRS 9, calculated in accordance with article 473 bis of the Regulation on Capital Requirements (CRR) and subsequent
amendments introduced by Regulation 2020/873 of the European Union. Additionally, the Tier 1 and total phased-in capital ratios include the transitory treatment according
to chapter 2, title 1, part 10 of the aforementioned CRR.
If we include the acquisition of SC USA minority interests, which
closed on 31 January 2022, and the announced acquisition of
Amherst Pierpont, which is pending to completion, the CET1 ratio
would be an estimated 16 basis points lower, bringing it to 11.96%.
The fully-loaded leverage ratio stood at 5.21%
Fully-loaded capital ratios in 2021
If we do not apply the transitory IFRS 9 provisions, nor the
subsequent amendments introduced by Regulation 2020/873 of the
European Union, which has a 39 bp impact, the fully-loaded CET1
ratio was 12.12%.
Of note in the year was organic generation of 118 basis points,
supported by the results obtained in the year and management of
risk-weighted assets. This figure includes a negative impact of 45
basis points related to shareholder remuneration. This strong
generation was partially offset by regulatory and model impacts, the
negative market impacts on available for sale (HTC&S) portfolios and
non-recurring impacts (acquisition of minority interest in Mexico and
restructuring costs).
Fully-loaded CET1 ratio in 2021
%
Annual report 2021 355
11.4111.8912.12201920202021
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Regulatory capital ratios (phased-in)
The phased-in ratios are calculated by applying the CRR transitory
schedules. At year-end, the total phased-in capital ratio was 16.81%
and the (phased-in) CET1 ratio was 12.51%.
We have a strong capital base, comfortably meeting the minimum
levels required by the European Central Bank on a consolidated basis
(13.01% for the total capital ratio and 8.85% for the CET1 ratio). This
resulted in a CET1 management buffer of 366 bps, compared to the
pre-covid-19 buffer of 189 bps.
Taking into account the shortfall in AT1, Santander exceeded the
2021 minimum regulatory requirements by 360 bps.
A. Countercyclical buffer.
B. Global systemically important banks (G-SIB) buffer.
C. Capital conservation buffer.
The phased-in leverage ratio stood at 5.37%.
Regulatory capital (phased-in). Flow statement
EUR million
Capital Core Tier 1 (CET 1)
Starting amount (31/12/2020)
Shares issued in the year and share premium
Treasury shares and own shares financed
Reserves
Attributable profit net of dividends
Other retained earnings
Minority interests
Decrease/(increase) in goodwill and other
intangible assets
Other
Ending amount (31/12/2021)
Additional Capital Tier 1 (AT1)
Starting amount (31/12/2020)
AT1 eligible instruments
T1 excesses - subsidiaries
Residual value of intangible assets
Deductions
Ending amount (31/12/2021)
Capital Tier 2 (T2)
Starting amount (31/12/2020)
T2 eligible instruments
Generic funds and surplus loan-loss provisions-IRB
T2 excesses - subsidiaries
Deductions
Ending amount (31/12/2021)
Deductions from total capital
Total capital ending amount (31/12/2021)
2021
69,399
(4,034)
(840)
2,640
6,394
152
67
(353)
(1,023)
72,402
9,102
1,248
(299)
—
—
10,050
12,514
2,073
75
203
—
14,865
—
97,317
Annual report 2021 356
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The following tables show the total risk-weighted assets (comprising the denominator of capital requirements based on risk) as well as their
distribution by geographic segment.
Risk-weighted assets
EUR million
Credit risk (excluding CCR)
Of which: standardized approach (SA)
Of which: the foundation IRB (FIRB) approach
Of which: slotting approach
Of which: equities under the simple risk weighted approach
Of which: the advanced IRB (AIRB) approach
Counterparty credit risk (CCR)
Of which: standardized approach
Of which: internal model method (IMM)
Of which: exposures to a CCP
Of which: credit valuation adjustment (CVA)
Of which: other CCR
Settlement risk
Securitization exposure in the banking book (after the cap)
Of which: SEC-IRBA approach
Of which: SEC-ERBA approach
Of which: SEC-SA approach
Of which: 1250% deduction
Position, foreign exchange and commodities risks (Market risk)
Of which: standardized approach
Of which: internal model approach (IMA)
Large exposures
Operational risk
Of which: basic indicator approach
Of which: standardized approach
Of which: advanced measurement approach
Amounts below the thresholds for deduction
Total
Includes equities under the PD/LGD approach
Fully loaded CRR, phased-in IFRS 9
RWAs
Minimum
capital
requirements
2021
477,977
262,869
9,483
14,672
2,219
173,956
15,674
13,639
—
268
1,767
—
1
11,151
5,226
1,366
2,676
1,883
17,224
6,844
10,380
—
58,786
—
58,786
—
21,032
578,930
2020
470,333
259,362
8,841
14,529
2,750
168,096
10,239
9,278
—
241
720
—
—
9,751
4,731
1,607
1,821
1,592
17,983
5,047
12,936
—
55,865
—
55,865
—
22,382
562,580
2021
38,238
21,029
759
1,174
178
13,916
1,254
1,091
—
21
141
—
0
892
418
109
214
151
1,378
547
830
—
4,703
—
4,703
—
1,683
46,314
Annual report 2021 357
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Capital requirements by geographical distribution
EUR million
Credit risk (excluding CRR)
o/w:
TOTAL EUROPE Spain
38,238
22,926
9,688
Of which: internal ratings-based (IRB) approach
A
16,684
13,090
5,789
21,032
9,193
3,208
1,530
5,548
4,667
6,146
3,918
o/w:
United
o/w:
Kingdom AMERICA o/w: US AMERICA Brazil
NORTH
SOUTH
5,824
4,320
—
95
1,306
426
55
1
2,515
216
—
187
—
6,831
1,320
—
138
1,175
205
108
1
3
—
—
2
—
5,205
540
7,592
1,530
5,103
1,241
—
67
470
56
1
1
2
—
—
—
—
—
54
—
11
1,472
1,229
62
57
—
2
—
1
1
—
—
54
—
—
—
—
—
—
24
—
—
—
—
17
491
516
54
76
2
12
—
—
—
160
—
15
—
—
123
692
—
—
15
—
—
114
674
846
16
10
—
—
126
975
776
13
—
—
—
103
399
2,631
2,280
2,167
1,714
792
281
10
—
6
—
—
586
241
10
—
—
—
—
962
304
88
—
—
—
7
279
196
16
—
—
—
—
—
—
—
—
125
78
—
8
38
—
—
—
—
—
114
104
—
1
9
—
—
—
—
—
67
60
—
1
5
—
131
345
310
14
14
—
546
—
546
—
11
11
—
1,170
—
1,170
—
11
11
—
879
—
879
—
—
—
—
—
177
153
—
6
17
—
11
340
103
237
1,149
—
1,149
—
—
—
—
—
127
111
—
6
9
—
11
96
96
—
622
—
622
—
Rest of
the world
888
745
—
131
389
49
1
1
8
—
14
203
—
144
9
—
—
—
—
6
23
96
1
3
—
—
5
—
—
1
—
—
—
—
4
2
—
—
2
—
2
—
—
—
383
—
383
—
—
776
9,428
1,345
1,593
232
—
454
6,392
1,029
1,427
231
3,650
3,636
373
578
372
564
1,562
1,356
85
85
—
92
3,586
362
1,226
222
884
98
388
435
85
2,073
1,058
903
25
29
—
—
367
3,450
7,868
2,614
957
111
13
20
17
12
3,475
1,358
178
428
753
1,254
1,091
—
21
141
—
741
8
4
—
—
113
1,760
2,973
860
370
13
13
8
17
5
4
—
—
—
59
329
324
180
156
2
—
1
6
—
1,358
1,358
178
428
753
959
832
—
14
113
—
383
178
428
753
701
670
—
1
31
—
114
653
60
594
834
—
834
—
1,378
1,027
547
830
433
594
4,703
2,001
—
4,703
—
—
2,001
—
1,992
1,245
337
838
746
644
421
Central governments and central banks
Institutions
Corporates
of which: Corporates - Specialized Lending
of which: Corporates – SME
Retail - Secured by real estate SME
Retail - Secured by real estate non-SME
Retail - Qualifying revolving
Retail - Other SME
Retail - Other non-SME
Other non-credit-obligation assets
Of which: standardized approach (SA)
Central governments or central banks
Regional governments or local authorities
Public sector entities
Multilateral Development Banks
International Organizations
Institutions
Corporates
Retail
Secured by mortgages on immovable property
Exposures in default
Items associated with particular high risk
Covered bonds
Claims on institutions and corporates with a short-
term credit assessment
Collective investments undertakings (CIU)
Equity exposures under risk weighted approach
Other items
Of which: Equity IRB
Simple method
Under the PD/LGD method
Equity exposures under risk weighted approach
Counterparty credit risk (CRR)
Of which: standardized approach
Of which: internal model method (IMM)
Of which: CCPs
Of which: CVA
Settlement risk
Securitization exposures in banking book (after cap)
Market risk
Of which: standardized approach
Of which: internal model method (IMM)
Operational risk
Of which: basic indicator approach
Of which: standardized approach
Of which: advanced measurement approach
Amounts below the thresholds for deduction and
other non-deducted investments (subject to 250%
risk weight)
Total
1,683
907
765
24
102
—
673
656
—
46,314
27,296 11,991
6,641
8,471
6,472
9,270
5,960
1,277
Note: Fully-loaded CRR, phased-in IFRS 9.
A. Including counterparty credit risk.
Annual report 2021 358
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This table presents the main changes to capital requirements by
credit risk:
Credit risk capital movements
EUR million
A
Starting amount (31/12/2020)
Asset size
Model updates
Regulatory
Acquisitions and disposals
Foreign exchange movements
Other
Ending amount (31/12/2021)
RWAs
487,745
(15,078)
4,407
14,058
(1,729)
11,482
—
Capital
requirements
39,020
(1,206)
353
1,125
(138)
919
—
500,884
40,071
A. Includes capital requirements from equity, securitizations and counterparty risk
(excluding CVA and CCP).
Credit risk RWAs increased EUR 13,139 million in 2021, largely driven
by exchange rate movements (+EUR 11,482 million), mainly due to
the USD's and GBP's appreciation. Regulatory changes (methodology
and policy) related to the implementation of the New Default
Definition and changes in the calculation of counterparty credit risk
exposure (SA-CCR) were also significant in the year. In models,
changes arose from TRIM (Targeted Review of Internal Models) in
Low Default Portfolios. In terms of asset size, of note was the impact
from securitizations the Group carried out in the year.
In short, from a qualitative point of view, Santander's solid capital
ratios are consistent with its business model, balance sheet structure
and risk profile.
Economic capital
Economic capital is the capital required to cover risks from our
activity with a certain level of solvency. We measure it through an
internal model. To calculate the required capital, we determine our
solvency level based on our long-term rating target of 'A' (above the
Kingdom of Spain's); this represents a confidence level of 99.95%
(above the regulatory level of 99.90%).
Our economic capital model measurements cover all significant risks
incurred in our activity (concentration risk, structural interest rate
risk, business risk, pensions risk, deferred tax assets (DTAs), goodwill
and others that are beyond the scope of regulatory Pillar 1). It also
considers diversification, which is key to determining and
understanding our risk profile and solvency in view of our
multinational operations and businesses.
Our total risk and related economic capital are less than the sum of
the risk and capital of all individual units combined. Because our
business spans several countries in a structure of separate legal
entities with different customer and product segments and risk
types, our earnings are less vulnerable to adverse situations for any
given market, portfolio, customer type or risk. Despite increasing
economic globalization, economic cycles are not the same and
countries are affected differently. This has been evident during the
covid-19 pandemic. Groups with a global presence tend to have
stabler results and are more resistant to the eventual market or
portfolio crises which translates into lower risk.
In contrast to regulatory criteria, we consider certain intangible
assets, such as DTAs or goodwill, to retain value, even in a
hypothetical resolution, owing to the geographic structure of our
subsidiaries. Thus, we can value assets and estimate their
unexpected loss and capital impact.
Economic capital is an essential tool for internal management and
the development of our strategy, assessing solvency and managing
portfolio and business risk. As such, it is a key part of the Supervisory
Review and Evaluation Process (SREP).
Regarding Basel Pillar 2, we use our economic model for the internal
capital adequacy assessment process (ICAAP). We plan business
progression and capital needs under a central scenario and
alternative stress scenarios to make sure we meet our solvency
objectives even in adverse scenarios.
Economic capital derived metrics help us assess risk-return
objectives, price operations based on risk, determine how
economically viable projects are, and value country units and
business lines to fulfil our overriding objective of maximizing
shareholder value.
As a homogeneous risk measure, we can use economic capital to
explain how we distribute risk throughout Santander, bringing
together different activities and risk types under a single metric.
Given its relevance to internal management, Santander includes
several economic capital-derived metrics from both a capital needs
and a risk-return point of view, within a conservative risk appetite
framework established at both Group and country unit level.
Required economic capital in December 2021 amounted to EUR
60,900 million. Compared to the available economic capital base of
EUR 88,790 million, this implies a capital surplus of EUR 27,890
million.
Annual report 2021 359
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Reconciliation of economic and regulatory capital
EUR million
The charts below show Group’s economic capital needs as at 31
December 2021, by region and risk type.
Net capital and issuance premiums
Reserves and retained profits
Valuation adjustments
Minority interests
Prudential filters
A
Other
Base economic capital available
Deductions
Goodwill
Other intangible assets
DTAs
Other
2021
55,683
62,357
2020
60,557
52,902
(34,395)
(35,345)
6,736
(637)
(954)
88,790
(16,922)
(13,911)
(2,153)
(859)
535
6,669
(592)
2,126
86,316
(16,337)
(13,621)
(2,090)
(627)
(580)
Base regulatory (FL CET1) capital
available
B
72,402
69,399
Base economic capital available
Economic capital required
Capital surplus D
C
88,790
60,900
27,890
86,316
60,386
25,931
A. Includes: deficit of provisions over economic expected loss, pension assets and
other adjustments.
B. Including IFRS 9 transitional arrangements.
C. For a better comparison with regulatory capital, the differences in goodwill due
to FX changes are included in the required economic capital. All figures
according to EC 2021 methodology.
D. If we include the pro forma impact of the transactions announced in December
2021 (-16 bp impact on the Group's CET1), the economic capital base would be
EUR 87,869 million and the excess capital EUR 26,969 million.
The main difference compared to regulatory CET1 is the treatment of
goodwill, other intangible assets and DTAs; we consider them
additional capital requirements rather than a deduction from
available capital.
Distribution of economic capital needs by type of risk
December 2021, %
Our distribution of economic capital among core business areas is an
indication of our business and risk diversification. Europe accounted
for 47% of capital needs; North America, 21%; South America, 22%;
and Digital Consumer Bank (DCB) 9%.
Outside our operating areas, the Corporate Centre mainly takes on
goodwill risk and structural exchange rate risk (from maintaining
stakes denominated in currencies other than the euro in foreign
subsidiaries).
The benefit from diversification included in the economic capital
model, including intra-risks (largely similar to geographic
diversification) and inter-risk diversification amounted to
approximately 25-30%.
Distribution of Group economic capital needs by region and risk type
EUR million. December 2021
Group. Total requirements: 60,900
Corporate Centre
16,042
Europe
21,242
North America
9,578
South America
9,872
DCB
4,166
All risks:
Goodwill
Market
DTAs
Other
All risks:
56 %
Credit
27 % Market
15 %
1 %
Pensions
ALM
Others
49 %
11 %
10 %
All risks:
Credit
Business
Fixed Assets
9 % Operational
21 % Others
Credit
Business
69 %
7 %
7 % DTAs
5 % Operational
12 % Others
All risks:
56 %
Credit
11 % Operational
7 %
7 %
Business
Fixed Assets
18 % Others
All risks:
68 %
7 %
7 %
5 %
12 %
Annual report 2021 360
Credit: 42%Goodwill: 15%Market: 12%DTAs: 6%Business: 5%ALM: 5%Operational: 5%Other: 10%
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RoRAC and Economic Value Added
Since 1993, Santander has been using risk-adjusted return (RoRAC)
methodology to:
• calculate economic capital consumption and return for business
units, segments, portfolios and customers, to optimize capital
allocation;
• measure the management of units through budgetary monitoring
of capital consumption and RoRAC; and
• analyse and set prices to make decisions on operations (approvals)
and customers (monitoring).
The RoRAC methodology helps us compare the return on operations,
customers, portfolios and businesses on a like-for-like basis. We can
identify what is obtaining a risk-adjusted return higher than its cost of
capital and thus align risk and business management to maximize
economic value added (EVA), which is senior management’s ultimate
goal.
We regularly assess the level and progression of EVA and RoRAC
across the Group. EVA is the profit generated above the cost of
economic capital employed, and is calculated as follows:
Economic Value Added = underlying consolidated profit – (average
economic capital x cost of capital)
We calculate profit by making the necessary adjustments to
consolidated profit to eliminate factors outside the ordinary course of
business and thus obtain each subsidiary’s underlying result for the
year.
Additionally, for internal management purposes, we analyse the
impact of items that are not covered by our economic capital model
but affect reserves without being included in the income statement.
The minimum return on capital a transaction must obtain is
determined by the cost of capital (i.e. the minimum compensation
required by shareholders). We calculate it by adding the premium
shareholders demand to invest in Santander to the risk-free return.
The premium depends essentially on the degree of volatility in our
share price with respect to market performance. Santander's cost of
capital in 2021 was 10.08% (compared to 12.00% in 2020 impacted
by higher volatility stemming from the covid-19 crisis).
On top of reviewing the cost of capital every year, Santander’s
management also estimates a cost of capital for each business unit
based on its features (under the philosophy that subsidiaries manage
capital and liquidity autonomously) to determine whether each
business is capable of creating standalone value.
If a transaction or portfolio obtains a positive return, it contributes to
our profits, but only adds economic value when that return exceeds
the cost of capital.
This table shows economic value added and RoRAC of the Group’s
main geographical segments at the end of December 2021. The
following figures reflect the economic value added in all the main
segments:
Economic Value Added
EUR million
A
and RoRAC
Main segments
Europe
North America
South America
Digital Consumer Bank
Total Group
2021
2020
RoRAC
12.1%
34.3%
30.4%
33.2%
15.0%
EVA
495
2,380
1,744
1,149
3,327
RoRAC
EVA
6.2%
(1,401)
15.0%
26.1%
33.8%
187
883
972
8.5%
(2,529)
A. The economic value added is calculated with the cost of capital of each unit. The
Group’s total RoRAC includes the operating units and the Corporate Centre,
reflecting the Group's economic capital and its return.
Capital planning and stress tests
Capital stress test exercises are a key tool in banks' dynamic
assessments of their risks and solvency. These forward-looking
reviews are based on unlikely-but-plausible macroeconomic and
idiosyncratic scenarios. They require robust planning models that can
translate the effects defined in the projected scenarios to elements
that affect solvency.
The ultimate aim of these exercises is to thoroughly assess risks and
solvency to determine capital requirements if a bank fails to meet its
regulatory and internal capital objectives.
Internally, Santander has a capital stress and planning process to
respond to various regulatory exercises which is a key tool integrated
within management and strategy.
Internal capital stress and planning aims to ensure sufficient current
and future capital, even in unlikely-but-plausible economic scenarios.
We estimate results in various business environments (including
severe recessions as well as expected macroeconomic
environments), based on our initial situation (financial statements,
capital base, risk parameters and regulatory and economic ratios) to
determine our solvency ratios, usually for a three-year period.
Planning offers a comprehensive view of our capital for the analysed
period and in each of the defined scenarios based on regulatory
capital and economic capital metrics.
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This chart describes the structure in place:
1
2
3
4
5
Macroeconomic
scenario
Balance sheet
and income statement forecasts
Capital requirements
forecasts
Solvency analysis
Idiosyncratic: based on specific risks the entity faces
• Central and recession
•
• Multi-year horizon
• Reverse stress tests
• Projection of volumes. Business strategy
• Margins and funding costs
• Fees and operating expenses
• Market shocks and operational losses
• Credit losses and provisions. PIT LGD and PD models
•
IFRS 9 models and migration among stages
• Consistent with projected balance sheet
• Regulatory and economic risk parameters (PD, LGD and EAD)
• Available capital base. Profits and dividends
• Regulatory and legislative impacts
• Capital and solvency ratios
• Compliance with capital objectives
• Regulatory and economic view
Action plan
•
In the event of failure to comply with internal objectives or regulatory
requirements
This structure supports the ultimate objective of capital planning, by
making it an important strategic element that:
• ensures current and future solvency, even in adverse economic
scenarios;
• ensures comprehensive capital management, analyses specific
effects and integrates them into strategic planning;
• enables a more efficient use of capital;
• helps formulate capital management strategy; and
• facilitates communication with the market and supervisors.
Senior managers are fully involved in and closely supervise capital
planning under a framework that ensures proper governance and is
subject to the robust levels of challenge, review and analysis.
In capital planning and stress analysis exercises, calculating the
required provisions under these 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 with 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. Our country units use it as an internal management tool,
particularly to respond to local regulatory requirements.
Since the beginning of the economic crisis in 2008, we have
undergone eight external stress tests. All proved our strength and
solvency in the most extreme and severe macroeconomic scenarios
showing that, owing to our business model and geographic
diversification, we would still be capable of generating a profit for
shareholders while satisfying the most demanding regulatory
requirements.
We have also conducted internal stress tests every year since 2008
as part of our ICAAP (Basel Pillar 2). Every test has proven our
capacity to confront the most difficult exercises on a global and local
level. These capital planning processes are carried out using shared
tools throughout the Group.
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Due to the special situation resulting from the covid-19 crisis, capital
planning capacities and stress tests have allowed us to analyse
various pandemic scenarios and ensure capital adequacy under the
various possible scenarios derived from the crisis.
In 2021, we incorporated the analysis of the potential impact of
climate risks (transition risk and physical risk) into the internal stress
exercises in addition to being expressly considered in the definition of
macroeconomic scenarios, in line with industry best practices and
supervisory expectations.
ECB/EBA 2021 stress test
In July 2021, the European Banking Authority (EBA) published the
results of the stress tests carried out on the European Union's 50
leading banks. As in the previous exercise, it did not impose any
minimum capital threshold to pass, rather the final results represent
an additional variable for the ECB to determine each bank’s minimum
capital requirement (as part of the Supervisory Review and
Evaluation Process - SREP). This exercise included two
macroeconomic scenarios (base and adverse), taking the banks’
end-2020 balance sheet positions as a starting point, with a
three-year time horizon (finishing in 2023). The very improbable
adverse scenario considers a sharp deterioration in the
macroeconomic environment and financial markets in Europe and
the other countries where we operate. For example, the simulation
included a cumulative fall in GDP of 3.6%, the impact of an increase
in unemployment to 12.1% and a cumulative decline in housing
prices of 16.1% in 2023 for the eurozone as a whole.
In the adverse scenario, Santander destroyed the least capital among
its peers. Our fully-loaded CET1 capital ratio fell 258 basis points (vs
the system average of -485 basis points) from 11.89% in 2020 to
9.31% in 2023.
Under the base scenario, Santander also generated the most capital
among its peers.
We also generated more profit than our peers and we were the only
bank not to incur a cumulative loss over the three-year horizon. In
short, we are more resilient than our peers in Europe due to our
highly recurrent revenue and profit, a testimony to the strength of
our business model and diversification.
Fully-loaded ratio 2020 vs. 2023
Adverse scenario. Basis points
Profit after tax (accumulated 3 years)
Adverse scenario. EUR million
Peer average
System
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Total Loss Absorbing Capacity (TLAC) and Minimum
Required Eligible Liabilities (MREL)
In November 2015, the FSB published the TLAC term sheet based on
the previously published principles for crisis management
frameworks. It aims to ensure global systemically important banks
(G- SIBs) will have the capacity to absorb losses and recapitalize as
required to maintain critical functions during and immediately after
resolution proceedings without compromising customer funds,
public funds or financial stability.
The TLAC term sheet requires each G-SIB to have an individually set
minimum TLAC level which is the greater of (a) 16% of risk-weighted
assets from 1 January 2019 and 18% from 1 January 2022, or (b) 6%
of the Basel III Tier 1 leverage ratio exposure measure from 1 January
2019, and 6.75% from 1 January 2022.
Some jurisdictions have already transposed the TLAC term sheet into
law (as is the case in Europe via the CRR 2 and BRRD 2, and in the US);
however, other jurisdictions where we operate (e.g. Brazil), have yet
to do so.
In Europe, the final texts of CRR 2 and BRRD 2, which amend the
resolution framework, were published in June 2019. One of the main
objectives of this revision was to implement the TLAC requirement in
Europe.
The CRR 2, which came into force in June 2019, dictates the
16%/18% minimum requirement for G-SIBs as set in the TLAC term
sheet. It must be made up of subordinated liabilities (with the
exception of a percentage of senior debt - 2.5%/3.5%).
As of 31 December 2021, the TLAC of the resolution group headed by
Banco Santander, S.A. stood at 26.86% of risk-weighted assets and
11.83% of the leverage ratio exposure.
The BRRD 2 was transposed into law in Spain in 2021.
G-SIBs also have a Pillar 2 requirement in addition to the minimum
CRR requirement, owing to the MREL methodology in the BRRD 2.
In December 2021, Banco de España formally communicated the
(binding) MREL requirement for the Banco Santander, S.A. Resolution
Group (sub-consolidated), which needed be met from 1 January
2022. It was set at highest of 29.85% of the Resolution Group’s
1
and 13.82% of the Resolution Group’s leverage ratio
RWAs
exposure, based on 31 December 2019 data.
As of 31 December 2021, Banco Santander, S.A. met its MREL
requirements having issued eligible instruments during the year.
Specifically, 35.35% of RWAs and 18.47% of the leverage ratio
exposure respectively.
Of the total MREL requirement, a minimum subordination level was
fixed as the larger of 9.04% of RWAs and 6.02% of the leverage ratio
exposure. However, the Resolution Group's minimum subordination
is determined by TLAC, not by MREL, as the TLAC subordination
requirement is greater In December 2021, the MREL subordinated
figures of the Resolution Group headed by Banco Santander, S.A.
were 32.22% and 16.83% respectively.
TLAC 2021
%
MREL 2021
%
A. The CBR of 2.79% is obtained by multiplying the 3.51% CBR by the post-MPE
Add-on RWAs and dividing the result by the Resolution Group’s total RWAs
1. When the requirement is set in terms of RWAs, the CET1 used to cover the combined capital buffers cannot be used to comply with the MREL requirement at the same time.
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3.6 Special Situations and Resolution
Corporate Special Situations and Resolution Framework,
crisis management, Recovery and Resolution Planning
This section summarizes the main developments in preparing for a
potential crisis, focusing on governance mechanisms, activities to
prepare and strengthen recovery plans, and initiatives relating to
preparing and improving resolvability plans.
Corporate framework for special situations and resolution
As part of our corporate frameworks that regulate the internal
governance of important matters that impact the Group's risk profile,
we updated the special situations and resolution corporate
framework. The board of directors ratified it in Q2 2021. Following
corporate level approval, country units now adhere to the updated
framework. The process of transposing and adapting the documents
of the new crisis management and resolution regulatory tree to local
requirements is being finalized.
The lessons learned so far from the covid-19 pandemic moved us to
make significant changes to the framework which focus on: (i) early
and pre-emptive identification of threats; (ii) coordination
mechanisms between units; (iii) simplifying governance procedures;
and (iv) promoting a crisis management preparation culture
internally, including preparation for resolution and improving
resolvability.
The framework enables our units, to comprehensively aggregate and
clearly interpret the different mechanisms for monitoring, escalating
and managing both financial and non-financial events as well as
governance. It helps link the different action plans (e.g. contingency
plans, business continuity plans, recovery plan, etc.).
We base crisis governance on a collective decision-making model,
that is organized into and operated under severity levels to facilitate
flexibility and sequential decision-making. For example, in the most
severe stages of a hypothetical crisis, the “Gold" committee,
composed of the Group’s main executives and supported by the
“Silver" forum and other specialist "Bronze" teams, would be the
leading decision-making body.
Furthermore, the framework aims to encourage (i) the sharing of
best practices between units; and (ii) the continuous collaboration
between local and corporate teams (including coordination in the
recovery and resolution planning phases) to continue developing our
management and control model in the most effective way.
Several training exercises were carried out in 2021, both at corporate
and local levels, facilitating the necessary dissemination of the
changes and collaborative discussions.
Regardless of these changes, Santander’s defining characteristic is its
pursuit of excellence. We regularly run simulation and testing
exercises to be better prepared for stress situations and to reinforce
the collective awareness and culture of the crisis management
function.
Recovery plans
Context. Santander drew up its twelfth corporate recovery plan in
2021. It sets out measures we have at our disposal to survive a very
severe crisis without extraordinary public aid, in accordance with
article 5.3 of the BRRD.
Its primary aim is to test the feasibility, effectiveness and credibility
of recovery measures as well as the suitability of the recovery
indicators and their respective thresholds, above which decision-
making will be escalated to cope with stress situations.
It sets out macroeconomic and financial crisis scenarios which
incorporate idiosyncratic and/or systemic events that could lead the
Group to trigger the plan.
The recovery plan should not be considered an instrument separate
from our structural mechanisms to measure, manage and supervise
risk. It includes the risk appetite framework (RAF), the risk appetite
statement (RAS), the risk profile assessment (RPA), the business
continuity management system (BCMS), the internal assessments of
capital and liquidity (ICAAP and ILAAP) and other tools. It is also
integrated into the Group's strategic plans.
Progress in 2021. In May, continuing the operational relief offered
last year in response to the covid-19 pandemic, the ECB asked banks
to focus efforts on the parts of the recovery plan that are essential for
crisis preparation and management. We therefore focused on
governance and escalation, indicators, measures and scenarios.
With regard to the scenarios, the ECB asked banks to develop two
stress scenarios related to the possible economic and financial
consequences of the covid-19 pandemic: one systemic and one
including an idiosyncratic element.
Like last year, and despite this easing of requirements, we prepared a
comprehensive plan in 2021 that comprised all chapters and fully
covered all of the ECB’s recommendations. Specifically:
• New special situations and resolution framework.
• Two new indicator categories (macroeconomic and market) and
new capital and asset quality indicators.
• New chapter explaining the Group’s subsidiary model and how
local crises in the subsidiaries could affect the consolidated capital
and liquidity ratios.
• Three stress scenarios to cover a wider range of crisis situations:
idiosyncratic, regional and combined (global crisis plus
idiosyncratic).
• Greater detail on total recovery capacity including a thorough
analysis showing recovery capacity in each time bucket.
• New recovery measures.
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The key takeaways from our review of the 2021 corporate plan
were:
• No material interdependencies between country units.
• Ample recovery capacity in all scenarios from available measures,
with an advantage in a recovery situation afforded by our
geographic diversification model.
• Sufficient capacity in each subsidiary to emerge from a recovery
situation on its own, strengthening capital and liquidity within our
autonomous subsidiaries model.
• Sufficiently robust governance to manage financial and non-
financial stresses varying in nature and intensity.
• Amid a serious financial or solvency event, no one subsidiary is
important enough to trigger the corporate plan by causing the
severest recovery indicator levels to be breached.
These factors prove our business model and geographic
diversification strategy, based on autonomous subsidiaries, remain
firm in a recovery situation.
Regulation and governance. Santander’s recovery plan complies
with EU regulations and follows the non-binding recommendations
of the Financial Stability Board (FSB) and other international bodies.
We submitted our latest plan to the Single Supervisory Mechanism in
October 2021; the EBA has six months to make formal
considerations.
It comprises the corporate plan (Banco Santander, S.A.) and local
plans for the UK, Brazil, Mexico, the US, Germany, Argentina, Chile,
Portugal, Norway and a recovery plan summary for Poland (as
required). All country units (except Santander Chile and SC Germany)
must draw up a local plan in compliance with local regulations and
corporate requirements.
Though the board of Banco Santander, S.A. approves the corporate
plan, relevant content and figures are previously submitted to and
discussed by the Silver forum, Gold committee, risk control
committee and the risk supervision, regulation and compliance
committee. Local plans are approved by corresponding local bodies
in coordination with the Group (as they are included in the corporate
plan).
Resolution plans
Santander cooperates with the relevant authorities to prepare
resolution plans, providing them with all information they request.
The members of the Crisis Management Group (CMG) upheld their
1
decision on our Multiple Point of Entry (MPE) strategy
to be used in a
hypothetical resolution.
This is based on our legal and business structure, organized into nine
resolution groups that can be resolved independently without
involving other parts of the organization.
Working meetings with the SRB and their communications (working
priorities letters) confirmed that there are no impediments to the
bank’s resolvability. In fact, the SRB highlighted the significant
progress the Group has made in recent years (especially in 2020 and
2021) to improve its resolvability.
In 2021, we prepared our first three-year multi-year plan. Banco
Santander, S.A.’s board of directors approved it in February 2021. It
set out the following actions:
1) Ensure the bank establishes processes and develops capabilities
to: (i) estimate liquidity needs for implementing the resolution
strategy; (ii) duly provide information regarding the liquidity
position in resolution; and (iii) identify and mobilize the available
collateral to obtain funding during and after resolution.
In 2021, we identified key liquidity entities (KLEs) that (i) provide
liquidity to other entities in the Group; (ii) depend on the liquidity
received from other entities in the Group; or (iii) perform liquidity
management functions for the Resolution Group.
We also identified the key liquidity drivers in resolution, which are
factors that could potentially trigger a substantial change or
deterioration in the bank's liquidity position in resolution.
Finally, we developed a methodology to identify, process and analyse
relevant data to estimate the liquidity position in resolution.
2) Ensure information systems can quickly provide the high-quality
information required in resolution.
We continued to make our governance of information provided to the
resolution authority for drawing up resolution plans stronger and
more systematic, including the following projects in 2021:
1. Automation of Santander Consumer Finance's liability data report
and additional liability report.
2. Automation of Banco Santander, S.A.’s TLAC/MREL reports.
3. Automated production of the necessary data to carry out a
valuation exercise in resolution.
4. Automated production of the dataset for bail-in.
1. With the exception of Santander US whose resolution plans correspond to the individual entities.
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3) Guarantee operational continuity in resolution situations.
In 2021, we identified essential services that support core business
lines, as well as their operational assets and critical personnel. We
also redrafted any service contracts that did not contain the
operational continuity clause to include said clause.
We continued to work on making contingency plans for market
infrastructure services more operational and executive.
4) Foster a culture of resolvability.
Santander continued to involve more senior managers in resolution
planning. We escalated the multi-year plan, which includes the
resolution work streams, to the board. We also presenting its
progress to other high-level committees (such as the Gold
committee, Silver forum, and other bodies). The board and senior
management also received resolution training in 2021.
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4. Financial information by segment
4.1 Description of segments
We base segment reporting on financial information presented to the
chief operating decision maker, which excludes certain statutory
results items that distort year-on-year comparisons and are not
considered for management reporting. This financial information
(underlying basis) is computed by adjusting reported results for the
effects of certain gains and losses (e.g. capital gains, write-downs,
impairment of goodwill, etc.). These gains and losses are items that
management and investors ordinarily identify and consider
separately to better understand the underlying trends in the business
(see also note 51.c to the Santander financial statements).
Santander has aligned the information in this chapter with the
underlying information used internally for management reporting
and with that presented in the Group's other public documents.
Santander's executive committee has been selected to be its chief
operating decision maker. The Group's operating segments reflect its
organizational and managerial structures. The executive committee
reviews internal reporting based on these segments to assess
performance and allocate resources.
The segments are split by geographic area in which profits are earned
and type of business. We prepare the information by aggregating the
figures for Santander’s various geographic areas and business units,
relating it to both the accounting data of the business units
integrated in each segment and that provided by management
information systems. The same general principles as those used in
the Group are applied.
On 9 April 2021, we announced that, starting and effective with the
financial information for the first quarter of 2021, we would carry out
a change in our reportable segments to reflect our new
organizational and management structure.
These changes in the reportable segments aim to align the segment
information with their management and have no impact on the
Group’s accounting figures.
a. Main changes in the composition of Santander's segments
made in April 2021
The main changes, which have been applied to management
information for all periods included in the consolidated financial
statements, are the following:
• Our fully-digital bank Openbank and the Open Digital Services
(ODS) platform, which were previously included in the
Santander Global Platform segment.
2. Santander Global Platform (SGP), which incorporated our global
digital services under a single unit, is no longer a primary segment.
Its activities have been distributed as follows:
• Openbank and Open Digital Services (ODS), which, as mentioned
above, are now included under the new Digital Consumer Bank
reporting segment.
• The business recorded in Global Payment Services (Merchant
Acquiring, International Trade and Consumer) has been
allocated to the three main geographic segments, Europe, North
America and South America, with no impact on the information
reported for each country.
Secondary segments
1. Creation of the PagoNxt segment, which incorporates simple and
accessible digital payment solutions to drive customer loyalty and
allows us to combine our most disruptive payment businesses into
a single autonomous company, providing global technology
solutions for our banks and new customers in the open market,
and which has been structured into three businesses, previously
included in SGP:
• Merchant Acquiring: acquiring solutions for merchants.
• International Trade: solutions for SMEs and companies
operating internationally.
• Consumer: payment solutions for individuals aimed at
underbanked populations.
2. Annual adjustment of the perimeter of the Global Customer
Relationship Model between Retail Banking and Santander
Corporate & Investment Banking and between Retail Banking and
Wealth Management & Insurance.
3. Elimination of the Santander Global Platform reporting segment:
• Openbank and ODS are now recorded in the Retail Banking
segment.
Primary segments
1. Creation of the new Digital Consumer Bank (DCB) segment, which
• The remaining Santander Global Platform businesses form the
new PagoNxt reporting segment.
includes:
• Santander Consumer Finance (SCF), previously included in the
Europe segment, and the consumer finance business in the
United Kingdom, previously recorded in the country.
The Group recasted the corresponding information of earlier periods
considering the changes included in this section. As stated above,
group consolidated figures remain unchanged.
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Santander Corporate & Investment Banking (SCIB): this business
reflects revenue from global corporate banking, investment banking
and markets worldwide including treasuries managed globally
(always after the appropriate distribution with Retail Banking
customers), as well as equity business.
Wealth Management & Insurance: includes the asset management
business (Santander Asset Management), the corporate unit of
Private Banking and International Private Banking in Miami and
Switzerland and the insurance business (Santander Insurance).
PagoNxt: this includes digital payment solutions, providing global
technology solutions for our banks and new customers in the open
market. It is structured in three businesses: Merchant Acquiring,
International Trade and Consumer.
In addition to these operating units, both primary and secondary
segments, the Group continues to maintain the area of Corporate
Centre, that includes the centralized activities relating to equity
stakes in financial companies, financial management of the
structural exchange rate position, assumed within the sphere of the
Group’s assets and liabilities committee, as well as management of
liquidity and of shareholders’ equity via issuances.
As the Group’s holding entity, this area manages all capital and
reserves and allocations of capital and liquidity with the rest of
businesses. It also incorporates goodwill impairment but not the
costs related to the Group’s central services (charged to the areas),
except for corporate and institutional expenses related to the Group’s
functioning.
b. Current composition of Group segments
Primary segments
This primary level of segmentation, which is based on the Group’s
management structure, comprises five reportable segments: four
operating areas plus the Corporate Centre. The operating areas are:
Europe: which comprises all business activity carried out in the
region, except that included in Digital Consumer Bank. Detailed
financial information is provided on Spain, the UK, Portugal and
Poland.
North America: which comprises all the business activities carried out
in Mexico and the US, which includes the holding company (SHUSA)
and the businesses of Santander Bank, Santander Consumer USA, the
specialized business unit Banco Santander International, Santander
Investment Securities (SIS) and the New York branch.
South America: includes all the financial activities carried out by
Santander through its banks and subsidiary banks in the region.
Detailed information is provided on Brazil, Chile, Argentina, Uruguay,
Peru and Colombia.
Digital Consumer Bank: includes Santander Consumer Finance, which
incorporates the entire consumer finance business in Europe,
Openbank and ODS.
Secondary segments
At this secondary level, Santander is structured into Retail Banking,
Santander Corporate & Investment Banking (SCIB), Wealth
Management & Insurance (WM&I) and PagoNxt.
Retail Banking: this covers all customer banking businesses,
including consumer finance, except those of corporate banking which
are managed through Santander Corporate & Investment Banking,
asset management, private banking and insurance, which are
managed by Wealth Management & Insurance. The results of the
hedging positions in each country are also included, conducted
within the sphere of their respective assets and liabilities
committees.
The businesses included in each of the primary segments in this report and the accounting principles under which their results
are presented here may differ from the businesses included and accounting principles applied in the financial information
separately prepared and disclosed by our subsidiaries (some of which are publicly listed) which in name or geographical
description may seem to correspond to the business areas covered in this report. Accordingly, the results of operations and
trends shown for our business areas in this document may differ materially from those of such subsidiaries.
As described in section 3 'Group financial performance' above, the results of our business areas presented below are provided on
the basis of underlying results only and generally including the impact of foreign exchange rate fluctuations. However, for a
better understanding of the changes in the performance of our business areas, we also provide and discuss the year-on-year
changes to our results excluding such exchange rate impacts.
The statements included in this section regarding Santander's competitiveness and that of its subsidiaries have been produced
by the Group based on public information (corporate websites of competing entities and information published by national
banking institutions).
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4.2 Summary of the Group's main business areas' income statements
2021
Main items of the underlying income statement
EUR million
Total
income
Net operating
income
Profit before
tax
Underlying
profit
attributable to
the parent
1,644
10,986
Primary segments
Europe
Spain
United Kingdom
Portugal
Poland
Other
North America
US
Mexico
Other
South America
Brazil
Chile
Argentina
Other
Digital Consumer Bank
Corporate Centre
TOTAL GROUP
Secondary segments
Retail Banking
Corporate & Investment Banking
Wealth Management & Insurance
PagoNxt
Corporate Centre
TOTAL GROUP
Net interest
income
10,952
3,994
4,431
751
1,049
726
8,204
5,405
2,799
0
11,323
7,875
1,984
1,070
395
4,281
(1,390)
33,370
31,389
2,995
375
1
(1,390)
33,370
Net fee
income
4,344
2,482
434
441
518
470
782
828
34
3,721
2,728
394
420
179
821
(28)
10,502
7,010
1,750
1,276
493
(28)
10,502
16,312
7,006
4,863
1,341
1,646
1,455
7,383
3,579
23
15,353
10,884
2,457
1,393
620
5,339
(1,586)
46,404
7,994
3,666
2,271
778
984
294
6,019
4,187
1,936
(104)
9,974
7,649
1,514
587
223
4,411
1,307
2,197
714
380
(187)
4,664
3,652
1,126
(114)
6,249
4,618
1,158
311
162
2,934
(1,931)
24,989
2,213
(2,277)
15,260
39,636
22,443
13,265
5,692
2,166
495
(1,586)
46,404
3,392
1,264
(178)
(1,931)
24,989
3,251
1,247
(227)
(2,277)
15,260
Underlying profit attributable to the parent distribution
A
2021
Underlying profit attributable to the parent. 2021
EUR million. % change YoY in constant euros
Europe
North
America
South
America
Digital
Consumer Bank
DCB
Global
businesses
A. As a % of operating areas. Excluding the Corporate Centre.
2,978
957
1,570
482
161
(191)
3,053
2,326
835
(108)
3,328
2,325
637
274
92
1,332
(2,037)
8,654
7,869
2,167
907
(253)
(2,037)
8,654
+288 %
+85 %
+42 %
+2 %
+230 %
+8 %
+21 %
+47 %
+73 %
+16 %
+26 %
+13 %
n.a.
Annual report 2021 370
Europe: 28%North America: 29%South America: 31%Digital Consumer Bank: 12%1,5709574821612,3268352,3256372741,3322,167907-253
Contents
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2020
Main items of the underlying income statement
EUR million
Primary segments
Europe
Spain
United Kingdom
Portugal
Poland
Other
North America
US
Mexico
Other
South America
Brazil
Chile
Argentina
Other
Digital Consumer Bank
Corporate Centre
TOTAL GROUP
Secondary segments
Retail Banking
Corporate & Investment Banking
Wealth Management & Insurance
PagoNxt
Corporate Centre
TOTAL GROUP
Net interest
income
9,911
3,957
3,504
787
1,037
627
8,470
5,645
2,825
1
10,723
7,625
1,787
912
399
4,263
(1,374)
31,994
30,056
2,918
394
(1)
(1,374)
31,994
Net fee
income
4,000
2,314
494
388
452
351
Total
income
14,673
6,782
3,980
1,296
1,524
1,090
1,684
11,034
889
772
24
3,589
2,824
335
273
158
771
(29)
10,015
6,987
1,542
1,153
362
(29)
10,015
7,360
3,651
23
14,868
10,866
2,263
1,128
611
5,166
(1,141)
44,600
38,022
5,332
2,030
356
(1,141)
44,600
Net operating
income
Profit before
tax
Underlying
profit
attributable to
the parent
6,398
3,175
1,441
706
895
181
6,357
4,281
2,098
(23)
9,511
7,325
1,363
496
327
2,837
(1,470)
23,633
20,736
3,294
1,159
(86)
(1,470)
23,633
2,084
1,413
715
508
483
370
8
2,307
1,250
1,082
(25)
5,267
4,045
785
200
238
1,929
(1,912)
9,674
7,866
2,689
1,132
(101)
(1,912)
9,674
517
391
338
162
5
1,472
731
762
(20)
2,907
2,113
432
179
183
1,133
(1,844)
5,081
4,420
1,798
823
(116)
(1,844)
5,081
Annual report 2021 371
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4.3 Primary segments
António Simões
Regional Head of Europe and
CEO of Santander Spain
Europe
Underlying attributable profit
EUR 2,978 Mn
“One Europe is about the fundamental
transformation of our business. In 2021, we laid the
foundations of that change and moving towards a
common operating model”
Strategy
Business performance
1
Results
1
Our strategy in Europe is to
maintain the focus on customer
experience and service quality,
while making the necessary
structural changes to develop a
common operating model
across the region
1. Excluding the exchange rate impact.
Strategy
Customer funds rose 6% driven
by retail deposits and mutual
funds. Loans and advances to
customers were 3% higher,
with strong growth in
individuals
Underlying attributable profit
rose 110% year-on-year
underpinned by NII and net fee
income growth, efficiency
improvement and the lower
cost of credit
The aim of One Santander is to create a better bank in Europe, that
our customers and employees feel a deep connection with while
delivering sustainable value to shareholders and society by:
• serving our customers better to grow our business, focusing on
capital efficient opportunities (including SCIB and WM&I),
simplifying our mass market value proposition, improving
customer experience and engaging with PagoNxt;
• making headway with our omnichannel strategy, redefining
customer interaction, accelerating our digital agenda and
maintaining close relationships through our teams; and
In 2021, we laid the foundations for our transformation, through
structure simplification, the convergence to our Everyday Banking
value proposition across the countries, the launch of a common app
in Spain, Portugal and Poland, and started to offer homogeneous
payment products. As a result, we:
• improved service quality, reflected in achieving a top 3 NPS position
in our core markets;
• increased revenue and improved efficiency 5.4 pp year-on-year;
and
• doubled Europe's return on equity in terms of underlying RoTE,
• creating a common operating model, to serve our businesses
from 3.6% in 2020 to 7.4% in 2021.
through shared technology platforms and automated operations,
leveraging shared services. This should enable us to become a
more agile organization with one aligned team across Europe.
Our ongoing structural changes aim to deliver revenue growth and
significant cost savings, resulting in positive operating jaws. This is
consistent with the commitment we announced in October 2020 to
deliver EUR 1 billion additional cost savings by 2022 year end.
Annual report 2021 372
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The strategy by country in 2021 was as follows:
Spain
United Kingdom
Economic activity picked up in the year, particularly reflected in
individuals.
We are delivering on our strategy, focusing on improved customer
loyalty.
• In individuals, higher demand for loans and positive trends in
protection insurance drove commercial dynamism. All of this was
channelled through our mobile app.
• In corporates, performance was largely shaped by ICO loans
granted in 2020, coupled with the integrated management
platform for Next Generation EU programmes (available to
customers and non-customers).
• In Private Banking, we consolidated our position as market leader
through customer attraction and digital interaction.
• In SCIB, we maintained our leadership in volumes and number of
transactions in the main league tables.
In line with One Santander's regional strategy in Europe, we
continued to make headway with business transformation and
product simplification.
We incorporated the more than 3,000 MAPFRE points of sale where
our products are offered. We also launched the rebranding campaign
Por ti, los primeros.
We continued to push our digital transformation process and develop
new product, services and process capabilities. Our app for
individuals, rolled out in 2020, led the Aqmetrix ranking and was
successfully exported to other countries such as Portugal and Poland.
We also launched a new app and website for businesses, including a
wider service proposition. As a result, Euromoney named us Best
Digital Bank in Western Europe in 2021.
We continued to enhance our operating model, by digitalizing the
business while simplifying its structure and automating processes.
• The number of digital customers reached 6.6 million, up 6%
year-on-year.
• We completed the transfer of the wholesale banking business
out of the UK perimeter, separating it from the retail banking and
asset management businesses.
• We enhanced our Breakthrough initiative that helps companies
(mainly SMEs) to re-focus their strategies post-pandemic.
We continued to run One Santander-related projects, such as the
Transformation for Success programme aimed at boosting
productivity.
Portugal
Against a backdrop of economic recovery, our main priority was to
increase customer loyalty by:
• implementing a more agile and simpler commercial and digital
transformation plan, that built on already high customer
satisfaction;
• strengthening our position as the leading bank in lending,
following double-digit growth in new mortgage lending and
above-market increases in corporate loans, while maintaining
high credit quality; and
• maintaining our leadership in efficiency without compromising
quality customer service.
Loyal
Customers
Thousands
YoY
Digital
Customers
Thousands
YoY
Europe
10,286
+3%
Europe
16,216
+6%
Spain
2,772
+5%
Spain
5,412
+3%
UK
Portugal
4,389
-1%
860
+6%
UK
Portugal
6,635
+6%
1,000
+7%
Poland
2,266
+7%
Poland
2,998
+9%
.
Annual report 2021 373
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Poland
Following the impact of the covid-19 crisis in 2020, we focused on
returning to pre-pandemic activity levels and to position our brand as
one of the banks with the highest customer satisfaction ratings,
ranking top 3 in 2021 by NPS.
• We focused on digitalizing and simplifying our catalogue, which
reduced the number of marketed products, processes and the
complexity of the organization.
• In retail banking, we streamlined online processes for account
openings which led to an increase in the number of digital
customers (+9% year-on-year) and record new lending.
• In business and corporate banking, we focused on the
development of the iBiznes24 app (launched in 2020) and used it
to build a common platform to offer comprehensive services to
our customers.
Customer deposits increased by 6% compared to 2020. Excluding
repurchase agreements and the FX impact, they were up 5%, as
demand deposits offset the drop in time deposits.
Mutual funds grew 16% in constant euros, with broad-based growth
across countries, with customer funds up 6% (excluding the
exchange rate impact).
Results
Underlying attributable profit in 2021 was EUR 2,978 million (28% of
the Group's total operating areas). Compared to 2020, underlying
attributable profit was up 111% and +110% in constant euros, as
follows:
• Total income was up 11%, with increased net interest income
(+10%), benefitting from higher volumes, interest rate
management and the positive TLTRO impact. Net fee income rose
9% spurred by greater commercial activity and business growth in
WM&I and CIB.
Business performance
The individuals segment recorded sharp growth in all countries. In
line with our strategy, WM&I also grew strongly and CIB increased its
revenue at double-digit rates.
• Despite inflation, increased activity and necessary investments in
IT, significant restructuring efforts in all countries and cost control
left administrative expenses and amortizations flat by year-end. As
a result, net operating income rose 24%.
Loans and advances to customers were 5% higher year-on-year. In
gross terms, excluding reverse repurchase agreements and the
exchange rate impact, they rose 3%. We saw broad-based growth in
all countries especially in mortgages in the UK, individuals in Spain,
mortgages and SMEs in Portugal and individuals, SMEs and CIB in
Poland.
• Net loan-loss provisions dropped 32% compared to 2020, due to
covid-19-related provisions recorded in 2020 that were partially
released in 2021.
• Other gains (losses) and provisions increased 32%, mainly due to
Swiss franc mortgage-related charges.
Europe. Business performance.
December 2021. EUR billion and YoY % change in constant euros
Europe. Underlying income statement
EUR million and % change
576 +3%
712 +6%
Revenue
Expenses
2021
2020
16,312
14,673
-8,318
-8,275
Net operating income
7,994
6,398
/ 2020
% % excl. FX
+11
+1
+25
-31
+11
0
+24
-32
LLPs
PBT
-2,294
-3,344
4,411
2,084
+112
+111
Gross loans and advances to
customers excl. reverse repos
Customer deposits excl.
repos + mutual funds
Detailed financial information in section 4.6 'Appendix'
Underlying attrib. profit
2,978
1,413
+111
+110
Annual report 2021 374
+0.4%+0.5%+3%+6%+8%+0.1%+8%+10%
Contents
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Spain
Underlying attributable profit
EUR 957 Mn
United
Kingdom
Underlying attributable profit
EUR 1,570 Mn
Business performance
Activity in the individuals segment picked up in 2021, especially in
residential mortgages (where we reached record highs in new
lending), and in consumer credit (which recovered to pre-pandemic
levels in Q2). As a result, we gained market share in both products.
In corporates, signs of recovery emerged in H2'21, with growth in
working capital management (+15% year-on-year). However, the
demand for loans slumped due to the extensions of grace periods in
ICO funding and expectations regarding the Next Generation EU
funds.
In transactional products, we gained significant market share and
expanded our customer base in PoS, which was reflected in a 44%
increase in turnover compared to the previous year. Both credit and
debit card turnover rose 17% year-on-year.
Loans and advances to customers rose 0.4% versus 2020. In gross
terms, excluding reverse repurchase agreements, growth was also
0.4%, driven by individuals and institutions.
Customer deposits increased 5% compared to 2020. Excluding repos,
growth was also 5%. Mutual funds grew 16% driven by sustained net
positive inflows in the last seven quarters. Customer funds rose 8%.
Results
Underlying attributable profit amounted to EUR 957 million (9% of
the Group’s total operating areas), 85% higher than 2020. By line:
• Total income increased 3% propelled by the positive performance
in net fee income (+7%), driven by transactional fees, insurance,
and mutual funds, and, to a lesser extent, net interest income
(+1%), supported by TLTROs.
• Our cost reduction efforts continued to bear fruit (-7% year-on-
year), improving the efficiency ratio by 5.5 pp to 47.7%. Net
operating income increased 15%.
• Net loan-loss provisions fell 8%, which enabled the cost of credit
to improve 9 bps year-on-year.
• Other gains (losses) and provisions increased due to higher
operational risks and contingencies.
Business performance
We delivered a very strong performance in 2021 against a
challenging backdrop. Our strategy remains focused on customer
loyalty, simplification, improved efficiency and sustainable growth,
while delivering outstanding customer experience. We are
transforming the business to meet changing customer needs and
delivering on our purpose to help people and businesses prosper.
The increasing use of digital channels is demonstrated by our
retention of 72% of refinanced mortgage loans thanks to new digital
retention journeys, and we opened 90% of new current accounts and
98% of credit cards through digital channels. We also transformed
our ways of working and reduced our head office and branch
property estate.
Strong mortgage growth, with GBP 7.5 bn net mortgage lending
(GBP 30.7 bn of gross new lending) in a buoyant housing market. This
performance was not reflected in total lending balances due to the
transfer of the CIB business to the London branch. In gross terms
excluding repos and the FX impact, loans and advances to customers
were 0.5% higher.
Customer deposits rose 5%. Excluding repurchase agreements and
the exchange rate impact, customer deposits and total customer
funds saw no material change. Mutual funds were 6% higher.
Results
Underlying attributable profit was EUR 1,570 million in 2021 (15% of
the Group’s total operating areas), four times that of 2020. In
constant euros, growth was 288%, as follows:
• Total income was up 18%, driven by net interest income growth
(+22%) from increased lending volumes and lower cost of funding.
• Administrative expenses and amortizations dropped 1%, due to
efficiency savings from our transformation programme, offsetting
ongoing investments in IT and the business, as well as costs
related to greater activity. As a result, net operating income was up
52%.
• We recorded a net credit impairment write-back of EUR 245
million, due to the improved economic outlook and partial release
of covid-19 provisions from 2020.
• The negative impact from other gains (losses) and provisions
increased compared to 2020, owing to legal contingencies.
Spain. Underlying income statement
EUR million and % change
United Kingdom. Underlying income statement
EUR million and % change
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
2021
2020
7,006
6,782
-3,340
-3,607
3,666
3,175
-1,833
-2,001
1,307
957
715
517
/ 2020
%
+3
-7
+15
-8
+83
2021
2020
% % excl. FX
/ 2020
Revenue
Expenses
4,863
3,980
-2,592
-2,539
Net operating income
2,271
1,441
LLPs
PBT
+85
Underlying attrib. profit
245
-677
2,197
1,570
508
391
+22
+2
+58
—
+332
+301
+18
-1
+52
—
+318
+288
Detailed financial information in section 4.6 'Appendix'
Detailed financial information in section 4.6 'Appendix'
Annual report 2021 375
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Portugal
Underlying attributable profit
EUR 482 Mn
Poland
Underlying attributable profit
EUR 161 Mn
Business performance
Our digitalization-led transformation strategy was reflected in the
number of digital customers (+7%). The simplification of our
processes and commercial proposition drove double-digit growth in
new mortgage lending and above-market increases in corporate
loans, reaching new lending market shares greater than 20%.
Loans and advances to customers rose 3%, as well as in gross terms
and excluding reverse repurchase agreements, while the NPL ratio
improved to 3.4%.
We focused on ensuring the funds we capture are efficient in terms
of costs and return on capital, recording strong growth in both
mutual funds and insurance premiums.
Customer deposits increased 6% boosted by the jump in demand
deposits. Mutual funds grew 33%. As a result, customer funds
increased 8% versus 2020.
Results
Underlying attributable profit amounted to EUR 482 million (5% of
the Group’s total operating areas), 42% more year-on-year, backed
by our efficiency (42%) and improved cost of credit.
• Total income was up 3%, underpinned by net fee income (+14%)
that was boosted by transactional fees, insurance and mutual
funds, and ALCO portfolio sales.
• We continued to implement our operating model transformation
plan and improve the productivity of our network, leading to a 5%
reduction in administrative expenses and amortizations. As a
result, net operating income rose 10%.
• Credit quality improvement enabled loan-loss provisions to fall to
Business performance
In 2021, we focused on recovering pre-pandemic levels. We rapidly
enhanced our digital capabilities, regaining the third position in NPS,
and aligned our commercial proposition with our customers' needs.
Loans and advances to customers rose 6%. In gross terms, excluding
reverse repurchase agreements and exchange rate impact, growth
was also 6%, driven by retail, where we hit record highs in mortgage
sales, digital loans, bancassurance and SME lending. In CIB, we
consolidated our market leadership as one of the country's preferred
banks for executing capital market transactions.
Customer deposits increased 9% compared to 2020, +10% excluding
repos and the exchange rate impact. Demand deposits spiked in
wholesale banking, individuals and SMEs. Mutual fund growth
remained positive, boosting growth in customer funds (+10% in
constant euros).
Results
Underlying attributable profit amounted to EUR 161 million (2% of
the Group’s total operating areas). Compared to 2020, profit dropped
1% but grew 2% in constant euros, as follows:
• Total income was 11% higher driven by transactional and WM&I
fee income, and net interest income, as NII pressures eased
following interest rate hikes in Q4.
• Administrative expenses and amortizations were up 8% affected
by high inflation and costs related to the rebound in activity. Net
operating income rose 13%.
• Loan-loss provisions plummeted, which enabled cost of credit to
improve.
EUR 38 million, driving the cost of credit to a low of 9 bps.
• The negative impact from other gains (losses) and provisions
• Other gains (losses) and provisions amounted to a loss of -EUR 26
million compared to -EUR 29 million in 2020.
(including the charges related to Swiss franc mortgages which
distort the year-on-year comparison) increased 113% to -EUR 404
million.
Portugal. Underlying income statement
EUR million and % change
Poland. Underlying income statement
EUR million and % change
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
2021
2020
1,341
1,296
-563
778
-38
714
482
-590
706
-193
483
338
/ 2020
%
+3
-5
+10
-80
+48
+42
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
161
2021
2020
1,646
1,524
-663
984
-200
380
-629
895
-330
370
162
/ 2020
% % excl. FX
+8
+5
+10
-39
+3
-1
+11
+8
+13
-38
+6
+2
Detailed financial information in section 4.6 'Appendix'
Detailed financial information in section 4.6 'Appendix'
Annual report 2021 376
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North America
Underlying attributable profit
EUR 3,053 Mn
"We provide a full range of financial services
with particular focus on retail, private and
corporate banking"
Héctor Grisi Checa
Regional Head of North America and
CEO of Santander México
Strategy
Business performance
1
Results
1
In North America, the Group's
strategy is to accelerate
profitable growth in the
region, increase collaboration
between countries, create a
joint value proposition and
implement local priorities
Customer funds surged 9%
boosted by retail and
corporate deposits in the US
and mutual funds. Loans and
advances to customers
increased 3%, driven by
overall growth in Mexico and
in auto in the US
1. Excluding the exchange rates impact.
Underlying attributable profit
surged 109% year-on-year,
driven largely by higher
revenue in the US and lower
LLPs in the region
Strategy
In North America, our aim is to create a joint value proposition that
boosts profitable growth in the region by leveraging the US's and
Mexico's individual strengths and the Group’s global digital
platforms.
In 2021, we continued with our strategy to deploy capital to the most
profitable businesses.
• In Q1, the Group announced its intention to repurchase the
outstanding c. 8.3% stake in Santander México it did not own. This
transaction closed in Q4 with the Group having paid MXN 5.17 bn
for Santander México shares and USD 138.5 million for its ADSs
acquired in this operation, increasing its stake by 4.5% to 96.2%.
• In Q2, BSI completed the acquisition of the Miami office of Crédit
Agricole's global wealth management company.
• In Q3, SHUSA entered into a definitive agreement with SC USA to
acquire the remaining common SC USA stock that it did not own.
This deal closed on 31 January 2022.
• Also in Q3, SHUSA reached an agreement to acquire Amherst
Pierpont Securities however it remains subject to completion,
regulatory approval and other conditions.
Synergies between countries leverage joint initiatives in our regional
strategy, including:
• further development of the USMX trade corridor. Revenue
increased as CIB and Commercial Banking continued to deepen
relationships with existing customers;
• boosting customer attraction and retention through loyalty
strategies, while broadening our tailored products and services
proposition for a more straightforward customer experience. We
are also working on developing payment solutions for the USMX
trade corridor and leveraging PagoNxt in line with the Group’s
strategy;
• improved customer interaction through new segmentation. In the
US, we launched a value proposition aimed at servicing affluent
customers. In Mexico, we implemented a service model for high-
income customers differentiating the value proposition into three
segments for a more customer-focused experience; and
• leveraging our regional capabilities to optimize expenses, improve
profitability and increase collaboration between the US and Mexico
and with the Group and continue reducing duplication in the
operating model, platform and architecture.
We are also consolidating IT functions across the region to address
common challenges, comprising operations (know-how,
digitalization, hubs, front-office and back-office) and the integration
of the regional IT platform, MEXUS.
Annual report 2021 377
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Our strategy by country in 2021 was as follows:
United States
Mexico
Santander US is positioned to maintain profitability above cost of
capital across core businesses.
We are refocusing our operations in the US around our consumer
franchise and fee-based businesses that benefit from the Group’s
connectivity or have a distinct competitive advantage.
The simplification of our US businesses anchored in disciplined
expense management and capital allocation is leading us to
discontinue our home lending product operations and to review
certain C&I segments.
The strategic investments we announced in 2021 will improve our
competitiveness and capture revenue and cost synergies (Amherst
Pierpont and SC USA minorities).
Our strategy has four key pillars:
• Simplify our operating model (One Santander US): optimize our
Auto business by integrating our origination and funding strategy
across our bank and finance company platforms.
• Drive organic growth across our profitable business lines:
– Consumer: Become a more relevant player in auto near-prime
and prime segments through other OEM partnerships and
relationships with large national dealer groups.
– Commercial: Expand multifamily direct origination capabilities.
– CIB: Deepen and up tier relationships with corporates;
successfully integrate APS/SIS.
– Wealth Management: Offshore market growth and capabilities
to compete in the onshore market for Latin American
individuals domiciled in the US.
• Transformation of Consumer and Commercial Banking
segments: Enhance value proposition, customer service and
digital capabilities and drive a customer-centric mindset across
the organization to deliver customer growth and product
penetration.
• Long term optionality: global Group initiatives to drive
optionality in digital banking and payments.
Multichannel innovation and digital channel momentum
continued to strengthen our value proposition and introduce new
products and services, allowing us to improve our customer
attraction and loyalty strategy.
• We continued to make headway with projects to generate
synergies between commercial areas, in particular the project
to increase profitability through the attraction of new payrolls
and portabilities. We also improved our value proposition for
collections and payments through new commercial alliances.
• Our digital focus prompted campaigns to promote the use of
electronic signatures and digital cards, such as the Like-U credit
card, which allows customers to make online purchases, tailor
benefits and support social causes.
• We strengthening our real-time capabilities and implementing
direct communication via WhatsApp to provide more direct and
fluid digital customer assistance.
• We confirmed a deal to partner with Samsung and MasterCard
and launched Members Wallet, which includes such services as
financing, payments, and balance and movement queries.
In mortgages, we are one of the main originators due to our
innovative products and services, such as Hipoteca Plus and
Hipoteca Free. We were the first bank in Mexico to offer an interest
rate tailored to the customer’s profile.
In auto, we doubled our market share in one year. It exceeded 12%
in December, due in part to a new alliance with Honda (together
with the already established partnerships with Mazda, Tesla,
Suzuki, Peugeot, among others).
In SMEs, partnerships with Contpaqi and Getnet helped attract
digital customers. We launched Getnet’s G Store, an initiative that
enables SMEs to digitalize their business through an online store,
developed by a professional team. We signed commercial alliances
with the main chambers of commerce and launched TDC Agro
which provides financing adapted to production cycles.
We continued to promote financial inclusion and empowerment
through Tuiio. We were named World’s Best Bank for Financial
Inclusion by Euromoney.
Loyal
customers
Thousands
YoY
Digital
customers
Thousands
YoY
North America
United States
Mexico
4,226
+7%
373
+8%
3,853
+7%
North America
United States
Mexico
6,706
+9%
1,036
+2%
5,499
+10%
Annual report 2021 378
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and compliance
Business performance
Results
Loans and advances to customers grew strongly year-on-year, up
14%. In gross terms, excluding reverse repurchase agreements and
the exchange rate impact, they rose 3% boosted by overall growth in
Mexico (except SMEs) and lending growth in auto in the US. Without
the impact of the Bluestem portfolio disposal, growth was 4%.
Customer deposits grew significantly compared to 2020 (+19%).
Excluding repurchase agreements and the exchange rate impact,
growth was 7% driven by retail and corporate deposits in the US and
demand deposits in Mexico.
Mutual funds were up 15% in constant euros owing to our strong
performances in both countries, reflecting the high level of liquidity
in the market and success with our customer attraction and loyalty
strategy. As a result, customer funds increased 9% in constant euros.
North America. Business performance
December 2021. EUR billion and YoY % change in constant euros A
134 +4%
137 +9%
Underlying attributable profit in 2021 was EUR 3,053 million (29% of
the Group's total operating areas).
Compared to 2020, underlying attributable profit more than doubled;
+107% in euros (+109% in constant euros). The year-on-year
comparison by line was distorted due to the impact of the Bluestem
portfolio and Puerto Rico disposals. Without them and the exchange
rate impact, growth was 111%, as follows:
• Total income was up 5%. Net interest income grew 3% as price
management and hedging in the US more than offset lower net
interest income in Mexico due to the negative impact of lower
interest rates and ALCO portfolio sales in 2020. Net fee income
grew 6% and leasing results increased 48%;
• Administrative expenses and amortizations rose 10% primarily due
to inflation and investments in digitalization. The efficiency ratio
stood around 46%;
• As a result, net operating income increased 2%;
• Net loan-loss provisions plummeted 66% due to better market
outlooks and a healthier operating environment, following heavy
covid-19-related provisioning in 2020. The cost of credit improved
notably to 0.93%, the NPL ratio stood at 2.42% and coverage was
135%; and
• Other gains (losses) and provisions were more negative in 2021
mainly due to the early amortization of buildings and integration
costs in the US.
North America. Underlying income statement
EUR million and % change
2021
2020
% % excl. FX
/ 2020
Revenue
Expenses
10,986
11,034
-4,967
-4,677
Net operating income
6,019
6,357
0
+6
-5
+1
+8
-4
LLPs
PBT
-1,210
-3,917
-69
-68
4,664
2,307
+102
+105
Underlying attrib. profit
3,053
1,472
+107
+109
Gross loans and advances to
customers excl. reverse repos
Customer deposits excl.
repos + mutual funds
Detailed financial information in section 4.6 'Appendix'
A. Excluding Bluestem portfolio impact.
Annual report 2021 379
+3%+8%+10%+6%
Contents
Responsible
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Economic and
financial review
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and compliance
United States
Underlying attributable profit
EUR 2,326 Mn
Mexico
Underlying attributable profit
EUR 835 Mn
Business performance
Loans and advances to customers increased 14% compared to 2020.
In gross terms and excluding reverse repurchase agreements and the
impacts of both the exchange rate and the Bluestem portfolio
disposal, they grew 3% year-on-year as lending growth in CIB and
auto more than offset tepid corporate demand. Considering the
Bluestem portfolio disposal impact, loans increased 2%.
Business performance
Loans and advances to customers increased 15% year-on-year. In
gross terms and excluding reverse repurchase agreements and the
exchange rate impact, they climbed 8% year-on-year, driven by loans
to individuals (mortgages +13%, consumption +17% and cards +3%)
as well as corporates (companies +4% and CIB +14% offset a 15%
decline in SMEs).
Auto originations climbed 13% versus 2020 as our consumer
business further leveraged its strong deposit base to support
originations across the full credit spectrum.
Customer deposits soared 23% year-on-year. Excluding repurchase
agreements and the exchange rate impact, customer deposits grew
strongly (8% higher), boosted by retail deposits.
Mutual funds also increased 23% excluding the exchange rate
impact.
Customer deposits grew 9% year-on-year. Excluding repos and the
impact of exchange rates, they rose by 5%, propelled by demand
deposits (+8%).
Mutual funds were up 8% in constant euros, a sign of the success of
our customer attraction and loyalty strategies, as well as efforts to
reduce the cost of funding.
Results
Results
Underlying attributable profit in the year was EUR 2,326 million (22%
of the Group's total operating areas), up 218% year-on-year in euros.
On a like-for-like basis, excluding the Puerto Rico and Bluestem
portfolio disposals and the exchange rate impact, growth was 237%.
By line, excluding divestiture impacts:
• Total income was up 11%. Though net interest income growth
was impacted by loan volumes and interest rate pressure, it still
increased 5% due to focused deposit price management. Net fee
income increased 6% due to CIB and Wealth Management. Other
operating income improved 53%, primarily due to outstanding
auto lease results;
• Administrative expenses and amortizations increased 10% due to
increased activity and investments in strategic initiatives (such as
digital transformation), as well as a USD 60 million donation to our
community foundation in Q3 and Q4. Excluding the latter, costs
rose 8%, resulting in a 3 pp increase in operating leverage;
• Net loan-loss provisions plummeted 85% on the back of lower net
charge-offs, better macroeconomic conditions and strong used
vehicle prices;
• The negative impact of other gains (losses) and provisions
increased by 31%, mainly due to the early amortization of
buildings and integration costs.
Underlying attributable profit in 2021 was EUR 835 million (8% of
the Group’s total operating areas), 10% higher than 2020. Excluding
the exchange rate impact, it increased 8%. By line:
• Total income fell 4%, impacted by lower gains on financial
transactions (sales of ALCO portfolios in 2020) and net interest
income (-2%), the latter a result of interest rate cuts and lower
ALCO portfolio volumes. Net fee income increased by 6%, mainly
due to transactional fees and insurance;
• Administrative expenses and amortizations increased 4%, well
below inflation, mainly driven by technology costs and the
increase in amortizations;
• As we move to a more normal operating environment, net loan-
loss provisions were down 21%, following the high levels
recorded in 2020 due to the pandemic;
• Other gains (losses) and provisions improved 49% mainly due to
the sale of foreclosed assets and lower contingencies charges.
United States. Underlying income statement
EUR million and % change
Mexico. Underlying income statement
EUR million and % change
Revenue
Expenses
2021
2020
7,383
7,360
-3,197
-3,079
Net operating income
4,187
4,281
LLPs
PBT
-419
-2,937
3,652
1,250
Underlying attrib. profit
2,326
731
/ 2020
% % excl. FX
0
+4
-2
-86
+192
+218
+4
+8
+1
-85
+203
+230
Revenue
Expenses
2021
2020
3,579
3,651
-1,643
-1,552
Net operating income
1,936
2,098
LLPs
PBT
-791
-979
1,126
1,082
Underlying attrib. profit
835
762
/ 2020
% % excl. FX
-2
+6
-8
-19
+4
+10
-4
+4
-9
-21
+2
+8
Detailed financial information in section 4.6 'Appendix
Detailed financial information in section 4.6 'Appendix
Annual report 2021 380
Contents
Responsible
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Corporate
governance
Economic and
financial review
Risk management
and compliance
South America
Underlying attributable profit
EUR 3,328 Mn
"We remain leaders in the region with a unique
footprint that is bolstered by the Group's assets. We
reaffirm our commitment to society, sustainability and
shareholders by delivering profitable growth"
Carlos Rey
Regional Head of South America
Strategy
Business performance
1
Results
1
We continued to focus on
delivering profitable growth,
increasing customer loyalty and
acquisition, and controlling risks
and costs amid high inflation
The innovation of our products
and services led to double-digit
growth in loans and advances to
customers and customer
deposits. We are rolling out ESG
initiatives in the region
Underlying attributable profit
rose 24% year-on-year, driven
by higher customer revenue,
efficiency improvement and
lower LLPs
1. Excluding the exchange rate impact.
Strategy
South America continued to show high growth potential and
opportunities for banking penetration and financial inclusion
progress. In this environment, we remained focused on growing our
customer base by leveraging business opportunities, exchanging
successful experiences across countries and boosting digitalization
and customer loyalty.
We continued to generate synergies across business units according
to our strategy:
• In consumer finance, Santander Brasil exported its new and used
vehicle financing platform to other countries. We are also rolling
out Cockpit in Chile, Argentina and Peru. We also made progress in
Argentina and Peru on expanding the digital strategy for consumer
credit and used vehicle finance. Santander Chile recorded strong
insurance sales and in Uruguay, our consumer finance entity
exceeded pre-pandemic growth.
• In payment methods, we focused on e-commerce strategies and
on instant domestic and international transfers. We continued to
consolidate Getnet in Brazil and expand it to other countries, based
on Santander Brasil's successful model; its market share is above
15% and in 33% e-commerce. In Chile, we reached 20% market
share in PoS in just 10 months. We are also Argentina's second
largest company in payments processing.
• We continued to make headway in joint initiatives between CIB and
corporates to deepen relations with multinational clients. That
helped boost loyalty and customer acquisition in every market,
(especially in Chile and Argentina).
• We continued to promote inclusive and sustainable businesses,
such as Prospera, our micro-credit programme in Brazil (with
708,000 active customers), Uruguay (10,000 entrepreneurs) and
Colombia (in 167 municipalities). We also launched a microfinance
entity, Surgir, in Peru; a green SME product in Chile and the first
vehicle loan that seeks to offset emissions by acquiring neutral
carbon credits in Uruguay. In Argentina, we partnered with a major
energy provider on renewable energy financing.
As a result, we were named the Best Bank for Sustainable Finance in
Latin America in 2021 by Euromoney. Santander Chile was
recognized by Global Finance as Outstanding Leader in Sustainable
Finance in Latin America (alongside Santander México).
Our customer service enhancement initiatives and our expanded
product and service proposition earned us a top 3 NPS position in four
markets, plus substantial customer growth in the region.
Annual report 2021 381
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and compliance
The main initiatives by country were:
• Autocompara, driven by increased vehicle sales, achieved 17%
Brazil
The strong dynamics of our commercial proposition resulted in an
all-time high customer acquisition in 2021. By segment:
• Excellent performance in mortgages, with a 24% new lending
market share in home equity.
• In cards, we reached record-high customer acquisition and credit
turnover (+28%).
• Santander vehicles remained a market leader with a 19% share,
while Santander Auto reached 20% penetration in new insurance
contracts.
• In SMEs, customer acquisition continued to grow. In wholesale
banking we remained the only Global Bank, Infrastructure,
Agribusiness and Equity Bank.
• In ESG, we channelled BRL 2.4 billion in solar energy loans,
committed to be net zero by 2050 and continued to make
progress with Plano Amazônia.
As a result, we were named Best Bank in Brazil in 2021 by The Banker
and one of the 10 best companies to work for in Brazil by GPTW
2021, in the DESTAQUE 50+, Women, LGBTQI+ and Ethnic-Racial
categories. We were also recognized as the most sustainable
company by Época Negócios 360°, and as one of the companies that
are effecting the most change in the world by Fortune magazine.
Chile
We kept our place as the country's leading bank, in terms of assets
and customers. Our strategy remained customer-centric, based on
digital expansion and better customer service. As a result, we
increased our market share in current accounts to 29% (+4 pp in the
year), driven by Santander Life and Superdigital.
• Getnet, our acquiring business, continued to gain momentum,
installing more than 68,000 PoS.
growth in new lending.
• In ESG, Santander Chile became the first local bank to be certified
by Chile's Ministry of Women and Gender Equality. We also
launched the Green SME initiative, to help SMEs obtain ESG
certification, and made progress with solar energy lending.
• As a result, we were named Best Bank in Chile by Euromoney and
The Banker magazines and as the Best Latin American Bank for
SMEs.
Argentina
We remained focused on offering the best customers service,
through innovation, improved customer care and process
digitalization, carrying out the following initiatives:
•
•
In digitalization, we rolled out Superdigital, which offers a fully-
digital account. 78% of total sales were digital and our app was
rated the best among banks on iOS and Android.
In Santander Consumer, we launched Todo en Cuotas, a fully-
digital platform to increase access to lending.
• We enhanced Getnet's value proposition (launched in Q4'20) and
ranked second in payments processing.
• We continued to expand MODO, which promotes digital
payments and financial inclusion in the country.
•
•
In vehicles, we began to implement the CRM Cockpit system at
dealerships.
In ESG, we partnered with an energy supplier to support
companies in their transition to cleaner, more sustainable
energy.
Loyal
customers
Thousands
YoY
Digital
customers
Thousands
YoY
South America
Brazil
10,625
+23%
8,037
+26%
Chile
832
+9%
Argentina
1,614
+19%
South America
Brazil
Chile
Argentina
23,771
+17%
18,351
+18%
2,017
+30%
2,730
+3%
Others South
America
141
+27%
Others South
America
502
+12%
Annual report 2021 382
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Uruguay
We strengthened our leadership among privately-owned banks in
Uruguay and expanded our insurance and card product proposition.
We saw strong growth in vehicles through partnerships with
dealers which enabled us to increase our market share by 10 pp,
propelling us to top of the pile.
We made further progress with our digital and technological
transformation strategy through Soy Santander, a fully-digital
loyalty proposition for individuals.
In ESG, we launched the first vehicle loan, with carbon credits to
offset the emissions of every car the bank finances. In addition,
GPTW named us the Best Bank in the country.
Peru
We continued to focus on global companies and the corporate
segment, growing through more sophisticated products. In auto
finance business continued to increase, reaching a 25% market
share in new vehicles. We also acquired a market place for new
and used vehicle financing.
We continued to digitalize our services and internal processes to
enhance customer experience. We processed 88% of transactions
digitally on our office banking platform and Nexus.
Colombia
We continued to expand in Colombia. In CIB, we remained a market
leader and participated in key transactions for nationwide
development. In corporates, we further increased our portfolio
(+36% year-on-year) aided by a joint CIB and corporate proposition.
In consumer finance, we grew our vehicle portfolio by 51% in the
year. In ESG, we continued to expand Microcredit (launched in June
2021) which is already present in 167 towns and cities.
Business performance
Loans and advances to customers climbed 9% year-on-year.
Excluding reverse repos and the exchange rate impact, gross loans
were 12% higher, with increases in all entities.
Customer deposits rose 8% in euros compared to 2020. Excluding
repurchase agreements and the exchange rate impact, they rose 11%
(increasing across all our markets) driven by demand and time
deposits. As mutual funds were up 4% (excluding the FX impact),
customer funds were 9% higher in constant euros.
Results
Underlying attributable profit in the year was EUR 3,328 million (31%
of the Group's total operating areas), 14% higher compared to 2020
(24% excluding the exchange rate impact). By line:
• Total income increased 12% underpinned by strong customer
revenue, driven by larger volumes and customer acquisition.
Net interest income was 14% higher and net fee income increased
by 13%, while gains on financial transactions remained stable.
• Administrative expenses and amortizations increased 8% at a
slower pace than inflation. In real terms, costs were 5% lower,
owing to management and greater productivity.
• Net loan-loss provisions dropped by 10% driven by covid-19-
related provisions recorded in 2020. The cost of credit improved
72 bps to 2.60%.
• Losses in other income and provisions increased in the year, owing
mainly to Argentina and Brazil.
South America. Business performance
December 2021. EUR billion and YoY % change in constant euros
South America. Underlying income statement
EUR million and % change
129 +12%
162 +9%
Revenue
Expenses
2021
2020
15,353
14,868
-5,380
-5,357
Net operating income
9,974
9,511
LLPs
PBT
-3,251
-3,924
-17
6,249
5,267
Gross loans and advances to
customers excl. reverse repos
Customer deposits excl.
repos + mutual funds
Underlying attrib. profit
3,328
2,907
Detailed financial information in section 4.6 'Appendix
/ 2020
% % excl. FX
+3
0
+5
+19
+14
+12
+8
+13
-10
+28
+24
Annual report 2021 383
+13%+6%+40%+27%+4%+11%+52%+18%
Contents
Responsible
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Economic and
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Risk management
and compliance
Brazil
Underlying attributable profit
EUR 2,325 Mn
Chile
Underlying attributable profit
EUR 637 Mn
Business performance
Our efforts to preserve business dynamism and improve service
quality helped us rank first in NPS and hit an all-time high in
customer acquisition in the year (5.1 million).
Loans and advances to customers increased 14% year-on-year. In
gross terms, excluding reverse repos and the exchange rate impact,
they rose 13%, underscored by individuals (+22%), consumer finance
(+12%) and SMEs (+15%).
We continued to build the most complete auto platform in the
market, reached record highs in customer acquisition figures in cards
and hit a record in mortgage origination for individuals. In corporates,
we expanded the range of available services in the app. GENT&, our
artificial intelligence channel, registered more than 19 million
interactions per month.
Customer deposits increased 6% in euros with respect to 2020.
Excluding repos and the exchange rate impact, growth was 4% driven
by the increase in demand deposits (+5%). As mutual funds were 3%
higher excluding the exchange rate impact, customer funds rose 4%
at constant exchange rates.
Results
Underlying attributable profit was EUR 2,325 million in 2021 (22% of
the Group's total operating areas), 10% higher compared to 2020.
Excluding the exchange rate impact, it was 21% higher. By line:
Business performance
Our strategy remained focused on boosting customer satisfaction
through an enhanced digital banking proposition and the
transformation of our commercial network, with new Work Café
branches. Santander Life and Superdigital continued to grow steadily.
Life customers rose nearly 100% in just one year, reaching close to
900,000, Superdigital has 257,000 customers and we maintained
the best NPS in the country.
Loans and advances to customers decreased 4% year-on-year in
euros. Excluding reverse repurchase agreements and the exchange
rate impact, gross loans and advances to customers rose 6%. By
segment, individuals grew 8% (boosted by mortgages), CIB by 17%,
and corporates and institutions by 4%, which more than offset the
fall in SMEs (-6%, affected by state-backed loans granted in 2020).
Customer deposits rose 4% year-on-year, up 15% excluding
repurchase agreements and the exchange rate impact (on the back of
demand deposits, +23%). Mutual funds fell 3% and customer funds
rose 11% in constant euros.
Results
Underlying attributable profit was EUR 637 million in 2021 (6% of
the Group’s total operating areas), up 47% compared to 2020.
Excluding the exchange rate impact it was also 47% higher. By line:
• Total income rose 10% boosted by 13% higher net interest income
plus net fee income, benefitting from higher volumes and a larger
customer base.
• Total income rose 8%, spurred on by 10% higher net interest
income, driven by inflation and margin management, and by the
17% increase in net fee income, mainly due to payment methods.
• Administrative expenses and amortizations had no material
change through efficient cost management and higher
productivity despite average inflation of 8%. The annual efficiency
ratio improved to an all-time record of 29.7%, while net operating
income was 14% higher.
• Net loan-loss provisions fell 1%, enabling cost of credit to improve
62 bps year-on-year to 3.73%. The NPL ratio was 4.88% and
coverage stood at 111%.
• Administrative expenses and amortizations rose 4% (below
inflation) which resulted in 10% higher net operating income and
an efficiency ratio of 38.4%.
• Net loan-loss provisions dropped 43% due to covid-19-related
charges in 2020, placing the cost of credit at 0.85%. The NPL ratio
improved to 4.43% and coverage was 63%.
• Other gains (losses) and provisions totalled -EUR 16 million (+EUR
• The negative impact of other gains (losses) and provisions rose due
16 million in 2020) due to contingencies in 2021.
to higher tax provisions in 2021 and releases in 2020.
Brazil. Underlying income statement
EUR million and % change
Chile. Underlying income statement
EUR million and % change
Revenue
Expenses
2021
2020
10,884
10,866
-3,236
-3,541
Net operating income
7,649
7,325
LLPs
PBT
-2,715
-3,018
4,618
4,045
Underlying attrib. profit
2,325
2,113
/ 2020
% % excl. FX
0
-9
+4
-10
+14
+10
+10
0
+14
-1
+25
+21
Revenue
Expenses
2021
2020
2,457
2,263
-942
-900
Net operating income
1,514
1,363
LLPs
PBT
-341
1,158
Underlying attrib. profit
637
-594
785
432
Detailed financial information in section 4.6 'Appendix
Detailed financial information in section 4.6 'Appendix
/ 2020
% % excl. FX
+9
+5
+11
-43
+48
+47
+8
+4
+10
-43
+47
+47
Annual report 2021 384
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Argentina
Underlying attributable profit
EUR 274 Mn
Uruguay
Underlying attributable profit
EUR 110 Mn
Business performance
Business performance
We continued to make headway with our digitalization strategy and
enhanced service quality, ranking second in NPS.
In 2021, we further expanded our product offering through different
initiatives, such as the launch of Superdigital and the opening of the
first agribusiness branch. We boosted Getnet's value proposition,
reaching 60,000 active customers and rolled out Cockpit and Todo en
Cuotas.
Our efforts to remain one of Argentina's top banks and a leader in
deposit volumes were recognized by the market, as The Banker once
again named us Best Bank in Argentina.
Loans and advances to customers rose 25%. Excluding reverse
repurchase agreements and the exchange rate impact, gross loans
and advances to customers were 40% higher driven by lending to
individuals, SMEs and corporates.
Customer deposits increased 28% compared to 2020 in euros.
Excluding repurchase agreements and the exchange rate impact,
deposits grew 44% and mutual funds +90%.
Results
Underlying attributable profit was EUR 274 million in the year (3% of
the Group’s total operating areas).
Compared to 2020, underlying attributable profit was 53% higher.
Excluding the exchange rate impact, it rose 73%. In particular:
• Total income grew 39% underpinned by net interest income
(+32%) and 74% higher net fee income, driven by transactional
fees. Gains on financial transactions were 168% higher.
• Administrative expenses and amortizations increased 44%,
affected by inflation and the salary agreement. The efficiency ratio
stood at 57.8% and net operating income rose 34%.
• Net loan-loss provisions fell 30% due to covid-19-related
provisioning in 2020. The NPL ratio improved to 3.01%.
• Other gains (losses) and provisions increased their loss due to
charges relating to downsizing.
In 2021, we strengthened our business model with new products,
such as Soy Santander, the launch of Getnet and partnerships and
growth in auto finance.
We also made progress with our technological transformation. We
upgraded our channels and processes: we completed the roll out of
Santander Lockers and our mobile branch saw great success.
These initiatives were reflected in volumes. Loans and advances to
customers increased 17% year-on-year in euros. Excluding reverse
repurchase agreements and the exchange rate impact, gross loans
and advances to customers rose 14%, due to lending to individuals,
(mainly due to auto segment growth well above market rates).
Customer deposits were 18% higher in euros compared to 2020.
Excluding the exchange rate impact and repurchase agreements,
they increased 15% backed by demand deposits (+20%). Mutual
funds were up 22% excluding the exchange rate impact.
Results
In 2021, underlying attributable profit was EUR 110 million (1% of
the Group's total operating areas).
Compared to 2020, it fell 18% in euros. Excluding the exchange rate
impact, it declined 12%. By line:
• Total income declined 3% mainly due to the 6% lower net interest
income, due heavily to lower interest rates, but partly offset by 9%
growth in net fee income.
• Administrative expenses and amortizations rose 11%, affected by
the salary agreement under the collective labour agreement
signed in 2021, and by higher costs from business growth. The
efficiency ratio stood at 47.4%.
• Net loan-loss provisions decreased 43%, due to covid-19-related
provisioning in 2020. The cost of credit improved 111 bps to
1.19%, the NPL ratio stood at 2.65% and coverage at 107%.
Argentina. Underlying income statement
EUR million and % change
Uruguay. Underlying income statement
EUR million and % change
Revenue
Expenses
Net operating income
LLPs
PBT
2021
2020
1,393
1,128
-805
587
-140
311
-632
496
-226
200
179
Underlying attrib. profit
274
Detailed financial information in section 4.6 'Appendix
/ 2020
% % excl. FX
+23
+27
+18
-38
+56
+53
+39
+44
+34
-30
+76
+73
2021
2020
/ 2020
% % excl. FX
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
342
-162
180
-32
145
110
380
-157
223
-61
161
134
Detailed financial information in section 4.6 'Appendix
-10
+3
-19
-47
-10
-18
-3
+11
-13
-43
-3
-12
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Peru
Underlying attributable profit
EUR 63 Mn
Colombia
Underlying attributable profit
EUR 25 Mn
Business performance
Loans and advances to customers rose 23% year-on-year (+26% on a
gross basis, excluding reverse repurchase agreements and the
exchange rate impact). Customer deposits surged 18% (+20%
excluding the exchange rate impact and repurchase agreements),
with growth in both demand and time deposits.
Results
Underlying attributable profit of EUR 63 million in 2021 was 18%
higher year-on-year. Excluding the exchange rate impact, it soared
36%:
• Total income grew 32% mainly led by customer revenue and gains
on financial transactions stemming from higher customer activity.
• Administrative expenses and amortizations were 35% higher,
mainly driven by the launch of new businesses. Net operating
income increased 31%.
Business performance
Loans and advances to customers rose 38% year-on-year in euros. In
gross terms, excluding reverse repurchase agreements and the
exchange rate impact growth was 51%.
Customer deposits rose 28% in euros and 40% excluding the
exchange rate impact and repurchase agreements, driven by 71%
growth in demand deposits.
Results
Underlying attributable profit of EUR 25 million in the year was 27%
higher than in 2020. Excluding the exchange rate impact, underlying
attributable profit rose 34%. By line:
• Total income grew 25% spurred by higher customer revenue.
• Administrative expenses and amortizations rose 30% and net
operating income was 21% higher.
• Net loan-loss provisions increased slightly, although the cost of
credit remained low at 0.58%.
• Net loan-loss provisions fell 8% and the cost of credit declined
year-on-year to 0.40%.
Other South America. Underlying income statement
EUR million and % change
Net operating income
Underlying attrib. profit
2021
2020
/ 2020
% % excl. FX
2021
2020
/ 2020
% % excl. FX
Peru
Colombia
106
43
93
37
+14
+15
+31
+21
63
25
53
19
+18
+27
+36
+34
Annual report 2021 386
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Digital Consumer Bank
Underlying attributable profit
EUR 1,332 Mn
“We aim to become the leading and largest digital
consumer bank leveraging SCF’s footprint in auto
and consumer finance and profiting from
Openbank’s technology stack"
Sebastian J. Gunningham
Chairman of Santander Consumer Finance
and VP of Openbank
Strategy
Business performance
1
Results
1
We prioritized the execution of our We continued to manage the
unstable environment. New
strategic operations to broaden our
lending was well above 2020
business capabilities, strengthen
(+10% year-on-year), with strong
leadership in global digital
new and used car volumes despite
consumer finance and generate
significant growth for the Group
lockdowns and the semiconductor
shortage. Demand gathered
momentum as restrictions were
lifted
Underlying attributable profit
stood at EUR 1,332 million (+16%
year-on-year), driven by revenue
growth (+3% year-on-year) and
better cost of credit
1. Excluding the exchange rate impact.
Strategy
Digital Consumer Bank (DCB) is the leading consumer finance bank
in Europe. It combines Santander Consumer Finance's (SCF) scale and
leadership in consumer finance and Openbank’s digital capabilities.
SCF is Europe's consumer finance leader. It operates in 18 countries
(16 in Europe, most recently in Greece, and presence in China and
Canada) through more than 130,000 affiliated points of sale (mainly
auto dealers and retail merchants). In addition, it is developing direct
financing capabilities.
Openbank is the largest fully-digital bank in Europe. It offers current
accounts, cards, loans, mortgages, a state-of-the-art robo-advisor
service and open platform brokerage services. Operating in Spain, the
Netherlands, Germany and Portugal, it is working on expansion
across Europe and the Americas.
The aim of the Digital Consumer Bank concept is to generate
synergies for both businesses:
• SCF will leverage Openbank's IT capabilities to further improve its
digital operating system and service to its customers and partners
(i.e. OEMs, car dealers, retailers and individuals) at a lower cost.
• Openbank will be able to offer retail banking products to SCF's
large customer base to expand retail capabilities across Europe at
lower customer acquisition costs.
Loans and advances to customers by geographic area
December 2021
Germany
Nordic countries
Spain
France
United Kingdom
Italy
Poland
Others
Annual report 2021 387
31%15%12%13%11%8%3%7%
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Jose Luis de Mora
CEO SCF
“We are dedicated to supporting our partners and developing
advanced technologies to give them a competitive edge, enabling us
to become the top mobility financer and provider in Europe"
In 2021 management focused on:
• Auto: strengthening our auto financing leadership position by:
renewing existing agreements and entering into new ones with car
manufacturers, importers and dealers; reinforcing our leasing
business; and developing new services (e.g. subscriptions) across
our footprint. SCF also focused on providing advanced online
financing capabilities to its partners to help boost their sales
growth.
The Auto business closed 2 million new contracts in 2021. By the
end of the year, it was managing a loan book of EUR 91 billion.
• Consumer (Non-Auto): gaining market share in consumer
financing solutions by leveraging our position to grow in e-
commerce, checkout lending and buy now, pay later (BNPL).
The Consumer (Non-Auto) business closed 6 million new contracts
in 2021. As at 31 December 2021, it managed a loan book of EUR
20 billion.
In retail, we focused on improving digital capabilities to inspire
loyalty among our 3.7 million retail (Openbank and SC Germany
Retail) customers and to boost digital banking activity.
• Cost reduction and simplification: accelerating digitalization to
transform the business and improve efficiency. The main drivers
were:
– organizational simplification by transitioning from banking
licences to branches in the Western hub. SCF is already working
through branches in Portugal, Belgium, the Netherlands and
Greece;
– streamlining IT by leveraging technology and data capabilities
with digital banking apps (APIs) and a Banking as a Service (BaaS)
model.
During 2021, DCB signed new agreements with retail distributors
and manufacturers, supporting them in their commercial
transformation and increasing the value proposition for end
customers. We executed strategic deals to strengthen our presence
in Europe in order to maintain our auto finance leadership and boost
digital channels including:
• the acquisition of Sixt Leasing in Germany (renamed Allane);
• the kick off of the joint consumer finance venture with Telecom
Italia Mobile in Italy, deploying a new consumer finance solution
(for smartphones, modems, eWatches, etc.) which was used by
more than 5,500 active retail points of sale and financed more
than 600,000 TIM customers in 2021;
• SCF's acquisition in the second half of 2021 of a 14.7% stake in
Vinturas Holding, a company with a blockchain-based technology
solution which allows manufacturers to digitally track vehicles
throughout the entire logistics process, supporting our focus on
digitalization; and
• a non-binding agreement with Stellantis (the world's fourth
largest car manufacturer) signed in December to renegotiate the
terms of cooperation (binding contracts expected to be signed in
Q1 2022). This new agreement will enable us to broaden our
scope and be the captive financing partner for all Stellantis brands
(Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS, Fiat, Fiat
Professional, Jeep, Lancia, Maserati, Opel, Peugeot, RAM and
Vauxhall) in France, Italy, Spain, Belgium, the Netherlands, Poland
and Portugal.
In 2021, the leasing business doubled and digital credit and leasing
sales tripled. We also launched a subscription business in Spain,
Germany and Norway (to be launched in our remaining countries in
2022-2023).
Moreover, we ran several cost reduction and income initiatives
(pricing and funding costs) to compensate revenue lost during
lockdowns.
To sustainably grow our business and contribute to the enhancement
of the environment, we are developing new business solutions and
partnerships to finance electric vehicles (we financed >113,000 fully-
electric vehicles in 2021), electric chargers, solar panels, green
heating systems, etc. while promoting carbon offset services
(available in all countries). Additionally, we are an active issuer in the
green bond market, with 5 issuances in 2021.
In comparison with our pan-European competitors, our higher
volumes and better efficiency (in absolute terms and trends) enabled
us to maintain our leadership position and high profitability, thereby
increasing our competitive advantage.
Thanks to all these initiatives, DCB secured its great potential to
continue enhancing the business and growing the 19 million active
customer base.
SCF was once again named Top Employer in Austria, Belgium,
Germany, the Netherlands and Poland recognizing its HR best
practices. Additionally, Great Place to Work named SCF among the
best 25 companies to work for in Italy, France and the UK.
Annual report 2021 388
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Ezequiel Szafir
CEO SCF and Openbank
“In applying Openbank's IT and business philosophy, we will
continue to exceed our customer loyalty and engagement targets,
while ensuring an unbeatable time to market”
Business performance
Results
Though pandemic restrictions affected commercial activity in early
2021 (mainly in Central Europe), new business recovered to pre-
covid-19 levels in Q2 (driven by Germany and the Nordics). The
second half of the year was affected by the semiconductor shortage
which impacted new car production and by the reintroduction of
some travel and social restrictions near year end.
Despite those headwinds, new lending increased 10% year-on-year.
We saw growth in all countries (except the Netherlands) and our
business model, highly diversified by country with a critical mass in
key products, supported further market share gains in Europe
(approximately +50 bps).
The stock of loans and advances to customers increased 1% year-on-
year. In gross terms, excluding reverse repos and the exchange rate
impact, it fell 1% to EUR 117 billion.
Customer deposits increased 8% in euros and 7% excluding repos
and the exchange rate impact. Mutual funds grew significantly. Our
recourse to wholesale funding markets remained strong and
diversified, with funding costs, rates and spreads remaining near all-
time lows.
Underlying attributable profit in 2021 was EUR 1,332 million (12% of
the Group’s total operating areas).
Compared to 2020, underlying profit increased 18% in euros. In
constant euros the increase was 16% as follows:
• Total income was up 3% driven by growth in net fee income (+6%
due to increased new business volumes) and leasing. Net interest
income fell slightly (-0.4%).
• Administrative expenses and amortizations increased 3% due to
perimeter effects (Allane and TIMFIN joint ventures) and digital
transformation investments. Net operating income increased 3%
and the efficiency ratio stood at 45.0%.
Without perimeter effects, costs were flat year-on-year and 4%
lower than in 2019.
• Net loan-loss provisions dropped 45% driven by covid-19
provisioning in 2020. Positive credit quality performance, with a 38
bp reduction in the cost of credit of credit to 0.46% and an NPL
ratio of 2.13% (-4 bps year-on-year). Coverage remained high
(108%).
• Negative impact from Other gains (losses) and provisions due to
charges related to Swiss franc mortgages.
• The largest contribution to underlying attributable profit came
from Germany (EUR 405 million), the UK (EUR 277 million), the
Nordic countries (EUR 247 million), France (EUR 145 million) and
Spain (EUR 133 million).
Digital Consumer Bank. Activity
December 2021. EUR billion and % change in constant euros
Digital Consumer Bank. Underlying income statement
EUR million and % change
-1%
YoY
117
Revenue
Expenses
2021
2020
5,339
5,166
-2,405
-2,329
Net operating income
2,934
2,837
58
+10%
YoY
LLPs
PBT
-527
-957
2,213
1,929
Underlying attrib. profit
1,332
1,133
/ 2020
% % excl. FX
+3
+3
+3
-45
+15
+18
+3
+3
+3
-45
+14
+16
Gross loans and advances to
customers excl. reverse repos
Customer deposits excl.
repos + mutual funds
Detailed financial information in section 4.6 'Appendix
Annual report 2021 389
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4.4 CORPORATE CENTRE
Corporate Centre
2021 HIGHLIGHTS
Underlying attributable profit
- EUR 2,037 mn
→ The Corporate Centre aims to aid the operating units by adding value and through oversight and control. It also performs
financial and capital management functions.
→ Underlying attributable loss was 10% higher than in 2020, mainly due to lower gains on financial transactions resulting from
exchange rate differences that affected our core units’ foreign currency hedges, as other results and provisions decreased
year-on-year.
Strategy and functions
The Corporate Centre adds value to the Group by:
• strengthening the Group's governance with global control
frameworks and supervision.
• fostering the exchange of best practices in cost management and
generating economies of scale, that enable us to be one of the
most efficient banks.
• helping launch global business projects that leverage our global
footprint to develop solutions for all business units, generating
economies of scale.
It also coordinates our relation with regulators and supervisors in the
EU and performs the following financial and capital management
functions:
• Financial management:
– Diversification of funding sources (issuances and other), to
maintain appropriate volumes, maturities and costs. The price of
these transactions with other Group entities is the market rate
plus a premium, which in liquidity terms, we support by
immobilizing funds during the term of the transaction.
– Active management of interest rate risk with derivatives with
high credit quality, high liquidity and low capital consumption in
order to reduce the impact of interest rate shifts on net interest
income.
– Strategic management of exposure to exchange rates in equity
and dynamic on the countervalue of the country units’ annual
results in euros. At year end, net investment hedges with spots,
forwards and other equity instruments amounted to EUR
18,730 million (mainly in Brazil, the UK, Mexico, Chile, the US,
Poland and Norway).
– Structural management of liquidity risks from funding the
Group's recurring activity and financial stakes.
• Management of total capital and reserves: efficient allocation of
capital to each of the Group's entities in order to maximize
shareholder return.
Global Headquarters. Boadilla del Monte.
Global Headquarters. Boadilla del Monte.
Annual report 2021 390
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Results
In 2021, underlying attributable loss of EUR 2,037 million was 10%
higher than in 2020 (-EUR 1,844 million) because:
• gains on financial transactions were lower (EUR 427 million less
than in 2020) dampened by negative foreign currency hedging
results in 2021 and positive results in 2020. Net interest income
fell 1%;
• administrative expenses and amortizations, however, increased by
5% compared to 2020, due to general inflation upturn in 2021.
Excluding this impact, they would have remained stable;
• net loan-loss provisions grew from EUR 31 million in 2020 to EUR
155 million in 2021; and
• the net impact of other gains (losses) and provisions (which
include provisions, intangible assets impairment, cost of the state
guarantee on deferred tax assets, pensions, litigation, one-off
provisions for stakes whose value was affected by the crisis, etc.)
went from -EUR 412 million in 2020 to -EUR 190 million in 2021.
Global Headquarters in Boadilla del Monte.
Corporate Centre
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial
transactions A
Other operating income
Total income
Administrative expenses and
amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
2021
2020
%
(1,390)
(1,374)
1.2
(28)
(29)
(5.4)
(140)
(28)
287
—
(25)
12.2
(1,586)
(1,141)
38.9
(346)
(329)
5.2
(1,931)
(1,470)
31.4
(155)
(190)
(31) 399.1
(412)
(53.8)
(2,277)
(1,912)
19.0
241
69 250.7
Profit from continuing operations
(2,036)
(1,844)
10.4
Net profit from discontinued
operations
Consolidated profit
Non-controlling interests
—
—
—
(2,036)
(1,844)
10.4
(1)
0 479.0
Underlying profit attributable to the
parent
(2,037)
(1,844)
10.5
Balance sheet
Loans and advances to customers
Cash, central banks and credit
institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to
B
customers
Customer funds
Customer deposits C
Mutual funds
Operating means
Number of employees
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
6,787
5,044
34.6
88,918
61,173
45.4
1,555
2,203
1,918
(18.9)
1,645
33.9
116,007 112,807
2.8
215,470 182,587
18.0
1,042
825
53,563
38,554
74,302
57,240
26.3
38.9
29.8
431
493
(12.5)
7,113
9,443
(24.7)
136,451 106,556
28.1
79,019
76,031
3.9
6,813
5,224
30.4
1,042
1,042
837
825
24.5
26.3
0
12
(100.0)
1,724
1,692
1.9
Annual report 2021 391
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4.5 Secondary segments
Retail Banking
Underlying attributable profit
EUR 7,869 mn
"We remained committed to our digital transformation
and multi-channel strategy with a clear focus on
customers and their satisfaction"
Smart Red branch, Spain
Strategy
Business performance
1
Results
1
Santander continued to
strengthen its commitment to
customers and society,
boosting digitalization and
offering new products and
services that meet their needs
1. Excluding the exchange rate impact.
Year-on-year growth in loans
and advances to customers
and customer deposits, driven
by individuals, benefitting
from economic recovery
Underlying attributable profit
up 78% in euros to EUR 7,869
million (+83% in constant
euros) due to strong
performance in core P&L lines
Strategy
The economic and social impacts of the global health crisis moved us
to strengthen our commitment to our customers and society, and
play a key part in economic and business recovery in the countries
where we operate.
The crisis brought forward the implementation and development of
our digital transformation strategy. It focuses on our multi-channel
approach and the digitalization of businesses and processes. We are
adapting channels to new business trends under a hybrid model that
prioritizes digital customer service, and complements the service of
our branches, which are well equipped to handle operations that are
more complex and those that require tailored assistance from our
professionals.
The personalized support we offer to our customers, also forms part
of our aim to continuously enhance customer care and service. This
enabled us to rank in the top 3 in customer satisfaction (measured by
NPS) in eight of our markets in 2021.
Thanks to our efforts to improve customer care and services, our
leadership position in the banking industry in digitalization and focus
on meeting our customers' needs, we registered double-digit growth
in loyal and digital customers.
Loyal customers
Digital customers
Total customers
Millions
Millions
Millions
Digital sales
% of total sales
+11%
+12%
+3%
+10 pp
Annual report 2021 392
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The number of loyal customers increased 11% year-on-year to more
than 25 million, digital customers rose 12% year-on-year to more
than 47 million and 54% of our of total sales were digital.
These increases were spurred by our commercial initiatives and
specialized products and services for each segment:
• Individuals: strong mortgage growth in almost all markets,
through initiatives. We were the first bank in Mexico to offer a
tailored interest rate based on customer profiles. In the UK, the
shift towards digitalization enabled us to process most new
mortgages, current accounts and cards through digital channels.
• Auto finance: Digital Consumer Bank continued to strengthen our
leadership position in Europe. We renewed agreements and
entered into new ones with manufacturers, importers and
distributors. In the US, we signed new agreements with the
country's largest auto dealer groups. In Mexico, we doubled our
auto market share, partly due to a new alliance with Honda. While
Santander Brasil exported its management platform for financing
new and used vehicles to other countries, we are also rolling out
Cockpit in Chile, Argentina and Peru.
• Corporates: we continued to roll out new services. In Spain, we
launched the integrated management platform for Next
Generation EU programmes. In Portugal, new corporate lending
grew at a fast pace, especially in SMEs. In Poland, we focused on
building a common platform to offer comprehensive services to
our customers.
Regarding our branch network transformation, we remain
committed to boosting our multi-channel proposition. In addition to
digital channels, we have 9,879 branches. Our aim is to improve
customer experience and offer advice on everything they need
through the channel that best suits their preferences and
requirements.
Business performance
Loans and advances to customers increased 4% year-on-year.
Excluding reverse repurchase agreements and the exchange rate
impact, gross loans rose 2%, boosted by South America.
Customer deposits were 8% higher compared to 2020. Excluding
repurchase agreements and the exchange rate impact, they were up
6%, driven by growth in demand deposits (+8%).
Results
Underlying attributable profit was EUR 7,869 million (74% of the
Group’s operating areas).
Compared to 2020, underlying attributable profit was up 78%.
Excluding the exchange rate impact, it was 83% higher, as follows:
• Total income increased 7% on the back of net interest income
(+7%) and net fee income (+4%). Gains on financial transactions
dropped 18% affected by the high levels recorded in the second
and the third quarter of 2020.
• Administrative expenses and amortizations increased slightly
(+1%, well below inflation), benefiting from positive cost
management and productivity improvement.
• Loan-loss provisions plummeted 37% mainly due to covid-19-
related provisioning in 2020.
• Other gains (losses) and provisions increased its loss versus
2020, mainly due to charges for Swiss franc mortgages.
Retail Banking. Underlying income statement
EUR million and % change
Revenue
Expenses
2021
2020
39,636
38,022
-17,193
-17,286
Net operating income
22,443
20,736
LLPs
PBT
-7,114
-11,632
13,265
7,866
Underlying attrib. profit
7,869
4,420
Detailed financial information in section 4.6 'Appendix
/ 2020
% % excl. FX
+4
-1
+8
-39
+69
+78
+7
+1
+12
-37
+74
+83
Annual report 2021 393
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Santander Corporate &
Investment Banking
Underlying attributable profit
EUR 2,167 mn
"The transformation we started a few years ago is paying
off. In an environment shaped by sustainable development
and digitalization, more and more clients are relying on
SCIB's leadership and expertise to guide their strategic
decision-making and business transformation"
José M. Linares
Senior Executive Vice-President and Global
Head of Santander CIB
Strategy
Business performance
Results
Expanding our content and
product proposition to
become our clients' strategic
advisors, while digitalizing
our business faster
Business in 2021 was marked
by recovery in SCIB's major
markets despite the pandemic
upsurge and uncertainty
caused by rising inflation and
geopolitical tension
Underlying attributable profit
reached EUR 2,167 million,
driven by higher revenue and
strong LLP reductions.
Efficiency was best-in-class
and RoRWA was 2.23%
Strategy
SCIB continued to make headway with its strategy to strengthen its
position as our clients' strategic advisor of choice, by boosting
specialized high value-added products and services that enable us to
optimize the return on capital.
In line with this strategy, SCIB focuses on high growth potential
sectors which require considerable expertise.
Our ESG team was involved in transactions in many sectors and
markets, such as Plug Power's M&A deals to lead the hydrogen
sector alongside Groupe Renault and Acciona; the issuance of the
2053 Green Gilt, to support the UK's environmental targets; and
Vineyard Wind 1, the largest offshore wind farm ever built in the US.
Created in Q1'21, our Digital Solutions Group (DSG) team supports
the development and digital transformation of our current and
potential customer base. The several transactions it took part in
include the Robinhood's IPO in the US and the issuance of the
European Investment Bank's first Digital Bond, which earned
Euromoney's 2021 Global Awards for Excellence in the with the
Financial Innovation Deal of the Year category.
acquisition of broker-dealer Amherst Pierpont, a market-leading
franchise in fixed income and structured products.
Though the deal is still subject to regulatory approvals, it will
strengthen our product offering, value proposition and distribution
capabilities in the US, with 230 seasoned professionals who serve
more than 1,300 institutional clients across the country and will
boost our global business.
SCIB held leading positions in several rankings in 2021:
• In Project Finance and Export & Agency Finance we ranked top 3 in
Latin America and Europe in volumes of transactions that promote
renewable energies (Top 3 in Green Global) the cornerstone of our
ESG strategy.
• In Debt Capital Markets (DCM) we are the market leaders in Spain
and ranked among the top 5 underwriters by volume of corporate
debt in Latin America.
• In Equity Capital Markets (ECM) we ranked in the top 3 in Latin
America and number one in Spain and Mexico.
Lastly, as part of our plans to continue to geographically diversify and
accelerate growth in the United States, Santander announced the
In the year, SCIB also received numerous awards in several
categories, including Global Finance and Euromoney.
Annual report 2021 394
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Ranking 2021
Award/ranking
Global Financial Adviser of the Year
Global ESG Deal of the Year: Vineyard Wind (US)
Europe Deal of the Year: Enfinium (UK)
Americas ESG Deal: Intersect Power (US)
Americas Transport Deal of the Year Americas: Rio Magdalena 2 (Colombia)
Best Bank for Cash Management in Latin America
Best Bank for Payments and Collections in Latin America
2021 Bank of the year in Argentina, Chile and Southern Cone
Investment Bank of the Year in Mexico
Infrastructure Bank of the Year-Andes
Best Bank for Latam
Best Bank for USD/BRL
Deals of the Year 2021 (Europe)
Deals of the Year 2021 (Americas)
Deals of the Year 2021 (Middle East)
Best Transactional Bank Latin America
Sustainability Bond of the Year
Lead Manager of the Year
Best Bank for Financial Inclusion
Financial Innovation of the Year
Source
PFI (Project Finance International)
PFI (Project Finance International)
PFI (Project Finance International)
PFI (Project Finance International)
PFI (Project Finance International)
Global Finance
Global Finance
Latin Finance
Latin Finance
Latin Finance
FX-W
FX-W
The Banker
The Banker
The Banker
The Banker
Environmental Finance
Environmental Finance
Euromoney
Euromoney
Area
GDF
GDF
GDF
GDF
GDF & GTB
GTB
GTB
GDF & B&CF
GDF & B&CF
GDF
Markets
Markets
GDF
GTB & B&CF
GDF
GTB
GDF
GDF
Global
GDF
Business performance
Business in 2021 was marked by recovery in SCIB's core markets
despite the pandemic upsurge and uncertainty caused by rising
inflation and geopolitical tension. Against this backdrop, SCIB
continued to offer clients tailored financing solutions, strategic advice
and assistance with capital markets to meet their needs, and advice
on their digital transformation and sustainability goals.
Each business's revenue performance (in constant euros) was as
follows:
• Global markets: revenue was 12% higher year-on-year. The
markets business recorded strong revenue growth in 2021
underscored by sound management of the trading books and sales
to clients whom we have continued to support with structured
hedging products, especially in Spain and Portugal, Asia, Argentina,
Brazil and Chile. Solid performance of interest rate and FX hedging
products, fixed income, lending and equity derivatives.
In 2021, SCIB developed the first sustainable market products,
such as the ESG Linked Derivatives, whose price is based on KPIs of
Santander's corporate ESG programmes and our customers; and
the first ESG Impact Derivatives, which help Santander run
environmental projects with a portion of their proceeds. SCIB also
issued structured notes and ESG deposits.
• GDF (Global Debt Financing): Santander continued to support
clients in accessing liquidity sources. As a result, funding volumes
spiked in the year and total income was 14% higher year-on-year.
We shifted our strategy towards sustainable financing in the loan
and bond markets.
In particular, we issued our first social project bond with Sacyr in
Colombia plus the sustainable bonds of the Kingdom of Spain,
Republic of Chile, the European Investment Bank and others.
We continued to be a global leader in structured finance. SCIB
ranked number one in Latin America and Europe thanks to the
large renewable projects we led.
We also began to engage in our clients' leveraged buy-outs on
companies in Europe such as Burger King, Masmovil, Urbaser and
the privatization of Aggreko.
• Global Transactional Banking (GTB): Total income was 1% higher
than in 2020. Cash Management improved during the year as
transactional banking continued to recover, with greater
commercial activity in most of the division's core countries,
offsetting the negative impact of low interest rates in some,
though rises are expected in 2022.
Export & Agency Finance continues to provide financial and risk
mitigation solutions for cross-border capex transactions in all
markets. It benefits from the support of Export Credit Agencies
(ECAs) and Multilateral Lending Agencies (MLAs) to serve our
entire client base.
We were particularly active in green finance for environmental
projects and in covid-19 impact mitigation programmes. We also
maintained our market leadership with solid growth (especially in
Europe).
Annual report 2021 395
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We performed exceptionally well in Brazil. Our 28 transactions (16
IPOs and 12 primary share offerings), included Armac's BRL 1.5
billion IPO and Brisanet's BRL 1.4 billion IPO and Lojas Renner's BRL
4 billion follow-on public offering.
Results
Underlying attributable profit in 2021 increased 21% to EUR 2,167
million (20% of the Group's total operating areas). Excluding the
exchange rate impact, growth was 26%, strongly backed by GDF and
Markets. RoRWA was 2.23% (1,86% in 2020). By line:
• Total income was 10% higher driven by net fee income (+16%) and
gains on financial transactions (+9%).
• Administrative expenses and amortizations rose 15%, compared to
2020 due to investments in products and franchises under
development. However, efficiency improved year-on-year and
remained a benchmark in the sector (40%).
• Sharp improvement in loan-loss provisions compared to 2020, due
to significant increases last year stemming from the widespread
macroeconomic downturn caused by the covid-19 pandemic.
Better-than-expected economic conditions at the beginning of
2021 led us to release provisions and improved the credit outlook
for the customer portfolio, which had an impact on the level of
provisions recorded during the year.
SCIB. Underlying income statement
EUR million and % change
Revenue
Expenses
2021
2020
5,692
5,332
-2,301
-2,038
Net operating income
3,392
3,294
LLPs
PBT
-130
-470
3,251
2,689
Underlying attrib. profit
2,167
1,798
Detailed financial information in section 4.6 'Appendix
/ 2020
% % excl. FX
+7
+13
+3
-72
+21
+21
+10
+15
+7
-72
+26
+26
In 2021, the Trade & Working Capital Solutions team enhanced its
industry leadership. It closed large transactions with the
development of new products and strategic asset allocation
initiatives. Of note was the launch of the Inventory Finance product
(which rounds off our working capital solutions proposition). To
maintain our double-digit growth rate sustainably, we expanded
our client base and developed tools that optimize the use of our
balance sheet. In particular, we rolled out an alternative
investment fund with Santander Asset Management for trade
assets, and entered into an EUR 2 billion agreement with the EIB to
expand our confirming programmes.
Total income breakdown
Constant EUR million
TOTAL
Other
+10%
+44%
Global Debt Financing
+14%
Global Transactional
Banking
+1%
Markets
+12%
• Corporate Finance (CF): we saw significant revenue growth (+44%
vs 2020) driven by an increase in mergers and acquisitions (M&A)
and equity capital market (ECM) transactions.
In M&A, we focused on transactions for assets related to the
energy transition and renewable electricity. In two green
hydrogen-related transactions, we advised Plug Power in the
creation of a joint venture with Renault and another with Acciona
Energía. In renewable energies, we advised Canada's Northland
Power and Italy's ENI on acquisitions in Spain.
In the technology, media and telecom (TMT) sector, we advised on
digital infrastructure transactions. SCIB advised Telefónica in three
sales of fibre-to-the-home (FTTH) companies worth more than
USD 2.5 billion, which will help expand digital inclusion in Chile,
Brazil and Colombia.
The infrastructure M&A market also had a good year. We carried
out more than 15 global transactions. In particular, Platinum
Equity acquired the Spanish environmental services group Urbaser
and Goldman Sachs Infra sold the last package of the RCO highway
in Mexico. As a result, SCIB was at the top of advisor rankings for
Spain and Portugal and for Latin America.
ECM revenue spiked, strengthening our market leadership in Spain
and Portugal, Brazil, Mexico and Poland. We led major
transactions of the year, such as Acciona Energía's EUR 1.5 billion
IPO in Spain (the largest in Europe's renewable energy industry),
Universal Music Group's EUR 20 billion IPO (the largest spin-off
ever) and EXI's IPO (the largest equity offering in Mexico since
2017).
Annual report 2021 396
5,1685,6921,9701,7911,64828320202021
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Insurance
Underlying attributable profit
EUR 907 Mn
"In 2021, we returned to double-digit growth rates
and consolidated the transformation of our
businesses, laying the groundwork for a new phase
of growth in the coming years"
Víctor Matarranz
Senior Executive Vice President and Head
of Wealth Management & Insurance
Strategy
Business performance
1
Results
1
We continue to innovate and
improve our product offering
(especially ESG products),
while increasing sales through
digital channels
Total assets under
management were 8% higher
than in 2020, and funds and
investments increased 9% a
sign of the gradual recovery of
activity
Total contribution to profit in
2021 was EUR 2,313 million,
12% higher than in 2020, due
to greater assets under
management and higher net
fee income
1. Excluding the exchange rate impact.
Strategy
We maintain our objective to be the best responsible wealth and
protection manager in Europe and Latin America, as one of the
Group's growth drivers with a 12% greater total contribution to
profit.
• In Private Baking, we continued to revamp our product
proposition, focusing on sustainable (ESG), alternative (e.g. private
markets, real estate and venture capital) and thematic products.
We also continued to expand our discretionary advisory service to
tailor value-added solutions to our clients' specific investment
needs and risk profiles. Those platforms recorded 20% growth in
2021.
Regarding our ESG investment product range, SAM and third-party
ESG products raised more than EUR 18 billion in assets under
management classified according to Article 8 and 9 of the
Sustainable Finance Disclosure Regulation (SFDR) or similar criteria
in Latin America, which integrate a wide range of sustainability
strategies.
Santander Future Wealth is our line of thematic funds and
structured products to help private banking clients invest in
innovation and disruptive technologies. This joint initiative with
SAM has reached EUR 3.9 billion in investment funds alone since
launching. Furthermore, our alternative product proposition
exceeded EUR 1.8 billion in SAM and third-party alternative funds
(Hamilton Lane, Bain, Brookfield, Blackstone, Harbour Vest, Owl
Rock and Everwood, among others).
Also of note was our Private Banking platform, with a large
number of clients operating across countries and a shared
business volume of EUR 9.9 billion (+34% versus 2020, mainly due
to operations in Mexico, Brazil, the US and the UK).
In 2021, we launched new digital private banking front-ends in
Portugal and Spain and new manager front-ends in Poland.
• Santander Asset Management continued to improve. We rounded
off our local and global product proposition. We launched
Santander ON ('oriented to your needs'), a range of solutions to
cover our clients' diverse investment needs. It follows a systematic
and quantitative management methodology, including various
investment themes and our ESG integration model.
The Santander GO product range grew strongly, reaching EUR 3.8
billion. Also, the hub in Luxembourg, which serves all of Europe,
amounted to more than EUR 11.5 billion.
We made further headway with our ESG strategy; we offer 29 ESG
products globally, and our assets under management stood close
to EUR 11.3 billion. We are also focused on strengthening our
proposition of products classed under Article 8 (SFDR).
Our range of alternative products aimed primarily at our
institutional clients is becoming more robust. Five funds
(Alternative Leasing, Private Debt fund of funds, Trade Finance
EUR, Santander European Hospitality opportunities and Sancus
Green Investments II SCR) already launched.
As part of our operational and technological transformation, we
fully rolled out the Aladdin platform in all our countries in 2021.
We are also about to launch our European Robo-advisor
proposition in Spain and Chile in 2022.
• In Insurance, we continued to see growth in premiums (+4% year-
on-year). Protection remained our main growth driver (+12%). Net
fee income grew overall by a remarkable 13%.
Annual report 2021 397
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Regarding our digital strategy, the number of insurance policies
sold via our digital channels doubled and now account for 17% of
total sales.
We closed an important agreement with Allianz in Poland, which
we expect will strengthen our position in the country.
Motor vehicle insurance business performed well, with a portfolio
of almost 2 million policies (most on the Autocompara platform)
and a strong increase in revenue (+27%) compared to 2020.
Business performance
Total assets under management amounted to EUR 399 billion, 8%
higher year-on-year, driven by the gradual business recovery
following the hardest months of the health crisis.
Business performance: SAM and Private Banking
December 2021. EUR billion and % change in constant euros
/ 2020
+8 %
+9 %
+7 %
+15 %
+6 %
+7 %
+23 %
Note: Total assets marketed and/or managed in 2021 and 2020.
(*) Total adjusted customer funds of private banking managed by SAM.
• In Private Banking, the volume of client assets and liabilities
reached EUR 253 billion. Net new money amounted to EUR 11.7
billion in 2021 (4.6% of total volume). Funds reached EUR 4.4
billion. Net profit in 2021 was 9% higher compared to 2020 at EUR
433 million, due primarily to 13% higher net fee income.
Threshold Private Banking clients rose 8% to 117,000 clients.
• SAM's total assets under management increased 7% compared to
2020 to EUR 194 billion. Record-high cumulative net sales mainly
in Spain, Mexico, Luxembourg, Argentina and Poland amounted to
EUR 8 billion (4.1% of total AuMs). SAM’s contribution to the
Group's profit (including ceded fee income) was EUR 562 million,
16% higher year-on-year.
• In Insurance, the gross written premiums in 2021 amounted to
EUR 8.6 billion (+4% year-on-year). In particular, non-credit-
related protection business grew 12% and total fee income
increased 13%. Total contribution to profit (including ceded fee
income) increased 12% year-on-year to EUR 1,318 million.
Results
Underlying attributable profit was EUR 907 million in 2021, up 10%
year-on-year. Excluding the exchange rate effect, it was 13% higher:
• Total income increased 9% mainly driven by the higher volume of
assets under management, net fee income growth and greater
insurance protection. Total fee income generated, including fees
ceded to the branch network rose 12% to EUR 3,397 million and
represented 32% of the Group's total fee income.
• Administrative expenses and amortizations increased 5%, due to
investments and costs stemming from greater commercial
activity.
• As a result, net operating income increased 11%.
The total contribution to the Group (including net profit and total fees
generated net of tax) was EUR 2,313 million in 2021, 12% higher
than in 2020 in constant euros.
Total contribution to profit
EUR million and % change in constant euros
2,313
⟩
+12%
/ 2020
WM&I. Underlying income statement
EUR million and % change
Revenue
Expenses
2021
2020
2,166
2,030
-902
-872
Net operating income
1,264
1,159
LLPs
PBT
-27
-28
1,247
1,132
Underlying attrib. profit
907
823
Detailed financial information in section 4.6 'Appendix
/ 2020
% % excl. FX
+7
+4
+9
-5
+10
+10
+9
+5
+11
-5
+13
+13
Annual report 2021 398
39924719480945821Total assets undermanagementFunds andinvestment*- SAM- Private BankingCustody ofcustomer fundsCustomerdepositsCustomer loans
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PagoNxt
Underlying attributable profit
-EUR 253 Mn
"After just over 12 months of existence, I'm thrilled to see the
progress we've made to become a one-stop-shop that meets all
payment needs for merchants, SMEs, corporates and consumers.
We're investing in world-class technology and hiring top payments
talent to continue to innovate and launch new products and services
that will improve user experience"
Javier San Félix
CEO of PagoNxt
Strategy
Business performance
Results
Accelerating commerce for merchants
and for their connected ecosystem of
customers and business partners, on the
back of our cloud-native global payments
platform, Santander's large-scale
distribution capabilities and open market
access
PagoNxt achieved significant growth
across markets in 2021. In the last 12
months, Getnet's base of active
merchants grew 6% and Total Payments
Volume was 50% higher
PagoNxt's revenue is growing
fast. It amounted to EUR 495 mn
in 2021, 47% higher in H2 than
in H1
• Our progressively integrated value proposition that leverages our
shared cloud-native, data-driven global payments platform.
PagoNxt's real-time, flexible and highly scalable technology
platform is fully cloud- and API- based, and enterprise-ready. It
ensures access to PagoNxt's latest features with simpler
integration. We process and generate insights to help our
customers and their businesses harness the full power of data and
make data-driven decisions.
• Santander’s distribution network and open market capabilities.
Our connection to Santander gives us privileged access to 153
million customers, plus proven distribution capabilities, that
enable us to scale up faster and save acquisition costs.
To expand our global reach, we are leveraging synergies with
Santander’s existing presence but also developing open market
distribution capabilities outside its footprint.
Our full autonomy and clear governance ensure delivery speed, as
we operate independently, with our own people, culture, technology
and operations.
Strategy
PagoNxt aims to accelerate commerce for merchants and for their
connected ecosystem of customers and business partners. Its
strength lies in its digital commerce proposition for merchants and in
its exposure to fast-growing markets, complemented by distinctive
assets that are progressively connecting corporates and consumers.
We are fulfilling our purpose with:
• Our strong track record serving merchants through a digital
commerce proposition. We serve merchants of different sizes
according to their payment needs with a full suite of merchant
service products, which include PoS payments, e-commerce and
omnichannel, boasting local and cross-border coverage. We also
offer value-added solutions that leverage our in-house product
development and third-party providers.
• Reinforced adjacencies that deliver value to businesses and
consumers. We are developing solutions to expand our breadth of
payment services to cover the entire commerce network. In
combining the cutting-edge platforms, One Trade and Ebury,
PagoNxt is offering a complete portfolio to meet SMEs' and
institutions' international trade needs and help them thrive across
borders with a simple, secure solution to transfer money globally.
This is complemented by our Payments Hub's instant payment
capabilities. In consumer, our Superdigital platform connects
merchants with the underbanked and with low-income individuals
across Latin America, providing them with a low cost-to-serve
model and innovative offering.
Annual report 2021 399
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Business performance
In late 2020, PagoNxt launched as a global payments platform to
bring Santander's most innovative payment assets under one roof,
build on the established Getnet franchise and achieve global
leadership in the payments market.
Since inception, we have had several important achievements:
• PagoNxt is now a standalone operation. Its talent, processes and
corporate governance provide the necessary base for faster
growth. It has autonomous decision-making processes and a
diverse talent pool with a strong technological background, 60% of
whom are technologists and payments experts. We are investing to
expand our payments proposition, increase our scale and enter
high growth markets.
• Getnet, our payment solution for merchants, increased its footprint
and achieved significant growth in 2021. Its Total Payments
Volume (TPV) grew 50% to EUR 116 billion and its active
merchants totalled 1.2 million a 6% increase year-on-year.
In Latin America, Getnet continued to expand. It achieved TPV
market share exceeding 15% TPV market share in Brazil and
Mexico, and it also launched commercial operations in Chile and
Uruguay. Getnet Brazil is now fully integrated within PagoNxt after
the completion of its spin-off from Santander Brasil and
subsequent listing on the B3, in São Paulo and on the Nasdaq.
Likewise, Getnet Europe began operations in H2 as a pan-European
acquirer after the integration of former Wirecard's technology, and
consolidated its position in Spain with a 14% TPV market share.
• PagoNxt's global technology platform continued to enhance its
capabilities and scale:
– On the merchant side, our global platform added multiple new
services including digital onboarding and PoS, alternative
payment methods (APMs) and other payment schemes. We
rolled it out in the EU, Argentina and Uruguay, and accelerated
migration in other countries (e.g., 80% of transactions in Mexico
have already been transferred).
– On the trade side, our One Trade value proposition expanded its
international payments, FX and trade finance solutions for SMEs
and institutions. It is already connected to eight countries,
providing, for example, instant payments in BRL in Brazil.
Merchant
Active merchants
Total Payments Volume
Millions
EUR billion
1.19
1.12
+6%
115.9
+50%
77.4
Dec-20
Dec-21
2020
2021
Results
In 2021, underlying attributable loss increased year-on-year to
-EUR 253 million (-EUR 116 million in 2020), driven by high
investments in new, developing projects and platforms (mainly in
Trade), and by the integration of Wirecard's assets into Merchant in
January 2021.
However, total income increased 39% in 2021, with a strong jump in
net fee income (+47% at constant exchange rates).
PagoNxt. Revenue performance
Constant EUR million
338
+47%
495
2020
2021
Our performance was backed by the activity recovery in recent
quarters. Volumes exceeded pre-pandemic levels, mainly in
Merchant (strong increase in the number of transactions, merchants
and total payments volumes in most of the countries).
– Our Payments Hub platform complements that proposition with
its instant payments access to schemes in GBP and EUR.
PagoNxt. Underlying income statement
EUR million and % change
– On the consumer side, our Superdigital global platform
developed digital wallets and payments for the underbanked. It
was rolled out in Argentina, ahead of an initial launch of friends &
family in Colombia and Peru.
2021
2020
/ 2020
% % excl. FX
Revenue
Expenses
Net operating income
LLPs
PBT
495
-673
-178
-10
-227
Underlying attrib. profit
-253
356
-443
-86
-12
-101
-116
+39
+52
+106
-17
+124
+118
+47
+57
+96
-10
+116
+114
Detailed financial information in section 4.6 'Appendix
Annual report 2021 400
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4.6 Appendix
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
2021
10,952
4,344
755
261
Europe
2020
9,911
4,000
869
(107)
16,312
(8,318)
14,673
(8,275)
7,994
6,398
%
10.5
8.6
(13.1)
—
11.2
0.5
24.9
% excl. FX
9.5
8.6
(12.7)
—
10.5
(0.2)
24.5
(2,294)
(3,344)
(31.4)
(31.7)
(1,289)
4,411
(970)
32.9
32.5
2,084
111.6
111.0
(1,362)
(594)
129.4
129.1
3,049
1,491
104.6
103.8
—
—
—
—
3,049
1,491
104.6
103.8
(71)
(78)
(9.0)
(6.1)
Underlying profit attributable to the parent
2,978
1,413
110.8
109.7
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
1.6
17.8
(18.2)
(23.0)
(18.5)
1.6
3.5
14.1
(16.1)
(29.4)
(9.6)
1.5
3.3
2.9
6.1
4.5
15.6
590,610
563,582
256,433
213,561
67,068
37,250
29,793
981,153
619,486
193,307
73,629
38,706
10,929
936,056
81,271
48,313
35,893
942,620
582,353
167,014
84,201
54,634
11,788
899,990
45,097
42,630
575,983
543,336
711,799
655,954
603,739
108,060
562,977
92,977
7.36
51.0
3.12
49.4
3.61
56.4
3.34
50.3
60,941
69,032
3,242
10,286
16,216
4,494
10,021
15,302
4.8
20.1
(17.5)
(22.9)
(17.0)
4.1
6.4
15.7
(12.6)
(29.2)
(7.3)
4.0
5.8
6.0
8.5
7.2
16.2
3.75
(5.4)
(0.22)
(0.9)
(11.7)
(27.9)
2.6
6.0
2021
3,994
2,482
552
(21)
7,006
(3,340)
3,666
(1,833)
(526)
1,307
(350)
957
—
957
0
957
195,041
142,040
13,915
2,550
17,712
371,258
265,004
52,855
25,428
7,937
4,147
355,371
15,887
201,549
345,298
265,004
80,295
Spain
2020
3,957
2,314
781
(269)
6,782
(3,607)
3,175
(2,001)
(459)
715
(199)
516
—
516
0
517
194,239
113,518
21,654
2,671
22,438
354,521
251,375
48,305
26,068
9,344
4,112
339,203
15,318
200,735
320,879
251,375
69,503
6.33
47.7
5.77
52.2
3.30
53.2
6.23
47.1
23,035
26,961
1,947
2,772
5,412
2,939
2,643
5,234
%
0.9
7.3
(29.3)
(92.0)
3.3
(7.4)
15.5
(8.4)
14.6
82.7
75.9
85.3
—
85.3
86.8
85.3
0.4
25.1
(35.7)
(4.5)
(21.1)
4.7
5.4
9.4
(2.5)
(15.1)
0.9
4.8
3.7
0.4
7.6
5.4
15.5
3.04
(5.5)
(0.46)
5.1
(14.6)
(33.8)
4.9
3.4
Annual report 2021 401
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Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
United Kingdom
2020
% % excl. FX
3,504
494
(20)
26.5
(12.3)
(59.4)
22.3
(15.2)
(60.8)
1
419.7
402.4
3,980
(2,539)
1,441
(677)
(256)
22.2
2.1
57.6
—
24.6
508
332.2
(117)
435.9
391
—
391
—
301.2
—
301.2
—
18.1
(1.3)
52.4
—
20.5
317.9
418.1
287.9
—
287.9
—
2021
4,431
434
(8)
6
4,863
(2,592)
2,271
245
(319)
2,197
(627)
1,570
—
1,570
—
Underlying profit attributable to the parent
1,570
391
301.2
287.9
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
261,414
249,777
72,499
7,832
389
5,667
347,801
242,739
44,086
54,444
11,527
712
8,177
324,637
231,921
20,587
4.7
33.2
(32.0)
(45.4)
(30.7)
7.1
4.7
114.1
40,796
51,151
(20.2)
2,558
2,316
2,442
332,620
4,508
310,483
15,181
14,154
10.5
(45.8)
7.1
7.3
247,775
230,674
237,780
228,790
222,268
214,329
7.4
7.0
6.7
8,991
7,938
13.3
(2.1)
24.6
(36.4)
(49.0)
(35.2)
0.2
(2.1)
100.3
(25.4)
3.3
(49.3)
0.2
0.3
0.5
0.1
(0.1)
5.9
11.71
53.3
1.43
25.8
3.02
63.8
1.24
44.7
18,684
22,028
450
4,389
6,635
564
4,450
6,267
8.69
(10.5)
0.19
(18.9)
(15.2)
(20.2)
(1.4)
5.9
Portugal
2020
787
388
111
10
1,296
(590)
706
(193)
(29)
483
(145)
339
—
339
0
338
38,058
5,819
11,569
1,487
1,475
58,408
39,881
9,974
2,520
249
1,643
54,267
4,141
39,054
43,133
39,881
3,252
8.73
45.5
3.89
66.5
6,336
477
812
930
2021
751
441
142
8
1,341
(563)
778
(38)
(26)
714
(231)
483
—
483
(1)
482
39,280
9,692
8,489
1,586
1,209
60,257
42,371
9,410
2,633
236
1,344
55,994
4,264
40,262
46,711
42,371
4,340
11.85
42.0
3.44
71.7
5,069
393
860
1,000
%
(4.6)
13.7
27.4
(21.8)
3.5
(4.7)
10.3
(80.5)
(9.2)
47.8
59.8
42.6
—
42.6
171.9
42.4
3.2
66.6
(26.6)
6.7
(18.0)
3.2
6.2
(5.7)
4.5
(5.5)
(18.2)
3.2
3.0
3.1
8.3
6.2
33.4
3.12
(3.6)
(0.45)
5.2
(20.0)
(17.6)
6.0
7.5
Annual report 2021 402
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Underlying profit attributable to the parent
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
Poland
2020
1,037
452
90
(55)
1,524
(629)
895
(330)
(195)
370
(130)
240
—
240
% % excl. FX
1.2
14.5
(14.2)
—
8.0
5.3
10.0
4.0
17.7
(11.8)
—
11.0
8.2
13.0
(39.4)
(37.7)
106.8
112.5
2.8
15.5
(4.1)
—
(4.1)
5.6
18.7
(1.4)
—
(1.4)
(8.6)
2.0
(78)
(11.1)
162
(0.7)
2021
1,049
518
77
2
1,646
(663)
984
(200)
(404)
380
(150)
230
—
230
(69)
161
29,817
28,025
2,968
2,539
15,082
14,006
6.4
16.9
7.7
7.3
17.8
8.6
980
(48.7)
(48.3)
503
1,419
49,788
37,919
3,312
1,618
692
1,529
45,071
4,717
30,657
42,325
37,919
4,406
1,341
46,890
34,868
2,613
2,110
993
1,232
41,816
5,074
29,055
38,889
34,865
4,023
5.00
40.2
3.61
73.9
5.05
41.3
4.74
70.7
9,718
10,582
440
2,266
2,998
502
(12.4)
2,115
2,756
7.1
8.8
6.7
7.1
9.7
27.8
(22.7)
(29.7)
25.1
8.7
(6.3)
6.4
9.7
9.7
10.4
5.8
6.2
8.8
26.7
(23.3)
(30.3)
24.1
7.8
(7.0)
5.5
8.8
8.8
9.5
(0.05)
(1.0)
(1.13)
3.2
(8.2)
Other Europe
2020
% % excl. FX
627
351
(93)
206
1,090
(909)
181
15.9
33.9
(91.0)
29.9
33.5
27.7
62.5
16.7
35.2
(91.2)
29.9
34.6
28.7
64.1
(144)
226.2
225.9
(30)
(56.4)
(56.2)
8
(3)
4
—
4
—
5
—
10.4
—
—
—
—
—
—
9.5
—
—
—
—
—
2021
726
470
(8)
267
1,455
(1,161)
294
(468)
(13)
(187)
(4)
(191)
—
(191)
(1)
(191)
65,058
29,234
21,748
32,222
53,483
37,241
22,516
42,463
21.6
19.9
(21.5)
(22.3)
(3.4)
(3.4)
(24.1)
(24.2)
3,785
152,049
2,462
158,165
31,452
83,644
3,154
24,307
85,535
2,353
27,283
41,732
1,468
147,000
294
154,221
53.8
(3.9)
29.4
(2.2)
34.1
(34.6)
399.3
(4.7)
5,048
3,944
28.0
47.6
(4.7)
28.4
(3.3)
34.1
(34.7)
395.8
(5.4)
25.1
55,740
39,684
29,655
10,029
43,818
30,786
22,526
8,260
27.2
28.9
31.7
21.4
25.0
28.2
30.6
21.4
Annual report 2021 403
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
North America
2020
8,470
% % excl. FX
2021
8,204
1,644
224
914
1,684
251
629
10,986
(4,967)
11,034
(4,677)
6,019
6,357
(3.1)
(2.4)
(10.6)
45.3
(0.4)
6.2
(5.3)
(1.4)
(1.3)
(9.9)
51.6
1.4
8.1
(3.5)
(1,210)
(3,917)
(69.1)
(68.4)
(145)
4,664
(1,056)
3,609
—
(133)
9.6
11.8
2,307
102.2
104.5
(573)
84.1
86.4
1,734
108.1
110.5
—
—
3,609
1,734
108.1
(556)
(262)
112.3
—
110.5
117.4
2021
5,405
782
152
1,044
7,383
(3,197)
4,187
(419)
(116)
3,652
(832)
2,821
—
2,821
United States
2020
5,645
% % excl. FX
(0.8)
(4.2)
889
118
709
7,360
(3,079)
4,281
(12.0)
29.1
47.3
0.3
3.8
(2.2)
(8.8)
33.9
52.7
4.0
7.6
1.4
(2,937)
(85.7)
(85.2)
(93)
24.0
1,250
192.1
(318)
161.2
932
—
932
202.6
—
202.6
28.6
202.7
170.7
213.7
—
213.7
154.3
(494)
(201)
145.4
Underlying profit attributable to the parent
3,053
1,472
107.4
109.3
2,326
731
218.4
230.0
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
14.0
21.6
0.3
5.9
13.5
(5.9)
(18.7)
(23.5)
(4.2)
1.9
10.4
(13.9)
(3.5)
(14.8)
(4.0)
0.8
11.3
3.2
8.7
7.2
15.4
137,428
120,571
34,857
38,500
12,555
21,394
244,734
121,989
35,059
38,061
14,652
6,194
215,955
28,666
38,402
15,439
20,718
223,797
102,924
38,017
36,583
16,182
6,029
199,735
3.3
9.4
18.5
(7.8)
4.0
(9.5)
2.7
8.1
28,779
24,062
19.6
134,090
120,665
137,206
117,548
111,004
26,202
96,315
21,233
13.10
45.2
2.42
6.95
42.4
2.23
11.1
16.7
15.3
23.4
6.15
2.8
0.19
134.9
182.6
(47.6)
43,595
38,706
1,859
4,226
6,706
1,958
3,942
6,127
12.6
(5.1)
7.2
9.5
103,548
24,033
16,341
4,258
90,992
16,614
14,084
4,381
17,638
165,819
17,003
143,074
83,159
21,851
31,482
4,038
67,450
20,989
29,737
4,329
4,140
144,670
3,369
125,874
21,149
17,200
99,731
91,865
77,775
14,090
90,459
76,972
66,385
10,586
13.62
43.3
2.33
4.66
41.8
2.04
13.8
44.7
16.0
5.0
33.5
7.1
(2.8)
(10.3)
3.7
15.9
23.3
4.1
5.9
(4.3)
7.0
13.8
(3.9)
(2.3)
(6.7)
(13.9)
13.4
6.1
13.5
1.8
10.2
8.1
22.8
22.9
14.9
23.0
10.2
19.3
17.2
33.1
8.96
1.5
0.28
150.3
210.4
(60.1)
15,674
16,125
488
373
585
347
1,036
1,011
(2.8)
(16.6)
7.6
2.5
Annual report 2021 404
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Underlying profit attributable to the parent
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
Mexico
2020
% % excl. FX
2,825
772
134
(0.9)
7.3
(45.9)
(79)
51.0
3,651
(1,552)
2,098
(979)
(37)
1,082
(2.0)
5.8
(7.7)
(19.2)
(48.6)
4.1
(2.5)
5.6
(46.7)
48.6
(3.5)
4.2
(9.2)
(20.5)
(49.4)
2.5
(259)
(11.1)
(12.5)
823
—
823
(61)
762
8.9
—
8.9
0.7
9.6
29,565
11,854
24,315
10,982
3,523
80,239
35,457
16,977
6,847
11,830
2,628
73,739
6,500
30,191
40,558
29,912
10,646
14.5
(10.6)
(8.9)
(24.5)
(1.4)
(2.3)
9.5
(22.3)
(3.9)
(10.7)
(23.1)
(3.5)
11.1
13.7
11.8
11.1
13.8
7.2
—
7.2
(0.9)
7.8
8.5
(15.3)
(13.7)
(28.4)
(6.6)
(7.5)
3.7
(26.4)
(9.0)
(15.4)
(27.1)
(8.6)
5.2
7.8
5.9
5.2
7.8
2021
2,799
828
72
(120)
3,579
(1,643)
1,936
(791)
(19)
1,126
(231)
896
—
896
(61)
835
33,860
10,593
22,159
8,297
3,474
78,383
38,820
13,183
6,579
10,559
2,022
71,162
7,221
34,339
45,330
33,218
12,112
13.91
14.38
(0.47)
45.9
2.73
95.0
42.5
2.81
120.8
27,266
22,246
1,371
3,853
5,499
1,373
3,595
5,000
3.4
(0.08)
(25.8)
22.6
(0.1)
7.2
10.0
Other North America
2020
2021
% % excl. FX
—
34
—
(11)
23
(127)
(104)
—
(10)
(114)
7
(108)
—
(108)
—
(108)
20
231
—
0
282
533
11
25
—
54
32
123
410
20
11
11
—
(26.9)
41.7
(84.3)
—
0.4
176.6
354.2
(26.9)
41.7
(84.3)
—
0.4
176.6
354.2
(80.9)
(80.9)
1
24
(1)
(1)
23
(46)
(23)
—
(2)
472.8
(25)
354.3
5
45.3
(21)
—
(21)
—
422.2
—
422.2
—
472.8
354.3
45.3
422.2
—
422.2
—
(20)
434.3
434.3
15
197
4
76
193
485
17
51
—
23
31
122
363
15
17
17
—
34.4
17.0
34.4
17.0
(100.0)
(100.0)
(99.5)
(99.5)
46.2
9.9
(38.3)
(49.7)
—
46.2
9.9
(38.3)
(49.7)
—
140.4
140.4
3.2
0.8
3.2
0.8
13.0
13.0
31.8
(38.3)
(38.3)
—
31.8
(38.3)
(38.3)
—
Annual report 2021 405
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
South America
2020
10,723
%
5.6
3,589
765
3.7
(6.5)
% excl. FX
14.0
12.7
0.4
Brazil
2020
7,625
% % excl. FX
13.2
3.3
2,824
467
(3.4)
(19.6)
5.9
(11.9)
2021
7,875
2,728
376
(210)
94.0
112.7
(95)
(51)
87.1
105.0
2021
11,323
3,721
716
(407)
15,353
(5,380)
14,868
(5,357)
9,974
9,511
3.3
0.4
4.9
11.6
8.4
13.4
10,884
(3,236)
10,866
(3,541)
7,649
7,325
0.2
(8.6)
4.4
(3,251)
(3,924)
(17.2)
(10.5)
(2,715)
(3,018)
(10.0)
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Underlying profit attributable to the parent
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
63.9
28.3
33.7
25.2
—
25.2
33.6
23.9
12.7
1.4
5.9
45.1
4.0
11.0
10.7
8.3
14.5
17.3
5.0
11.4
5.7
12.3
8.5
10.5
4.4
(474)
6,249
(321)
5,267
(2,364)
(1,923)
3,884
3,344
—
—
3,884
3,344
(556)
(436)
3,328
2,907
123,920
113,745
43,134
51,451
23,809
15,491
257,805
120,500
44,303
23,461
40,490
8,610
237,364
43,154
49,303
17,342
15,201
238,746
111,808
42,040
21,280
35,456
8,334
218,918
20,441
19,828
128,916
118,784
162,212
153,241
110,875
103,319
51,337
49,922
20.28
17.72
35.0
4.50
98.3
36.0
4.39
97.4
74,970
65,587
4,469
10,625
23,771
4,431
8,614
20,315
48.0
18.6
23.0
16.2
—
16.2
27.5
14.5
8.9
0.0
4.4
37.3
1.9
8.0
7.8
5.4
10.2
14.2
3.3
8.4
3.1
8.5
5.9
7.3
2.8
2.56
(1.0)
0.11
0.9
14.3
0.9
23.3
17.0
9.8
0.1
14.4
(1.4)
31.9
25.1
31.3
20.6
—
20.6
21.1
20.6
13.3
(10.5)
(2.4)
46.0
0.6
5.0
5.4
4.1
14.5
7.4
(14.9)
5.4
1.0
(316)
4,618
(263)
4,045
(2,029)
(1,693)
2,589
2,352
—
—
2,589
2,352
(263)
(238)
2,325
2,113
73,085
28,400
37,078
10,129
63,974
31,466
37,655
6,877
10,755
159,446
10,600
150,573
74,475
27,664
13,737
25,503
70,083
26,350
11,901
23,536
5,283
146,662
6,157
138,026
12,785
12,547
20.4
14.2
19.8
10.1
—
10.1
10.5
10.0
14.2
(9.7)
(1.5)
47.3
1.5
5.9
6.3
5.0
15.4
8.4
(14.2)
6.3
1.9
76,569
67,424
13.6
12.6
105,095
100,351
64,890
40,205
61,627
38,725
4.7
5.3
3.8
3.8
4.4
2.9
21.49
19.16
29.7
4.88
32.6
4.59
111.2
113.2
52,871
43,258
3,614
8,037
3,571
6,382
18,351
15,556
2.33
(2.9)
0.29
(2.0)
22.2
1.2
25.9
18.0
Annual report 2021 406
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Underlying profit attributable to the parent
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
Gross loans and advances to customers B
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of loyal customers (thousands)
Number of digital customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
Chile
2020
% % excl. FX
1,787
335
174
11.0
17.8
(24.7)
(32)
62.5
2,263
(900)
1,363
8.5
4.7
10.4
17.2
(25.1)
61.6
7.9
4.1
11.1
10.5
(594)
(42.6)
(43.0)
16
785
(155)
629
—
629
(197)
432
—
47.5
48.0
47.4
—
47.4
47.7
47.3
5,836
8,365
10,221
3,076
66,880
28,362
11,611
9,247
11,162
1,519
61,902
4,978
40,593
37,873
28,330
16.0
31.0
31.8
(4.4)
7.6
4.1
4.3
0.2
24.0
67.4
8.7
(5.5)
(4.1)
(0.1)
4.1
—
46.7
47.2
46.6
—
46.6
46.9
46.5
6.3
28.4
44.9
45.8
5.8
19.1
15.2
15.4
10.8
37.2
85.2
20.2
4.6
6.1
10.6
15.1
9,543
(12.4)
(3.0)
2021
1,984
394
131
(52)
2,457
(942)
1,514
(341)
(16)
1,158
(230)
928
—
928
(291)
637
6,773
10,955
13,469
2,942
71,987
29,525
12,109
9,264
13,841
2,543
67,282
4,705
38,930
37,847
29,484
8,363
37,849
39,381
(3.9)
19.28
13.19
38.4
4.43
63.3
39.8
4.79
61.4
10,574
10,835
326
832
346
764
2,017
1,547
6.09
(1.4)
(0.36)
1.9
(2.4)
(5.8)
8.9
30.4
2021
1,070
420
147
(245)
1,393
(805)
587
(140)
(136)
311
(35)
275
—
275
(2)
274
5,173
5,243
1,358
92
966
12,832
9,170
645
204
1,013
443
11,475
1,357
5,454
11,891
9,170
2,721
57.8
3.61
153.8
8,620
411
1,614
2,730
Argentina
2020
% % excl. FX
912
273
62
17.3
53.9
137.4
(119)
105.3
1,128
(632)
496
23.4
27.4
18.5
32.2
73.5
167.7
131.4
39.2
43.6
33.5
(226)
(37.9)
(30.0)
(70)
200
(19)
180
—
180
(1)
179
93.6
55.8
83.8
52.8
—
52.8
25.9
53.0
118.3
75.7
107.2
72.3
—
72.3
41.9
72.5
4,151
3,048
1,897
59
832
9,988
7,179
840
20
657
359
9,056
931
4,395
8,795
7,179
1,616
56.0
2.11
24.6
72.0
40.5
93.9
(28.4)
(19.3)
74.9
30.9
44.8
44.0
(13.4)
—
73.7
39.0
42.9
64.2
39.9
52.4
44.0
89.9
55.1
16.1
28.5
27.7
(23.2)
911.8
54.0
23.3
26.7
45.6
24.1
35.2
27.7
68.4
1.20
1.8
1.50
275.1
(121.3)
9,159
408
1,356
2,650
(5.9)
0.7
19.0
3.0
Annual report 2021 407
27.44
26.24
183
(49.7)
(44.3)
1,332
1,133
17.6
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Other South America
2020
2021
% % excl. FX
Digital Consumer Bank
2020
2021
% % excl. FX
395
179
62
(15)
620
(397)
223
(55)
(7)
162
(70)
92
—
92
—
92
7,813
2,718
2,061
119
828
13,539
7,331
3,885
255
134
340
11,945
1,595
7,963
7,378
7,331
48
399
158
62
(8)
611
(284)
327
(86)
(3)
238
(55)
183
—
183
—
(1.0)
13.3
(0.1)
96.2
1.5
39.8
(31.7)
(36.3)
89.5
8.0
21.5
9.7
117.1
10.3
49.4
(24.6)
(30.6)
97.9
(31.8)
(24.4)
27.2
(49.4)
—
(49.4)
—
41.4
(44.0)
—
(44.0)
—
6,239
2,803
1,386
25.2
(3.0)
48.7
27.6
(3.1)
48.8
185
(35.8)
(35.0)
692
11,306
6,184
3,239
112
101
298
9,934
1,372
6,373
6,222
6,184
38
19.6
19.8
18.5
20.0
20.3
21.1
18.1
25.0
127.2
131.6
33.2
14.0
20.2
16.2
25.0
18.6
18.5
25.3
34.6
13.9
21.6
16.8
27.3
18.2
18.1
22.4
Primary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Underlying profit attributable to the parent
Balance sheet
Loans and advances to customers
Cash, central banks and credit institutions
Debt instruments
Other financial assets
Other asset accounts
Total assets
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities
Other liabilities accounts
Total liabilities
Total equity
Memorandum items:
B
Gross loans and advances to customers
Customer funds
Customer deposits C
Mutual funds
Ratios (%), operating means and customers
Underlying RoTE
Efficiency ratio
NPL ratio
Total coverage ratio
Number of employees
Number of branches
Number of total customers (thousands)
A. Includes exchange differences.
B. Excluding reverse repos.
C. Excluding repos.
0.4
6.4
(46.3)
96.4
3.3
3.3
3.4
(0.4)
6.4
(43.5)
92.1
2.6
2.6
2.5
(957)
(44.9)
(45.5)
4,281
4,263
821
8
228
5,339
(2,405)
2,934
(527)
(194)
2,213
(536)
1,678
—
1,678
771
16
116
5,166
(2,329)
2,837
49
1,929
(495)
1,433
—
1,433
(346)
(301)
0.0
14.8
8.2
17.0
—
17.0
15
0.6
53.9
(6.7)
57.3
12.8
8.7
7.6
18.1
2.1
2.0
15.8
9.6
(0.3)
0.4
11.1
7.6
0.0
13.8
7.5
15.9
—
15.9
15
16.2
(0.6)
53.1
(7.1)
56.4
11.0
7.5
6.7
16.1
1.3
0.9
15.2
8.4
(1.7)
(0.8)
10.2
6.7
113,936
113,257
33,482
21,754
5,280
5,660
47
30
6,937
159,683
6,149
146,851
55,327
49,109
36,710
1,397
51,399
41,567
35,965
1,370
4,565
147,108
3,940
134,241
12,575
12,610
116,580
116,083
57,824
55,327
2,497
52,058
51,399
658
279.4
279.4
14.05
11.77
45.0
2.13
45.0
2.17
107.8
113.3
15,840
16,172
2.27
(0.04)
(0.04)
(5.54)
(2.1)
309
353
(12.46)
19,437
19,611
(0.89)
Annual report 2021 408
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Secondary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Retail Banking
2020
% % excl. FX
2021
Corporate & Investment Banking
% % excl. FX
2020
2021
31,389
30,056
7,010
920
318
6,987
1,132
(153)
39,636
(17,193)
38,022
(17,286)
22,443
20,736
4.4
0.3
(18.8)
—
4.2
(0.5)
8.2
7.0
3.7
(17.6)
—
7.0
1.4
11.6
(7,114)
(11,632)
(38.8)
(36.9)
(2,064)
(1,238)
13,265
(4,052)
9,213
—
9,213
(1,344)
7,866
(2,524)
5,342
—
5,342
(922)
66.8
68.6
60.5
72.5
—
72.5
45.8
78.0
70.6
74.2
68.2
77.0
—
77.0
49.1
82.9
2,995
1,750
684
263
5,692
(2,301)
3,392
(130)
(11)
3,251
(937)
2,314
—
2,314
(147)
2,918
1,542
670
202
5,332
(2,038)
3,294
(470)
(135)
2,689
(773)
1,916
—
1,916
(119)
2,167
1,798
2.6
13.5
2.1
30.1
6.8
12.9
3.0
5.8
16.4
8.7
29.3
10.1
15.0
7.1
(72.3)
(92.2)
(72.1)
(91.9)
20.9
21.2
20.8
—
20.8
24.1
20.6
26.5
27.3
26.2
—
26.2
31.2
25.8
Underlying profit attributable to the parent
7,869
4,420
A. Includes exchange differences.
Secondary segments
EUR million
Underlying income statement
Net interest income
Net fee income
Gains (losses) on financial transactions A
Other operating income
Total income
Administrative expenses and amortizations
Net operating income
Net loan-loss provisions
Other gains (losses) and provisions
Profit before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Underlying profit attributable to the parent
A. Includes exchange differences.
Wealth Management & Insurance
% % excl. FX
2020
2021
375
1,276
101
414
2,166
(902)
1,264
(27)
10
1,247
(304)
943
—
943
(36)
907
394
1,153
100
383
2,030
(872)
1,159
(4.9)
10.7
0.3
8.3
6.7
3.5
9.1
(28)
(4.6)
1
1,132
(271)
860
—
860
(38)
823
—
10.2
12.1
9.6
—
9.6
(4.1)
10.3
(2.5)
12.5
2.9
10.2
8.7
5.2
11.3
(4.5)
—
12.6
14.0
12.1
—
12.1
0.1
12.7
PagoNxt
2020
% % excl. FX
(1)
362
(2)
(3)
356
(443)
(86)
(12)
(3)
(101)
(16)
(117)
—
—
36.3
(44.4)
—
38.9
52.0
106.3
(16.5)
—
124.3
51.0
114.3
—
—
43.9
(43.6)
—
46.6
57.0
95.5
(9.5)
—
115.6
71.2
110.3
—
(117)
114.3
110.3
1
—
—
(116)
117.9
113.9
2021
1
493
(1)
2
495
(673)
(178)
(10)
(38)
(227)
(24)
(251)
—
(251)
(2)
(253)
Annual report 2021 409
Contents
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banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
5. Research, development and
innovation (R&D&I)
Research, development and innovation activities
Innovation and technological development are fundamental to
Santander's strategy. We aim to focus on operational excellence and
customer experience in response to fresh challenges that emanate
from digital transformation.
Moreover, the information from our new technological platforms
helps us better understand the customer journey and enable us to
design a more accurate digital profile to generate more confidence
and increase customer loyalty.
As well as competition from other banks, financial entities must
watch out for new entrants to the financial system, whose use of
new technology is both a differentiating factor and a competitive
advantage.
Developing a sound strategic technology plan must provide:
• greater capacity to adapt to customers’ needs (customized
products and services, full availability, and excellent, secure
service across all channels);
• enhanced processes for Santander’s professionals to ensure
greater reliability and productivity; and
• proper risk management, supplying teams with the necessary
infrastructures to help identify and assess all business-related,
operational, reputational, regulatory and compliance risks.
As a global systemically important bank, Santander and its
subsidiaries face increasing regulatory demands that impact system
models and their underlying technology. Therefore they must make
considerable additional investments to guarantee compliance and
legal security.
As in previous years, the European Commission's 2021 EU Industrial
R&D Investment Scoreboard (based on 2020 data) ranked our
technological effort first among Spanish companies and our R&D
investment second among global banks.
The equivalent investment in R&D&I to that considered in the ranking
was EUR 1,325 million. See note 18 to the consolidated financial
statements.
Technological strategy
To meet business and customer needs, we must integrate new
digital capabilities such as agile methodologies, public and private
cloud-based products and core systems development. We must also
broaden our data and technological capabilities (APIs - Application
Programming Interface, artificial intelligence, robotics, blockchain,
etc.).
Our technological strategy aligns with the three pillars of the Group's
strategy: One Santander, PagoNxt and Digital Consumer Bank. Our
technological pillars (cloud, agile, data, core evolution and deep tech
skills), a flexible and common architecture and a global operating
model, and better risk and associated cost management, help us
achieve this.
To ensure the technology strategy is consistent in all the Group's
entities, the Santander Architecture Review Board (SARB) holds
monthly meetings that bring together the chief technology officers
(CTOs) of the different units and businesses to actively participate in
key architecture decision-making. The SARB oversees everything; the
analysis of potential assets, the migration to the cloud, the review of
data lake reference architectures and other measures. The use of a
single technology stack and reference architectures are key to
achieving Santander Common Architecture. Based on simplification,
component recycling and the principle of composable architecture,
the SARB also guarantees the use of technologies that matches the
business of the future.
To implement our technological strategy we rely on internal
regulation, the Group's commitment and experience in relations with
our entities, and a governance model that articulates projects and
initiatives that help crystallize it in all our markets.
The development of our technology and operations (T&O) model will
help us cultivate new business, especially in terms of global products
and digital services. Some 5,000 Santander Global Technology &
Operations professionals in Spain, the UK, Portugal, Poland, the US,
Mexico, Brazil and Chile are gradually incorporating the global
product portfolio agreed on by the Group's entities, our global
businesses and the T&O division, guaranteeing the not only quality of
digital services and products, but also their security.
Technological infrastructure
Santander has a network of high-quality data centres (CPDs)
interconnected by a redundant communications system. The CPDs
are spread across strategic markets to support and develop our
activity. They combine traditional information technology (IT)
systems with the capabilities supplied by an on-premise private
cloud, which, thanks to its swift adoption, enables integrated
management of the business areas’ technology, accelerates digital
transformation and allows us to save costs significantly.
Santander has migrated more than 75% of its technology
infrastructure to the cloud and expects to complete the roll-out by
2023. Our cloud strategy enables us to improve processes, innovate
swiftly and improve service quality. Our Local Cloud Centres of
Excellence (local CCoEs), which the Global CCoE coordinates,
guarantee consistent and rigorous cloud adoption across our entities.
This minimizes risks in accordance with our Public Cloud policy. The
process will also help fulfil Santander's responsible banking goals as
Annual report 2021 410
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
we expect it to save 70% of the energy our technology infrastructure
consumes.
Cybersecurity
Cybersecurity is one of Santander’s main priorities and a crucial
element in supporting our purpose of helping people and businesses
prosper, as well as offering excellent digital services to our
customers.
The new cyber services and capabilities created during the 3-year
Cybersecurity Transformation Plan completed in 2020 have moved to
business as usual (BAU) operations in line with the Group’s
Cybersecurity Framework. It enabled us to set the organizational
foundations and governance for cyber security globally; establish
global cybersecurity services in the Group; strengthen defences
according to existing best practices and latest technology tools; and
drive a security-aware culture among employees and clients. During
the transformation, Santander opened a Global Cybersecurity Centre
in Madrid which proactively identifies, monitors and responds to
cyber threats 24/7 to protect all Group entities, systems and
customers.
At the same time, as cyber threats and attack techniques become
more sophisticated, we must continuously evolve our cyber
defences. In 2021, we established these key strategic cyber security
pillars and initiatives to help us develop our cyber defences against
emerging threats and technologies:
• Level the playing field: The current threat landscape is increasingly
challenging and new weaknesses, techniques and procedures are
reported on a daily basis. Deterrence, deception and automation
techniques are crucial to make attacks more difficult;
• Defend the (hyper-connected) "Bank of the Future":
Banks'platforms, cloud and supply chains are increasingly hyper-
connected and interdependent. Cybersecurity teams have been
working on implementing new defence paradigms such as “Zero
Trust” and other innovative solutions; and
• Generate value and trust: Helping customers stay safe online is
key to continue building trust and helping everyone prosper in the
digital world. Santander promoted public-private partnerships and
collaborations to tackle cybercrime to protect customers and
society as a whole. For Santander this has translated into several
initiatives in 2021, detailed in section 'Acting responsibly towards
customers' of the Responsible banking chapter.
Internal and external audits of information systems occur
periodically. The Group identifies IT assets, systems and information
(including those in third parties), and regularly reviews the relevant
risks and levels of protection to proactively discover and remedy any
weakness through frequent security testing such as vulnerability
scanning, penetration testing and red team exercises that simulate
real cyber-attack scenarios.
Santander also actively participates in various coordinated cyber-
exercises in collaboration with public and private organizations. In
2021, Santander placed first and third against 29 teams in the
“Capture the Flag” exercise the SANS Institute in Spain had organized.
We also placed seventh out of 200 teams from 48 countries in the
World Economic Forum's Cyberpolygon exercise.
In addition to regular testing and reviews, independent certification
authorities such as the International Organization for Standardization
(ISO) 27001 and the Statement on Standards for Attestation
Engagements (SSAE) 18 certify our critical cyber security services.
For more details on the different on how we measure, monitor and
control cybersecurity risks and their respective mitigation plans, see
section 6.2 'Operational risk management' of the Risk management
and compliance chapter.
Digitalization and fintech ecosystem
To make headway in our digital transformation, in addition to the
technological strategy, infrastructure development and cybersecurity
initiatives, we created PagoNxt in 2020. This new brand enables us to
accelerate business for merchants and enhance their ecosystem
connecting customers and business partners, through our cloud-
native, data-driven global payments platform, coupled with
Santander's large-scale distribution and proven capabilities to
provide access to the open market. Further details are given in
section 4 'Financial information by segment' in this chapter.
Moreover, Santander combined Santander Consumer Finance's scale
and leading position in Europe with Openbank's platform.
Openbank's technology (digital banking API, with a Banking as a
Service model) and data management capabilities drive growth by
offering new services and operational improvements.
For more details about our digital and innovative products and
services for individuals and corporates, as well as references to
cybersecurity policies, see section 2 ‘Inclusive and sustainable
growth’ in the Responsible banking chapter.
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6. Significant events since
year end
No significant events occurred from 1 January 2022 to the date on
which these consolidated financial statements were authorized for
issue, other than those described in these consolidated annual
accounts.
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7. Trend information 2022
This director’s report contains certain prospective information on the
directors’ plans, forecasts and estimates, based on what they
consider to be reasonable assumptions.
Readers of this report should take into account that such prospective
information must not be considered a guarantee of our future
performance. As the plans, forecasts and estimates are subject to
numerous risks and uncertainties, our future performance may not
match initial expectations. These risks and uncertainties are
described in the Risk management chapter of this report and in note
53 of the consolidated financial statements.
The economic outlook for 2022 is subject to considerable uncertainty
owing to the spread of new covid-19 variants in Europe and the US in
the final stretch of 2021, the risk they will spread to other regions
and doubts about the transience of the 2021 inflation upturn.
The impact of the omicron variant and any future variants or
outbreaks on activity is difficult to gauge and will largely depend on
the resulting pressure on hospital capacity, which is not easy to
foresee given the varying contagiousness and virulence of each
covid-19 variant. Higher inflation will have an adverse effect on
consumption and on financial conditions.
Our baseline scenario assumes that the measures to contain the virus
will have a moderate effect on business activity, inflation gradually
subsides but remains above the target for the year, and, with some
exceptions, the withdrawal of monetary stimulus will be very
gradual. Among the bank's most relevant economies, growth in
Europe and the US is expected to stay strong growth, but it may be
more imbalanced in Latin America.
The macroeconomic forecast for 2022 by country/region is as
follows:
Eurozone
Although growth recorded in 2021 may be slightly more hesitant at
the start of 2022, it is expected to continue into the year,
underpinned by continued expansionary financial conditions, loose
fiscal policy, a greater weight of Next Generation EU funds, a
downturn in the pandemic and a gradual decline in inflation.
In several countries, upcoming elections and the reforms and
credibility of countries' fiscal consolidation plans will be important in
a year in which the restoration of the Stability and Growth Pact may
be announced and monetary and prudential measures against the
pandemic will be gradually withdrawn.
Spain
In Europe, the deployment of EU funds (particularly crucial for Spain),
the potential improvement in international tourism, the expected
further recovery in household consumption and the anticipated
reactivation of home construction indicate remarkable growth that
could push GDP close to pre-pandemic levels.
The success of ongoing structural reforms (partly related to EU
funds) will be fundamental in the short- and medium-term.
United Kingdom
A favourable outlook points to another year of strong recovery. The
main unknown is the UK's ability to adapt to Brexit and the
implications it will have for supply (mainly in the labour market
which has shown some tension due to labour shortages in some
segments).
Overall, financial conditions are expected to remain expansionary and
inflation is projected to fall, which will boost confidence and activity
as long as the spread of covid-19 reduces.
Portugal
The economy is forecast to grow above pre-pandemic levels as early
as 2022, thanks to consumption growth (backed by accumulated
savings), Next Generation EU funds and the hope of an upturn in
tourism. The labour market is already at pre-pandemic employment
levels, but is suffering from worker shortages, as the job vacancy rate
suggests that unemployment will fall even further, to around 6%.
The commitment to putting public accounts in order will remain a
priority.
Poland
GDP growth was surprisingly positive in 2021 and it seems as though
the economy is starting 2022 strongly. That could keep annual GDP
growth close to 5%. Positive outlooks for the highly competitive and
diversified manufacturing and export sector (which will benefit from
ongoing positive growth abroad). While high inflation has not
affected corporate profit margins, it did lead to a 165 bp rise in
interest rates in Q4'21 to 1.75%, a trend that is expected to continue.
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United States
The US economy is forecasted to grow around 4% in 2022 supported
by pick ups in activity, wealth-backed private consumption and
inventory rebuilding. However, the withdrawal of fiscal and
monetary stimulus and effects of potential further covid-19 waves
will have a negative impact. Inflation will start the year suffering
from supply-side strains; however it is expected to moderate but at
high rates. The Federal Reserve (Fed) is expected to end tapering in
March and begin to raise interest rates.
Mexico
Mexico's outlook is positive in light of the dynamism in the US, the
credibility of monetary and fiscal policies and expected easing of the
recent bottlenecks. The Fed's interest rate hike is not expected to
have a major influence on the central bank's plans to continue raising
rates given that it has already raised them significantly.
Brazil
Inflation, the sharp tightening of financial conditions and the
uncertainty generated by the presidential elections are expected to
have a strong impact on business in 2022. Once political uncertainty
subsides, economic recovery may be stronger.
Chile
Following the strong economic expansion in 2021, growth is
expected to be subdued in 2022, due to the withdrawal of fiscal
stimulus and the tighter monetary policy, amid lower inflation than in
the previous year but still higher than the central bank's target.
Argentina
Argentina's economy is expected to grow moderately in 2022, in light
of its economic stabilization programme with the International
Monetary Fund (agreed in the first quarter of 2022), to refinance its
debt maturities with the organization.
à Financial markets
Inflationary pressures, less fiscal and, especially, monetary support,
and geopolitical risk, mean more vulnerable financial markets in
2022.
Our expectation of inflation moderating gradually throughout the
year and slower but above potential economic growth after a strong
post-covid-19 recovery will help equities adjust to the transition to
monetary policy normalization. However, in light of the gap between
real interest rates and inflation expectations at maximum levels and
given the current high stock prices, moments of instability could
befall the stock markets during this adjustment.
We expect the Fed to end its net purchase programme in March
2022, potentially opening the door to rate hikes. The more laggard
ECB will exhaust its pandemic programme before considering raising
the deposit rate. The landscape suggests bond yields may rebound
(albeit moderately in any case), although the ECB's gradual
withdrawal could put pressure on peripheral spreads. The US dollar
will likely remain strong against the euro in the short term, but a
gradual appreciation of the euro is possible in the medium term as
the US-Europe growth differential narrows and the US is
encumbered by fiscal and trade deficits.
The risks that emerged in Latin America in the second half of 2021
fuel uncertainty regarding 2022. At the domestic level, there are two
main obstacles: increased concerns that public finances in the Latin
American countries that increased debt the most to cope with the
pandemic will become unsustainable amid rising interest rates; and
on the political front, Brazil's presidential elections may spur market
volatility.
The banking environment will be conditioned by inflation and central
banks' response, both in mature and emerging countries. In general,
a gradual normalization of monetary policy would not negative for
business; but central banks must get the pace and communication of
their measures right.
The tightening of monetary policy may be followed by the
withdrawal of liquidity support measures, but gradually, allowing
banks to adjust to the new conditions. Lastly, the private sector
remains vulnerable to an economic downturn, especially in those
sectors most affected by social distancing and mobility measures.
Even so, at the moment most institutions have a solvency position
sound enough to cope, as demonstrated by several stress tests
conducted on the main banking systems.
In addition to the economic environment, banks must deal with faster
business digitalization while understanding and managing climate
change risks.
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àFinancial regulation
In 2022, we expect sustainability and digitalization will remain at the
top of the regulatory agenda, alongside prudential and financial
matters.
Prudential. Talks about implementing the Basel III reforms in Europe
will take centre stage. The most important matters include the
treatment of operational risk, the output floor (a measure that sets a
lower limit on risk-weighted assets that banks calculate when using
their internal models) and EU-specific scenarios relating to SME and
infrastructure support. The new rules will take effect on 1 January
2025, regardless of their approval date.
The authorities will continue to assess the impact of the crisis and the
interaction of regulatory framework in matters such as current
capital buffers (which banks have not used despite supervisors’
recommendations). The European Commission is expected to review
the macroprudential framework before the year is out. The Basel
Committee will continue to issue proposals on the prudential
treatment of financial entities’ cryptoasset exposures.
Finance: In 2022, the EU will commence a third revision of the Bank
Recovery and Resolution Directive (BRRD) aiming to improve the
application of the framework, eliminate incentives to bail out failing
banks with public money and ensure the framework is suitable for
small and medium-sized banks.
A first revision of the Deposit Guarantee Schemes Directive (DGSD) is
planned. Negotiations on the creation of a common European deposit
guarantee fund (European Deposit Insurance Scheme – EDIS) will
also continue.
Sustainability: To enhance the green taxonomy, the European
Commission will work on drafting the four remaining environmental
objectives and determining one taxonomy for activities that harm the
environment and another for activities with social aims. Further work
will be done on setting European and international sustainable
reporting standards and on finalizing details of the ESG information
to be included in the Pillar 3 report from 2023.
The legislative proposal on sustainable corporate governance to help
companies introduce ESG objectives into their strategies will be
published. Progress will be made in with sustainability labels and
standards linked to the Taxonomy, such as the European Green Bond
Standard (EGBS). The Basel Committee will continue the work it
started in 2021 on recommendations for the management and
supervision of sustainability-related risks.
Digitalization: The Digital Markets Act (DMA) could possibly be
passed in Q1. It would prove a turning point in the EU’s digital
strategy by setting criteria for considering a large online platform a
“gatekeeper” as well as obligations that ensure a fairer environment
where all businesses could market their services.
The authorities acknowledge that data will be at the centre of the
digital transformation. Further talks are expected on a regulatory
framework for data sharing (Data Act). Debates will intensify on so-
called “open finance”, which considers the possibility that banks (and
also insurers and asset managers) may have to share more data than
the Payment Services Directive (PSD2) requires.
While talks on reforming PSD2 will begin, the European Commission
could issue a proposal on instant cross-border payments.
Technological innovation: In 2022, talks about the Commission's
2019 regulatory proposals to strengthen the Digital Operational
Resilience Act (DORA) and regulate markets in cryptoassets (MiCA)
will continue. Those could be passed during the year. Legislative
procedures will continue to pass those submitted in 2021 to regulate
the use of artificial intelligence and create a European digital identity
(eIDAs2) which could be used to access financial services, for
example.
The ECB will continue its analysis of the digital euro. In 2021, it began
a two-year study into the feasibility of issuing a digital euro. Almost
all of the world's central banks are examining digital currencies.
Retail banking: Several initiatives underway are seeking to boost
consumer protection and adapt laws to the digital landscape.
Legislators are expected to approve proposed reforms of the
Consumer Credit Directive and the Mortgage Credit Directive.
The key obligations that will apply from 2022 fall under the
Taxonomy Regulation on environmentally sustainable activities),
including banks' disclosure of the proportion of eligible assets held
on their balance sheets.
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These are the main management priorities for 2022 in our core regions and segments:
Europe
Our priority in Europe is to integrate all businesses within a common operating model to boost cost efficiency and
improve service quality. Our main action lines in 2022 are:
→ Continuing to grow our digital capabilities in the region, accelerating customer-to-digital conversion for better service
and higher customer satisfaction, while reducing the cost base.
→ Delivering on our EUR 1 billion cost savings commitment.
→ Leveraging our global businesses, SCIB and WM&I, and the connection with PagoNxt to allocate capital to the most
profitable segments faster and more efficiently and thereby improve the overall profitability.
→ Excelling in risk management and maintaining and reinforcing our balance sheet strength.
The cornerstone of our strategy in Spain is customer
service. We aim to:
• grow the customer base through excellent service
quality and seamless interaction with both customers
and non-customers through digital channels;
• increase customer loyalty with better customer
experience when acquiring products through simple,
digital processes;
• achieve operational excellence and improve NPS;
Santander UK’s priorities remain largely unchanged. In
2022, specific focus will be on managing revenue and
simplifying the business as well as:
• increasing customer loyalty by improving customer
experience when interacting with the bank;
• reducing the cost of deposits and maximizing the margin
of the mortgage portfolio;
• furthering the digital transformation, optimizing the
branch network and simplifying processes;
• develop low capital-intensive revenue streams (i.e. funds
• engaging, motivating and developing a talented and
and insurance); and
diverse team; and
• continue to revise the cost structure in light of the new,
• being a responsible and sustainable business.
more efficient model.
Due to our market leadership in Portugal, we can focus on:
Our strategy is based on the following pillars:
• consolidating the commercial and digital interaction
• customers: continuing to improve customer satisfaction,
model;
to remain top 3 or better;
• strengthening our lending leadership and focusing on
organic growth from transactions with the highest return
on capital;
• digitalization: increasing sales, loyalty and our customer
base atop the foundations we've laid for digital
interaction with customers;
• increasing customer loyalty with a diversified Daily
Banking proposition and by attracting off-balance sheet
funds;
• simplification: leveraging One Europe to evolve our
business into a more agile, dynamic and profitable bank;
and
• maintaining our position as market leaders in efficiency,
with a better cost base; and
• responsible banking: continuing to support our
customers' transition to a sustainable economy.
• maintaining an appropriate risk policy, with high credit
quality and a strong capital position.
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North America
In North America, we will strive to generate synergies by leveraging the Group's global presence and strength,
capitalizing on our advantages over competitors and running cross-cutting One Santander initiatives. We aim to:
→ Generate new business opportunities on the back of cross-border, US-Mexico collaboration, as well as operational
efficiencies, including technology.
→ Continue to execute our regional collaboration strategy, sharing best practices and know-how between countries,
increasing our common value proposition and profitability, leveraging our global strength as part of the Group.
→ Take advantage of new and improved value propositions and improved interactions to drive customer loyalty, NPS and
CX.
→ Simplify the regional business model to reduce duplications (platforms and architecture) and optimize expenses.
→ Continue consolidating regional IT under a single leadership, in pursuit of faster time to market and greater
efficiencies.
→ Continue developing value-added products that meet customers' needs.
→ Capitalize on recent acquisitions to expand market capabilities while also driving organic growth.
Our goal is to maintain above cost of capital returns across
our core businesses. To do so, we will:
Our strategic agenda aimed at becoming the best bank for
our customers is based on:
• continue to refocus our business on our consumer
finance franchise;
• develop a global hub in CIB for capital markets and
investment banking; while capitalizing on the APS
acquisition to broaden our product offering and fee
income;
• remain among the top 10 CRE and multifamily lenders
in commercial banking; and
• complete the integration of the acquisition in Wealth
Management and leverage the Group's connectivity to
gain market share, backed by our leading brand in Latin
America.
• leveraging digital solutions and process enhancement to
improve customer experience;
• developing appropriate, innovative and profitable
solutions for the country's mass market, such as the
Like-U credit card and the Samsung Members debit
account to significantly expand our customer base;
• remaining a market leader with value-added products
for corporates and leverage existing relationships to
attract individuals;
• executing our multi-year plan to improve our operating
model and IT security and further drive our technological
and digital transformation; and
• focusing on profitability, by proactively allocating capital
in businesses with higher potential and profitability.
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South America
The Group's priorities in South America are to:
→ Accelerate profitable growth, with a strategy that seeks to boost connectivity across South America through regional
projects, seizing on business opportunities and anticipating trends.
→ Maintain high profitability and best-in-class efficiency, while expanding our customer base and increasing customer
loyalty to remain a leader in the region and our markets.
→ Improve our customers' banking experience by making further progress with our digital transformation through the
development of digital platforms and a more efficient model.
→ Administer strict risk controls, with credit growth mainly in secured products.
Santander Brasil's management priorities for 2022 are to:
Santander Chile's strategy will focus on:
• build a more integrated, market-leading distribution
• continuing to improve our service quality to maintain our
platform and strengthen connections between
businesses in order to allow us to seize on opportunities
faster;
• grow our customer base and make it more profitable
while increasing customer loyalty;
• maintain controlled credit quality levels, by continuously
enhancing our risk models, with a focus on anticipating
trends;
• strengthen our high productivity culture, optimize our
channels and review our processes to improve
operational efficiency; and
• innovate in order to adapt to different scenarios and
maintain profitability.
leadership position in NPS;
• expanding Getnet to become a platform for our
customers (particularly corporates);
• continuing to strengthen our position in the mass
segment, through Life and Superdigital; and
• increasing green finance, our use of renewable energy
and financially empowering our customers to fulfil our
ESG strategy.
In Argentina, our strategy will focus on:
In Uruguay, our priorities for 2022 are to:
• expanding our customer base, increasing loyalty and
ensuring the best customer service though our multi-
channel strategy;
• further consolidate the business, leverage Getnet's roll-
out and strengthen our SME offering;
• enhance and expedite our technological and digital
• developing new businesses and commercial alliances
development model; and
further;
• continuing our efficiency and simplification process
through digital transformation;
• boosting profitable growth, optimizing capital
consumption and maintaining the quality of our
portfolio; and
• accelerating cultural transformation through a more
collaborative and agile environment.
• make progress with new ways of working and
distribution models, by integrating talent and brand
management among the Group's companies.
Our strategy in the Andean region will focus on:
In Peru, we aim to continue driving greater synergies and
expanding our microfinance business to expand our global,
corporate and retail customer base.
In Colombia, we will focus on increasing profitability in
each of the business areas and generating synergies
between them: capitalizing on the new financial entity in
Consumer, developing Prospera and broadening our
Multilatinas proposition in Corporates, while enhancing
digitalization by adopting automation tools.
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Digital Consumer Bank
Our priorities for 2022 are to:
→ Secure leadership in global digital consumer lending (on the shoulders of Santander Consumer Finance's existing
footprint and the business and technology stack of Openbank's digital platform) by focusing on growth and
transformation to:
– leverage the successful global insurance model while optimizing capital consumption and expanding into new
markets to strengthen Auto positioning;
– gain market share in consumer lending and develop buy now, pay later (BNPL) 2.0 to strengthen our current top 3
position in Europe; and
– simplify for efficiency, increase competitiveness and gain scale benefits with the finalization of the new legal and
operational structure with three hubs.
→ Launch a large global transformation project, re-platforming the auto, consumer and retail banking businesses
completely to seize on the fast-growing transition to online to support digital customer base expansion and maintain
high profitability and one of the best efficiency ratios in the sector.
→ Increase profits on the back of the strategic operations initiated in 2021 (e.g. Stellantis Agreement in Auto, and BNPL
business in Non-Auto).
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SECONDARY SEGMENTS
In 2022, we will focus on:
In 2022, the key management aims will be:
• partnering with our clients as strategic advisors and
strengthening our value-added services, with an
increased focus on ESG and digital solutions to transform
our business;
• leveraging the pan-European platform to strengthen our
advisory capabilities, better serve the needs of our global
customers and improving our position in Europe;
• bolstering our leadership and going from being
multinational to pan-regional to become the leading CIB
player in most countries and products in South America;
and
• raising the level of our CIB franchise to compete on a
level playing field in the US and integrating Amherst
Pierpont Securities (once the acquisition is completed), a
step towards meeting our growth expectations.
PagoNxt strategy for 2022 is to:
• enhance our Getnet franchise and continue to develop and
grow Santander’s acquiring business, leverage our
agreements with One Santander in Europe, North and South
America and SCIB, bring innovations from one region to
another and expand our products and value-added services as
a multi-regional provider with a growing global presence, and
tailor our solutions to local merchants’ needs. The
commercial expansion will leverage both the distribution
through Santander channels and through third parties and
alliances in the open market;
• expand our global platforms; continue delivering on Getnet's
plan to migrate payment volumes from local operations, as
we further expand our gateways convergence and technical
interoperability; roll out One Trade platform services to
Santander banks under a SaaS model, according to our plans
to migrate payment volumes from the Group to the global
platform and to integrate financing solutions, as well as our
plan to implement Payments Hub’s instant functionality in
Spain, the UK and SCIB; and gradually migrate Superdigital's
volumes from our local operations to the global platform.
• accelerate our commercial activity in the open market
through direct marketing and partnerships; continue to
expand Getnet's channels in the open market, focusing on
Brazil, Mexico and the EU; deliver One Trade's and Payments
Hub's direct digital marketing of e-money services in the
Eurozone and the UK; use our APIs to access GBP and EUR
payment schemes (subject to regulatory approvals); and
accelerate Superdigital’s plan to launch of its global payment
services platform in Latin American markets to reach seven
countries by year end and gradually introduce new services
such as credit.
• continue fulfilling our strong commitment to ESG, focused on
driving financial inclusion by empowering micro-
entrepreneurs and underbanked communities to overcome
barriers and access our services, supporting the development
of vulnerable customers.
In Private Banking:
• continuing to leverage our scale so clients benefit
globally and fostering cooperation across countries
(+43% in 2021) and segments;
• continuing to expand our product range in line with
market trends, with a focus on discretionary
management, secured lending, alternative products,
investment banking and ESG; and
• continuing to focus on strengthening our technological
capabilities, with an ambitious strategy to maximize
operational efficiency and provide the best digital
experience to our customers.
In Santander Asset Management:
• following a systematic and quantitative management
approach to support our unchanged ambition to
improve performance and market share via our
distribution networks, and to continue to create a
global value proposition of such highly successful
products as Santander Future Wealth, Santander GO
and the Santander ON range of solutions geared
towards our clients' needs;
• continuing to develop the alternative business with the
aim of expanding our institutional client base and
addressing our Private Banking clients' specific needs;
• strengthening our ESG fund offering, making
responsible and profitable investment solutions
available to our clients in line with our strong
commitment to sustainability; and
• implementing digital robo-advisor investment
platforms in certain markets where we operate.
In Insurance:
• continuing to develop our value proposition consistent
with the new needs of individual and corporate
customers;
• ensuring the best customer experience in taking-out,
renewing and using insurance;
• focusing on use of data to customize and simplify our
insurance value proposition; and
• providing an end-to-end digital insurance proposition
for all interested customers, with support from the
other channels.
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8. Alternative performance measures
(APMs)
In addition to the financial information prepared under IFRS, this
consolidated directors’ report contains financial measures that
constitute alternative performance measures (APMs) to comply with
the guidelines on alternative performance measures issued by the
European Securities and Markets Authority on 5 October 2015 and
non-IFRS measures.
The financial measures contained in this consolidated directors’
report that qualify as APMs and non-IFRS measures have been
calculated using our financial information but are not defined or
detailed in the applicable financial information framework or under
IFRS and have neither been audited nor reviewed by our auditors.
We use these APMs and non-IFRS measures when planning,
monitoring and evaluating our performance. We consider these
APMs and non-IFRS financial measures to be useful metrics for
management and investors to facilitate operating performance
comparisons from period to period. While we believe that these
APMs and non-IFRS financial measures are useful in evaluating our
business, this information should be considered as supplemental in
nature and is not meant as a substitute of IFRS measures. In addition,
the way in which Santander defines and calculates these APMs and
non-IFRS measures may differ from the calculations used by other
companies with similar measures and, therefore, may not be
comparable.
The APMs and non-IFRS measures we use in this document can be
categorized as follows:
Underlying results
In addition to IFRS results measures, we present some results
measures which are non-IFRS measures and which we refer to as
underlying measures. These underlying measures allow, in our view,
a better year-on-year comparability as they exclude items outside the
ordinary course performance of business which are grouped in the
non-IFRS line net capital gains and provisions and are further detailed
at the end of section 3.2 'Results' of this chapter.
In addition, the results by business areas in section 4 'Financial
information by segment' are presented only on an underlying basis in
accordance with IFRS 8. The use of this information by the Group’s
Governance bodies and reconciled on an aggregate basis to our IFRS
consolidated results can be found in note 51.c to our consolidated
financial statements.
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Profitability and efficiency ratios
The purpose of the profitability and efficiency ratios is to measure the ratio of profit to capital, to tangible capital, to assets and to risk weighted
assets, while the efficiency ratio measures how much general administrative expenses (personnel and other) and amortization costs are needed
to generate revenue.
The goodwill adjustments have been removed from the RoTE numerator as, since they are not considered in the denominator, we believe this
calculation is more correct.
Underlying RoE
Underlying profit attributable to the parent
Formula
Relevance of the metric
Profit attributable to the parent
Average stockholders’ equity A
(excl. minority
interests)
Average stockholders’ equity A
(excl. minority
interests)
Profit attributable to the parent
B
Average stockholders’ equity A
(excl. minority
interests)
This ratio measures the return that shareholders obtain
on the funds invested in the bank and as such measures
the bank’s ability to pay shareholders.
This ratio measures the return that shareholders obtain
on the funds invested in the bank excluding results from
operations outside the ordinary course of business.
This is a very common indicator, used to evaluate the
profitability of the company as a percentage of a its
tangible equity. It’s measured as the return that
shareholders receive as a percentage of the funds
invested in the bank less intangible assets.
Underlying profit attributable to the parent
Average stockholders’ equity A
(excl. minority
interests) - intangible assets
This indicator measures the profitability of the tangible
equity of a company arising from ordinary activities, i.e.
excluding results from operations outside the ordinary
course of business.
Consolidated profit
Average total assets
Underlying consolidated profit
Average total assets
This metric measures the profitability of a company as a
percentage of its total assets. It is an indicator that
reflects the efficiency of the bank’s total assets in
generating profit over a given period.
This metric measures the profitability of a company as a
percentage of its total assets excluding results from
operations outside the ordinary course of business. It is
an indicator that reflects the efficiency of the bank’s total
assets in generating profit over a given period.
Consolidated profit
Average risk-weighted assets
The return adjusted for risk is a derivative of the RoA
metric. The difference is that RoRWA measures profit in
relation to the Group’s risk-weighted assets.
Ratio
RoE
(Return on Equity)
RoTE
(Return on Tangible Equity)
Underlying RoTE
RoA
(Return on Assets)
Underlying RoA
RoRWA
(Return on Risk-Weighted
Assets)
Underlying RoRWA
RoRAC
(Return on Risk-Adjusted
Capital)
Underlying consolidated profit
Average risk weighted assets
Underlying consolidated profit
Average economic capital
Economic Value Added
Underlying consolidated profit – (average
economic capital x cost of capital)
Efficiency
(Cost-to-income)
Operating expenses C
Total income
This relates the underlying consolidated profit (excluding
results from operations outside the ordinary course of
business) to the Group’s risk weighted assets.
This is the return on economic capital required internally
(necessary to support all risks inherent in our activity).
Economic value added is the profit generated in excess
of the cost of economic capital employed. This measures
risk adjusted returns in absolute terms,
complementing the RoRAC approach.
One of the most commonly used indicators when
comparing productivity of different financial entities. It
measures the amount of resources used to generate the
bank’s operating income.
A. Stockholders’ equity = Capital and Reserves + Accumulated other comprehensive income + Profit attributable to the parent + Dividends.
B. Excluding the adjustment to the valuation of goodwill.
C. Operating expenses = Administrative expenses + amortizations.
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A B
Profitability and efficiency
RoE
Profit attributable to the parent
Average stockholders' equity (excluding minority interests)
(EUR million and %)
Underlying RoE
Profit attributable profit to the parent
(-) Net capital gains and provisions
Underlying profit attributable to the parent
Average stockholders' equity (excluding minority interests)
RoTE
Profit attributable to the parent
(-) Goodwill impairment
Profit attributable to the parent (excluding goodwill impairment)
Average stockholders' equity (excluding minority interests)
(-) Average intangible assets
Average stockholders' equity (excl. minority interests) - intangible assets
Underlying RoTE
Profit attributable to the parent
(-) Net capital gains and provisions
Underlying profit attributable to the parent
Average stockholders' equity (excl. minority interests) - intangible assets
RoA
Consolidated profit
Average total assets
Underlying RoA
Consolidated profit
(-) Net capital gains and provisions
Underlying consolidated profit
Average total assets
RoRWA
Consolidated profit
Average risk-weighted assets
Underlying RoRWA
Consolidated profit
(-) Net capital gains and provisions
Underlying consolidated profit
Average risk-weighted assets
RoRAC
Consolidated profit
(-) Net capital gains and provisions
Underlying consolidated profit
Average economic capital
Economic value added
Underlying consolidated profit
(-) Average economic capital x cost of capital
Average economic capital
Cost of capital
Efficiency ratio
Underlying operating expenses
Operating expenses
Net capital gains and provisions impact in operating expenses C
Underlying total income
Total income
Net capital gains and provisions impact in total income C
2021
9.66%
8,124
84,133
10.29%
8,124
-530
8,654
84,133
11.96%
8,124
-6
8,130
84,133
16,169
67,964
12.73%
8,124
-530
8,654
67,964
2020
-9.80%
-8,771
89,459
5.68%
-8,771
-13,852
5,081
89,459
1.95%
-8,771
-10,100
1,329
89,459
21,153
68,306
7.44%
-8,771
-13,852
5,081
68,306
2019
6.62%
6,515
98,457
8.38%
6,515
-1,737
8,252
98,457
11.44%
6,515
-1,491
8,006
98,457
28,484
69,973
11.79%
6,515
-1,737
8,252
69,973
0.62%
9,653
1,563,899
0.65%
9,653
-530
10,183
1,563,899
-0.50%
-7,708
1,537,552
0.40%
-7,708
-13,866
6,158
1,537,552
0.54%
8,116
1,508,167
0.65%
8,116
-1,710
9,826
1,508,167
1.69%
9,653
572,136
1.78%
9,653
-530
10,183
572,136
14.97%
9,653
-530
10,183
68,042
3,327
10,183
-6,856
68,042
10.08 %
46.15%
21,415
21,415
—
46,404
46,404
—
-1.33%
-7,708
578,517
1.06%
-7,708
-13,866
6,158
578,517
8.51%
-7,708
-13,866
6,158
72,389
-2,529
6,158
-8,687
72,389
12.00 %
47.01%
20,967
21,130
-163
44,600
44,279
321
1.33%
8,116
609,170
1.61%
8,116
-1,710
9,826
609,170
12.91%
8,116
-1,710
9,826
76,105
3,509
9,826
-6,317
76,105
8.30 %
47.04%
23,280
23,280
—
49,494
49,229
265
A. Averages included in the RoE, RoTE, RoA and RoRWA denominators are calculated using 13 months (from December to December).
B. The risk-weighted assets included in the denominator of the RoRWA metric are calculated in line with the criteria laid out in the CRR (Capital Requirements Regulation).
C. Following the adjustments in note 51.c to the consolidated financial statements.
Annual report 2021 423
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Efficiency ratio by business areas (EUR million and %)
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
2021
2020
% Total income
Operating
expenses
% Total income
Operating
expenses
51.0
47.7
53.3
42.0
40.2
45.2
43.3
45.9
35.0
29.7
38.4
57.8
45.0
16,312
7,006
4,863
1,341
1,646
10,986
7,383
3,579
15,353
10,884
2,457
1,393
5,339
8,318
3,340
2,592
563
663
4,967
3,197
1,643
5,380
3,236
942
805
2,405
56.4
53.2
63.8
45.5
41.3
42.4
41.8
42.5
36.0
32.6
39.8
56.0
45.1
14,673
6,782
3,980
1,296
1,524
11,034
7,360
3,651
14,868
10,866
2,263
1,128
5,166
8,275
3,607
2,539
590
629
4,677
3,079
1,552
5,357
3,541
900
632
2,329
Underlying RoTE by business area (EUR million and %)
2021
2020
Average
stockholders'
equity (excl.
minority
interests) -
intangible
assets
Underlying
profit
attributable to
the parent
2,978
957
1,570
482
161
3,053
2,326
835
3,328
2,325
637
274
1,332
40,478
15,108
13,411
4,065
3,211
23,300
17,086
6,001
16,411
10,821
3,304
997
9,479
%
7.36
6.33
11.71
11.85
5.00
13.10
13.62
13.91
20.28
21.49
19.28
27.44
14.05
Average
stockholders'
equity (excl.
minority
interests) -
intangible
assets
Underlying
profit
attributable to
the parent
1,413
517
391
338
162
1,472
731
762
2,907
2,113
432
179
1,133
39,178
15,674
12,966
3,875
3,204
21,182
15,690
5,298
16,409
11,028
3,278
681
9,620
%
3.61
3.30
3.02
8.73
5.05
6.95
4.66
14.38
17.72
19.16
13.19
26.24
11.77
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Annual report 2021 424
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Credit risk indicators
The credit risk indicators measure the quality of the credit portfolio and the percentage of non-performing loans covered by provisions.
Ratio
Formula
Relevance of the metric
NPL ratio
(Non-performing loans
ratio)
Credit impaired loans and advances to customers, customer
guarantees and customer commitments granted
A
Total Risk
The NPL ratio is an important variable regarding financial
institutions' activity since it gives an indication of the
level of risk the entities are exposed to. It calculates risks
that are, in accounting terms, declared to be credit
impaired as a percentage of the total outstanding
amount of customer credit and contingent liabilities.
Total coverage ratio
Total allowances to cover impairment losses on loans and
advances to customers, customer guarantees and customer
commitments granted
Credit impaired loans and advances to customers, customer
guarantees and customer commitments granted
The total coverage ratio is a fundamental metric in the
financial sector. It reflects the level of provisions as a
percentage of the credit impaired assets. Therefore it is a
good indicator of the entity's solvency against client
defaults both present and future.
Cost of Credit
Allowances for loan-loss provisions over the last 12 months
Average loans and advances to customers over the last 12
months
This ratio quantifies loan-loss provisions arising from
credit risk over a defined period of time for a given loan
portfolio. As such, it acts as an indicator of credit quality.
A. Total risk = Total loans and advances and guarantees to customers (including credit impaired assets) + contingent liabilities that are credit impaired.
Credit risk (I) (EUR million and %)
NPL ratio
Credit impaired loans and advances to customers, customer guarantees and customer
commitments granted
Gross loans and advances to customers registered under the headings “financial assets
measured at amortized cost” and "financial assets designated at fair value through profit or
loss" classified in stage 3 (OCI), excluding POCI (Purchased or Originated Credit Impaired)
that is currently impaired
POCI exposure (Purchased or Originated Credit Impaired) that is currently impaired
Customer guarantees and customer commitments granted classified in stage 3
Doubtful exposure of loans and advances to customers at fair value through profit or loss
Total risk
Impaired and non-impaired gross loans and advances to customers
Impaired and non-impaired customer guarantees and customer commitments granted
2021
3.16%
2020
3.21%
2019
3.32%
33,234
31,767
33,799
31,288
358
1,578
10
30,318
497
941
11
31,826
706
1,250
17
1,051,115
989,456
1,016,507
995,646
55,469
939,795
49,662
964,450
52,057
Annual report 2021 425
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Credit risk (II) (EUR million and %)
Total coverage ratio
Total allowances to cover impairment losses on loans and advances to customers, customer
guarantees and customer commitments granted
Total allowances to cover impairment losses on loans and advances to customers
measured at amortised cost and designated at fair value through OCI
Total allowances to cover impairment losses on customer guarantees and customer
commitments granted
Credit impaired loans and advances to customers, customer guarantees and customer
commitments granted
Gross loans and advances to customers registered under the headings “financial assets
measured at amortized cost” and "financial assets designated at fair value through profit
or loss" classified in stage 3 (OCI), excluding POCI (Purchased or Originated Credit
Impaired) that is currently impaired
POCI exposure (Purchased or Originated Credit Impaired) that is currently impaired
Customer guarantees and customer commitments granted classified in stage 3
Doubtful exposure of loans and advances to customers at fair value through profit or loss
Cost of credit
Underlying allowances for loan-loss provisions over the last 12 months
Allowances for loan-loss provisions over the last 12 months
Net capital gains and provisions impact in allowances for loan-loss provisions
2021
71%
23,698
22,964
734
2020
76%
24,272
23,577
695
2019
68%
22,965
22,229
736
33,234
31,767
33,799
31,288
358
1,578
10
0.77 %
7,436
7,436
—
30,318
497
941
11
1.28 %
12,173
12,431
-258
31,826
706
1,250
17
1.00 %
9,321
9,321
—
Average loans and advances to customers over the last 12 months
968,931
952,358
935,488
NPL ratio by business areas (EUR million and %)
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
2021
Credit impaired
loans and
advances to
customers,
customer
guarantees and
customer
commitments
granted
19,822
12,758
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
%
3.12
5.77
1.43
3.44
3.61
2.42
2.33
2.73
4.50
4.88
4.43
3.61
2.13
Total risk
636,123
221,100
262,869
41,941
33,497
149,792
112,808
36,984
141,874
85,702
41,479
5,481
116,989
2020
Credit impaired
loans and
advances to
customers,
customer
guarantees and
customer
commitments
granted
20,272
13,796
3,138
1,584
1,496
2,938
2,025
913
5,688
3,429
2,051
93
2,525
%
3.34
6.23
1.24
3.89
4.74
2.23
2.04
2.81
4.39
4.59
4.79
2.11
2.17
Total risk
606,997
221,341
252,255
40,693
31,578
131,626
99,135
32,476
129,590
74,712
42,826
4,418
116,381
Annual report 2021 426
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Coverage ratio by business areas (EUR million and %)
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Cost of credit (EUR million and %)
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
2021
Total
allowances to
cover
impairment
losses on
loans and
advances to
customers,
customer
guarantees
and customer
commitments
granted
Credit
impaired loans
and advances
to customers,
customer
guarantees
and customer
commitments
granted
9,800
6,660
971
1,033
895
4,901
3,943
958
6,279
4,651
1,164
305
2,684
19,822
12,758
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
2021
Underlying
allowances for Average loans
and advances
to customers
over the last
12 months
loan-loss
provisions over
the last 12
months
2,294
1,833
-245
38
200
591,703
199,243
258,636
39,805
29,777
1,210
130,635
419
791
3,251
2,715
341
140
527
97,917
32,434
125,089
72,808
40,344
4,667
115,156
%
49.4
52.2
25.8
71.7
73.9
134.9
150.3
95.0
98.3
111.2
63.3
153.8
107.8
%
0.39
0.92
-0.09
0.09
0.67
0.93
0.43
2.44
2.60
3.73
0.85
3.01
0.46
2020
Total
allowances to
cover
impairment
losses on
loans and
advances to
customers,
customer
guarantees
and customer
commitments
granted
10,199
6,495
1,403
1,053
1,058
5,364
4,261
1,103
5,540
3,880
1,260
257
2,862
Credit
impaired loans
and advances
to customers,
customer
guarantees
and customer
commitments
granted
20,272
13,796
3,138
1,584
1,496
2,938
2,025
913
5,688
3,429
2,051
93
2,525
2020
Underlying
allowances for Average loans
and advances
to customers
over the last
12 months
loan-loss
provisions over
the last 12
months
3,344
2,001
677
193
330
3,917
2,937
979
3,924
3,018
594
226
957
579,501
198,273
255,038
37,951
30,073
134,187
102,662
32,287
118,138
69,421
39,534
3,813
114,747
%
50.3
47.1
44.7
66.5
70.7
182.6
210.4
120.8
97.4
113.2
61.4
275.1
113.3
%
0.58
1.01
0.27
0.51
1.10
2.92
2.86
3.03
3.32
4.35
1.50
5.93
0.83
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Other indicators
The market capitalization indicator provides information on the
volume of tangible equity per share. The loan-to-deposit ratio (LTD)
identifies the relationship between net customer loans and advances
and customer deposits, assessing the proportion of loans and
advances granted by the Group that are funded by customer
deposits.
The Group also uses gross customer loan magnitudes excluding
reverse repurchase agreements (repos) and customer deposits
excluding repos. In order to analyse the evolution of the traditional
commercial banking business of granting loans and capturing
deposits, repos and reverse repos are excluded, as they are mainly
treasury business products and highly volatile.
Ratio
Formula
Relevance of the metric
TNAV per share
(Tangible net asset
value per share)
Tangible book value A
Number of shares excluding treasury stock
Price / tangible book
value per share (X)
Share price
TNAV per share
LtD
(Loan-to-deposit)
Net loans and advances to customers
Customer deposits
Loans and advances
(excl. reverse repos)
Gross loans and advances to customers excluding reverse
repos
Deposits (excl. repos)
Customer deposits excluding repos
This is a very commonly used ratio used to measure the
company’s accounting value per share having deducted
the intangible assets. It is useful in evaluating the amount
each shareholder would receive if the company were to
enter into liquidation and had to sell all the company’s
tangible assets.
Is one of the most commonly used ratios by market
participants for the valuation of listed companies both in
absolute terms and relative to other entities. This ratio
measures the relationship between the price paid for a
company and its accounting equity value.
This is an indicator of the bank’s liquidity. It measures the
total (net) loans and advances to customers as a
percentage of customer funds.
In order to aid analysis of the commercial banking activity,
reverse repos are excluded as they are highly volatile
treasury products.
In order to aid analysis of the commercial banking activity,
repos are excluded as they are highly volatile treasury
products.
PAT + After tax fees
paid to SAN (in Wealth
Management &
Insurance)
Net profit + Fees paid from Santander Asset Management and
Santander Insurance to Santander, net of taxes, excluding
Private Banking customers
Metric to assess Wealth Management & Insurance’s total
contribution to Group’s profits
A. Tangible book value = Stockholders’ equity - intangible assets.
Others (EUR million and %)
TNAV (tangible book value) per share B
Tangible book value
Number of shares excl. treasury stock (million)
B
Price / tangible book value per share (X)
B
Share price (euros)
TNAV (tangible book value) per share B
Loan-to-deposit ratio
Net loans and advances to customers
Customer deposits
PAT + After tax fees paid to SAN (in WM&I) (Constant EUR million)
Profit after tax
Net fee income net of tax
B. 2019 data adjusted for the capital increase in December 2020.
2019
4.18
72,384
17,332
0.86
3.575
4.18
114%
942,218
824,365
2021
4.12
70,346
17,063
0.71
2.941
4.12
106%
972,682
918,344
2,313
943
1,370
2020
3.79
65,568
17,312
0.67
2.538
3.79
108%
916,199
849,310
2,061
841
1,220
Annual report 2021 428
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Impact of exchange rate movements on profit and loss
accounts
The Group presents, at both the Group level as well as the business
unit level, the real changes in the income statement as well as the
changes excluding the exchange rate effect, as it considers the latter
facilitates analysis, since it enables businesses movements to be
identified without taking into account the impact of converting each
local currency into euros.
Said variations, excluding the impact of exchange rate movements,
are calculated by converting P&L lines for the different business units
comprising the Group into our presentation currency, the euro,
applying the average exchange rate for 2021 to all periods
contemplated in the analysis. The table below shows the average
exchange rates of the main currencies in which the Group operates.
Impact of inflation on operating expenses
Santander presents, for both the Group and the business units
included in the primary segments, the changes in operating
expenses, as well as the changes excluding the exchange rate effect,
and the changes of the latter excluding the effect of average inflation
in 2021. The reason is that the two latter facilitate analysis for
management purposes.
Inflation is calculated as the arithmetic average of the last twelve
months for each country and, for the regions, as the weighted
average of each country comprising the region's inflation rate,
weighed by each country's operating expenses in the region. The
table below shows the average inflation rates calculated as indicated
for each of the regions and countries.
Impact of exchange rate movements on the balance
sheet
Average inflation
%
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Total Group
The Group presents, at both the Group level as well as the business
unit level, the real changes in the balance sheet as well as the
changes excluding the exchange rate effect for loans and advances to
customers excluding reverse repos and customer funds (which
comprise deposits and mutual funds) excluding repos. As with the
income statement, the reason is to facilitate analysis by isolating the
changes in the balance sheet that are not caused by converting each
local currency into euros.
These changes excluding the impact of exchange rate movements
are calculated by converting loans and advances to customers
excluding reverse repos and customer funds excluding repos, into our
presentation currency, the euro, applying the closing exchange rate
on the last working day of 2021 to all periods contemplated in the
analysis. The table below shows the period-end exchange rates of
the main currencies in which the Group operates.
Exchange rates: 1 euro/currency parity
US dollar
Pound sterling
Brazilian real
Mexican peso
Chilean peso
Argentine peso
Polish zloty
Average
2021
1.182
0.859
6.372
2020
1.140
0.889
5.814
Period-end
2021
2020
1.133
0.840
6.319
1.227
0.898
6.373
23.980
24.364
23.152
24.438
897.123
902.072
964.502
871.819
112.383
79.555
116.302
103.159
4.564
4.441
4.597
4.559
2021
2.9
3.1
2.6
1.3
5.1
5.0
4.7
5.7
13.7
8.3
4.5
48.1
2.6
6.0
Annual report 2021 429
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Risk management
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Risk management
and compliance
1. Risk management and
compliance overview
1.1 Executive summary and 2021 highlights
1.2 2021 key achievements
1.3 Santander's top and emerging risks
2. Risk management and control model
2.1 Risk principles and culture
2.2 Risk factors
2.3 Risk governance
2.4 Management processes and tools
2.5 Models & Data unit
3. Credit risk
3.1 Introduction
3.2 Credit risk management
3.3 Key metrics
3.4 Details of main geographies
3.5 Other credit risk details
4. Market, structural and liquidity risk
4.1 Introduction
4.2 Market risk management
4.3 Market risk key metrics
4.4 Structural balance sheet risk
management
4.5 Structural balance sheet risk key metrics
4.6 Liquidity risk management
4.7 Liquidity risk key metrics
4.8 Pension and actuarial risk management
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439
439
440
442
444
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446
446
449
455
460
466
466
467
469
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475
477
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478
5. Capital risk
5.1 Introduction
5.2 Capital risk management
5.3 Key metrics
6. Operational risk
6.1 Introduction
6.2 Operational risk management
6.3 Key metrics
7. Compliance and conduct risk
7.1 Introduction
7.2 Compliance and conduct risk
management
8. Model risk
8.1 Introduction
8.2 Model risk management
9. Strategic risk
9.1 Introduction
9.2 Strategic risk management
10. Climate and environmental risk
10.1 Introduction
10.2 Climate and environmental risk
management
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Risk management
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1. Risk management
and compliance
Our risk and compliance culture is a key pillar of Grupo Santander's
strategy and underpins our safe and robust business model
In 2021, we continued to support
our customers and all our
stakeholders to encourage a
sustainable and responsible
economic recovery.
The Risk and Compliance function
kept its commitment to the
digitalization and fulfilment of our
strategic goals and initiatives such as
One Santander, PagoNxt and Digital
Consumer Bank.
Management of ESG-related risks
(with special focus on the effects of
climate-related risk and the
achievement of our ambitious net zero
goals) is also one of our priorities.
1.1 Executive summary and 2021 highlights
This section outlines Santander’s risk management and risk profile in
2021 based on key risk indicators and their performance.
The subsequent sections in this chapter (accessible via the links
provided) provide additional information on each risk factor, as well
as our analysis of top and emerging risks.
Credit risk
> Section 3
Our risk management and control model together with our solid
risk culture contributed to the bank's strong performance in 2021
while improving the way we serve our customers.
Credit quality indicators maintained their positive trend through
the year.
NON-PERFORMING LOANS RATIO
Loan growth coupled with positive portfolio performance drove the
NPL rate down.
29
20
COST OF CREDIT
Cost of credit improved owing to the good performance of the
portfolio and the additional provisions made in 2020 to cover
potential losses that could arise as a result of the covid pandemic.
TOTAL RISK BY REGION
30
TOTAL RISK BY SEGMENT
Digital Consumer Bank (DCB) and Santander Corporate & Investment Banking (SCIB)
29
Includes gross lending to customers, guarantees and documentary credits.
'Others' not included represent 1% (Corporate Centre).
Cost of credit is the ratio of 12-month loan-loss provisions to average lending on the same period.
20
30
Annual report 2021 432
3.16%3.21%2021202061%14%13%11%EuropeN. AmericaS. AmericaDCB0.77%1.28%2021202056%27%17%IndividualsCompaniesSCIB
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Market, structural and liquidity risk
> Section 4
Risk levels in trading activity remained low, in an environment
where volatility was lower than in 2020.
2021 AVG. VALUE AT RISK (VaR)
EUR million. Dec.21
Max.
EUR 15.9mn
Min.
EUR 6.8mn
VaR remained stable averaging EUR 10.5 million. It peaked in
September (EUR 15.9 million) due to supply chain disruptions and
rising energy prices.
▲164%
The liquidity ratio (LCR) was stable in
2021 and always remained above the
regulatory threshold.
We managed liquidity buffers effectively to maintain a sound risk
profile (within regulatory limits) and a profitable balance sheet.
Our subsidiaries have a strong balance sheet and a stable funding
structure, supported by a large customer deposit base. This
strength is demonstrated in stress scenarios developed under
homogeneous corporate criteria.
Capital risk
> Section 5
31
BY RISK TYPE
RWA
Credit risk, which is our core business, stands out among RWA.
RWA BY REGION
Diversified and balanced distribution.
2021 EUR 579 bn
32
2020 EUR 563 bn
FULLY LOADED CET1
33
RoRAC
▲12.12%
▲ 23 bp in 2021
placing CET1 at the
top of our 11-12%
target
▲ 15.0%
▲ 6 pp in 2021
Others not included represent 2% in 2021 and 3% in 2020.
The CET1 ratio increased due to strong organic capital generation
based on underlying profits and efficient RWA management.
The strength of our diversified retail banking business model is
demonstrated by our positive performance in all eight regulatory
stress tests performed since 2008.
RoRAC methodology allows us to compare homogeneously the
return on loans, customers, portfolios and businesses, helping to
identify those that obtain a risk-adjusted return above the cost of
capital.
31
32
33
Risk weighted assets.
Credit includes counterparty risk, securitizations and amounts below deduction thresholds.
The Group’s total RoRAC includes the operative units and the Corporate Centre, reflecting the Group's economic capital and its return.
Annual report 2021 433
9.59.110.612.9Q1Q2Q3Q4Operational: 10%Market: 3%Credit: 87%12.12%11.89%2021202012%34%30%33%EuropeN. AmericaS. AmericaDCB44%19%21%14%EuropeNorth AmericaSouth AmericaDCB45%18%20%14%EuropeNorth AmericaSouth AmericaDCB
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Operational risk
Our operational risk profile remained stable despite the
exceptional circumstances. With the goal of reinforcing existing
controls, our 2021 priorities were:
> Section 6
Operational management model
Relevant operational risks
Progress implementation and improvements in
instruments related to risk appetite, risk
assessment and control, business continuity plans,
as well as in the analysis and integration within the
monitoring and control of non-financial risks
(transformation risk and climate).
Several initiatives in place to mitigate emerging
risks (technological, cyber, etc.) and also adapt to
regulatory framework changes, focusing on
strengthening capacities to recover from disruptive
events that affect our main business operations.
OPERATIONAL LOSSES BY BASEL CATEGORY
Dec.2021
Clients
73%
Compliance and conduct risk
Main initiatives in 2021:
→ Transformation: Continued development of One
FCC strategic transformation plan; use of artificial
intelligence techniques to improve root-cause
analysis of customer complaints and for proactive
conduct risk management in commercialization;
exploration of RegTech tools.
→ Process redesign to improve effectiveness: Use
of homogeneous management methodologies
and tools in subsidiaries: Heracles, CCM, Annual
compliance program, Product and service
approval. Stronger governance under a risk-based
approach for the supervision of our subsidiaries.
Damage to
physical
assets
1.8%
External
fraud
15%
Processes
& systems
8%
Employees
2%
Internal
fraud
0.2%
> Section 7
→ Compliance & conduct risk management by the
first line of defence:
· Designation of an executive responsible for FCC
at subsidiary/business level.
· More robust compliance and conduct risk
management in terms of dealing with
vulnerable customers, conduct risk control,
better reputational risk management and
regulatory agenda with GDPR and Anti-Trust
requirements.
→ Risk culture: Fine-tuning of team capabilities
according to strategic objectives, gender and
diversity initiatives, talent review in succession
planning.
Model risk
> Section 8
→ We continue to make progress with our Model Risk
Management (MRM 2.0) strategic plan, with two achievements:
better management of our regulatory models (IRB and IMA) and
compliance with supervisory expectations.
→ Our digitalization progress helped us improve real-time
decision-making through more agile admission models.
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Strategic risk
> Section 9
→ 2021 strategic focus was to see how economic recovery fared
→ Challenging strategic plans, reviewing our business model,
against the uncertainty generated by new covid-19 variants and
the progress of vaccination campaigns in various geographies;
and to monitor the progress of our transformational projects.
identifying and monitoring top risks, assessing and validating
new products and coordinating the risk analysis for corporate
development transactions.
Climate and environmental risk
> Section 10
→ In 2021, progress was made in developing the Group's
capabilities to assess portfolios with scenario analysis
techniques. Among other management uses, it is also enabling
to meet growing regulatory requirements, including the Climate
Biennial Exploratory Scenarios (CBES) in the UK and the Single
Supervisory Mechanism (SSM) climate risk stress test for 2022.
→ Progress in credit approval process according to EBA guidelines;
and the adaptation of our policy to comply with environmental
commitments.
→ Climate-related and environmental risk further embedded in our
core risk management processes. Major 2021 milestones
include a new quantitative metric in our risk appetite statement
that allows us to closely monitor our commitment to reduce
thermal coal exposure.
→ Progress also made with increasing granularity and scope (e.g.
Santander Consumer Finance and Private Banking) of credit risk
materiality assessments.
→ Continued support for our public commitments on climate
change and for our customers’ transition to a more sustainable
economy.
Grupo Santander's risk profile could be affected by the
macroeconomic environment, regulations and competition.
This financial information, prepared with the same Group-wide
principles, aggregates figures for our various markets and business
subsidiaries, based on accounting data and internal management
system reporting.
The segments shown are differentiated by the geographical area
where profits are earned and by type of business. The financial
information of each reportable segment is prepared by aggregating
the figures for the Group’s various geographical areas and business
units. The information relates to both the accounting data of the units
integrated in each segment and that provided by internal
management information systems. In all cases, the same general
principles as those used in the Group are applied.
The notes to the consolidated financial statements contain additional
information on Grupo Santander’s provisions, legal proceedings,
taxes and other risks.
For additional information on segments,
please see '4.1 Description of segments' of
the Economic and financial review chapter.
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1.2 2021 key achievements
Our Risk and Compliance function is forward-looking, pragmatic and
a reference in the market. It is also guided by a clear and reinforced
strategy with lessons learnt throughout the crisis that enables us to
be better prepared.
Covid-19 close monitoring
Unprecedented level of
support to customers
(EUR 150 bn).
Integrated Health
reports and stats into
BAU reporting for
effective & timely
updates.
Closely following most
affected sectors/clients
supported by clear
segmentation.
Fully prepared
Collections & Recoveries
teams were
instrumental in helping
manage the crisis
including Conduct
approach.
Detailed & regular
assessments of
provisions alongside a
robust control
environment.
Operational excellence
Strong customer-centric
credit management
with excellent results in
the ECB’s stress test.
Creating value
ONE Compliance
strategy in motion and
accelerating One FCC
transformation
programme through
global standards
implementation and
detection activities.
Considerable cyber risk
progress made with the
launch of Europe’s hub.
Climate &
environmental factors
integration into the
admission process.
Constantly raising up
the bar in credit risk
digitalisation and
automation to improve
customer experience
(time to yes/time to
cash).
Capital accuracy:
continuous
optimization through
model enhancements
and other initiatives.
Consolidation of Monet
as the Group’s tool
supporting our
consistent model risk
management
framework.
Integration of
compliance & conduct
risk assessments/
indicators into one
process under the same
methodology through
the enhancements
made to our Heracles
tool.
Compliance & conduct
governance, process,
methodologies and
tool simplification to
better engage with
subsidiaries and be
more effective and
efficient.
Leverage new
advanced analytics
techniques in risk
management: conduct
and customer voice,
reputational risk, credit
risk, FCC.
New ways of working
Simplified key
processes through state
of the art modelling
techniques and robotics.
New regional heads in
place accelerating
shared services/
common solutions.
Introduced Flexi-
working to better
reconcile work-life
balance and protect
employees during covid.
Broadened Risk Culture
to include cyber,
compliance & conduct
and climate.
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1.3 Santander's top and emerging risks
For forward-looking management and strict control, we regularly
measure top and emerging risks under various stress scenarios. We
detect, analyse and monitor major internal and external threats that
could affect our strategic plan and compromise our profitability and
solvency. Top and emerging risks could lead to deviations from our
targets, as (by definition) their potential impact is not included in
current plans. Still, management measures can mitigate impact
severity.
In 2021, the covid pandemic and vaccine rollouts (especially in OECD
countries, where they have prompted faster economic recovery than
expected) still affected our top risks identification process. The risk of
new virus variants remains under close observation, particularly in
geographies where vaccination rates are low.
• regular reviews of our risk profile and commercial, market and
macroeconomic dynamics, and new action plans to remain on track
with established plans.
Growing regulatory pressure
In light of our international footprint and status as a global
systemically important bank, we are subject to substantial capital
requirements that could increase owing to new regulation or to a
review by the supervisor of the existing criteria. This could reduce our
profitability and return on capital while raising our cost of funding. In
the coming years, banks must implement capital and leveraging
requirements in accordance with Basel III reforms, aimed to enhance
the comparability of capital ratios at the industry level.
Key mitigation measures:
Grupo Santander is monitoring and adopting measures to mitigate
strategic risks, such as:
• Continued enhancement of our models and multiple initiatives on
each risk factor to optimize capital.
A macroeconomic scenario in which recovery is
restrained:
Ongoing inflation in the US and Europe over recent months and signs
of some economic indicators' slowdown have cast doubts about
global economic recovery. Extreme scenarios even suggest the
return of stagflation.
Following lockdowns, global manufacturing and services have not
been able to keep up with increasing demand and changing
consumption patterns prompted by covid. Global supply chains have
not yet recovered their full capacity, which was diminished by
pandemic restrictions. Examples of this are the maritime shipping
woes and the semi-conductor shortage that is especially affecting
the auto industry.
Food and commodity prices are on the rise, and many markets
(including the US and the UK) are seeing labour shortages. Amid the
inflationary tension (which central banks will have to tackle), fiscal
and monetary stimulus measures to reverse the economic slowdown
spurred by the pandemic which are gradually being reduced. There is
the risk that economic recovery will be affected by these ongoing
supply shocks, leading to higher, more structural inflation.
Furthermore, if job market instability pushes inflation forecasts
above targets, due to the so called "second-round effects", the
pressure for tighter monetary policies will be greater.
Our balanced diversification between mature and developing
markets and our wide range of products leave us more resilient to
macroeconomic threats. We also managed to reduce the potential
severity of these risks through mitigating measures we took at the
onset of the pandemic and adapted throughout 2021. They include:
• robust risk policies and processes and proactive management,
which kept our risk profile within the parameters set out in our risk
appetite statement;
• our recoveries and collections teams’ full capacity after adapting to
the new environment through a Group-wide preparedness plan
initiated in 2020 and finalized in 2021;
• continuous monitoring of the social and political situation
regarding countries and industries where we have considerable
exposure, and adjustments of our limits and positions according to
our risk appetite; and
• Participation in all forums to debate and work with banking
associations, regulators and supervisors on new regulation and
requirements.
• Appropriate capital planning that allows us to absorb new
regulation impacts preventing them from affecting our solvency
levels.
Cyber risk in a digital business model
Cybersecurity threats are increasing rapidly in terms of frequency,
sophistication and impact. Ransomware and data breaches continued
to dominate the external threat landscape during 2021. Additionally,
new vulnerabilities that can be rapidly exploited are also on the rise.
As cyber threats continue to grow and new attack techniques are
developed, continuous evolution of cyber defences is essential.
Cybersecurity initiatives, described on the Cyber risk paragraph on
section 6.2 'Operational risk management', are helping Grupo
Santander to evolve its defences in line with emerging threats and
technologies.
The increase in digital transactions and the expansion of remote
working schemes seen in recent times can also have an effect on
cyber risks and threats. These are the measures Grupo Santander has
taken to combat them:
• We tightened controls (e.g., patching, browsing control, data
protection and remote connections from the call centre),
anticipating the worst scenarios in order to create a "defence in
depth" to prevent, detect, react and recover.
• We standardized and continued to bolster existing defences
through agile, sustainable and risk-driven management.
Risk in the execution of our transformational projects
In the new digital environment driven by covid-19, growing
competition between existing companies and new players is causing
banks to rethink their business models, customer experience and
market demands, spurring faster digitalization. Regulation plays a
fundamental role and may give rise to asymmetries between new
and traditional competitors, and between markets.
To adapt, Grupo Santander is executing a transformation plan that is
complex owing to the number of countries, systems and regulation it
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involves. If we fail to execute these key strategic projects, it could
damage our business plan and worsen efficiency as well as
regulatory expectations.
Key mitigation measures:
• Continuing to make progress in digitalization to make the bank an
open financial services platform. This has been vital in the new
environment. Our agreements and joint ventures have been
playing a fundamental role in our transformation.
• Sharing best practices and commercial solutions in order to
continue to embed a culture of fast experimentation in Grupo
Santander.
• Establish a strategic project management office with robust
governance to monitor and report to the risk control and strategy
committees on strategic projects.
• We carefully measure and monitor risks stemming from
inadequate project execution. Projects must be closely overseen by
specific departments.
Inclusion of climate-related risks within risk management
Climate-related risks have become a priority for broader society.
Governments, international organizations, regulators and
supervisors continue to develop initiatives to comprehend the
magnitude of this risk, with stricter transparency and market
disclosure requirements in regard to climate-related risks to banks’
profitability, resilience and business strategies.
We split climate-related risk into two categories: (1) risks from the
transition to a low-carbon economy and (2) risks from the physical
effects of climate change. To identify and respond to them properly,
proactive management is key.
In 2022, European banks will undergo their first-ever climate-related
stress test to measure the Eurosystem’s balance sheet exposure to
climate-related risk. Furthermore, as the Supervisory Review and
Evaluation Process (SREP) gradually includes environmental risks,
they could eventually have an effect on regulatory capital.
Key mitigation measures:
• Direct participation of senior managers to support Grupo
Santander’s strategic objectives, in accordance with our established
governance.
For more details on those objectives, see
section 10. 'Climate and environmental
risk' in this chapter.
• Climate-related project, with Responsible Banking, Corporate &
Investment Banking (CIB) and Risks at the helm, to develop risk
measurement approaches, climate-related metrics, strategies,
new policies and frameworks; set out a robust risk appetite
statement; and design green products to satisfy the growing
demand. Stronger internal resources and capabilities to meet
increasing requirements.
• Financing for renewable energy and smart infrastructure to aid
customers’ transition to reducing their own carbon emissions.
Support for inclusive and sustainable growth in consideration of
risks and opportunities.
• Active role in international forums and working groups to promote
the energy transition programme, including the United Nations
Environment Programme Finance Initiative's (UNEP FI) pilot
programme to develop scenarios, models and metrics to measure
climate-related risks and opportunities in the future.
As part of our risk identification process, we also defined other
events, which could affect our strategy and transformation plan in
the longer-term, such as significant shifts in market tendencies and
the business environment; consumer behaviour; geopolitics; political
fragmentation; social and demographic changes; asymmetric access
to natural resources; extended use of crypto assets; and potential
legal loopholes. We conducted Board Risk Strategy sessions to
discuss with board members new and fast emerging key trends.
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2. Risk management
and control model
Our risk management and control model is underpinned by
common principles, a strong risk culture, a solid governance
structure and advanced risk management processes and tools
2.1 Risk principles and culture
Our risk principles below are compulsory. They comply with
regulatory requirements and are inspired by best market practices:
1. All employees are risk managers who must understand the risks
associated with their functions and not assume risks with an
impact that exceeds the Group’s risk appetite or is unknown.
2. Involvement of senior managers, with consistent risk
management and control through their conduct, actions and
communications, as well as oversight of our risk culture and make
sure we maintain our risk profile within the defined risk appetite.
3. Independent risk management and control functions, according
to our three lines of defence model, described in detail under
section 2.3 'Risk and Compliance governance' of this chapter.
4. A forward-looking, comprehensive approach to risk
management and control for all businesses and risk types.
5. Complete and timely information to identify, assess, manage and
disclose risks to the appropriate level.
Grupo Santander’s holistic control structure stands on these
principles and includes strategic tools and processes set out in the
risk appetite statement, such as annual and budget planning,
scenario analysis, the risk reporting structure and risk identification
and assessment.
Risk culture - Risk Pro
Santander has a strong risk culture called Risk Pro (or I AM RISK in the
UK and the US), based on the principle that all employees are risk
managers. Risk Pro is a pillar of 'The Santander Way' group culture
and considers all risks to promote socially responsible management
and long-term sustainability.
For more details, see the section 'Risk pro:
our risk culture' in the Responsible Banking
chapter.
2.2 Risk factors
Grupo Santander's risks categorization ensures effective risk
management, control and reporting. Our risk framework
distinguishes these risk types:
Credit risk relates to financial loss arising from the default
1 or credit quality deterioration of a customer or
counterparty, to which Santander has directly financed or
assumed a contractual obligation.
Market risk results of loss and detriment to profits or
2 capital stemming from movements in interest rates,
exchange rates, stock and commodity prices and its
potential impact on capital requirements.
Liquidity risk occurs if liquid financial resources are
3 insufficient or too costly to obtain in order to meet liabilities
when they fall due.
Structural risk is the risk that market movements or
4 balance sheet behaviour will change the value or profit
generation of assets or liabilities in the banking book. It
covers insurance and pension risks, as well as the risk that
Santander will not have sufficient capital (in terms of
quantity or quality) to meet internal business targets,
regulatory requirements or market expectations.
Operational risk is the possibility of losses due to
5 shortcomings and failures relating to processes, employees
and internal systems, even as a result of external events. It
includes legal, regulatory compliance and conduct risks.
Financial crime risk is the risk of loss due to criminal or
6 illegal activity involving Santander’s resources, products
and services. Such activity includes money laundering,
terrorism financing, violation of international sanctions,
corruption, bribery and tax evasion.
Model risk involves potential losses due to inaccurate
7 forecasting or from a model being implemented or misused
that can result in poor decision-making.
Reputational risk is the risk of current or potential negative
8 economic impact due to damage to the bank’s reputation
among employees, customers, shareholders, investors and
broader society.
Strategic risk relates to losses due to strategic decisions or
9 their poor implementation that affect our core stakeholders’
medium-to-long-term interests or to an inability to adapt to
a changing environment.
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Environmental and climate-related risk drivers are considered as
factors that could impact the existing risks in the medium-to-long-
term.
These elements include, on the one hand, those derived from the
physical effects of climate change, generated by one-off events as
well as by chronic changes in the environment and, on the other
hand, those derived from the process of transition to a development
model with lower emissions, including changes on legislation,
technology or economic agents' behaviour.
The Group chief compliance officer (Group CCO), who decides
compliance and conduct strategy, is in charge of controlling the risks
within their purview and must provide the Group CRO with a
complete overview on the situation of risks being monitored.
Both the Group CRO and the Group CCO have direct access and report
to the risk supervision, regulation and compliance committee and the
board of directors.
Risk governance keeps risk control and risk-taking lines separate:
Board of
directors
Risk
management
Risk
control
Board
executive
committee
Board risk supervision,
regulation and compliance
committee
Executive risk
committee
Chair: CEO
Risk control
committee
Chair: GCRO
Compliance
and conduct
committee
Chair: GCCO
2.3 Risk and Compliance governance
Grupo Santander´s robust risk and compliance governance structure
allows us to conduct effective oversight in line with our risk appetite.
It stands on three lines of defence, a structure of committees and
strong Group-subsidiary relations, guided by our risk culture, Risk
Pro.
Lines of defence
Our model of three lines of defence effectively manages and controls
risks:
– First line: formed by businesses and functions that take or
originate exposure to risk, it recognizes, measures, controls,
monitors and reports on risks according to internal risk
management regulation. Risk origination must be consistent with
the approved risk appetite and related limits.
– Second line: formed by the Risk and Compliance and Conduct
functions, it independently oversees and challenges the first line’s
risk management. Its duties include ensuring that risks are
managed according to the risk appetite defined by senior
management and strengthening our risk culture throughout Grupo
Santander.
– Third line: the Internal Audit function, which is independent to
ensure the board of directors and senior managers with high-
quality and efficient internal controls, governance and risk
management systems, helping to safeguard our value, solvency
and reputation.
The Risk, Compliance & Conduct and Internal Audit functions are
separate and independent. Each has direct access to the board of
directors and its committees.
Risk and Compliance committees' structure
The board of directors is ultimately responsible for risk and
compliance management and control. It revises and approves the
bank's risk frameworks and appetite, while promoting a strong risk
culture across the Group. The board relies on its risk supervision,
regulation and compliance committee for risk control and on the
group’s executive committee for risk approval.
For more details, see section 4.8 ‘Risk
supervision, regulation and compliance
committee activities in 2021’ of the chapter on
Corporate governance.
The Group chief risk officer (Group CRO), who decides risk strategy
and promotes proper risk culture, is in charge of overseeing all risks
and challenging and advising business lines on risk management.
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The executive risk, risk control and compliance and conduct
committees (described below) are executive committees and have
been delegated powers by the board.
Executive risk committee
(ERC)
Risk control committee
(RCC)
Compliance and conduct
committee
Functions:
Manages risks according to the
powers it has been delegated by the
board. It is authorized to approve,
alter or scale significant models as
well as any measures or
transactions that may pose
substantial risk to Grupo Santander.
It makes the highest-level risk
decisions according to the group’s
risk appetite.
Controls and provides a holistic
overview of risks. It makes sure
business lines are managed
according to risk appetite. It also
identifies, monitors and assesses
the impact of existing and emerging
risks on Santander's risk profile.
The committee monitors and
reviews compliance and conduct
risk management. It also oversees
corrective measures for new risks
and risks detected among
management-related deficiencies.
Chair:
CEO
Group CRO
Group CCO
Composition:
Appointed executive directors and
other senior managers,
representing the risk, finance and
compliance and conduct functions.
The Group CRO reserves the right to
veto the committee’s decisions.
Senior managers from the risk,
compliance & conduct, finance,
accounting and management
control functions. From time to
time, each CRO from subsidiaries
attend to report on their respective
risk profiles.
Senior managers representing the
compliance & conduct, risk,
accounting and management
control functions. The chair reserves
the right to veto the committee’s
decisions.
Meetings:
Weekly
Monthly
Monthly
Forums:
• Model approval forum
• Risk proposal forum
• Forum on market, structural,
liquidity and capital risk control
• Corporate product governance
forum
• Credit risk control forum
• Financial crime prevention forum
• Provisions forum
• Reputational risk forum
In addition, for each risk factor there are forums and regular
meetings to manage and control the risks within their purview.
Executive committees also delegate part of their duties to
subordinate forums.
Their responsibilities include:
• reporting to the Group CRO, the Group CCO, the risk control
committee and the compliance and conduct committee on risk
management according to risk appetite;
• monitoring and ensuring proper management of each risk factor;
and
• overseeing measures to comply with supervisors and auditors'
expectations.
In order to establish an adequate control environment for the
management of each risk factors, the Risk and Compliance and
Conduct functions have effective internal regulation to create the
right environment to manage and control all risks.
Grupo Santander can also dictate new governance measures for
special situations. For the Brexit transition process, it set up separate
steering committees and working groups with Santander UK. Also, to
cope with the covid crisis, it created special situation forums, in which
close coordination with subsidiaries, local contingency plan activation
(including scenario analysis) enhanced allocated resources and
governance to ensure the efficiency of the measures.
The Group’s relationship with its subsidiaries
Our subsidiaries’ risk and compliance management and control
models is consistent with the frameworks approved by the group’s
board of directors, which they adhere to through their own boards
and can only adapt according to local law and regulation. In its duty
to carry out aggregate risk oversight, Grupo Santander validates and
challenges subsidiaries’ internal regulation and transactions, which
results in a common risk management model across the group.
In 2021, we continued to strengthen our regional subsidiary relations
model, based on regions, to find synergies for common operations
and platforms building on our global and regional scale; to
streamline processes; and to tighten control mechanisms so our
business can grow, allocate capital more efficiently and offer the best
service to our customers.
Local CRO interact regularly with their regional head of risk, the
Group CRO and the Group CCO in periodic regional or country control
meetings. Local and global Risk and Compliance functions also hold
follow-up meetings to address special matters. The Group CRO and
the Group CCO and regional heads of risk are involved in appointing,
setting of objectives, reviewing and compensating their local
counterparts to ensure proper risk management.
Grupo Santander enhances its relations with subsidiaries and its
advanced risk management model through:
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• close collaboration between countries in the same region to carry
• independent subsidiaries that manage their own capital and
out common initiatives efficiently;
• structural change, subsidiary benchmarks and a strategic vision for
the function to implement advanced risk management
infrastructures and practices
• the exchange of best practices to strengthen processes and drive
liquidity, with risk profiles that do not compromise the Group’s
solvency;
• an independent risk function with involvement by senior
management to embed a strong risk culture and drive a
sustainable return on capital;
innovation in order to achieve a quantitative impact.
• a global, holistic outlook through extensive control and monitoring
of risks, businesses and markets;
• a focus on products we know well;
• a conduct model that protects our customers; and
• a remuneration policy that aligns employees and executives'
interests with risk appetite and long-term results.
Our risk appetite principles
The principles that inform our risk appetite are:
• the board and senior management's responsibility for risk
appetite;
• an enterprise-wide view of risk, backtesting and challenge of
risk profile based on quantitative metrics and qualitative
indicators;
• a forward-looking view based on plausible assumptions and
adverse/stress scenarios to reflect our desired risk profile in the
short and medium term;
• strategic and business plans embedded in daily management
by policies and limits;
• common standards that align each subsidiary's appetite with the
Group's; and
• regular reviews, best practice and regulatory requirements,
with mechanisms in place to keep the risk profile stable and
mitigate non-compliance.
• identification of talent in risk and compliance teams, promoting
international mobility through a global risk talent programme and
tightening succession plans.
For more details on our relationship with our
subsidiaries, see section 7 ‘Group structure and
internal governance’ of the chapter on Corporate
Governance.
2.4 Risk management processes and tools
Grupo Santander has the following processes and tools to carry out
an effective risk management:
Risk appetite and structure of limits
Risk appetite is the volume and type of risks we deem prudent for our
business strategy, even in unforeseen circumstances. It considers
adverse scenarios that could have a negative impact on capital,
liquidity and profitability. The board sets the Group's risk appetite
statement (RAS) every year. Our subsidiaries' boards also set their
own risk appetites annually. Each of those risk appetites translates
into risk management limits and policies based on risk type, portfolio
and segment.
Group's RAS
RAS
Unit 1
RAS
Unit 2
RAS
Unit n
Risk limits
& policies
Unit 1
Risk limits
& policies
Unit 2
Risk limits
& policies
Unit n
Business model and risk appetite fundamentals
Santander's risk appetite is consistent with our risk culture and our
business model built on customer focus, scale and diversification. At
the core of our risk appetite are:
• a medium-low and predictable target risk profile that is centred on
retail and commercial banking, internationally diversified
operations and strong market share;
• stable, recurrent earnings and shareholder remuneration,
sustained by a sound base of capital, liquidity and sources of
funding;
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• Minimum liquidity coverage position.
• risk performance (to measure exposure to each type of risk);
Limits structure, monitoring and control
Our risk appetite is expressed in qualitative terms and limits
structured on these five core elements.
1
2
3
4
5
Earnings volatility
Maximum loss Santander can tolerate in an acute-but-
plausible stress scenario.
Solvency
• Minimum capital position Santander can tolerate in a
stress scenario.
• Maximum leverage Santander can tolerate in a stress
scenario.
Liquidity
• Minimum structural liquidity position.
• Minimum liquidity horizon Santander can tolerate in peak
stress scenarios.
Concentration
• Concentration in single-names, industries and portfolios.
• Concentration in non-investment-grade counterparties.
• Concentration in large exposures.
Non-financial risks
• Maximum operational risk losses.
• Maximum risk profile.
• Non-financial risk indicators:
◦ Financial crime compliance (FCC)
◦ Cyber and security risk
◦ Model risk
◦ Reputational risk
While risk appetite limits are regularly monitored, specialized control
functions report on risk profile and compliance with limits to the
board and its committees every month. The link between risk
appetite limits and the limits used to manage business units and
portfolios is key to making risk appetite an effective tool for
managing risks. Management policies and limits are based on the risk
appetite statement (see sections 3.2 ‘Credit risk management’, 4.2
‘Market risk management’ and 4.4 ‘Structural balance sheet risk
management’ of this chapter).
Key initiatives in 2021
Santander continued to thoroughly review the impact of covid and
the adequacy of our risk appetite to cope with the new landscape. We
strengthened our controls and metrics to monitor our commitment
to the environment and to the Paris Agreement for the transition to a
low-carbon and climate-resilient economy more closely. Having
achieved our aim to be carbon neutral in 2020, our ambition is to be
net-zero in carbon emissions by 2050. We set our first
decarbonization objectives, which are to stop providing financial
services to power generation customers with a revenue dependency
on coal of over 10% and to reduce our worldwide exposure to coal
mining production to zero, a key step in fighting climate change.
Risk profile assessment (RPA)
Identification and assessment are central to the management,
control and reporting of Grupo Santander’s risk. To assess the
Group's risk profile systematically, we use a single, robust
methodology that allows us to analyse the various risk types
described in our risk framework (outlined under section 2.2 'Risk
factors'). In addition, it classifies them by different levels and unit
according to a points system with four categories (“low”, “medium-
low”, “medium-high” and “high”).
The RPA methodology is based on the main principles of the
identification and risk assessment model, such as: self-assessment
and exercise suitability; efficiency; and holistic, in-depth risk analysis
(with common approaches and alignment for decision-making). The
three lines of defence take part in the assessment, strengthening our
risk culture by reviewing how risks change and pinpointing areas for
improvement.
Risk profile assessment covers:
• control environment (to measure the target operating model of
our advanced risk management according to regulation and best
market practice); and
• forward-looking analysis (to measure threats that can affect
business planning and strategic objectives).
In 2021, we revised and strengthened our control environment
standards, adding an internal self-assessment questionnaire on the
management of risks relating to environment and climate-related
risks to check the implementation of measures designed to achieve
net-zero emissions by 2050.
At the end of 2021, Grupo Santander’s risk profile returned to
“medium-low”. Our core profitability and credit quality indicators
improved due to efficient risk management, a sustained low liquidity
risk profile and the reopening of the economy spurred by vaccination
and government stimulus in our geographies.
Furthermore, the severity of the emerging risks on our risk profile
declined, as health indicators improved and the global economy
shows signs of recovery. Grupo Santander maintains a robust risk
control environment.
Scenario analysis
Scenario analyses are a useful risk management tool to measure our
resilience to stress situations under a forward-looking approach and,
if necessary, prepare mitigating plans for expected loss, capital and
liquidity. Our Research department plays a key role in determining
analysis scenarios based on macroeconomic and other variables that
can affect our risk profile in our markets. The governance and control
of the entire process, including the review by our three lines of
defence and senior management, is also a fundamental aspect to
ensure its consistency and robustness, to which it also contributes:
• develop and execute models that estimate future metric values
(e.g. credit losses);
• backtesting (in order to challenge model outcomes regularly);
• our teams’ expert opinions and vast understanding of portfolios;
and
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• thorough monitoring of models, scenarios, assumptions, results
and mitigating management measures.
Grupo Santander has repeatedly obtained excellent quantitative and
qualitative scores in the European Banking Authority’s (EBA) stress
tests.
Scenario analysis applications
We run a systematic review of our risk exposure under a base
scenario and several adverse and favourable scenarios to predict
potential solvency and liquidity changes. These exercises are
fundamental for:
• Regulatory exercises according to instructions given by EU and
local supervisors.
• Internal capital and liquidity adequacy assessment processes
(ICAAP and ILAAP), in which Grupo Santander follows its own
approach to measure capital and liquidity under various scenarios.
• Risk appetite, which includes stressed metrics to determine the
highest risk we can assume. Though risk appetite and capital and
liquidity stress exercises are closely related, they have different
time frames and granularity.
• Recurrent risk management also uses scenario analyses for:
◦ budget and strategy planning, when implementing a new risk
approval policy or reviewing the Group’s risk profile, monitoring
specific portfolios and business lines;
◦ systematic top risk identification and impact analysis (where
each top risk relates to a macroeconomic or idiosyncratic
scenario);
◦ our annual Recovery Plan, which specifies the tools Grupo
Santander can use to survive a severe financial crisis. The plan
includes financial and macroeconomic stress scenarios with
varying levels of severity, plus idiosyncratic and systemic events.
◦ IFRS 9: Since 1 January 2018, regulation for estimating provisions
have required scenario analysis models and methodologies.
◦ Credit and market risk stress testing exercises, simulating
changes to expected losses or estimating required capital to
absorb losses resulting from unforeseen events.
In the covid-19 pandemic context, scenario analyses continued to be
instrumental in 2021 to check if the additional provisions recognized
in 2020 were sufficient to cover expected losses caused by the health
crisis. In the Group we have developed a new tool (Delphi) to review
the calculation of provisions, using the latest best practices available
in the industry, to better anticipate and manage the impacts of covid.
Across our geographies, macroeconomic conditions were differently
affected by the progress of vaccination campaigns, government relief
programmes and monetary and tax policies. Accordingly, our
scenario analyses helped us recognize points of action, develop
adequate commercial responses and adapt our risk strategy to
conserve our strength and solvency.
For more details on scenario analysis, see
sections 3.2 ‘Credit risk management', 4.2
‘Market risk management’ and 4.6 'Liquidity risk
management' and Note 53 section 'Expected
loss estimation' in this report
• Grupo Santander made significant inroads with climate-related
analysis in 2021. We added the Network for Greening in the
Financial System (NGFS) climate scenarios and created others to
account for risks posed by the transition to a low-carbon economy
and by potential climate events in certain geographies. Our 2021
ICAAP showed improvement against environmental and climate-
related risks, and we anticipate further progress in 2022. We will
also take part in pilot stress tests led by the Single Supervisory
Mechanism (SSM) in 2022, which will be included in the
Supervisory review and evaluation process (SREP).
For more details, see 'Monitoring' in section
10.2 'Climate and environmental risk
management' in this chapter
Risk reporting structure (RRS)
To provide senior managers with a complete, up-to-date
understanding of our risk profile, the Enterprise-wide risk
management team regularly consolidates and reports on current and
future risks so the right decisions can be made in a timely manner.
We continue to change our reporting, as we simplify and automate
processes, tighten controls and adapt to new needs. In 2021, to
report on the covid crisis, we monitored such critical topics as the
macroeconomic situation, health indicators, relief measures for our
customers and risk areas, which helped us make decisions. We also
vigorously accounted for initiatives relating to our strategic
objectives, such as new regional structures and new business units.
Our risk reporting covers all factors set out in our risk framework,
especially environmental, social and climate-related risks, as well as
all those fundamental aspects that may be necessary for our risk
assessment. We issue weekly, monthly and group-wide reports for
senior managers; as well as monthly subsidiary risk reports and
reports on each risk factor found in our risk framework. Our robust
risk reporting structure is characterized by:
• balanced data analysis and qualitative commentary (with future
measures, alerts, risk appetite limits and emerging risks);
• holistic, accurate overviews of risk factors, subsidiaries and
markets;
• consistent risk analysis structure and standards; and
• metric reporting according to our corporate data framework,
guaranteeing information quality and consistency.
This ensures complete, agile and dynamic reporting that provides a
clear overview of current and future risks and enables us to adapt to
emerging risks.
2.5 Models & Data Unit
In 2021, Grupo Santander made progress towards becoming the best
open financial services platform, using advanced analytics and
artificial intelligence (AI) to enrich its understanding of current and
potential customers’ needs and to earn their trust.
The leading data scientists and analysts that make up the group's
Models & Data unit (part of the Risk and Technology & Operations
divisions) used state-of-the-art algorithms and models to help us
achieve our targets and get the most out of data in a responsible way.
During 2021, they worked on two priorities:
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a. Strengthening the business, where AI and digitalization enable
Santander to scale up and grow efficiently. The Models & Data
teams in headquarters and each of our geographies help by:
• growing the customer base: We select quality potential
customers and get to know their needs and behaviours to boost
onboarding and conversion rates. AI has been useful for
customer approval, especially at Santander Brasil, where new
account openings climbed from 51% to 76%. When combined
with better digital customer experience, it proves highly
beneficial at scale.
• increasing customer loyalty: We meet expectations and offer
smart services throughout the customer life cycle. In particular,
Santander España created and applied a machine learning
model to split the Spanish economy into high-growth industries
1
); identify SMEs in those
(in collaboration with Tresmares
industries; and design a value proposition that meets existing
and potential customers' needs.
• maximizing profitability: Grupo Santander is increasing
efficiency by using cognitive robotics to automate repetitive
tasks. Santander México uses this type of robotics to review
20,000 digitalized collateral documents per month.
b. Enhancing risk management: Our data and models are key to
regulatory compliance.
In 2021, Grupo Santander worked on internal ratings-based (IRB)
2.1 models programme to comply with the EBA Repair Programme
(and other regulatory requirements), which sets out new
provisions for internal models developed under the IRB approach.
The programme posed significant planning and resource
challenges for the industry. Our Data & Models teams created
models to delve deeper into our portfolios and better manage their
risks.
They also developed Reg-Tech apps to upgrade anti-money
laundering practices in geographies as Santander Brasil. The apps
use AI to prioritize major risk alerts for analysts and help scale anti-
money laundering processes.
In the future, Santander will continue to innovate its risk
management based on two pillars:
• Boosting sustainable growth and climate risk management. In
accordance with EBA requirements, the Models & Data teams
quantify transition and physical risks from natural and climate-
related disasters based on geography and exposure.
• Promoting the use of new analysis techniques (AI) in risk models
(especially for regulatory capital). Banco Santander took part in a
study on machine learning models' prediction of credit default
2
in early 2021, which showed
published by Banco de España
that advanced models have greater predictive power than
traditional ones.
Grupo Santander commits to promoting changes to risk
management in banking through the responsible use of
advanced analytics (machine learning and AI).
[1] Tresmares is a financing platform specialized in SMEs with the collaboration of
Santander España.
[2] Understanding the performance of Machine Learning Models to predict credit
default: a novel approach for supervisory evaluation.
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3. Credit risk
3.1 Introduction
Credit risk is the risk of financial loss due to the failure to pay or
impaired credit of a customer or counterparty Santander has financed
or maintains a contractual obligation with. It is our most significant
risk in terms of exposure and capital consumption, and includes
counterparty risk, country risk and sovereign risk.
3.2 Credit risk management
We take a holistic view of the credit risk cycle, which includes the
transaction, the customer and the portfolio to identify, analyse,
control and decide on credit risk.
Credit risk identification is key to managing and controlling our
portfolios effectively. We classify external and internal risks in each
business and adopt corrective and mitigating measures when needed
through the following processes:
1. Planning
Our planning helps us set business targets and draw up concrete
action plans within our risk appetite statement.
Strategic commercial plans (SCPs) are a risk management and
control tool the business and risk areas prepare for our credit
portfolios. They determine commercial strategies, risk policies,
resources and infrastructure, ensuring a holistic view of portfolios.
In addition, they provide us with an updated view of portfolio credit
quality to measure credit risk; run internal controls over the strategy
with regular monitoring; detect significant deviations in risk and
potential impacts; and take corrective actions when necessary.
The SPCs align with our risk appetite and our subsidiaries’ capital
targets, and are approved and monitored by senior managers at each
subsidiary before the group reviews and validates them.
2. Risk assessment and credit rating
To analyse customers’ ability to meet contractual obligations, we use
assessment and parameter estimation models in each of our
segments. Our credit quality assessment models are based on credit
rating engines, which we monitor to calibrate and adjust the
decisions and ratings they assign. Depending on each segment,
engines can be:
1
2
Rating: From mathematical algorithms that use a
quantitative module based on balance sheet ratios or
macroeconomic variables, and a qualitative module
supplemented by credit analysts' expert judgement. It is
used in the SCIB, corporate and institutions, and SME
segments (individually).
Scoring: Automated loan application assessment that
assigns a score to retail customers and small enterprises
that do not have an assigned analyst for subsequent
decision-making.
Our parameter estimation models follow econometric models built
on our portfolios' historical defaults and losses. We use them to
calculate economic and regulatory capital as well as IFRS 9 provisions
for each portfolio.
We regularly monitor and evaluate models' suitability, predictive
capacity, performance, granularity, compliance with policies and
other related factors. We review ratings with the latest financial and
other relevant information. We increased the reviews for customers
who are subject to close observation or automatic warnings in risk
management systems.
3. Credit risk mitigation techniques
Risk approval is generally determined by the borrowers’ ability to pay
when financial obligations fall due, regardless of any additional
collateral or personal guarantees we require from them. We analyse
funds or net cash flows from their businesses or income with no
guarantors or assets pledged as collateral. When approving a loan,
we always consider guarantors and collateral as a secondary means
of recourse if the first channel fails.
Guarantees are a reinforcement measure in a credit transaction to
mitigate a loss if the borrower defaults on their payment obligation.
We have credit risk mitigation techniques for various types of
customer and product. Some are for specific transactions (e.g.
property) while others apply to a series of transactions (e.g.
derivatives netting and collateral). They can be grouped into personal
and real guarantees or with credit derivatives coverage.
4. Limits, pre-classifications and pre-approvals
We use SCPs to manage credit portfolios, defining limits for each of
them and for new originations in line with our credit risk appetite and
our target risk profile. Introducing our risk appetite into portfolio
management strengthens controls over our credit portfolios.
Our limits setting processes, pre-classifications and pre-approvals
determine the risk we can assume with each customer. Limits are
approved by the executive risk committee (or delegated committees)
and should reflect a transaction’s expected risk-return. We use
different limits models based on the segment:
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• Large corporates are subject to a pre-classification model based
on a system for measuring and monitoring economic capital. Pre-
classification models set the level of risk we are willing to assume
in transactions with customers or groups in terms of capital at risk
(CaR), nominal CAP and maximum tenors, depending on the
transaction type. To manage limits with financial entities, we use
credit equivalent risk (CER), which includes current and expected
risks with customers according to risk appetite and credit policies.
• Corporates and institutions that meet certain requirements
(strong relationships, rating, etc.) are subject to a simpler pre-
classification model with an internal limit that benchmarks a
customer's risk level against their repayment capacity, overall
indebtedness and pool of banks.
Transactions with large corporates, corporates and institutions
above certain limits or with special characteristics could require
approval from a senior credit analyst or a committee.
• For individual customers and SMEs with low turnover, we
manage large volumes of credit transactions with automated
decision models to classify customers and transactions.
5. Scenario analysis
In line with section 2.4 'Management processes and tools' of this
chapter, our scenario analyses determine potential risks in credit
portfolios; give us a better understanding of their performance under
various macroeconomic conditions; and enable us to employ
management strategies that will avoid future deviations from set
plans and targets.
They simulate the impact of alternative scenarios in portfolios’ credit
parameters (PD, LGD) and expected credit losses. We compare
findings with the portfolio’s credit profile indicators to find the right
measures for managers to take. The credit risk management of
portfolios and SCPs incorporate scenario analyses.
6. Monitoring
Regularly monitoring business performance and checking it
according to our original plans is key to our risk management. Our
holistic customer monitoring aids the early detection of impacts on
risk performance and credit quality. We assign customers a
monitoring classification with a pre-determined course of action and
ad hoc measures to correct any deviations.
In monitoring customers, local and global risk teams consider
transaction forecasts and characteristics as well as changes in
classification. It is based on the following customer segmentation:
• Monitoring in SCIB is a function of business managers and risk
analysts and provide an up-to-date view of customers’ credit
quality to predict a potential customer's deterioration.
• For corporates, institutions and SMEs with an assigned credit
analyst, we monitor more closely those customers that require so
and review their ratings based on relevant indicators.
• For individual customers, businesses and smaller SMEs, we use
automatic alerts to detect shifts in portfolio performance.
Our monitoring function uses the Santander Customer Assessment
Note (SCAN). It helps set individual monitoring levels and
frequencies, policies and actions for customers.
In addition to monitoring customer credit quality, we draw up control
procedures to analyse portfolios and performance, as well as any
possible deviations from planning or approved alert levels.
7. Collections and recoveries
The Collections and Recoveries function is key to risk management
and control. It sets a global strategy with general lines of action for
our subsidiaries based on the economic landscape, business model
and other local recovery conditions. Recovery management follows
the EBA guidelines on the management of credit impaired and
forborne exposures.
Its sustained value creation is based on effective and efficient
collections management, for which digital channels that develop
new customer relations are key. Our diverse customer base requires
segmentation to manage recoveries competently. The highly
technological and digital procedures we follow help us attend to
large groups of customers with similar profiles and products. Our
personalized management, however, focuses on customer profiles
that require an assigned manager and tailored approach.
We split recovery management into four phases: arrears, credit
impaired loans, write-offs and foreclosed assets. We may use
mechanisms like portfolios sales and foreclosed assets in order to
rapidly reduce deteriorated assets. We constantly seek alternatives
to legal action in order to collect debt.
We include debt instruments in the write-off loans category (even if
they are not past-due) if an individual analysis showing a noticeable
and irreversible impairment leads us to believe recovery is remote.
Though this may lead to full or partial cancellation and de-
recognition of the gross carrying amount of debt, we never interrupt
negotiations and existing legal proceedings to recover debt. In
countries with high exposure to property risk, we have efficient sales
management instruments that help maximize recovery and optimize
balance sheet stocks.
Forbearance
Grupo Santander's internal forbearance policy is a reference for our
subsidiaries locally and follows regulations and supervisory
expectations such as the EBA Guidelines on the management of
credit impaired and forborne exposures. It defines forbearance as the
modification of a transaction’s payment terms to enable a customer
who is experiencing (or may foreseeably experience) financial
difficulties to fulfil their payment obligations; otherwise, there would
be reasonable certainty that the customer would not be able to meet
those obligations.
This policy also sets out rigorous criteria for assessing, classifying and
monitoring forbearances to ensure the strictest possible care and
diligence in recovering due amounts. Forbearance must focus on
recovering due amounts and adapting payment obligations to
customers' current circumstances. Thus, we must recognize losses as
soon as we deem any amounts irrecoverable. The loans we put into
forbearance to recognize risks appropriately must remain classified
as credit impaired or on a watch-list for as long as necessary to
ensure reasonable certainty of repayment. Forbearance may never
be used to delay the immediate recognition of losses or hinder the
appropriate recognition of risk of default.
Total forbearance amounted to EUR 36,042 million at the end of
December 2021. After years of important decreases, due to the
positive macroeconomic situation of the Group's main geographies,
forbearance stock remained flat in 2020. The portfolio increased by
24% in 2021, as a result of greater volume of forbearance carried out
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to attend to the needs of customers facing financial difficulties. In
terms of credit quality, 43% are classified as doubtful with a
coverage of 41%
KEY FORBEARANCE FIGURES
EUR million
Performing
Credit impaired
Total forborne
% Total coverage
A
2021
20,504
15,538
36,042
23%
2020
14,164
14,995
29,159
28%
2019
15,199
17,276
32,475
28%
A. Total forbearance portfolio loan-loss allowances/total forborne portfolio.
Identifying and managing most vulnerable sectors
Grupo Santander has implemented a quarterly sectoral monitoring
process that enables the identification of sectors that could
potentially be of concern. This process considers, among other
things, the following information at the sector level:
• Market information: Industries’ stock market performance.
• Analysts’ EBITDA forecasts for the coming years.
• Internal information: Changes in credit exposure, defaults (in
different timelines) and stagings.
• Our industry experts’ opinion, based on specific details about our
exposures and our relationships with customers.
As at December 2021, we considered the industries listed in the table
below as vulnerable based on our analysis and the covid landscape,
including their exposure (excluding individuals):
EXPOSURE TO VULNERABLE SECTORS
EUR million
Industry
Automobile
A
Hotels, leisure, cruises
& restaurants
Transport
Oil & Gas
Retail (non-food)
Construction
B
Exposure
31,600
Stage 1
90.6 %
Stage 2
7.7 %
Stage 3
1.7 %
16,400
57.4 %
27.5 %
15.1 %
17,100
22,100
21,700
12,800
85.1 %
96.5 %
87.1 %
78.5 %
9.2 %
2.3 %
9.1 %
12.1 %
5.7 %
1.2 %
3.8 %
9.4 %
A. Catering and others not included.
B. Property development not included.
Total exposure to the most vulnerable industries fell 3.1% from last
year to EUR 121.700 million at year end. Exposure to the most short-
term affected industries (hotels, leisure, cruises and restaurants; oil
and gas; retail (non-food); and passenger transport) was EUR 65.300
million, down 1.4% compared to 2020.
Our findings were consistent with similar analyses conducted by the
ECB, Banco de España and rating agencies.
Credit risk target operating model (ATOMiC)
We launched our advanced target operating model in collaboration
(ATOMiC) to bolster our credit risk strategy, permanently challenge
the Group’s credit targets, and create the best bank in risk
management in all of the markets where we operate. Its objective is
to implement, extend, continuously improve and promote (under a
realistic and medium-term goal) the credit target operating model
(TOM) in our subsidiaries based on best practice in the Group and
across the industry.
ATOMiC's success lies in the collaboration and best practice of
experts from several geographies (Champions/Boosters/ATOMiC
Team). Their over 40 success case studies (SCS) allowed to quantify
benefits, apply lessons learned and identify impacts of each SCS,
which enabled the development of TOM in each portfolio segment.
They monitor progress twice a year through key performance
indicators (KPIs) and have the support and commitment of a unique
risk team.
ATOMiC has progressively embedded credit strategy in management
and enabled us to bolster the control environment through greater
preparation for unforeseen events like the Covid-19 crisis. It has also
given us the ability to meet the EBA's Guidelines on loan origination
and monitoring. In ATOMiC's first cycle, we accelerated and
reinforced these priority initiatives:
• C&R efficiency and digital connectivity;
• foresight and preventive monitoring that use new data sources
(transactional and CRM) and advanced analytics (early warning
system) to determine what action to take towards customers;
• industry sensitivity and forward-looking analysis through pre-
determined risk playbooks to make better decisions when
anticipating unexpected changes;
• risk-based pricing tools to ensure sustainable portfolio growth;
and;
• significant developments in customer pre-assessments and pre-
approvals through greater automation and digitalization.
2021 was crucial in setting management metrics to demonstrate
how ATOMiC enhances lending and customer onboarding across our
footprint. We came up with several tangible and homogeneous
metrics to report to the Group's senior management, uncover trends,
make comparisons and agree on medium-term improvements. The
main aim was to create a common language to show the fruits of
credit risk transformation. ATOMiC laid down solid foundations for us
to continue building up our credit risk strategy over a long period.
Continuous challenging of our ambition was key, not to mention the
commitment and collaborative culture among our subsidiaries. That,
together with an agile working methodology and robust
organizational structure, enabled us to address the next challenge of
defining the strategic credit lines that will shape our strategy for
2022-2025 and that align with our risk strategy and priorities:
1."Customer first" for an enhanced customer experience through
digital processes and tailored solutions that help drive loyalty and
grow the customer base;
2.Efficiency to increase volumes and expected profitability (risk-
adjusted return);
3."Responsible banking", with the inclusion of environmental, social
and climate related risk in the lending process;
4."Forward thinking", including climate related scenarios in stress
test; and
5.Exploring opportunities for shared services and fintechs.
Annual report 2021 448
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3.3 Key metrics
2021 general performance
2021 saw gradual economic recovery in our core markets, as well as
progress with covid vaccination campaigns to ease the health crisis.
That, along with effective credit risk management, helped boost
Santander’s performance.
Q1’21 was marked by new, targeted lockdown measures,
inconsistent vaccination programmes and the extension and revision
of economic policies. Growth in corporate and large corporate
portfolios offset the decline in consumer portfolios, while credit
quality indicators began to stabilize. Loan-loss provisions fell sharply
in all regions and in most subsidiaries.
The second quarter brought economic recovery on the back of
vaccination progress in all regions. Credit volumes grew despite the
ongoing impact of the pandemic and heightened liquidity in our
markets; a stronger Brazilian real also reinforced this trend. By
segment, lending to corporates and large corporates remained high.
Key credit indicators reflected our strong credit quality, supported by
mitigation measures and portfolio growth. Loan-loss provisions
continued to fall. Most notably in the UK and the US, a greater
economic outlook led to lower provisions.
The third quarter saw further recovery (in all regions), higher
vaccination rates and the gradual lifting of restrictions relating to the
health crisis. Currency depreciation slowed credit volume growth in
South America. Nonetheless, the wholesale and retail banking
portfolios continued to flourish, and the corporate banking portfolio
began to tail off. Loan-loss provisions returned to Q1 levels following
unusual market behaviour in the UK and US in Q2.
In the last quarter of the year, revenues continued to grow steadily as
business recovered across all regions. In contrast to previous
quarters, loan-loss provisions plunged owing mainly to the
provisions recognized to cope with the pandemic in 2020, brighter
macroeconomic outlooks and overall positive NPL and loan loss
trends, especially among customers who benefited from relief
measures (e.g. payment holidays) and the general positive portfolio
performance.
As of December 2021, credit risk with customers rose 6.2% from
2020 within the same perimeter. This was mainly due to currency
appreciation in our core markets. All our subsidiaries saw growth in
local currency with the exception of Santander Spain and Santander
Chile. Our credit risk remained diversified, with a strong balance
(61%), South
between mature and emerging markets: Europe
America (13%), North America (14%) and Digital Consumer Bank
(11%).
34
Loan book growth offset the rise in credit impaired loans to EUR
33,234 million (+4.6% vs 2020 year end) and reduced our NPL ratio
to 3.16% (-5 bps vs 2020).
In accordance with IFRS 9, Santander recorded loan-loss provisions of
EUR 7,436 million (-39% vs December 2020) driven by economic
recovery, federal economic stimulus in the US, effective portfolio
management and the use of additional provisions raised in 2020 to
mitigate potential impact that could arise as a result of the covid-19
pandemic. Santander's total loan-loss allowances amounted to EUR
23,698 million. This brought our NPL coverage ratio to 71.3%, down
from 76.4% in December 2020.
34
"Others" not included make up the remaining 1% (Corporate Centre)
Regarding the support measures put in place in 2020 to tackle the
covid-19 pandemic, at the end of December 2021, 99.8% of the
payment holidays granted as part of Santander’s response to the
Covid-19 pandemic had ended and only 7% were classified as stage
3. The positive performance owed to better macroeconomic
conditions in our main markets.
Government liquidity programmes remained in force in 2021. By
geography, Spain makes up 68% of total exposure to those
programmes with an average ICO guarantee coverage of 77%. The
UK makes up 13% of total exposure, with an average coverage of
98%.
In light of those measures, Grupo Santander made additional credit
loss allowances throughout 2020 upon analysing vulnerable sectors
and struggling segments and estimating further impairment of loans
and advances amid the economic crisis caused by the pandemic;
those provisions are an indication of the economy's actual structural
deterioration. Our estimation, which was based on available
information and affected by the high uncertainty at the time, is
consistent with ECB forecasts. The macroeconomic scenario was not
“through the cycle” but included a balance sheet with short- and
long-term provisions. We expected most macroeconomic indicators
in those scenarios to reach pre-crisis levels in the first quarter of
2022 (with the exception of housing prices, which should reach them
in the first quarter of 2023).
In 2020 and 2021, the Group closely and frequently monitored: (1)
pandemic developments and macroeconomic outlooks; (2)
institutions and central banks’ forecasts; and (3) Santander’s
portfolios in each country.
In accordance with established governance, we monitored or
updated macroeconomic scenarios according to new, realistic and
substantiated information. When calculating IFRS 9 provisions at the
end of 2021, we updated our most recent scenarios by eliminating
the overlay (which accounts for structural economic deterioration),
the effect of which had been assimilated by the model upon
recalibrating its parameters according to current macroeconomic
conditions and outlooks in order to re-estimate losses.
Also, we gradually used the additional credit loss allowances for the
groups most affected by the pandemic in line with the portfolio’s
performance on the back of extraordinary support measures. The
outstanding moratoria at the end of December 2021 amounted to
EUR 166 million.
Annual report 2021 449
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The tables below show the results of the key metrics of customer credit risk:
A
MAIN CREDIT RISK METRICS
Data as of 31 December
Europe
Spain
UK
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Corporate Centre
Total Group
Europe
Spain
UK
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Corporate Centre
Total Group
B
Credit risk with customers
(EUR million)
2020
606,997
221,341
252,255
40,693
31,578
131,626
99,135
32,476
129,590
74,712
42,826
4,418
116,381
4,862
989,456
2021
636,123
221,100
262,869
41,941
33,497
149,792
112,808
36,984
141,874
85,702
41,479
5,481
117,049
6,277
1,051,115
2019
605,969
213,668
264,297
37,978
33,566
143,839
105,792
38,047
143,428
88,893
42,000
5,044
117,399
5,872
1,016,507
Credit impaired loans
(EUR million)
2020
20,272
13,796
3,138
1,584
1,496
2,938
2,025
913
5,688
3,429
2,051
93
2,525
344
31,767
2021
19,822
12,758
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
903
33,234
2019
21,054
14,824
2,736
1,834
1,447
3,165
2,331
834
6,972
4,727
1,947
171
2,470
138
33,799
NPL coverage ratio
(%)
2021
49.4
52.2
25.8
71.7
73.9
134.9
150.3
95.0
98.3
111.2
63.3
153.8
107.8
3.6
71.3
2020
50.3
47.1
44.7
66.5
70.7
182.5
210.4
120.8
97.4
113.2
61.4
275.1
113.3
89.0
76.4
C
provisions
Net ASR
(EUR million)
2020
3,344
2,001
677
193
330
3,917
2,937
979
3,923
3,018
594
226
957
31
12,173
2021
2,293
1,833
(245)
38
200
1,210
419
791
3,251
2,715
341
140
527
155
7,436
2019
1,332
856
223
(8)
217
3,656
2,792
863
3,789
3,036
443
235
508
36
9,321
2019
43.0
41.1
33.4
52.8
66.8
153.0
161.8
128.3
88.4
99.8
56.0
124.0
108.1
174.5
67.9
A. Management perimeter according to the reported segments.
B. Includes gross loans and advances to customers, guarantees and documentary credits.
C. Post write-off recoveries (EUR 1,383 million).
D. Cost of credit is the ratio of 12-month loan-loss provisions to average lending of the same period.
NPL ratio
(%)
2020
2021
2019
3.12
5.77
1.43
3.44
3.61
2.42
2.33
2.73
4.50
4.88
4.43
3.61
2.13
14.38
3.16
0.03
6.23
1.24
3.89
4.74
2.23
2.04
2.81
4.39
4.59
4.79
2.11
2.17
7.08
3.21
Cost of credit
(%/risk)
D
2021
0.39
0.92
(0.09)
0.09
0.67
0.93
0.43
2.44
2.60
3.73
0.85
3.01
0.46
2.45
0.77
2020
0.58
1.01
0.27
0.51
1.10
2.92
2.86
3.03
3.32
4.35
1.50
5.93
0.83
0.54
1.28
0.03
6.94
1.04
4.83
4.31
2.20
2.20
2.19
4.86
5.32
4.64
3.39
2.10
2.34
3.32
2019
0.24
0.43
0.09
(0.02)
0.72
2.76
2.85
2.49
2.92
3.93
1.08
5.09
0.45
0.57
1.00
Annual report 2021 450
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Reconciliation of key figures
Santander’s 2021 consolidated financial statements disclose loans
and advances to customers before and after provision allowances.
Credit risk also includes off-balance sheet risk. The following table
shows the relationship between those concepts:
The graph below shows the breakdown of our credit risk (including
gross loans and advances to customers, guarantees and
documentary credits):
CREDIT RISK DISTRIBUTION
A. Includes gross loans and advances to customers, guarantees and documentary
credits.
B. Before loan-loss allowances.
Geographical distribution and segmentation
Santander organizes its credit risk function around three customer
groups:
• Individuals: All salaried individuals, subdivided by income level to
manage risk by customer type.
Mortgages to individuals made up approximately 37% of net
customers loans at the end of 2021. They are mainly in Spain and
the UK, and primarily consist of residential mortgages with low risk
profiles and NPL ratios as well as robust coverage levels. Low risk
profiles produce low losses.
• SME, commercial banking and institutions: Companies and self-
employed individuals, public entities and private not-for-profit
entities.
• Santander Corporate and Investment Banking (SCIB): Corporate
customers, financial institutions and sovereigns in a closed list that
is revised annually through comprehensive customer analysis
(business type, geographic diversification, product types, revenue
volume for Santander, etc.).
Annual report 2021 451
Individuals56%Companies27%SCIB17%
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Below is a breakdown of the geographical distribution and amounts
of performing and credit impaired loans:
TOTAL
Total
1,051,115
INDIVIDUALS
Total
592,245
SME, COMMERCIAL BANKING AND INSTITUTIONS
Total
278,902
SCIB
Total
179,967
Others' include Corporate Centre.
Performing and non-performing exposure for 2020 and 2019 has been redistributed across segments.
Annual report 2021 452
Europe61%South America13%North America14%DCB 11%Others 1%1,017,881957,690982,70833,23431,76733,799PerformingCredit impaired202120202019Europe57%South America11%North America12%DCB20%577,107529,480550,72815,13814,13916,380PerformingCredit impaired202120202019Europe67%South America17%North America14%Others 2%263,334270,722267,61015,56816,10417,877PerformingCredit impaired202120202019Europe62%South America15%North America23%177,439157,488163,4632,5281,5241,556PerformingCredit impaired202120202019
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The following table shows Grupo Santander's credit risk exposure by
stages and geography:
A
EXPOSURE BY STAGE AND GEOGRAPHY
EUR million
Europe
Spain
UK
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Stage 1
544,590
187,577
225,846
34,051
30,642
124,066
90,179
33,887
126,144
75,242
37,148
5,039
Stage 2 Stage 3
41,953 19,822
15,906 12,759
3,767
18,079
1,442
6,448
1,210
1,517
3,632
13,811
2,623
12,155
1,008
1,657
6,387
8,269
4,182
5,259
1,838
2,450
198
244
Total
606,365
216,242
247,692
41,941
33,369
141,509
104,957
36,552
140,800
84,683
41,436
5,481
Digital Consumer
Bank
Corporate Centre
Total Group
110,605
3,932
2,490
117,027
193
905,598
2,873
903
70,838 33,234
3,969
1,009,670
A. Excluding EUR 23,799 million from reverse repos. In addition excluding from the
total, EUR 17,646 million from balances not subject to impairment accounting.
Impairment provisions include expected credit risk losses over the
expected residual life of purchased or originated impaired (POCI)
financial instruments.
• Europe: the NPL ratio fell 22 bps to 3.12% from 2020 due to a
significant reduction in credit impaired loans in Spain and Poland,
offsetting the increase in the UK.
• North America: The NPL ratio increased 19 bps to 2.42% from
2020, mainly due to increases at SC USA. credit impaired stock
rose 24% year-on-year.
• South America: The NPL ratio rose 11 bps to 4.50%. comparing to
2020, due to the increase observed in Argentina (+150 bps) and
Brazil (+29 bps), offsetting the decrease in Chile (-36 bps)
• Digital Consumer Bank: The NPL ratio decreased 4 bp to 2.13%,
despite the decrease in automobile financing.
For more details, see section
3.4. 'Details of main geographies'.
Financial asset impairment
The IFRS 9 impairment model applies to financial assets valued at
amortized cost; debt instruments valued at fair value with changes in
other comprehensive income; leasing receivables; and commitments
and guarantees not valued at fair value. The portfolio of financial
instruments subject to IFRS 9 has three credit risk categories (or
stages):
◦ Stage 1: Financial instruments with no significant increase in risk
since initial recognition – the impairment provision reflects
expected credit losses from defaults over the twelve months from
the reporting date.
◦ Stage 2: Financial instruments with a significant credit risk
increase since initial recognition but no materialized impairment
event – the impairment provision reflects expected losses from
defaults over the financial instrument’s residual life.
◦ Stage 3: Financial instruments with true signs of impairment as a
result of one or more events resulting in a loss – the impairment
provision reflects expected losses for credit risk over the
instrument’s expected residual life.
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Financial instruments with effective signs of impairment (stage 3)
performed as follows:
2019 - 2021 ALLOWANCES
EUR million
NPL PERFORMANCE BY CONSTITUENT ITEM
EUR million
2019 - 2021 CREDIT IMPAIRED EVOLUTION
EUR million
Credit impaired (start of period)
Stage 3
NPL not subject to impairment
accounting
Net entries
Perimeter
FX and others
Write-off
Credit impaired (end of period)
Stage 3
NPL not subject to impairment
accounting
2019
35,692
35,670
2020
33,799
33,783
2021
31,767
31,758
22
16
9
10,544
—
156
(12,593)
33,799
33,783
10,277
(44)
(3,335)
(8,930)
31,767
31,758
10,027
—
529
(9,089)
33,234
33,224
16
9
10
ALLOWANCES EVOLUTION ACCORDING TO CONSTITUENT ITEM
EUR million
Allowances (start of period)
Stage 1 and 2
Stage 3
Gross provision for impaired
assets and write-downs
Provision for other assets
FX and other
Write-off
Allowances (end of period)
Stage 1 and 2
Stage 3
2019
24,061
8,913
15,148
2020
22,965
8,872
14,093
2021
24,271
10,491
13,780
10,905
13,263
8,824
6
586
(12,593)
22,965
8,872
14,093
139
(3,166)
(8,930)
24,271
10,491
13,780
(6)
(302)
(9,089)
23,698
9,983
13,715
We quantify expected losses from credit events using an unbiased,
weighted consideration of up to five future scenarios that could
affect our ability to collect contractual cash flows. They consider the
time-value of money, information from past events, and current
conditions and projections of GDP, house pricing, unemployment and
other important macroeconomic factors.
We calculated impairment losses using parameters (mainly EAD, PD,
LGD and discount rate) based on internal models, and regulatory and
management expertise. Far from being a simple adaptation, we
defined and validated them according to specific requirements of
IFRS 9 and other guidelines by regulators, supervisors and other
international organizations (EBA, NCAs, BIS, GPPC, etc.), such as
forward-looking information, point-in-time (PiT) vision, multiple
scenarios, calculation of losses for the entire life of the transaction
through lifetime PD, etc.
• Identifying a significant increase in credit risk: when classifying
financial instruments under stage 2, we consider:
◦ Quantitative criteria: We review and quantify changes in the risk
of default during their expected life based on their credit risk
level on initial recognition.
To recognize significant changes so instruments can be classified
in stage 2, each subsidiary set quantitative thresholds for its
portfolios based on Santander's guidelines for consistent
interpretation across all our footprint.
Of those quantitative thresholds, we consider two: the relative
threshold, which shows the difference in credit quality since the
transaction was approved as a percentage of change; and the
absolute threshold, which calculates the total difference in credit
quality. All subsidiaries apply them (with different values) in the
same manner. The use of one or both depends on portfolio type
and other aspects, such as the starting point for average credit
quality.
◦ Qualitative criteria: Several indicators aligned with ordinary credit
risk management indicators (e.g. past due for over 30 days,
forbearance, etc.). Each subsidiary defined these criteria for its
portfolios.
We supplement these qualitative criteria with expert opinions.
• Definition of default: For provisions, we use the definition of
default dictated by Article 178 of the CRR. We are gradually
applying the new definition to provisions calculation according to
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the EBA’s guidelines; we are also considering applying it to
prudential framework once the competent authorities approve it
for calculating regulatory capital.
• Past, present and future information: To estimate expected
losses, we require a great deal of expert analysis as well as past,
present and future data. We base expected loss estimates on
multiple macroeconomic scenarios, measure the probability of loss
considering past events, current conditions, and future trends of
GDP, unemployment and other macroeconomic indicators. We use
forward-looking information in internal management and
regulatory processes under several scenarios, which helps us make
sure our processes are consistent.
• Expected life of financial instruments: We estimate the expected
life of financial instruments according to their contractual terms
(e.g. prepayments, duration, purchase options, etc.). The
contractual period (including extension options) is the maximum
time frame for measuring the expected credit loss. If financial
instruments have an undefined maturity period and available
balance (e.g. credit cards), we estimate its expected life based on
the total exposure period and effective management practices to
mitigate exposure.
3.4 Details of main geographies
United Kingdom
General overview
Credit risk with customers in the UK (excluding Santander Consumer
UK and Santander London Branch) grew 4.2% (-2.5% in local
currency) year-on-year to EUR 262,869 million. The UK accounts for
25% of Santander’s loan portfolio.
Since the pandemic began, we’ve granted 368,000 payment holidays
and EUR 5,280 million in government-backed loans to help our
customers.
The NPL ratio, 1.43%, increased compared to 2020 (+19 bps), due to
the increase in the SME portfolio offset by the decrease observed in
the wholesale portfolio. The profile of the different segments
remains stable.
The Santander UK portfolio is divided into these segments:
PORTFOLIO SEGMENTATION
Dec. 21 data
A
A. Excluding SCF UK and London Branch
Mortgage portfolio performance
Because of its size, we closely monitor Santander UK’s mortgage
portfolio for both the entity itself and the group. As of December
2021, the portfolio amounted to EUR 209,949 million, growing by
4.3% in local currency. It comprises residential mortgages granted to
new and existing customers which are first lien mortgages. There are
no second or more liens on mortgaged properties.
2021 was a year of strong mortgage activity, mainly due to the
higher demand after the covid-19 restrictions were lifted and the
reduction of the stamp duty rates up until September. As a
consequence, Santander UK achieved all-time high mortgage lending
origination levels in June.
In accordance with Santander's risk management principles,
properties are appraised independently before we approve a new
mortgage. In line with market practice and legislation, property
values used as collateral for granted mortgages are updated
quarterly by an independent agency's automatic appraisal system.
Credit exposures are predominantly in Southeast UK and the London
metropolitan area.
Geographically, credit exposures are predominantly in the South East
of the UK and the London metropolitan area.
GEOGRAPHICAL DISTRIBUTION
Dec. 21 data
Annual report 2021 455
Mortgages80%Other Individuals2%SME &Commercialbanking 18%1.36%1.11%1.04%1.24%1.43%30%30%33%45%26%0.08%0.06%0.09%0.27%-0.09%Non-pefoming loans ratioNon-performing coverage ratioCost of credit2017201820192020202125%14%13%2%4%32%10%LondonMidlands and East AngliaNorthNorthern IrelandScotlandSouth East excluding LondonSouth West, Wales and other
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The chart below breaks down the portfolio by borrower type:
The chart below shows the LTV structure of residential mortgages as
of December 2021:
MORTGAGE PORTFOLIO LOAN TYPE
LOAN TO VALUE
Dec. 21 data
Home mover: customers who change houses, with or without
changing the bank granting the loan.
Remortgage: customers who switch the mortgage from
another financial entity.
First time buyer: customers who purchase a home for the first
time.
Buy to let: houses bought for renting out.
Santander UK's wide range of mortgage products include:
• Interest-only loans (23%): Customers pay interest every month
and repay the principal at maturity. Loans require an appropriate
repayment vehicle, such as a pension plan or an investment fund.
This product is common in the UK. Santander UK applies restrictive
policies to mitigate inherent risks. For instance, a maximum loan-
to-value (LTV) ratio of 50% entails more stringent approval criteria
and assessment of ability to pay, simulating the repayment of both
interest and capital.
• Flexible loans (5%): Loan agreements allow borrowers to modify
monthly payments or draw down additional funds up to a set limit
under various conditions.
• Buy-to-let (8%): Buy-to-let mortgages account for a small portion
of the total portfolio and are subject to strict risk approval policies.
The NPL ratio reflects the mortgage portfolio’s strength, which was
stable at 1.01% at the end of December 2021 (-5 bp YoY). The
portfolio’s credit quality owed to high repayment rates as payment
holidays expired (of which, 100% expired), and to low levels of
default.
Prudent approval policies put the portfolio’s simple average LTV at
41%. 2% of the portfolio has a LTV of between 85% and 100%. These
policies resulted in no sign of risk quality deterioration in new
business.
Loan to value: relation between the amount of the loan and the appraised value
of the property. Based on indices.
Our credit risk policies forbid loans considered "high risk" (e.g.
subprime mortgages) and set out strict credit quality requirements
for transactions and customers.
Spain
General overview
Santander España’s credit risk totalled EUR 221,100 million (21% of
the Group’s total). It is appropriately diversified among products and
customer segments.
Amid economic and credit recovery, as macroeconomic figures
improved following covid-19 lockdowns in 2020, consumer loans
(especially mortgages) grew significantly; but the corporate and SME
lending remained below 2020 numbers, while we maintained
positions with customers in liquidity support programmes (i.e. ICO
lines of credit) without having to seek new financing. Total credit risk
decreased -0.1% from December 2020. The ICO loans in corporate
and SME lending amounted to a significant EUR 27,294 million;
around half of them were extended.
The credit portfolio’s NPL ratio was 5.77%, 46 bps lower than in
December 2020. This better overall portfolio performance was
driven by customer support programmes; the regularization of
several restructured positions; and portfolio sales.
The additional provisions raised to mitigate the potential impacts
from the exceptional circumstances of the covid-19 pandemic,
increased the NPL coverage ratio to 52% (+5 pp vs December 2020).
The credit impaired portfolio declined mainly from loans with the
highest expected losses.
The cost of credit reflects the rise in covid provisions, with slight
improvement at the end of 2021 compared to December 2020.
Annual report 2021 456
43%43%29%25%20%19%8%13%StockNew production45%45%8%2%0%< 50%>50-75%>75-85%>85-100%>100%
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The NPL ratio for residential mortgages granted to households fell 18
bps to 2.78%, mainly owing to non-performing portfolio sales.
NPL RATIO, RESIDENTIAL MORTAGES
%
Santander España's portfolio is divided into these segments:
• Principal repayment starts on the first day of all mortgage
In 2021, mortgage origination soared 94% year-on-year on the back
of higher customer demand caused by the pandemic. The residential
mortgage portfolio in Spain maintained a medium-low risk profile
with low expectations of additional impairment:
PORTFOLIO SEGMENTATION
Dec. 21 data
Residential mortgages performance
Santander España’s residential mortgages portfolio amounted to EUR
60,948 million, 28% of its total credit risk. 99.3% have a mortgage
guarantee.
RESIDENTIAL MORTGAGES
EUR million
A
Gross Amount
Without mortgage guarantee
With mortgage guarantee
of which credit impaired loans
Without mortgage guarantee
With mortgage guarantee
2021
60,948
419
60,529
1,798
115
1,683
2020
58,079
387
57,692
1,784
75
1,709
2019
60,557
306
60,251
2,581
14
2,567
A. Excluding SC España mortgage portfolio (EUR 1,376 million in December 2021
with doubtful loans for EUR 62 million, and EUR 1,526 million with doubtful loans
for EUR 66 million in 2020).
transactions.
• Because early repayment is common, so the average transaction
life is shorter than the agreement term.
• High-quality collateral, concentrated almost exclusively in
financing for first-time buyers.
• The average affordability rate stood at 26%.
• 90% of the portfolio has an LTV below 80%, calculated as the ratio
of total risk to the latest available appraisal.
• All customers applying for a residential mortgage are subject to a
rigorous credit risk and solvency assessment by credit analysts to
determine if their income will be sufficient to pay loan instalments
and stable until the end of the mortgage term.
DEBT TO INCOME*
Dec. 21 data
LOAN TO VALUE**
Dec. 21 data
Average 27%
(*) Debt to income: relation between the annual instalments and the customer’s net
income.
(**) Loan to value: percentage indicating the total risk/latest available home
appraisal.
Annual report 2021 457
7.70%7.32%6.94%6.23%5.77%46%44%41%47%52%0.37%0.38%0.43%1.01%0.92%Non-pefoming loans ratioNon-performing coverage ratioCost of credit20172018201920202021Mortgages28%Other Individuals7%Companies53%SCIB12%4.26%2.96%2.78%20192020202156%21%23%DI < 30%30% < DI < 40%DI > 40%27%31%32%7%3%LTV < 40%40% - 60%60% - 80%80% - 100%> 100%
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Corporate and SME financing
Credit risk with SME and corporates in commercial banking, which is
Santander España's core lending segment (at 53% of total credit risk)
declined 3.1% from December 2020 to EUR 117,544 million, mainly
due to a drop in the SME portfolio. Most of the portfolio is customers
with an assigned credit analyst to monitor their loans throughout the
risk cycle.
The portfolio is highly diversified and not concentrated in any
industry. Its NPL ratio stood at 7.50% in December 2021, up 8 bps
from December 2020 due to lower volume; meanwhile, credit
impaired stock remained flat. 2021 brought stable portfolio figures
after significant growth in 2020 due to liquidity support programmes
(ICO), which after the initial grace period are now being repaid.
United States
General overview
Santander US's credit risk stood at EUR 112,808 million at the end of
December. It makes up 11% of the Group's total credit risk and
includes these business units:
BUSINESS UNITS SEGMENTATION
Dec. 21 data
Business units performance
Santander Bank N.A.
At 78% of total credit risk, retail and commercial banking is
Santander Bank N.A.’s main business. 24% of the portfolio is with
individuals, and approximately 76% with corporates. The bank's
primary goals include increasing the SCIB business — 22% of total
credit risk — by enhancing customer experience and growing core
customers and deposits through digital, branch and commercial
transformation initiatives; leveraging its deposit base to support its
commercial real estate business; and strengthening its auto finance
partnerships. Its 15.1% hike in lending spanned all segments. Minus
the FX effect, the increase was lower, standing at 9.2%.
Its NPL ratio increased to 0.85% (+4 bps in the year) as of December
2021, and the cost of credit fell to -0.06% due to the release of
provisions based on better-than-expected market performance,
customer behaviour (support programmes and fiscal stimulus) and
greater recovery.
SBNA: Santander Bank N.A.
SC USA: Santander Consumer USA
NYB - SIS: Santander Investment Securities
BSI: Banco Santander International
Fiscal stimulus together with the reopening of the economy favoured
a strong recovery that was moderated as of the summer due to
problems on the supply side. The supply chain and labour constraints
pushed inflation up to 7.0%, while the unemployment rate fell to
3.9% in November, leading to the start of the Fed's withdrawal of
monetary stimulus.
As of December, Santander US's lending had grown 13.8% from
2020, particularly in SCIB portfolios in Santander Bank N.A., the New
York branch, and the Miami branch. Excluding foreign exchange (FX)
effect, growth was 8%.
Santander US remains focused on supporting its customers and
making inroads with its strategic initiatives to enhance customer
experience and allocate capital to its businesses.
Its NPL ratio rose to 2.33% (+29 bps in the year), while the cost of
credit fell to 0.43% (-243 bps YoY). Loan-loss provisions dropped
82% due to lower net charges, and the improved macroeconomic
outlook, customer loan relief measures and steadfast used car prices
prompted lending growth.
The performance of Santander US's core units is described below.
Santander Consumer USA
Santander Consumer USA (SC USA) presents higher risk indicators
than other Santander US units due to the nature of its business (auto
loans and leasing). Its focus remains on managing the profitability-
to-risk balance through pricing aligned with the credit quality of the
customer/transaction, while improving the dealer experience.
In 2021, loan originations grew more than 4% year-on-year,
returning to the pre-pandemic prime and non-prime mix on the back
of the commercial relationship we have with Stellantis Group.
Auto originations continued to increase, driven mainly by hikes in
used car prices and demand. As of December, the NPL ratio rose to
6.27% (+101 bps in the year) and the cost of credit stood at 1.54%
(-654 bps YoY). Annual net credit losses fell year on year due to
customer support programmes (triggered by the health crisis),
federal fiscal stimulus packages and greater recovery driven by a
surge in used car prices. Due to the increase in defaults, the non-
performing coverage ratio fell to 176% (-54 pp in the year).
Annual report 2021 458
51%26%18%5%1.21%0.88%0.69%0.81%0.85%102%122%141%174%129%0.25%0.24%0.35%0.85%-0.06%Non-pefoming loans ratioNon-performing coverage ratioCost of credit20172018201920202021
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Furthermore, leases carried out exclusively under the Stellantis
Group agreement (primarily with highly creditworthy customers)
dropped 5% to EUR 13,600 million, providing stable and recurring
earnings. Risk management and residual value mitigation measures
remain a priority.
agribusiness — Brazil's largest agricultural commodities desk — and
equities.
In ESG, Santander is a leader in sustainable solutions. It channelled
EUR 5,000 million in social and environmental business. Progress
continues on Plano Amazônia, our joint project with Brazil's other two
largest private banks. We created a new business unit in the region
that has already channelled EUR 43 million.
Net loan-loss provisions stood at EUR 2,715 million (-10% compared
to 2020), a decrease driven by additional provision made in 2020
related to covid-19. In local currency, provisions declined by 11%.
Cost of credit decreased to 3.73% from 4.35% at the end of 2020,
driven by the provisions evolution aforementioned.
Brazil
General overview
Despite the economic recovery due to the reopening of the service
sector, in line with the advances in the vaccination campaigns and the
lift of restrictions, international supply problems have continued to
hamper industry growth.
Santander Brasil's credit risk amounted to EUR 85,702 million. It
increased by 15% from 2020. Excluding the exchange rate effect, it
grew by 13%. As of December 2021, Santander Brasil accounts for
8% of Grupo Santander's loan book.
In line with the commercial strategy, we continued to build an auto
platform focused on end-to-end customer experience, thanks to
which we achieved a 20% market share in vehicles (including
individuals and companies). Santander Auto began selling insurance
to corporates and had 19% penetration in insurance.
Credit cards broke customer capture records and remained third in
the market. We also hit records figures in billing. The surge in
mortgage origination continued, where Santander Brasil leads the
home equity segment with a market share of 25%.
The SME portfolio (Varejo PJ) grew significantly due to the
contribution of the different billing clusters that make the portfolio
and its different products. State-backed guarantees to combat the
effects of the pandemic ended in December 2020, although a new
window opened in July 2021.
Our digital business continued to grow. 90% of transactions were
digital. Furthermore, Gente, our virtual assistance channel based on
artificial intelligence, has over 18 million hits per month.
Our leadership of the wholesale sector makes us one of the top
corporate banks, thanks to our experience as a global bank — the
biggest in FX transactions for the last eight years — in infrastructure,
Santander Brasil's loan book is distributed as follows:
Portfolio segmentation
Dec.21 data
It is diversified and has an increasing retail profile, with 80% of loans
extended to individuals, consumer financing and companies.
Portfolio performance
In 2020 moratorium campaigns had a strong influence on the
portfolio. The NPL ratio rose from 4.59% to 4.88% at December
2021, and the coverage ratio decreased slightly to 111% from 113%.
Annual report 2021 459
5.86%7.73%6.16%5.26%6.27%213%155%175%230%176%9.84%10.01%9.42%8.09%1.54%Non-pefoming loans ratioNon-performing coverage ratioCost of credit201720182019202020215.29%5.25%5.32%4.59%4.88%93%107%100%113%111%4.36%4.06%3.93%4.35%3.73%Non-pefoming loans ratioNon-performing coverage ratioCost of credit20172018201920202021Individuals38%Consumer Finance11%Companies31%SCIB20%
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In the individuals segment, growth in local currency was strong.
Market share of payroll loans, mortgages and other low-risk
products increased.
SME lending performed beyond expectations and started to show
signs of recovery. All ratios returned to pre-crisis levels. The portfolio
was also well provisioned and saw continuous improvement in its
risk profile. We must pay close attention to the maturities of
government programmes and other payment deferrals to confirm
the recovery of the SME market.
To monitor the credit quality of our loan book and prevent
deterioration, one of the main credit risk performance indicators we
track is the ‘Over 90' impairment ratio. It continues to indicate that
Grupo Santander is outperforming its local peers, having stood at
2.7% at December 2021 (+60 bps vs 2020 year-end), below the
average of its competitors.
Over 90 total (%) - PDTE
Dec. 21 data
3.5 Other credit risk details
Credit risk from financial markets activities
This section covers credit risk from treasury management through
money market financing and counterparty risk products to satisfy
customers’ (especially credit institutions) needs.
According to the CRR, counterparty credit risk results from the
likelihood that a customer in a derivatives contract on financial
securities or commodities, repurchase agreement, securities lending,
long settlement transactions, margin lending and other transactions
could default before the final settlement of the transaction’s cash
flows.
To measure exposure, we use two methods: “Mark-to-
market” (MtM) (replacement cost of derivatives) plus potential future
exposure (“add-on”); and the Montecarlo simulation to calculate
exposure for certain countries and products. We also calculate capital
at risk and unexpected loss (economic capital, net of collateral and
recoveries, after deducting expected loss). At market close, we
recalculate exposures by adjusting all transactions to their new time
horizon, adapting potential future exposure and applying netting,
collateral and other mitigants. Thus, we can check exposures daily
against the limits approved by senior management. For risk control,
we use a real-time integrated system that shows the exposure limit
with any counterparty, for any product and term, and in all
subsidiaries.
Counterparty risk exposures: over-the-counter (OTC) transactions
and organised markets (OM)
By December 2021, after applying netting and collateral agreements
for counterparty risk, the positive market value of total exposure
(under management criteria) was EUR 5,491 million (net exposure of
EUR 31,444 million).
COUNTERPARTY RISK: MARKET VALUE EXPOSURE AND CREDIT RISK
EQUIVALENT, INCLUDING MITIGATION EFFECT
EUR million
A
Market value, netting effect
B
Collateral received
C
Market value with netting effect
and collateral
D
E
Net CRE
2021
2020
2019
31,390
37,204
37,365
25,899
31,970
30,100
5,491
5,235
7,265
31,444
30,139
32,552
A. Figures under internal risk management criteria. Listed derivatives have a market
value of zero. No collateral is received for these types of transactions.
B. Market value used to include the effects of mitigation agreements to calculate
exposure for counterparty risk.
C. Included variation margin, initial margin and secured finance transactions
collateral.
D. Including the mitigation of netting agreements and deducting the collateral
received.
E. CRE (credit risk equivalent): net value of replacement plus the maximum potential
value, less collateral received.
Annual report 2021 460
2.12.12.12.22.42.72.62.72.72.72.82.82.32.22.52.52.62.8SantanderPeer 1Peer 23Q204Q201Q212Q213Q214Q21
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The chart below shows products that generate counterparty risk
(especially interest rate and FX hedging instruments) by their
nominal risk and market value:
COUNTERPARTY RISK BY NOMINAL RISK AND GROSS MARKET VALUE
EUR million
A
B
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Total OTC derivatives
Derivatives organised markets
Repos
Securities lending
C
Total counterparty risk
D
2021
Market value
Positive Negative
228
3,244
275
(346)
(2,553)
(123)
Nominal
17,164
79,062
4,409
2020
Market value
2019
Market value
Nominal
Positive
Negative
Nominal Positive Negative
14,530
53,821
11,370
145
2,973
47
(215)
(1,848)
(386)
29,805
71,401
23,136
312
2,481
119
(1,357)
(1,836)
(177)
947,061
22,329
(26,965)
863,001
25,341
(27,071)
897,886
21,053
(23,260)
4,915,150
106,341
(103,074)
4,917,944
143,679
(139,261)
5,089,817 112,128
(108,651)
12,022
722
(32)
3,732
83
(15)
735
56
(27)
5,786,114
131,243
(131,316) 5,695,339 170,911
(167,650)
5,944,977 135,194
(134,392)
188,755
129,085
1,896
4,404
(1,777)
169,059
(5,997)
146,984
1,357
3,978
(1,147)
(7,311)
167,803
955
(917)
143,163
4,334
(2,722)
48,346
12,802
(29,919)
46,418
12,500
(26,072)
48,786
17,490
(23,652)
6,152,300
150,345
(169,009) 6,057,800 188,746
(202,180)
6,304,729 157,973
(161,682)
A. Figures under internal risk management criteria.
B. Credit derivatives acquired including hedging of loans.
C. Refers to transactions involving listed derivatives (proprietary portfolio). Listed derivatives have a market value of zero. No collateral is received for these types of
transactions.
D. Spot transaction not included.
As the following table shows, most of Santander’s derivatives reach
maturity in up to five years, while its repurchase agreements and
securities lending reach maturity in up to one year.
COUNTERPARTY RISK BY NOMINAL RISK AND MATURITY
EUR million. Dec.21 data
A
B
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Total OTC derivatives
C
Derivatives organised markets
Repos
Securities lending
Total counterparty risk
Up to 1 year
Up to 5 years
Up to 10 years
More than 10 years
23%
50%
86%
51%
34%
85%
37%
59%
93%
100%
39%
68%
48%
8%
30%
39%
14%
37%
39%
7%
—%
37%
2%
2%
6%
13%
17%
1%
16%
1%
—%
—%
15%
6%
—%
—%
6%
10%
—%
10%
—%
—%
—%
9%
TOTAL
17,164
79,062
4,409
947,061
4,915,150
12,022
5,786,114
188,755
129,085
48,346
6,152,300
A. Figures under internal risk management criteria.
B. Credit derivatives acquired including hedging of loans.
C. Refers to transactions involving listed derivatives (proprietary portfolio). Listed derivatives have a market value of zero. No collateral is received for these types of
transactions.
Even if the credit quality of some counterparties declines, we focus
counterparty credit risk on customers with high credit quality (85% of
counterparties have a rating of A or higher), especially financial
institutions (23%) and clearing houses (71%).
Annual report 2021 461
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A
NOMINAL COUNTERPARTY RISK BY CUSTOMER RATING
Dec.21 data
Rating
AAA
AA
A
BBB
BB
B
Other
%
0.98 %
0.34 %
83.83 %
13.34 %
1.43 %
0.05 %
0.02 %
A. Ratings based on internally defined equivalences between internal ratings and
credit agency ratings.
Transactions with clearing houses and financial institutions are
subject to netting and collateral agreements. We constantly aim to
have all other transactions covered by such agreements as well. In
general, the collateral agreements Santander signs are bilateral; still,
there are a few exceptions of unilateral agreements in the customer’s
favour, mainly with multilateral organizations and securitization
funds.
COUNTERPARTY RISK BY CUSTOMER SEGMENT
Dec.21 data
Received collateral is distributed among the following geographies:
COLLATERAL RECEIVED. GEOGRAPHIC DISTRIBUTION
Dec.21 data
Due to counterparty credit risk, we calculate the results of trading
portfolios by applying credit valuation adjustments (CVA) to over-the-
counter (OTC) derivatives. We also make debt valuation adjustments
(DVA) in view of the risk of Santander that our counterparties
assume.
At the end of December 2021, CVA adjustments amounted to EUR
236.5 million (a decrease of 31% compared to the end of 2020) and
DVA adjustments were EUR 161.8 million (a decrease of 17,5%
compared to the end of 2020). These impacts are mainly due to the
continuous credit market improvement , the creation of specific
credit curves for certain counterparties and the introduction of
methodological improvements in the exposure calculation.
The definition and methodology for
calculating the CVA and DVA are set out in the
section 4.2 ‘Market risk management'.
Collateral helps reduce counterparty risk. It consists of highly liquid
instruments with economic value that are deposited or transferred
from one counterparty to another to guarantee or reduce
counterparty credit risk from portfolios of cross-risk derivatives. We
usually measure transactions subject to collateral agreements daily,
applying contractual parameters to quantify the collateral (in cash or
securities) to pay or receive from the counterparty. Amid the
pandemic, the processes we have in place to manage collateral in the
Group properly and more often have proved effective. The collateral
received under CSA, OSLA, ISMA, GMRA and other collateral
agreements signed by the Group amounted to EUR 25,899 million
(including EUR 15,089 million in received collateral for derivatives),
with 41% in cash. The remaining collateral is subject to strict quality
policies in regard to the issuer and their rating, debt seniority and
haircuts.
Annual report 2021 462
71%4%1%23%1%Clearing housesCorporates/Project FinanceCommercial banking/IndividualsFinancial InstitutionsSovereign/supranational81%8%3%7%1%SpainUKMexicoChileOther
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Counterparty risk, organized markets and clearing houses
Santander’s policies aim to promote early action according to
regulation for OTC derivatives, repurchase agreements and securities
lending (whether settled through clearing houses or bilaterally). In
recent years, we have gradually standardized OTC transactions to
settle and clear new contracts through clearing houses according to
current regulation, in addition to increasing internal use of electronic
execution systems. We also manage transactions not settled by
clearing houses actively to optimize their volume according to
regulation on margins and capital. While our counterparty risk
management does not contemplate the credit risk in such
transactions, we have been calculating regulatory credit exposure for
organized market exchanges since the Capital Requirements
Directive (CRD) IV and the Capital Requirements Regulation (CRR)
took effect in 2014, transposing the Basel III principles on capital
calculation.
The tables below show the weight of transactions settled by clearing
houses versus total counterparty as of December 2021:
COUNTERPARTY RISK BY SETTLEMENT CHANNEL AND PRODUCT TYPE
Nominal in EUR million
A
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Repos
Securities lending
Total
Organised markets
Nominal
C
Bilateral
B
CCP
Nominal
10,450
18,173
4,409
900,845
740,599
11,459
93,800
48,346
%
60.9 %
23.0 %
100.0 %
95.1 %
15.1 %
95.3 %
72.7 %
100.0 %
Nominal
6,714
—
—
38,755
4,054,711
—
35,284
—
%
39.1 %
— %
— %
4.1 %
82.5 %
— %
27.3 %
— %
—
60,889
—
7,462
119,841
563
—
—
1,828,081
4,135,464
188,754
%
— %
77.0 %
— %
0.8 %
2.4 %
4.7 %
— %
— %
Total
17,164
79,062
4,409
947,061
4,915,150
12,022
129,085
48,346
6,152,300
A. Figures under internal risk management criteria.
B. Central counterparties (CCP).
C. Refers to transactions involving listed derivatives (proprietary portfolio). Listed derivatives have a market value of zero. No collateral is received for these types of
transactions.
RISK SETTLED BY CCP AND ORGANIZED MARKETS BY PRODUCT
Nominal in EUR million
A
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Repos
Securities lending
Total
2021
6,714
—
—
2020
6,245
62
—
2019
11,556
370
—
38,755
31,043
43,358
4,054,711
4,020,927
4,087,255
—
—
—
35,284
39,397
23,933
—
—
—
4,135,464 4,097,674 4,166,472
A. Figures under internal risk management criteria.
Credit derivatives
We use credit derivatives to hedge transactions, customer business in
financial markets and trading. The notional value of the credit
derivatives Santander has negotiated is low (0.3% of the notional
value of counterparty risk). Furthermore, we subject credit
derivatives to internal robust controls and procedures to minimize
operational risk.
Concentration risk
Concentration risk control is key for our management. We
continuously monitor credit risk concentration by region and country,
economic sector, customer type and other criteria.
The board sets concentration limits according to risk appetite (See
‘Risk appetite framework and structure of limits’ in 2.4 'Management
processes and tools'). Accordingly, the executive risk committee
develops risk policies and reviews the appropriate exposure levels so
we can effectively manage credit risk concentration.
As indicated in the key metrics section of this chapter, our credit risk
is diversified among our core markets (UK 25%, Spain 21%, United
States 11%, Brazil 8%, etc.). In terms of sector diversification, 56% of
our credit risk is with individuals, who are inherently highly diverse.
Our lending portfolio is also well distributed, with no significant
concentrations in any specific industry. The chart below shows the
distribution as of December 2021:
Annual report 2021 463
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DIVERSIFICATION BY ECONOMIC SECTOR
A
Agriculture, livestock,
forestry and fishing
Extractive industries
Information and
communications
Financial and insurance
activities
Manufacturing industry
Real estate activities
Electricity, gas and water
production and distribution
Professional, scientific and
technical activities
Construction
Administrative activities
Trade and repairs
Public administration
Transport and storage
Other social services
Hotels and restaurants
Other services
A. Excluding individuals and reverse repos.
Because Santander is subject to the CRR stipulations on large risks,
exposure with a customer or group of associated customers will be
considered “large exposure” if its value is equal to, or greater than,
10% of eligible capital. To limit large exposures, no entity may
assume any exposure with a single customer or group of associated
customers if it exceeds 25% of their eligible capital, having factored
in the credit risk reduction effect set out in the regulation.
The use of risk mitigation techniques resulted in no groups triggering
those thresholds as of the end of December. Regulatory credit
exposure with the 20 biggest groups within the scope of large risks
made up 5% of credit risk (lending to customers and off-balance
sheet risks) as of December 2021.
Our Risk division works closely with the Finance division to manage
credit portfolios, aimed at reducing the concentration of exposures
through credit derivatives, securitizations and other techniques to
optimize the risk-reward of the entire portfolio.
Country risk
Country risk is a component of credit risk arising in transactions with
clients resident in a particular country due to circumstances other
than usual business risks. It consists of sovereign risk, transfer risk
and others that might affect international financing transactions
(wars, natural disasters, current account balance crises, among
others). It is embedded in our provisioning models and processes, in
compliance with the applicable regulation.
19. Countries that are not considered low risk by Banco de España
20. Internal rating are applied'.
Our country risk management continued to follow a standard of
maximum prudence. We assume country risk very selectively in
transactions that enhance the global relationship with our
customers.
Sovereign risk and risk with government agencies
Sovereign risk arises from central bank transactions (including
regulatory cash reserves), government bonds (public debt) and
transactions with non-commercial government institutions funded
exclusively by a state’s budget revenue. In some respects, Banco
Santander's standard for sovereign risk differs from the European
Banking Authority's (EBA) standard for regular stress testing. In
particular, the EBA does not consider deposits with central banks,
exposures with insurance companies or indirect exposures to
guarantees and other financial instruments; however, its standard
does generally include central, regional and local government
agencies.
Our local sovereign exposure, in currencies other than the official
currency of the country of issuance, is not significant ( EUR 10,013
million, 2.6% of total sovereign risk) according to our management
criteria. Furthermore, exposure to non-local sovereign issuers
involving cross-border risk is even less significant (EUR 7,011 million,
1.8% of total sovereign risk).The sovereign debt we hold in Latin
America is almost entirely in local currency, recorded in local ledgers
and predominantly short-term.
In recent years, our total sovereign risk exposure has been consistent
with both regulation and our strategy. Because it spans countries
with diverse macroeconomic conditions, growth scenarios, interest
rates and exchange rates, it varies on account of our strategy to
manage liquidity and hedge both interest rate and foreign exchange
risk. Furthermore, our sovereign debt strategy also sets exposure
limits based on each country’s credit rating. The table below shows
exposure ratios by level
20
:
AAA
AA
A
BBB
Lower than BBB
2021
15 %
32 %
26 %
11 %
16 %
2020
18 %
25 %
25 %
14 %
18 %
2019
20 %
24 %
18 %
15 %
23 %
Annual report 2021 464
2%2%13%4%5%16%5%3%4%20%10%4%3%6%2%1%
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Sovereign exposure at the end of December 2021 is shown in the
table below (data in million euros):
2021
2020
Financial assets held
for trading and
Financial assets
designated as FV with
changes in results
Portfolio
Financial assets
at fair value
through other
comprehensive
income
Financial
assets at
amortised cost
Non-trading
financial assets
mandatory at fair
value through
profit or loss
Total net direct
exposure
Total net direct
exposure
2,574
(20)
(73)
—
—
(233)
(538)
(15)
—
1,050
8,733
2,150
56
94
2
13,780
2,805
2,287
634
—
—
1,231
676
10,819
77
13,803
16,432
10,253
1,134
651
1,524
62,326
14,178
4,277
323
—
9
2,631
228
489
1,291
7,616
3,394
1,106
4,881
680
1,811
42,914
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19,557
6,544
884
—
9
3,629
366
11,293
1,368
22,469
28,559
13,509
6,071
1,425
3,337
24,245
8,730
4,015
—
—
4,054
(97)
10,947
1,070
15,548
27,717
21,029
6,955
958
4,752
119,020
129,923
Spain
Portugal
Italy
Greece
Ireland
Rest Eurozone
UK
Poland
Rest of Europe
US
Brazil
Mexico
Chile
Rest of America
Rest of the World
Total
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4. Market, structural
and liquidity risk
4.1 Introduction
This section describes our market risk management and control in
2021, covering trading risk as well as liquidity and structural risks. It
also contains a brief description of our methodologies and metrics.
Activities exposed to market risk encompass transactions where risk
is assumed as a consequence of potential changes in interest rates,
inflation rates, exchange rates, stock prices, credit spreads,
commodity prices, volatility and other market factors; the liquidity
risk from our products and markets, and the balance-sheet liquidity
risk. Therefore, they include trading risks and structural risks.
• Interest rate risk arises from movements in interest rates that
reduce the value of a financial instrument, a portfolio or the Group.
It can affect loans, deposits, debt securities, most assets and
liabilities held for trading, and derivatives.
• Inflation rate risk arises from movements in inflation that can
reduce the value of a financial instrument, a portfolio or the Group.
It can affect loans, debt securities and derivatives (e.g. inflation
swaps and futures) whose profitability is linked to inflation.
• Exchange rate risk is the possibility of loss because the currency of
a long or open position will depreciate against the base currency. It
can affect debt in subsidiaries whose local currency is not the euro,
as well as loans denominated in a foreign currency.
• Equity risk is the possibility of loss from open positions in securities
if their market price or expected future dividends fall. It affects
shares, stock market indices, convertible bonds and derivatives
with shares as the underlying asset (put, call, equity swaps, etc.).
• Credit spread risk is the possibility of loss from open positions in
fixed-income securities or credit derivatives if their yield curve, or
the recovery rate of their issuer or type change. A spread is the yield
difference between financial instruments against a benchmark
(e.g. the internal rate of return (IRR) of government bonds and
interbank interest rates).
• Commodity price risk is the possibility of loss from movements in
commodity prices. Our commodity exposure is minor and stems
mainly from commodity derivatives.
• Volatility risk is the possibility of loss caused by movements in
interest rates, exchange rates, the stock market, credit spreads and
other risk factors affecting portfolio value. It is inherent to all
financial instruments whose value considers volatility (especially
options contracts).
Derivative contracts (such as options, futures, forwards and swaps)
can mitigate market risks partially or fully.
Some market risks that require more complex hedging are:
• Correlation risk is the possibility of loss due to an adverse
correlation between risk variables that affect portfolio value. Risk
variables could be the same (e.g. two FX rates) or different (e.g. an
interest rate and a commodity price).
• Market liquidity risk is the possibility that fewer market makers or
institutional investors, a large number of transactions, market
instability and other factors will cause the Group or a subsidiary to
exit a position at a worse market price or trade cost. Exposure to
different products and currencies can also increase this risk.
• Pre-payment or cancellation risk originates when mortgages,
deposits and other on-balance-sheet instruments give holders the
option to buy or sell them, thus altering future cash flows.
Potential mismatches on the balance sheet pose a risk since cash
flows may have to be reinvested at an interest rate that is
potentially lower (assets) or higher (liabilities).
• Underwriting risk is the possibility that the bank will have to hold
part of a debt issue it has underwritten or agreed to place if it
cannot all be placed among potential buyers.
In addition, during 2021, there was an increased focus on climate
and environmental risk, which arise from the possibility that changes
in climate may adversely affect the value of a financial instrument, a
portfolio or the Group as a whole. Changes in climate include both
extreme weather scenarios as well as gradual climate change and
other situations where there is environmental degradation. This risk
may have an impact both on financial instruments value or portfolios
and on Santander's liquidity. The Group measures this risk through
stress scenarios for both market and liquidity risk.
Balance sheet liquidity risk (unlike market liquidity risk) is the
possibility of loss caused by forced disposal of assets or cash flow
imbalance if the bank meets its payment obligations late or at
excessive cost. It can cause losses by forced asset sales or impacts on
margins due to the mismatch between expected cash inflows and
outflows.
Pension and actuarial risks (explained at the end of this section) also
depend on market variables.
We aim to comply with the Basel Committee’s Fundamental Review
of the Trading Book (FRTB) and the EBA’s Guidelines on the
management of interest rate risk arising from non-trading book
activities. The purpose of several projects we run is to provide risk
control managers and teams with the best market risk management
tools under the right governance framework for the models we use
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for metric reporting; and to comply with regulation on the risks
mentioned above.
IBOR Reform
Since 2015, central banks and regulators have organized working
groups to propose alternative risk-free-rates to the Euro Overnight
Index Average (EONIA), the London Interbank Offered Rate (LIBOR).
For the purpose of risk control during the transition, we launched the
Santander's global IBOR Transition Programme in 2019, making sure
concerned business units and subsidiaries understand risks regarding
the transition and can take the right mitigating measures.
It takes recommendations, guidance and targets from regulators and
working groups into account. The areas it is structured on are
Technology and operations; the Legal department; Customer
relations; Risk and model management; Conduct and
communications; and Accounting and Finance.
In 2021, the programme focused on handling the transition to LIBOR
and EONIA rates in December 2021. In 2022, the program will
continue to address next steps in the transition related to the
contract history management and the LIBOR dollar termination
milestone in June 2023.
Santander also keeps taking part in public and private initiatives on
benchmark interest rate indices reform.
For more details on IBOR reform, see Notes
to the consolidated annual accounts nº 53
section 'c) Trading market risk
management'.
4.2 Market risk management
Limits management and control system
The Market Risk function's daily control keeps market risk positions
within approved limits, and evaluates performance and significant
fluctuations in metrics. This assessments inform regular reports for
senior management and both internal and external stakeholders to
ensure proper oversight of market risk management.
We set market risk limits in a dynamic process according to the risk
appetite in the annual limits plan prepared by senior management
and extended to all subsidiaries (See “Risk appetite and structure of
limits” under Section 2.4 ‘Management processes and tools’).
To ensure limits cover operations exposed to market risk from
various perspectives, we take a prudent approach involving these
metrics:
• Value at Risk (VaR) and Stressed VaR limits.
• Limits of equivalent and/or nominal positions.
• Interest rate sensitivity limits.
• Vega limits.
• Limits on the volume of effective losses to protect earnings from
the period.:
◦ Loss trigger.
◦ Stop loss.
• Credit limits:
◦ Total exposure limit.
◦ Jump-to-default limit by issuer .
◦ Others.
• Limits for origination transactions.
Those general limits include sub-limits that make the structure
granular enough to control market risks from Santander’s trading
operations. We monitor subsidiaries’ positions daily, checking
changes in portfolios and at trading desks in order to detect events
that may necessitate immediate mitigation.
The Group establishes global approval and control limits; global
approval limits with local control; and local approval and control
limits. They are requested by each subsidiary’s business manager in
consideration of business particulars, budgetary targets and the risk/
reward ratio. They are then approved by risk bodies according to
internal governance processes. Subsidiaries must adhere to approved
limits. On the day a limit breach occurs, subsidiary business
managers must provide a written explanation with an action plan and
corrective measures, such as reducing a position within the limits or
formulating a strategy that justifies raising limits.
Methodologies and key aspects
a) Value at Risk
Value at risk (VaR), our standard methodology for managing and
controlling market risk, measures maximum expected loss with a
certain confidence level over a given time. For standard historical
simulation, the confidence level is 99% and the time horizon is one
day. We also make statistical adjustments (i.e. a two-year horizon or
daily figures from the 520 days since the reference date for
calculating VaR) to account for recent events that influence our risk
levels in a quick and efficient manner.
We report the highest of two VaR figures, which we calculate every
day. To one of them, we apply an exponential decay factor, which
assigns a low weighting to the oldest observations; the other assigns
the same weighting to all observations. At the same time, we use the
same methodology for VaR to calculate “value at earnings” (VaE),
which gives maximum potential earnings with a certain confidence
level over a given time.
As a risk metric, historical VaR simulation has many advantages. It
states a portfolio’s market risk in a single figure according to market
movements, without assumptions about functions, forms or
correlations between market variables.
• Delivery risk limits for short positions in securities (fixed-income
and securities)
Still, it also has limitations. Some are inherent to the VaR metric, no
matter the methodology used to calculate it. In particular:
• Because VaR is calibrated at a certain confidence level, it does not
reveal potential losses beyond the VaR level.
• The liquidity horizon of certain products in a portfolio is longer than
the VaR model’s.
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• VaR is a static measurement of portfolios’ risk and subject every
day to significant (albeit unlikely) changes.
Santander reviews and contrasts the VaR calculation model on a
regular basis to verify its accuracy.
Historical simulation also has limitations, such as:
• high sensitivity to time frame used
• inability to show plausible high-impact events outside the time
frame used;
• no market inputs (e.g. correlations, dividends or recovery rates) for
measurement parameters; and
• slow adaptation to new volatility and correlations, as the weighting
of the newest and the oldest data is the same.
To circumvent some limitations, we use stressed VaR (sVaR) and
expected shortfall (ES); calculate VaR with exponential decay; make
conservative measurement adjustments; and run analyses and
backtesting to assess the accuracy of the VaR calculation model.
b) Stressed VaR (sVaR) and Expected Shortfall (ES)
Every day, we calculate sVaR for our main portfolios using the same
VaR calculation method but with these exceptions:
• A window of 260 observations (as opposed to 520 for VaR) over a
continuous stress period. For each portfolio, we review the history
of a subset of market risk factors (selected with expert criteria) and
the most significant positions per books.
• Unlike with VaR, the percentile we take to get sVaR has uniform
weighting and is not the highest one based on exponential and
uniform weightings.
To calculate ES, we estimate expected potential loss above the level
obtained from VaR and assign uniform weightings to all observations.
Unlike VaR, ES has the advantage of showing tail risk (i.e. the risk of
loss due to a rare event) while being a subadditive metric. According
to the Basel Committee, ES with 97.5% confidence interval is at a
similar risk level than VaR with 99% confidence interval.
c) Scenario analysis
Santander’s risk measures are based on normal market conditions,
price stability, sufficient liquidity and other assumptions used in daily
risk management and decision-making. However, it is possible that
extreme movements and strong unforeseen changes will not be
properly anticipated. Therefore, we run scenario analyses, which
prove important to predict the outcome of a wide range of risks and
estimate the capital needed to absorb any losses in case such
unexpected events occur.
The scenarios we use to predict future risks are important to
overcome the limitations of models and historic data; support
liquidity and capital plans; report on risk tolerance levels in place; and
help us execute risk reduction and contingency plans under stress. All
units engaged in trading regularly calculate and review historical,
hypothetical and reverse stress-test scenarios.
d) Gauging and backtesting measures
According to regulation, the VaR model must accurately show
material risks. Because VaR uses statistical techniques under normal
conditions for a certain confidence level over a set time horizon, the
estimate of maximum potential loss may differ from actual losses.
Our Market risk functions run internal backtesting, contrast VaR and
review hypothesis about portfolios for subsidiaries that apply the
internal market risk model. For subsidiaries with an approved internal
model, we run regulatory backtesting to find exceptions (where daily
profit or loss is higher than VaR or VaE) that will influence the
calculation of regulatory capital requirements for market risk.
Through backtesting, we assess the quality and general effectiveness
of our risk measurement model, comparing daily VaR or VaE from
D-1 with these P&L figures on D:
• Economic P&L: P&L at end-of-day mark-to-market or mark-to-
model value. Backtesting indicates if VaR/VaE methodology to
measure and aggregate risk is appropriate.
• Current P&L: The difference between a portfolio’s end-of-day value
and real value by the end of the next day, in light of intraday trading
but not fees or interest margin. Backtesting results enable us to
determine the number of regulatory exceptions.
• Hypothetical P&L: The difference between a portfolio’s end-of-day
value and real value by the end of the next day, based on the
assumption that positions will not vary. This backtesting does not
consider the time effect, intraday trading, nor changes in portfolio
positions in order to maintain consistency with VaR. We use it to
determine if portfolios can withstand an intraday risk not reflected
in closing positions (nor in VaR) over time. We also use it to count
the number of regulatory surpluses.
• Theoretical P&L: Calculated with the market risk calculation engine,
without intraday trading, changes in portfolio positions or time
(“Theta”). We use this backtesting to check the quality of the
internal VaR model.
Every day, we run backtesting for our subsidiaries. We also do
internal (non-regulatory) backtesting every day, week or month
depending on portfolio granularity.
The number (or proportion) of exceptions we record is one of the
most intuitive indicators of a model’s soundness. As our regulatory
backtesting covers a historical period of one year (250 days) and a
99% VaR, we expect two to three exceptions per year. To calculate
from the
regulatory capital for market risk, we take the regulatory K
number of exceptions we find in actual and hypothetical backtesting.
35
e) Analysis of positions, sensitivities and results
Santander uses positions to quantify the market value of derivative
transactions by main risk factor and with the Delta value of futures
and options. We can express risk positions in subsidiaries’ base
currency and in the currency used to standardize information. We
monitor positions every day to correct any incidents we uncover
immediately.
Sensitivity to market risk is the estimated impact of change in a risk
factor on the market value of an instrument or portfolio. To measure
it, we take analytical approximations from partial derivatives or a full
portfolio revaluation.
The Risk function’s daily P&L statement is an excellent indicator of
the impact of changes of financial variables on portfolios.
35
K: Parameter used for calculating the consumption of regulatory capital due to market risk.
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Market risk capital requirements
We use internal and standard models to determine market risk-
related capital requirements.
In 2019, the ECB authorized Santander to use internal market risk
models to calculate regulatory capital for the trading portfolios of our
subsidiaries in Spain, Chile and Mexico; and to extend our Spain
subsidiary’s internal model to our London branch. As we aim to get
the rest of our subsidiaries gradually approved, we have been
working closely with the ECB and reviewing the new requirements
recently published by the Basel Committee to strengthen financial
institutions’ capital.
Santander launched the Market risk advanced platform (MRAP), a
global initiative to strengthen market risk infrastructure according to
the new Fundamental Review of the Trading Book (FRTB); and to
adapt internal market risk models to the latest Targeted Review of
Internal Models (TRIM) and to supervisory demands. MRAP takes a
multi-disciplinary and multi-regional approach. It includes all
subsidiaries that generate market risk, as well as the Market risk
function, IT, Front office, the Finance function, the Regulatory affairs
function and other relevant stakeholders. In 2021, it continued to
improve our functional and IT architecture and our operational
models significantly, while generating synergies between initiatives
and resources.
According to Santander’s internal market risk model, we calculate
consolidated regulatory capital as the total regulatory capital of the
subsidiaries that the ECB has approved. This standard for
consolidating capital does not consider capital savings owing to
geographical diversification and is, therefore, conservative.
In light of the ECB’s approval, we use advanced methods with VaR,
sVaR and IRC as fundamental metrics to calculate market risk-related
regulatory capital consistently with the Basel requirements and, in
particular, with the EU Capital Requirements Regulation (CRR).
f) Derivatives activities and credit management
Because of their atypical characteristics, we have special measures to
monitor derivatives and credit management daily. We monitor the
sensitivity of underlying assets to price movements (Delta and
Gamma), to volatility (Vega
systematically check measurements of their sensitivity to spread,
jump-to-default risk and position concentrations by rating.
) and over time (Theta). We also
36
According to regulation and the Basel Committee’s
recommendations, we also calculate the incremental risk charge
(IRC), an additional metric for credit risk in the trading book. The IRC
covers default risk and rating migration risk (which VaR does not
show adequately) by taking credit spread changes into account. In
general, we apply it to government and corporate bonds; to
forwards, options and other bond derivatives; and to credit default
swaps, asset-backed securities and other credit derivatives. To
calculate it, we take direct measurements of loss distribution tails at
the right percentile (99.9%) over a one-year horizon and follow the
Montecarlo method with one million simulations.
g) Credit valuation adjustment and debit valuation adjustment
Santander makes credit and debit valuation adjustments to calculate
trading book value.
A credit valuation adjustment (CVA) is a change in the value of OTC
derivatives to take into account counterparty credit risk. For a given
counterparty, it adds up to the CVAs for all its maturity dates. We
calculate it based on exposure at default, loss given default,
probability of default, the discount curve and other inputs.
A debit valuation adjustment (DVA) is similar to a CVA but results
from the risk our counterparties assume with OTC derivatives traded
with Banco Santander.
4.3 Market risk key metrics
In 2021, risk levels from trading generally remained low amid less
volatility than in 2020, as well as economic recovery spurred by
vaccination progress. However, uncertainty persisted in light of the
possibility of new covid variants. Risks mainly originated from trading
non-complex instruments with customers. Most were to hedge
interest rate and FX risks. Like last year, our own trading portfolio
positions’ contribution to overall risk stayed lower than in previous
years.
2021 saw generally low consumption of trading limits, which
correspond to the Group's market risk appetite.
Our stressed scenarios also revealed low risk levels based on
observed losses in stress testing. We run the scenarios time and
again to measure any risk not covered by the usual metrics for
monitoring and controlling market risks.
36
Vega, a Greek term, is the sensitivity of the value of a portfolio to changes in the price of market volatility
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VaR analysis
As demonstrated by the VaR of SCIB’s trading portfolio, Santander's
market risk strategy focuses on trading with customers to minimize
net directional exposure and keep risk diversified by geography and
risk factor.
Despite constant market volatility (especially in regard to interest and
FX rates), VaR stayed mostly below the average of the last three
years, with the exception of a spike in the last quarter of the year . In
this period, there was an increase in market volatility due to the
uncertainty caused by the potential impact of the new covid variant
(Omicron). This could lead to a possible economic growth slowdown,
mainly due to new disruptions in supply chains together with
increases in energy prices, closing December VaR at EUR 12.3 million.
VaR 2019-2021
EUR million. VaR at 99% over a one day horizon
In 2021, VaR fluctuated between EUR 15.9 million and EUR 6.8
million. The average VaR in 2021 was EUR 10.5 million, lower than in
2020 and 2019 (EUR 12.5 million and EUR 12.1 million, respectively).
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Risk per factor
This table shows the latest and average VaR at a 99% confidence
level by risk factor in the last three years. It also shows the minimum
and maximum VaR values in 2021 and 97.5% ES at the end of
December 2021:
VaR STATISTICS AND EXPECTED SHORTFALL BY RISK FACTOR
EUR million. VaR at 99% and ES at 97.5% with one day time horizon
A
2021
VaR (99%)
ES
(97.5%)
2020
VaR
2019
VaR
Latest
Average
Latest
Average
Latest
11.9
(15.0)
12.5
(13.0)
8.3
(11.8)
Total Trading
Diversification effect
Interest rate
Equities
Exchange rate
Credit spread
Commodities
Total Europe
Diversification effect
Interest rate
Equities
Exchange rate
Credit spread
Commodities
Total North America
Diversification effect
Interest rate
Equities
Exchange rate
Total South America
Diversification effect
Interest rate
Equities
Exchange rate
Commodities
Min
6.8
(6.3)
Average
10.5
(12.9)
6.0
2.2
1.9
2.6
0.4
6.1
(5.2)
5.3
1.8
1.6
2.6
—
1.6
0.2
1.3
—
0.1
3.3
(1.2)
3.0
0.4
0.7
0.4
9.6
3.5
4.2
4.8
1.3
9.3
(9.3)
7.7
3.3
2.8
4.8
—
2.5
(0.7)
2.5
0.1
0.6
5.9
(4.9)
5.5
1.2
2.8
1.3
Max
15.9
(26.6)
15.3
7.7
8.0
8.0
3.5
16.1
(16.9)
11.7
8.3
5.0
8.0
—
7.4
(2.9)
7.0
1.5
1.8
10.5
(16.0)
12.2
3.2
7.6
3.5
Latest
12.3
(13.4)
9.1
5.1
5.7
5.1
0.7
9.4
5.1
5.6
6.0
0.8
9.2
4.4
5.9
5.5
0.5
9.9
(12.6)
9.7
(13.1)
10.5
(10.7)
7.1
5.8
4.5
5.1
—
2.7
(0.6)
2.7
—
0.6
6.3
(5.1)
5.8
1.1
3.8
0.7
6.7
5.2
4.9
6.0
—
2.8
(0.5)
2.7
—
0.6
6.4
(3.8)
6.3
1.0
2.1
0.8
7.9
4.3
3.5
5.5
—
6.6
(2.2)
3.4
0.3
5.1
5.6
(3.8)
5.2
1.0
2.7
0.5
12.1
(8.1)
10.0
2.9
3.9
3.4
—
6.3
(6.9)
6.0
1.9
1.9
3.4
—
3.5
(1.3)
2.6
0.2
2.0
9.5
(2.9)
7.8
2.0
2.6
—
10.3
(9.8)
9.2
4.8
2.6
3.5
—
10.1
(8.4)
8.2
4.9
1.9
3.5
—
3.8
(2.1)
3.4
0.1
2.4
6.0
(3.7)
5.9
1.7
2.1
—
5.4
3.1
6.0
4.5
1.1
8.0
(8.9)
6.5
3.0
2.9
4.5
—
2.9
(1.0)
3.3
0.1
0.5
4.5
(5.4)
4.1
0.5
4.2
1.1
A. In North America and South America, VaR levels of credit spreads, and in North America for VaR of commodities, are not shown separately due to their low or null materiality.
At the end of December, VaR was EUR 4.0 million higher than at the
end of 2020; however, average VaR fell by EUR 2.0 million. Average
VaR fell for most risk factors owing to low market volatility
throughout the year. By region, average VaR decreased in Europe and
especially in North America with lower exchange rate volatility.
By risk factor, VaR has followed a generally stable trend in recent
years. For many factors, temporary VaR increases generally owe
more to short-term price volatility than to significant changes in
positions.
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Backtesting
Actual losses can differ from predicted losses because of the
mentioned VaR’s limitations. Santander measures the accuracy of our
VaR calculation model to make sure it is reliable (see “Methodologies
and other key details” under section 4.2 ‘Market risk management’).
The most important tests we run involve backtesting:
• Backtesting of hypothetical P&L and of the entire trading book
showed no exceptions to 99% VaR and VaE in 2021.
• The results for the past year are consistent with the assumptions of
the VaR calculation model.
BACKTESTING OF TRADING PORTFOLIOS: DAILY RESULTS VS. VaR FOR PREVIOUS DAY
EUR million
CHANGE IN RISK OVER TIME (VaR) OF STRUCTURE DERIVATIVES
EUR million. VaR Vega at a 99% over a one day horizon
Derivatives risk management
Our operations with derivatives consist mainly in selling investment
products and hedging risks for customers. We aim to keep open net
risk as low as possible. Trading includes equity, fixed-income and FX
options, chiefly in Spain, Brazil, the UK and Mexico.
The graph below shows the Vega VaR of structural derivatives over
the last three years. It has fluctuated around an average of EUR 2.0
million. In general, high VaR values stem from significantly high
market volatility, such as at the start of the health crisis, amid
changes to monetary policy, or at times of political uncertainty in our
geographies.
Average VaR was based on interest rates, equities and FX rates. In
2021, average risk (EUR 2.6 million) was slightly higher than in 2019
and 2020 (see table below):
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FINANCIAL DERIVATIVES. RISK (VaR) BY RISK FACTOR
EUR million. VaR at a 99% over a one day horizon
c
Total VaR Vega
Diversification effect
VaR interest rate
VaR equities
VaR exchange rate
VaR commodities
2021
2020
2019
Minimum
Average Maximum
Latest
Average
Latest
Average
Latest
1.5
(0.6)
0.7
0.9
0.5
—
2.6
(0.9)
1.4
1.2
0.9
—
7.7
(2.3)
6.7
1.8
1.5
—
3.7
(0.1)
1.2
1.6
1.0
— —
1.9
(1.3)
1.0
1.3
0.9
—
2.3
(1.7)
1.8
1.4
0.8
—
1.5
(1.1)
1.1
0.8
0.6
—
2.6
(1.3)
2.7
0.8
0.4
—
Thanks to our risk culture and prudent risk management, exposure to
complex structured instruments and vehicles is minor. At the end of
December 2021, we had exposure to:
• hedge funds (as the counterparty in derivative contracts): EUR 109
million (indirect). We review this type of counterparty risk on a case
by case basis, setting collateralization ratios based on each fund's
characteristics and assets.
• monolines: no exposure at the end of December 2021.
Santander’s policy on approving new derivatives transactions has
always been extremely prudent and conservative. It is closely
monitored by senior management.
Scenario analysis
We regularly calculate and review stress test scenarios for all the
trading portfolios of the group and its subsidiaries, such as:
Historical scenarios
Historical scenarios consider trading portfolio performance during a
crisis or significant past market events to estimate maximum losses if
such events reoccur.
• “Subprime crisis”: Historical scenario based on 2007-2008 events
arising from the US subprime mortgage crisis. The financial crisis
caused high volatility and drastically low liquidity in markets across
the globe. For each market risk factor, we determine the worst
market shocks over one-day and ten-day horizons.
• “Covid crisis”: Historical scenario added to our stress testing
programme in 2020 and based on abrupt movements in financial
markets owing to the health crisis. After calculating a ten-day
horizon of peak trading losses in the first half of 2020, all risk
factors were affected. Stock indices plummeted, volatility
increased for all risk factors, emerging market currencies
depreciated, government bond yields hit record lows and credit
spreads widened significantly.
Hypothetical scenarios
We use extreme scenarios based on market risk shocks that do not
necessarily relate to past events. Unlike generally ex post historical
scenarios, hypothetical scenarios are ex ante.
• “Abrupt crisis”: A scenario of strong, sudden movements in all risk
factors, including higher yield curves, stock market crashes, a
stronger US dollar against other currencies, higher volatility, wider
credit spreads, declines in commodity prices, reduction in dividends
and default from main fixed-income and equity positions.
• “Worst case”: A hypothetical scenario that combines movements of
each risk factor with its volatility. We base these scenarios on
historical volatility with between ± 3 and ±6 standard deviations
per day (irrespective of any historical correlation between them) in
order to review trading books’ risk profile and potential maximum
losses under the worst possible scenario.
• EBA’s adverse scenario: A hypothetical scenario based on the EBA’s
proposed adverse macroeconomic scenario for all market risk
factors in biennial EU-wide stress testing.
• Forward-looking scenario: A plausible hypothetical scenario
defined and calculated on the basis of portfolio positions and
expert opinions about expected short-term market risk movements
that could have a negative effect on trading positions.
Reverse stress test scenarios
Reverse stress test scenarios identify market variable shifts that can
lead to a loss that will endanger our survival. They complement
traditional stress scenarios and help signal business vulnerabilities,
hidden risks and interactions between risk factors. They begin with a
known stress result (such as failure to achieve determined capital,
liquidity or solvency ratios) and identify extreme scenarios.
Other stress test scenarios
We also run different quarterly stress tests based on extreme market
movements to determine potential losses or major impacts on
capital:
• IRC scenarios: Designed to stress market risk capital consumption
by incremental risk charge (IRC), associated with default risk and
credit rating change risk of issuers of debt instruments present in
trading portfolios.
• Stress proxy scenario: Specially constructed to measure how
selecting the wrong proxies would affect VaR.
• Illiquidity and concentration scenarios: To show the impact of
scarce liquidity in markets under stress, price gaps and
concentration risk.
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The table below shows the worst scenario outcomes at the end of
December 2021:
STRESS SCENARIO: MAXIMUM VOLATILITY (WORST CASE)
EUR million. Dec. 2021 data
Total trading
Europe
North America
South America
Interest rate
Equities
Exchange rate
Credit spread
Commodities
(22.6)
(15.1)
(4.4)
(3.1)
(17.5)
(14.8)
—
(2.7)
(13.2)
(4.9)
(2.1)
(6.2)
(21.1)
(21.1)
—
—
—
—
—
—
Total
(74.4)
(55.9)
(6.5)
(12.0)
Our analysis concludes that Santander's trading portfolios would lose
EUR 74 million in market value in the worst-case scenario of market
stress. The loss would mainly affect Europe (in this order: credit
spread, interest rates, equities, and FX rates).
Connection with balance sheet items
Below are items on Santander’s consolidated balance sheet that
generate market risk. The table distinguishes positions whose main
risk metric is VaR from other positions that are monitored with other
risk metrics.
RISK METRIC VALUES ON THE CONSOLIDATED BALANCE SHEET
EUR Million. As of Dec. 2021
Assets subject to market risk
Cash, cash balances at central banks and other deposits on demand
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets measured at amortised cost
Hedging derivatives
Changes in the fair value of hedged items in portfolio hedges of interest risk
Other assets
Total assets
Liabilities subject to market risk
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortised cost
Hedging derivatives
Changes in the fair value hedged items in portfolio hedges of interest rate
risk
Other liabilities
Total liabilities
Total equity
Balance sheet
amount
210,689
116,953
5,536
15,957
108,038
1,037,898
4,761
410
95,593
1,595,835
79,469
32,733
1,349,169
5,463
248
31,700
1,498,782
97,053
Main market
risk metrics
VaR
116,953
4,042
5,489
2,453
79,469
390
Main risk factors for
Other 'Other' balance
210,689 Interest rate
1,494 Interest rate, spread
10,468 Interest rate, spread
105,585 Interest rate, spread
1,037,898 Interest rate, spread
4,761
Interest rate, exchange
rate
410 Interest rate
32,343 Interest rate, spread
1,349,169 Interest rate, spread
5,463
Interest rate, exchange
rate
248 Interest rate
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4.4 Structural balance sheet risk management
Limits management and control systems
The policies of senior management dictate mechanisms to monitor
and control structural risk according to regulatory requirements and
our risk appetite. The mechanisms consider sub-types of structural
risk and their implications, contingencies and interrelations.
The Structural risk function’s role in the second line of defence is to
ensure structural risks are understood, controlled and reported to
senior management according to established governance:
• It sets interest rate risk metrics and reviews and challenges
structural risk appetite and limits proposed by the first line of
defence.
• It oversees the first line of defence’s structural risk management
and checks compliance with set limits.
• It regularly reports on risk profile to senior management and issues
guidelines to business lines about measures it deems necessary.
• It evaluates and challenges commercial proposals and gives senior
management and business units information to understand the
interest rate risk of Santander’s businesses and operations.
• It confirms proper structural risk procedure, in addition to
formulating and overseeing models and policies.
Like market risk, structural risk also has an annual plan framework to
set structural balance sheet risk limits according to risk appetite.
• Balance-sheet structural interest-rate risk:
◦ Limit on net interest income (NII) sensitivity over a 1 year horizon.
◦ Limit on the sensitivity of economic value of equity (EVE).
◦ Limit on the market value of ALCO portfolios under stress
scenarios and that given their accounting classification (fair value
with changes in equity) could have an impact on shareholders'
equity.
• Structural exchange rate risk:
◦ Limit on the net permanent position of the core capital ratio.
◦ Limit on individual hedge required for each currency.
Business lines’ risk managers must prove explanations for potential
limit and sub-limit breaches as well as an action plan to correct
them.
Methodologies and other key details
a) Structural interest-rate risk
As part of structural risk, interest rate risk in the banking book (IRRBB)
is the main source of balance sheet risk.
Santander measures the potential impact of interest rate movements
on EVE and NII. Because changing rates may generate impacts, we
must manage and control many subtypes of interest rate risk, such as
repricing risk, curve risk, basis risk and option risk (e.g. behavioural or
automatic). Interest rate risk in the balance sheet and market
conditions and outlooks could necessitate certain financial measures
to achieve Santander's desired risk profile (such as selling positions
or setting interest rates on products we market). The metrics we use
to monitor IRRBB include NII and EVE sensitivity to interest rate
movements.
• Net interest income sensitivity
Net interest income (NII) is the difference between interest income
from assets and the interest cost of liabilities in the banking book
over a typical one- to three-year horizon (one year being standard in
Santander). Because NII sensitivity is the difference in income
between a selected scenario and the base scenario, its values can be
as many as considered scenarios. It enables us to see short-term risks
and supplement economic value of equity (EVE) sensitivity.
• Economic value of equity sensitivity
Economic value of equity (EVE) is the difference between the net
current value of all assets minus the net current value of all liabilities
in the banking book. It does not include shareholders’ equity and non-
interest-bearing instruments. Because EVE sensitivity is the
difference in EVE between a selected scenario and the base scenario,
it can have as many values as considered scenarios. It enables us to
see long-term risks and supplement NII sensitivity.
b) Interest rate models
Interest rate risk metrics consider the behaviour of financial products
under stress scenarios in which uncertainty is common and the
failure to meet contractual terms is possible. We have
methodologies that help explain how such products will behave.
These are our key interest rate risk models:
• Treatment of liabilities without stated maturity
Santander's model uses such variables as stable and unstable
volumes, the rate of settlement over time and the difference
between customer rates and market rates to model non-maturity
account balances.
• Prepayment treatment for certain assets
Prepayment risk mainly affects fixed-rate mortgages at
subsidiaries where their contractual rates are low compared to
market levels and there is an incentive for customers to amortize in
advance (in whole or in part). In variable rate products, the
prepayment is due to other factors such as economic cycle, tax
factors, cultural factors, etc. The impact in terms of IRRBB risk is
more limited by having a variable repricing. In the Group, this risk is
modelled and included in the risk appetite metrics.
c) Structural foreign exchange rate risk/hedging of results
Every day, we measure FX positions, VaR and P&L.
d) Structural equity risk
We measure equity positions, VaR and P&L.
4.5 Structural balance sheet risk key metrics
Consistent with previous years, the market risk profile of Santander’s
balance sheet remained moderate in 2021 in terms of asset,
shareholders’ equity and NII volumes. Each subsidiary’s Finance
division manages interest rate risk from commercial banking and is
responsible for handling structural risk from interest rate
fluctuations.
To measure interest rate risk, Santander uses statistical models
based on strategies to mitigate structural risk with interest-rate
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instruments (such as bonds and derivatives) to keep risk profile
within risk appetite.
The NII and EVE sensitivities below are based on scenarios of parallel
interest rate movements from -100 to +100 basis points.
Structural interest rate risk
Europe
In general, the NII and EVE of our main balance sheets (i.e. Santander
España and Santander UK) show positive sensitivity to rising interest
rates. Across our footprint, exposure was moderate in relation to
annual budget and capital levels in 2021.
At the end of December 2021, under the scenarios previously
described, the most significant NII sensitivity risk concentration in
euros amounted to EUR 703 million; in pounds sterling, EUR 541
million; in Polish złoty, EUR 65 million; and in US dollars, EUR 54
million, all relating to interest rate cut risks.
NET INTEREST INCOME (NII) SENSITIVITY
% of total
North America
In general, the NII and EVE of our North American balance sheets
tend to show positive sensitivity to rising interest rates. Exposure was
moderate in relation to annual budget and capital levels in 2021. At
the end of December, the most significant risk to NII was mainly in
the US and amounted to EUR 152 million.
NET INTEREST INCOME (NII) SENSITIVITY
% of total
The most significant risk to EVE was in the US and amounted to EUR
590 million.
ECONOMIC VALUE OF EQUITY (EVE) SENSITIVITY
% of total
* Other: Portugal and SCF.
The most significant EVE risk concentration amounted to EUR 3,684
million in the yield curve of the euro ; of the pound sterling, EUR
1,056 million; of the US dollar, EUR 221 million; and of the Polish
złoty, EUR 56 million, all relating to interest rate cut risks.
ECONOMIC VALUE OF EQUITY (EVE) SENSITIVITY
% of total
South America
The EVE and NII of our main South American balance sheets are
positioned for interest rate cuts.
In 2021, exposure was moderate in relation to annual budget and
capital levels. At the end of December, the most significant risks to
NII were mainly in Chile (EUR 86 million) and Brazil (EUR 83 million).
NET INTEREST INCOME (NII) SENSITIVITY
% of total
* Other: Poland, Portugal and SCF.
* Other: Argentina, Peru and Uruguay.
The most significant risks to EVE were recorded in Brazil (EUR 271
million) and Chile (EUR 258 million).
ECONOMIC VALUE OF EQUITY SENSITIVITY
% of total
* Other: Argentina, Peru and Uruguay.
Structural foreign exchange rate risk/results hedging
Our structural FX risk stems mainly from the income and hedging of
foreign currency transactions for permanent financial investments. In
our dynamic management of this risk, we aim to limit the impact of
FX rate movements on the core capital ratio. In 2021, we hedged
nearly all currencies that have an impact on our core capital ratio.
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43.6%39.9%4.8%11.7%ParentUKPolandOthers70.9%20.5%8.6%ParentUKOthers*87%13%USMexico90%10%USMexico46%48%6%BrazilChileOthers*45%47%8%BrazilChileOthers*
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Structural VaR
With such a homogeneous metric as VaR, we can fully monitor
market risk in the banking book (not including SCIB’s trading
operations, as explained in Section 4.3 ‘Market risk key metrics’).We
differentiate fixed income based on interest rates and credit spreads
in ALCO portfolios, FX rates and shares.
In general, the structural VaR of our total assets and equity is minor.
In December 2021, our permanent exposures (with potential impact
on shareholders’ equity) were, from largest to smallest, in US dollars,
British pounds sterling, Brazilian reais, Mexican pesos, Chilean pesos
and Polish złoty.
We use FX derivatives to hedge part of those permanent positions.
The Finance division manages FX risk and hedging for the expected
profits and dividends of subsidiaries whose base currency is not the
euro.
Structural equity risk
Santander holds equity positions in its banking and trading books.
They are either equity instruments or stock, depending on the share
of ownership or control. By the end of December 2021, the equities
and shareholdings in the banking book were diversified among Spain,
China, Morocco, Poland and other countries. Most of them invest in
the financial and insurance sectors. We have minor equity exposure
to property and other sectors.
Structural equity positions are exposed to market risk. We calculate
their VaR with a set of market prices or proxies. At the end of
December 2021, VaR at a 99% confidence level over a one-day
horizon was EUR 309 million (EUR 319 million in 2020 and EUR 170
million in 2019).
STRUCTURAL VaR
EUR million. VaR at a 99% over a one day horizon
Structural VaR
Diversification effect
A
VaR Interest Rate
VaR Exchange Rate
VaR Equities
A. Includes credit spread VaR on ALCO portfolios.
2021
2020
2019
Minimum
Average Maximum
Latest
Average
895.8
993.7
1,090.7
1,011.9
911.0
Latest
903.1
Average
511.4
Latest
729.1
(158.8)
(327.3)
(431.4)
(240.2)
(349.8)
(263.4)
(304.2)
(402.0)
224.2
521.3
309.1
400.7
600.6
319.7
540.5
655.2
326.4
287.8
655.2
309.1
465.1
499.9
295.9
345.5
502.6
318.5
345.6
308.1
161.9
629.7
331.7
169.8
4.6 Liquidity risk management
The Liquidity risk function’s role in the second line of defence is to
ensure liquidity risks are understood, controlled and reported to
senior management and across the Group according to established
governance:
• It determines liquidity risk and provides detailed measurements of
current and emerging risks.
• It sets liquidity risk metrics, and reviews and challenges liquidity
risk appetite and limits proposed by the first line of defence.
• It oversees the first line of defence’s liquidity risk management;
measures how long business will remain within risk appetite limits;
and checks compliance with liquidity risk limits.
• It reports to governing bodies on risk, risk appetite and exceptions.
• It evaluates and challenges commercial and business proposals,
and gives senior management and business units the information
they need to understand Santander’s liquidity risk.
• It provides a comprehensive overview of our liquidity risk exposure
and profile.
• It makes sure the liquidity risk procedures in place are appropriate
to manage business within risk appetite limits.
Methodologies and key other key details
Grupo Santander measures liquidity risk with tools and metrics that
account for the appropriate risk factors.
a) Liquidity buffer
The liquidity buffer is the total liquid assets a bank has to cope with
cash outflows during periods of stress. The assets are free of
encumbrances and can be used immediately to generate liquidity
without losses or excessive discounts. The liquidity buffer is a tool for
calculating most liquidity metrics. It is also a metric with defined
limits for each subsidiary.
b) Liquidity coverage ratio (LCR)
The liquidity coverage ratio (LCR) is a regulatory metric. Its purpose is
to promote the short-term resilience of a bank’s liquidity profile and
make sure it has enough high-quality liquid assets to withstand a
considerable idiosyncratic or market stress scenario over 30 calendar
days, in addition to a currency distribution according to its needs.
c) Wholesale gap metric
The wholesale liquidity metric measures the number of days the
Group would survive if it used liquid assets to cover lost liquidity from
a wholesale deposit run-off (without possible renewal) over a set
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time horizon. We also use it as an internal short-term liquidity metric
to reduce risk from dependence on wholesale funding
d) Net stable funding ratio
The net stable funding ratio (NSFR) is a regulatory metric we use to
measure long-term liquidity risk. It is the ratio of available stable
funding to required stable funding. It requires banks to keep a robust
balance sheet, with off-balance-sheet assets and operations financed
by stable liabilities.
e) Asset encumbrance metrics
We calculate two metrics to measure asset encumbrance risk. On the
one hand, the asset encumbrance ratio gives the proportion of
encumbered assets to total assets; on the other, the structural asset
encumbrance ratio gives the proportion of encumbered assets by
structural funding transaction (namely long-term collateralized
issues and credit transactions with central banks).
f) Other liquidity indicators
In addition to traditional tools to measure short and long-term
liquidity and funding risk, Santander has a set of additional liquidity
indicators to complement those and to measure other non-covered
liquidity risk factors. These include concentration metrics, such as the
main and the five largest funding counterparties, or the distribution
of funding by maturity. Additionally, we calculate a number of
metrics on the institution’s ability to generate liquidity through
collateralized financing, such as overcollateralization, eligibility ratios
assets without charges and deadlines for their placement.
g) Liquidity scenario analysis
Our four standard liquidity stress test scenarios are:
i. an idiosyncratic scenario of events detrimental only to Santander;
ii. a local market scenario of events highly detrimental to a base
country’s financial system or real economy;
iii. a global market scenario of events highly detrimental to the
global financial system; and
iv. a combined scenario of the most severe idiosyncratic and local
and global market events, occurring simultaneously in an
interconnected manner.
We use these stress test outcomes as tools to determine risk
appetite and support business decision-making.
h) Liquidity early warning indicators (EWI)
The system of early warning indicators (EWI) consists of quantitative
and qualitative liquidity indicators that help predict stress situations
and weaknesses in the funding and liquidity structure of Santander
entities. External indicators relate to market-based financial
variables; internal indicators relate to our own performance.
i) Intraday liquidity metrics
Santander follows Basel regulation and calculates several metrics
and stress scenarios for intraday liquidity risk to maintain a high level
of control.
In general, our LCR remained stable and well above the regulatory
threshold. In 2021, our minimum required LCR was 100% and our
risk appetite limit was 110%. We calculate and monitor this metric
every day.
We manage liquidity buffers effectively to maintain a sound risk
profile within regulatory limits and a profitable balance sheet. They
mostly consist of level 1 assets: cash and sovereign debt, adequately
diversified by currency according to the Group’s balance sheet needs.
Our subsidiaries have a sound balance sheet and stable funding
structure, supported by a large base of customer deposits, low
dependence on short-term funding and liquidity metrics well above
local and corporate regulatory requirements and within risk appetite
limits.
The regulatory NSFR of our core subsidiaries and the Group remained
above the regulatory requirement and internal risk appetite. In June
2021, we adapted our metric calculation to the new implementing
technical standards (ITS) in the EBA’s Reporting framework 3.0.
Our main sources of structural asset encumbrance are collateralized
issues (e.g. securitizations and covered bonds) and credit transactions
with central banks with collateral. The higher asset encumbrance
from 2020 carried over into 2021 on the back of more appeals to
central banks by using the management drivers provided for the
covid scenario. Santander’s asset encumbrance is consistent with the
other European banks’.
As demonstrated by stress scenarios run under uniform corporate
standards, the balance sheets of Santander’s units are robust. Under
the worst scenario, every unit would survive and handle liquidity
needs with nothing more than its liquidity buffer for at least 45 days.
Santander has worked to introduce intraday liquidity risk
management into its main metrics by setting daily limits and warning
indicators to help anticipate contingencies.
For more details on liquidity metrics, see
section 3.4 ‘Liquidity and funding
management’ of the chapter on Economic
and financial review.
4.8 Pension and actuarial risk management
Pension risk
Santander covers financial, market, credit and liquidity risks from the
assets and investments of employees’ defined benefit pension funds,
as well as actuarial risks from pension obligations. We aim to
recognize, measure, control, mitigate and report on pension risk and
all its sources. We estimate combined losses each year on assets and
liabilities under a stress scenario that accounts for shifting interest
rates, exchange rates, inflation, stock markets, property values and
credit spreads.
In 2021, the markets’ effect on our pension risk was positive mainly
because of higher discount rates in our main geographies. Also,
Santander took measures in core units to reduce exposure to
actuarial and pension risk.
4.7 Liquidity risk key metrics
Santander's sound liquidity and funding situation stands on a
decentralized liquidity model. Each subsidiary manages its own
liquidity independently, keeping a large stock of highly liquid assets.
Actuarial risk
Actuarial risk stems from biometric changes in defined benefit
recipients and life insurance policyholders’ life expectancy; from
suddenly higher non-life insurance payments; and from
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policyholders’ unexpected behaviour to file claims covered by
insurance policies.
These are the actuarial risks we distinguish:
• Life liability risk: risk of loss on liabilities due to changing risk
factors that affect pension obligations. We split it into:
◦ mortality/longevity risk: risk of loss on liabilities due to death or
survival rates that exceed expectations.
◦ morbidity risk: risk of loss on liabilities due to changes in
estimated policyholder disability or incapacitation rates.
◦ surrender/lapse risk: risk of loss on liabilities due to early policy
surrender or changes in policyholders’ exercise of withdrawal
rights, extraordinary premium payments or suspension of
premium payments.
◦ expense risk: risk of loss on liabilities from negative shifts in
expected costs.
◦ catastrophe risk: losses caused by catastrophic events that
increase the bank’s life insurance obligations.
• Non-life liability risk: risk of loss on liabilities from risk variations
that increase Santander's non-life payment obligations towards
employees. We split it into:
◦ premium risk: loss from insufficient premiums to cover future
claims.
◦ reserve risk: loss from insufficient reserves for unpaid claims
(including management costs).
◦ catastrophe risk: losses caused by catastrophic events that
increase the bank’s non-life insurance obligations.
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5. Capital risk
5.1 Introduction
Our structural risk includes the risk of insufficient quality or quantity
of capital to meet internal business objectives, regulatory
requirements and market expectations.
Our Capital Risk function, which is part of our second line of defence,
controls and oversees first-line capital management. It checks that
our capital adequacy and coverage match our risk profile. It also
approves and monitors transactions that could be significant risk
transfers (SRT).
It brings together capital planning, budget execution and tracking,
and the ongoing measurement, reporting and disclosure of capital
data (described below).
The Capital Risk function controls and oversees the capital activities
carried out by the first line of defence. These activities split into four
workflows to ensure monitoring is adequate to Santander’s risk
profile:
• Capital planning: internal process to determine capital levels and
returns according to our strategy. Because we must ensure
solvency and efficiency of capital, we identify the necessary
measures to achieve our capital ratios and return on capital targets.
• Capital adequacy: assessment of capital levels against the type
and amount of risk assumed based on the risk profile assessment
(RPA), our strategy and risk appetite. For more details, see section
2.4 'Management processes and tools' - Risk profile assessment
and Risk appetite and structure of limits.
• Capital risk measurement: process to cover required actions to
measure capital metrics, based on a set methodology for obtain
final figures required. It also supports the stages of capital
management, monitoring, oversight and control.
• Origination: assessment of our portfolios' capital efficiency for
identifying securitization, risk mitigation techniques, asset sales
and other capital optimization initiatives.
In 2021, the function continued to work on implementing capital risk
operating model improvements across the Group. A key objective
was to reduce the capital risk profile through more robust control
and oversight environment, which we achieved by:
• revising and updating corporate and local capital risk procedures;
• improved traceability on capital planning;
• standardization of capital reporting under our common guidelines
while adapting to local market and regulations; and
• following up regularly on local progress made on the TOM rollout.
Key initiatives 2021
The year 2021 saw economic recovery on the back of progress in the
vaccination process and the gradual lifting of restrictions. Capital risk
management focused on protecting solvency and making sure
internal objectives were met. We identified and assessed the risks
that could affect solvency and continuously monitored key metrics.
We closely track the evolution of our organic capital generation and
securitizations plan and the impact of regulators’ market risk and
credit risk model reviews, such as the targeted review of internal
models (TRIM) on low default portfolios; the new definition of
default (NDD); and the amendments to counterparty credit risk (SA-
CCR) and NPL provision regulations. We also checked the impact of
market variables on capital levels. We continued to implement
hedging policies to mitigate exchange rate volatility on our CET1
ratio.
The Capital Risk function periodically establishes uncertainty levels
on budget execution, evaluating forecast possible deviations.
At year-end, our fully-loaded CET1 was 12.12%, above our 11-12%
target. When including the minority interest acquisition of SC USA,
which closed on 31 January 2022, and the announced acquisition of
Amherst Pierpont Securities (APS) by Santander Holding USA - still
subject to complete regulatory approval - , the fully-loaded CET1
ratio would be 11.96%, at the top of our 11-12% target.
The increase in fully-loaded CET1 ratio for the year is 23 bps, which
reflects the strong organic generation of 118 bps based mainly on
the year's profit and the growth in risk-weighted assets (RWA). This is
supported by an adequate management, as well as by the recovery
of the securitization activity.
In addition, we registered -49 bps from regulatory and model
impacts and -46 bps from other items on the back of market
developments.
Under IFRS 9 transitional arrangements, the phased-in CET1 ratio
was 12.51% and the total phased-in capital ratio was 16.81%,
comfortably meeting the ECB's 8.85% and 13.01% minimum levels,
respectively. The fully-loaded leverage ratio was 5.21% and the
phased-in ratio was 5.37%.
We kept all ratios above solvency appetite limits throughout the
whole year.
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For more details, see the section 3.5
‘Capital management and adequacy.
Solvency ratios' in the Economic and
financial review.
5.2 Capital risk management
In the second line of defence, capital risk management can
independently challenge business and first-line activities by:
• reviewing key items affecting capital ratios to supervise capital
planning and adequacy exercises.
• identifying key metrics to calculate regulatory capital; setting
tolerance levels; and analysing significant variations and single
transactions that impact on capital; and
Conclusions and disclosure
Based on the outcomes of the capital planning and adequacy phases,
Grupo Santander conducts a final assessment that covers the scope
of analysis, detected weaknesses and areas for improvement. We
report to senior management according to governance procedures,
ensuring effective and constructive challenge of proposed capital
plans from the second line of defence.
Ongoing oversight of capital measurement
Continuous monitoring of our regulatory capital measurement is an
additional capital risk control function to ensure the right capital risk
profile. We conduct a qualitative analysis of the regulatory and
supervisory framework and a review of capital metrics and specific
thresholds. We also monitor compliance with capital risk appetite to
maintain capital levels above regulatory requirements and market
expectations.
• reviewing and challenging proposed capital actions according to
capital planning and risk appetite.
This function follows these phases and procedures:
Supervision of capital planning and adequacy exercises
The Capital Risk function reviews capital planning and adequacy
exercises to make sure capital is consistent with risk appetite and the
risk profile. Its core objectives are:
• ensuring the monitoring of Grupo Santander's significant risks in
the course of its operations;
• checking that planning methodologies and assumptions are
appropriate,
• confirming that results are reasonable and consistent with
business strategy, the macroeconomic environment and system
variables;
• assessing the consistency of exercises, especially ones that use
baseline and stressed scenarios.
Capital planning and adequacy supervision follows these phases:
Definition of scope
Supervising capital planning and adequacy begins with proposed
materiality based on the level of importance of subsidiaries' risk-
weighted assets to the Group. It may include other units, businesses
and portfolios (even if they are not significantly material) whose
impact on strategy, compliance with the global plan or timely
relevance might require analysis.
Qualitative analysis
We run a qualitative review of forecasting to ensure proper
governance.
Quantitative analysis
We quantitatively assess metrics and components affecting RWA,
available capital forecasts and pre-provisions net revenues (PPNRs).
This phase requires proper coordination with subsidiaries to analyse
local projections, which underpin group-wide projections and ensure
traceability.
Definition of metrics and thresholds
The function sets metrics and thresholds used in supervision every
year to monitor and control capital risk. They consist of:
• Primary metrics, which cover capital ratios and numerator and
denominator components at the highest level.
• Secondary metrics, which include a more extensive breakdown (for
instance, credit RWA or the basis for measuring market RWA).
• Supplementary metrics for more detailed analyses.
Thresholds for certain metrics trigger a more detailed analysis and
explanation.
The internal ‘Capital measurement control metrics guidelines’ outline
these metrics, thresholds and sources of information.
Preliminary analysis
At this stage of the control process, we analyse qualitative issues,
such as process governance and the regulatory framework. We
review our capital management measures to fulfil supervisory
authorities' recommendations and instructions.
Assessment and measurement
The Capital Risk function uses received information to review primary
and secondary metrics, detect variations that might exceed defined
thresholds and run a detailed analysis of the causes based on the
supplementary metrics. If a subsidiary or global area is the cause of a
threshold breach, it must provide the Capital Risk function with
additional information on volume variations, one-off events, capital
actions and other items.
We also monitor capital appetite metrics every month to check for
excesses in the Group and our subsidiaries, which we report to the
corresponding governing bodies every quarter.
Conclusions and disclosure
The body responsible for capital risk control analyses the report and
conclusions. If needed, it will submit them to the second-line (capital
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committee) or first-line (risk control committee) committees for
deliberation.
Securitizations oversight
The Capital Risk function oversees securitizations that might be
significant risk transfers (SRT) originated by Santander, in accordance
with articles 243 and 245 of Regulations (EU) 2017/2401 and
2017/2402.
Oversight is an essential prerequisite for synthetic and traditional
securitization, especially if they can reduce RWA under regulatory
standards. It aims to make sure that the Capital risk function analyses
the conditions that could alter a securitization's SRT classification,
namely:
• if it can effectively transfer risk;
• if it complies with all prudential regulation requirements;
• if its risk parameters follow our methodology; and
• if its economic rationale that meets group-wide standards.
SRT supervision is split into these stages:
• ECB pre-notification: The Capital Risk function issues an
assessment before notifying the ECB of an intended securitization
that may be an SRT.
• Validation: Capital and risk committees review the securitization
based on the capital risk function's assessment to validate it.
• ECB notification: Submission of final securitization documents to
the ECB take place no later than 15 days after the securitization's
closing date.
• Monitoring: The Capital Risk function regularly monitors executed
securitizations and reports its findings to the corresponding
bodies.
5.3 Key metrics
Grupo Santander’s strong capital position is consistent with our
business model, balance sheet structure, risk profile and regulatory
requirements. Our strong balance sheet and profitability enables us
to finance growth and continue to accumulate capital.
Our model of subsidiaries with autonomy over liquidity and capital
allows us to mitigate the risk that one subsidiary experiencing
difficulties could affect others. Our capital metrics are stable, as
ratios remain comfortably above the regulatory requirements and
are consistent with senior management-approved risk appetite.
For more details, see the section 3.5 ‘Capital
management and adequacy. Solvency ratios'
in the Economic and financial review.
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6. Operational risk
6.1 Introduction
In accordance with the Basel framework, Santander defines
“operational risk” as the risk of loss due to inadequate or failed
internal processes, people and systems or to external events. It
covers fraud, technological risk, cyber risk, legal
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and conduct risk.
Operational risk is inherent in all products, activities, processes and
systems. It is generated in all business and support areas. All
employees are responsible for managing and controlling the
operational risks generated by their activities.
Our operational risk (OR) management and control model is based on
a continual process of identifying, evaluating and mitigating sources
of risk (regardless of whether they have materialized), ensuring that
risk management priorities are established appropriately.
6.2 Operational risk management
Grupo Santander’s operational risk management is based on the
following elements:
Management and control model
Santander’s operational risk model establishes the elements needed
to manage and control operational risk properly according to
advanced regulatory standards and best management practice. Its
phases are:
• strategy and planning;
• identification, measurement and monitoring of risks and internal
controls;
• implementation and monitoring of mitigation measures; and
• disclosure, proper reporting and escalation of relevant matters.
Operational risk management in Grupo Santander is underpinned by
the following items:
• Internal events database: registry of operational risk events
whose impact could be financial (e.g. losses, regardless of their
amount) or non-financial (i.e. relating to regulation, customers or
services). This information:
◦ enables the analysis of root causes;
◦ increases the awareness of risks for better operational risk
management;
◦ enables the escalation of relevant operational risk events to
senior risk executives in the shortest time possible;
◦ facilitates regulatory reporting; and
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Legal processes with an operational risk root cause.
◦ facilitates the economic capital model within the internal capital
adequacy assessment process (ICAAP).
• Operational risk and control self-assessment (RCSA): a qualitative
process that evaluates each area´s operational risks and assesses
the control environment based on the opinion of experts from each
function. Its purpose is to identify, assess and measure material
operational risks that could prevent the business or support units
from achieving their objectives. After assessing risks and internal
controls, mitigating measures for risk levels above tolerance are
identified.
Our RCSA integrates specific reviews that allow to identify cyber,
technology, fraud, third party supplier and other risk drivers that
could lead to operational risk as well as the failure to meet
regulations. In addition, the RCSA incorporates reviews related to
conduct and financial crime risk (for more details, see section 7.2
'Compliance and conduct risk management').
• External event database: quantitative and qualitative information
about external operational risk events. The database facilitates
detailed and structured analysis of relevant events in the industry;
the comparison of the Group and subsidiaries’ loss profile; as well
as the preparation for RCSA exercises, insurance and scenario
analysis.
• Operational risk scenario analyses: identifies highly unlikely
events that could result in significant losses for Santander, and
establishes appropriate mitigating measures based on the
assessment and opinion of experts from business lines and risk
managers.
• Key risk indicators: indicators that provide quantitative
information about Santander’s risk exposure and control
environment. The most significant indicators related to main risk
exposure are part of operational risk appetite.
• Risk appetite, which has the following structure:
◦ a global non-financial risk appetite statement, which asserts
Santander’s commitment to controlling and limiting: non-
financial risk events that can or will result in financial losses;
fraud events; operational and technological incidents; legal and
regulatory infractions; issues associated with conduct; or
reputational damage. While some losses are expected, high
severity unexpected losses resulting from failed controls are not
acceptable. This statement is associated with our loss and
control environment metrics.
◦ statements regarding technological risk, cyber risk, cloud, fraud,
money laundering, product sales, regulatory compliance, model
risk and supplier risk management, each with their own forward-
looking monitoring metrics.
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• Recommendations from internal audit, external audit and
regulators: provide independent information about inherent and
residual risk, identifying controls and processes improvements.
• Economic capital model: a loss distribution approach (LDA) model
that captures Grupo Santander’s operational risk profile, with
information collected from the internal loss database, external
data and scenarios. It is mainly used to determine operational risk
economic capital and estimate expected and stressed losses for
operational risk appetite.
• Other specific instruments are used to analyse and manage
operational risk; assess new products and services; manage
business continuity plans (BCP); review and revise perimeters; and
run quality assurance reviews.
Our management and reporting system for operational risk,
Heracles, supports the operational risk programme and tools with a
Governance, Risk and Compliance (GRC) approach. It provides
information for management and reporting at subsidiaries and
throughout the group. Heracles facilitates better operational risk
management decisions by consolidating information, preventing
duplication and simplifying reporting. To achieve this, we ensure that
employees can have a timely, full and precise view of their risks by
using a common set of taxonomies and methodological standards.
Implementing the model and initiatives
In 2021, we enhanced our operational risk model by:
• enhancing the risk appetite framework: establishing new metrics
(inclusion of new internal control metrics and of a qualitative
statement regarding cloud risk in risk appetite for 2022); and
improving defined thresholds and measurements;
• developing models used to conduct an independent assessment of
our risk profile and control environment to assist subsidiaries in
their oversight and help to challenge the accuracy of local
assessments;
• improving and progressing with our holistic risk assessment
programme, in which each specialist second line monitors and
contrasts the principal risks that are integrated within non-financial
risks;
• improvements in the process to determine, identify and assess
reference risks and standard controls with the objective of
strengthening and ensuring consistency of our risk and control
environment;
• establishing initiatives to assess climate risk as related to
operational risk within our management model;
• improving the assessment methodology of the global cyber
security transformation plan to identify and measure the reduction
in risk due to the implementation of new information security
developments;
• improvements to contingency, business continuity and crisis
management plans, in coordination with the recovery and
resolution plans, while also hedging emerging risks; and
• developing the methodology to analyse and assess transformation
risk, with an approved operating model.
Operational resilience and business continuity plan (BCP)
Digital transformation is revolutionizing how banks operate,
presenting new business opportunities. At the same time this
structural change is also giving rise to new emerging risks such as
technology risk, cyber risk and an increased dependency on third
party suppliers, which increase the potential exposure to events that
could affect the provision of services to our clients.
We are also witnessing changes in regulation that are increasingly
focused on the importance of Operational Resilience, such as in the
recently published Basel Principles for Operational Resilience; in the
policy statement and final rules, Building the UK Financial Sector’s
Operational Resilience, by Bank of England (BoE), the Financial
Conduct Authority (FCA) and the Prudential Regulation Authority
(PRA); and in the EU's Digital Operational Resilience Act (DORA). In
particular, these regulations require banks to strengthen their ability
to recover from disruptive events that could have an impact on their
core business operations.
Grupo Santander is firmly committed to maintaining a robust control
environment according to the best standards in the banking industry.
This allows us to reinforce our operational resilience against
potential disruptive events thus ensuring the provision of services to
our customers as well as ensuring systemic stability.
A major pillar of our operational resilience is our business continuity
management system (BCMS), which ensures the continuity of our
business processes in all our subsidiaries in the event of a severe
incident or disaster. It is a holistic management process that
identifies potential threats and their impact to our operations and
resources as well as defines the proper protocols and governance in
order to provide an effective response. Its main objectives are:
• safeguarding people's safety in a contingency situation;
• guaranteeing that core functions are performed, and service is
delivered to our customers;
• fulfilling our obligations towards employees, customers,
shareholders, and other stakeholders;
• to comply with regulatory requirements;
• to minimize potential losses to Grupo Santander as well as the
impact on business activities;
• to safeguard the bank’s reputation and credibility, as well as our
client’s confidence in the bank;
• to reduce the effects of an incident by ensuring efficient
procedures, priorities, and strategy for the recovery and restoration
of business operations in a contingency situation; and
• contribute to a stable financial system.
The pandemic challenged the business continuity plan frameworks
and strategies of our subsidiaries. While we did have to adapt some
protocols, the crisis has demonstrated that Santander has a robust
BCMS. In 2021, we continued to enhance and revise our BCMS
incorporating conclusions and lessons learned from the
management of the pandemic. In particular:
• revision of the scope and extent of the critical processes that
should be considered in the definition and determination of
business continuity strategy and plans (especially for prolonged
contingencies);
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• reinforcement of infrastructure and protocols to establish the
possibility of remote working as a valid and effective strategic
alternative within continuity plans;
• mandatory risk assessments and cost-benefit analyses in order to
select the necessary continuity strategies for each contingency
scenario identified;
• implementation of flexible solutions (such as robotics and the
digitization of documents) in order to be able to respond quickly to
the needs of our customers and business units during a
contingency;
• development of a methodology and tool to manage and monitor
the maturity level of subsidiary business continuity programmes.
In addition, we have formed a multidisciplinary working group led by
the non-financial risk function in order to review the risk identification
and management frameworks that are currently in place. The
objective of the working group is to ensure proper coverage of the
new Operational Resilience regulatory requirements.
Relevant mitigation actions
Grupo Santander continuously implements and monitors mitigation
actions for major sources of risk identified by internal management
tools and other external sources of information.
Fraud
The transformation and digitalization of the business has given rise to
new risks and threats, such as more payment scams and credit fraud
(fraud in origination). To mitigate these risks, we enhanced control
mechanisms and designed new products. Strong customer
authentication processes, in line with the EU’s Payment Service
Directive (PSD2), such as biometric validation (e.g., facial recognition)
in customer onboarding and enhancing anti-fraud alerts in
origination are becoming increasingly widespread to mitigate fraud
risk.
To reduce fraud, Grupo Santander applies special measures in some
geographies, such as:
• Card fraud:
◦ Generalized use of chip and PIN (transactions with chip cards that
require a numeric verification code) for all transactions in ATMs
and stores, with advanced authentication mechanisms between
ATMs, points of sale and Grupo Santander’s systems.
◦ Continuously improved card protection against e-commerce
fraud, with a secure standard (3D Secure) via two-step
authentication based on one-time passwords, mobile
applications that enable card deactivation for e-commerce
transactions, or virtual cards issuance with dynamic
authentication passwords.
◦ Use of a new biometric authentication system in ATMs and
branches in Santander Brazil. Customers could use their
fingerprint to withdraw cash from ATMs.
◦ Continuous integration of monitoring and fraud detection tools
with internal and external systems for better detection of
suspicious activity.
◦ Reinforced ATM security with new physical protection and anti-
skimming elements, as well as improved logical security of
devices.
• Online/mobile banking fraud:
◦ Online banking transaction verification with a second security
factor of one-time passwords. The evolution of technologies
differ across geographies, e.g., the use of QR codes generated
from transactional data.
◦ Continuous improvements to online banking security with a
transaction scoring system that assigns transactions a risk level,
which trigger additional authentication when a given security
threshold is breached.
◦ Implementation of specific mobile banking protections, such as
identification and registration of customer devices.
◦ Monitoring of the e-banking platform security to avoid systems
attacks.
• Forgery and identity theft fraud:
◦ Enhanced fraud controls that verify the applicant’s identity and
the device used to submit the request.
◦ Implementation of biometrics for customers and employees.
◦ Transfer of the credit fraud prevention function to the Credit Risk
area for enhanced mitigation of fraud in origination as well as
strengthening of alerts.
◦ New management and authentication platforms.
Cyber risk
In 2021, cyberthreats were more frequent and stronger, as hackers
continued to enhance their capabilities. This is a trend that is
expected to continue in coming years and the financial sector will
remain a primary target. This trend as well as Santander's increasing
reliance on digital systems, make cyber risk one of the top non-
financial risks for the business.
Therefore, our objective is to make Santander a cyber resilient
organization that can withstand, detect and rapidly react to cyber-
attacks, while constantly evolving and improving our defences. We
continue to enhance our cyber security controls, policies, and
procedures according to our global cyber security framework and
international best practices.
During 2021, several key strategic cyber security pillars and
initiatives, described on section 5. Research, development &
innovation (R&D&I) of Economic & Financial Review chapter, have
been established to help Santander evolve its cyber defences in line
with emerging threats and technologies.
In the second line of defence, the cybersecurity risk team developed
and implemented a cyber risk management and control framework
that assesses and evaluates the cyber risk profile and control
environment of the bank. The main focal points have been:
• approval and implementation of an operating model that drives
and steers the second line of defence cyber-risk function. The
model provides a structured approach and enables effective and
proactive risk management. It establishes the mission, principles,
procedures, tools and required skills for cyber risk management;
• implementation of a holistic procedure across all second line
functions to regularly measure and assess the cyber security
control environment and risk profile. The assessment has been
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integrated with the different Non-Financial Risk instruments and
tools, which enables the second line of defence to provide an
independent opinion and challenge of control effectiveness and
risk reduction;
• simplification and automation of existing processes to improve
operating performance. Creation of an automated tool enabling
cyber risk data correlation, analysis and reporting, significantly
reducing information gathering and consolidation to enable
prioritization of risk management activities;
• establishment of group-wide governance to verify that subsidiaries
have properly implemented the operating model and to ensure
consistency of the risk control tools and procedures implemented
across our footprint.
For more details on cyber security, see
section 5 'Research, development and
innovation (R&D&I)'.
IT risk
The process of digital transformation as well as Santander’s mission
to become the best open financial services platform requires that we
constantly review, assess and improve our controls to mitigate and
manage IT risk. Along these lines, the risk analyses that we perform
on key transformation initiatives help us understand and escalate, as
necessary, to senior management the risk profile of these initiatives
in terms of inherent and residual risks.
Despite a demanding environment that is constantly changing, we
have quickly adapted our technology to meet the new needs of our
customers as well as meet new regulatory requirements. It is
important to note that, even with the current digital transformation,
total IT incidents at Group level have continued their downward trend
in comparison with figures from previous years. For 2021 key aspects
of our IT Risk Management programme are summarized below:
• The adoption of a risk-based approach to ensure we prioritize the
necessary resources and corrective actions taking into
consideration the criticality of our IT assets. These critical assets
have corresponding risk appetite metrics that are used to monitor
the level of IT risk in areas such as availability, obsolescence, and
the application of security patches. We have made significant
progress on reducing the level of obsolescence in key IT assets in
all subsidiaries.
• As with cyber risk, we have developed and implemented an
automated tool that enables IT risk data correlation, analysis, and
reporting. This tool has facilitated information gathering and
consolidation to enable the prioritization of risk management
activities, allowing for more efficient supervision and oversight of
IT risk.
• Detailed analyses of the most relevant IT risks as identified in our
RCSA to gain an in-depth understanding of these risks, and ensure
appropriate mitigation plans.
• The issuance of a new IT risk supervision and oversight policy that
establishes common protocols and standards for the monitoring
and controlling of IT risks, in conjunction with functional and
governance aspects.
Supplier management
Our digitalization strategy sets out to offer our customers the best
solutions and products in the market. This can entail an increase in
third-party services and the use of new technologies such as cloud. In
light of the increase in cyber risks and regulatory requirements, we
continue to update and strengthen our supplier risk management
model, internal control framework, and risk culture to properly
assess and manage the risks in outsourcing and third-party
agreements
In 2021, we adopted a risk-based approach that focused on those
suppliers, in the different entities of the Group, that could increase
the potential risk level in our operations and client services. We have
implemented enhanced monitoring of those suppliers to ensure:
• they present an appropriate control environment in accordance
with established Group policies and with the risk level of the
service provided;
• business continuity plans are in place to guarantee the delivery of
the service even in the event of a disruption;
• the proper controls are in place to guarantee the protection of
information processed during the provision of service;
• contracts and third party agreements include the required clauses
to protect the interests of the Group and our customers, while
providing coverage of the legal obligations in force;
• regular monitoring of these providers is carried out, with particular
attention to the monitoring of service level agreements and to the
regular testing of the provider’s business continuity plans; and
• exit strategies are defined, including reversion or migration plans,
particularly for those services with a high impact on business
continuity and complex substitution.
We began the implementation of a new certification process to
ensure our suppliers follow the same ESG sustainability standards
and criteria. Santander has defined ESG sustainability as integral to
our way of operating and doing business.
Lastly, we revised our supervision methodologies and tools to
enhance the monitoring of third-party risk in our subsidiaries.
Other key mitigating actions
We are constantly improving our risk mitigation measures related to
customer, products, and business practices. Santander has specific
frameworks and policies on the marketing and selling of products
and services; customer complaint handling and analysis; financial
crime prevention; and compliance with new regulations.
For more details on compliance risk mitigation,
see section 7.2 'Compliance and conduct risk
management'.
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Given the nature, specificity and complexity of financial markets, SCIB
improves operational risk management and control on a continuous
basis. The following enhancements were implemented in 2021:
• Continued to monitor the risk of unauthorized trading via a specific
risk appetite metric that measures the periodic assessment of key
risk mitigation controls. Global guidelines were updated with new
requirements. We continued to strengthen the control framework
by performing the regular review of controls, as well as
incorporating reports to facilitate the holistic supervision and
monitoring of markets’ activity.
• Increased incident and risk surveillance to make resolution quicker
and operational risk mitigation measures more effective.
• Continued to enhance processes and drive the operational
excellence of services provided to our customers by reinforcing a
culture of quality and promoting the best standards in all SCIB
geographies.
• Strengthened the governance and oversight of third-party risk
management through the creation of a specialized function within
the division to mitigate the risks inherent in our business.
• Advanced the maturity of the control framework that covers cyber
security risks with special focus on the risks related to data leaks,
vulnerability management (ransomware), identity management
and access control.
• Continuous improvement of the control model related to
regulatory requirements such as MiFID II, the Dodd-Frank Act,
EMIR, IFRS 9, GDPR and other regulations.
For more details on regulatory compliance in
markets, see section 7.2 'Compliance and
conduct risk management'
Insurance in operational risk management
Santander considers insurance to be a key component in the
management of operational risk. The Own Insurance function is
responsible for the use of risk transfer formulas to optimize and
safeguard the bank´s financial results. The Own Insurance function, in
collaboration with non- financial Risk (NFR), performs the continuous
oversight and supervision of entities across the Group to ensure the
proper application of policies and procedures to manage risk that is
insurable. This collaboration is governed by:
• NFR participation as a permanent member in the quarterly Own
Insurance forum.
• NFR attendance of the quarterly Claims forum, which monitors and
enhances processes for loss recovery via insurance.
• Procedures outlining the interaction model between NFR and Own
insurance, as well as other functions that correspond to the various
insurance typologies (e.g. Facilities, Legal, etc.). These procedures
ensure the proper management of insurance throughout the entire
process of identification, assessment, transfer, and retention of
risk.
• the coordination on an annual basis of the mapping of risks to
insurance across the Group, with the objective of monitoring the
effectiveness of insurance coverage, and identifying and correcting
any potential gaps in coverage.
We continue to adapt the use of insurance to align our management
with changes in the risk environment. As a result, we have expanded
our analysis and implemented coverage related to climate-related
risk, the digital environment, and other elements. To respond to
these and other transversal risks, Santander has global insurance
programmes for property damage, general civil liability, fraud,
expenses arising from cyber security breaches, and third-party claims
against directors and officers of the Group (D&O insurance). These
global policies are complemented by local insurance policies that
adapt to the characteristics of each subsidiary and are purchased
according to the Own Insurance risk management model
implemented in each geography.
Analysis and monitoring of controls in Santander
Corporate & Investment Banking
In 2021, SCIB maintained normal activity and its robust internal
control environment without major incidents. Preventative measures
related to the pandemic continued to be applied and were consistent
with recommendations by local authorities.
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6.3 Key metrics
Net losses (including incurred losses and net provisions) as per
Basel
risk categories for the last three years were:
38
NET LOSSES BY OPERATIONAL RISK CATEGORY
(% o/total)
A
A. Excluding employee litigation from Santander Brazil
Losses due to Fraud, as well as those due to Processing errors were
lower than in the previous year. However, Customers, products and
business practices losses increased.
The chart below shows net losses by country:
NET LOSSES BY COUNTRY
(% o/total)
A
A. Excluding Trabalhistas events from Brazil
Santander considers employee litigation in Santander Brasil to be a
staff expense. Our governing bodies continuously monitor expense
levels with specific risk appetite metrics and take special actions to
reduce them. These expenses are reported under the categories
defined by the Basel Operational Risk framework.
In 2021, the most significant losses by geography are related to
litigation in Santander Brazil (with ongoing root cause analyses of the
main products), Poland and Spain (due to legacy cases). Additionally,
the amount of losses in the US continues to decrease due to a
reduction in legal cases provisions.
38
The Basel categories incorporate risks which are detailed in section 7 'Compliance and conduct risk'.
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0.2%15.5%1.6%73.5%0.6%1.0%7.6%201920202021I - Internal fraduII - External fraudIII - Employeespractices andworkplace safetyIV - Practices withcostumer,products andbusinessV - Damege tophysical assetsVI - Businessdisruption andsystem failuresVII - Execution,delivery andprocessmanagementBrazil22%UK14%Spain23%US4%Mexico3%Other34%
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7. Compliance and
conduct risk
7.1 Introduction
According to our three lines of defence model, the Compliance and
Conduct risk function is an independent control function within the
second line of defence. It reports directly and periodically to the
Board of Directors and its committees through the Group Chief
Compliance Officer (GCCO).
The Compliance and Conduct function, as the second line of defence,
will facilitate critical and independent debate. It will also exercise
oversight and control of the first line of defence's management of
regulatory compliance, product governance and consumer
protection, financial crime compliance, and reputational risk.
Additionally, it will ensure that risks are managed in accordance with
the risk appetite formulated by senior management while assessing
the impact on our risk appetite and risk profile.
The responsibility of the second line of defence includes the
obligation to inform the relevant governance bodies when necessary,
of risks, risk appetite and risk excesses. It should adopt and promote
a common risk culture and provide guidance, advice and expert
judgment on all relevant matters relating to compliance and conduct
business.
The compliance program is one of the key processes of the
compliance and conduct risk function and details the main activities
to be developed throughout the year. The parent company and each
of the subsidiaries execute a compliance program appropriate to their
size and complexity which is structured around the four
management areas mentioned above, being a key tool that enables
the supervision of our subsidiaries and the control environment.
7.2 Compliance and conduct risk management
The compliance and conduct risk ensures compliance with the
General code of conduct (“GCC”) under the supervision of the
compliance and the risk supervision, regulation and compliance
committees. The GCC dictates the ethical principles and conduct
rules that must govern our employees’ work. It is to be understood
and applied along with all other internal regulation. It sets out:
• compliance functions and duties;
• the Group’s general ethical principles;
• the general rules of conduct;
• the consequences for failure to comply;
• an ethical channel (Canal Abierto) to report possible misconduct in
a confidential and anonymous manner.
Regulatory Compliance
The Regulatory compliance function monitors and controls
regulatory risk from employees, data processing and market
regulations (together with SCIB’s compliance team). Its core areas
are:
A. Employees
The Regulatory compliance function promotes a culture of ethics and
compliance among our employees. It sets internal standards to
prevent criminal risks, conflicts of interest and anti-competitive
practices according to the GCC. It also manages Canal Abierto.
To enhance the Group’s compliance system, in 2021 the function
launched in our core units a competition law programme based on
international standards and best practices from competition
authorities. Its main elements are “Tone from the top”, policies,
training, awareness, identification of risk areas, risk domains,
controls, Canal Abierto and disciplinary proceedings. It helped us
reduce risk from failure to comply with competition regulation while
tightening our monitoring and awareness so employees could
recognize and report breaches.
This year:
• we updated mandatory employee training, with a message from
senior management (Expanding “Tone from the top” is key to the
cultural transformation needed for the programme to be
successful).
• We enhanced our methodology for measuring competition risk.
• We drafted conduct guidelines so employees can recognize and
report risk situations and seek advice from our Legal and
Compliance areas.
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Real ethics: Employees’ compliance functions
Canal Abierto
Training and awareness
→ Provide a channel for employees to report unethical
conduct and breaches of internal regulation.
→ Manage and investigate reported cases.
→ Promote a culture of speaking up and truly listening.
→ Develop and implement training programmes and
awareness campaigns among employees on Corporate
Defense and Employees compliance.
→ Issue messages about ethics to the entire Group and
promote relationships built on trust.
Disciplinary proceedings
Policies and procedures
→ Investigate conduct that is misaligned with our ethics and
→ Ensure compliance with the GCC and design special
compliance principles.
→ Assess disciplinary measures.
policies and procedures to enforce it.
→ Report to governing bodies regularly.
Appointments
Queries about ethics
→ Manage queries from employees and members of
governing bodies about ethics and internal regulation.
→ Provide ethical advice in controversial situations.
→ Assess the suitability of the Group’s board and senior
management appointments.*
Competition Programme
→ Manage the Competition compliance programme.
* Carried out by the Corporate compliance function
For more details on Canal Abierto and its
management during covid-19, see section
'A strong and inclusive culture' of the
Responsible Banking chapter.
B. Market abuse
The Market abuse function’s Control room team applies the Code of
conduct in securities markets (CCSM) to prevent risk from trading
with or making unlawful disclosures of inside information and from
market manipulation.
In 2021 the Surveillance team has worked together with the SCIB
compliance area performing the monitoring of the traders and
overseeing their trades and communications.
Control Room
Control of the personal operations of persons subject to CCMV and the flow of sensitive information.
Main achievements
→ Global Control Room: Initiated a strategic and multi-year project
to remodel the Group's Control Room, aiming at creating a single
team with members in different locations who assists to manage
potential conflicts of interests arising from deals originated from
the Group units.
→ Treasury Shares Activity: improvements have been made in the
controls in place to ensure compliance with the Treasury Shares
Policy approved by the Board.
→ Euribor: adaptation of internal procedures in accordance with the
new requirements of the benchmark administrator, as part of the
contribution process oversight.
→ Training: course update on the CCSM, which has been carried out
by the 97% of the covered persons.
→ Countries Oversight: update of the countries supervision manual
adapted to the new structure of the Control Room function.
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E. SCIB markets regulation
SCIB’s compliance team manages risks from core international
market regulation that affects Banco Santander.
EU regulation
US regulation
It continued to reinforce its
control environment to
monitor compliance with
EU regulation (market
regulations, mainly MiFID
and EMIR). It paid close
attention to reporting and
monitoring the quality of
transactions. It also
enhanced its system for
monitoring the bank's
high-frequency trading in
real time.
It reviewed and adapted its
swap dealer compliance
programme to new cross-
border regulation. It also
reinforced its control
environment to monitor
compliance with US
regulation.
It implemented the security-
based swap dealer
compliance programme to
meet imminent US Securities
and Exchange Commission
(SEC) requirements.
C. Regulatory compliance is responsible for:
• Announcing the Group’s relevant information to markets. This year,
Banco Santander made public several inside information and other
relevant information, which are available on the Group’s website
and on the Comisión Nacional del Mercado de Valores’s (Spanish
securities market commission or "CNMV”) website.
• Disclosing transactions relating to own shares (CNMV) and major
shareholding notifications of Banco Santander; and major
shareholding notification and remuneration schemes of the
Group's board members and senior managers (CNMV and other
regulatory bodies of those markets where Santander share is
listed).
D. Data processing
In 2021, Data processing focused on:
Data protection
• Adopting measures to comply with new regulation on
international data transfers: identification of data flows and
affected suppliers; impact analyses and additional guarantee
proposals; and negotiation and signing of new agreements.
• Monitoring closely the Group’s adaptation of digital assets to
regulation on transparency obligations and consent management.
We have made significant progress on our control framework by
updating our unit-monitoring programme, improving management
metric traceability, enhancing reporting and monitoring tools, and
expanding our perimeter to countries outside the European Economic
Area (EEA). We also revised and approved a new corporate policy on
data protection.
Foreign Account Tax Compliance Act (FATCA) and Common
Reporting Standards (CRS)
Corporate oversight for automatic exchange of information for tax
purposes between countries (pursuant to FATCA and CRS) focused on
monitoring subsidiaries’ regular reporting obligations and three-year
FATCA certification under the 2 IGA model or by direct agreement
with the US Internal Revenue Service (IRS).
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Product governance and consumer
protection
Our product governance and customer
protection function promotes that our
actions are based on our customers’
interests, regulation, our values and our
principles by:
1 Promoting a culture with a 2 Overseeing key procedures to
make sure:
3 Managing risk by:
Simple, Personal and Fair
approach towards our
customers:
→ Establishing the consumer
protection and conduct principles
for marketing, customer
engagement and the promotion
of a solid culture, which are
found in the Corporate
framework of commercialization
of products and services and
consumer protection (and the
internal regulation that builds on
it).
→ Running corporate and local
product governance forums and
escalating customer conduct risk
monitoring and related issues to
the compliance, risk and
responsible banking committees.
→ our products will meet customer
needs under the right balance of
risks, costs and profitability;
→ making correct decisions; drawing up
and tracking action plans; and keeping
senior managers and statutory bodies
properly informed;
→ we are selling to the right target
markets; providing transparent
information; training our sales force
appropriately; and implementing
remuneration schemes centred on
meeting customers’ expectations;
and
→ our customer service, post-sale
systems and processes are Simple,
Personal and Fair, and we check for
deterioration in products and
services and process shortcomings
to manage them promptly.
→ overseeing the design and execution of
controls for marketing and customer
relations; and assessing the second line
of defence management and control
model;
→ identifying new risks in regulatory
guidelines, industry practices, supervisor
and auditor opinions and learning from
internal and external events; and
→ applying group risk assessment
methodologies, such as customer survey
analysis, management indicator
tracking, thematic assessments and
first-line self-assessments.
Our product approval governance operates on two levels. All
subsidiaries have their own approval bodies to ensure new products
and services will meet the needs of their target market, are being
sold through the appropriate channels and processes, and have fair
and transparent terms and conditions. Products and services
classified as new are then escalated to the corporate product
governance forum (CPGF) to be approved before launch. This two-tier
approval system helps us share best practices and manage product
and service risk in line with risk appetite.
In addition, the Fiduciary Risk function meetings follow-up that the
investment products have a proper definition of their policies and
that their management is carried out in a robust risk control
environment, aligned with the Group's policy on approval,
monitoring and control of fiduciary risks.
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In 2021, the Product governance and consumer protection function
introduced these new features in the design of products and services:
Adapting our products to the landscape:
→ Analysis and transparency of our growing ESG product
development.
→ Replacement of IBOR indices with new risk-free rates.
→ Management of Santander Corporate Investment Banking –
ALCO proposals.
→ Enhanced alternative investment propositions for professional
and private banking clients that offer greater potential returns
amid low interest rates.
Supporting our digital strategy
→ Governance of PagoNxt proposals that are to be distributed
across our footprint.
→ Focus on elevating customer experience on digital channels,
especially by removing difficulties in acquiring and cancelling
products and services. Implementation of good practice in
accordance with the Product governance and consumer
protection function's Digital product and service design guide.
Key conducts risk lines of action in 2021
Objectives
Lines of action
Vulnerable
customers and
special cases
Effective protection of vulnerable
customers and special cases
(including, but not limited to,
people affected by Covid).
→ Global vulnerable customer strategy and support to units for
its roll-out.
→ Monthly monitoring of collection and recovery indicators.
Customer focus
Research into big data and artificial
intelligence analysis on customer
survey findings and business
indicators.
→ Development of a root-cause analysis methodology for
customer complaints.
→ Creation of consumer protection indicators.
Sustainable
products and
services
Support in collaboration with the
Risk and Responsible banking
functions on projects relating to the
Group’s transition towards a more
sustainable economy.
→ Transparent information on the investment products and
services we offer to retail customers.
→ ESG risks embedded in our management through
measurement tools and methodologies.
→ Meeting our customers’ sustainability preferences.
Awareness and
accountability of
the first line of
defence
Ongoing raising of awareness by
the business and support functions
of conduct risk prevention and
management.
→ Mandatory conduct training; risk and control self-assessment
exercises; and the creation of working groups led by the first
line.
→ First line teams’ remuneration linked to conduct and quality.
→ Medium-term project to come up with a rating scheme
(conduct branch rating) to promote conduct risk management
in our employees’ work.
Control
Further strengthening of retail
conduct risk management with a
focus on continuous improvement.
→ List of standard controls that all geographies must perform
when marketing products and services, and awareness of local
controls.
→ Spotting areas for improvement and including them in other
risk assessment exercises for more robust monitoring in risk-
based testing.
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Financial Crime Compliance (FCC)
Financial crimes are universal, globalised phenomena that take
advantage of the international economy, and thus their detection,
deterrence and disruption call for a coordinated global response by
the international community and the financial sector. Santander
Group is wholly committed to the fight against financial crime and
does not tolerate compliance failures with financial crime regulations
both internationally and in the countries in which it operates.
• The addition of new members to the FCC Corporate Forum,
increasing the representation of accountable stakeholders from the
business functions;
• And regular key risk indicator reporting and an annual FCC risk and
controls self-assessment exercise, paired with a risk-pro culture
that encourages self-identified issues and the identification of risk
events.
The business functions within the Group maintain the primary
responsibility for managing financial crime risk and to support and
promote the organization's risk culture. The FCC Function in turn is
responsible for monitoring and overseeing financial crime risks and
for ensuring adequate policies and procedures have been
implemented to manage the business within the Group's established
risk appetite.
In 2021, the Board of Directors approved an expanded FCC Corporate
Framework, which establishes:
• The principles that must be adhered to by entities of the Group in
relation to the prevention of financial crime;
• The roles and responsibilities for effective financial crime risk
management;
• The key FCC processes to be developed and embedded within the
entities of the Group in compliance with the Group policies and
procedures that must be adopted locally; and
• The essential features of FCC governance at a Corporation and
local level.
Under this expanded FCC Corporate Framework, the scope of
financial crime related risk includes not only money laundering,
terrorist financing, and the violation of international sanctions
programmes, but also bribery, corruption, tax evasion and external
fraud, as well as any other priority criminal activity reportable under
AML/CFT regulation.
The Group has significantly advanced the FCC strategic
transformation plan over 2021, initially defined in 2020, designing a
bank-wide FCC target operating model that reaffirms the role of the
business functions in assuming responsibility and accountability for
managing financial crime risk. The strategic transformation plan
continues to work toward the centralization of key FCC controls along
with their maintenance and calibration. The transformation plan
embraces the responsible use of automation, artificial intelligence
and machine learning, and the use of reliable third-party data
sources, all to improve financial crime risk management, enhance the
customer experience, and give the business the necessary risk
management tools to continue to pursue financial inclusion
initiatives.
The on-going implementation of the FCC strategic transformation
has relied on a series of successes over 2021, including:
• The transposition of enhanced policies and procedures, tracking
control implementation on a country-by-country, control-by-
control basis;
• The establishment of a legal framework that will facilitate over the
long-term inter-group information sharing;
• Continued intensive subsidiary oversight to ensure country-by-
country advancements on key FCC pillars;
Highlights over 2021 in key activities include:
221
subsidiary reviews
(+3% vs. 2020)
150,343
disclosures to authorities
(+64% vs. 2020)
315,512
investigations conducted
164,547
employees trained
In addition, the FCC Function implemented over 2021 a significant
FCC upskilling training initiative in line with the expanded FCC
corporate framework. Further, following a series of successful
group-wide awareness sessions in 2020, over 2021 the FCC
introductory training module was fully redesigned to highlight, for
example, risks associated with crypto-assets, compliance challenges
faced in designing innovative digital products, trends in responding to
complex international sanctions regimes, and awareness on drug
trafficking, human trafficking and online child sexual exploitation
risks, and environmental crime.
The Group continues to play a leading role in key industry groups and
public-private initiatives, including as a founding member of the
Wolfsberg Group, a representative on the Europol Financial
Intelligence Public Private Partnership (EFIPPP) Steering Group, a
member of the United for Wildlife Financial Taskforce, a member of
the European Banking Federation, and a frequent contributor to
private sector consultations from the Financial Action Task Force
(FATF). Notably in 2021 the Santander FCC Function was asked by the
FATF to represent the private sector in an awareness-raising webcast
on environmental crime, and the United Nations Office on Drugs and
Crime (UNODC) named the Santander FCC function as the chair of the
UNODC’s quarterly Private Sector Dialogue on Disruption of Financial
Crimes Related to Forestry Crimes.
Reputational risk
Santander classifies reputational risk as the risk of loss due to
damage to the bank’s reputation among employees, customers,
shareholders, investors and broader society. It may come from
various sources or even other risks relating to business and support
operations; the economic, social and political climate; and events
involving our competitors.
Our reputational risk model is based on a preventive risk
management and control approach, with effective handling of early
warnings and monitoring of events and detected risks. This requires
regular update and review of the Group’s risk appetite and
preventative risk management and control.
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Key actions in 2021:
We continued to enhance our risk management and control, as well
as reviewing and updating our action guidelines for certain areas.
These were the most significant actions we took:
• Revision of the Group's policies on the defence industry and other
sensitive industries, including new standards for banking in the
cannabis, tobacco, defence and other sensitive industries as well as
for social contributions.
• New operating procedure approved by the Group and subsidiaries
to analyse reputational risk in a broader scope of activities.
• New guidelines for supplier reputation assessments.
• Reputational impact analysis, prevention and mitigation measures
and best practices on branch and workforce restructuring in
Europe.
• E-learning modules for all corporation employees. Thematic
reputational risk training sessions with the business, risks and
support functions on sensitive transactions and customers, and
general awareness for employees across our footprint.
• Global reputational risk assessment that involved all corporate risk
management and control areas as well as all key group units to
draw up a more comprehensive risk road map.
• A new reputational risk tool that assesses stakeholder perception
of the bank and finance industry.
• Earlier and more coordinated risk management as part of forward-
looking reputational risk analysis.
• More advanced reputational risk approach for measuring global
risk profile.
• Better governance and challenge in oversight of subsidiaries.
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8. Model risk
8.1 Introduction
A model is a system, approach or method that makes quantitative
estimations based on statistical, economic, financial or mathematical
theories, techniques or assumption about data. Its simplified
representations that contrast real and observed trends help Grupo
Santander focus on specific aspects. In particular, we use models for
approval (scoring/rating), capital calculation, behaviour, provisions,
market risk, operational risk, compliance and liquidity.
Models risk is the risk of loss from inappropriate, inaccurate or
misused models in decision-making. Sources of model risk can be:
• incorrect or incomplete data in the model itself or the modelling
method used in systems;
• incorrect use or implementation of the model.
Model risk can prompt financial loss, poor commercial and strategic
decision-making or damage to Grupo Santander’s transactions.
We have been defining, managing and controlling model risk for
several years. The Model Risk function has been enhanced and
consolidated across corporate and our core subsidiaries.
To ensure adequate model risk management, we have a set of
policies and procedures that establish the principles, obligations and
procedures for organizing, governing, managing and approving
models throughout their life cycle.
We monitor model risk according to each model’s level of
importance. Through tiering, we synthesize the level of importance
of non-regulatory models and determine how intense risk
management should be. As regulatory models are particularly
important to Grupo Santander, we subject them to more intense
monitoring and management.
We implemented our multi-year Model risk management (MRM) 2.0
strategy to manage model risk better according to regulatory
standards (e.g. ECB guide to internal models, 2018). Upon concluding
in 2021, MRM 2.0 included several initiatives that strengthened our
Model risk function, such as:
• Streamlining: It helped us take risk-driven measures to simplify
processes involving regulatory model management and other
important operations for the Group.
• Regulatory models (IRB and IMA): To fulfil regulatory requirements
and the EBA’s new guidelines, we scaled back our mapping of
regulatory credit risk model portfolios.
• Validation: We continued to reinforce the Single Validation Office,
which guarantees consistent and well-coordinated validation of
the Group’s models.
• Model risk facilitators: We made additional improvements to our
infrastructure and tools and helped spread the model culture
across the Group. Real-time information from advanced
digitalization enhanced decision-making.
In addition to MRM 2.0, we have made further progress on the two
regulatory credit risk and market risk model projects under way that
focus on the targeted review of internal models (TRIM), internal
model inspections (IMIs) and compliance with new regulation.
Our main aim will be to keep building up our IRB and IMA
management in line with ECB requirements for 2022, especially the
new EBA Repair Programme due to take effect in January. In 2021,
we submitted several model changes to the ECB for authorization,
which entails a lengthy review that will carry on into 2022 and
require the Model risk function’s full cooperation. We anticipate
sending additional model changes to the ECB in the coming years.
8.2 Model risk management
Model risk management and control are structured processes known
as the model life cycle and consist of the following phases in
Santander:
Identification
Model risk control must include identified models. For sound
management, a complete inventory of models in use is key.
Our centralized inventory system, which has uniform taxonomy and
detailed information for all the models that business units use,
enables us to monitor them closely according to their level of
importance and tiering.
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Planning
This is an internal annual exercise, approved by our subsidiaries’
governance bodies and validated by the global team. It formulates
strategic measures for models managed by the Model risk function
and pinpoints needs for any models to be created, revised or used
during the year.
Development
Development is the model-building phase. It is based on
econometrics and run by methodology experts. Model development
considers each unit’s needs in line with the annual model plan.
To guarantee model quality and consistency, it must apply the
common group-wide methodology formulated by the global team.
Models & Data unit aims to make model development a more
efficient and more centralized process that builds on shared
synergies.
More detail see section 2.5 'Models & Data
Unit' of this chapter.
Internal validation
Independent model validation is a regulatory requirement and key
feature of our model risk management. A specialist unit that is totally
independent from developers and users issues technical
assessments of internal model suitability. The validation opinion for
each model is expressed through a rating that summarizes the model
risk associated to it. Validation intensity and frequency are well-
defined and risk-driven.
Validation covers theory, methodology, technological systems and
data quality to ensure effectiveness. It also involves a detailed
analysis of model performance and other risk management elements
(e.g. controls, reporting, uses and senior manager involvement).
One internal validation task is the consistency analysis conducted by
validators to review the severity and ratings. It acts as an important
point of control to ensure the homogeneity and comparability of
validation tasks.
Validation tasks only conclude after the consistency analysis phase.
The Single Validation Office also plays an important role to ensure
consistent validation of the Group’s models.
Approval
Before we can use a model, internal governing bodies must approve
it through a governance circuit in place for our model inventory,
based on their level of importance.
Deployment and use
In this phase, newly developed models are added to computer
systems. Because this creates another source of model risk, technical
teams and model owners must run tests that verify proper model
integration based on methodology and intended function.
Monitoring and control
We must regularly review models to ensure that they function
correctly or, otherwise, adapt and redesign them. Model risk
monitoring teams must make sure models are managed according to
the general model risk framework and internal rules and principles.
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9. Strategic risk
9.1 Introduction
Strategic risk is the threat of loss due to poor strategic decisions or
their deficient implementation that affect our core stakeholders’
medium-to-long-term interests or to an inability to adapt to a
changing environment.
Because Grupo Santander’s business model is pivotal to strategic risk,
it has to be viable and sustainable and should produce results in
accordance with the Group’s annual targets (particularly the next
three years) and long-term outlook.
Strategic risk has three components:
Business model risk, which includes the risk that the
1 Group's model will become obsolete or irrelevant; or
that it will lose value and not produce desired results.
Strategy design risk, which relates to the strategy and
2 assumptions set out in Grupo Santander’s long-term
plan (including the risk that the plan will not be up to
par), which could result in a failure to deliver expected
results.
Strategy execution risk, which involves the three-year
3 financial plan; internal and external impacts; the
inability to react to changes in the business
environment; and risks associated with corporate
development transactions.
9.2 Strategic risk management
Grupo Santander views strategic risk as a cross-sectional risk and has
a target operating model that our subsidiaries use as a reference. The
model covers the governance, procedures and necessary tools for
robust monitoring and control according to the board-approved risk
appetite statement.
We constantly monitor changes in competition, regulation and
market conditions as well as within the bank to determine whether
we need to revise our strategy and verify any mitigating factors and
resolution plans in place. The strategic risk function engages key
first- and second-line teams to make sure measures are primed for
immediate implementation in case they are needed.
In 2021, the main strategic focus was to see how economic recovery
fared against the uncertainty fuelled by new covid-19 variants and
progress of global vaccination campaigns and especially in our
markets. We also continued to monitor the progress of our
transformation projects, which are key to meeting our objectives. Our
proactive and effective response to business challenges meant our
strategic risk profile was once again medium-low.
While our long-term strategy remains valid, our success is
increasingly dependent on our customer focus (i.e. “think customer”).
Boosting our revenue, profitability and value hinge on increasing
customer numbers, loyalty and satisfaction.
Our strategic risk model is based on:
• Challenging strategic plans: With the support of specialized
functions within the Risk division, the Strategic Risk function
challenged the three-year financial plan, including a specific
chapter in the final plan that identifies potential threats and
changes in the environment that could jeopardize strategic
objectives. In 2021, we closely monitored the key digital
transformation projects that underpin our plan: One Santander
(common operating model), PagoNxt and Digital Consumer Bank.
• Top risks: Under stressed scenarios, Grupo Santander identifies,
measures, monitors and manages risks that could have a
significant impact on results, liquidity or capital.
The first and second line of defence work with our subsidiaries to
identify top risks, which are also added to idiosyncratic scenarios in
exercises like ICAAP, ILAAP and the Group's viability and recovery
plans.
For more details on top risks, see section 1.3
'Santander Top and emerging risks' of this
chapter.
• Analysing business model performance: To measure and identify
the main threats to the bank’s business plan and strategic
objectives, based on four pillars that bring together retrospective
and prospective analyses.
◦ Strategy execution (retrospective): Measurement of the risk of
deviation from the plans and targets set in the board-approved
strategy and strategic and transformation initiatives, which are
deemed crucial to addressing strategic priorities.
◦ Viability and sustainability (prospective): Measurement of the
risk that the business model will fail to create shareholder value
or will perform poorly. We also assess the bank’s position in
relation to competitors.
◦ Business plan volatility (retrospective): Measurement of the risk
that our income statement planning is unstable and that profits
will not be recurrent in the long term.
◦ Likelihood of meeting strategic objectives (prospective): Risk of
failing to achieve the strategic objectives set in the financial
plan, based on the threats uncovered in the top risks exercise.
• The strategic risk and corporate development and strategy
functions prepare the strategic risk report to measure and monitor
the strategy and its risks. It is presented to senior management and
includes an update on strategy execution, strategic projects,
corporate development transactions, business model performance,
top risks and the risk profile.
• Commercialization of new products: The strategic risk function
helps assess and validate new product and service proposals
before Grupo Santander launches them, ensuring alignment with
the approved strategy.
• Corporate development transactions: With the support of other
functions within the Risk division, the strategic risk function makes
sure risk assessments are carried out on the impact of these
transactions on our risk profile and risk appetite.
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10. Climate and
environmental risk
10.1 Introduction
Climate-related and environmental risk management is key to
fulfilling our objectives and the commitments in our climate strategy
sustainably. Santander takes aiding customers’ and households’
transition to a low-carbon economy seriously, offering financial
products and services to environmentally and socially responsible
businesses in keeping with our sustainability commitments and the
objectives of the Paris Agreement. For more details, see the
Responsible banking chapter.
Santander has an environmental, social and climate change risk
policy (available on its corporate website). It dictates the standards
for measuring, monitoring and managing risks from oil and gas,
power generation, mining and metals, soft commodities and other
sectors that require in-depth analysis because of their potential
10.2 Climate-related and environmental risk
management
Climate-related and environmental risk management is a priority of
the Risk function. The graph below sums up how we’ve been
integrating it within core processes and risk cycle phases (more
details in the sections below).
impact on the environment and society. It is consistent, and must be
applied, with the Group's policies on sustainability and human rights.
The Risk and Responsible banking functions oversee the annual
revision of the policy alongside other business areas to make sure it
will conform to international practices and standards and to the
Group's sustainability strategy.
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Identification
Two core processes help Santander spot climate-related risks: top
and emerging risk identification (see section 1.3 'Santander Top and
emerging risks') and regular risk profile assessment — RPA — (see
section 2.4 'Management processes and tools' ). Here is how they
form part of climate-related risk management.
In identifying emerging and top risks, we pinpoint and measure our
most significant internal and external threats to profitability, capital
adequacy and strategy. Since 2018, our four top risk event categories
have included a climate and environment subcategory. Our analysis
covers qualitative as well as quantitative factors (which we’ve been
Climate Risk
Type
Climate Drivers
developing further as more data and new methodologies become
available).
As the Group makes progress on its climate-related commitment, it
shows us how the importance of climate-related and environmental
risks and the mounting pressures from regulators, supervisors and
broader society have grown in recent years. The table below shows
certain climate matters that could influence the types of risks within
our framework over various time horizons. Santander deems
climate-related and environmental risk a cross risk, as climate drivers
could influence other risks.
→ Change in consumer behaviours including deliberate move to more sustainable
products
→ Potential loss of competitive advantage with our green product proposition or pricing
risks
Market &
Customers
→ Increased market volatility and cost, sourcing restrictions for carbon heavy raw
materials
→ More demanding policy environment affecting our customer's business operations
Policy-Making
→ Increased green house gas (GHG) emissions pricing to foster movement to renewable
sources
Main affected
Time Horizon
Short - Medium
Term
Short - Medium -
Long Term
Technology &
Data
→ Investment in technology to reduce emissions or improve energy efficiency ratings
→ Lack of procedures and systems to obtain and store reliable data for risk assessments
Medium Term
and disclosure
Transition
Risk
Regulatory
Pressure
→ New public disclosure products which increase the risk of misrepresentation, increased
regulatory requirements which increases the potential of non-compliance, increased
use of external analytics providers which increases the potential for data privacy
breaches, all of which could result in fines, payment of damages and the voiding of
contracts
→ Increasingly demanding banking regulation (disclosure, stress testing, taxonomies, etc)
→ Inefficiencies as consequence of different climate regulations, with special attention in
those financial entities with international scope
→ Risk of slow, lack or not sufficient reaction from financial entities impacting its
reputation; extreme events that would cause damages to financial entities and
employees own sites could challenge, if readiness response plans fail, the ability of the
banks to prompt react to restoration of service and customers attention in vulnerable
situations due to the damages
→ Increased scrutiny from different stakeholders (e.g. supervisors, regulators, media,
Reputational
NGO's, shareholders, investors, etc)
→ Perceived not to be meeting, sufficiently progressing, or providing transparency on
climate-related commitments and transitioning
→ Liability implications as an intermediary in several value chain (e.g. data, products,
financial services)
→ Reputational impact from potential misalignment of emissions reduction commitments
with performance in specific portfolios
Short - Medium
Term
Short - Medium -
Long Term
Acute
→ More frequent and severe climate events such as flooding, drought, etc, that could
affect financed assets and the value of the collaterals
Short - Medium -
Long Term
Physical Risk
→ Alterations in weather patterns and stability of local ecosystems affecting food
production and living environment.
Chronic
→ Rising temperatures affecting working conditions, living conditions and local
Long Term
infrastructure.
→ Rising sea levels affecting local ecosystems, increasing subsidence and flood risks
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Findings from emerging and top risk identification fuel our internal
capital and liquidity adequacy assessment processes (ICAAP and
ILAAP). For instance, our 2021 ICAAP included an idiosyncratic event
to show climate change's potential impact on measurement.
The risk profile assessment (RPA) is the second topic of this section.
Santander regularly conducts an RPA that covers all risk types and
reveals any threat to its business plan. In 2021, we added a special
module on climate-related risk control to measure the Corporate
Centre and the other subsidiaries'’ progress. The questionnaire covers
strategic planning, implementation, control and monitoring, and
governance. Its findings enable us to find gaps and areas for
improvement. The questionnaire will continue to change throughout
2022.
Planning
Strategic planning includes annual budgeting, the three-year
financial plan (including risk in executing the Group's strategy,
internal and external influence, inability to respond to a changing
business environment) and the Group's long-term strategic plan
(including risk from its own design).
Those core strategic processes enable the Group to plan for risks
from the transition to a low-carbon economy and the physical impact
of climate change, and introduce them into short-, medium- and
long-term strategy, making it easier to spot threats and changing
conditions that could influence our ability to deliver objectives. In
qualitative and group-wide terms, plans cover priorities and projects
for the coming years; in quantitative terms, they include a financial
plan for the period that is consistent with the Group's risk appetite.
Assessment
To determine the most significant climate-related and
environmentally material loan portfolios, Santander runs a quarterly
materiality assessment. It proves fundamental to making decisions
about selected industries, customers and regions and to establishing
our strategic priorities. It covers climate-related and environmental
risks over many time horizons so our management processes (e.g.
risk appetite, top risk identification, credit limits and stress testing)
can address them.
Our risk taxonomy and heatmaps are the basis for categorizing
portfolios by industry and region according to their potential
exposure to physical or transition-based climate-related and
environmental risk. Santander’s materiality assessment follows the
guidelines of the Task Force on Climate-related Financial Disclosures
(TCFD) and the United Nations Environmental Programme Finance
Initiative (UNEP-FI).Because the taxonomy of industries and sub-
industries is based on the EU’s NACE codes, it enables us to
consistently compile exposure data that serve as a starting point
(along with the heatmap for physical and transition-based risks) for
quantitative and qualitative measurements of the most material
climate change-related risks.
It covers practically our entire balance sheet. It also analyses residual
value, strategic risk, market risk and liquidity risk in depth. In 2021,
we continued making progress with our climate-related risk
materiality assessment by raising the level of granularity and
including other businesses (namely Santander Consumer Finance
and Private Banking). The graph below shows the Group's last
materiality assessment at the end of Q3’21.
MATERIALITY ASSESSMENT - CLIMATE RISK ANALYSIS AND HEAT
MAPPING OF PORTFOLIOS
September 2021- Billions euros
TR PR
Power (conventional)
of which, electricity generation
customers with more than 10% of
incomes from coal
Power (Renewables)
Oil & Gas
Mining y metals
of which coal mining
Transport
Real Estate
Agriculture
Construction
Manufacturing
Water supply
Climate sectors
Other sectors
Total portfolio
SCIB
25
4
12
19
9
4
27
6
3
20
33
3
157
59
216
Other
segments
2
0.3
2
94
361
4
7
14
1
485
161
646
Low
Moderately low
Medium
High
Very High
TR: transitional risk; PR: physical risk
Credit risk for SCIB is credit equivalent risk (CER: loans on and off the balance sheet +
guarantees + structured financial product (SFP) derivatives. For other segments, it is
the drawn-down amount.
Other industries: SCIB, Corporates and NACE businesses outside the risk taxonomy
perimeter + Individuals and DCB (cards and other consumer credit).
Other segments include Retail and commercial banking (Corporates), Individuals,
SCF and WM&I.
For more details about our materiality assessment, see our 2021
Climate Finance Report on our corporate website.
Monitoring
Santander uses risk appetite, scenario analyses and other tools to
monitor climate-related and environmental risk. Here we delve
deeper into each one.
Risk appetite sets the volume and type of risks we deem prudent for
our business strategy. Along with implementing policies, it is a key
tool to monitor climate-related risk, our objectives and our
commitments, and to mitigate the risk of failing to meet them.
Climate-related matters have been expressly part of our risk appetite
since 2019. The board of directors approved a qualitative risk
appetite statement on climate. It linked climate change management
to our industry-related policies, which prohibit or place restrictions
on financing operations with an environmental or social impact in the
energy, mining and metals, and soft commodities industries. We
review those policies every year to make sure our standards remain
consistent with our strategy and best practice.
In line with our ambition and commitment to financing the transition
to a low-carbon economy, in November 2020 the Group updated our
risk appetite consistently with our support for the Paris Agreement
while our industry-based policies were combined into our
environmental, social and climate change policy.
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In February 2021, the Group made its first decarbonization
commitments as part of its goal to reach net zero emissions by 2050.
They included commitments on the thermal carbon industry.
Accordingly, by 2030 we will end financial services to electricity
generating customers if 10% of their revenues rely on thermal coal;
and eliminate our exposure to coal mining worldwide.
We continue to enhance our risk appetite statement to complement
the Group’s strategy with available methodologies and data. To start
setting climate-related risk appetite metrics, we determine industry
targets according to our strategy and follow this conceptual process:
Design options:
metrics, data
availability and
frequency
Calibration and
definition of limits
thresholds
Policy and
procedure analysis
Approval
government
Monitoring
According to our first decarbonization commitments, our current
qualitative risk appetite statement added a specific quantitative
metric the board had approved in November 2021 in accordance with
established governance procedures.
regulatory and supervisory stress testing. We use scenarios
determined by the network for greening the financial system (NGFS)
and others designed by our Research department to analyse the
impact on climate under various circumstances.
The metric puts limits and thresholds on counterparties from the
thermal carbon industry that our commitments concern. It also gives
a path to those limits that is conducive to fulfilling the target by
2030. The process involves permanent contact with affected
customers to share Santander’s strategy and to understand and
assess their transition planning.
Santander will also continue to set alignment targets for industries
with a material impact on climate as part of the Net Zero Banking
Alliance initiative. The Group's risk appetite will gradually introduce
metrics and limits for each one of those industries (subject to
established governance procedures).
As mentioned earlier, scenario analyses are a management tool to
monitor climate-related and environmental risk. Analysis techniques
are useful for the Group's internal management and for handling
In 2022, Santander will undergo the Single Supervisory Mechanism’s
(SSM) climate and environmental risk stress test. It will have three
modules: a qualitative questionnaire; climate risk metrics; and
bottom-up stress test projections. Although it may be qualitatively
introduced into the Supervisory review and evaluation process
(SREP), it is an overall learning exercise without direct quantitative
implications about capital. To carry it out, the Group will use a
combination of internally developed items and an external provider’s
platform and databases to quantify the financial impact of each
counterparty’s physical and transition-based risks. According to the
graph below, the platform has seven modules and is based on the
United Nations Environmental Programme Finance Initiative's (UNEP
FI) methodology and other external information. The exercises we
conduct entail both a bottom-up analysis of the customer and a top-
down analysis of portfolios by industry and geography.
Inputs
Model
Outputs
1
2
Scenario selection
Scenario expansion and country downscaling
(e.g. damage curve, transition pathways)
Financial data of
the counterparty
Revenue
Cost
Equity valuation
Sector/
geography
PD/LGD
3
Physical risk
impact
4 Transition Risk
impact
Chronic
impact
Acute impact
Carbon cost
Demand
impact
5 Competition
module
Stage 2 profit
revenue, costs
6
Integration
module
PD: Probability of default. LGD: Loss given default. SSM: Single supervisory mechanism - European Central Bank Banking supervision
Financial data of the
counterparty after climate
stress
Cost
Equity valuation
7
Credit risk modelling
Stressed PD & LGD
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Furthermore, Santander UK took part in the Bank of England’s
Climate Biennial Exploratory Scenario (CBES) in 2021. The CBES
marks the first time Santander UK conducted an analysis of climate
scenarios in what became a learning exercise. That enables us to
measure the dimension of our portfolios’ climate change-related
risks and understand the challenges involved.
The CBES required three scenario models exploring many
combinations of physical and transition-based risks over 30 years. It
also required closer contact with customers to better understand
their plans to adapt to climate change and reflect them in final risk
models. Focus was on credit risk and, in particular, on detailed
analyses of risks to large corporates.
In response to the CBES, Santander UK set out its target operating
model, created internal climate-related risk models, engaged with
providers specializing in climate modelling, obtained internal and
market data to include them within models, and involved hundreds
of employees and customers. Its CBES exercise followed a sound
governance and control framework. We expect the Bank of England
will publish its findings in May 2022.
Mitigation
In mitigation, we updated our environmental, social and climate
change policy, which sets out our public commitments and aims to
support our strategy for sensitive, special-attention and prohibited
industries. Our loan approval policies follow the EBA's guidelines on
loan origination and monitoring.
Our internal taxonomy is also considered a mitigating instrument
since it helps us inform our customers of the need to have credible
plans in place to cease carbon-based activities in the coming years
and ensure an orderly transition. The sustainable finance
classification system (SFCS) is our internal guide to identify
sustainable activities and ensures a blanket approach to monitoring
operations, supporting the development of solutions for customers
and mitigating the risk of greenwashing. It is also key to designing
our sustainable financing proposition and supplements our Global
sustainable bond framework and Green finance commitment.
Furthermore, for credit approvals, the first line of defence runs due
diligence with several special questionnaires. If the process reveals a
reputational issue, it will be escalated to the Reputational risk team
as a preventative measure. All project finance transactions with SCIB
must be analysed according to the Equator Principles (for more
details about Santander’s commitment to the Equator Principles, see
section ‘Environmental and social risk analysis’ in the Responsible
banking chapter).
For 2022, we have planned several measures to continue including
climate and environmental variables in credit approvals:
• Credit committees: Subsidiary committees will inquire about
environmental, social and climate change factors.
• Customer ratings: They aim to ensure all SCIB corporate ratings
include environmental, social and climate change factors. We will
broaden the scope to retail banking (corporates). Environmental,
social and climate change analysis is gradually being introduced
into pricing based on companies’ ratings. However, pricing for
green mortgages and other special products already provides
discounts under certain conditions.
• Collateral: Collateral valuation includes energy certificates.
A corporate multidisciplinary working group is analysing and
monitoring the most significant claims and disputes, including those
related to climate change management that could have an impact on
Santander’s reputation. Its work includes mitigation plans and
escalations according to the established governance.
Santander takes part in international regulatory and supervisory
forums and working groups to assess climate risks and opportunities,
while anticipating and mitigating potential risks to the Group.
Lastly, the Risk function increased the number and capabilities of its
resources to manage and monitor climate and environmental risk, for
which specialist training proved fundamental. Furthermore, we will
gradually give most employees general training in 2022 to raise their
awareness. Our Risk pro culture will be essential. In 2022, we also
hope to progress our policy on incentives/remuneration tied to
climate-related risk management and control.
Reporting
Santander continues to make progress on internal and external
disclosures to ensure communications to stakeholders on climate
and environmental risk progress are transparent and accurate
according to the law and supervisors’ expectations.
Our external reports such as the 2021 Climate finance report (that
explains Santander’s position and strategy on climate change) and
this Annual report highlight the progress we made climate and
environmental risk. We are also working on areas that are closely
related to external disclosures such as the green asset ratio (GAR),
transparency requirements of the sustainable finance disclosure
regulation (SFRD) and climate disclosure requirements under Pillar
III. Because of the increasing interest in, and scrutiny of, climate and
environmental risk, information on climate-related and
environmental risk is becoming more important to the Group’s senior
managers.
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Glossary
1LoD
2019 AGM
2020 AGMs
2021 AGM
2022 AGM
2Dii
2LoD
Act 5/2021
Active customer
ADS
AEAT
AI
ALCO
ALM
AML
API
APM
April 2020 AGM
APS
ASF
ASR
AT1
ATM
ATOMIC
Available capital
B2B2C
B2C
Banco Popular/Popular
Basel or Basel Committee
BAU
BBLS
BCBS
BCMS
BCP
BIS
BMR
Bn
BNDES
BOE
BoE
bps
BRRD
First Line of Defence
Annual general meeting held on 12 April 2019
April 2020 AGM and October 2020 AGM
Annual general meeting held on March 26 2021
Annual general meeting called for 31 March on first call or on 1April on second call
2 Degree Investing Initiative
Second Line of Defence
Law (Act) 5/2021 of 12 April, amending the revised Spanish Companies Act and other financial
regulation in regard to the fostering of long-term shareholder engagement by listed companies
Those customers who comply with balance, income and/or transactionality demanded minimums
defined according to the business area
American Depositary Shares
Agencia Estatal de Administración Tributaria
Artificial Intelligence
Asset-Liability Committee
Asset and Liability Management
Anti-money laundering
Application Programming Interface
Alternative Performance Measure
Annual general meeting held on 3 April 2020
Amherst Pierpont Securities
Available Stable Funding
Recovered write-off assets (Activos en suspenso recuperados)
Additional Tier 1
Automated teller machine
Advanced Target Operating Models in Collaboration
The volume of own funds Grupo Santander deems eligible under management criteria to meet its
capital needs
Business to business to customer
Business to customer
Banco Popular Español, S.A., a bank whose share capital was acquired by Banco Santander, S.A. on 7
June 2017 and was merged into Santander in September 2018
The Basel Committee on Banking Supervision
Business as usual
Bounce Back Loans
Basel III leverage ratio framework
Business Continuity Management System
Business continuity plans
Bank for International Settlements
EU Benchmark Regulation
Billion (1,000,000,000)
Banco Nacional de Desenvolvimiento Económico y Social
Official State Bulletin
Bank of England
basis points
Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions
and investment firms, as amended from time to time
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BSI
CAE
CAF
CAO
CaR
Capital requirements
CARF
CBES
CCCA
CCM
CCMV
CCO
CCP
CCPS
CCR
CCSM
CDI
CDS
CEB
CEO
CER
CET1
CFO
CHF
CIB
CIO
CNMV
COFINS
COMEX
COP26
Corporate Centre
Corporation
COSO
Cost of capital
CPGF
CRD IV
CRD V
CRE
CRM
CRO
CRR
CRS
CSA
CSLL
CTO
CVA
Banco Santander Internacional
Chief audit executive
Development Bank of Latin America
Chief accounting officer
Capital at Risk
The minimum volume of own funds required by the regulator to ensure solvency based on credit,
market and operational risks
Conselho Administrativo de Recursos Fiscais
Climate Biennial Exploratory Scenario
Collective Commitment to Climate Action
Capability Maturity Model
Code of conduct in the stock markets
Chief compliance officer
Central Counterparties
Contingent convertible preferred securities
Counterparty credit risk
Code of conduct in security markets
Crest Depositary Interests
Credit Default Swaps
Council of Europe Development Bank
Chief executive officer
Credit equivalent risk
Common equity tier 1
Chief financial officer
Swiss currency
Corporate & Investment Banking
Chief information officer
Spanish stock market authority (Comisión Nacional del Mercado de Valores)
Contribuiçao para Financiamento da Seguridade Social
Commodity Exchange
UN Climate change conference
Our headquarters in Boadilla and business segment as described in section 4.1 ‘Description of
segments’ in the Economic and financial review chapter.
All the governing bodies, organizational structures and employees entrusted by Banco Santander,
S.A. to exercise oversight and control across the entire Group, including those functions typically
associated with the relationship between a parent company and its subsidiaries.
Committee of Sponsoring Organizations of the Tradeway Commission
The minimum return investors (shareholders) require as compensation for the opportunity cost and
risk of investing in Santander. It represents a 'cut-off rate' or 'minimum return', which allows
analysts to compare business units' performance and analyse efficiency
Corporate Products Governance Forum
The prudential framework established by the CRD and CRR currently in force
Amendment to the CRD IV package
Credit Risk Equivalent
Customer Relationship Management
Chief risk officer
Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms, as
amended from time to time
The Common Reporting Standard approved by the OECD Council on 15 July 2014
Credit Support Annex
Social Contribution on Net Income
Chief technology officer
Credit Valuation Adjustment
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DCB
D&I
DI
Digital customers
DLP
Dodd-Frank Act
DTA
DVA
E&S
EAD
EBA
EBRD
ECB
ECB Recommendation III
ECL
EIB
EISM
Eligible capital
EMIR
EONIA
EPS
ERC
ES
ESG
ESMA
ESRM
ETF
EU
EVA
EVE
EWIs
Expected loss
FATCA
FATF
FCA
FCA Group
FCC
FEBEF
FED
Final Cash Dividend
First Buyback Programme
FROB
FRTB
Digital Consumer Bank
Diversity & inclusion
Debt to Income
Every consumer of a commercial bank’s services who has logged on to their personal online banking
and/or mobile banking in the last 30 days.
Data Leakage Protection
The US Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
Deferred Tax Asset
Debt Valuation Adjustment
Environmental and social
Exposure at Default
European Banking Authority
European Bank for Reconstruction and Development
European Central Bank
Recommendation that the ECB issued on 15 December 2020 to repeal ECB Recommendations I and II
and ask the European credit institutions it supervises to exercise extreme prudence when deciding
on, or paying out, dividends; or performing share buybacks to remunerate shareholders
Expected credit loss
European Investment Bank
Global Systematic Important Bank
The amount of own funds considered eligible by the regulator to meet capital requirements,
principally accounting capital and reserves
Regulation (EU) 648/2012 on OTC derivatives, central counterparties and trade repositories, as
amended from time to time
Euro Overnight Index Average
Earnings Per Share
Executive risk committee
Expected Shortfall
Environmental, Social and Governance
European Securities and Markets Authority
Environmental and social risk management
Exchange Traded Funds
European Union
Economic value added. It is measured by profit generated in excess of the cost of economic capital.
Grupo Santander adds economic value when the RoRAC exceeds its cost of capital; otherwise, value
is destroyed. EVA measures absolute risk-adjusted returns (in monetary units), which complements
the RoRAC approach
Economic Value of Equity
Early Warning Indicators
Loss due to insolvency that an entity may suffer on average over an economic cycle. It considers
insolvency a cost that can be reduced by proper loan approval
Foreign Account Tax Compliance Act
Financial Action Task Force
Financial Conduct Authority
Fiat Chrysler Automobiles
Financial Crime Compliance
Fundación Española de Banca para Estudios Financieros
Federal Reserve
The final cash dividend of 0.10 euros per share put to a vote by the board in February 2020 at the
April 2020 AGM
On September 2021 the board resolved to execute a shares buyback programme worth up to 841
million euros as part of shareholder remuneration charged against 2021
Fondo de Reestructuración Ordenada Bancaria
Fundamental Review of the Trading Book
Annual report 2021 506
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
Financial Stability Board
Fair value
Foreign Exchange
Green Asset Ratio
Global Systematic Important Bank
Pound sterling
General Code of Conduct
Group chief compliance officer
Group chief risk officer
Gross Domestic Product
General Data Protection Regulation
Global Anti-Base Erosion
Global master repurchase agreement
Global Merchant Services
Global Public Policy Committee
Great Place to Work
Governance, risk and compliance
Global Reporting Initiative
Group-Subsidiary Governance Model
Global Trade Services
High Quality Liquid Assets
Human Resources
International Accounting Standards
International Accounting Standards Board
Interbank offered rates
Internal Capital Adequacy Assessment Process
Accounting and Audit Institute (Instituto de Contabilidad y Auditoría de Cuentas)
Internal control over financial reporting
Instituto de Crédito Oficial
Information and Communication Technology
Identification
Other executives whose activities may have a significant impact on the Group's risk profile
International Finance Corporation
Instituciones financieras internacionales
International Financial Reporting Standards (IFRS) as adopted in the EU pursuant to Regulation (EC)
1606/2002 on the application of international accounting standards, as amended from time to time
Internal Liquidity Adequacy Assessment Process
Internal Model Approach
International Monetary Fund
Internal Model Inspections
Principles for financial benchmarks
Intergovernmental Panel on Climate Change
Initial Public Offering
Internal Rating Based
Incremental Risk Charge
Internal Risk Control System
Imposto de Renda Pessoa Jurídica
Internal rate of return
Interest rate risk of the banking book
Internal Revenue Service
International Swaps and Derivatives Association
International Securities Market Association
Annual report 2021 507
FSB
FV
FX
GAR
G-SIB
GBP
GCC
GCCO
GCRO
GDP
GDPR
GloBe
GMRA
GMS
GPPC
GPTW
GRC
GRI
GSGM
GTS
HQLA
HR
IAS
IASB
IBORs
ICAAP
ICAC
ICFR
ICO
ICT
ID
Identified Staff
IFC
IFI
IFRS
ILAAP
IMA
IMF
IMIs
IOSCO
IPCC
IPO
IRB
IRC
IRCS
IRPJ
IRR
IRRBB
IRS
ISDA
ISMA
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
IT
ITS
JPY
KPI
KRI
LCR
LDA
Leverage ratio
LGD
LIBOR
Loyal customers
LTD
LTV
M/LT
MiFID II
Mn
MRAP
MREL
MRM
MtM
MXN
NACE
NCAs
NDoD
NFRD
NGFS
NGO
NII
Nominal cap
NPLs
NPS
NSFR
NYSE
o/w
OCI
October 2020 AGM
OECD
OM
ONP
OP
OR
OSLA
OSSG
OTC
PB
P&L
PACTA
PCAOB
Information technology
Internal technical standards
Japanese currency
Key performance indicator
Key Risk Indicators
Liquidity Coverage Ratio
Loss Distribution Approach
This regulatory metric compares a bank's size to its capital to measure how sound and robust it is,
dividing Tier1 capital by the leverage exposure. This takes into account balance sheet size with some
adjustments for derivatives, funding of securities operations and off-balance sheet items
Loss Given Default
London Interbank Offer Rate
Active customers who receive most of their financial services from the Group according to the
commercial segment to which they belong. Various engaged customer levels have been defined
taking profitability into account.
Loan to Deposit ratio
Loan to Value
Medium and long-term
Markets in Financial Instruments Directive.
Million
Market Risk Advanced Platform
Minimum requirement for own funds and eligible liabilities which is required to be met under the
BRRD
Model Risk Management
Mark-to-Market
Mexican peso
Statistical classification of economic activities in the European Community
National competent authority
New definition of default
Non-financial reporting directive
Network for Greening the Financial System
Non-governmental organization
Net Interest Income
Maximum nominal amount of a risk operation, excluding market transactions
Non-performing loans
Net promoter score
Net stable funding ratio
New York Stock Exchange
Of which
Originated Credit Impairment
Annual meeting held on 27 October 2020
Organization for Economic Co-operation and Development
Organised Markets
Ordinary net profit
Operational risk
Operational risk
Overseas Securities Lender’s Agreement
Official Sector Steering Group
Over the counter
Private Banking
Profit and Loss
Paris Agreement Capital Transition Assessment
Public Company Accounting Oversight Board
Annual report 2021 508
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
PD
People supported in our
communities
PFE
PIS
PIT
PIT
PLN
POCI
POS
pp
PPI
PPNR
PPP
PRA
PRI
PSD2
PwC
R&D&i
RAF
RAS
RCC
RCSA
RDA
REC
RIA
RoA
RoE
RoRAC
RoRWA
RoTE
RPA
RRS
RSF
Rules and regulations of the
board
Rules and regulations of the
general meeting
RWAs
S&P 500
SAM
Santander Consumer US
SBNA
SC USA
SCAN
SCF
SCIB
Probability of Default
The Bank has devised a corporate methodology tailored to Santander’s requirements and specific
model for contributing to society. This methodology identifies a series of principles, definitions and
criteria to allow the Bank to consistently keep track of those people who have benefited from the
programmes, services and products with a social and/or environmental component promoted by the
Bank. This methodology has been reviewed by an external auditor.
Potential Future Exposure (posible exposición futura)
Programa de Integraçao Social
Point in time
Point-in-time
Polish Zloty
Purchased or Originated Credit Impaired
Point of sale
percentage point
Payment protection insurance
Pre-provision net revenues
Paycheck Protection Program
UK Prudential Regulatory Authority
Principles for responsible Investment
Payment Services Directive II
PricewaterhouseCoopers Auditores, S.L.
Research, development and innovation
Risk appetite framework
Risk appetite statement
Risk control committee
Risk control self-assessment
Risk Data Aggregation
Equivalent risk of credit
Risk Identification and Assessment
Return on assets. Ratio between net income and total average assets, or the amount of financial and
operational income a company receives in a financial year as compared to the average of the
company's total assets. The ratio is considered to be an indicator of how effectively a company is
using its assets to generate earnings
Return on equity
Return (net of tax) on economic capital required internally
Return (net of tax) on risk weighted assets for a particular business. Grupo Santander uses RoRWA to
establish strategies to allocate regulatory capital for maximums returns
Return on tangible equity
Risk profile assessment
Risk Reporting Structure
Required Stable Funding
Rules and regulations of the board of directors of Banco Santander, S.A.
Rules and regulations of the general meeting of Banco Santander, S.A.
Risk weighted assets
The S&P 500 index maintained by S&P Dow Jones Indices LLC
Santander Asset Management
Santander Consumer USA Holdings Inc.
Santander Bank N.A.
Santander Consumer US
Santander Customer Assessment Note
Santander Consumer Finance
Santander Corporate & Investment Banking
Annual report 2021 509
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
SCPs
SCS
SDE
SDG
SEA
SEC
Second Buyback Programme
Self-imposed capital
requirement
SELIC
SHUSA
SICR
SIS
SLA
SMEs
SOX
Spanish Companies Act
Spanish Corporate
Governance Code
Spanish Securities Markets
Act
SPF
SRB
SREP
SRF
SRI
SRT
SSM
ST
STEM
STF
STR
SVaR
T&O
T2
TCFD
TLAC
TLTRO
TOM
TRIM
TSR
UAI
UK
UN SDG
UNEP FI
US
USD
VaE
VaR
Strategic commercial plans
Success case studies
Santander Dividendo Elección
Sustainable Development Goals
Securities Exchange Act
Securities and Exchange Commission
On 24 February 2022 the board resolved to execute a shares repurchase programme for an amount
of 865 million euros as part of shareholder remuneration charged against 2021
The minimum volume of own funds Grupo Santander requires, for a given level of probability, to
absorb unexpected losses resulting from its current exposure to risks, including risks not considered
in regulatory capital
Sistema Especial de Liquidaçâo e Custodia (Brasil)
Santander Holdings USA, Inc.
Significant increase of credit risk
Santander Investment Securities
Service Level Agreement
Small and medium enterprises
Sarbanes-Oxley Act of 2002
Consolidated text of the Spanish Companies Act approved by Royal Legislative Decree 1/2010, of 2
July
CNMV's Good Governance Code for Listed Companies
Consolidated text of the Spanish Securities Markets Act approved by Royal Legislative Decree
4/2015, of 23 October
Simple, Personal and Fair
European Single Resolution Board
Supervisory Review and Evaluation Process
Single Resolution Fund
Socially Responsible Investment
Significant Risk Transfer
Single Supervisory Mechanism, the system of banking supervision in Europe. It comprises the ECB
and the national supervisory authorities of the participating countries.
Short-term
Science, Technology, Engineering and Mathematics
Supreme Federal Court of Brazil
Short-term interest rate
Stressed value at risk
Technology and operations
Tier 2
Task Force on Climate-related Financial Disclosures
The total loss-absorbing capacity requirement which is required to be met under the CRD V package
Targeted longer-term refinancing operations
Target Operational Model
Targeted Review of Internal Models
Total Shareholder Return
Real Estate Unit in Spain
United Kingdom
United Nations Sustainable Development Goals
United Nations Environmental Program Financial Initiative
United States of America
United States dollar
Value at Earnings
Value at Risk
Annual report 2021 510
Contents
Responsible
banking
Corporate
governance
Economic and
financial review
Risk management
and compliance
VAT
Volcker Rule
VPN
WBCSD
WFH
WM&I
Wolfsberg group
YoY
Value Added Tax
Section 619 of the Dodd-Frank Act
Virtual Private Network
World Business Council for Sustainable Development
Working From Home
Wealth Management and Insurance
Association of thirteen global banks which aims to develop frameworks and guidance for the
management of financial crime risks
Year over year
Annual report 2021 511
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Auditor's report
and consolidated
financial statements
Annual report 2021 512
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Auditor’s report
Consolidated financial statements
Consolidated balance sheets as of 31 December
2020, 2019 and 2018
Consolidated income statements for the years
ended 31 December 2020, 2019 and 2018
Consolidated statements of recognised income and
expense for the years ended 31 December 2020,
2019 and 2018
Consolidated statements of changes in total equity
for the years ended 31 December 2020, 2019
and 2018
Consolidated statements of cash flows for the years
ended 31 December 2020, 2019 and 2018
Notes to the consolidated financial
statements
1. Introduction, basis of presentation of the
consolidated financial statements (consolidated
annual accounts) and other information
2. Accounting policies
3. Santander Group
4. Distribution of the Bank’s profit, shareholder
remuneration scheme and earnings per share
5. Remuneration and other benefits paid to the
Bank’s directors and senior managers
6. Loans and advances to central banks and credit
institutions
7. Debt instruments
8. Equity instruments
9. Trading Derivatives (assets and liabilities)
and short positions
10. Loans and advances to customers
11. Trading derivatives
12. Non-current assets
13. Investments
14. Insurance contracts linked to pensions
15. Liabilities and assets under insurance contracts
and reinsurance assets
16. Tangible assets
17. Intangible assets – Goodwill
18. Intangible assets - Other intangible assets
19. Other assets
20. Deposits from central banks and credit
institutions
21. Customer deposits
22. Marketable debt securities
23. Subordinated liabilities
24. Other financial liabilities
514
525
525
529
531
532
538
540
541
547
588
591
593
607
608
610
611
611
617
617
617
619
619
621
624
627
628
629
629
630
635
637
25. Provisions
26. Other liabilities
27. Tax matters
28. Non-controlling interests
29. Other comprehensive income
30. Shareholders’ equity
31. Issued capital
32. Share premium
33. Accumulated retained earnings
34. Other equity instruments and own shares
35. Memorandum items
36. Hedging derivatives
37. Discontinued operations
38. Interest income
39. Interest expense
40. Dividend income
41. Commission income
42. Commission expense
43. Gains or losses on financial assets and liabilities
44. Exchange differences, net
45. Other operating income and expenses
46. Staff costs
47. Other general administrative expenses
48. Gains or losses on non financial assets, net
49. Gains or losses on non-current assets held for
sale not classified as discontinued operations
50. Other disclosures
51. Main and secondary segments reporting
52. Related parties
53. Risk management
54. Explanation added for translation to English
Appendix
Appendix I. Subsidiaries of Banco Santander, S.A.
Appendix II. Societies of which the Group owns more
than 5%, entities associated with Grupo Santander
and jointly controlled entities
Appendix III. Issuing subsidiaries of shares and
preference shares
Appendix IV. Notifications of acquisitions and
disposals of investments in 2019
Appendix V. Other information on the Group’s banks
Appendix VI. Annual banking report
638
652
652
659
660
666
666
667
667
668
668
669
692
692
692
693
693
693
693
694
695
695
701
701
701
702
713
727
754
766
767
768
790
796
797
798
804
Annual report 2021 513
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Auditor's
report
Annual report 2021 514
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 515
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 516
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 517
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 518
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 519
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 520
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 521
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 522
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Annual report 2021 523
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Consolidated
financial statements
Annual report 2021 524
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Translation of the consolidated annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and
54). In the event of a discrepancy, the Spanish- version prevails.
Grupo Santander
CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2021, 2020 AND 2019
EUR million
ASSETS
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND
FINANCIAL ASSETS HELD FOR TRADING
Derivatives
Equity instruments
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
NON-TRADING FINANCIAL ASSETS MANDATORILY AT
FAIR VALUE THROUGH PROFIT OR LOSS
Equity instruments
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Equity instruments
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
FINANCIAL ASSETS AT AMORTIZED COST
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
HEDGING DERIVATIVES
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN
PORTFOLIO HEDGES OF INTEREST RATE RISK
Note
20
9 and 11
8
7
6
6
10
8
7
6
6
10
7
6
6
10
8
7
6
6
10
7
6
6
10
36
36
2021
2020*
2019*
210,689
116,953
54,292
15,077
26,750
20,834
3,608
10,397
6,829
5,536
4,042
957
537
—
—
537
15,957
2,516
13,441
—
3,152
10,289
153,839
114,945
67,137
9,615
37,894
101,067
108,230
63,397
12,437
32,041
299
—
3
296
4,486
3,234
700
552
—
—
552
48,717
2,979
45,738
9,481
12,136
24,121
355
—
—
355
4,911
3,350
1,175
386
—
—
386
62,069
3,186
58,883
6,473
21,649
30,761
108,038
120,953
125,708
2,453
97,922
7,663
—
—
2,783
2,863
108,903
118,405
9,267
4,440
—
—
—
—
7,663
9,267
4,440
1,037,898
958,378
995,482
35,708
26,078
29,789
1,002,190
932,300
965,693
15,657
39,169
12,499
37,838
18,474
40,943
947,364
881,963
906,276
4,761
8,325
7,216
410
1,980
1,702
Annual report 2021 525
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2021, 2020 AND 2019
EUR million
ASSETS
INVESTMENTS
Joint venture entities
Associated entities
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS
TANGIBLE ASSETS
Property, plant and equipment
For own-use
Leased out under an operating lease
Investment properties
Of which leased out under an operating lease
INTANGIBLE ASSETS
Goodwill
Other intangible assets
TAX ASSETS
Current tax assets
Deferred tax assets
OTHER ASSETS
Insurance contracts linked to pensions
Inventories
Other
NON-CURRENT ASSETS HELD FOR SALE
TOTAL ASSETS
Note
13
15
16
16
17
18
27
14
19
12
2021
7,525
1,692
5,833
283
33,321
32,342
13,259
19,083
979
839
16,584
12,713
3,871
25,196
5,756
19,440
8,595
149
6
8,440
4,089
2020
7,622
1,492
6,130
261
32,735
31,772
13,213
18,559
963
793
15,908
12,471
3,437
24,586
5,340
19,246
11,070
174
5
10,891
4,445
2019
8,772
1,325
7,447
292
35,235
34,262
15,041
19,221
973
823
27,687
24,246
3,441
29,585
6,827
22,758
10,138
192
5
9,941
4,601
1,595,835
1,508,250
1,522,695
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated balance sheet as of 31 December 2021.
Annual report 2021 526
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2021, 2020 AND 2019
EUR million
LIABILITIES
FINANCIAL LIABILITIES HELD FOR TRADING
Derivatives
Short positions
Deposits
Central banks
Credit institutions
Customers
Marketable debt securities
Other financial liabilities
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
Deposits
Central banks
Credit institutions
Customers
Marketable debt securities
Other financial liabilities
Memorandum items: subordinated liabilities
FINANCIAL LIABILITIES AT AMORTIZED COST
Deposits
Central banks
Credit institutions
Customers
Marketable debt securities
Other financial liabilities
Memorandum items: subordinated liabilities
HEDGING DERIVATIVES
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN
PORTFOLIO HEDGES OF INTEREST RATE RISK
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS
PROVISIONS
Pensions and other post-retirement obligations
Other long term employee benefits
Taxes and other legal contingencies
Contingent liabilities and commitments
Other provisions
TAX LIABILITIES
Current tax liabilities
Deferred tax liabilities
OTHER LIABILITIES
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE
TOTAL LIABILITIES
Note
9 and 11
9
20
20
21
22
24
20
20
21
22
24
23
20
20
21
22
24
23
36
36
15
25
27
26
2021
79,469
53,566
12,236
13,667
1,038
6,488
6,141
—
—
32,733
27,279
607
1,064
25,608
5,454
—
—
2020*
81,167
64,469
16,698
2019*
77,139
63,016
14,123
—
—
—
—
—
—
48,038
43,598
2,490
6,765
34,343
4,440
—
—
—
—
—
—
—
—
60,995
57,111
12,854
9,340
34,917
3,758
126
—
1,349,169
1,248,188
1,230,745
1,078,587
990,391
942,417
139,757
112,804
52,235
62,620
62,468
90,501
886,595
814,967
789,448
240,709
230,829
258,219
29,873
26,196
5,463
248
770
9,583
3,185
1,242
1,996
733
2,427
8,649
2,187
6,462
26,968
21,880
6,869
286
910
30,109
21,062
6,048
269
739
10,852
13,987
3,976
1,751
2,200
700
2,225
8,282
2,349
5,933
6,358
1,382
3,057
739
2,451
9,322
2,800
6,522
12,698
12,336
12,792
—
—
—
1,498,782
1,416,928
1,412,036
Annual report 2021 527
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2021, 2020 AND 2019
EUR million
EQUITY
SHAREHOLDERS´ EQUITY
CAPITAL
Called up paid capital
Unpaid capital which has been called up
SHARE PREMIUM
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL
Equity component of the compound financial instrument
Other equity instruments issued
OTHER EQUITY
ACCUMULATED RETAINED EARNINGS
REVALUATION RESERVES
OTHER RESERVES
Reserves or accumulated losses in joint venture investments
Others
(-) OWN SHARES
PROFIT OR LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
(-) INTERIM DIVIDENDS
OTHER COMPREHENSIVE INCOME OR LOSS
Items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss
NON-CONTROLLING INTEREST
Other comprehensive income or loss
Other items
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS
Loan commitments granted
Financial guarantees granted
Other commitments granted
Note
30
31
32
34
34
33
33
33
34
4
29
28
35
2021
2020*
2019*
119,649
114,620
124,239
8,670
8,670
—
8,670
8,670
—
8,309
8,309
—
47,979
52,013
52,446
658
—
658
152
627
—
627
163
598
—
598
146
60,273
65,583
61,028
—
(4,477)
1,572
(6,049)
(894)
8,124
(836)
—
(3,596)
1,504
(5,100)
(69)
(8,771)
—
—
(3,110)
1,210
(4,320)
(31)
6,515
(1,662)
(32,719)
(33,144)
(24,168)
(4,241)
(5,328)
(4,288)
(28,478)
(27,816)
(19,880)
10,123
(2,104)
12,227
97,053
9,846
(1,800)
11,646
91,322
10,588
(982)
11,570
110,659
1,595,835
1,508,250
1,522,695
262,737
241,230
241,179
10,758
75,733
12,377
64,538
13,650
68,895
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated balance sheet as of 31 December 2021.
Annual report 2021 528
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019
EUR million
Gain or losses on financial assets and liabilities held for trading, net
43
1,141
Interest income
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Other interest income
Interest expense
Interest income/(charges)
Dividend income
Income from companies accounted for using the equity method
Commission income
Commission expense
Gain or losses on financial assets and liabilities not measured
at fair value through profit or loss, net
Financial assets at amortized cost
Other financial assets and liabilities
Reclassification of financial assets at fair value through other comprehensive income
Reclassification of financial assets at amortized cost
Other gains (losses)
Gains or losses on non-trading financial assets and liabilities mandatorily
at fair value through profit or loss
Reclassification of financial assets at fair value through other comprehensive income
Reclassification of financial assets at amortized cost
Other gains (losses)
Gain or losses on financial assets and liabilities measured
at fair value through profit or loss, net
Gain or losses from hedge accounting, net
Exchange differences, net
Other operating income
Other operating expenses
Income from assets under insurance and reinsurance contracts
Expenses from liabilities under insurance and reinsurance contracts
Total income
Administrative expenses
Staff costs
Other general administrative expenses
Depreciation and amortisation cost
Provisions or reversal of provisions, net
Note
38
(Debit) Credit
2021
2020*
46,463
2,582
40,471
3,410
45,741
2,840
40,365
2,536
2019*
56,785
3,571
48,552
4,662
39
(13,093)
(13,747)
(21,502)
33,370
31,994
35,283
40
13
41
42
43
513
432
13,812
(3,310)
628
89
539
—
—
391
(96)
13,024
(3,009)
1,107
(31)
1,138
3,211
—
—
533
324
15,349
(3,570)
1,136
308
828
1,349
—
—
1,141
3,211
1,349
132
—
—
132
270
(46)
(562)
2,255
(2,442)
1,516
(1,305)
46,404
(18,659)
(11,216)
(7,443)
(2,756)
(2,814)
82
—
—
82
(171)
51
(2,093)
1,920
(2,342)
1,452
(1,242)
44,279
(18,320)
(10,783)
(7,537)
(2,810)
(2,378)
292
—
—
292
(286)
(28)
(932)
1,797
(2,138)
2,534
(2,414)
49,229
(20,279)
(12,141)
(8,138)
(3,001)
(3,490)
43
43
43
44
45
45
45
45
46
47
16 and 18
25
Annual report 2021 529
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019
EUR million
Impairment or reversal of impairment at financial assets not measured
at fair value through profit or loss and net gains and losses from changes
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Impairment or reversal of impairment of investments in
subsidiaries, joint ventures and associates, net
Impairment or reversal of impairment on non-financial assets, net
Tangible assets
Intangible assets
Others
Gain or losses on non-financial assets and investments, net
Negative goodwill recognized in results
Gains or losses on non-current assets held for sale
not classified as discontinued operations
Operating profit/(loss) before tax
Tax expense or income from continuing operations
Profit/(loss) from continuing operations
Profit/(loss) after tax from discontinued operations
Profit/(loss) for the year
Profit/(loss) attributable to non-controlling interests
Profit/(loss) attributable to the parent
Earnings/(losses) per share
Basic
Diluted
Note
(Debit) Credit
2021
2020*
2019*
(7,407)
(12,382)
(9,352)
(19)
(19)
(12)
10
(7,388)
(12,363)
(9,340)
17 and 18
16
17 and 18
48
49
27
37
28
4
4
—
(231)
(150)
(71)
(10)
53
—
(43)
14,547
(4,894)
9,653
—
9,653
1,529
8,124
0.438
0.436
—
—
(10,416)
(1,623)
(174)
(45)
(10,242)
(1,564)
—
114
8
(171)
(2,076)
(5,632)
(7,708)
—
(7,708)
1,063
(8,771)
(0.538)
(0.538)
(14)
1,291
—
(232)
12,543
(4,427)
8,116
—
8,116
1,601
6,515
0.347
0.346
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated income statement for the year ended 31 December 2021.
Annual report 2021 530
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019
EUR million
CONSOLIDATED PROFIT/(LOSS) FOR THE YEAR
OTHER RECOGNISED INCOME AND EXPENSE
Items that will not be reclassified to profit or loss
Actuarial gains and losses on defined benefit pension plans
Non-current assets held for sale
Other recognised income and expense of investments in
subsidiaries, joint ventures and associates
Note
29
Changes in the fair value of equity instruments measured at fair value through other
comprehensive income
Gains or losses resulting from the accounting for hedges of equity instruments measured at
fair value through other comprehensive income, net
36
Changes in the fair value of equity instruments measured at fair value through other
comprehensive income (hedged item)
Changes in the fair value of equity instruments measured at fair value through other
comprehensive income (hedging instrument)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable
to changes in credit risk
Income tax relating to items that will not be reclassified
Items that may be reclassified to profit or loss
Hedges of net investments in foreign operations (effective portion)
Revaluation gains (losses)
Amounts transferred to income statement
Other reclassifications
Exchanges differences
Revaluation gains (losses)
Amounts transferred to income statement
Other reclassifications
Cash flow hedges (effective portion)
Revaluation gains (losses)
Amounts transferred to income statement
Transferred to initial carrying amount of hedged items
Other reclassifications
Hedging instruments (items not designated)
Revaluation gains (losses)
Amounts transferred to income statement
Other reclassifications
Debt instruments at fair value with changes in other comprehensive income
Revaluation gains (losses)
Amounts transferred to income statement
Other reclassifications
Non-current assets held for sale
Revaluation gains (losses)
Amounts transferred to income statement
Other reclassifications
Share of other recognised income and expense of investments
Income tax relating to items that may be reclassified to profit or loss
Total recognised income and expenses for the year
Attributable to non-controlling interests
Attributable to the parent
29
36
36
36
29
2021
9,653
(220)
754
1,567
—
(1)
2020*
(7,708)
(9,794)
(1,018)
(25)
—
(4)
2019*
8,116
267
(1,351)
(1,677)
—
1
(171)
(917)
(29)
—
117
(117)
(99)
(542)
(974)
(1,159)
(1,159)
—
—
3,082
3,082
—
—
(938)
(1,739)
801
—
—
—
—
—
—
(3,250)
(3,063)
(545)
358
—
—
—
—
19
1,272
9,433
1,255
8,178
—
4
(4)
31
(103)
(8,776)
2,340
2,340
—
—
(11,040)
(11,040)
—
—
(53)
799
(852)
—
—
—
—
—
—
(100)
692
(1,165)
373
—
—
—
—
(151)
228
(17,502)
245
(17,747)
—
44
(44)
(156)
510
1,618
(1,151)
(1,151)
—
—
1,232
1,232
—
—
8
(1,104)
1,112
—
—
—
—
—
—
2,414
2,588
(792)
618
—
—
—
—
(15)
(870)
8,383
1,911
6,472
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated statement of recognised income and expense for the year ended 31 December
2021.
Annual report 2021 531
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019
EUR million
Balance at 31 December 2020*
Adjustments due to errors
Adjustments due to changes in accounting policies
Opening balance at 1 January 2021*
Total recognised income and expense
Other changes in equity
Issuance of ordinary shares
Issuance of preferred shares
Issuance of other financial instruments
Maturity of other financial instruments
Conversion of financial liabilities into equity
Capital reduction
Dividends
Purchase of equity instruments
Disposal of equity instruments
Transfer from equity to liabilities
Transfer from liabilities to equity
Transfers between equity items
Increases (decreases) due to business combinations
Share-based payment
Others increases or (-) decreases in equity
Balance at 31 December 2021
Capital
8,670
—
—
Share
premium
52,013
—
—
8,670
52,013
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(4,034)
—
—
—
—
—
—
(477)
—
—
—
—
(3,557)
—
—
—
8,670
47,979
Equity
instruments
issued (not
capital)
Other equity
instruments
627
—
—
627
—
31
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31
658
163
—
—
163
—
(11)
—
—
—
—
—
—
—
—
—
—
—
—
—
(62)
51
152
Accumulated
retained
earnings
65,583
—
—
65,583
—
(5,310)
—
—
—
—
—
—
—
—
—
—
—
(5,310)
—
—
—
60,273
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2021.
Annual report 2021 532
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Revaluation
reserves
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
(3,596)
—
—
(3,596)
—
(881)
—
—
—
—
—
—
—
—
23
—
—
(275)
—
—
(629)
(4,477)
Profit
attributable to
shareholders
of the parent
(-) Own
shares
(-) Interim
dividends
Other
comprehensive
income
Other
comprehensive
income
Other items
Non-controlling interest
(69)
—
—
(69)
—
(825)
—
—
—
—
—
—
—
(1,645)
820
—
—
—
—
—
—
(8,771)
—
—
(8,771)
8,124
8,771
—
—
—
—
—
—
—
—
—
—
—
8,771
—
—
—
—
—
—
—
—
(836)
—
—
—
—
—
—
(836)
—
—
—
—
—
—
—
—
(33,144)
(1,800)
11,646
—
—
(33,144)
54
371
—
—
(1,800)
(274)
(30)
—
—
11,646
1,529
(948)
—
—
—
—
—
—
—
—
—
—
—
371
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(30)
—
—
—
17
—
—
—
—
—
(648)
—
—
—
—
30
(5)
—
(342)
Total
91,322
—
—
91,322
9,433
(3,702)
17
—
—
—
—
—
(1,961)
(1,645)
843
—
—
—
(5)
(62)
(889)
(894)
8,124
(836)
(32,719)
(2,104)
12,227
97,053
Annual report 2021 533
Contents
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019
EUR million
Balance at 31 December 2019*
Adjustments due to errors
Adjustments due to changes in accounting policies
Opening balance at 1 January 2020*
Total recognised income and expense
Other changes in equity
Issuance of ordinary shares
Issuance of preferred shares
Issuance of other financial instruments
Maturity of other financial instruments
Conversion of financial liabilities into equity
Capital reduction
Dividends
Purchase of equity instruments
Disposal of equity instruments
Transfer from equity to liabilities
Transfer from liabilities to equity
Transfers between equity items
Increases (decreases) due to business combinations
Share-based payment
Others increases or (-) decreases in equity
Balance at 31 December 2020*
Capital
8,309
—
—
Share
premium
52,446
—
—
8,309
52,446
—
361
361
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(433)
(72)
—
—
—
—
—
(361)
—
—
—
—
—
—
—
—
8,670
52,013
Equity
instruments
issued (not
capital)
Other equity
instruments
598
—
—
598
—
29
—
—
—
—
—
—
—
—
—
—
—
—
—
—
29
627
146
—
—
146
—
17
—
—
—
—
—
—
—
—
—
—
—
—
—
(53)
70
163
Accumulated
retained
earnings
61,028
—
—
61,028
—
4,555
—
—
—
—
—
—
—
—
—
—
—
4,555
—
—
—
65,583
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2021.
Annual report 2021 534
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Profit
attributable to
shareholders
of the parent
(-) Own
shares
(-) Interim
dividends
Other
comprehensive
income
Other
comprehensive
income
Other items
Total
Non-controlling interest
6,515
(1,662)
(24,168)
(982)
11,570
110,659
Revaluation
reserves
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
(3,110)
—
—
(3,110)
—
(486)
70
—
—
—
—
—
—
—
1
—
—
298
—
—
(855)
(3,596)
(31)
—
—
(31)
—
(38)
—
—
—
—
—
—
—
(758)
720
—
—
—
—
—
—
—
—
6,515
(8,771)
(6,515)
—
—
(1,662)
—
1,662
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(6,515)
1,662
—
—
—
—
—
—
—
(69)
(8,771)
—
—
(24,168)
(8,976)
—
—
(982)
(818)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11,570
1,063
(987)
5
—
—
—
—
—
(465)
—
—
—
—
—
(54)
—
(473)
(33,144)
(1,800)
11,646
—
—
110,659
(17,502)
(1,835)
364
—
—
—
—
—
(826)
(758)
721
—
—
—
(54)
(53)
(1,229)
91,322
Annual report 2021 535
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019
EUR million
Balance at 31 December 2018*
Adjustments due to errors
Adjustments due to changes in accounting policies
Opening balance at 1 January 2019*
Total recognised income and expense
Other changes in equity
Issuance of ordinary shares
Issuance of preferred shares
Issuance of other financial instruments
Maturity of other financial instruments
Conversion of financial liabilities into equity
Capital reduction
Dividends
Purchase of equity instruments
Disposal of equity instruments
Transfer from equity to liabilities
Transfer from liabilities to equity
Transfers between equity items
Increases (decreases) due to business combinations
Share-based payment
Others increases or (-) decreases in equity
Balance at 31 December 2019*
Capital
8,118
—
—
Share
premium
50,993
—
—
8,118
50,993
—
191
191
—
1,453
1,453
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,309
52,446
Equity
instruments
issued (not
capital)
Other equity
instruments
565
—
—
565
—
33
—
—
—
—
—
—
—
—
—
—
—
—
—
—
33
598
234
—
—
234
—
(88)
—
—
—
—
—
—
—
—
—
—
—
—
—
(88)
—
146
Accumulated
retained
earnings
56,756
—
—
56,756
—
4,272
—
—
—
—
—
—
(1,055)
—
—
—
—
5,327
—
—
—
61,028
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2021.
Annual report 2021 536
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Profit
attributable to
shareholders
of the parent
(-) Own
shares
(-) Interim
dividends
Other
comprehensive
income
Other
comprehensive
income
Other items
Total
Non-controlling interest
7,810
(2,237)
(24,125)
(1,292)
12,181
107,361
—
—
—
—
(2,237)
(24,125)
Revaluation
reserves
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
(1,583)
—
(391)
(1,974)
—
(1,136)
28
—
—
—
—
—
—
—
(6)
—
—
246
—
—
(1,404)
(3,110)
(59)
—
—
(59)
—
28
—
—
—
—
—
—
—
(928)
956
—
—
—
—
—
—
—
—
7,810
6,515
(7,810)
—
—
—
—
—
—
—
—
—
—
—
—
575
—
—
—
—
—
—
(1,662)
—
—
—
—
(7,810)
2,237
—
—
—
—
—
—
—
—
(1,292)
310
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(43)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(31)
6,515
(1,662)
(24,168)
(982)
—
—
12,181
1,601
(2,212)
1
—
—
—
—
(2)
(895)
—
—
—
—
—
110
—
(1,426)
11,570
—
(391)
106,970
8,383
(4,694)
1,673
—
—
—
—
(2)
(3,612)
(928)
950
—
—
—
110
(88)
(2,797)
110,659
Annual report 2021 537
Contents
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2021, 2020 Y 2019
EUR million
A. CASH FLOWS FROM OPERATING ACTIVITIES
Profit or loss for the year
Adjustments made to obtain the cash flows from operating activities
Depreciation and amortisation cost
Other adjustments
Net increase/(decrease) in operating assets
Financial assets held-for-trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Other operating assets
Net increase/(decrease) in operating liabilities
Financial liabilities held-for-trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Other operating liabilities
Income tax recovered/(paid)
B. CASH FLOWS FROM INVESTING ACTIVITIES
Payments
Tangible assets
Intangible assets
Investments
Subsidiaries and other business units
Non-current assets held for sale and associated liabilities
Other payments related to investing activities
Proceeds
Tangible assets
Intangible assets
Investments
Subsidiaries and other business units
Non-current assets held for sale and associated liabilities
Other proceeds related to investing activities
C. CASH FLOW FROM FINANCING ACTIVITIES
Payments
Dividends
Subordinated liabilities
Redemption of own equity instruments
Acquisition of own equity instruments
Other payments related to financing activities
Proceeds
Subordinated liabilities
Issuance of own equity instruments
Disposal of own equity instruments
Other proceeds related to financing activities
Note
2021
56,691
9,653
21,363
2,756
18,607
27,258
2,064
969
2020*
66,153
(7,708)
37,836
2,810
35,026
51,385
12,390
2019*
3,389
8,116
23,990
3,001
20,989
64,593
15,450
(275)
(6,098)
(32,746)
(10,314)
(9,152)
73,181
(7,058)
56,945
(1,386)
6,549
43,541
(506)
90,356
7,880
(14,316)
(10,907)
4,464
1,693
49,541
(457)
38,469
6,968
(8,858)
79,114
96,561
47,622
(6,467)
(4,012)
(3,715)
11,669
10,015
1,388
126
140
—
—
7,954
6,382
—
672
6
894
—
(3,178)
(2,946)
(7,220)
11,976
7,386
1,134
525
2,931
—
—
4,756
2,014
—
182
1,775
785
—
(7,263)
(2,593)
(7,229)
14,289
12,766
1,377
63
83
—
—
7,060
4,091
—
686
218
2,065
—
(1,322)
(1,909)
(10,122)
7,741
1,313
2,684
—
1,645
2,099
6,419
5,340
—
854
225
6,978
12,159
—
3,780
—
758
2,440
5,069
4,095
—
721
253
3,773
5,123
—
928
2,335
2,037
1,090
—
947
—
16
18
13
16
18
13
12
4
23
23
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Appendix
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2021, 2020 Y 2019
EUR million
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
G. CASH AND CASH EQUIVALENTS AT END OF THE YEAR
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR
Cash
Cash equivalents at central banks
Other financial assets
Less, bank overdrafts refundable on demand
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR
In which, restricted cash
Note
2021
5,196
56,850
153,839
210,689
2020*
(4,252)
2019*
1,366
52,772
(12,596)
101,067
153,839
113,663
101,067
8,142
7,817
193,102
137,047
9,445
—
8,975
—
8,764
75,353
16,950
—
210,689
153,839
101,067
—
—
—
* Presented for comparison purposes only (note 1.d).
The accompanying notes 1 to 54 and appendices are an integral part of the consolidated statement of cash flows for the year ended 31 December 2021.
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Notes to the consolidated
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Banco Santander, S.A., and Companies composing Grupo
Santander
Notes to the consolidated financial statements (consolidated annual
accounts) for the year ended 31 December 2021
1. Introduction, basis of presentation of the
consolidated financial statements (consolidated
annual accounts) and other information
a) Introduction
Banco Santander, S.A. ('the parent' or 'Banco Santander'), is a private-
law entity subject to the rules and regulations applicable to banks
operating in Spain, where it was constituted and currently maintains
its legal domicile, which is paseo de Pereda, numbers 9 to 12 (39004,
Santander, Spain).
The principal headquarters of Banco Santander are located in Ciudad
Grupo Santander, Avenida Cantabria s/n (28660, Boadilla del Monte,
Madrid, Spain).
The corporate purpose of Banco Santander, S.A., mainly entails
carrying out all kinds of activities, operations and services inherent to
the banking business in general and permitted by current legislation,
and the acquisition, holding, enjoyment and disposal of all kinds of
securities.
In addition to the operations carried on directly by it, Banco Santander
is the head of a group of subsidiaries that engage in various business
activities and which compose, together with it, Grupo Santander
('Santander' or 'the Group'). Therefore, Banco Santander is obliged to
prepare, in addition to its own separate financial statements, the
Group's consolidated financial statements, which also include the
interests in joint ventures and investments in associates.
At 31 December 2021, Grupo Santander consisted of 721
subsidiaries of Banco Santander, S.A. In addition, other 172
companies are associates of the Group, joint ventures or companies
of which the Group holds more than 5% (excluding the Group
companies of negligible interest with respect to the fair presentation
that the annual accounts must express).
Grupo Santander consolidated financial statements for 2019 were
approved by the shareholders at the group´s annual general meeting
on 3 April 2020. Grupo Santander consolidated financial statements
for 2020 were approved by the shareholders at the group´s annual
general meeting on 26 March 2021. The Group's 2021 consolidated
financial statements, the financial statements of the parent and of
substantially all the Group companies have not been approved yet by
their shareholders at the respective annual general meetings.
However, Banco Santander board of directors considers that the
aforementioned financial statements will be approved without any
significant changes.
b) Basis of presentation of the consolidated financial
statements
Under Regulation (EC) n.º 1606/2002 of the European Parliament
and of the Council of 19 July 2002 all companies governed by the law
of an EU Member State and whose securities are admitted to trading
on a regulated market of any Member State must prepare their
consolidated financial statements for the years beginning on or after
1 January, 2005 in conformity with the International Financial
Reporting Standards ('IFRS') previously adopted by the European
Union ('EU-IFRS').
In order to adapt the accounting system of Spanish credit institutions
with the principles and criteria established by the IFRS adopted by the
European Union ('EU-IFRS'), the Bank of Spain published circular
4/2017, dated 27 November 2017, on Public and Confidential
Financial Reporting Standards and Financial Statement Formats.
During 2021 and 2020, the Bank of Spain published Circulars 6/2021
of 22 December, 2/2020 and 3/2020 of 11 June, amending Circular
4/2017 of 27 November to credit institutions on Public and
Confidential Financial Reporting Standards and Financial Statement
Formats.
Grupo Santander consolidated financial statements for 2021 were
authorised by the Bank's directors (at the board meeting on 24
February 2022) in accordance with International Financial Reporting
Standards as adopted by the European Union and with Bank of Spain
circular 4/2017 and subsequent modifications, and Spanish corporate
and commercial law applicable to the Group, using the basis of
consolidation, accounting policies and measurement bases set forth
in note 2, accordingly, they present fairly the Group's equity and
financial position at 31 December 2021, 2020 and 2019 and the
consolidated results of its operations and the consolidated cash
flows in 2021, 2020 and 2019. These consolidated financial
statements were prepared from the accounting records kept by the
Bank and by the other Group entities, and include the adjustments
and reclassifications required to unify the accounting policies and
measurement bases applied by the Group. These consolidated
annual accounts have been prepared on the basis of the accounting
records held by the Bank and by each of the other companies of the
Group, and include the adjustments and reclassifications required to
standardise the accounting policies and valuation criteria applied by
Grupo Santander.
The notes to the consolidated financial statements contain additional
information to that presented in the consolidated balance sheet,
consolidated income statement, consolidated statement of
recognised income and expense, consolidated statement of changes
in total equity and consolidated statement of cash flows. The notes
provide, in a clear, relevant, reliable and comparable manner,
narrative descriptions and breakdowns of these statements.
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Adoption of new standards and interpretations issued
The following modifications came into force and were adopted by the
European Union in 2021:
• Amendments to IFRS 9 Financial Instruments, IAS 39 Financial
Instruments: Recognition and Measurement, IFRS 7 Financial
Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16
Leases, on Reference Interest Rates - Phase 2: The amendments
allow for the temporary application of certain exceptions to the
requirements of (i) assessment of derecognition of financial
assets, financial liabilities and lease liabilities in the event of
changes in the financial assets, financial liabilities and lease
liabilities, and (ii) exemptions from hedge accounting
requirements directly affected by the IBOR reform, requiring
additional disclosures, (iii) exemptions for lease modifications that
allow the liability to be measured using the reformed interest rate
curves against the right-of-use. These new exemptions require
additional disclosures. The amendments became effective as of 1
January 2021, with the possibility of early application and will
cease to be applicable when the uncertainties about the hedged
risks, cash flows of the financial instruments affected or the
hedging relationship is terminated. In this regard, the Group chose
to apply the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16 in the preparation of the financial statements for the year
ending 31 December 2020.
The additional breakdowns required by the amendments to IFRS 7
relating to hedging relationships are included in note 36. A
description of the Grupo Santander's management of the
transition to alternative reference rates, as well as the changes in
risk management strategy is included in note 53.
Following is a detail of the carrying amount at 31 December 2021
of financial assets, financial liabilities, derivatives and loan
commitments that continue to be referenced to the indices subject
to the IBOR Reform:
EUR million
Gross Carrying amount
Referenced to EONIA
Referenced to LIBOR
of which USD
of which GBP
TOTAL
Loans and
advances
15
45,713
39,806
2,957
45,728
Debt securities
acquired
(Assets)
68
4,325
2,749
1,570
4,393
Debt securities
issued
(Liabilities)
284
8,408
6,667
1,700
8,692
Deposits
949
9,358
8,634
253
10,307
Derivatives
(Assets)
101
11,806
8,387
3,386
11,907
Derivatives
(Liabilities)
242
17,551
11,163
4,899
17,793
Loan
Commitments
—
24,533
24,034
418
24,533
• Covid-19-Related Rent Concessions - Amendments to IFRS 16
Leases: As a result of the covid-19 pandemic, IFRS 16 is amended
to allow the lessee to apply a practical alternative and not to
consider rental concessions as a modification of the lease
agreement when the following requirements are met: the revised
consideration is the same or less than the consideration before the
change, the affected payments are prior to 30 June 2021, and
there are no substantial changes to the remaining lease terms. On
31 March 2021, the IASB published an additional amendment to
extend the scope of the practical expedient to 30 June 2022. It is
applicable from 1 April 2021.
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• Amendment to IFRS 4 Insurance Contracts, which is aimed at
extending the expiry date of the temporary exemption from
applying IFRS 9 by two years (from 1 January 2021 to 1 January
2023) for entities whose activities are predominantly insurance-
related. This achieves alignment with the effective date of IFRS 17
Insurance Contracts (1 January 2023). It is applicable from 1
January 2021.
The application of the aforementioned amendments to accounting
standards and interpretations did not have any material effects on
Grupo Santander consolidated financial statements.
Likewise, at the date of approval of these consolidated annual
accounts, the following standards which effectively came into force
have effective dates after 31 December 2021:
• Amendment to IFRS 3 Business Combinations: to update the
references to the Conceptual Framework for Financial Reporting
and add an exception for the recognition of liabilities and
contingent liabilities within the scope of IAS 37 Provisions,
Contingent Liabilities and Contingent Assets and IFRIC 21 Levies.
The amendments also confirm that an acquirer should not
recognize contingent assets acquired in a business combination. It
will apply from 1 January 2022.
• Amendment to IAS 16 Property, Plant and Equipment: prevents an
entity from deducting from the cost of an item of property, plant
and equipment any revenue from the sale of finished goods while
the entity is preparing the item for its intended use. It is also clear
that an entity is "testing whether the asset is functioning properly"
when evaluating the technical and physical performance of the
asset. The financial performance of the asset should not be taken
into account for this evaluation.
Additionally, entities should disclose separately the amounts of
income and expenses related to finished goods that are not the
product of the entity's ordinary activities. It will apply from 1
January 2022.
• Amendment to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: clarifies that the direct costs of fulfilling a
contract include both the incremental costs of fulfilling the
contract and an allocation of other costs directly related to
fulfilling contracts. Before recognising a separate provision for an
onerous contract, the entity recognises any impairment loss that
has occurred on assets used in fulfilling the contract. It will apply
from 1 January 2022.
• Amendment to IFRS Cycle (2018-2020): introduces minor
amendments, to be applied from 1 January 2022, with early
application permitted, to the following standards:
• IFRS 9 Financial Instruments: clarifies which rates must be
included in the 10% test for derecognition of financial liabilities.
• IFRS 16 Leases: amendment to remove possible confusion
regarding the treatment of leasing incentives in the application of
IFRS 16 Leases.
• IFRS 1, in relation to the first-time adoption of International
Financial Reporting Standards, allows entities that have
measured their assets and liabilities at the carrying amounts
recorded in their parent's books to also measure any cumulative
translation differences using the amounts reported by the
parent. This amendment also applies to associates and joint
ventures that have adopted the same exemption from IFRS 1.
• IFRS 17 Insurance Contracts: new general accounting standard for
insurance contracts, which includes the recognition,
measurement, presentation and disclosure of information.
Insurance contracts combine financial and service provision
features that, in many cases, generate variable long-term cash
flows. To properly reflect these characteristics, IFRS 17 combines
the measurement of future cash flows with the recording of the
result of the contract during the period in which the service is
provided, presents separately the financial results from the results
for the provision of the service and allows entities, through the
choice of an accounting policy option, to recognize the financial
results in the income statement or in other comprehensive
income. It will apply from 1 January 2023.
In addition, during 2021, although it is still pending adoption by
the European Union a transitional option relating to comparative
information presented on financial assets in the initial application
of IFRS 17, which is intended to help entities avoid temporary
accounting mismatches between the financial assets and liabilities
of insurance contracts, has been included during 2021 but is still
pending adoption by the European Union. It will apply from 1
January 2023.
Grupo Santander is still analysing the possible effects of this new
standard, however, it should be noted that no material impacts on
the consolidated financial statements of Grupo Santander have
been identified as a result of its application, except for certain
balance sheet reclassifications arising from the different treatment
that this new standard establishes for the components of an
insurance contract.
Finally, at the date of approval of these consolidated annual
accounts, the following standards which effectively come into force
after 31 December 2021 had not yet been adopted by the European
Union:
• Classification of Liabilities, amendments to IAS 1 Presentation of
Financial Statements, considering non-current liabilities those in
which the entity has the possibility of deferring payment for more
than 12 months from the closing date of the reporting period.
They must be applied retrospectively in accordance with the
normal requirements in IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors. It will apply from 1 January
2023.
• The amendments to IAS 1 Presentation of Financial Statements
require companies to disclose material information about their
accounting policies rather than their significant accounting
policies. It will be applicable from 1 January 2023.
• The amendments to IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors clarifies how to distinguish
changes in accounting policies, which are generally applied
retrospectively, from changes in accounting estimates, which are
generally applied prospectively. It will be applicable from 1
January 2023.
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• The amendments to IAS 12 Income Taxes require companies to
• The fair value of the identifiable assets acquired and the liabilities
recognise deferred tax on transactions that, on initial recognition,
give rise to equal amounts of taxable and deductible temporary
differences. In addition, entities should recognise deferred tax
assets (to the extent that it is probable that they can be utilised)
and deferred tax liabilities at the beginning of the earliest
comparative period for all deductible and taxable temporary
differences associated with:
• Right-of-use assets and lease liabilities, and
• Decommissioning, restoration and similar liabilities, and the
corresponding amounts recognised as part of the cost of the
related assets.
The cumulative effect of recognising these adjustments is
recognised in retained earnings, or another component of equity,
as appropriate. It will be applicable from 1 January 2023.
Grupo Santander is currently analysing the possible effects of these
new standards and interpretations.
All accounting policies and measurement bases with a material
effect on the consolidated financial statements for 2021 were
applied in the preparation of these consolidated annual accounts.
c) Use of critical estimates
The consolidated results and the determination of consolidated
equity are sensitive to the accounting policies, measurement bases
and estimates used by the directors of the Bank in preparing the
consolidated financial statements.
The main accounting policies and measurement bases are set forth in
note 2.
In the consolidated financial statements estimates were occasionally
made by the senior management of Grupo Santander in order to
quantify certain of the assets, liabilities, income, expenses and
obligations reported herein. These estimates, which were made on
the basis of the best information available, relate basically to the
following:
• The impairment losses on certain assets: it applies to financial
assets at fair value through other comprehensive income, financial
assets at amortised cost, non-current assets held for sale,
investments, tangible assets and intangible assets (see notes 6, 7,
10, 12, 13, 16, 17, 18 and 53).
• The assumptions used in the actuarial calculation of the post-
employment benefit liabilities and commitments and other
obligations (see note 25).
• The useful life of the tangible and intangible assets (see notes 16
and 18).
• The measurement of goodwill arising on consolidation (see note
17).
• The calculation of provisions and the consideration of contingent
liabilities (see note 25).
• The fair value of certain unquoted assets and liabilities (see notes
6, 7, 8, 9, 10, 11, 20, 21 and 22).
assumed in business combinations (see note 3).
To update the estimates described above, the Group's Management
has taken into account the current situation as a result of covid-19,
classified as a pandemic by the World Health Organization, which
significantly is affecting the economic activity worldwide and, as a
result, the Group's operations and financial results, and which
generates uncertainty in the Group's estimates. Therefore, the
Group's Management has made an assessment of the current
situation according to the best information available to date,
disclosing in the notes the main estimates made and the potential
impacts of covid-19 on them for the period ended 31 December
2021 (see notes 17, 27 and 53).
Although these estimates have been made on the basis of the best
information available at the end of the year 2021, and considering
information updated at the date of preparation of these consolidated
annual accounts, it is possible that events that may take place in the
future may make it necessary to modify them (upwards or
downwards) in the coming years, which would be done, if
appropriate, in a prospective manner, recognising the effects of the
change in estimate in the corresponding consolidated income
statement.
d) Information relating to 2020 and 2019
In July 2016, the IASB published IFRS 16, Leases, which was adopted
by the Group in accordance with the standard on 1 January 2019.
IFRS 16 establishes the principles for the recognition, measurement,
presentation and breakdown of lease contracts, with the objective of
ensuring reporting information that faithfully represents the lease
transactions.
The adoption of IFRS 16 led to changes in the Group's accounting
policies for the recognition, measurement, presentation and
breakdown of lease contracts. As a result of its adoption , the impact
of the first application recorded by Grupo Santander corresponds,
mainly, to the recognition of right-of-use for an amount of EUR 6,693
million, financial liabilities for an amount of EUR 7,084 million and a
negative impact on the Group's equity of EUR 391 million. The impact
of the first application of IFRS 16 on the ordinary capital ratio
(Common Equity Tier 1 - CET 1) was -20 bp.
Secondly, Grupo Santander chose to apply in advance for the financial
statements for the year ended 31 December 2019 the amendment
to IFRS 9, IAS 39 and IFRS 7 on Reference Interest Rates (IBOR Reform
- Phase 1). Grupo Santander applies IAS 39 for hedge accounting,
detailed below are the main assumptions or judgments made by
Grupo Santander when applying the amendments to that standard.
– For cash flow hedges, the Group has assumed that the cash flows
covered (which are based on the benchmark index) are not
modified as a result of the aforementioned reform, and therefore
continue to comply with the highly probable future transaction
requirement.
– To determine the prospective effectiveness of hedges, the Group
has assessed that the economic relationship between the hedged
item and the hedging instrument continues to exist since the
interest rate benchmark on which the hedged item and the
hedging instrument are based is not changed as a result of the
IBOR reform.
• The recoverability of deferred tax assets and the income tax
expense (see note 27).
See information regarding Phase 2 of that Reform in section b of this
note and in note 53.
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Additionally, the segment information corresponding to the year
ended 31 December 2020 and 2019 were restated for comparative
purposes in accordance with the Group's new organizational
structure, as required by IFRS 8 (see note 51).
In addition to the above, the information in note 4.b relating to the
shares outstanding in 2019 has been restated due to the capital
increase done in 2020 described in note 31.a in accordance with IAS
33 Earnings per Share.
Finally, based on the meeting held on 3 March 2020 by the
International Financial Reporting Standards Committee (IFRIC), the
Group has changed its accounting policy in relation to the
presentation of exchange differences and the effects of
hyperinflation of the operations generated in Argentina with
retroactive effect (see note 2.a.iv).
Therefore, the information contained in these consolidated financial
statements for the financial years 2020 and 2019 is presented solely
and exclusively for comparative purposes with the information
relating to the year ended 31 December 2021 (see note 2.a.iv).
In order to interpret the changes in the balances with respect to 31
December 2021, it is necessary to take into consideration the
exchange rate effect arising from the volume of foreign currency
balances held by Grupo Santander in view of its geographic diversity
(see note 51.b) and the impact of the appreciation/depreciation of the
various currencies against the euro in 2021, based on the exchange
rates at the end of 2021: Mexican peso (5.55%), US dollar (8.34%) ,
Brazilian real (0.85%) , Argentine peso (-11.30%), Sterling pound
(6.91%), Chilean peso (-9.61%), and Polish zloty (-0.82%); as well as
the evolution of the comparable average rates: Mexican peso
(1.60%), US dollar (-3.52%), Brazilian real (-8.75%), Argentine peso
( -8.21%), Sterling pound (3.43%), Chilean peso (0.55%) and Polish
zloty (-2.70%).
e) Capital management
i. Regulatory and economic capital
Credit institutions must meet a number of minimum capital and
liquidity requirements. These minimum requirements are governed
by the European Capital Requirements Regulation, better known as
CRR, and the Capital Requirements Directive, CRD. In June 2019,
these regulations were significantly amended. The applicable
regulations are now CRR II and CRD V.
As the Directives need to be transposed into the legal systems of the
different Member States in order to be applicable, in the case of
Spain, Royal Legislative Decree 7/2021 and Royal Decree 970/2021
were published for this purpose in 2021.
In June 2019, CRR II introduced the minimum TLAC (Total Loss
Absorbing Capacity) requirement, which only applies to global
systemically important banks (G-SIBs). This requirement introduces
two metrics: i) a minimum requirement for own funds and eligible
liabilities as a percentage of the Total Risk Exposure Amount (TREA)
set at 16% during the transition period and 18% from 1 January 2022
after the end of the transition period; and ii) a metric to set a
minimum requirement for own funds and eligible liabilities as a
percentage of the Total Risk Exposure Amount of 6% during the
transition period and 6.75% from 1 January 2022 after the end of the
transition period.
This year saw the implementation of the EBA Guidelines on the
Definition of New Default, which were prepared in accordance with
CRR II, on 1 January 2021. The changes to CRR II that are applicable
from June 2021 include the introduction of a minimum leverage ratio
of 3%, the new standardised EAD calculation for counterparty risk,
known as SA-CCR, the long-term liquidity ratio (NSFR), the new limits
for large exposures and the requirement to report under the
standardised approach for market risk.
The CRD V introduces important modifications such as the regulation
of Pillar 2G ('guidance', orientation of requirements by Pillar 2).
On 27 October 2021, the European Commission published the draft
review of European banking legislation: CRR III and CRD VI.
The banking package consists of the following elements: 1)
Implementation of the final Basel III reforms, 2) Contribution to
sustainability and green transition and 3) Stronger supervision:
ensuring sound management of EU banks and better protection of
financial stability.
In general, the Commission proposes to start applying the new rules
from 1.1.2025, but the amendments to the regulation that concern
resolution issues could come into force in the first months of 2022.
With regard to the resolution rules, institutions must have an
adequate funding structure to ensure that, in the event of financial
distress, the institution has sufficient liabilities to absorb losses in
order to recover its position or be resolved, while ensuring the
protection of depositors and financial stability.
The directive that governs the resolution framework mentioned
above is the Bank Recovery and Resolution Directive (BRRD). Like the
CRR and the CRD, the BRRD was amended in June 2019, so BRRD II
refers to all of these amendments. The transposition of this directive
into the Spanish legal system took place in 2021 through a Royal
Decree.
BRRDII has introduced important changes to the Minimum
Requirement for Own Funds and Eligible Liabilities (MREL). For
example, the TLAC requirement is now considered a Pillar 1
resolution requirement for G-SIBs. For large banks (defined as banks
with total assets of more than EUR 100 billion) or banks deemed
systemically important by the resolution authority, BRRDII sets a
minimum subordination requirement of 13.5% of risk-weighted
assets or 5% of the leverage ratio, whichever is higher. For all other
institutions, the subordination requirement is set by the resolution
authority on a case-by-case basis.
Finally, Deposit Guarantee Schemes (DGS) are regulated by Directive
2014/49 or DSGD, which has not undergone any significant changes
since its publication in 2014. It aims to harmonise the deposit
guarantee schemes of the Member States, thus ensuring stability
and balance in the different countries. It creates an appropriate
framework for depositors to have better access to DGSs than was the
case before the publication of this Directive through clear coverage,
shorter repayment periods, better information and robust funding
requirements. This Directive is transposed into Spanish law by Law
11/2015, Royal Decree 1012/2015 and Royal Decree 1041/2021.
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Appendix
As regards the other risks explicitly addressed under Basel Pillar I, the
Group is authorised to use its internal model for market risk for its
treasury trading activities in Spain, Chile and Mexico.
For the purpose of calculating regulatory capital for operational risk,
the Group uses the standardised approach provided for the CRR. In
2017 the European Central Bank authorised the use of the
Alternative Standardised Approach to calculate the capital
requirements at consolidated level in Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander México, in
addition to the approval obtained in 2016 in Brazil.
f) Environmental impact
In view of the business activities carried on by the Group entities, the
Group does not have any environmental liability, expenses, assets,
provisions or contingencies that might be material with respect to its
consolidated equity, financial position or results.
Grupo Santander considers the aspects related to climate change in
the preparation of the ratings of its wholesale clients if they are
relevant. These ratings influence the subsequent assignment of
credit parameters for the calculation of the expected loss' estimate.
With the reasonable and supportable information available at the
date of approval of these consolidated annual accounts, the potential
additional impacts of expected losses on the time horizons of the
Group's portfolios, taking into account as well the mitigation
measures, are not considered material.
Grupo Santander, together with the rest of the financial industry, is
working on developing the appropriate methodologies to improve
the measurement of these losses, when the necessary regulatory
developments are more advanced and information is available to
carry out a more precise measurement.
See additional information in note 53.a.
g) Events after the reporting period
No significant events occurred from 1 January 2022 to the date on
which these consolidated financial statements were authorised for
issue, other than those described in these consolidated annual
accounts.
In 2020, the national governments took measures to address the
economic and social impact of the vine population, in particular
legislative moratoria that were aimed at containing NPLs and helping
the population to meet liquidity needs. Throughout 2020, the EBA
adopted a series of guidelines, including the Guidelines on legislative
and non-legislative moratoria applied in the context of the Cov19
crisis on 2 April 2020 (EBA/GL/2020/08). These guidelines clarified
the requirements for public and private moratoria to avoid
classification of exposures affected by moratoria as forborne
exposures.
Although these guidelines were initially going to apply to moratoria
granted before 30 June 2020, the EBA decided on 2 December 2020
to reactivate the application of these guidelines (EBA/GL/2020/02)
for moratoria requested before 31 March 2021 and for a period not
exceeding 9 months.
Another measure adopted in 2020 to provide flexibility in meeting
the requirements was the approval and entry into force of the CRR
"Quick Fix" amending CRR II (urgent and extraordinary amendments
to bring about a more flexible regulatory framework in response to
COVID-19). The Quick Fix introduces a number of new features,
including the extension of the transitional period granted before the
pandemic for the entry into force of IFRS 9, due to the sudden and
significant increase in expected credit loss provisions to be
recognised. The implementation of certain provisions of CRR II has
also been delayed, such as those relating to the leverage ratio buffer
(postponed until 1 January 2023); the possibility of excluding
exposures to central banks from the calculation of the leverage ratio,
which should have been applied from June 2021 on, has been
brought forward. Other provisions beneficial to institutions have also
been brought forward. These include the support factors for SMEs
and infrastructure, and the new treatment for software (applicable
from the day following the publication date of the Delegated
Regulation that implements it).
At 31 December 2021 Grupo Santander met the minimum capital
requirements established by current legislation (see note 53d).
ii. Plan for the roll-out of advanced approaches and authorisation
from the supervisory authorities
Grupo Santander continues adopting, over the next few years, the
advanced internal ratings-based (AIRB) approach under Basel II for
substantially all its banks. The commitment assumed before the
supervisor still implies the adoption of advanced models within the
ten key markets where Santander Group operates.
This objective of covering IRB models in the group should be seen in
the context of the current supervisory focus on the robustness and
adequacy of existing models, as well as the simplification strategy
recently agreed with the ECB.
Grupo Santander has obtained authorisation from the supervisory
authorities to use the AIRB approach for the calculation of regulatory
capital requirements for credit risk for the Parent and the main
subsidiaries in Spain, the United Kingdom and Portugal, as well as for
certain portfolios in Germany, Mexico, Brazil, Chile, the Nordic
countries (Norway, Sweden and Finland), France and the United
States.
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2. Accounting policies
The accounting policies applied in preparing the consolidated
financial statements were as follows:
a) Foreign currency transactions
i. Presentation currency
Banco Santander’s functional and presentation currency is the euro.
Also, the presentation currency of the Group is the euro.
ii. Translation of foreign currency balances
Foreign currency balances are translated to euros in two consecutive
stages:
▪ Translation of foreign currency to the functional currency (currency
of the main economic environment in which the entity operates).
▪ Translation to euros of the balances held in the functional
currencies of entities whose functional currency is not the euro.
Translation of foreign currency to the functional currency
Foreign currency transactions performed by consolidated entities (or
entities accounted for using the equity method) not located in
European Monetary Union (“EMU”) countries are initially recognised
in their respective currencies. Monetary items in foreign currency are
subsequently translated to their functional currencies using the
closing rate.
Furthermore:
▪ Non-monetary items measured at historical cost are translated to
the functional currency at the exchange rate at the date of
acquisition.
▪ Non-monetary items measured at fair value are translated at the
exchange rate at the date when the fair value was determined.
▪
Income and expenses are translated at the average exchange rates
for the year for all the transactions performed during the year.
When applying this criterion, the Group considers whether there
have been significant changes in the exchange rates in the year
which, in view of their materiality with respect to the consolidated
financial statements taken as a whole, would make it necessary to
use the exchange rates at the transaction date rather than the
aforementioned average exchange rates.
▪ The balances arising from non-hedging forward foreign currency/
foreign currency and foreign currency/euro purchase and sale
transactions are translated at the closing rates prevailing in the
forward foreign currency market for the related maturity.
Translation of functional currencies to euros
The balances in the financial statements of consolidated entities (or
entities accounted for using the equity method) whose functional
currency is not the euro are translated to euros as follows:
▪ Assets and liabilities, at the closing rates.
▪ Income and expenses, at the average exchange rates for the year.
▪ Equity items, at the historical exchange rates.
iii. Recognition of exchange differences
The exchange differences arising on the translation of foreign
currency balances to the functional currency are generally recognised
at their net amount under 'Exchange differences, net' in the
consolidated income statement, except for exchange differences
arising on financial instruments at fair value through profit or loss,
which are recognised in the consolidated income statement without
distinguishing them from other changes in fair value, and for
exchange differences arising on non-monetary items measured at
fair value through equity, which are recognised under 'Other
comprehensive income–Items that may be reclassified to profit or
loss–Exchange differences' (except for exchange differences on
equity instruments, where the option to irrevocably elect to be
measured at fair value through changes in accumulated other
comprehensive income, which are recognised in accumulated 'Other
Comprehensive Income - Items not to be reclassified to profit or loss
- Changes in fair value of equity instruments measured at fair value'
through other comprehensive income (see note 29).
The exchange differences arising on the translation to euros of the
financial statements denominated in functional currencies other than
the euro are recognised in 'Other comprehensive income–Items that
may be reclassified to profit or loss–Exchange differences' in the
consolidated balance sheet, whereas those arising on the translation
to euros of the financial statements of entities accounted for using
the equity method are recognised in equity under 'Other
comprehensive income–Items that may be reclassified to profit or
loss and Items not reclassified to profit or loss–Other recognised
income and expense' of investments in subsidiaries, joint ventures
and associates (see note 29), until the related item is derecognised,
at which time they are recognised in profit or loss.
Exchange differences arising on actuarial gains or losses when
converting to euros the financial statements denominated in the
functional currencies of entities whose functional currency is
different from the euro are recognised under equity 'Other
comprehensive income–Items not reclassified to profit or loss–
Actuarial gains or (-) losses' on defined benefit pension plans (see
note 29).
iv. Entities located in hyperinflationary economies
When a subsidiary operates in a country with hyperinflationary
economy, IAS 29 Financial Information in Hyperinflationary
Economies is applied, which means that:
– Historical cost of non-monetary assets and liabilities and of the
various items of equity have to be adjusted to reflect the changes
in the purchasing power of the currency due to inflation from
their date of acquisition or incorporation into the consolidated
balance sheet.
– The different items of the income statement are adjusted by the
inflationary index since their generation, with a balancing entry in
'Other comprehensive income'.
– The loss on the net monetary position is recorded in the income
for the year against 'Accumulated Other comprehensive income'.
– All components of the financial statements of the subsidiary are
translated at the closing exchange rate.
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The deterioration of the economic situation in Argentina over the last
years caused, among other impacts, a significant increase in inflation,
which by the end of 2018 had reached 48% per year (147%
accumulated in three years). This led the Group to conclude that it
was necessary to apply IAS 29 Financial Information in
Hyperinflationary Economies to its activities in the country in
question in its consolidated financial statements from that year on.
At that moment, according with Group’s accounting policies,
exchange differences arising on the translation to the Group´s
presentation currency of financial statements denominated in
functional currencies other than euro for subsidiaries located in
countries with high inflation rates were recorded in the consolidated
statement of changes in total 'Equity-Other reserves'.
However, on the basis of the meeting held on 3 March 2020 by the
International Financial Reporting Standards Committee (IFRIC), in
2020 Grupo Santander changed its accounting policy with regard to
the presentation of exchange differences and the effects of
hyperinflation in the operations generated in Argentina, which
resulted in a reclassification of EUR -2,136 million at 31 December
2019 for comparability purposes, from the heading "Other reserves"
to "Accumulated other comprehensive income", from "Other
reserves" to "Accumulated other comprehensive income",
corresponding to the accumulated amount of exchange differences
related to foreign operations in a hyperinflationary economy and the
amount corresponding to the adjustment of the historical cost of the
Argentine companies reflecting the changes in the purchasing power
of the currency derived from inflation. This change in accounting
policy and its consequent restatement between different equity
items has no impact on the total equity of Grupo Santander.
In accordance with the provisions of the Argentine Federation of
Professional Councils in Economic Sciences (Fcpce), which is the
organization that issues the professional accounting standards in said
country, the inflation indexes applied are the wholesale internal price
index (WPI) until 30 November 2016 and the National Consumer
Price Index published by the National Institute of Statistics and
Censues (Indec) from 1 December 2016 on. Inflation during 2021
was 50.9%% for the year (36.1% at 31 December 2020). The
exchange rate at 31 December 2021 has been of Argentine pesos
116.30 per euro (Argentine pesos 103.16 Argentine pesos per euro at
31 December 2020).
The net impact on Other Comprehensive Income in 2021 of the
effects derived from the exchange differences arising on the
translation to the Group´s presentation currency of financial
statements of the subsidiaries located in Argentina and the
application of IAS 29 was a profit of EUR 177 million (loss of EUR
202 million in 2020).
At 31 December 2020, no other country in which the consolidated
and associated entities of Grupo Santander are located is considered
to have a hyperinflationary economy in accordance with the criteria
established in this regard by the International Financial Reporting
Standards adopted by the European Union.
v. Exposure to foreign currency risk
Grupo Santander hedges a portion of its long-term foreign currency
positions using foreign exchange derivative financial instruments
(see note 36). Also, the Group manages foreign exchange risk
dynamically by hedging its short-term position (with a potential
impact on profit or loss) in order to limit the impact of currency
depreciations while optimising the cost of financing the hedges.
The following tables show the sensitivity of the consolidated income
statement and consolidated equity to percentage changes of ± 1% in
the foreign exchange rate positions arising from investments in
Grupo Santander companies with currencies other than the euro
(with its hedges) and in their results (with its hedges), in which the
Group maintains significant balances.
The estimated effect on the consolidated equity attributable to Grupo
Santander and on consolidated profit of a 1% appreciation of the euro
against the corresponding currency is as follows:
EUR million
Currency
US dollar
Chilean peso
Pound
sterling
Mexican peso
Brazilian real
Polish zloty
Argentine
peso
Effect on
consolidated equity
2021
2020
2019
Effect on
consolidated profit
2021
2020
2019
(133.3) (123.6) (161.3)
(11.4)
(20.4)
(21.8)
(105.9) (107.9) (189.2)
(23.1)
(21.7)
(22.6)
(8.6)
(2.4)
(2.3)
(0.9)
(4.1)
(4.4)
(1.2)
(2.0)
(3.5)
(2.3)
(3.9)
(3.3)
(80.8)
(75.0)
(71.6)
(15.4)
(12.6)
(10.4)
(27.5)
(26.7)
(38.3)
(1.1)
(2.2)
(1.2)
(10.7)
(7.9)
(6.9)
(2.5)
(1.8)
(1.2)
Similarly, the estimated effect on the Group’s consolidated equity
and on consolidated profit of a 1% depreciation of the euro against
the corresponding currency is as follows:
EUR million
Currency
US dollar
Chilean peso
Pound
sterling
Mexican peso
Brazilian real
Polish zloty
Argentine
peso
Effect on
consolidated equity
2021
2020
2019
Effect on
consolidated profit
2021
2020
2019
136.0
126.1
164.6
11.6
20.8
22.2
108.0
110.1
193.0
23.6
82.4
28.0
22.1
76.5
27.2
23.1
73.1
39.0
8.8
2.4
2.3
0.9
4.2
4.5
1.2
2.0
3.5
2.4
4.0
3.4
15.7
12.8
10.6
1.1
2.2
1.2
11.0
8.0
7.0
2.6
1.8
1.3
The above data were obtained as follows:
a) Effect on consolidated equity: in accordance with the accounting
policy detailed in note 2.a.iii, foreign exchange rate impact arising
on the translation to euros of the financial statements in the
functional currencies of the Group entities whose functional
currency is not the euro are recognised in consolidated equity. The
potential effect that a change in the exchange rates of the related
currency would have on the Group’s consolidated equity was
therefore determined by applying the aforementioned change to
the net value of each unit’s assets and liabilities -including, where
appropriate, the related goodwill- and by taking into consideration
the offsetting effect of the hedges of net investments in foreign
operations.
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b) Effect on consolidated profit: the effect was determined by
applying the up and down movements in the average exchange
rates of the year, as indicated in note 2.a.ii (except in the case of
Argentina, which is a hyperinflationary economy and has applied
the closing exchange rate), to translate to euros the income and
expenses of the consolidated entities whose functional currency is
not the euro, taking into consideration, where appropriate, the
offsetting effect of the various hedging transactions in place.
The estimates used to obtain the foregoing data were performed
considering the effects of the changes in the exchange rate in
standalone basis not considering the effect of the performance of
other variables whose changes would affect equity and profit or loss,
such as variations in the interest rates of the reference currencies or
other market factors. Accordingly, all variables other than the
exchange rate variations were kept constant with respect to their
positions at 31 December 2021, 2020 and 2019.
b) Basis of consolidation
i. Subsidiaries
Subsidiaries are defined as entities over which the Bank has the
capacity to exercise control. The Bank controls an entity when it is
exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its
power over the investee.
The financial statements of the subsidiaries are fully consolidated
with those of the Bank. Accordingly, all balances and effects of the
transactions between consolidated companies are eliminated on
consolidation.
On acquisition of control of a subsidiary, its assets, liabilities and
contingent liabilities are recognised at their acquisition-date fair
values. Any positive differences between the acquisition cost and the
fair values of the identifiable net assets acquired are recognised as
goodwill (see note 17). Negative differences are recognised in profit
or loss on the date of acquisition.
ii. Interests in joint ventures
Joint ventures are deemed to be entities that are not subsidiaries but
which are jointly controlled by two or more unrelated entities. This is
evidenced by contractual arrangements whereby two or more parties
have interests in entities so that decisions about the relevant
activities require the unanimous consent of all the parties sharing
control.
In the consolidated financial statements, investments in joint
ventures are accounted for using the equity method, i.e. at the
Group’s share of net assets of the investee, after taking into account
the dividends received therefrom and other equity eliminations. The
profits and losses resulting from transactions with a joint venture are
eliminated to the extent of the Group’s interest therein.
The appendices contain relevant information on the joint ventures.
iii. Associates
Associates are entities over which Banco Santander is in a position to
exercise significant influence, but not control or joint control. It is
presumed that Banco Santander exercises significant influence if it
holds 20% or more of the voting power of the investee.
In the consolidated financial statements, investments in associates
are accounted for using the equity method, i.e. at the Group’s share
of net assets of the investee, after taking into account the dividends
received therefrom and other equity eliminations. The profits and
losses resulting from transactions with an associate are eliminated to
the extent of the Group’s interest in the associate.
There are certain investments in entities which, although Grupo
Santander owns 20% or more of their voting power, are not
considered to be associates because the Group is not in a position to
exercise significant influence over them. At 31 December 2021 and
2020, this was the situation of the investment in Project Quasar
Investments 2017, S.L., despite maintaining a 49% interest in its
share capital (see appendix II). The remaining investments are not
significant for the Group.
Additionally, the share of third parties of Grupo Santander equity is
presented under 'Non-controlling interests' in the consolidated
balance sheet (see note 28). Their share of the profit for the year is
presented under 'Profit attributable to non-controlling interests' in
the consolidated income statement.
There are also certain investments in associates where the Group
owns less than 20% of the voting rights, as it is determined that it has
the capacity to exercise significant influence over them. The impact of
these companies is immaterial in the Group's consolidated financial
statements.
The results of subsidiaries acquired during the year are included in
the consolidated income statement from the date of acquisition
to year-end. Similarly, the results of subsidiaries for which control is
lost during the year are included in the consolidated income
statement from the beginning of the year to the date of disposal.
At 31 December 2021 Grupo Santander controls a company in which
it holds an ownership interest of less than 50% of the share capital,
Luri 1, S.A., in liquidation, apart from the structured consolidated
entities. The percentage ownership interest in the aforementioned
company is 46% (see appendix I). Although Grupo Santander holds
less than half the voting power, it manages and, as a result, exercises
control over this entity. The company´s corporate purpose for the
entity is the acquisition of real estate and other general operations
relating thereto, including rental, and the purchase and sale of
properties; the company object of the latter entity is the provision of
payment services. The impact of the consolidation of this company
on the Group's consolidated financial statements is immaterial.
The appendices contain significant information on the subsidiaries.
The appendices contain significant information on the associates.
iv. Structured entities
When Grupo Santander incorporates entities, or holds ownership
interests therein, to enable its customers to access certain
investments, or for the transfer of risks or other purposes (also called
structured entities since the voting or similar power is not a key
factor in deciding who controls the entity), the Group determines,
using internal criteria and procedures and taking into consideration
the applicable legislation, when control (as defined above) exists and,
therefore, whether these entities should be consolidated.
Specifically, for those entities to which this policy applies (mainly
investment funds and pension funds), the Group analyses the
following factors:
▪ Percentage of ownership held by Grupo Santander; 20% is
established as the general threshold.
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▪
Identification of the fund manager, and verification as to whether it
is a company controlled by the Group since this could affect Grupo
Santander ability to direct the relevant activities.
▪ Existence of agreements between investors that might require
decisions to be taken jointly by the investors, rather than by the
fund manager.
▪ Existence of currently exercisable removal rights (possibility of
removing the manager from his position), since the existence of
such rights might limit the manager’s power over the fund, and it
may be concluded that the manager is acting as an agent of the
investors.
▪ Analysis of the fund manager’s remuneration regime, taking into
consideration that a remuneration regime that is proportionate to
the service rendered does not, generally, create exposure of such
importance as to indicate that the manager is acting as the
principal. Conversely, if the remuneration regime is not
proportionate to the service rendered, this might give rise to an
exposure that would lead the Group to a different conclusion.
These structured entities also include the securitisation special
purpose vehicles, which are consolidated in the case of the Special
Purpose Vehicles (SPVs) over which, being exposed to variable yield,
it is considered that the Group continues to exercise control.
The exposure associated with unconsolidated structured entities are
not material with respect to the Group’s consolidated financial
statements.
v. Business combinations
A business combination is the bringing together of two or more
separate entities or economic units into one single entity or group of
entities.
Business combinations whereby Grupo Santander obtains control
over an entity or a business are recognised for accounting purposes
as follows:
▪ Grupo Santander measures the cost of the business combination,
which is normally the consideration transferred, defined as the
acquisition-date fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity
instruments issued, if any, by the acquirer. In cases where the
amount of the consideration to be transferred has not been
definitively established at the acquisition date, but rather depends
on future events, any contingent consideration is recognised as
part of the consideration transferred and measured at its
acquisition-date fair value. Moreover, acquisition-related costs do
not for these purposes form part of the cost of the business
combination.
▪ The fair values of the assets, liabilities and contingent liabilities of
the acquired entity or business, including any intangible assets
identified in the business combination which might not have been
recognised by the acquiree, are estimated and recognised in the
consolidated balance sheet; the Group also estimates the amount
of any non-controlling interests and the fair value of the previously
held equity interest in the acquiree.
▪ Any positive difference between the aforementioned items is
recognised as discussed in note 2.m. Any negative difference is
recognised under 'Negative Goodwill' recognised in the
consolidated income statement.
Goodwill is only calculated and recognised once, when control of a
business or an entity is obtained.
vi. Changes in the levels of ownership interests in subsidiaries
Acquisitions and disposals not giving rise to a change in control are
recognised as equity transactions, and no gain or loss is recognised in
the income statement and the initially recognised goodwill is not
remeasured. The difference between the consideration transferred or
received and the decrease or increase in non-controlling interests,
respectively, is recognised in reserves.
Similarly, when control over a subsidiary is lost, the assets, liabilities
and non-controlling interests and any other items recognised in
'Other Comprehensive income' of that company are derecognised
from the consolidated balance sheet, and the fair value of the
consideration received and of any remaining equity interest is
recognised. The difference between these amounts is recognised in
profit or loss.
vii. Acquisitions and sales
Note 3 provides information on the most significant acquisitions and
sales in the last three years.
c) Definitions and classification of financial instruments
i. Definitions
A financial instrument is any contract that gives rise to a financial
asset of one entity and a financial liability or equity instrument of
another entity.
An equity instrument is a contract that evidences a residual interest in
the assets of the issuing entity after deducting all of its liabilities.
A financial derivative is a financial instrument whose value changes in
response to the change in an observable market variable (such as an
interest rate, foreign exchange rate, financial instrument price,
market index or credit rating), whose initial investment is very small
compared with other financial instruments with a similar response to
changes in market factors, and which is generally settled at a future
date.
Hybrid financial instruments are contracts that simultaneously
include a non-derivative host contract together with a derivative,
known as an embedded derivative, that is not separately transferable
and has the effect that some of the cash flows of the hybrid contract
vary in a way similar to a stand-alone derivative.
Compound financial instruments are contracts that simultaneously
create for their issuer a financial liability and an own equity
instrument (such as convertible bonds, which entitle their holders to
convert them into equity instruments of the issuer).
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The preference shares contingently convertible into ordinary shares
eligible as Additional Tier 1 capital (CCPSs) -perpetual shares, which
may be repurchased by the issuer in certain circumstances, the
interest on which is discretionary, and would
convert into variable number of newly issued ordinary shares if the
capital ratio of the Bank or its consolidated group falls below a
given percentage (trigger event), as those two terms are defined in
the related issue prospectuses- are recognised for accounting
purposes by the Group as compound instruments. The liability
component reflects the issuer’s obligation to deliver a variable
number of shares and the equity component reflects the issuer’s
discretion in relation to the payment of the related coupons. In order
to effect the initial allocation, the Group estimates the fair value of
the liability as the amount that would have to be delivered if the
trigger event were to occur immediately and, accordingly, the equity
component, calculated as the residual amount, is zero. In view of the
aforementioned discretionary nature of the payment of the coupons,
they are deducted directly from equity.
Capital perpetual preference shares (CPPS), with the possibility of
purchase by the issuer in certain circumstances, whose remuneration
is discretionary, and which will be amortised permanently, totally or
partially, in the event that the bank or its consolidated group submits
a capital ratio lesser than a certain percentage (trigger event), as
defined in the corresponding prospectuses, are accounted for by the
Group as equity instruments. The following transactions are not
treated for accounting purposes as financial instruments:
▪
Investments in associates and joint ventures (see note 13).
▪ Rights and obligations under employee benefit plans (see
note 25).
▪ Rights and obligations under insurance contracts (see note 15).
▪ Contracts and obligations relating to employee remuneration
based on own equity instruments (see note 34).
ii. Classification of financial assets for measurement purposes
Financial assets are initially classified into the various categories used
for management and measurement purposes, unless they have to be
presented as 'Non-current assets held for sale' or they relate to
'Cash, cash balances at central banks and other deposits on demand',
'Changes in the fair value of hedged items in portfolio hedges of
interest rate risk (asset side)', 'Hedging derivatives and Investments',
which are reported separately.
Classification of financial instruments: the classification criteria for
financial assets depends on the business model for their
management and the characteristics of their contractual flows.
Grupo Santander business models refer to the way in which it
manages its financial assets to generate cash flows. In defining these
models, the Group takes into account the following factors:
• How key management staff are assessed and reported on the
performance of the business model and the financial assets held in
the business model.
• The risks that affect the performance of the business model (and
the financial assets held in the business model) and, specifically,
the way in which these risks are managed.
• How business managers are remunerated.
• The frequency and volume of sales in previous years, as well as
expectations of future sales.
The analysis of the characteristics of the contractual flows of
financial assets requires an assessment of the congruence of these
flows with a basic loan agreement. The Group determines if the
contractual cash flows of its financial assets that are only principal
and interest payments on the outstanding principal amount at the
beginning of the transaction. This analysis takes into consideration
four factors (performance, clauses, contractually linked products and
currencies). Furthermore, among the most significant judgements
used by the Group in carrying out this analysis, the following ones are
included:
• The return on the financial asset, in particular in cases of periodic
interest rate adjustments where the term of the reference rate
does not coincide with the frequency of the adjustment. In these
cases, an assessment is made to determine whether or not the
contractual cash flows differ significantly from the flows without
this change in the time value of money, establishing a tolerance
level of 2%.
• The contractual clauses that may modify the cash flows of the
financial asset, for which the structure of the cash flows before and
after the activation of such clauses is analysed.
• Financial assets whose cash flows have different priority for
payment due to a contractual link to underlying assets (e.g.
securitisations) require a look-through analysis by the Group so as
to review that both the financial asset and the underlying assets
are only principal and interest payments and that the exposure to
credit risk of the set of underlying assets belonging to the tranche
analysed is less than or equal to the exposure to credit risk of the
set of underlying assets of the instrument.
Depending on these factors, the asset can be measured at amortised
cost, at fair value with changes in other comprehensive income, or at
fair value with changes through profit and loss. IFRS 9 also
establishes an option to designate an instrument at fair value with
changes in profit or loss, when doing so eliminates or significantly
reduces a measurement or recognition inconsistency (sometimes
referred to as 'accounting asymmetry') that would otherwise arise
from measuring assets or liabilities or recognising gains and losses
on different bases.
Grupo Santander uses the following criteria for the classification of
financial debt instruments:
• Amortised cost: financial instruments under a business model
whose objective is to collect principal and interest flows, over
which there is no significant unjustified sales and fair value is not a
key element in the management of these assets and contractual
conditions they give rise to cash flows on specific dates, which are
only payments of principal and interest on the outstanding
principal amount. In this sense, unjustified sales are considered to
be those other than those related to an increase in the credit risk of
the asset, unanticipated funding needs (stress case scenarios).
Additionally, the characteristics of its contractual flows represent
substantially a “basic financing agreement”.
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• Fair value with changes in other comprehensive income: financial
instruments held in a business model whose objective is to collect
principal and interest cash flows and the sale of these assets,
where fair value is a key factor in their management. Additionally,
the contractual cash flow characteristics substantially represent a
'basic financing agreement'.
• Fair value with changes in profit or loss: financial instruments
included in a business model whose objective is not obtained
through the above mentioned models, where fair value is a key
factor in managing of these assets, and financial instruments
whose contractual cash flow characteristics do not substantially
represent a 'basic financing agreement'. In this section it can be
enclosed the portfolios classified under 'Financial assets held for
trading', 'Non-trading financial assets mandatorily at fair value
through profit or loss' and 'Financial assets at fair value through
profit or loss'. In this regard, most of the financial assets presented
in the category of 'Financial assets designated at value reasonable
with change in results' are instruments financial services that, not
being part of the portfolio of negotiation, are contracted jointly
with other financial instruments that are recorded in the category
of 'held for trading', and that by both are recorded at fair value with
changes in results, so your record in any other category would
produce accounting asymmetries.
Equity instruments will be classified at fair value under IFRS 9, with
changes in profit or loss, unless the Group decides, for non-trading
assets, to classify them at fair value with changes in other
comprehensive income (irrevocably) at initial recognition.
iii. Classification of financial assets for presentation purposes
Financial assets are classified by nature into the following items in
the consolidated balance sheet:
• Cash, cash balances at Central Banks and other deposits on
demand: cash balances and balances receivable on demand
relating to deposits with central banks and credit institutions.
• Loans and advances: includes the debit balances of all credit and
loans granted by the Group, other than those represented by
securities, as well as finance lease receivables and other debit
balances of a financial nature in favour of the Group such as
cheques drawn on credit institutions, balances receivable from
clearing houses and settlement agencies for transactions on the
stock exchange and organised markets, bonds given in cash, capital
calls, fees and commissions receivable for financial guarantees and
debit balances arising from transactions not originating in banking
transactions and services, such as the collection of rentals and
similar items. They are classified, on the basis of the institutional
sector to which the debtor belongs, into:
– Central banks: credit of any nature, including deposits and money
market transactions received from the Bank of Spain or other
central banks.
– Credit institutions: credit of any nature, including deposits and
money market transactions, in the name of credit institutions.
▪ Equity instruments: financial instruments issued by other entities,
such as shares, which have the nature of equity instruments for the
issuer, other than investments in subsidiaries, joint ventures or
associates. Investment fund units are included in this item.
▪ Derivatives: includes the fair value in favour of the Group of
derivatives which do not form part of hedge accounting, including
embedded derivatives separated from hybrid financial instruments.
▪ Changes in the fair value of hedged items in portfolio hedges of
interest rate risk: this item is the balancing entry for the amounts
credited to the consolidated income statement in respect of the
measurement of the portfolios of financial instruments which are
effectively hedged against interest rate risk through fair value
hedging derivatives.
▪ Hedging derivatives: Includes the fair value in favour of the Group
of derivatives, including embedded derivatives separated from
hybrid financial instruments, designated as hedging instruments in
hedge accounting.
iv. Classification of financial liabilities for measurement purposes
Financial liabilities are initially classified into the various categories
used for management and measurement purposes, unless they have
to be presented as 'Liabilities associated with non-current assets held
for sale' or they relate to 'Hedging derivatives' or changes in the fair
value of hedged items in portfolio hedges of interest rate risk (liability
side), which are reported separately.
In most cases, changes in the fair value of financial liabilities
designated at fair value through profit or loss, caused by the entity's
credit risk, are recognized in other comprehensive income.
Financial liabilities are included for measurement purposes in one of
the following categories:
▪ Financial liabilities held for trading (at fair value through profit or
loss): this category includes financial liabilities incurred for the
purpose of generating a profit in the near term from fluctuations in
their prices, financial derivatives not designated as hedging
instruments, and financial liabilities arising from the outright sale
of financial assets acquired under reverse repurchase agreements
(“reverse repos”) or borrowed (short positions).
▪ Financial liabilities designated at fair value through profit or loss:
financial liabilities are included in this category when they provide
more relevant information, either because this eliminates or
significantly reduces recognition or measurement inconsistencies
(accounting mismatches) that would otherwise arise from
measuring assets or liabilities or recognising the gains or losses on
them on different bases, or because a group of financial liabilities
or financial assets and liabilities is managed and its performance is
evaluated on a fair value basis, in accordance with a documented
risk management or investment strategy, and information about
the group is provided on that basis to the Group’s key
management personnel. Liabilities may only be included in this
category on the date when they are incurred or originated.
– Customers: includes the remaining credit, including money
market transactions through central counterparties.
Liabilities may only be included in this portfolio at the date of issue
or origination.
▪ Debt instruments: bonds and other securities that represent a debt
for their issuer, that generate an interest return, and that are in the
form of certificates or book entries.
▪ Financial liabilities at amortised cost: financial liabilities,
irrespective of their instrumentation and maturity, not included in
any of the above-mentioned categories which arise from the
ordinary borrowing activities carried on by financial institutions.
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v. Classification of financial liabilities for presentation purposes
Financial liabilities are classified by nature into the following items in
the consolidated balance sheet:
▪ Deposits: includes all repayable balances received in cash by Grupo
Santander, other than those instrumented as marketable securities
and those having the substance of subordinated liabilities (amount
of the loans received, which for credit priority purposes are after
common creditors), except for the debt instruments. This item also
includes cash bonds and cash consignments received the amount
of which may be invested without restriction. Deposits are
classified on the basis of the creditor’s institutional sector into:
– Central banks: deposits of any nature, including credit received
and money market transactions received from the Bank of Spain
or other central banks.
– Credit institutions: deposits of any nature, including credit
received and money market transactions in the name of credit
institutions.
– Customer: includes the remaining deposits, including money
market transactions through central counterparties.
On 6 June 2019, the European Central Bank announced a new
program of targeted longer-term refinancing operations (TLTRO
III); additionally, the conditions of the initial program were
successively modified in the months of March and April 2020,
reducing the interest rate by 25 bps to -0.5% from June 2020 to
June 2021 and providing that, for banks meeting a certain volume
of eligible loans, the interest rate could be -1% for that period.
These conditions were extended on December 10, 2020 for the
period from June 2021 to June 2022, including the option to cancel
or reduce the amount of financing before maturity in windows
coinciding with the interest rate review and adjustment periods.
The accounting standards indicate that for the recording of
amortized cost the entity 'shall use a shorter period when the fees,
basis points paid or received, transaction costs, premiums or
discounts relate to it, this being the case when the variable to
which the fees, basis points paid or received, transaction costs, and
discounts or premiums relate is adjusted to market rates prior to
the expected maturity of the financial instrument. In this case, the
appropriate amortization period is the period until the next
adjustment date'.
In this case, the applicable interest rate of -1% from June 2020 to
June 2021 and from June 2021 to June 2022 corresponds to a
specific period after which the funding is adjusted to market rates
(specifically, the average rate applied in the Eurosystem's main
refinancing operations) and must therefore be accrued until the
next adjustment date. The early repayment windows of this
funding program are substantive terms, given that at that time of
adjustment of the funding cost to market, the entity may opt for
renewal or cancellation and obtain new funding at more favorable
terms.
Grupo Santander has opted to accrue interest in accordance with
the specific periods of adjustment to market rates, so that the
interest corresponding to that period (-1%) will be recorded in the
income statement from June 2020 to June 2022, assuming
compliance with the threshold of eligible loans that gives rise to
the extra rate.
Compliance with the qualifying loan thresholds is assessed at each
reporting date and is based on the financial budgets approved by
the Group's directors, as well as on the evolution of
macroeconomic variables (GDP, unemployment rate, inflation,
etc.). If, subsequent to the initial recording of the financial liability,
there is a change in the expectations of meeting this threshold of
eligible loans, the Group would adjust the carrying amount of the
financial liability to the amount resulting from discounting the new
estimated flows at the original Effective Interest Rate (EIR),
recognizing this difference in profit or loss, without modifying the
original EIR.
At the end of both periods, the Group has met the financing
objective established in the program, although the data relating to
the second reference period (October 2020 to December 2021),
will not be sent until next May, after validation by the external
auditor, as established in the program conditions.
▪ Marketable debt securities: includes the amount of bonds and
other debt represented by marketable securities, other than those
having the substance of subordinated liabilities (amount of the
loans received, which for credit priority purposes are after common
creditors, and includes the amount of the financial instruments
issued by the Group which, having the legal nature of capital, do
not meet the requirements to qualify as equity, such as certain
preferred shares issued). This item includes the component that
has the consideration of financial liability of the securities issued
that are compound financial instruments.
▪ Derivatives: includes the fair value, with a negative balance for the
Group, of derivatives, including embedded derivatives separated
from the host contract, which do not form part of hedge
accounting.
• Short positions: includes the amount of financial liabilities arising
from the outright sale of financial assets acquired under reverse
repurchase agreements or borrowed.
▪ Other financial liabilities: includes the amount of payment
obligations having the nature of financial liabilities not included in
other items (includes, among others, the balance of lease liabilities
that started to be recorded in 2019 as a result of the application of
IFRS 16), and liabilities under financial guarantee contracts, unless
they have been classified as non-performing.
▪ Changes in the fair value of hedged items in portfolio hedges of
interest rate risk: this item is the balancing entry for the amounts
charged to the consolidated income statement in respect of the
measurement of the portfolios of financial instruments which are
effectively hedged against interest rate risk through fair value
hedging derivatives.
▪ Hedging derivatives: includes the fair value of the Group’s liability
in respect of derivatives, including embedded derivatives separated
from hybrid financial instruments, designated as hedging
instruments in hedge accounting.
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d) Measurement of financial assets and liabilities and
recognition of fair value changes
In general, financial assets and liabilities are initially recognised at
fair value which, in the absence of evidence to the contrary, is
deemed to be the transaction price.
In this regard, IFRS 9 states that regular way purchases or sales of
financial assets shall be recognised and derecognised on the trade
date or on the settlement date. Grupo Santander has opted to make
such recognition on the trading date or settlement date, depending
on the convention of each of the markets in which the transactions
are carried out. For example, in relation to the purchase or sale of
debt securities or equity instruments traded in the Spanish market,
securities market regulations stipulate their effective transfer at the
time of settlement and, therefore, the same time has been
established for the accounting record to be made.
The fair value of instruments not measured at fair value through
profit and loss is adjusted by transaction costs. Subsequently, and on
the occasion of each accounting close, they are valued in accordance
with the following criteria:
i. Measurement of financial assets
Financial assets are measured at fair value are valued mainly at their
fair value without deducting any transaction cost for their sale.
The fair value of a financial instrument on a given date is taken to be
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. The
most objective and common reference for the fair value of a financial
instrument is the price that would be paid for it on an active,
transparent and deep market (quoted price or market price). At 31
December 2021, there were no significant investments in quoted
financial instruments that had ceased to be recognised at their
quoted price because their market could not be deemed to be active.
If there is no market price for a given financial instrument, its fair
value is estimated on the basis of the price established in recent
transactions involving similar instruments and, in the absence
thereof, of valuation techniques commonly used by the international
financial community, taking into account the specific features of the
instrument to be measured and, particularly, the various types of risk
associated with it.
All derivatives are recognised in the balance sheet at fair value from
the trade date. If the fair value is positive, they are recognised as an
asset and if the fair value is negative, they are recognised as a
liability. The fair value on the trade date is deemed, in the absence of
evidence to the contrary, to be the transaction price. The changes in
the fair value of derivatives from the trade date are recognised in
'Gains/losses on financial assets and liabilities held for trading (net)'
in the consolidated income statement. Specifically, the fair value of
financial derivatives traded in organised markets included in the
portfolios of financial assets or liabilities held for trading is deemed
to be their daily quoted price and if, for exceptional reasons, the
quoted price cannot be determined on a given date, these financial
derivatives are measured using methods similar to those used to
measure derivatives.
The fair value of derivatives is taken to be the sum of the future cash
flows arising from the instrument, discounted to present value at the
date of measurement (present value or theoretical close) using
valuation techniques commonly used by the financial markets: net
present value, option pricing models and other methods.
The amount of debt securities and loans and advances under a
business model whose objective is to collect the principal and
interest flows are valued at their amortised cost, as long as they
comply with the 'SPPI' (Solely Payments of Principal and Interest)
test, using the effective interest rate method in their determination.
Amortised cost refers to the acquisition cost of a corrected financial
asset or liability (more or less, as the case may be) for repayments of
principal and the part systematically charged to the consolidated
income statement of the difference between the initial cost and the
corresponding reimbursement value at expiration. In the case of
financial assets, the amortised cost includes, in addition, the
corrections to their value due to the impairment. In the loans and
advances covered in fair value hedging transactions, the changes that
occur in their fair value related to the risk or the risks covered in these
hedging transactions are recorded.
The effective interest rate is the discount rate that exactly matches
the carrying amount of a financial instrument to all its estimated cash
flows of all kinds over its remaining life. For fixed rate financial
instruments, the effective interest rate coincides with the contractual
interest rate established on the acquisition date plus, where
applicable, the fees and transaction costs that, because of their
nature, form part of their financial return. In the case of floating rate
financial instruments, the effective interest rate coincides with the
rate of return prevailing in all connections until the next benchmark
interest reset date.
Equity instruments and contracts related with these instruments are
measured at fair value. However, in certain circumstances the Group
estimates cost value as a suitable estimate of the fair value. This can
happen if the recent event available information is not enough to
measure the fair value or if there is a broad range of possible
measures and the cost value represents the best estimates of fair
value within this range.
The amounts at which the financial assets are recognised represent,
in all material respects, the Group’s maximum exposure to credit risk
at each reporting date. Also, Grupo Santander has received collateral
and other credit enhancements to mitigate its exposure to credit risk,
which consist mainly of mortgage guarantees, cash collateral, equity
instruments and personal security, assets leased out under finance
lease and full-service lease agreements, assets acquired under
repurchase agreements, securities loans and credit derivatives.
ii. Measurement of financial liabilities
In general, financial liabilities are measured at amortised cost, as
defined above, except for those included under 'Financial liabilities
held for trading' and 'Financial liabilities designated at fair value
through profit or loss' and financial liabilities designated as hedged
items (or hedging instruments) in fair value hedges, which are
measured at fair value. The changes in credit risk arising from
financial liabilities designated at fair value through profit or loss are
recognised in accumulated other comprehensive income, unless they
generate or increase an accounting mismatch, in which case changes
in the fair value of the financial liability in all respects are recognised
in the income statement.
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iii. Valuation techniques
The following table summarises the fair values, at the end of each of
the years indicated, of the financial assets and liabilities listed below,
classified according to the different valuation methodologies used by
the Group to determine their fair value:
EUR million
Published
price
quotations
in active
markets
(level 1)
2021
Internal
Models
(level 2
and 3)
Published
price
quotations
in active
markets
(level 1)
2020
Internal
Models
(level 2
and 3)
Total
2019
Published
price
quotations
in active
markets
(level 1)
Internal
Models
(level 2
and 3)
Total
Total
Financial assets held for trading
39,678
77,275 116,953
46,379
68,566 114,945
44,581
63,649 108,230
Non-trading financial assets mandatorily at
fair value through profit or loss
Financial assets designated at fair value
through profit or loss
Financial assets at fair value through other
comprehensive income
Hedging derivatives (assets)
Financial liabilities held for trading
Financial liabilities designated at fair value
through profit or loss
Hedging derivatives (liabilities)
Liabilities under insurance or reinsurance
contracts
2,398
3,138
5,536
1,756
2,730
4,486
1,530
3,381
4,911
2,113
13,844
15,957
2,509
46,208
48,717
2,572
59,497
62,069
77,749
30,289 108,038
91,771
29,182 120,953
103,089
22,619 125,708
—
4,761
4,761
—
8,325
8,325
—
7,216
7,216
10,379
69,090
79,469
9,863
71,304
81,167
9,781
67,358
77,139
3,620
29,113
32,733
2,118
45,920
48,038
1,484
59,511
60,995
—
—
5,463
5,463
770
770
—
—
6,869
6,869
910
910
—
—
6,048
6,048
739
739
The financial instruments at fair value determined on the basis of
published price quotations in active markets (level 1) include
government debt securities, private-sector debt securities,
derivatives traded in organised markets, securitised assets, shares,
short positions and fixed-income securities issued.
In cases where price quotations cannot be observed, management
makes its best estimate of the price that the market would set, using
its own internal models. In most cases, these internal models use
data based on observable market parameters as significant inputs
(level 2) and, in cases, they use significant inputs not observable in
market data (level 3). In order to make these estimates, various
techniques are employed, including the extrapolation of observable
market data. The best evidence of the fair value of a financial
instrument on initial recognition is the transaction price, unless the
fair value of the instrument can be obtained from other market
transactions performed with the same or similar instruments or can
be measured by using a valuation technique in which the variables
used include only observable market data, mainly interest rates.
Grupo Santander has developed a formal process for the systematic
valuation and management of financial instruments, which has been
implemented worldwide across all the Group’s units. The governance
scheme for this process distributes responsibilities between two
independent divisions: Treasury (development, marketing and daily
management of financial products and market data) and Risk (on
a periodic basis, validation of pricing models and market data,
computation of risk metrics, new transaction approval policies,
management of market risk and implementation of fair value
adjustment policies).
The approval of new products follows a sequence of steps (request,
development, validation, integration in corporate systems and quality
assurance) before the product is brought into production. This
process ensures that pricing systems have been properly reviewed
and are stable before they are used.
The following subsections set forth the most important products and
families of derivatives, and the related valuation techniques and
inputs, by asset class:
Fixed income and inflation
The fixed income asset class includes basic instruments such as
interest rate forwards, interest rate swaps and cross currency swaps,
which are valued using the net present value of the estimated future
cash flows discounted taking into account basis swap and cross
currency spreads determined on the basis of the payment frequency
and currency of each leg of the derivative. Vanilla options, including
caps, floors and swaptions, are priced using the Black-Scholes model,
which is one of the benchmark industry models. More exotic
derivatives are priced using more complex models which are
generally accepted as standard across institutions.
These pricing models are fed with observable market data such as
deposit interest rates, futures rates, cross currency swap and
constant maturity swap rates, and basis spreads, on the basis of
which different yield curves, depending on the payment frequency,
and discounting curves are calculated for each currency. In the case
of options, implied volatilities are also used as model inputs. These
volatilities are observable in the market for cap and floor options and
swaptions, and interpolation and extrapolation of volatilities from the
quoted ranges are carried out using generally accepted industry
models. The pricing of more exotic derivatives may require the use of
non-observable data or parameters, such as correlation (among
interest rates and cross-asset), mean reversion rates and
prepayment rates, which are usually defined from historical data or
through calibration.
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Inflation-related assets include zero-coupon or year-on-year
inflation-linked bonds and swaps, valued with the present value
method using forward estimation and discounting. Derivatives on
inflation indices are priced using standard or more complex bespoke
models, as appropriate. Valuation inputs of these models consider
inflation-linked swap spreads observable in the market and
estimations of inflation seasonality, on the basis of which a forward
inflation curve is calculated. Also, implied volatilities taken from
zero-coupon and year-on-year inflation options are also inputs for
the pricing of more complex derivatives.
Equity and foreign exchange
The most important products in these asset classes are forward and
futures contracts; they also include vanilla, listed and OTC (Over-The-
Counter) derivatives on single underlying assets and baskets of
assets. Vanilla options are priced using the standard Black-Scholes
model and more exotic derivatives involving forward returns, average
performance, or digital, barrier or callable features are priced using
generally accepted industry models or bespoke models, as
appropriate. For derivatives on illiquid stocks, hedging takes into
account the liquidity constraints in models.
The inputs of equity models consider yield curves, spot prices,
dividends, asset funding costs (repo margin spreads), implied
volatilities, correlation among equity stocks and indices, and cross-
asset correlation. Implied volatilities are obtained from market
quotes of European and American-style vanilla call and put options.
Various interpolation and extrapolation techniques are used to obtain
continuous volatility for illiquid stocks. Dividends are usually
estimated for the mid and long term. Correlations are implied, when
possible, from market quotes of correlation-dependent products. In
all other cases, proxies are used for correlations between benchmark
underlyings or correlations are obtained from historical data.
The inputs of foreign exchange models include the yield curve for
each currency, the spot foreign exchange rate, the implied volatilities
and the correlation among assets of this class. Volatilities are
obtained from European call and put options which are quoted in
markets as of-the-money, risk reversal or butterfly options. Illiquid
currency pairs are usually handled by using the data of the liquid
pairs from which the illiquid currency can be derived. For more exotic
products, unobservable model parameters may be estimated by
fitting to reference prices provided by other non-quoted market
sources.
Credit
The most common instrument in this asset class is the credit default
swap (CDS), which is used to hedge credit exposure to third parties. In
addition, models for first-to-default (FTD), n-to-default (NTD) and
single-tranche collateralised debt obligation (CDO) products are also
available. These products are valued with standard industry models,
which estimate the probability of default of a single issuer (for CDS)
or the joint probability of default of more than one issuer for FTD,
NTD and CDO.
Valuation inputs are the yield curve, the CDS spread curve and the
recovery rate. For indices and important individual issuers, the CDS
spread curve is obtained in the market. For less liquid issuers, this
spread curve is estimated using proxies or other credit-dependent
instruments. Recovery rates are usually set to standard values. For
listed single-tranche CDO, the correlation of joint default of several
issuers is implied from the market. For FTD, NTD and bespoke CDO,
the correlation is estimated from proxies or historical data when no
other option is available.
Valuation adjustment for counterparty risk or default risk
The Credit valuation adjustment (CVA) is a valuation adjustment to
over the counter (OTC) derivatives as a result of the risk associated
with the credit exposure assumed to each counterparty.
The CVA is calculated taking into account potential exposure to each
counterparty in each future period. The CVA for a specific
counterparty is equal to the sum of the CVA for all the periods. The
following inputs are used to calculate the CVA:
• Expected exposure: including for each transaction the mark-to-
market (MtM) value plus an add-on for the potential future
exposure for each period. Mitigating factors such as collateral and
netting agreements are taken into account, as well as a temporary
impairment factor for derivatives with interim payments.
• Severity: percentage of final loss assumed in a counterparty credit
event/default.
• Probability of default: for cases where there is no market
information (the CDS quoted spread curve, etc.), proxies based on
companies holding exchange-listed CDS, in the same industry and
with the same external rating as the counterparty, are used.
• Discount factor curve.
The Debit Valuation Adjustment (DVA) is a valuation adjustment
similar to the CVA but, in this case, it arises as a result of the Group’s
own risk assumed by its counterparties in OTC derivatives.
The CVA at 31 December 2021 amounted to EUR 237 million
(resulting in a decrease of 41.9% compared to 31 December 2020)
and DVA amounted to EUR 162 million (resulting in a decrease of
30.4% compared to 31 December 2020). These impacts are mainly
due to the continuous improvement in credit markets, the creation of
particular credit curves for certain counterparties and the
introduction of methodological improvements in the calculation of
exposures.
The CVA at 31 December 2020 amounted to EUR 408 million
(resulting in an increase of 49.8% compared to 31 December 2019)
and DVA amounted to EUR 233 million (resulting in an increase of
36.0% compared to 31 December 2019). These impacts were due to
the fact that credit spread levels were at levels above 25% compared
to 2019 due to the covid-19 pandemic.
The CVA at 31 December 2019 amounted to EUR 272 million
(decrease of 22.5% compared to 31 December 2018) and DVA
amounted EUR 171 million (decrease of 34.6% compared to 31
December 2018). The decrease was mainly due to improvements in
the credit quality of counterparties, which led to reductions in credit
spreads in percentages of around 40% in the most liquid maturities.
In addition, the Group amounts the funding fair value adjustment
(FFVA) is calculated by applying future market funding spreads to the
expected future funding exposure of any uncollateralised component
of the OTC derivative portfolio. This includes the uncollateralised
component of collateralised derivatives in addition to derivatives that
are fully uncollateralised. The expected future funding exposure is
calculated by a simulation methodology, where available. The FFVA
impact is not material for the consolidated financial statements as of
31 December 2021, 2020 and 2019.
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• The currency markets are exposed to model risk resulting from
forward skew modelling and the impact of stochastic interest rate
and correlation modelling for multi-asset instruments. Risk may
also arise from market data, due to the existence of specific illiquid
foreign exchange pairs.
• The most important source of model risk for credit derivatives
relates to the estimation of the correlation between the
probabilities of default of different underlying issuers. For illiquid
underlying issuers, the CDS spread may not be well defined.
Grupo Santander has not carried out significant reclassifications of
financial instruments between levels other than those disclosed in
level 3 movement table during 2021 continuing the trend observed
in 2020. The main variations over the last few years in the Level 3
volume have been due to purchases/sales of these instruments.
There have been no significant variations in the market observability
conditions, nor relevant changes in the criteria used for the
classification of instruments within the fair value hierarchy.
In 2019, the Group reclassified between levels 2 and 3 financial
instruments for a net amount of EUR 708 million (mainly due to
reclassifications to level 2 of positions, both derivatives as debt
instruments, with maturities for that there were already observable
assessment inputs or on which new sources of information have
been recurring prices, and at level 3 certain bonds in Brazil that,
based on the criteria of observability of the Group, did not meet the
requirements to be considered as observable inputs).
Valuation adjustments due to model risk
The valuation models described above do not involve a significant
level of subjectivity, since they can be adjusted and recalibrated,
where appropriate, through internal calculation of the fair value and
subsequent comparison with the related actively traded price.
However, valuation adjustments may be necessary when market
quoted prices are not available for comparison purposes.
The sources of risk are associated with uncertain model parameters,
illiquid underlying issuers, and poor quality market data or missing
risk factors (sometimes the best available option is to use limited
models with controllable risk). In these situations, the Group
calculates and applies valuation adjustments in accordance with
common industry practice. The main sources of model risk are
described below:
• In the fixed income markets, the sources of model risk include
bond index correlations, basis spread modelling, the risk of
calibrating model parameters and the treatment of near-zero or
negative interest rates. Other sources of risk arise from the
estimation of market data, such as volatilities or yield curves,
whether used for estimation or cash flow discounting purposes.
• In the stock markets, the sources of model risk include forward
skew modelling, the impact of stochastic interest rates, correlation
and multi-curve modelling. Other sources of risk arise from
managing hedges of digital callable and barrier option payments.
Also worthy of consideration as sources of risk are the estimation
of market data such as dividends and correlation for quanto and
composite basket options.
• For specific financial instruments relating to home mortgage loans
secured by financial institutions in the UK (which are regulated and
partially financed by the Government) and property asset
derivatives, the main input is the Halifax House Price Index (HPI). In
these cases, risk assumptions include estimations of the future
growth and the volatility of the HPI, the mortality rate and the
implied credit spreads.
• Inflation markets are exposed to model risk resulting from
uncertainty around modelling the correlation structure among
various Consumer Price Index (CPI) rates. Another source of risk
may arise from the bid-offer spread of inflation-linked swaps.
Annual report 2021 557
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Set forth below are the financial instruments at fair value whose
measurement was based on internal models (levels 2 and 3) at 31
December 2021, 2020 and 2019:
EUR million
Fair values calculated
using internal models
at
2021*
Level 2
Level 3
Valuation techniques
Main assumptions
ASSETS
Financial assets held for trading
Central banks**
Credit institutions**
Customers**
Debt and equity instruments
Derivatives
Swaps
121,640
76,738
3,608
10,397
6,829
2,312
53,592
43,700
7,667
537
— Present value method
— Present value method
— Present value method
24 Present value method
513
224 Present value method, Gaussian
Copula
Exchange rate options
539
12 Black-Scholes Model
Interest rate options
Interest rate futures
Index and securities options
Other
Hedging derivatives
Swaps
Interest rate options
Other
Non-trading financial assets mandatorily at
fair value through profit or loss
Equity instruments
Debt instruments
Loans and receivables
Financial assets designated at fair value
through profit or loss
Credit institutions
Customers***
Debt instruments
Financial assets at fair value through other
comprehensive income
Equity instruments
Debt instruments
Loans and receivables
Yield curves, FX market prices
Yield curves, FX market prices
Yield curves, FX market prices
Yield curves, FX market prices
Yield curves, FX market prices, HPI,
Basis, Liquidity
Yield curves, Volatility surfaces, FX
market prices, Liquidity
Yield curves, Volatility surfaces, FX
market prices, Liquidity
Yield curves, FX market prices
Yield curves, Volatility surfaces, FX &
EQ market prices, Dividends,
Liquidity
Yield curves, Volatility surfaces, FX
and EQ market prices, Dividends,
Correlation, HPI, Credit, Others
Yield curves, FX market prices, Basis
Yield curves, FX market prices,
Volatility surfaces
Yield curves, Volatility surfaces, FX
market prices, Credit, Liquidity,
Others
2,112
409
439
182 Black's Model, multifactorial
advanced models interest rate
— Present value method
41 Black's Model, multifactorial
advanced models interest rate
6,393
54 Present value method, Advanced
stochastic volatility models and
other
4,761
4,204
9
—
— Present value method
— Black's Model
548
— Present value method, Advanced
stochastic volatility models and
other
1,273
1,865
415
589
269
1,231 Present value method
366 Present value method
268 Present value method, swap asset
model & CDS
Market price, Interest rates curves,
Dividends and Others
Yield curves
Yield curves and Credit curves
13,426
418
3,152
10,270
4
— Present value method
18 Present value method
400 Present value method
25,442
4,847
74
821 Present value method
21,585
3,783
146 Present value method
3,880 Present value method
Yield curves, FX market prices
Yield curves, FX market prices, HPI
Yield curves, FX market prices
Market price, Yield curves, Dividends
and Others
Yield curves, FX market prices
Yield curves, FX market prices and
Credit curves
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
LIABILITIES
Financial liabilities held for trading
Central banks**
Credit institutions**
Customers
Derivatives
Swaps
Exchange rate options
Index and securities options
Interest rate options
Futures on interest rate and variable income
Other
Short positions
Hedging derivatives
Swaps
Other
Financial liabilities designated at fair value
through profit or loss
Liabilities under insurance contracts
Fair values calculated
using internal models at
2021*
Level 2
Level 3
Valuation techniques
Main assumptions
103,807
68,930
1,038
6,488
6,141
53,234
42,438
658
446
2,720
184
6,788
2,029
5,463
4,149
1,314
629
160
— Present value method
— Present value method
— Present value method
160
Market price, Yield curves,
Dividends and Others
Yield curves, FX market prices
Yield curves, FX market prices and
Credit curves
44 Present value method, Gaussian
Copula
7 Black-Scholes Model
67 Black-Scholes Model
Yield curves, FX market prices,
Basis, Liquidity, HPI
Yield curves, Volatility surfaces, FX
market prices, Liquidity
Yield curves, FX market prices
26 Black's Model, multifactorial
advanced models interest rate
Yield curves, Volatility surfaces, FX
market prices, Liquidity
— Present value method
16 Present value method, Advanced
stochastic volatility models
— Present value method
—
— Present value method
— Present value method, Advanced
stochastic volatility models and
other
Yield curves, Volatility surfaces, FX
& EQ market prices, Dividends,
Correlation, Liquidity, HPI
Yield curves, Volatility surfaces, FX
& EQ market prices, Dividends,
Correlation, Liquidity, HPI, Credit,
Others
Yield curves ,FX & EQ market
prices, Equity
Yield curves ,FX & EQ market
prices, Basis
Yield curves , Volatility surfaces,
FX market prices, Credit, Liquidity,
Other
Yield curves, FX market prices
28,644
469 Present value method
770
— Present Value Method with
actuarial techniques
Mortality tables and interest rate
curves
*
**
***
Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.
Includes mainly short-term loans and reverse repurchase agreements with corporate customers (mainly brokerage and investment companies).
Includes, mainly, structured loans to corporate clients.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
ASSETS
Financial assets held for trading
Credit institutions
Customers**
Debt and equity instruments
Derivatives
Swaps
Exchange rate options
Interest rate options
Interest rate futures
Index and securities options
Other
Hedging derivatives
Swaps
Interest rate options
Other
Non-trading financial assets mandatorily at
fair value through profit or loss
Equity instruments
Debt securities issued
Loans and receivables
Financial assets designated at fair value
through profit or loss
Central banks
Credit institutions
Customers
Debt instruments
Equity instruments
Financial assets at fair value through other
comprehensive income
Equity instruments
Debt instruments
Loans and receivables
Fair values calculated
using internal models at
2020*
Fair values calculated
using internal models at
2019*
Level 2
Level 3
Level 2
Level 3 Valuation techniques
146,468
67,826
3
296
1,453
66,074
54,488
696
3,129
1,069
554
6,138
8,325
6,998
25
1,302
1,796
984
555
257
45,559
9,481
11,973
24,102
3
—
22,962
75
18,410
4,477
8,543
740
149,711
63,051
6,651
598
—
—
10
730
272
22
241
—
94
101
—
—
—
—
934
505
134
295
649
—
163
19
467
—
—
355
760
61,936
51,594
469
3,073
190
1,164
5,446
7,216
6,485
25
706
1,780
1,272
498
10
58,833
6,474
21,598
30,729
32
—
—
—
65
533
182
8
177
—
95
71
Present Value method
Present Value method
Present Value method
Present Value method, Gaussian Copula
Black-Scholes Model
Black's Model, advanced multifactor
interest rate models
Present Value method
Black's Model, advanced multifactor
interest rate models
Present Value method, Advanced
stochastic volatility models and other
—
— Present Value method
— Black’s Model
Present Value method, Advanced
stochastic volatility models and other
—
1,601
550 Present Value method
675 Present Value method
Present Value method, swap asset model
& CDS
376
664
— Present Value method
50 Present Value method
32 Present Value method
582 Present Value method
— Present Value method
6,220
1,223
206
4,791
18,831
3,788
98
17,486
1,247
407 Present Value method
188 Present Value method
3,193 Present Value method
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financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
LIABILITIES
Financial liabilities held for trading
Derivatives
Swaps
Interest rate options
Exchange rate options
Index and securities options
Interest rate and equity futures
Other
Short positions
Hedging derivatives
Swaps
Interest rate options
Other
Fair values calculated
using internal models at
2020*
Fair values calculated
using internal models at
2019*
Level 2
Level 3
Level 2
Level 3 Valuation techniques
124,098
71,009
63,920
51,584
4,226
724
456
1,054
5,876
7,089
6,869
5,821
13
1,035
905
295
295
81
49
1
97
2
65
—
—
—
—
—
132,582
1,074
67,068
61,789
49,927
4,291
658
1,309
20
5,584
5,279
6,048
4,737
10
1,301
290
290
115
Present Value method, Gaussian
Copula***
34
Black's Model, advanced multifactor
interest rate models
1 Black-Scholes Model
88 Black-Scholes Model
2 Present Value method
Present Value method, Advanced
stochastic volatility models and other
50
— Present Value method
—
0 Present Value method
— Black’s Model
Present Value method, Advanced
stochastic volatility models and other
—
Financial liabilities designated at fair value
through profit or loss
Liabilities under insurance contracts
45,310
610
58,727
784 Present Value method
910
—
739
Present Value method with actuarial
techniques
—
*
**
Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.
Includes mainly short-term loans and reverse repurchase agreements with corporate customers (mainly brokerage and investment companies).
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Notes to the consolidated
financial statements
Appendix
Financial Instruments (level 3)
Set forth below are the Group’s main financial instruments measured
using unobservable market data as significant inputs of the internal
models (level 3):
• HTC&S (Hold to collect and sale) syndicated loans classified in the
fair value category with changes in other comprehensive income,
where the cost of liquidity is not directly observable in the market,
as well as the prepayment option in favour of the borrower.
• Illiquid equity in non-trading portfolios, classified at fair value
through profit or loss and at fair value through equity.
• Instruments in Santander UK’s portfolio (loans, debt instruments
and derivatives) linked to the House Price Index (HPI). Even if the
valuation techniques used for these instruments may be the same
as those used to value similar products (present value in the case
of loans and debt instruments, and the Black-Scholes model for
derivatives), the main factors used in the valuation of these
instruments are the HPI spot rate, the growth and volatility
thereof, and the mortality rates, which are not always observable
in the market and, accordingly, these instruments are considered
illiquid.
• Callable interest rate derivatives (Bermudan-style options) where
the main unobservable input is mean reversion of interest rates.
• Trading derivatives on interest rates, taking as an underlying asset
titling and with the amortization rate (CPR, Conditional
prepayment rate) as unobservable main entry.
• Derivatives from trading on inflation in Spain, where volatility is
not observable in the market.
• Equity volatility derivatives, specifically indices and equities, where
volatility is not observable in the long term.
• Derivatives on long-term interest rate and FX in some units
(mainly South America)where for certain underlyings it is not
possible to demonstrate observability to these terms.
• Debt instruments referenced to certain illiquid interest rates, for
which there is no reasonable market observability.
The measurements obtained using the internal models might have
been different if other methods or assumptions had been used with
respect to interest rate risk, to credit risk, market risk and foreign
currency risk spreads, or to their related correlations and volatilities.
Nevertheless, the Bank’s directors consider that the fair value of the
financial assets and liabilities recognised in the consolidated balance
sheet and the gains and losses arising from these financial
instruments are reasonable.
The net amount recognised in profit and loss in 2021 arising from
models whose significant inputs are unobservable market data (level
3) amounted to EUR 73 million profit (EUR 193 million profit in 2020
and EUR 85 million profit in 2019).
The table below shows the effect, at 31 December 2021 and 2020 on
the fair value of the main financial instruments classified as level 3 of
a reasonable change in the assumptions used in the valuation. This
effect was determined by applying the probable valuation ranges of
the main unobservable inputs detailed in the following table:
Annual report 2021 562
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financial statements
Notes to the consolidated
financial statements
Appendix
2021
Portfolio/Instrument
(Level 3)
Financial assets held for trading
Derivatives
Cap&Floor
CCS
CCS
Convertibility curve - inputs:
NDFs Offshore
EQ Options
EQ Options
FRAs
FX Options
Inflation Derivatives
Inflation Derivatives
IR Futures
IR Options
IRS
IRS
IRS
IRS
IRS
IRS
IRS
IRS
Property derivatives
Swaptions
Debt securities
Valuation technique
Main unobservable inputs
Impacts (EUR million)
Range
Weighted
average
Unfavourable
scenario
Favourable
scenario
Volatility option model
Discounted Cash Flows
Forward estimation
Volatility
Interest rate
Interest rate
Forward estimation
EQ option pricing model
Local volatility
Asset Swap model
FX option pricing model
Asset Swap model
Volatility option model
Asset Swap model
IR option pricing model
Asset Swap model
Discounted Cash Flows
Discounted Cash Flows
Discounted Cash Flows
Forward estimation
Forward estimation
Others
Prepayment modelling
Option pricing model
IR option pricing model
Price
Volatility
Volatility
Interest rate
Volatility
Inflation Swap Rate
Volatility
Interest rate
Volatility
Interest rate
Credit spread
Inflation Swap Rate
Swap Rate
Interest rate
Prepayment rate
Others
Prepayment rate
Growth rate
Volatility
10% - 90%
(0.7)% - 0.7%
4bps - (4)bps
0% - 2%
0% - 90%
10% - 90%
0% - 4%
0% - 50%
(50)% - 50%
0% - 40%
0% - 15%
0% - 60%
(6)% - 12.80%
103.10bps - 375.6bps
(0.8)% - 6.5%
7.7% - 8.2%
TIIE91 (8.98)bps -
TIIE91 +11.12bps
6% - 12%
0.05%
2.5% - 6.2%
0% - 5%
0% - 40%
36.30 %
0.73 %
(0.09) %
0.61 %
61.20 %
40.00 %
1.78 %
32.14 %
50.00 %
13.29 %
5.91 %
36.28 %
10.36 %
71.91 %
1.81 %
(2.87) %
n.a.
n.a.
n.a.
0.44 %
2.50 %
26.67 %
(0.50)
(0.11)
(0.03)
(0.65)
(0.24)
(6.82)
(0.91)
(0.28)
(0.56)
(0.47)
(1.09)
(0.20)
(0.07)
(7.21)
(0.04)
(0.23)
(0.27)
—
(1.49)
(0.09)
(2.62)
(0.13)
0.43
0.11
0.03
0.28
0.52
6.82
0.73
0.50
0.28
0.24
0.71
0.31
0.13
4.16
0.01
0.10
0.17
—
—
0.05
2.62
0.27
—
Corporate debt
Price based
Market price
85% - 115%
15.00 %
—
Financial assets designated at
fair value through profit or loss
Loans and advances to
customers
Loans
Mortgage portfolio
Debt securities
Corporate debt
Government debt
Other debt securities
Discounted Cash Flows
Black Scholes model
Credit spreads
Growth rate
Discounted Cash Flows
Discounted Cash Flows
Others
Credit spread
Discount curve
Inflation Swap Rate
0.1% - 1.4%
0%- 5%
0% - 20%
0% - 10%
0% - 10%
0.66 %
2.50 %
9.88 %
8.33 %
4.74 %
(0.26)
(1.9)
(1.23)
(4.14)
(5.47)
0.26
1.90
1.20
20.69
4.92
Annual report 2021 563
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financial statements
Notes to the consolidated
financial statements
Appendix
2021
Portfolio/Instrument
(Level 3)
Valuation technique
Main unobservable inputs
Impacts (EUR million)
Range
Weighted
average
Unfavourable
scenario
Favourable
scenario
Non-trading financial assets
mandatorily at fair value
through profit or loss
Debt securities
Corporate debt
Property securities
Equity instruments
Equities
Financial assets at fair value
through other comprehensive
income
Loans and advances to
customers
Loans
Loans
Loans
Loans
Debt securities
Government debt
Equity instruments
Equities
Financial liabilities held for
trading
Derivatives
Cap&Floor
Financial liabilities designated at
fair value through profit or loss
Loans and advances to
customers
Discounted Cash Flows
Probability weighting
Margin of a reference portfolio
Growth rate
(1)bp - 1bp
0% - 5%
0.01
2.50 %
(0.56)
(1.19)
0.60
1.19
Price Based
Price
90% - 110%
10.00 %
(123.1)
123.10
Discounted Cash Flows
Discounted Cash Flows
Discounted Cash Flows
Forward estimation
Credit spread
Interest rate curve
Margin of a reference portfolio
Credit spread
n.a.
(0.1)% - 0.1%
(1)bp - 1bp
77bps - 242bps
n.a.
0.12 %
1.00 %
n.a.
(19.84)
(0.07)
(13.12)
—
—
0.07
13.04
—
Discounted Cash Flows
Interest rate
0.6% - 0.8%
0.09 %
(0.01)
0.01
Price Based
Price
90% - 110%
10.00 %
(82.13)
82.13
Volatility option model
Volatility
10% - 90%
36.30 %
(0.5)
0.43
Repos/Reverse repos
Asset Swap Repo Model
Long-term repo spread
n.a
n.a.
(0.36)
—
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financial statements
Notes to the consolidated
financial statements
Appendix
Valuation technique
Main unobservable inputs
Range
Weighted
average
Impacts (EUR million)
Favourable
scenario
Unfavourable
scenario
2020
Portfolio/
Instrument
(Level 3)
Financial assets held for trading
Derivatives
Cap&Floor
CCS
Convertibility curve - NDFs
Offshore
EQ Options
FRAs
FX Forward
FX Options
Inflation Derivatives
Inflation Derivatives
IR Futures
IR Options
IRS
IRS
IRS
IRS
Volatility option model
Discounted Cash Flows
Volatility
Interest rate
Forward estimation
EQ option pricing model
Asset Swap model
Discounted Cash Flows
FX option pricing model
Asset Swap model
Volatility option model
Asset Swap model
IR option pricing model
Asset Swap model
Discounted Cash Flows
Discounted Cash Flows
Prepayment modelling
Price
Volatility
Interest rate
Swap Rate
Volatility
Inflation Swap Rate
Volatility
Interest rate
Volatility
Interest rate
Swap Rate
Credit spread
Prepayment rate
10% - 90%
(0.30)% - 0.66%
0% - 2%
7.86% - 93.67%
0% - 5%
(0.02)% - (0.30)%
0% - 50%
(100)% - 50%
0% - 50%
0% - 15%
0% - 100%
(6)% - 12.50%
5.90% - 6.31%
78.97 bps - 202.37 bps
2.47% - 6.22%
Property derivatives
Swaptions
Option pricing model
IR option pricing model
HPI Forward growth rate and HPI
Spot rate
Volatility
0% - 5%
0% - 50%
Financial assets designated at
fair value through profit or loss
Loans and advances to
customers
Repos / Reverse repos
Mortgage portfolio
Other loans
Debt securities
Government debt
Other debt securities
Asset Swap Repo Model
Black Scholes model
Present value method
Long-term repo spread
HPI Forward growth rate
Credit spreads
Discounted Cash Flows
Price based
Interest rate
Market Price
n/a
0% - 5%
0.07% - 1.55%
0% - 10%
90% - 110%
Property securities
Probability weighting
HPI Forward growth rate and HPI
Spot rate
0% - 5%
Non-trading financial assets
mandatorily at fair value
through profit or loss
Equity instruments
31.55 %
0.66 %
0.61 %
48.37 %
2.22 %
0.11 %
32.14 %
83.33 %
16.67 %
0.94 %
19.05 %
10 %
2.26 %
9.82 bps
0.06 %
2.50 %
33.33 %
n/a
2.50 %
0.74 %
8.33 %
10 %
2.50 %
(0.07)
—
(0.72)
(1.46)
(0.78)
—
(0.39)
(0.63)
(0.47)
(0.94)
(0.27)
(0.08)
(0.01)
(2.81)
(0.12)
0.05
0.20
0.31
1.81
0.63
—
0.70
0.31
0.23
0.06
0.06
0.13
0.02
1.29
0.05
(17.82)
(0.16)
17.82
0.31
(0.18)
(2.23)
(0.35)
(0.78)
(0.15)
0.23
2.23
0.35
3.91
0.15
(7.24)
7.24
Equities
Price Based
Price
90% - 110%
10 %
(50.47)
50.47
Financial assets at fair value
through other comprehensive
income
Loans and advances to
customers
Loans
Loans
Other loans
Debt securities
Discounted Cash Flows
Discounted Cash Flows
Present value method
Credit spread
Interest rate curve
Credit spreads
n/a
(0.15)% - 0.15%
0.15% - 0.53%
n/a
0.15 %
0.19 %
(6.72)
(0.09)
(0.04)
—
0.09
0.04
Government debt
Discounted Cash Flows
Interest rate
1.1% - 1.3%
0.10 %
—
—
Equity instruments
Equities
Financial liabilities held for
trading
Derivatives
Cap&Floor
Price Based
Price
90% - 110%
10 %
(122.14)
122.14
Volatility option model
Volatility
10% - 90%
34.61 %
(0.02)
0.01
EQ Options
Option pricing model
HPI Forward growth rate and HPI
Spot rate
0% - 5%
2.50 %
(6.35)
6.35
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Contents
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Lastly, the changes in the financial instruments classified as Level 3 in
2021, 2020 and 2019 were as follows:
01/01/2021
Fair value
calculated
using
internal
models
(Level 3)
Changes
Changes in
fair value
recognised
in profit or
loss
Changes in
fair value
recognised
in equity
Purchases/
Issuances
Sales/
Settlements
(124)
(181)
EUR million
Financial assets held for trading
Debt instruments
Equity instruments
Trading derivatives
Swaps
Exchange rate options
Interest rate options
Index and securities options
Other
Financial assets at fair value
through profit or loss
Credit entities
Loans and advances to customers
Debt instruments
Non-trading financial assets
mandatorily at fair value through
profit or loss
Customers
Debt instruments
Equity instruments
Financial assets at fair value
through other comprehensive
income
Loans and advances
Debt instruments
Equity instruments
TOTAL ASSETS
Financial liabilities held for trading
Trading derivatives
Swaps
Exchange rate options
Interest rate options
Index and securities options
Securities and interest rate
futures
Others
Financial liabilities designated at
fair value through profit or loss
TOTAL LIABILITIES
740
7
3
730
272
22
241
94
101
649
163
19
467
934
295
134
505
6,220
4,791
206
1,223
8,543
295
295
81
1
49
97
2
65
610
905
136
20
—
116
5
14
7
18
72
59
—
—
59
534
122
206
206
(2)
(1)
(121)
(33)
(27)
(39)
(12)
(10)
(120)
—
(2)
(118)
(251)
(149)
(28)
(74)
5,681
5,597
75
9
(6,588)
(6,298)
(25)
(265)
6,410
(7,083)
85
85
4
2
26
23
—
30
143
228
(42)
(42)
(10)
—
(19)
(5)
(2)
(6)
—
(42)
(2)
—
(179)
(35)
3
(27)
(51)
(69)
(11)
—
—
(11)
127
—
28
99
—
—
—
—
(65)
(138)
(138)
(36)
4
(8)
(27)
—
(71)
—
(138)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(228)
(37)
(43)
(148)
(228)
—
—
—
—
—
—
—
—
—
—
31/12/2021
Fair value
calculated
using
internal
models
(level 3)
537
22
2
513
224
12
182
41
54
418
—
18
400
1,865
268
366
1,231
4,847
3,880
146
821
7,667
160
160
44
7
26
67
—
16
469
629
Level
reclassifications Other
(15)
(19)
—
—
(15)
33
—
—
(8)
(40)
(163)
(163)
—
—
485
(3)
17
471
(241)
(173)
(68)
—
66
(21)
(21)
3
—
—
(22)
—
(2)
(289)
(310)
(1)
—
(18)
(18)
—
—
—
—
4
—
1
3
36
3
9
24
3
—
1
2
24
(19)
(19)
2
—
(22)
1
—
—
5
(14)
Annual report 2021 566
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
01/01/2020
Fair value
calculated
using
internal
models
(level 3)
Changes
Changes in
fair value
recognized
in profit or
loss
Changes in
fair value
recognized
in equity
Purchases
/Issuances
Sales/
Settlements
Level
reclassifications Other
31/12/2020
Fair value
calculated
using
internal
models
(level 3)
598
65
—
533
182
8
177
95
71
664
50
32
582
1,601
376
675
550
3,788
6,651
290
290
115
1
34
88
2
50
784
1,074
52
7
3
42
—
—
15
25
2
280
164
—
116
120
104
—
16
(98)
(27)
—
(71)
(8)
—
(12)
(43)
(8)
(45)
—
(15)
(30)
(292)
(136)
(144)
(12)
8,795
9,247
(7,616)
(8,051)
40
40
8
—
11
21
—
—
4
44
(14)
(14)
—
—
(2)
(8)
—
(4)
(3)
(17)
330
1
—
329
116
15
61
85
52
17
(1)
3
15
(36)
12
(63)
15
—
311
130
130
(7)
2
6
95
—
34
(12)
118
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(45)
—
—
(45)
(8)
—
—
(38)
1
(91)
(50)
—
(97)
(39)
—
(58)
(10)
(1)
—
(30)
(17)
(176)
—
(1)
(41)
(175)
(119)
(340)
(30)
(31)
2
(336)
(91)
27
740
7
3
730
272
22
241
94
101
649
163
19
467
934
295
134
505
(390)
(390)
571
316
1,072
459
6,220
8,543
—
—
—
—
—
—
—
—
—
—
(96)
(96)
(26)
—
—
(55)
(55)
(9)
(2)
—
(70)
(29)
—
—
—
(15)
(32)
(128)
(131)
(186)
295
295
81
1
49
97
2
65
610
905
EUR million
Financial assets held for trading
Debt instruments
Equity instruments
Trading derivatives
Swaps
Exchange rate options
Interest rate options
Index and securities options
Other
Financial assets at fair value
through profit or loss
Credit entities
Loans and advances to customers
Debt instruments
Non-trading financial assets
mandatorily at fair value through
profit or loss
Loans and advances to customers
Debt instruments
Equity instruments
Financial assets at fair value
through other comprehensive
income
TOTAL ASSETS
Financial liabilities held for trading
Trading derivatives
Swaps
Exchange rate options
Interest rate options
Index and securities options
Securities and interest rate
futures
Others
Financial liabilities designated at
fair value through profit or loss
TOTAL LIABILITIES
Annual report 2021 567
Contents
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Financial assets held for trading
Debt instruments and equity
instruments
Trading derivatives
Swaps
Exchange rate options
Interest rate options
Index and securities options
Other
Hedging derivatives (Assets)
Swaps
Financial assets designated at fair
value through profit or loss
Credit entities
Loans and advances to customers
Debt instruments
Non-trading financial assets
mandatorily at fair value through
profit or loss
Loans and advances to customers
Debt instruments
Equity instruments
Financial assets at fair value
through other comprehensive
income
TOTAL ASSETS
Financial liabilities held for trading
Trading derivatives
Swaps
Exchange rate options
Interest rate options
Index and securities options
Securities and interest rate
futures
Other
Hedging derivatives (Liabilities)
Swaps
Financial liabilities designated at
fair value through profit or loss
TOTAL LIABILITIES
01/01/2019
Fair value
calculated
using
internal
models
(level 3)
Changes
Changes in
fair value
recognised
in profit or
loss
Changes in
fair value
recognised
in equity
Level
reclassifications Other
31/12/2019
Fair value
calculated
using
internal
models
(level 3)
Purchases/
Issuances
Sales/
Settlements
738
153
585
185
2
149
198
51
21
21
876
201
560
115
1,403
460
481
462
1,435
4,473
289
289
111
7
26
143
—
2
6
6
147
442
142
34
108
10
—
—
48
50
—
—
55
—
20
35
426
126
199
101
4,424
5,047
136
136
6
1
—
79
3
47
—
—
298
434
(80)
(38)
(42)
(14)
—
(5)
(18)
(5)
—
—
(16)
—
(9)
(7)
(325)
(252)
(7)
(66)
(1,698)
(2,119)
(12)
(12)
(5)
—
—
(7)
—
—
—
—
(5)
(17)
115
4
111
22
6
33
50
—
—
—
65
—
(1)
66
81
21
(10)
70
—
261
45
45
(17)
—
8
51
—
3
—
—
31
76
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(190)
(190)
—
—
—
—
—
—
—
—
—
—
—
—
(317)
(88)
(229)
(20)
—
—
(182)
(27)
(21)
(21)
(261)
(151)
(496)
386
—
—
—
—
(252)
(851)
(164)
(164)
20
(7)
—
(177)
—
—
(6)
(6)
313
143
—
—
—
(1)
—
—
(1)
2
—
—
(55)
—
(42)
(13)
16
21
12
(17)
69
30
(4)
(4)
—
—
—
(1)
(1)
(2)
—
—
—
(4)
598
65
533
182
8
177
95
71
—
—
664
50
32
582
1,601
376
675
550
3,788
6,651
290
290
115
1
34
88
2
50
—
—
784
1,074
Annual report 2021 568
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
iv. Recognition of fair value changes
As a general rule, changes in the carrying amount of financial assets
and liabilities are recognised in the consolidated income statement. A
distinction is made between the changes resulting from the accrual
of interest and similar items, (which are recognised under Interest
income or Interest expense, as appropriate), and those arising for
other reasons, which are recognised at their net amount under
'Gains/losses on financial assets and liabilities'.
v. Hedging transactions
The consolidated entities use financial derivatives for the following
purposes: i) to facilitate these instruments to customers who request
them in the management of their market and credit risks; ii) to use
these derivatives in the management of the risks of the Group
entities’ own positions and assets and liabilities (hedging derivatives);
and iii) to obtain gains from changes in the prices of these derivatives
(derivatives).
Adjustments due to changes in fair value arising from:
• 'Financial assets at fair value with changes in other comprehensive
income' are recorded temporarily, in the case of debt instruments
in 'Other comprehensive income - Elements that can be
reclassified to profit or loss - Financial assets at fair value with
changes in other comprehensive income', while in the case of
equity instruments are recorded in 'other comprehensive income -
Elements that will not be reclassified to line item - Changes in the
fair value of equity instruments valued at fair value with changes
in other comprehensive income'.
Exchange differences on debt instruments measured at fair value
with changes in other comprehensive income are recognised under
'Exchange Differences, net' of the consolidated income statement.
Exchange differences on equity instruments, in which the irrevocable
option of being measured at fair value with changes in other
comprehensive income has been chosen, are recognised in 'Other
comprehensive income - Items that will not be reclassified to profit
or loss - Changes in the fair value of equity instruments measured at
fair value with changes in other comprehensive income'.
• Items charged or credited to 'Items that may be reclassified to
profit or loss – Financial assets at fair value through other
comprehensive income' and 'Other comprehensive income – Items
that may be reclassified to profit or loss – Exchange differences in
equity' remain in the Group's consolidated equity until the asset
giving rise to them is impaired or derecognised, at which time they
are recognised in the consolidated income statement.
• Unrealised gains on Financial assets classified as Non-current
assets held for sale because they form part of a disposal group or a
discontinued operation are recognised in 'Other comprehensive
income under Items that may be reclassified to profit or loss –
Non-current assets held for sale'.
Financial derivatives that do not qualify for hedge accounting are
treated for accounting purposes as trading derivatives.
A derivative qualifies for hedge accounting if all the following
conditions are met:
1. The derivative hedges one of the following three types of
exposure:
a. Changes in the fair value of assets and liabilities due to
fluctuations, among others, in the interest rate and/or exchange
rate to which the position or balance to be hedged is subject
(fair value hedge).
b. Changes in the estimated cash flows arising from financial
assets and liabilities, commitments and highly probable
forecast transactions (cash flow hedge).
c. The net investment in a foreign operation (hedge of a net
investment in a foreign operation).
2. It is effective in offsetting exposure inherent in the hedged item or
position throughout the expected term of the hedge, which means
that:
a. At the date of arrangement the hedge is expected, under normal
conditions, to be highly effective (prospective effectiveness).
b. There is sufficient evidence that the hedge was actually
effective during the whole life of the hedged item or position
(retrospective effectiveness). To this end, the Group checks that
the results of the hedge were within a range of 80% to 125% of
the results of the hedged item.
3. There must be adequate documentation evidencing the specific
designation of the financial derivative to hedge certain balances or
transactions and how this hedge was expected to be achieved and
measured, provided that this is consistent with the Group’s
management of own risks.
Annual report 2021 569
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The changes in value of financial instruments qualifying for hedge
accounting are recognised as follows:
a. In fair value hedges, the gains or losses arising on both the
hedging instruments and the hedged items attributable to the
type of risk being hedged are recognised directly in the
consolidated income statement.
In fair value hedges of interest rate risk on a portfolio of financial
instruments, the gains or losses that arise on measuring the
hedging instruments are recognised directly in the consolidated
income statement, whereas the gains or losses due to changes
in the fair value of the hedged amount (attributable to the
hedged risk) are recognised in the consolidated income
statement with a balancing entry under Changes in the fair value
of hedged items in portfolio hedges of interest rate risk on the
asset or liability side of the balance sheet, as appropriate.
b. In cash flow hedges, the effective portion of the change in value
of the hedging instrument is recognised temporarily in Other
comprehensive income – under Items that may be reclassified
to profit or loss – Hedging derivatives – Cash flow hedges
(effective portion) until the forecast transactions occur, when it
is recognised in the consolidated income statement, unless, if
the forecast transactions result in the recognition of non-
financial assets or liabilities, it is included in the cost of the non-
financial asset or liability.
c. In hedges of a net investment in a foreign operation, the gains or
losses attributable to the portion of the hedging instruments
qualifying as an effective hedge are recognised temporarily in
Other comprehensive income under Items that may be
reclassified to profit or loss – Hedges of net investments in
foreign operations until the gains or losses – on the hedged item
are recognised in profit or loss.
d. The ineffective portion of the gains or losses on the hedging
instruments of cash flow hedges and hedges of a net
investment in a foreign operation is recognised directly under
'Gains/losses on financial assets and liabilities (net)' in the
consolidated income statement, in Gains or losses from hedge
accounting, net.
If a derivative designated as a hedge no longer meets the
requirements described above due to expiration, ineffectiveness or
for any other reason, the derivative is classified for accounting
purposes as a trading derivative.
When fair value hedge accounting is discontinued, the adjustments
previously recognised on the hedged item are amortised to profit or
loss at the effective interest rate recalculated at the date of hedge
discontinuation. The adjustments must be fully amortised at
maturity.
When cash flow hedge accounting is discontinued, any cumulative
gain or loss on the hedging instrument recognised in equity under
other comprehensive income 'Items that may be reclassified to profit
or loss' (from the period when the hedge was effective) remains in
this equity item until the forecast transaction occurs, at which time it
is recognised in profit or loss, unless the transaction is no longer
expected to occur, in which case the cumulative gain or loss is
recognised immediately in profit or loss.
vi. Derivatives embedded in hybrid financial instruments
Derivatives embedded in other financial instruments or in other host
contracts are accounted for separately as derivatives if their risks and
characteristics are not closely related to those of the host contracts,
provided that the host contracts are not classified as financial assets/
liabilities designated at fair value through profit or loss or as
'Financial assets/liabilities held for trading'.
e) Derecognition of financial assets and liabilities
The accounting treatment of transfers of financial assets depends on
the extent to which the risks and rewards associated with the
transferred assets are transferred to third parties:
1. If the Group transfers substantially all the risks and rewards to
third parties unconditional -sale of financial assets, sale of financial
assets under an agreement to repurchase them at their fair value
at the date of repurchase, sale of financial assets with a purchased
call option or written put option that is deeply out of the money,
securitisation of assets in which the transferor does not retain a
subordinated debt or grant any credit enhancement to the new
holders, and other similar cases-, the transferred financial asset is
derecognised and any rights or obligations retained or created in
the transfer are recognised simultaneously.
2. If the Group retains substantially all the risks and rewards
associated with the transferred financial asset -sale of financial
assets under an agreement to repurchase them at a fixed price or
at the sale price plus interest, a securities lending agreement in
which the borrower undertakes to return the same or similar
assets, and other similar cases-, the transferred financial asset is
not derecognised and continues to be measured by the same
criteria as those used before the transfer. However, the following
items are recognised:
a. An associated financial liability, which is recognised for an
amount equal to the consideration received and is subsequently
measured at amortised cost, unless it meets the requirements
for classification under 'Financial liabilities designated at fair
value through profit or loss'.
b. The income from the transferred financial asset not
derecognised and any expense incurred on the new financial
liability, without offsetting.
Annual report 2021 570
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
3. If the Group neither transfers nor retains substantially all the risks
and rewards associated with the transferred financial asset -sale
of financial assets with a purchased call option or written put
option that is not deeply in or out of the money, securitisation of
assets in which the transferor retains a subordinated debt or other
type of credit enhancement for a portion of the transferred asset,
and other similar cases- the following distinction is made:
a. If the transferor does not retain control of the transferred
financial asset, the asset is derecognised and any rights or
obligations retained or created in the transfer are recognised.
b. If the transferor retains control of the transferred financial
asset, it continues to recognise it for an amount equal to its
exposure to changes in value and recognises a financial liability
associated with the transferred financial asset. The net carrying
amount of the transferred asset and the associated liability is
the amortised cost of the rights and obligations retained, if the
transferred asset is measured at amortised cost, or the fair
value of the rights and obligations retained, if the transferred
asset is measured at fair value.
Accordingly, financial assets are only derecognised when the rights
to the cash flows they generate have expired or when substantially
all the inherent risks and rewards have been transferred to third
parties. Similarly, financial liabilities are only derecognised when the
obligations they generate have been extinguished or when they are
acquired with the intention either to cancel them or to resell them.
Regarding contractual modifications of financial assets, Grupo
Santander has differentiated them into two main categories in
relation to the conditions under which a modification leads to a
derecognition or disposal of the financial asset (and the recognition
of a new financial asset) and those under which the accounting of the
original financial instrument with the modified terms is maintained:
• Contractual modifications for commercial or market reasons,
which are generally carried out at the request of the debtor to
apply current market conditions to the debt. The new contract is
considered a new transaction and, consequently, it is necessary to
derecognize the original financial asset and recognize a new
financial asset subject to the classification and measurement
requirements established by IFRS 9. Also, the new financial asset
will be recorded at fair value and, if applicable, the difference
between the carrying amount of the asset derecognized and the
fair value of the new asset will be recognized in profit or loss.
• Modifications due to refinancing or restructuring, in which the
payment conditions are modified to allow a customer that is
experiencing financial difficulties (current or foreseeable) to meet
its payment obligations and that, if such modification had not been
made, it would be reasonably certain that it would not be able to
meet such payment obligations. In this case, the modification does
not result in the derecognition of the financial asset, but rather the
original financial asset is maintained and does not require a new
assessment of its classification and measurement. When
assessing credit impairment, the current credit risk (considering
the modified cash flows) should be compared with the credit risk
at initial recognition. Finally, the gross carrying amount of the
financial asset (the present value of the renegotiated or modified
contractual cash flows that are discounted at the original effective
interest rate of the financial asset) should be recalculated, with a
gain or loss recognized in profit or loss for the difference.
Annual report 2021 571
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
f) Offsetting of financial instruments
Financial asset and liability balances are offset, i.e. reported in the
consolidated balance sheet at their net amount, only if the Group
entities currently have a legally enforceable right to set off the
recognised amounts and intend either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Following is the detail of financial assets and liabilities that were
offset in the consolidated balance sheets as of 31 December 2021,
2020 and 2019:
31 December 2021
EUR million
Gross amount
of
financial
assets
Gross amount
of financial
assets
offset in the
balance sheet
Net amount
of financial
assets
presented in
the balance
sheet
101,485
(42,432)
59,053
72,023
173,508
(13,917)
(56,349)
58,106
117,159
31 December 2020
EUR million
Gross amount
of
financial
assets
Gross amount
of financial
assets
offset in the
balance sheet
Net amount
of financial
assets
presented in
the balance
sheet
136,437
(60,975)
75,462
82,865
219,302
(16,078)
(77,053)
66,787
142,249
31 December 2019
EUR million
Gross amount
of
financial
assets
Gross amount
of financial
assets
offset in the
balance sheet
Net amount
of financial
assets
presented in
the balance
sheet
126,389
(55,776)
70,613
89,465
215,854
(5,168)
(60,944)
84,297
154,910
Assets
Derivatives
Reverse
repurchase
agreements
Total
Assets
Derivatives
Reverse
repurchase
agreements
Total
Assets
Derivatives
Reverse
repurchase
agreements
Total
31 December 2021
EUR million
Gross amount
of
financial
liabilities
Gross amount
of financial
liabilities
offset in the
balance sheet
Net amount
of financial
liabilities
presented in
the balance
sheet
101,461
(42,432)
59,029
73,424
174,885
(13,916)
(56,348)
59,508
118,537
31 December 2020
EUR million
Gross amount
of
financial
liabilities
Gross amount
of financial
liabilities
offset in the
balance sheet
Net amount
of financial
liabilities
presented in
the balance
sheet
132,313
(60,975)
71,338
77,925
210,238
(16,078)
(77,053)
61,847
133,185
31 December 2019
EUR million
Gross amount
of
financial
liabilities
Gross amount
of financial
liabilities
offset in the
balance sheet
Net amount
of financial
liabilities
presented in
the balance
sheet
124,840
(55,776)
69,064
81,087
205,927
(5,168)
(60,944)
75,919
144,983
Liabilities
Derivatives
Reverse
repurchase
agreements
Total
Liabilities
Derivatives
Reverse
repurchase
agreements
Total
Liabilities
Derivatives
Reverse
repurchase
agreements
Total
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At 31 December 2021, Grupo Santander has offset other items
amounting to EUR 1,188 million (EUR 1,194 million and EUR 1,366
million at 31 December 2020 and 2019, respectively).
At 31 December 2021 the balance sheet shows the amounts
EUR 106,430 million (EUR 130,653 million and EUR 141,201 million
at 31 December 2020 and 2019) on derivatives and repos as assets
and EUR 104,130 million (EUR 122,416 million and EUR 134,694
million at 31 December 2020 and 2019) on derivatives and repos as
liabilities that are subject to netting and collateral arrangements.
g) Impairment of financial assets
i. Definition
Grupo Santander associates an impairment in the value to financial
assets measured at amortised cost, debt instruments measured at
fair value with changes in other comprehensive income, lease
receivables and commitments and guarantees granted that are not
measured at fair value.
The impairment for expected credit losses is recorded with a charge
to the consolidated income statement for the period in which the
impairment arises. In the event of occurrence, the recoveries of
previously recognised impairment losses are recorded in the
consolidated income statement for the period in which the
impairment no longer exists or is reduced.
In the case of purchased or originated credit-impaired assets, the
Group only recognizes at the reporting date the changes in the
expected credit losses during the life of the asset since the initial
recognition as a credit loss. In the case of assets measured at fair
value with changes in other comprehensive income, the changes in
the fair value due to expected credit losses are charged in the
consolidated income statement of the year where the change
happened, reflecting the rest of the valuation in other comprehensive
income.
As a rule, the expected credit loss is estimated as the difference
between the contractual cash flows to be recovered and the
expected cash flows discounted using the original effective interest
rate. In the case of purchased or originated credit-impaired assets,
this difference is discounted using the effective interest rate adjusted
by credit rating.
Depending on the classification of financial instruments, which is
mentioned in the following sections, the expected credit losses may
be along 12 months or during the life of the financial instrument:
• 12-month expected credit losses: arising from the potential
default events, as defined in the following sections that are
estimated to be likely to occur within the 12 months following the
reporting date. These losses will be associated with financial
assets classified as 'normal risk' as defined in the following
sections.
• Expected credit losses over the life of the financial instrument:
arising from the potential default events that are estimated to be
likely to occur throughout the life of the financial instruments.
These losses are associated with financial assets classified as
'normal risk under watchlist' or 'doubtful risk'.
With the purpose of estimating the expected life of the financial
instrument all the contractual terms have been taken into account
(e.g. prepayments, duration, purchase options, etc.), being the
contractual period (including extension options) the maximum period
considered to measure the expected credit losses. In the case of
financial instruments with an uncertain maturity period and a
component of undrawn commitment (e.g.: credit cards), the
expected life is estimated through quantitative analyses to determine
the period during which the entity is exposed to credit risk, also
considering the effectiveness of management procedures that
mitigate such exposure (e.g. the ability to unilaterally cancel such
financial instruments, etc.).
The following constitute effective guarantees:
a) Mortgage guarantees on housing as long as they are first duly
constituted and registered in favour of the entity. The properties
include:
i. Buildings and building elements, distinguishing among:
• Houses.
• Offices, stores and multi-purpose premises.
• Rest of buildings such as non-multi-purpose premises and
hotels.
ii. Urban and developable ordered land.
iii. Rest of properties that classify as: buildings and building
elements under construction, such as property development in
progress and halted development, and the rest of land types,
such as rustic lands.
b) Collateral guarantees on financial instruments in the form of cash
deposits and debt securities issued by creditworthy issuers.
c) Other types of real guarantees, including properties received in
guarantee and second and subsequent mortgages on properties,
as long as the entity demonstrates its effectiveness. When
assessing the effectiveness of the second and subsequent
mortgages on properties the entity will implement particularly
restrictive criteria. It will take into account, among others, whether
the previous charges are in favour of the entity itself or not and the
relationship between the risk guaranteed by them and the
property value.
d) Personal guarantees, as well as the incorporation of new owners,
covering the entire amount of the financial instruments and
implying direct and joint liability to the entity of persons or other
entities whose solvency is sufficiently proven to ensure the
repayment of the loan on the agreed terms.
The different aspects that the Group considers for the evaluation of
effective guarantees are set out below in relation to the individual
analysis.
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ii. Financial instruments presentation
For the purposes of estimating the impairment amount, and in
accordance with its internal policies, the Group classifies its financial
instruments (financial assets, commitments and guarantees)
measured at amortised cost or fair value through other
comprehensive income in one of the following categories:
• Normal Risk ('stage 1'): includes all instruments that do not meet
the requirements to be classified in the rest of the categories.
• Normal risk under watchlist ('stage 2'): includes all instruments
that, without meeting the criteria for classification as doubtful or
default risk, have experienced significant increases in credit risk
since initial recognition.
In order to determine whether a financial instrument has increased
its credit risk since initial recognition and is to be classified in stage 2,
the Group considers the following criteria:
Changes in the risk of a default occurring through the
expected life of the financial instrument are analysed and
quantified with respect to its credit level in its initial
recognition.
With the purpose of determining if such changes are
considered as significant, with the consequent
classification into stage 2, each Group unit has defined
the quantitative thresholds to consider in each of its
portfolios taking into account corporate guidelines
ensuring a consistent interpretation in all units.
Within the quantitative thresholds, two types are
considered: A relative threshold is those that compare
current credit quality with credit quality at the time of
origination in percentage terms of change. In addition, an
absolute threshold compares both references in total
terms, calculating the difference between the two. These
absolute/relative concepts are used homogeneously
(with different values) in all geographies. The use of one
type of threshold or another (or both) is determined in
accordance with the process described in note 53, below,
and is marked by the type of portfolio and characteristics
such as the starting point of the average credit quality of
the portfolio.
In addition to the quantitative criteria indicated, various
indicators are used that are aligned with those used by
the Group in the normal management of credit risk.
Irregular positions of more than 30 days and renewals
are common criteria in all Group units. In addition, each
unit can define other qualitative indicators, for each of its
portfolios, according to the particularities and normal
management practices in line with the policies currently
in force (i.e. use of management alerts, etc.).
The use of these qualitative criteria is complemented
with the use of an expert judgement, under the
corresponding governance.
Quantitative
criteria
Qualitative
criteria
In the case of forbearances, instruments classified as 'normal risk
under watchlist' may be generally reclassified to 'normal risk' in the
following circumstances: at least two years have elapsed from the
date of reclassification to that category or from its forbearance date,
the client has paid the accrued principal and interest balance, and the
client has no other instruments with more than 30 days past due
balances.
• Doubtful Risk ('stage 3'): includes financial instruments, overdue or
not, in which, without meeting the circumstances to classify them
in the category of default risk, there are reasonable doubts about
their total repayment (principal and interests) by the client in the
terms contractually agreed. Likewise, off-balance-sheet exposures
whose payment is probable and their recovery doubtful are
considered in stage 3. Within this category, two situations are
differentiated:
– Doubtful risk for non-performing loans: financial instruments,
irrespective of the client and guarantee, with balances more
than 90 days past due for principal, interest or expenses
contractually agreed.
This category also includes all loan balances for a client which
overdue amount more than 90 days past due is greater than
20% of the loan receivable balance.
These instruments may be reclassified to other categories if, as a
result of the collection of part of the past due balances, the reasons
for their classification in this category do not remain and the client
does not have balances more than 90 days past due in other loans.
– Doubtful risk for reasons other than non-performing loans: this
category includes doubtful recovery financial instruments that
are not more than 90 days past due.
Grupo Santander considers that a financial instrument to be doubtful
for reasons other than delinquency when one or more combined
events have occurred with a negative impact on the estimated future
cash flows of the financial instrument. To this end, the following
indicators, among others, are considered:
a) Negative net equity or decrease because of losses of the client's
net equity by at least 50% during the last financial year.
b) Continued losses or significant decrease in revenue or, in
general, in the client's recurring cash flows.
c) Generalised delay in payments or insufficient cash flows to
service debts.
d) Significantly inadequate economic or financial structure or
inability to obtain additional financing by the client.
e) Existence of an internal or external credit rating showing that
the client is in default.
f) Existence of overdue customer commitments with a significant
amount to public institutions or employees.
These financial instruments may be reclassified to other categories if,
as a result of an individualised study, reasonable doubts do not
remain about the total repayment under the contractually agreed
terms and the client does not have balances with more than 90 days
past due.
In the case of forbearances, instruments classified as doubtful risk
may be reclassified to the category of 'normal risk under watchlist'
when the following circumstances are present: a minimum period of
one year has elapsed from the forbearance date, the client has paid
the accrued principal and interest amounts, and the client has no
other loan balance with more than 90 days past due.
• Default Risk: includes all financial assets, or part of them, for
which, after an individualised analysis, their recovery is considered
remote due to a notorious and irrecoverable deterioration of their
solvency.
In any event, except in the case of financial instruments with
effective collateral covering a substantial portion of the
transaction amount, the Group generally consider as remote the
following:
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- Those operations that, after an individualized analysis, are
categorized as unsustainable debt, assuming an irrecoverability
of such debt.
- Transactions classified as doubtful due to non-performing loans
with recovery costs that exceed the amounts receivable.
- The operations on which the award is executed. The queue of
these operations shall be included under default risk, as the
recovery of the flows, provided that no further guarantees
associated with the operation remain after the award of the
property.
- Those operations on which a deduction is made, the portion of
the operation corresponding to that deduction, will be given as a
balance at the time of signature.
A financial asset amount is maintained in the balance sheet until they
are considered as a "default risk", either all or a part of it, and the
write-off is registered against the balance sheet.
In the case of operations that have only been partially derecognised,
for forgiveness reasons or because part of the total balance is
considered unrecoverable, the remaining amount shall be fully
classified in the category of 'doubtful risk', except where duly
justified.
The classification of a financial asset, or part of it, as a 'default risk'
does not involve the disruption of negotiations and legal proceedings
to recover the amount.
iii. Impairment valuation assessment
Grupo Santander has policies, methods and procedures in place to
hedge its credit risk, both due to the insolvency attributable to
counterparties and its residence in a specific country.
These policies, methods and procedures are applied in the
concession, study and documentation of financial assets,
commitments and guarantees, as well as in the identification of their
impairment and in the calculation of the amounts needed to cover
their credit risk.
The asset impairment model in IFRS 9 applies to financial assets
measured at amortised cost, debt instruments at fair value with
changes in other comprehensive income, lease receivables and
commitments and guarantees granted that are not measured at fair
value.
The impairment represents the best estimation of the financial assets
expected credit losses at the balance sheet date, assessed both
individually and collectively.
• Individually: for the purposes of estimating the provisions for
credit risk arising from the insolvency of a financial instrument, the
Group individually assesses impairment by estimating the
expected credit losses on those financial instruments that are
considered to be significant and with sufficient information to
make such an estimate.
Therefore, this classification mostly includes wholesale banking
customers —Corporations, specialised financing— as well as some of
the largest companies —Chartered and real estate developers— from
retail banking. The determination of the perimeter in which the
individualised estimate is applied is detailed in a later section.
The individually assessed impairment estimate is equal to the
difference between the gross carrying amount of the financial
instrument and the estimated value of the expected cash flows
receivable discounted using the original effective interest rate of the
transaction. The estimate of these cash flows takes into account all
available information on the financial asset and the effective
guarantees associated with that asset. This estimation process is
detailed below.
• Collectively: the Group also assesses impairment by estimating the
expected credit losses collectively in cases where they are not
assessed on an individual basis. This includes, for example, loans
with individuals, sole proprietors or businesses in retail banking
subject to a standardised risk management.
For the purposes of the collective assessment of expected credit
losses, the Group has consistent and reliable internal models. For the
development of these models, instruments with similar credit risk
characteristics that are indicative of the debtors' capacity to pay are
considered.
The credit risk characteristics used to group the instruments are,
among others: type of instrument, debtor's sector of activity,
geographical area of activity, type of guarantee, aging of past due
balances and any other factor relevant to estimating the future cash
flows.
Grupo Santander performs retrospective and monitoring tests to
evaluate the reasonableness of the collective estimate.
On the other hand, the methodology required to estimate the
expected credit loss due to credit events is based on an unbiased and
weighted consideration by the probability of occurrence of a series of
scenarios, considering a range of three to five possible future
scenarios, depending on the characteristics of each unit, which could
have an impact on the collection of contractual cash flows, always
taking into account the time value of money, as well as all available
and relevant information on past events, current conditions and
forecasts of the evolution of macroeconomic scenarios that are
shown to be relevant for the estimation of this amount (for example:
GDP (Gross Domestic Product), housing price, unemployment rate,
etc.).
The estimation of expected losses requires expert judgment and the
support of historical, current and future information. The probability
of loss is measured considering past events, the present situation and
future trends of macroeconomic scenarios.
Grupo Santander uses forward-looking information in both internal
risk management and prudential regulation processes, so that for the
calculation of the impairment loss allowance, various scenarios are
incorporated that take advantage of the experience with such
information, thus ensuring consistency in obtaining the expected
loss.
The challenge of the exercise has focused on the uncertainty of the
economic outlook caused by the covid-19 crisis, coupled with a
complex environment for value creation.
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Grupo Santander has internally ensured the criteria to be followed
for guarantees received from government bodies, both through
credit lines and other public guarantees, so that when they are
adequately reflected in each of the contracts, they are recognised as
mitigating factors of the potential expected losses, and therefore of
the provisions to be recognised, based on the provisions of the
applicable standard (IFRS 9 Par. B5.5.55). Furthermore, where
applicable, these guarantees are appropriately reflected in the
mitigation of the significant increase in risk, considering their nature
as personal guarantees.
For the estimation of the parameters used in the estimation of
impairment provisions -EAD (exposure at default), PD (probability of
default), LGD (loss given default)-, the Group based its experience in
developing internal models for the estimation of parameters both in
the regulatory area and for management purposes, adapting the
development of the impairment provision models under IFRS 9.
• Exposure at default: is the amount of estimated risk incurred at the
time of the counterparty's analysis.
• Probability of default: is the estimated probability that the
counterparty will default on its principal and/or interest payment
obligations.
• Loss given default: is the estimate of the severity of the loss
incurred in the event of non-compliance. It depends mainly on the
updating of the guarantees associated with the operation and the
future cash flows that are expected to be recovered.
In any case, when estimating the flows expected to be recovered,
portfolio sales are included. It should be noted that due to the
Group's recovery policy and the experience observed in relation to the
prices of past sales of assets classified as stage 3 and/or default risk,
there is no substantial divergence between the flows obtained from
recoveries after performing recovery management of the assets with
those obtained from the sale of portfolios of assets discounting
structural expenses and other costs incurred.
The definition of default implemented by the Group for the purpose
of calculating the impairment provision models is based on the
definition in Article 178 of Regulation 575/2013 of the European
Union (CRR), which is fully aligned with the requirements of IFRS 9,
which considers that a 'default' exists in relation to a specific
customer/contract when at least one of the following circumstances
exists: the entity considers that there are reasonable doubts about
the payment of all its credit obligations or that the customer/contract
is in an irregular situation for more than 90 days with respect to any
significant credit obligation.
Grupo Santander will partially and voluntarily align during 2022 the
accounting definition of Stage 3, as well as for the calculation of
impairment provision models, to the New Definition of Default,
incorporating the criteria defined by the EBA in its implementation
guide of the definition of default, capturing the economic
deterioration of the operations (days in default - on a daily basis - and
materiality thresholds - minimum amount in arrears). The alignment
of criteria will be done taking into account the criteria of IFRS 9 as
well as the accounting principles of unbiased presentation of
financial information. The expected increase in the default rate is
estimated at around 24 basis points, with no material impact on the
provision figures for credit risk.
In addition, the Group considers the risk generated in all cross-border
transactions due to circumstances other than the usual commercial
risk of insolvency (sovereign risk, transfer risk or risks arising from
international financial activity, such as wars, natural catastrophes,
balance of payments crisis, etc.).
IFRS 9 includes a series of practical solutions that can be
implemented by entities, with the aim of facilitating its
implementation. However, in order to achieve a complete and high-
level implementation of the standard, and following the best
practices of the industry, the Group does not apply these practical
solutions in a generalised manner:
– Rebuttable presumption that the credit risk has increased
significantly, when payments are more than 30 days past due:
this threshold is used as an additional, but not primary, indicator
of significant risk increase. Additionally, there may be cases in
the Group where its use has been rebutted as a result of studies
that show a low correlation of the significant risk increase with
this past due threshold. The volume rebutted does not exceed
0.1% of the Group's total exposure.
– Assets with low credit risk at the reporting date: the Group
assesses the existence of significant risk increase in all its
financial instruments.
This information is provided in more detail in note 53 b.
iv. Detail of individual estimate of impairment
For the individual estimate of the assessment for impairment of the
financial asset, the Group has a specific methodology to estimate the
value of the cash flows expected to be collected:
• Recovery through the debtor's ordinary activities (going approach).
• Recovery through the execution and sale of the collateral
guaranteeing the operations (gone approach).
Gone approach:
a. Evaluation of the effectiveness of guarantees
Grupo Santander assesses the effectiveness of all the guarantees
associated considering the following:
• The time required to execute these guarantees.
• Grupo Santander's ability to enforce or assert these guarantees in
its favour.
• The existence of limitations imposed by each local unit´s regulation
on the foreclosure of collateral.
Under no circumstances the Group considers that a guarantee is
effective if its effectiveness depends substantially on the solvency of
the debtor, as could be the case:
• Promises of shares or other securities of the debtor himself when
their valuation may be significantly affected by a debtor's default.
• Personal cross-collateralisation: when the guarantor of a
transaction is, at the same time, guaranteed by the holder of that
transaction.
On the basis of the foregoing, the following types of guarantees are
considered to be effective:
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• Mortgage guarantees on properties, which are first charge, duly
• Estimated marketing or sales costs.
constituted and registered. Real estate includes:
– Buildings and finished building elements.
– Urban and developable land in order.
Finally, since it is considered that the guarantee will be sold in the
future, the Group applies an additional adjustment ('index forward')
in order to adjust the value of the guarantees to future valuation
expectations.
– Other real estate, including buildings under construction,
v. Impairment individual assessment scope
developments in progress or at a standstill, and other land, such
as rural properties.
• Pledges on financial instruments such as cash deposits, debt
securities of reputable issuers or equity instruments.
• Other types of security interests, including movable property
received as security and second and subsequent mortgages on real
state , provided that they are proven to be effective under
particularly restrictive criteria.
• Personal guarantees, including new holders, covering the entire
amount and involving direct and joint liability to the entity, from
persons or entities whose equity solvency ensures repayment of
the transaction under the agreed terms.
b. Valuation of guarantees
Grupo Santander assesses the guarantees on the basis of their nature
in accordance with the following:
• Mortgage guarantees on properties associated with financial
instruments, using a complete individual valuations carried out by
independent valuation experts and under generally accepted
valuation standards. If this is not possible, alternative valuations
are used with duly documented and approved internal valuation
models.
• Personal guarantees are valued individually on the basis of the
guarantor´s updated information.
• The rest of the guarantees are valued based on current market
values.
c. Adjustments to the value of guarantees and estimation of future
cash flow inflows and outflows
Grupo Santander applies a series of adjustments to the value of the
guarantees in order to improve the reference values:
• Adjustments based on the historical sales experience of local units
for certain types of assets.
• Individual expert adjustments based on additional management
information.
Likewise, to adjust the value of the guarantees, the time value of
money is taken into account based on the historical experience of
each of the units, estimating:
• Period of adjudication.
• Estimated time of sale of the asset.
In addition, the Group takes into account all those cash inflows and
outflows linked to that guarantee until it is sold:
• Possible future income commitments in favour of the borrower
which will available after the asset is awarded.
• Estimated foreclosure costs.
• Asset maintenance costs, taxes and community costs.
Grupo Santander determines the perimeter over which it makes an
estimate of the assessment for impairment on an individual basis
based on a relevance threshold set by each of the geographical areas
and the stage in which the operations are located. In general, the
Group applies the individualised calculation of expected losses to the
significant exposures classified in stage 3, although Banco Santander,
S.A. has also extended its analyses to some of the exposures
classified in stage 2.
It should be noted that, in any case and irrespective of the stage in
which their transactions are carried out, for customers who do not
receive standardised treatment, a relational risk management model
is applied, with individualised treatment and monitoring by the
assigned risk analyst. In addition to wholesale customers (Santander
Corporate & Investment Banking or SCIB) and large companies, this
relational management model also includes other segments of
smaller companies for which there is information and capacity for
more personalised and expert analysis and monitoring. As indicated
in the Group's wholesale credit model, the individual treatment of
the client facilitates the continuous updating of information. The risk
assumed must be followed and monitored throughout its life cycle,
enabling anticipation and action to be taken in the event of possible
impairments. In this way, the customer's credit quality is analysed
individually, taking into account specific aspects such as his
competitive position, financial performance, management, etc. In the
wholesale risk management model, every customer with a credit risk
position is assigned a rating, which has an associated probability of
customer default. Thus, individual analysis of the debtor triggers a
specific rating for each customer, which determines the appropriate
parameters for calculating the expected loss, so that it is the rating
itself that initially modulates the necessary coverage, adjusting the
severity of the possible loss to the guarantees and other mitigating
factors that the customer may have available. In addition, if as a
result of this individualised monitoring of the customer, the analyst
finally considers that his coverage is not sufficient, he has the
necessary mechanisms to adjust it under his expert judgement,
always under the appropriate governance.
h) Repurchase agreements and reverse repurchase
agreements
Purchases (sales) of financial instruments under a non-optional
resale (repurchase) agreement at a fixed price (repos) are recognised
in the consolidated balance sheet as financing granted (received),
based on the nature of the debtor (creditor), under 'Loans and
advances with central banks', 'Loans and advances to credit
institutions' or 'Loans and advances to customers' (Deposits from
central banks, Deposits from credit institutions or Customer
deposits).
Differences between the purchase and sale prices are recognised as
interest over the contract term.
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i) 'Non-current assets' and 'liabilities associated with
non-current assets held for sale'
'Non-current assets held for sale' includes the carrying amount of
individual items, disposal groups or items forming part of a business
unit earmarked for disposal (discontinued operations), whose sale in
their present condition is highly likely to be completed within
one year from the reporting date. Therefore, the recovery of the
carrying amount of these items -which can be of a financial nature or
otherwise- will foreseeably be effected through the proceeds from
their disposal.
Specifically, property or other non-current assets received by the
consolidated entities as total or partial settlement of their debtors’
payment obligations to them are deemed to be 'Non-current assets
held for sale', unless the consolidated entities have decided to make
continuing use of these assets. In this connection, for the purpose of
its consideration in the initial recognition of these assets, the Group
obtains, at the foreclosure date, the fair value of the related asset
through a request for appraisal by external appraisal agencies.
Grupo Santander has in place a corporate policy that ensures the
professional competence and the independence and objectivity of the
external appraisal agencies, in accordance with the regulations,
which require appraisal agencies to meet independence, neutrality
and credibility requirements, so that the use of their estimates does
not reduce the reliability of its valuations. This policy establishes that
all the appraisal companies and agencies with which the Group
works in Spain should be registered in the Official Register of the
Bank of Spain and that the appraisals performed by them should
follow the methodology established in Ministry of Economy Order
ECO/805/2003, of 27 March. The main appraisal companies and
agencies with which the Group worked in Spain in 2021 are as
follows: Gloval Valuation, S.A.U., Tinsa Tasaciones Inmobiliarias,
S.A.U., Gesvalt Sociedad de Tasacion, S.A. and Sociedad de tasacion,
S.A.
Also, this policy establishes that the various subsidiaries abroad work
with appraisal companies that have recent experience in the area and
the type of asset under appraisal and meet the independence
requirements established in the corporate policy. They should verify,
inter alia, that the appraisal company is not a party related to the
Group and that its billings to the Group in the last twelve months do
not exceed 15% of the appraisal company’s total billings.
'Liabilities associated with non-current assets held for sale' includes
the balances payable arising from the assets held for sale or disposal
groups and from discontinued operations.
'Non-current assets and disposal groups of items that have been
classified as held for sale' are generally recognised at the date of
their allocation to this category and are subsequently valued at the
lower of their fair value less costs to sell or its book value. 'Non-
current assets and disposal groups of items that are classified as held
for sale' are not amortised as long as they remain in this category.
At 31 December 2021 the fair value less costs to sell of non-current
assets held for sale exceeded their carrying amount by EUR 567
million (EUR 560 million at 31 December 2020); however, in
accordance with the accounting standards, this unrealised gain could
not be recognised.
The valuation of the portfolio of non-current assets held for sale has
been made in compliance with the requirements of International
Financial Reporting Standards in relation to the estimate of the fair
value of tangible assets and the value-in-use of financial assets.
The value of the portfolio is determined as the sum of the values of
the individual elements that compose the portfolio, without
considering any total or batch grouping in order to correct the
individual values.
Banco Santander, in compliance with Bank of Spain Circular 4/2017,
and subsequent amendments, on public and private financial
reporting standards and financial statement models, has developed a
methodology that enables it to estimate the fair value and costs of
sale of assets foreclosed or received in payment of debts. This
methodology is based on the classification of the portfolio of
foreclosed assets into different segments. Segmentation enables the
intrinsic characteristics of Banco Santander's portfolio of foreclosed
assets to be differentiated, so that assets with homogeneous
characteristics are grouped by segment.
Thus, the portfolio is segmented into (i) finished assets of a
residential and tertiary nature, (ii) developments in progress and (iii)
land
1.
In determining the critical segments in the overall portfolio, assets
are classified on the basis of the nature of the asset and its stage of
development. This segmentation is made in order to seek the
liquidation of the asset (which should be carried out in the shortest
possible time).
When making decisions, the situation and/or characteristics of the
asset are fundamentally taken into account, as well as the evaluation
of all the determining factors that favour the recovery of the debt. For
them, the following aspects are analyzed, among others:
• The time that has elapsed since the adjudication.
• The transferability and contingencies of the foreclosed asset.
• The economic viability from the real estate point of view with the
necessary investment estimate.
• The expenses that may arise from the marketing process.
• The offers received, as well as the difficulties in finding buyers.
1.The assets in a situation of 'stopped development' are included under 'land'
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Appendix
In the case of real estate assets foreclosed in Spain, which represent
91% of the Group’s total non-current assets held for sale, the
valuation of the portfolio is carried out by applying the following
models:
• Market Value Model used in the valuation of finished properties of
a residential nature (mainly homes and car parks) and properties
of a tertiary nature (offices, commercial premises and
multipurpose buildings). For the valuation of finished assets
whose availability for sale is immediate, a market sale value
provided by a third party external to Banco Santander is
considered, calculated under the AVM methodology by the
comparable properties method adjusted by our experience in
selling similar assets, given the term, price, volume, trend in the
value of these assets and the time elapsing until their sale and
discounting the estimated costs of sale.
The market value is determined on the basis of the definition
established by the International Valuation Standards drawn up by the
IVSC (International Valuation Standards Council), understood as the
estimated amount for which an asset or a liability should be
exchanged on the measurement date between a willing buyer and a
willing seller, in an arm's length transaction, after appropriate
marketing, and in which the parties have acted with sufficient
information, prudently and without coercion.
The current market value of the properties is estimated on the basis
of automated valuations obtained by taking comparable properties
as a reference; simulating the procedure carried out by an appraiser
in a physical valuation according to Order ECO 805/2003: selection of
properties and obtaining the unit value by applying homogenisation
adjustments. The selection of the properties is carried out by location
within the same real estate cluster and according to the
2
, surface area range
characteristics of the properties, filtering by type
and age. The model enables a distinction to be made within the
municipality under study as to which areas are similar and
comparable and therefore have a similar value in the property
market, discriminating between which properties are good
comparators and which are not.
Adjustments to homogenize the properties are made according to: (i)
the age of the property according to the age of the property to be
valued, (ii) the deviation of the built area from the common area with
respect to the property to be valued and (iii) by age of the date of
capture of the property according to the price evolution index of the
real estate market.
In addition, for individually significant assets, complete individual
valuations are carried out, including a visit to the asset, market
analysis (data relating to supply, demand, current sale or rental price
ranges and supply-demand and revaluation expectations) and an
estimate of expected income and costs.
2. Assets qualified as protected housing are taken into account. The maximum legal value of these assets is determined by the VPO module, obtained from the result of
multiplying the State Basic Module (MBE) by a zone coefficient determined by each autonomous community. To carry out the valuation of a protected property, the useful
surface area is used in accordance with current regulations.
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For this segmentation of assets, when they are completed, the real
costs are known and the actual expenses for the marketing and sale
of the asset must be taken into account. Therefore, Banco Santander
uses the actual costs in its calculation engine or, failing that, those
estimated on the basis of its observed experience.
• Market Value Model according to Evolution of Market Values used
to update the valuation of developments in progress. The
valuation model estimates the current market value of the
properties based on complete individual valuations by third
parties, calculated from the values of the feasibility studies and
development costs of the promotion, as well as the selling costs,
distinguishing by location, size and type of property. The inputs
used in the valuation model for residential assets under
construction are actual revenues and costs.
For this purpose, in order to calculate the investment flows, Banco
Santander considers, on the basis of the feasibility studies, the
expenditure required for construction, the professional fees relating
to the project and to project management, the premiums for
mandatory building insurance, the developer's administrative
expenses, licenses, taxes on new construction and fees, and urban
development charges.
With respect to the calculation of income flows, Banco Santander
takes into account the square metres built, the number of homes
under construction and the estimated selling price over 1.5 years.
The market value will be the result of the difference between the
income flows and the investment flows estimated at each moment.
• Land Valuation model. The methodology followed by the Group
regarding land valuation consists of updating the individual
reference valuation of each of the land on an annual basis, through
updated valuation valuations carried out by independent
professionals and following the methodology established in the
OM (Ministerial Order) ECO/805/2003, of 27 March, whose main
verifications in the case of land valuation, regardless of the degree
of urbanisation of the land, correspond to:
– Visual verification of the assessed property.
– Registry description.
– Urban planning.
– Visible easements.
– Visible state of occupation, possession, use and exploitation.
– Protection regime.
– Apparent state of preservation.
– Correspondence with cadastral property.
– Existence of expropriation procedure, expropriation plan or
project, administrative resolution or file that may lead to
expropriation.
– Expiry of the urbanization or building deadlines.
– Existence of a procedure for failure to comply with obligations.
– Verification of surfaces.
For the purposes of valuation, the land will be classified in the
following levels:
– Level I: It will include all the lands that do not belong to level II.
– Level II: It shall include land classified as undeveloped where
building is not allowed for uses other than agriculture, forestry,
livestock or linked to an economic exploitation permitted by the
regulations in force. Also included are lands classified as
developable that are not included in a development area of
urban planning or that, in such an area, the conditions for its
development have not been defined.
In those cases where the Group does not have an updated reference
value through an ECO valuation for the current year, we use as a
reference value the latest available ECO valuation reduced or
corrected by the average annual coverage ratio of the land on which
we have obtained an updated reference value, through an ECO
valuation.
Grupo Santander applies a discount to the aforementioned reference
values that takes into account both the discount on the reference
value in the sales process and the estimated costs of marketing or
selling the land:
Discount on reference value = % discount on sales + % marketing
costs being:
– % discount on Sales: = 100 - (sales price / updated appraisal
value).
– marketing costs: calculated on the basis of our historical
experience in sales and in accordance with the marketing
management fees negotiated with our suppliers of this type of
service.
In this way the Group obtains the corrected market value, an amount
that we compare with the net cost of each piece of land to determine
its correct valuation and conclude with our valuation process.
In addition, in relation to the previously mentioned valuations, less
costs to sell, are contrasted with the sales experience of each type of
asset in order to confirm that there is no significant difference
between the sale price and the valuation.
Impairment losses on an asset or disposal group arising from a
reduction in its carrying amount to its fair value (less costs to sell) are
recognised under 'Gains or (losses) on non-current assets held for
sale not classified as discontinued operations' in the consolidated
income statement.
The gains on a non-current asset held for sale resulting from
subsequent increases in fair value (less costs to sell) increase its
carrying amount and are recognised in the consolidated income
statement up to an amount equal to the impairment losses
previously recognised.
j) Assets under insurance or reinsurance contracts and
Liabilities under insurance or reinsurance contracts
Insurance contracts involve the transfer of a certain quantifiable risk
in exchange for a periodic or one-off premium. The effects on the
Group’s cash flows will arise from a deviation in the payments
forecast and/or an insufficiency in the premium set.
The Group controls its insurance risk as follows:
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• By applying a strict methodology in the launch of products and in
the assignment of value thereto.
• By using deterministic and stochastic actuarial models for
measuring commitments.
• By using reinsurance as a risk mitigation technique as part of the
credit quality guidelines in line with the Group’s general risk policy.
assets, these gains or losses are recognised directly in equity. The
corresponding adjustment in the liabilities under insurance contracts
(or in the deferred acquisition costs or in intangible assets) is also
recognised in equity.
The most significant items forming part of the technical provisions
(see note 15) are detailed below:
• By establishing an operating framework for credit risks.
• By actively managing asset and liability matching.
• By applying security measures in processes.
Reinsurance assets includes the amounts that the consolidated
entities are entitled to receive for reinsurance contracts with third
parties and, specifically, the reinsurer’s share of the technical
provisions recorded by the consolidated insurance entities.
At least once a year these assets are reviewed to ascertain whether
they are impaired (i.e. there is objective evidence, as a result of an
event that occurred after initial recognition of the reinsurance asset,
that Grupo Santander may not receive all amounts due to it under the
terms of the contract and the amount that will not be received can be
reliably measured), and any impairment loss is recognised in the
consolidated income statement and the assets are written down.
'Liabilities under insurance contracts' includes the technical
provisions recorded by the consolidated entities to cover claims
arising from insurance contracts in force at year-end.
Insurers’ results relating to their insurance business are recognised,
according to their nature, under the related consolidated income
statement items.
In accordance with standard accounting practice in the insurance
industry, the consolidated insurance entities credit to the income
statement the amounts of the premiums written and charge to
income the cost of the claims incurred on final settlement thereof.
Insurance entities are therefore required to accrue at period-end the
unearned revenues credited to their income statements and the
accrued costs not charged to income.
At least at each reporting date the Group assesses whether the
insurance contract liabilities recognised in the consolidated
balance sheet are adequate. For this purpose, it calculates the
difference between the following amounts:
• Current estimates of future cash flows under the insurance
contracts of the consolidated entities. These estimates include all
contractual cash flows and any related cash flows, such as claims
handling costs.
• The carrying amount recognised in the consolidated balance sheet
of its insurance contract liabilities (see note 15), less any related
deferred acquisition costs or related intangible assets, such as the
amount paid to acquire, in the event of purchase by the entity, the
economic rights held by a broker deriving from policies in the
entity’s portfolio.
If the calculation results in a positive amount, this deficiency is
charged to the consolidated income statement. When unrealised
gains or losses on assets of the Group’s insurance companies affect
the measurement of liabilities under insurance contracts and/or the
related deferred acquisition costs and/or the related intangible
• Non-life insurance provisions:
i) Provision for unearned premiums: relates to the portion of the
premiums received at year-end that is allocable to the period
from the reporting date to the end of the policy cover period.
ii) Provisions for unexpired risks: this supplements the provision for
unearned premiums to the extent that the amount of the latter is
not sufficient to reflect all the assessed risks and expenses to be
covered by the insurance companies in the policy period not
elapsed at the reporting date.
• Life insurance provisions: represent the value of the net obligations
acquired vis-à-vis life insurance policyholders. These provisions
include:
i) Provision for unearned premiums and unexpired risks: this
relates to the portion of the premiums received at year-end that
is allocable to the period from the reporting date to the end of
the policy cover period.
ii) Mathematical provisions: these relate to the value of the
insurance companies’ obligations, net of the policyholders’
obligations. These provisions are calculated on a policy-by-
policy basis using an individual capitalisation system, taking as a
basis for the calculation the premium accrued in the year, and in
accordance with the technical bases of each type of insurance
updated, where appropriate, by the local mortality tables.
• Provision for claims outstanding: this reflects the total obligations
outstanding arising from claims incurred prior to the reporting
date. This provision is calculated as the difference between the
total estimated or certain cost of the claims not yet reported,
settled or paid and all the amounts already paid in relation to such
claims.
• Provision for bonuses and rebates: this provision includes the
amount of the bonuses accruing to policyholders, insureds or
beneficiaries and that of any premiums to be returned to
policyholders or insureds, to the extent that such amounts have
not been assigned at the reporting date. These amounts are
calculated on the basis of the conditions of the related individual
policies.
• Technical provisions for life insurance policies where the
investment risk is borne by the policyholders: these provisions are
calculated on the basis of the indices established as a reference to
determine the economic value of the policyholders’ rights.
k) Tangible assets
Tangible assets includes the amount of buildings, land, furniture,
vehicles, computer hardware and other fixtures owned by the
consolidated entities or acquired under finance leases. Tangible
assets are classified by use as follows:
i. Property, plant and equipment for own use
Property, plant and equipment for own use – including tangible
assets received by the consolidated entities in full or partial
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satisfaction of financial assets representing receivables from third
parties which are intended to be held for continuing use and tangible
assets acquired under finance leases– are presented at acquisition
cost, less the related accumulated depreciation and any estimated
impairment losses (carrying amount higher than recoverable
amount).
Depreciation is calculated, using the straight-line method, on the
basis of the acquisition cost of the assets less their residual value.
The land on which the buildings and other structures stand has an
indefinite life and, therefore, is not depreciated.
The period tangible asset depreciation charge is recognised in the
consolidated income statement and is calculated using the following
depreciation rates (based on the average years of estimated useful
life of the various assets):
Buildings for own use
Furniture
Fixtures
Office and IT equipment
Lease use rights
Average
annual rate
2.7%
8.5%
8.5%
23.8%
Less than the lease
term or the useful life
of the underlying asset
At the end of each reporting period, consolidated entities assess
whether there is any indication that the carrying amount of an asset
exceeds its recoverable amount, in which case they write down the
carrying amount of the asset to its recoverable amount and adjust
future depreciation charges in proportion to its adjusted carrying
amount and to its new remaining useful life, if the useful life needs
to be re-estimated.
Similarly, if there is an indication of a recovery in the value of a
tangible asset, the consolidated entities recognise the reversal of the
impairment loss recognised in prior periods and adjust the future
depreciation charges accordingly. In no circumstances may the
reversal of an impairment loss on an asset raise its carrying amount
above that which it would have if no impairment losses had been
recognised in prior years.
The estimated useful lives of the items of property, plant and
equipment for own use are reviewed at least at the end of the
reporting period with a view to detecting significant changes therein.
If changes are detected, the useful lives of the assets are adjusted by
correcting the depreciation charge to be recognised in the
consolidated income statement in future years on the basis of the
new useful lives.
Upkeep and maintenance expenses relating to property, plant and
equipment for own use are recognised as an expense in the period in
which they are incurred, since they do not increase the useful lives of
the assets.
ii. Investment property
'Investment property' reflects the net values of the land, buildings
and other structures held either to earn rentals or for obtaining
profits by sales due to future increase in market prices.
The criteria used to recognise the acquisition cost of investment
property, to calculate its depreciation and its estimated useful life
and to recognise any impairment losses thereon are consistent with
those described in relation to property, plant and equipment for own
use.
In order to evaluate the possible impairment Grupo Santander
determines periodically the fair value of its investment property so
that, at the end of the reporting period, the fair value reflects the
market conditions of the investment property at that date. This fair
value is determined annually, taking as benchmarks the valuations
performed by independent experts. The methodology used to
determine the fair value of investment property is selected based on
the status of the asset in question; thus, for properties earmarked for
lease, the valuations are performed using the sales comparison
approach, whereas for leased properties the valuations are made
primarily using the income capitalisation approach and,
exceptionally, the sales comparison approach.
In the sales comparison approach, the property market segment for
comparable properties is analysed, inter alia, and, based on specific
information on actual transactions and firm offers, current prices are
obtained for cash sales of those properties. The valuations performed
using this approach are considered as level 2 valuations.
In the income capitalisation approach, the cash flows estimated to be
obtained over the useful life of the property are discounted taking
into account factors that may influence the amount and actual
obtainment thereof, such as: (i) the payments that are normally
received on comparable properties; (ii) current and probable future
occupancy; (iii) the current or foreseeable default rate on payments.
The valuations performed using this approach are considered as
Level 3 valuations, since significant unobservable inputs are used,
such as current and probable future occupancy and/or the current or
foreseeable default rate on payments.
iii. Assets leased out under an operating lease
'Property, plant and equipment' - Leased out under an operating
lease reflects the amount of the tangible assets, other than land and
buildings, leased out by the Group under an operating lease.
The criteria used to recognise the acquisition cost of assets leased out
under operating leases, to calculate their depreciation and their
respective estimated useful lives and to recognise the impairment
losses thereon are consistent with those described in relation to
property, plant and equipment for own use.
l) Accounting for leases
On 1 January 2019, Grupo Santander changed the accounting policy
for leases when acting as a lessee (see note 1.d).
The main aspects contained in the regulation (IFRS 16) adopted by
the Group are included below:
When the Group acts as lessee, it recognises a right-of-use asset
representing its right to use the underlying leased asset with a
corresponding lease liability on the date on which the leased asset is
available for use by the Group. Each lease payment is allocated
between the liability and the finance charge. The finance charge is
allocated to the income statement during the term of the lease in
such a way as to produce a constant periodic interest rate on the
remaining balance of the liability for each year. The right-of-use asset
is depreciated over the useful life of the asset or the lease term,
whichever is shorter, on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use
asset is amortized over the useful life of the underlying asset.
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Assets and liabilities arising from a lease are initially measured at
present value. Lease liabilities include the net present value of the
following lease payments:
– Fixed payments (including inflation-linked payments), less any
lease incentive receivable
– Variable lease payments that depend on an index or rate.
– The amounts expected to be paid by the lessee under residual
value guarantees.
– The exercise price of a purchase option if the lessee is reasonably
certain that it will exercise that option.
– Lease termination penalty payments, if the term of the lease
reflects the lessee's exercise of that option.
Lease payments are discounted using the interest rate implicit in the
lease. Given in certain situations this interest rate cannot be obtained,
the discount rate used in this cases, is the lessee's incremental
borrowing rate at the related date. For this purpose, the entity has
calculated this incremental borrowing rate taking as reference the
listed debt instruments issued by the Group; in this regard, the Group
has estimated different interest rate curves depending on the
currency and economic environment in which the contracts are
located.
In order to construct the incremental borrowing rate, a methodology
has been developed at the corporate level. This methodology is
based on the need for each entity to consider its economic and
financial situation, for which the following factors must be
considered:
– Economic and political situation (country risk).
– Credit risk of the company.
– Monetary policy.
– Volume and seniority of the company’s debt instrument issues.
The incremental borrowing rate is defined as the interest rate that a
lessee would have to pay for borrowing, given a similar period to the
duration of the lease and with similar security, the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar
economic environment. The Group entities have a wide stock and
variety of financing instruments issued in different currencies to that
of the euro (pound, dollar, etc.) that provide sufficient information to
be able to determine an "all in rate" (reference rate plus adjustment
for credit spread at different terms and in different currencies). In
circumstances, where the leasing company has its own financing,
this has been used as the starting point for determining the
incremental borrowing rate. On the other hand, for those Grupo
Santander entities that do not have their own financing, the
information from the financing of the consolidated subgroup to
which they belong was used as the starting point for estimating the
entity's curve, analysing other factors to assess whether it is
necessary to make any type of negative or positive adjustment to the
initially estimated credit spread.
Right-of-use assets are valued at cost which includes the following:
– The amount of the initial measurement of the lease liability.
– Any lease payment made at or before the commencement date
less any lease incentive received.
– Any initial direct costs.
– Restoration costs.
The Group recognises the payments associated with short-term
leases and leases of low-value assets on a straight-line basis as an
expense in the income statement. Short-term leases are leases with
a lease term less than or equal to 12 months (a lease that contains a
purchase option is not a short term lease).
m) Intangible assets
Intangible assets are identifiable non-monetary assets (separable
from other assets) without physical substance which arise as a result
of a legal transaction or which are developed internally by the
consolidated entities.
Only assets whose cost can be estimated reliably and from which the
consolidated entities consider it probable that future economic
benefits will be generated are recognised.
Intangible assets are recognised initially at acquisition or production
cost and are subsequently measured at cost less any accumulated
amortisation and any accumulated impairment losses.
i. Goodwill
Any excess of the cost of the investments in the consolidated entities
and entities accounted for using the equity method over the
corresponding underlying carrying amounts acquired, adjusted at the
date of first-time consolidation, is allocated as follows:
• If it is attributable to specific assets and liabilities of the companies
acquired, by increasing the value of the assets (or reducing the
value of the liabilities) whose fair values were higher (lower) than
the carrying amounts at which they had been recognised in the
acquired entities’ balance sheets.
▪
If it is attributable to specific intangible assets, by recognising it
explicitly in the consolidated balance sheet provided that the fair
value of these assets within twelve months following the date of
acquisition can be measured reliably.
▪ The remaining amount is recognised as goodwill, which is
allocated to one or more cash-generating units (CGUs) (a cash-
generating unit is the smallest identifiable group of assets that, as
a result of continuing operation, generates cash inflows that are
largely independent of the cash inflows from other assets or
groups of assets). The cash-generating units represent the Group’s
geographical and/or business segments.
Goodwill (only recognised when it has been acquired by
consideration) represents, therefore, a payment made by the
acquirer in anticipation of future economic benefits from assets of
the acquired entity that are not capable of being individually
identified and separately recognised.
At the end of each annual reporting period or whenever there is any
indication of impairment goodwill is reviewed for impairment (i.e. a
reduction in its recoverable amount to below its carrying amount)
and, if there is any impairment, the goodwill is written down with a
charge to 'Impairment or reversal of impairment on non-financial
assets, net - Intangible assets' in the consolidated income statement.
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An impairment loss recognised for goodwill is not reversed in a
subsequent period.
In the event of sale or departure of an activity that is part of a CGU,
the part of the goodwill that can be assigned to said activity would be
written-off, taking as a reference the relative value of the same over
the total of the CGU at the time of sale or abandonment. If applicable,
the distribution by currency of the remaining goodwill will be
performed based on the relative values of the remaining activities.
ii. Other intangible assets
Other intangible assets includes the amount of identifiable intangible
assets, such as purchased customer lists and computer software.
Other intangible assets can have an indefinite useful life -when,
based on an analysis of all the relevant factors, it is concluded that
there is no foreseeable limit to the period over which the asset is
expected to generate net cash inflows for the consolidated entities-
or a finite useful life, in all other cases.
Intangible assets with indefinite useful lives are not amortised, but
rather at the end of each reporting period or whenever there is any
indication of impairment the consolidated entities review the
remaining useful lives of the assets in order to determine whether
they continue to be indefinite and, if this is not the case, to take the
appropriate steps.
Intangible assets with finite useful lives are amortised over those
useful lives using methods similar to those used to depreciate
tangible assets.
The intangible asset amortisation charge is recognised under
'Depreciation and amortisation' in the consolidated income
statement.
In both cases the consolidated entities recognise any impairment loss
on the carrying amount of these assets with a charge to 'Impairment
or reversal of impairment on non-financial assets, net - Intangible
assets in the consolidated' income statement.
The criteria used to recognise the impairment losses on these assets
and, where applicable, the reversal of impairment losses recognised
in prior years are similar to those used for tangible assets (see note
2.k).
Internally developed computer software
Internally developed computer software is recognised as an
intangible asset if, among other requisites (basically the Group’s
ability to use or sell it), it can be identified and its ability to generate
future economic benefits can be demonstrated.
Expenditure on research activities is recognised as an expense in the
year in which it is incurred and cannot be subsequently capitalised
into the carrying amount of the intangible asset.
n) Other assets
'Other assets' in the consolidated balance sheet includes the amount
of assets not recorded in other items, the breakdown being as
follows:
▪
Inventories: this item includes the amount of assets, other than
financial instruments, that are held for sale in the ordinary course
of business, that are in the process of production, construction or
development for such purpose, or that are to be consumed in the
production process or in the provision of services. Inventories
include land and other property held for sale in the property
development business.
Inventories are measured at the lower of cost and net realisable
value, which is the estimated selling price of the inventories in the
ordinary course of business, less the estimated costs of completion
and the estimated costs required to make the sale.
Any write-downs of inventories -such as those due to damage,
obsolescence or reduction of selling price- to net realisable value and
other impairment losses are recognised as expenses for the year in
which the impairment or loss occurs. Subsequent reversals are
recognised in the consolidated income statement for the year in
which they occur.
The carrying amount of inventories is derecognised and recognised
as an expense in the period in which the revenue from their sale is
recognised.
▪ Other: this item includes the balance of all prepayments and
accrued income (excluding accrued interest, fees and
commissions), the net amount of the difference between pension
plan obligations and the value of the plan assets with a balance in
the entity’s favour, when this net amount is to be reported in the
consolidated balance sheet, and the amount of any other assets
not included in other items.
o) Other liabilities
'Other liabilities' includes the balance of all accrued expenses and
deferred income, excluding accrued interest, and the amount of any
other liabilities not included in other categories.
p) Provisions and contingent assets and liabilities
When preparing the financial statements of the consolidated entities,
Banco Santander’s directors made a distinction between:
• Provisions: credit balances covering present obligations at the
reporting date arising from past events which could give rise to a
loss for the consolidated entities, which is considered to be likely
to occur and certain as to its nature but uncertain as to its amount
and/or timing.
▪ Contingent liabilities: possible obligations that arise from past
events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more future events not
wholly within the control of the consolidated entities. They include
the present obligations of the consolidated entities when it is not
probable that an outflow of resources embodying economic
benefits will be required to settle them. The Group does not
recognise the contingent liability. The Group will disclose a
contingent liability, unless the possibility of an outflow of
resources embodying economic benefits is remote.
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Santander UK plc is cooperating with an FCA civil regulatory
investigation which commenced in July 2017 into its compliance
with the Money Laundering Regulations 2007 and potential
breaches of FCA principles and rules relating to anti-money
laundering and financial crime systems and controls. The FCA’s
investigation focuses primarily on the period 2012 to 2017 and
includes consideration of high risk customers including Money
Service Businesses. It is not currently possible to make a reliable
assessment of any liability resulting from the investigation
including any financial penalty.
▪ Contingent assets: possible assets that arise from past events and
whose existence is conditional on, and will be confirmed only by,
the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Group. Contingent
assets are not recognised in the consolidated balance sheet or in
the consolidated income statement, but rather are disclosed in the
notes, provided that it is probable that these assets will give rise to
an increase in resources embodying economic benefits.
Grupo Santander’s consolidated financial statements include all the
material provisions with respect to which it is considered that it is
more likely than not the obligation will have to be settled. In
accordance with accounting standards, contingent liabilities must not
be recognised in the consolidated financial statements, but must
rather be disclosed in the Notes.
Provisions (which are quantified on the basis of the best information
available on the consequences of the event giving rise to them and
are reviewed and adjusted at the end of each year) are used to cater
for the specific obligations for which they were originally recognised.
Provisions are fully or partially reversed when such obligations cease
to exist or are reduced.
Provisions are classified according to the obligations covered as
follows (see note 25):
▪ Provision for pensions and similar obligations: includes the
amount of all the provisions made to cover post-employment
benefits, including obligations to pre-retirees and similar
obligations.
▪ Provisions for contingent liabilities and commitments: include the
amount of the provisions made to cover contingent liabilities -
defined as those transactions in which the Group guarantees the
obligations of a third party, arising as a result of financial
guarantees granted or contracts of another kind- and contingent
commitments -defined as irrevocable commitments that may give
rise to the recognition of financial assets.
▪ Provisions for taxes and other legal contingencies and Other
provisions: include the amount of the provisions recognised to
cover tax and legal contingencies and litigation and the other
provisions recognised by the consolidated entities. Other
provisions includes, inter alia, any provisions for restructuring costs
and environmental measures.
q) Court proceedings and/or claims in process
At the end of 2021 certain court proceedings and claims were in
process against the consolidated entities arising from the ordinary
course of their operations (see note 25).
r) Own equity instruments
Own equity instruments are those meeting both of the following
conditions:
▪ The instruments do not include any contractual obligation for the
issuer (i) to deliver cash or another financial asset to a third party;
or (ii) to exchange financial assets or financial liabilities with a third
party under conditions that are potentially unfavourable to the
issuer.
▪ The instruments will or may be settled in the issuer’s own equity
instruments and are: (i) a non-derivative that includes no
contractual obligation for the issuer to deliver a variable number of
its own equity instruments; or (ii) a derivative that will be settled
by the issuer through the exchange of a fixed amount of cash or
another financial asset for a fixed number of its own equity
instruments.
Transactions involving own equity instruments, including their
issuance and cancellation, are charged directly to equity.
Changes in the value of instruments classified as own equity
instruments are not recognised in the consolidated financial
statements. Consideration received or paid in exchange for such
instruments, including the coupons on preference shares
contingently convertible into ordinary shares and the coupons
associated with CCPP, is directly added to or deducted from equity.
s) Equity-instrument-based employee remuneration
Own equity instruments delivered to employees in consideration for
their services, if the instruments are delivered once the specific
period of service has ended, are recognised as an expense for services
(with the corresponding increase in equity) as the services are
rendered by employees during the service period. At the grant date
the services received (and the related increase in equity) are
measured at the fair value of the equity instruments granted. If the
equity instruments granted are vested immediately, Grupo
Santander recognises in full, at the grant date, the expense for the
services received.
When the requirements stipulated in the remuneration agreement
include external market conditions (such as equity instruments
reaching a certain quoted price), the amount ultimately to be
recognised in equity will depend on the other conditions being met
by the employees (normally length of service requirements),
irrespective of whether the market conditions are satisfied. If the
conditions of the agreement are met but the external market
conditions are not satisfied, the amounts previously recognised in
equity are not reversed, even if the employees do not exercise their
right to receive the equity instruments.
t) Recognition of income and expenses
The most significant criteria used by Grupo Santander to recognise its
income and expenses are summarised as follows:
i. Interest income, interest expenses and similar items
Interest income, interest expenses and similar items are generally
recognised on an accrual basis using the effective interest method.
Dividends received from other companies are recognised as income
when the consolidated entities’ right to receive them arises.
ii. Commissions, fees and similar items
Fee and commission income and expenses are recognised in the
consolidated income statement using criteria that vary according to
their nature. The main criteria are as follows:
▪ Fee and commission income and expenses relating to financial
assets and financial liabilities measured at fair value through profit
or loss are recognised when paid.
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▪ Those arising from transactions or services that are performed
over a period of time are recognised over the life of these
transactions or services.
▪ Those relating to services provided in a single act are recognised
when the single act is carried out.
v) Assets under management and investment and pension
funds managed by the Group
Assets owned by third parties and managed by the consolidated
entities are not presented on the face of the consolidated balance
sheet. Management fees are included in 'Fee and commission
income' in the consolidated income statement.
iii. Non-finance income and expenses
They are recognised for accounting purposes when the good is
delivered or the non-financial service is rendered. To determine the
amount and timing of recognition, a five-step model is followed:
identification of the contract with the customer, identification of the
separate obligations of the contract, determination of the transaction
price, distribution of the transaction price among the identified
obligations and finally recording of income as the obligations are
satisfied.
iv. Deferred collections and payments
These are recognised for accounting purposes at the amount
resulting from discounting the expected cash flows at market rates.
v. Loan arrangement fees
Loan arrangement fees, mainly loan origination, application and
information fees, are accrued and recognised in income over the term
of the loan.
u) Financial guarantees
Financial guarantees are defined as contracts whereby an entity
undertakes to make specific payments on behalf of a third party if the
latter fails to do so, irrespective of the various legal forms they may
have, such as guarantees, insurance policies or credit derivatives.
Grupo Santander initially recognises the financial guarantees
provided on the liability side of the consolidated balance sheet at fair
value, which is generally the present value of the fees, commissions
and interest receivable from these contracts over the term thereof,
and simultaneously the Group recognises the amount of the fees,
commissions and similar interest received at the inception of the
transactions and a credit on the asset side of the consolidated
balance sheet for the present value of the fees, commissions and
interest outstanding.
Financial guarantees, regardless of the guarantor, instrumentation or
other circumstances, are reviewed periodically so as to determine the
credit risk to which they are exposed and, if appropriate, to consider
whether a provision is required. The credit risk is determined by
application of criteria similar to those established for quantifying
impairment losses on debt instruments carried at amortised cost
(described in note 2.g above).
The provisions made for these transactions are recognised under
'Provisions - Provisions for commitments and guarantees given in the
consolidated balance sheet' (see note 25). These provisions are
recognised and reversed with a charge or credit, respectively, to
'Provisions or reversal of provisions', net, in the consolidated income
statement.
If a specific provision is required for financial guarantees, the related
unearned commissions recognised under 'Financial liabilities at
amortised cost - Other financial liabilities in the consolidated balance
sheet', are reclassified to the appropriate provision.
The investment funds and pension funds managed by the
consolidated entities are not presented on the face of the Group’s
consolidated balance sheet since the related assets are owned by
third parties. The fees and commissions earned in the year for the
services rendered by the Group entities to these funds (asset
management and custody services) are recognised under Fee and
'Commission income' in the consolidated income statement.
Note 2.b.iv describes the internal criteria and procedures used to
determine whether control exists over the structured entities, which
include, inter alia, investment funds and pension funds.
w) Post-employment benefits
Under the collective agreements currently in force and other
arrangements, the Spanish banks included in the Group and certain
other Spanish and foreign consolidated entities have undertaken to
supplement the public social security system benefits accruing to
certain employees, and to their beneficiary right holders, for
retirement, permanent disability or death, and the post-employment
welfare benefits.
Grupo Santander's post-employment obligations to its employees
are deemed to be defined contribution plans when the Group makes
pre-determined contributions (recognised under Personnel expenses
in the consolidated income statement) to a separate entity and will
have no legal or effective obligation to make further contributions if
the separate entity cannot pay the employee benefits relating to the
service rendered in the current and prior periods. Post-employment
obligations that do not meet the aforementioned conditions are
classified as defined benefit plans (see note 25).
Defined contribution plans
The contributions made in this connection in each year are recognised
under 'Personnel expenses' in the consolidated income statement.
The amounts not yet contributed at each year-end are recognised, at
their present value, under 'Provisions - Provision for pensions' and
similar obligations on the liability side of the consolidated balance
sheet.
Defined benefit plans
Grupo Santander recognises under 'Provisions - Provision for
pensions and similar obligations on the liability side of the
consolidated balance sheet' (or under 'Other assets' on the asset
side, as appropriate) the present value of its defined benefit post-
employment obligations, net of the fair value of the plan assets.
Plan assets are defined as those that will be directly used to settle
obligations and that meet the following conditions:
▪ They are not owned by the consolidated entities, but by a legally
separate third party that is not a party related to the Group.
▪ They are only available to pay or fund post-employment benefits
and they cannot be returned to the consolidated entities unless the
assets remaining in the plan are sufficient to meet all the benefit
obligations of the plan and of the entity to current and former
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employees, or they are returned to reimburse employee benefits
already paid by Grupo Santander.
publicly announced or objective facts concerning its implementation
have been disclosed.
If Grupo Santander can look to an insurer to pay part or all of the
expenditure required to settle a defined benefit obligation, and it is
practically certain that said insurer will reimburse some or all of the
expenditure required to settle that obligation, but the insurance
policy does not qualify as a plan asset, the Group recognises its right
to reimbursement -which, in all other respects, is treated as a plan
asset- under 'Insurance contracts linked to pensions' on the asset
side of the consolidated balance sheet.
Grupo Santander will recognise the following items in the income
statement:
• Current service cost, (the increase in the present value of the
obligations resulting from employee service in the current period),
is recognised under 'Staff costs'.
• The past service cost, which arises from changes to existing post-
employment benefits or from the introduction of new benefits and
includes the cost of reductions, is recognised under 'Provisions or
reversal of provisions'.
• Any gain or loss arising from a liquidation of the plan is included in
the Provisions or reversion of provisions.
• Net interest on the net defined benefit liability (asset), i.e. the
change during the period in the net defined benefit liability (asset)
that arises from the passage of time, is recognised under 'Interest
expense' and similar charges ('Interest and similar income' if it
constitutes income) in the consolidated income statement.
The remeasurement of the net defined benefit liability (asset) is
recognised in 'Other comprehensive income' under Items not
reclassified to profit or loss and includes:
▪ Actuarial gains and losses generated in the year, arising from the
differences between the previous actuarial assumptions and what
has actually occurred and from the effects of changes in actuarial
assumptions.
▪ The return on plan assets, excluding amounts included in net
interest on the net defined benefit liability (asset).
▪ Any change in the effect of the asset ceiling, excluding amounts
included in net interest on the net defined benefit liability (asset).
x) Other long-term employee benefits
Other long-term employee benefits, defined as obligations to pre-
retirees -taken to be those who have ceased to render services at the
entity but who, without being legally retired, continue to have
economic rights vis-à-vis the entity until they acquire the legal status
of retiree-, long-service bonuses, obligations for death of spouse or
disability before retirement that depend on the employee’s length of
service at the entity and other similar items, are treated for
accounting purposes, where applicable, as established above for
defined benefit post-employment plans, except that actuarial gains
and losses are recognised under 'Provisions or reversal of provisions',
net, in the consolidated income statement (see note 25).
y) Termination benefits
Termination benefits are recognised when there is a detailed formal
plan identifying the basic changes to be made, provided that
implementation of the plan has begun, its main features have been
z) Income tax
The expense for Spanish income tax and other similar taxes
applicable to the foreign consolidated entities is recognised in the
consolidated income statement, except when they arise from a
transaction whose results are recognised directly in equity, in which
case the related tax effect is recognised in equity.
The current income tax expense is calculated as the sum of the
current tax resulting from application of the appropriate tax rate to
the taxable profit for the year (net of any deductions allowable for tax
purposes), and of the changes in deferred tax assets and liabilities
recognised in the consolidated income statement.
'Deferred tax assets' and liabilities include temporary differences,
which are identified as the amounts expected to be payable or
recoverable on differences between the carrying amounts of assets
and liabilities and their related tax bases, and tax loss and tax credit
carryforwards. These amounts are measured at the tax rates that are
expected to apply in the period when the asset is realised or the
liability is settled.
'Tax assets' include the amount of all tax assets, which are broken
down into current -amounts of tax to be recovered within the next
twelve months- and deferred -amounts of tax to be recovered in
future years, including those arising from tax loss or tax credit
carryforwards.
'Tax liabilities' includes the amount of all tax liabilities (except
provisions for taxes), which are broken down into current -the
amount payable in respect of the income tax on the taxable profit for
the year and other taxes in the next twelve months- and deferred -
the amount of income tax payable in future years.
Deferred tax liabilities are recognised in respect of taxable temporary
differences associated with investments in subsidiaries, associates or
joint ventures, except when the Group is able to control the timing of
the reversal of the temporary difference and, in addition, it is
probable that the temporary difference will not reverse in the
foreseeable future. In this regard, no deferred tax liabilities of EUR
317.4 million were recognised in relation to the taxation that would
arise from the undistributed earnings of certain Group holding
companies, in accordance with the legislation applicable in those
jurisdictions.
Deferred tax assets are only recognised for temporary differences to
the extent that it is considered probable that the consolidated entities
will have sufficient future taxable profits against which the deferred
tax assets can be utilised, and the deferred tax assets do not arise
from the initial recognition (except in a business combination) of
other assets and liabilities in a transaction that affects neither taxable
profit nor accounting profit. Other deferred tax assets (tax loss and
tax credit carryforwards) are only recognised if it is considered
probable that the consolidated entities will have sufficient future
taxable profits against which they can be utilised.
Differences generated by the different accounting and tax treatment
of any of the income and expenses recorded directly in equity to be
paid or recovered in the future are accounted for as temporary
differences.
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The deferred tax assets and liabilities are reassessed at the reporting
date in order to ascertain whether any adjustments need to be made
on the basis of the findings of the analyses performed.
instruments, equity-instrument-based payments, transfers
between equity items and any other increases or decreases in
consolidated equity.
aa) Residual maturity periods
The analysis of the maturities of the balances of certain items in the
consolidated balance sheet.
ad) Consolidated statement of cash flows
The following terms are used in the consolidated statements of cash
flows with the meanings specified:
ab) Consolidated statement of recognised income and
expense
This statement presents the income and expenses generated by the
Group as a result of its business activity in the year, and a distinction
is made between the income and expenses recognised in the
consolidated income statement for the year and the other income
and expenses recognised directly in consolidated equity.
Accordingly, this statement presents:
a. Consolidated profit for the year.
b. The net amount of the income and expenses recognised in 'Other
comprehensive income' under items that will not be reclassified to
profit or loss.
c. The net amount of the income and expenses recognised in Other
comprehensive income under items that may be reclassified
subsequently to profit or loss.
d. The income tax incurred in respect of the items indicated in b and c
above, except for the valuation adjustments arising from
investments in associates or joint ventures accounted for using the
equity method, which are presented net.
e. Total consolidated recognised income and expense, calculated as
the sum of a) to d) above, presenting separately the amount
attributable to the parent company and the amount relating to
non-controlling interests.
The statement presents the items separately by nature, grouping
together items that, in accordance with the applicable accounting
standards, will not be reclassified subsequently to profit and loss
since the requirements established by the corresponding accounting
standards are met.
ac) Statement of changes in total equity
This statement presents all the changes in equity, including those
arising from changes in accounting policies and from the correction
of errors. Accordingly, this statement presents a reconciliation of the
carrying amount at the beginning and end of the year of all the
consolidated equity items, and the changes are grouped together on
the basis of their nature into the following items:
a. Adjustments due to changes in accounting policies and to errors:
include the changes in consolidated equity arising as a result of the
retrospective restatement of the balances in the consolidated
financial statements, distinguishing between those resulting from
changes in accounting policies and those relating to the correction
of errors.
b. Income and expense recognised in the year: includes, in aggregate
form, the total of the aforementioned items recognised in the
consolidated statement of recognised 'Income and expense'.
c. Other changes in equity: includes the remaining items recognised
in equity, including, inter alia, increases and decreases in capital,
distribution of profit, transactions involving own equity
• Cash flows: inflows and outflows of cash and cash equivalents,
which are short-term, highly liquid investments that are subject to
an insignificant risk of changes in value, irrespective of the
portfolio in which they are classified.
Grupo Santander classifies as cash and cash equivalents the balances
recognised under 'Cash, cash balances at central banks' and 'Other
deposits on demand' in the consolidated balance sheet.
• Operating activities: the principal revenue-producing activities of
credit institutions and other activities that are not investing or
financing activities.
• Investing activities: the acquisition and disposal of long-term
assets and other investments not included in cash and cash
equivalents.
• Financing activities: activities that result in changes in the size and
composition of the equity and liabilities that are not operating
activities.
During 2021 Grupo Santander received interest amounting to EUR
48,081 million (EUR 43,953 million and EUR 55,269 million in 2020
and 2019, respectively) and paid interest amounting to EUR 12,738
million (EUR 13,690 million and EUR 20,671 million in 2020 and
2019, respectively).
Also, dividends received and paid by the Group are detailed in notes
4, 28 and 40, including dividends paid to minority interests (non-
controlling interests).
3. Grupo Santander
a) Banco Santander, S.A., and international Group
structure
The growth of Grupo Santander in the last decades has led Banco
Santander to also act, in practice, as a holding entity of the shares of
the various companies in its Group, and its results are becoming
progressively less representative of the performance and earnings of
the Group. Therefore, each year the bank determines the amount of
the dividends to be distributed to its shareholders on the basis of the
consolidated net profit, while maintaining the Group’s objectives of
capitalisation and taking into account that the transactions of the
Bank and of the rest of the Group are managed on a consolidated
basis (notwithstanding the allocation to each company of the related
net worth effect).
At the international level, the various banks and other subsidiaries,
joint ventures and associates of the Group are integrated in a
corporate structure comprising various holding companies which are
the ultimate shareholders of the banks and subsidiaries abroad.
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The purpose of this structure, all of which is controlled Banco
Santander, is to optimise the international organisation from the
strategic, economic, financial and tax standpoints, since it makes it
possible to define the most appropriate units to be entrusted with
acquiring, selling or holding stakes in other international entities, the
most appropriate financing method for these transactions and the
most appropriate means of remitting the profits obtained by the
group’s various operating units to Spain.
The Appendices provide relevant data on the consolidated group
companies and on the companies accounted for using the equity
method.
b) Acquisitions and disposals
Following is a summary of the main acquisitions and disposals of
ownership interests in the share capital of other entities and other
significant corporate transactions performed in the last three years or
pending to be completed:
i. Purchase by SHUSA for shares of Santander Consumer USA
In August 2021 Santander Holdings USA, Inc. ('SHUSA') and
Santander Consumer USA Holdings Inc. ('SC') entered into a definitive
agreement pursuant to which SHUSA acquired all outstanding shares
of common stock of SC not already owned by SHUSA via an all-cash
tender offer (the 'Tender Offer') for USD 41.50 per SC common share
(the 'Offer Price'), followed by a second-step consisting of a merge
(together with the Offer, the 'Transaction') in which a wholly owned
subsidiary of SHUSA was merged with and into SC, with SC surviving
as a wholly owned subsidiary of SHUSA, and all outstanding shares of
common stock of SC not tendered in the Tender Offer were
converted into the right to receive the Offer Price in cash. The Offer
Price represented a 14% premium to the closing price of SC common
stock of USD 36.43 as of 1 July 2021, the last day prior to the
announcement of SHUSA’s initial offer to acquire the remaining
outstanding shares of SC’s common stock.
On 31 January 2022, after completion of the customary closing
conditions, the Transaction was performed and SHUSA increased its
share up to the 100% of SC's common stock. The transaction has
meant a disbursement of USD 2,510 million (around EUR
2,239 million) for the Group.
ii. Acquisition of Amherst Pierpont, a U.S. fixed-income broker
dealer
On 15 July 2021, Santander Holdings USA, Inc. reached an agreement
to acquire Amherst Pierpont Securities, a market-leading
independent fixed-income and structured products broker dealer,
through the acquisition of its parent holding company, Pierpont
Capital Holdings LLC, for a total consideration of approximately USD
600 million (around EUR 530 million). Amherst Pierpont will become
part of Santander Corporate & Investment Banking (Santander CIB)
Global business line.
The transaction is expected to close upon receipt of relevant
regulatory approvals.
iii Tender offer for shares of Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander
México
On 26 March 2021, Banco Santander, S.A. announced its intention to
make a tender offer for all shares of Banco Santander Mexico, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander México
('Santander México') that were not owned by Grupo Santander,
representing (after the execution of the operation referred to in point
vii. below) approximately 8.3% of the share capital of Santander
México. The announcement was subsequently supplemented by
other publications on 24 May, 8 June and 28 October 2021, in which
amendments to some of the terms of the offer were announced.
The offer was finally launched on 3 November 2021 and was settled
on 10 December. Banco Santander accepted all of the Santander
Mexico Shares and Santander Mexico American Depositary Share
(ADS) (securities listed on the New York Stock Exchange, each
representing 5 shares of Santander Mexico) tendered and not
withdrawn representing approximately 4.5% of the share capital of
Santander México. After the transaction, Santander Group holds
approximately 96.2% of Santander México share capital.
The shareholders who have tendered their shares in the offer have
received MXN 26.5 (approximately EUR 1) per share of Santander
México and USD 6.2486 in cash per each ADS (the USD equivalent of
MXN 132.50 per ADS based on the USD/MXN exchange rate on the
expiration date of 7 December 2021) which has meant a
disbursement of approximately EUR 335 million.
This transaction has entailed a decrease of reserves of EUR 41 million
and a decrease of EUR 294 million of minority interests.
iv.Agreement for the acquisition of a significant stake in Ebury
On 28 April 2020, the investment in Ebury, a payments and
currencies platform for SMEs, announced on 4 November 2019, was
completed. The transaction involved a total outlay of GBP 357 million
(EUR 409 million) of which GBP 70 million (approximately EUR
80 million) was for new shares. At 2019 year-end the Group had
already acquired 6.4% of the company for GBP 40 million
(approximately EUR 45 million). Following the disbursement made in
April 2020, the Group is entitled to receive 50.38% of the dividends
distributed by the company. This interest is recognized under
'Investments in Joint Ventures and Associates - Associates' in the
consolidated balance sheet.
v. Reorganization of the banking insurance business, asset
management and pension plans in Spain
On 24 June 2019, Banco Santander, S.A., reached an agreement with
the Allianz Group to terminate the agreement that Banco Popular
Español, S.A.U. ('Banco Popular') held in Spain with the Allianz Group
for the exclusive distribution of certain life insurance products, non-
life insurance products, collective investment institutions (IIC), and
pension plans through the Banco Popular network (the 'Agreement').
Under this Agreement, the Group held a 40% stake in the capital of
Popular Spain Holding de Inversiones, S.L.U., classified as
investments in joint ventures and associated entities for an overall
amount of EUR 409 million on 31 December 2019.
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The Agreement was executed on 15 January 2020 for the non-life
business and on 31 January 2020 for the remaining businesses, once
the regulatory authorisations were obtained in the first half of 2020.
The execution of the Termination Agreement entailed the payment
by Banco Santander of a total consideration of EUR 859 million (after
deducting the dividends paid until the end of the operation) and the
acquisition of the remaining 60% of the capital of Popular Spain
Holding de Inversiones, S.L.U.
On 10 July, 51% of the life-risk insurance business held by Banco
Santander and the 51% of the new General Insurance business from
Banco Popular's network not transferred to Mapfre (in accordance
with the agreement indicated below) was acquired by Aegon, valuing
these businesses at a total of approximately EUR 557 million.
The total amount of the life-savings business, collective investment
institutions and pension plans is EUR 711 million and has resulted in
the recognition of EUR 271 million of goodwill.
In addition, under the agreement reached between Banco Santander
and Mapfre on 21 January 2019, 50.01% of the car, commercial
multi-risk, SME multi-risk and corporate liability insurance business
in the whole network of Banco Santander in Spain was acquired by
Mapfre on 25 June 2019 amounting to EUR 82 million.
vi. Agreement with Crédit Agricole S.A. on the depositary and
custody business
On 17 April 2019, Banco Santander, S.A., announced that it had
signed a memorandum of understanding with Crédit Agricole S.A.
with the purpose of combining CACEIS and its subsidiaries (the
'CACEIS Group'), which is wholly-owned by Crédit Agricole S.A., with
Santander Securities Services, S.A.U. and its subsidiaries (the 'S3
Group'), which is wholly-owned by Banco Santander, S.A.
The operation consisted of the contribution by the Santander Group
to the CACEIS Group of 100% of the S3 Group in Spain and 50% of the
S3 Group's business in Latin America in exchange for a 30.5% stake in
the CACEIS Group Capital and voting rights. The remaining 69.5%
remained the property of Crédit Agricole, SA. The S3 Group's Latin
American business is under the joint control of the CACEIS Group and
the Santander Group.
On 27 June 2019, the signing of the final contracts took place after
having carried out the precise prior consultations with the
representative bodies of Crédit Agricole, SA employees and the
CACEIS Group. The closing of the operation took place on 20
December 2019 once the relevant regulatory authorizations were
obtained.
The operation generated a net capital gain of EUR 693 million
recorded for its gross amount under the heading of 'Non-classified
assets as non-current assets for sale' of the consolidated profit and
loss account, of which EUR 219 million correspond to the recognition
at fair value of the investment of 49.99% retained by the Group in S3
Latin America. The 30.5% interest in the CACEIS Group was recorded
under the heading of 'Investments - Associates' of the consolidated
balance sheet for an amount of EUR 1,010 million.
vii . Offer to acquire shares of Banco Santander Mexico, S.A.,
Institución de Banca Multiple, Grupo Financiero Santander
México.
On 12 April 2019, Banco Santander, S.A., announced its intention to
make an offer to acquire all the shares of Banco Santander Mexico,
S.A., Institución de Banca Múltiple, Grupo Financiero Santander
México ('Santander México') which are not owned by Grupo
Santander, representing approximately 25% of the share capital of
Santander México.
The shareholders who have accepted the offer have received 0.337
newly issued shares of Banco Santander, S.A., per share of Santander
México and 1.685 American Depositary Shares (ADSs) of Banco
Santander, S.A., per ADS of Santander México.
The offer was accepted by holders of shares representing 16.69% of
the capital stock of Santander Mexico, so the Group's participation in
Santander Mexico became 91.65% of its share capital. To meet the
exchange, the Bank proceeded to issue, in execution of the
agreement adopted by the extraordinary general meeting held on 23
July 2019, 381,540,640 shares, which represented approximately
2.35% of the Bank's share capital in the date of issue. This operation
meant an increase of EUR 191 million in Capital, EUR 1,491 million in
issue premium and a decrease of EUR 670 million in Reserves and
EUR 1,012 million in minority interests.
c) Offshore entities
According to current Spanish regulation (Law 11/2021, of 9 July and
Royal Decree 1080/1991, of 5 July), Santander has one subsidiary
and three branches in the non-cooperative jurisdictions of Jersey, the
Isle of Man and the Cayman Islands (offshore entities). Santander
also has three other subsidiaries incorporated in non-cooperative
jurisdictions that are tax resident in the UK and subject to British tax
law.
i. Offshore subsidiaries
A subsidiary resident in the Isle of Man was liquidated in 2021 so, at
the reporting date, Grupo Santander has only one subsidiary resident
in Jersey: Abbey National International Limited. In 2021, this
subsidiary’s contribution to Santander’s consolidated profit was
insubstantial.
ii. Offshore branches
Grupo Santander also has three offshore branches. One is found in
the Cayman Islands, one is on the Isle of Man and another is in Jersey.
They report to, and consolidate balance sheets and income
statements with, their foreign headquarters. They are taxed either
with their headquarters (the Cayman Islands branch in Brazil) or in
the territories they are located in (Jersey and Isle of Man, pertain to
the UK).
The entities mentioned in Sections I and II had 147 employees as of
December 2021.
iii. Subsidiaries in non-cooperative jurisdictions that are tax
resident in the United Kingdom
Grupo Santander also has three subsidiaries (one in liquidation) that
were incorporated in offshore jurisdictions but are not deemed
offshore entities. They only operate from, and are tax resident in, the
UK and, thus, are subject to British tax law.
Annual report 2021 590
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
iv. Other offshore holdings
From Brazil, Grupo Santander manages Santander Brazil Global
Investment Fund SPC, a segregated portfolio company located in the
Cayman Islands. It also has two small financial investments in
entities located in the Cayman Islands. In 2021, Guaranteed
Investment Products 1 PCC Limited, a protected cell company found
in Guernsey managed from the UK, was liquidated.
Organization for Economic Cooperation and Development (OECD)
Grupo Santander is not in any of the non-cooperative jurisdictions the
OECD released in November 2021. Furthermore, Jersey, the Isle of
Man and the Cayman Islands satisfy OECD standards on transparency
and exchange of information for tax purposes.
The European Union (EU)
As of October 2021, the EU’s blacklist comprises 9 jurisdictions where
Santander is not present. Additionally, the EU’s grey list comprises 15
jurisdictions which have sufficiently committed to adapt legislation to
international standards, subject to monitoring by the EU. Within
these jurisdictions, Santander is only present in Uruguay and Hong
Kong mainly through Banco Santander S.A. in Uruguay and a branch
in Hong Kong.
The Group's presence in offshore territories at the end of 2021 is as
follows:
Presence of the
Group in non-
cooperative
jurisdictions
Jersey
Isle of Man
Guernsey*
Bermuda*
Cayman Islands
2021
2020
OECD
Sub. Branch
European
Commission
Blacklist
Sub. Branch
Spanish
legislation
Sub.
1
Branch
1
1
1
3
3
1
2
—
—
—
—
—
—
—
—
* Additionally, there are 2 entities constituted in Guernsey (1 in liquidation) and 1
in Bermuda, but resident for tax purposes in the United Kingdom.
Changes to Spain's tax law
On 10 July 2021, Law 11/2021 on measures to prevent and fight
against tax fraud was published in the Official Estate Gazette. The
law expands the meaning of tax havens, which it renames “non-
cooperative jurisdictions”. It also allows government to update the
non-cooperative jurisdictions list. Nonetheless, until that list
conforms to the new criteria, the former list set out in Royal Decree
1080/1991 of 5 July will remain in effect.
Grupo Santander has the right mechanisms (risk management,
supervision, verification and review plans, and regular reporting) to
prevent reputational, tax and legal risk in entities resident in non-
cooperative jurisdictions. Grupo Santander also maintains its policy of
reducing the number of these entities.
PwC (PricewaterhouseCoopers) member firms audited the financial
statements of Grupo Santander’s offshore entities in 2021, 2020 and
2019.
4. Distribution of Banco Santander's profit,
shareholder remuneration scheme and earnings per
share
a) Distribution of Banco Santander's profit and
shareholder remuneration scheme
The distribution of the Bank's net profit against the results for 2021,
that the board of directors will propose for approval by the
shareholders at the annual general meeting is as follows:
EUR million
To dividends
Dividend paid prior to the meeting date*
Complementary dividend**
To voluntary reserves***
Net profit for the year
1,701
836
865
2,231
3,932
* Total amount paid as interim dividend, at the rate of EUR 4.85 fixed cents per
eligible share (recorded in 'Shareholders' equity - Interim dividends').
** Fixed dividend of EUR 5.15 gross cents per eligible share, payable in cash as from
2 May 2022. The total amount has been estimated on the assumption that, after
the implementation of the second buy-back programme announced on 24
February 2022, the number of the Bank's outstanding shares eligible for the
dividend will be 16,804,353,202.
***Estimated amount corresponding to a final dividend of EUR 865 million. To be
increased or reduced by the same amount by which the final dividend is lower or
higher, respectively, than that amount.
The transcribed proposal comprises the part of the 2021 shareholder
remuneration policy that is implemented through cash dividends (the
interim dividend paid in November 2021 of EUR 4.85 cents per share
with dividend entitlement and the final dividend expected to be paid
as of 2 May 2022, subject to approval by the general meeting of
shareholders, of EUR 5.15 cents per share with dividend entitlement).
In addition, the 2021 remuneration policy also provided for
shareholder remuneration through the implementation of share
buyback programs, which are not reflected in the above-transcribed
proposal for the appropriation of earnings. The first of these
programs, amounting to approximately EUR 841 million, was
completed between October and November 2021. Subject to
obtaining the appropriate regulatory approvals, a second repurchase
program for approximately EUR 865 million is planned to be
launched. Capital reduction resolutions are also submitted to the
general shareholders' meeting to redeem the treasury shares
acquired in each of the two repurchase programs, also subject to the
relevant regulatory authorizations.
Finally, and although it is not part of the remuneration charged to the
2021 financial year, it should be noted that in May 2021 Banco
Santander paid a dividend of EUR 2.75 cents in cash per share
corresponding to the 2020 financial year against share premium, for
an amount of EUR 477 million, this being the maximum amount
allowed in accordance with the limit established by the
recommendation of the European Central Bank of 15 December
2020. This payment was made in execution of the premium
distribution resolution approved at the General Shareholders'
Meeting of Banco Santander held on 27 October 2020.
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Notes to the consolidated
financial statements
Appendix
2021
2020
2019
2021
2020
2019
b) Earnings/loss per share from continuing and
discontinued operations
i. Basic earnings / loss per share
Basic earnings/loss per share are calculated by dividing the net profit
attributable to the Group, adjusted by the after-tax amount of the
remuneration of contingently convertible preference shares
recognised in equity (see note 23) and the capital perpetual
preference shares, if applicable, by the weighted average number of
ordinary shares outstanding during that period, excluding the
average number of own shares held through that period.
Accordingly:
Profit (Loss) attributable
to the Parent (EUR
million)
Remuneration of
contingently convertible
preference shares (CCP)
(EUR million) (note 23)
Of which:
Profit (Loss) from
discontinued
operations (non
controlling interest
net) (EUR million)
Profit (Loss) from
continuing operations
(PPC net)
(EUR million)
Weighted average
number of shares
outstanding
Impact factor correction*
Adjusted number of
shares
Basic earnings (Loss)
per share (euros)
Of which, from
discounted operations
(euros)
Basic earnings (Loss) per
share from continuing
operations (euros)
8,124
(8,771)
6,515
(566)
7,558
(552)
(9,323)
(595)
5,920
—
—
—
7,558
(9,323)
5,920
17,272,055,430 17,316,288,908 16,348,415,883
Not applicable
Not applicable
710,800,691
17,272,055,430 17,316,288,908 17,059,216,574
0.438
(0.538)
0.347
—
—
—
0.438
(0.538)
0.347
* Correction factor for the capital increase released on 3 December 2020 (see
notes 1.d and 31.a).
ii. Diluted earnings / loss per share
Diluted earnings/loss per share are calculated by dividing the net
profit attributable to the Group, adjusted by the after-tax amount of
the remuneration of contingently convertible preference shares
recognised in equity (see note 23) and the capital perpetual
preference shares, if applicable, by the weighted average number of
ordinary shares outstanding during the year, excluding the average
number of treasury shares and adjusted for all the dilutive effects
inherent to potential ordinary shares (share options, and convertible
debt instruments).
Accordingly, diluted earnings/loss per share were determined as
follows:
Profit (Loss) attributable
to the Parent (EUR
million)
Remuneration of
contingently convertible
preference shares (CCP)
(EUR million) (Note 23)
Dilutive effect of changes
in profit for the period
arising from potential
conversion of ordinary
shares
Of which:
Profit (Loss) from
discontinued
operations (net of
non-controlling
interests) (EUR
million)
Profit (Loss) from
continuing operations
(net of non-
controlling interests
and CCP) (EUR
million)
Weighted average
number of shares
outstanding
Dilutive effect of options/
rights on shares
Impact factor correction*
Adjusted number of
shares
Diluted earnings (Loss)
per share (euros)
Of which, from
discounted operations
(euros)
Diluted earnings (Loss)
per share from
continuing operations
(euros)
8,124
(8,771)
6,515
(566)
(552)
(595)
—
7,558
—
(9,323)
—
5,920
—
—
—
7,558
(9,323)
5,920
17,272,055,430 17,316,288,908 16,348,415,883
48,972,459
Not applicable
Not applicable
Not applicable
35,891,644
712,361,197
17,321,027,889 17,316,288,908 17,096,668,724
0.436
(0.538)
0.346
—
—
—
0.436
(0.538)
0.346
* Correction factor for the capital increase released on 3 December 2020 (see
notes 1.d and 31.a).
Annual report 2021 592
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
5. Remuneration and other benefits paid to the Bank’s
directors and senior managers
The following section contains qualitative and quantitative
disclosures on the remuneration paid to the members of the board of
directors —both executive and non-executive directors— and senior
managers for 2021 and 2020:
a) Remuneration of Directors
i. Bylaw-stipulated emoluments
The annual General Meeting held on 22 March 2013 approved an
amendment to the Bylaws, whereby the remuneration of directors in
their capacity as board members became an annual fixed amount
determined by the annual General Meeting. This amount shall
remain in effect unless the shareholders resolve to change it at a
general meeting. However, the board of directors may elect to
reduce the amount in any years in which it deems such action
justified.
The remuneration established by the Annual General Meeting was
EUR 6 million in 2021 (same amount as in 2020), with two
components: (a) an annual emolument and (b) attendance fees.
In regard to 2020, as a gesture of responsibility in view of the
situation created by the health emergency the board of directors
agreed on 5 May 2020 to reduce their allotments by 20% for the
balance of 2020, with effect from 1 April 2020, and propose that
amounts saved thereby be used to finance the initiatives of the Bank
to fight against the covid-19 pandemic.
The specific amount payable for the above-mentioned items to each
of the directors is determined by the Board of Directors. For such
purpose, it takes into consideration the positions held by each
director on the Board, their membership of the Board and the board
committees and their attendance to the meetings thereof, and any
other objective circumstances considered by the Board.
The total bylaw-stipulated emoluments earned by the Directors in
2021 amounted to EUR 4.8 million (4.1 million in 2020).
Annual emolument
In 2021, the board voted not to change the fees amount set out in
the 2020 policy ahead of the aforementioned exceptional decision
and, per the remuneration policy approved at the 2021 AGM.
Additionally, the innovation and technology committee also began to
be remunerated, and its members received EUR 25,000 and its Chair,
an additional EUR 70,000. The annual amounts received individually
by the directors in 2021 and 2020 based on the positions held by
them on the board and their membership of the board committees
were as follows:
Amount per director in euros
2020
1 Jan to 1 Apr to
31 Mar 31 Dec
2021
Members of the board of directors
Members of the executive committee
Members of the audit committee
90,000
22,500 49,500
170,000
42,500 93,500
40,000
10,000 22,000
Members of the appointments
committee
Members of the remuneration
committee
Members of the risk supervision,
regulation and compliance
committee
25,000
6,250 13,750
25,000
6,250 13,750
40,000
10,000 22,000
Members of the responsible banking,
sustainability and culture committee
15,000
3,750
8,250
Members of the innovation and
technology committee
Chairman of the audit committee
Chairman of the appointments
committee
Chairman of the remuneration
committee
Chairman of the risk supervision,
regulation and compliance
committee
25,000
—
—
70,000
17,500 38,500
50,000
12,500 27,500
50,000
12,500 27,500
70,000
17,500 38,500
Chairman of the responsible banking,
sustainability and culture committee
50,000
12,500
27,500
Chairman of the innovation and
technology committee
Lead director*
Non-executive vice chairmen
70,000
—
—
110,000
27,500 60,500
30,000
7,500 16,500
* Mr. Bruce Carnegie-Brown, in view of the positions held on the board and its
committees, in particular as chairman of the appointments and remuneration
committees and as coordinating director, and the time and dedication required
to properly perform such positions, has been assigned a minimum total annual
remuneration of EUR 700,000 since 2015, including the annual allowance for
the items corresponding to him of those indicated above and attendance fees.
However, in line with the decision taken by the board of directors to reduce his
fees by 20% with effect from April 1, 2020 to 31 December, which is shared by
Mr. Bruce Carnegie-Brown, the same reduction was applied to this amount.
Accordingly, the amount assigned for 2020 was EUR 595,000.
Attendance fees
The directors receive fees for attending board and committee
meetings, excluding executive committee meetings, since no
attendance fees are received for this committee.
Like the annual allotment, the board voted not to change the fees
amount set out in the 2020 policy ahead of the aforementioned
exceptional decision and, per the remuneration policy approved at
the 2021 AGM, added attendance fees for innovation and technology
committee members (which they did not receive before).
Annual report 2021 593
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Notes to the consolidated
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Appendix
The fees for 2021 and 2020 are as follows:
Attendance fees per director per
meeting in euros
Board of directors
Audit committee and risk supervision,
regulation and compliance committee
Other committees (excluding executive
committee)
2020
2021
1 Jan to
31 Mar
1 Apr to
31 Dec
2,600
2,600
2,080
1,700
1,700
1,360
1,500
1,500
1,200
ii. Salaries
The executive directors receive salaries. In accordance with the policy
approved by the annual general meeting, salaries are composed of a
fixed annual remuneration and a variable one, which consists in a
unique incentive, which is a deferred variable remuneration plan
linked to multi-year objectives, which establishes the following
payment scheme:
• 40% of the variable remuneration amount, determined at year-
end on the basis of the achievement of the established objectives,
is paid immediately.
• The remaining 60% is deferred over five years, to be paid in five
portions, provided that the conditions of permanence in the Group
and non-concurrence of the malus clauses are met, and subject to
long term metrics, taking into account the following accrual
scheme:
– The accrual of the first and second portion (payment in 2023
and 2024) will be conditional on none of the malus clauses
being triggered.
– The accrual of the third, fourth, and fifth portion (payment in
2025, 2026 and 2027), is linked to objectives related to the
period 2021—2023 and the metrics and scales associated with
these objectives. The fulfilment of the objectives determines the
percentage to be paid of the deferred amount in these three
annuities, which, accordingly, might not be paid, where the
maximum amount is the amount determined at closing of
2021, when the total variable remuneration is approved.
• In accordance with current remuneration policies, the amounts
already paid will be subject to a possible recovery (clawback) by
the Bank during the period set out in the policy in force at each
moment.
The immediate payment (or short-term), as well as each deferred
payment (linked to long term metrics and not linked to long-term
metrics) will be settled 50% in cash and the remaining 50% in
Santander shares.
In the case of Sergio Rial, he has been considered as an executive
director since his appointment as director became effective on 30
May 2020 by virtue of Article 529 duodecies of the Spanish
Companies Act in light of his role as CEO and vice-chairman of Banco
Santander Brasil, S.A. In 2021 he received as fixed pay for his role as
Regional head for South America, the EUR 750,000 euros that had
been approved at the 2021 AGM as part of the 2021 remuneration
policy. He has not received any other remuneration for executive
functions in Banco Santander, S.A.
The same policy and principles above apply to Sergio Rial's
remuneration as CEO in Santander Brasil.
Comparative of Executive Remuneration (Chairman and CEO)
The board resolved to maintain the same gross annual salary for Ana
Botín and José Antonio Álvarez for 2021 as in 2020. It also
maintained the fixed pension contribution of 22% of gross annual
salary it had declared in 2020 for 2021.
Comparing with the previous year, it should be mentioned that amid
the covid-19 health crisis in 2020, Ana Botín and José Antonio Álvarez
proposed to reduce their total 2020 compensation (salary and bonus)
by 50%.
To achieve the 50% reduction compared to 2019, the board of
directors decided to apply an additional adjustment to Ana Botín’s
and José Antonio Alvarez’s variable compensation, reducing the
variable compensation by 74% in the case of Ana Botín and 79% in
the case of José Antonio Álvarez.
And in 2021, the good business performance (which enabled Banco
Santander to reach a 12.73% underlying RoTE, above the end of
2019), the excellent execution of our strategy (with the highest
underlying attributable profit of the last 12 years), and the efficient
capital management, boosted the bonus pool and thus the variable
remuneration of corporate centre employees, (including executive
directors).
iii. Detail by director
The detail, by bank director, of the short-term (immediate) and
deferred (not subject to long-term goals) remuneration for 2021 and
2020 is provided below:
Annual report 2021 594
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR thousand
Ana Botín
José Antonio Álvarez
Bruce Carnegie-
Brown
Homaira Akbari
Javier Botín
A
Álvaro Cardoso
B
C
R.Martín Chávez
Sol Daurella
D
Henrique de Castro
E
Gina Díez
F
Luis Isasi
Ramiro Mato
G
Sergio Rial
Belén Romana
Pamela Walkden
H
I
Rodrigo Echenique
J
Ignacio Benjumea
Guillermo de la
DehesaK
Esther Giménez-
SalinasL
Total 2021
Total 2020
BoardM
90
90
276
90
90
90
90
90
90
90
90
90
90
90
90
—
—
—
—
2021
Bylaw-stipulated emoluments
Annual emolument
Executive
committee
Audit
committee
Appointments
committee
Remuneration
committee
Risk
supervision,
regulation
and
compliance
oversight
committee
Responsible
banking,
sustainability
and culture
committee
Innovation
and
technology
committee
Attendance
fees and
commissions
170
170
170
—
—
—
—
—
—
—
170
170
—
170
—
—
—
—
—
—
—
—
40
—
—
—
—
40
—
—
40
—
40
110
—
—
—
—
270
208
—
—
75
—
—
—
25
25
—
1
—
—
—
—
—
—
—
—
—
—
—
75
—
—
—
25
25
25
—
25
—
—
—
—
—
—
—
—
—
—
—
—
—
28
40
—
—
—
40
40
—
93
27
—
—
—
—
—
—
—
15
—
15
—
15
—
—
—
65
—
15
—
—
—
—
—
25
25
25
25
—
—
95
—
25
—
—
—
—
25
—
—
—
—
—
45
45
80
78
39
50
99
84
87
39
81
94
39
100
76
—
—
—
—
126
133
175
138
268
252
125
135
245
—
1,035
1,066
1,536
1,303
1,020
915
A. All amounts received were reimbursed to Fundación Botín.
B. Director since 1 April 2018.
C. Director since 27 October 2020.
D. Director since 17 July 2019.
E. Director since 22 December 2020.
F. Director since 19 May 2020.
G. Executive director since 30 May 2020.
H. Director since 29 October 2019.
I. Stepped down as executive director on 30 April 2019. Non-executive director from 1 May 2019 to 22 December 2020.
J. Stepped down as director on 5 May 2020.
K. Stepped down as director on 3 April 2020.
L. Stepped down as director on 27 October 2020.
M Also includes emoluments for other roles in the board.
Annual report 2021 595
Ana Botín
José Antonio Álvarez
Bruce Carnegie-
Brown
Homaira Akbari
Javier Botín
A
Álvaro Cardoso
B
R.Martín Chávez
C
Sol Daurella
Henrique de Castro
D
E
Gina Díez
F
Luis Isasi
Ramiro Mato
Sergio Rial
G
Belén Romana
Pamela Walkden
H
I
Rodrigo Echenique
J
Ignacio Benjumea
Guillermo de la
K
Dehesa
Esther Giménez-
L
Salinas
Total 2021
Total 2020
Footnotes in previous table.
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
2021
2020
Short-term and deferred (not subject to long-term goals) salaries of
executive directors
Variable - immediate
payment
Deferred variable
Fixed
3,176
2,541
In cash
In shares
In cash In shares
1,838
1,241
1,839
1,240
1,103
1,103
744
745
Total
9,059
6,511
Pension
Other
contribution remuneration
1,041
783
1,006
1,536
Total
11,436
9,160
Total
6,819
6,019
—
—
—
—
—
—
—
—
—
—
750
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
750
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,467
5,717
3,079
3,079
1,847
1,848
514
515
308
309
16,320
7,363
1,824
2,019
3,542
5,537
—
—
—
—
—
—
—
—
700
248
129
183
374
239
267
130
1,000
1,406
—
—
—
—
—
—
—
—
499
879
533
303
—
—
—
—
26,486
595
203
122
243
37
214
217
4
943
431
63
418
214
1,956
276
107
192
—
—
19,073
Annual report 2021 596
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financial statements
Notes to the consolidated
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Appendix
Following is the detail, by executive director, of the salaries linked to
multi-year objectives at their fair value, which will only be received if
the conditions of permanence in the group, non-applicability of
malus clauses and achievement of the established objectives are met
(or, as the case may be, of the minimum thresholds thereof, with the
consequent reduction of amount agreed-upon at the end of the year)
in the terms described in Note 46.
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
2020
Variable subject to
Long-term
1
objectives
In cash
In shares
Total
Total
1,158
1,158
2,316
782
782
1,563
1,940
1,940
3,880
420
228
648
1. Corresponds with the fair value of the maximum amount they are entitled to in
a total of 3 years: 2025, 2026 and 2027, subject to conditions of continued
service, with the exceptions provided, and to the non-applicability of malus
clauses and achievement of the objectives established.
The fair value has been determined at the grant date based on the
valuation report of an independent expert, Willis Towers Watson.
Based on the design of the plan for 2021 and the levels of
achievement of similar plans in comparable entities, the expert
concludes that the reasonable range for estimating the initial
achievement ratio is around 60% - 80%. Accordingly, it has been
considered that the fair value is 70% of the maximum (see note 46).
Note 5.e below includes disclosures on the shares delivered from the
deferred remuneration schemes in place in previous years and for
which delivery conditions were met, as well as on the maximum
number of shares that may be received in future years in connection
with the aforementioned 2021 and 2020 variable remuneration
plans.
In addition to the EUR 750,000 Sergio Rial received as Regional head
for South America, he was paid the following amounts as CEO of
Santander Brasil (additionally, in the following table, it is also
disclosed the variable subject to long-term objectives at 70% of fair
value):
2021
Base salary
Other fixed benefits
Pensions
Variable remuneration immediately
payable and deferred (not linked to
long-term objectives)
Total
BRL thousand
EUR thousand
12,645
47
7,350
26,600
46,642
1,985
7
1,153
4,018
7,163
EUR thousand
2021
2020
Variable subject to
Long-term
objectives
Sergio Rial
In cash
In shares
Total
791
791
1,582
Total
1,311
b) Remuneration of the Board members as
representatives of the Bank
By resolution of the executive committee, all the remuneration
received by the Bank’s directors who represent the Bank on the
Boards of Directors of listed companies in which the Bank has a stake,
paid by those companies and relating to appointments made on or
after 18 March, 2002, accrues to the Group. In 2021 and 2020 the
Bank’s directors did not receive any remuneration in respect of these
representative duties.
On the other hand, in their personal capacity, in 2021 Álvaro Cardoso
was paid BRL 2,130 thousand (EUR 334 thousand) as non-executive
chairman of Banco Santander Brasil, S.A., Homaira Akbari was paid
USD 190 thousand (EUR 161 thousand) as member of the board of
Santander Consumer USA (SCUSA) and EUR 52 thousand as member
of the Board of PagoNxt, and Henrique de Castro and R. Martín
Chávez were each paid the same EUR 52 thousand as members of
the board of PagoNxt. Likewise, Pamela Walkden was paid GBP 31
thousand (EUR 36 thousand) as member of Santander UK plc y
Santander UK Group Holdings.
Likewise, Luis Isasi was paid EUR 1,000 thousand as non-executive
chairman of the board of Santander Spain and for attending board
and committee meetings (amounts paid by Banco Santander, S.A.).
c) Post-employment and other long-term benefits
In 2012, the contracts of Ms. Ana Botín and Mr. José Antonio Alvarez
(and other members of the Bank's senior management) with defined
benefit pension commitments were modified to transform these
commitments into a defined contribution system, which covers the
contingencies of retirement, disability and death. From that moment
on, the Bank makes annual contributions to their pension system for
their benefit.
This system gives them the right to receive benefits upon retirement,
regardless of whether or not they are active at the Bank at such time,
based on contributions to the system, and replaced their previous
right to receive a pension supplement in the event of retirement.
Upon revision in 2021, José Antonio Álvarez’s contract precluded the
right to early retirement if terminated. Furthermore, Ana Botín is not
entitled to early retirement if she freely resigns; however, she will
still be entitled to it if Banco Santander terminates her contract
before 31 August 2022, at which time early retirement will no longer
be available. As long as she retains that right, she is entitled to an
annual allotment equal to her total fixed remuneration, plus 30% of
the average of up to her last three variable pays.
The initial balance for each of them in the new defined benefits
system corresponded to the market value of the assets from which
the provisions corresponding to the respective accrued obligations
had materialised on the date on which the old pension commitments
were transferred into the new benefits system.
Since 2013, the Bank has made annual contributions to the benefits
system for executive directors and senior executives, in proportion to
their respective pensionable bases, until they leave Grupo Santander
or until their retirement within the Group, death, or disability.
The benefit plan system is outsourced to Santander Seguros y
Reaseguros, Compañía Aseguradora, S.A., and the economic rights of
the foregoing directors under this plan belong to them regardless of
whether or not they are active at the Bank at the time of their
retirement, death or disability.
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In accordance with the provisions of the remuneration regulations,
contributions made calculated on variable remuneration are subject
to the discretionary pension benefits regime. Under this regime,
contributions are subject to malus clauses and clawback according to
the policy in force at any given time and during the same period in
which the variable remuneration is deferred.
Furthermore, they must be invested in bank shares for a period of
five years from the date when the executive director leaves the
Group, regardless of whether or not they leave to retire. Once that
period has elapsed, the amount invested in shares will be reinvested,
along with the remainder of the cumulative balance corresponding to
the executive director, or it will be paid to the executive director or to
their beneficiaries in the event of a contingency covered by the
benefits system.
As per the director´s remuneration policy approved at the 23 March
2018 general shareholder´s meeting, the system was changed with a
focus on:
• Aligning the annual contributions with practices of comparable
institutions.
• Reducing future liabilities by eliminating the supplementary
benefits scheme in the event of death (death of spouse or parent)
and permanent disability of serving directors.
• Not increasing total costs for the Bank.
The changes to the system were the following:
• Fixed and variable pension contributions were reduced to 22% of
the respective pensionable bases. The gross annual salaries and
the benchmark variable remuneration were increased in the
corresponding amount with no increase in total costs for the Bank.
The pensionable base for the purposes of the annual contributions
for the executive directors is the sum of fixed remuneration plus
30% of the average of their last three variable remuneration
amounts.
• The death and disability supplementary benefits were eliminated
since 1 April 2018. A fixed remuneration supplement (included in
other remuneration in section a.iii in this note) was implemented
the same date.
• The total amount insured for life and accident insurance was
increased.
The provisions recognised in 2021 and 2020 for retirement pensions
and supplementary benefits (surviving spouse and child benefits, and
permanent disability) were as follows:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
1,041
783
2020
1,155
864
1,825
2,019
Following is a detail of the balances relating to each of the executive
directors under the welfare system as of 31 December 2021 and
2020:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
2020
48,075
49,444
18,821
18,082
66,896
67,526
d) Insurance
The Group pays for life insurance policies for the Bank’s directors,
who will be entitled to receive benefits if they are declared disabled;
in the event of death, the benefits will be payable to their heirs. The
premiums paid by the Group are included in the 'Other remuneration'
column of the table shown in Note 5.a.iii above. Also, the following
table provides information on the sums insured for the Bank’s
executive directors:
Insured capital
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2021
2020
21,489
21,984
18,028
18,703
39,517
40,687
The insured capital has been modified in 2018 for Ms Ana Botín and
Mr José Antonio Alvarez as part of the pension systems
transformation set out in note 5.c) above, which has encompassed
the elimination of the supplementary benefits systems (death of
spouse and death of parent) and the increase of the life insurance
annuities.
During 2021 and 2020, the Group has disbursed a total amount of
EUR 25.5 million and EUR 19.5 million , respectively, for the
payment of civil-liability insurance premiums. These premiums
correspond to several civil-liability insurance policies that hedge,
among others, directors, senior executives and other managers and
employees of the Group and the Bank itself, as well as its
subsidiaries, in light of certain types of potential claims. For this
reason, it is not possible to disaggregate or individualize the amount
that correspond to the directors and executives.
As of 31 December 2021 and 2020, no life insurance commitments
exist for the Group in respect of any other directors.
e) Deferred variable remuneration systems
The following information relates to the maximum number of shares
to which the executive directors are entitled at the beginning and end
of 2021 and 2020 due to their participation in the deferred variable
remuneration systems, which instrumented a portion of their
variable remuneration relating to 2021 and prior years, as well as on
the deliveries, in shares or in cash, made to them in 2021 and 2020
once the conditions for the receipt thereof had been met (see Note
46):
i) Deferred conditional variable remuneration plan
From 2011 to 2015, the bonuses of executive directors and certain
executives (including senior management) and employees who
assume risk, who perform control functions or receive an overall
remuneration that puts them on the same remuneration level as
senior executives and employees who assume risk (all of whom are
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referred to as identified staff) have been approved by the Board of
Directors and instrumented, respectively, through various cycles of
the deferred conditional variable remuneration plan. Application of
these cycles, insofar as they entail the delivery of shares to the plan
beneficiaries, was authorized by the related Annual General
Meetings.
The purpose of these plans was to defer a portion of the bonus of the
plan beneficiaries (60% in the case of executive directors) over a
period of five years (three years for the plans approved up to 2014)
for it to be paid, where appropriate, in cash and in Santander shares.
The remaining 40% portion of the bonus is paid in cash and
Santander shares (in equal parts), upon commencement of this plan,
in accordance with the rules set forth below.
In addition to the requirement that the beneficiary remains in
Santander Group’s employ, the accrual of the deferred remuneration
was conditional upon none of the following circumstances existing in
the opinion of the Board of Directors -following a proposal of the
remuneration committee-, in relation to the corresponding year, in
the period prior to each of the deliveries: (i) poor financial
performance of the Group; (ii) breach by the beneficiary of internal
regulations, including, in particular, those relating to risks; (iii)
material restatement of the Group’s consolidated financial
statements, except when it is required pursuant to a change in
accounting standards; or (iv) significant changes in the Group’s
economic capital or its risk profile. All the foregoing shall be subject
in each case to the regulations of the relevant plan cycle.
Deferred amounts (whether or not contingent on multi-year targets)
is earned if the beneficiary continues to work with the group14, and
none of the circumstances triggering the malus clause arise before
each payment, according to the section on malus and clawback
clauses in the remuneration policy.
Similarly, Banco Santander can clawback any paid variable amounts
in the scenarios and for the period dictated by the terms and
conditions in the said policy.
On each delivery, the beneficiaries are paid an amount in cash equal
to the dividends paid for the amount deferred in shares and the
interest on the amount deferred in cash. If the Santander Dividendo
Elección scrip dividend scheme is applied, payment will be based on
the price offered by the Bank for the bonus share rights
corresponding to those shares.
The maximum number of shares to be delivered is calculated taking
into account the daily volume-weighted average prices for the 15
trading sessions prior to the date on which the board of directors
approves the bonus for the Bank’s Executive Directors for each year.
This plan and the Performance Shares (ILP) plan described below
have been integrated for the executive directors and other senior
managers in the deferred variable compensation plan linked to
multiannual objectives, in the terms approved by the General
Meeting of Shareholders held on March 18, 2016.
In the case of Sergio Rial, who does not receive any remuneration for
executive duties in Banco Santander, S.A., the same policy principles,
deferrals, multi year targets linked to the payment of deferred
amounts and malus and clawback principles described herein apply
to his variable remuneration in the subsidiary where he is the CEO.
ii) Deferred variable compensation plan linked to multiannual
objectives
In the annual shareholders meeting of 18 March 2016, with the aim
of simplifying the remuneration structure, improving the ex-ante risk
adjustment and increasing the incidence of long-term objectives, the
bonus plan (deferred and conditioned variable compensation plan)
and ILP were replaced by one single plan, the deferred multiyear
objectives variable remuneration plan.
The variable remuneration of executive directors and certain
executives (including senior management) corresponding to 2021
has been approved by the Board of Directors and implemented
through the sixth cycle of the deferred variable remuneration plan
linked to multi-year objectives. The application of the plan was
authorised by the annual general meeting of shareholders, as it
entails the delivery of shares to the beneficiaries.
As indicated in section a.ii of this note, 60% of the variable
remuneration amount is deferred over five years (three years for
certain beneficiaries, not including executive directors), to be paid,
where appropriate, in five portions, provided that the conditions of
permanence in the group and non-concurrence of malus clauses are
met, and subject to long term metrics, according to the following
accrual scheme:
• The accrual of the first and second parts (instalments in 2023 and
2024) is conditional on none of the malus clauses being triggered.
• The accrual of the third, fourth and fifth parts (instalments in
2025, 2026 and 2027) is linked to the fulfilment of certain
objectives related to the 2021‑2023 period and the metrics and
scales associated with those objectives, as well as to non-
concurrence of malus clauses. These objectives are:
– The growth of consolidated earnings per share in 2023
compared to 2020;
– The relative performance of the Bank’s total shareholder return
(RTA) in the 2021-2023 period in relation to the weighted RTAs
of a reference group of 9 credit institutions;
– Compliance with the fully loaded ordinary level 1 capital
objective for the year 2023.
The degree of compliance with the above objectives determines
the percentage to be applied to the deferred amount in these three
annuities, the maximum being the amount determined at the end of
the year 2021 when the total variable remuneration is approved.
Both the immediate (short-term) and each of the deferred (long-
term and conditioned) portions are paid 50% in cash and the
remaining 50% in Santander shares.
The accrual of deferred amounts (whether or not subject to
performance measures) is conditioned, in addition to the
permanence of the beneficiary in the Group, to non-occurrence,
during the period prior to each of the deliveries, of any the
circumstances giving rise to the application of malus as set out in the
Group’s remuneration policy in its chapter related to malus and
clawback. Likewise, the amounts already paid of the incentive will be
subject to clawback by the Bank in the cases and during the term
foreseen in said policy, and in accordance with the terms and
conditions foreseen in it.
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Malus and clawback clauses are triggered by poor financial
performance of Banco Santander, a division or area, or exposures
from staff as a result of an executive(s)’s management of, at least,
one of these factors:
(i)
Significant failures in risk management committed by the entity,
or by a business unit or risk control.
(ii) The increase suffered by the entity or by a business unit of its
capital needs, not foreseen at the time of generation of the
exposures.
(iii) Regulatory sanctions or judicial sentences from events that
could be attributable to the unit or the personnel responsible for
those. Also, the breach of internal codes of conduct of the entity.
(iv)
Irregular conduct, whether individual or collective. In this
regard, the negative effects derived from the marketing of
inappropriate products and the responsibilities of the people or
bodies that made those decisions will be specially considered.
The maximum number of shares to be delivered is calculated by
taking into account the average weighted daily volume of the
average weighted listing prices corresponding to the fifteen trading
sessions prior to the previous Friday (excluded) to the date on which
the bonus is agreed by the board of executive directors of the Bank.
In the case of Mr. Sergio Rial, as explained above, he just received a
fixed pay for executive duties in Banco Santander, S.A. (head for
South America), and he is included as CEO of Santander Brasil in the
deferred variable compensation plan linked to multiannual objectives
and thus subject to the same conditions and principles of deferral,
multiannual objectives, deferrals and malus and clawback herein in
respect of the remuneration he receives in his role as CEO of this
subsidiary.
iii) Shares assigned by deferred variable remuneration plans
The following table shows the number of Santander shares assigned
to each executive director and pending delivery as of 1 January 2020,
31 December 2020 and 31 December 2021, as well as the gross
shares that were delivered to them in 2020 and 2021, either in the
form of an immediate payment or a deferred payment. In this case
after having been appraised by the board, at the proposal of the
remuneration committee, that the corresponding one-fifth of each
plan had accrued. They come from each of the plans through which
the variable remunerations of deferred conditional variable
remuneration plans in 2015 and of the deferred conditional and
linked to multi-year objectives in 2016, 2017, 2018, 2019, 2020 and
2021 were formalized.
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Share-based variable remuneration
2015 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
2016 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
2017 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
2018 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
2019 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
2020 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
Mr José Antonio Álvarez Álvarez
Mr Sergio Rial
2
2021 variable remuneration
Ms Ana Botín-Sanz de Sautuola y O’Shea
1
Mr José Antonio Álvarez Álvarez
Mr Sergio Rial
2
Maximum
number of
shares to be
delivered at
January 1,2020
Shares
delivered in
2020
(immediate
payment 2019
variable
remuneration)
Shares
delivered in
2020 (deferred
payment 2018
variable
remuneration)
Shares
delivered in
2020 (deferred
payment 2017
variable
remuneration)
Shares
delivered in
2020 (deferred
payment 2016
variable
remuneration)
Variable
remuneration
2020
(Maximum
number of
shares to be
delivered)
128,809
85,620
214,429
216,308
145,998
362,306
275,700
184,377
460,077
516,519
345,161
861,680
—
—
—
—
—
—
—
—
887,193
592,915
1,480,108
(354,877)
(237,166)
(592,043)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(103,304)
(69,032)
(172,336)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(72,102)
(48,667)
(120,769)
(68,925)
(46,094)
(115,019)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
310,615
168,715
355,263
834,593
—
—
—
1. For each director, 40% of the shares indicated correspond to the short-term variable (or immediate payment). The remaining 60% is deferred for delivery, where
appropriate, by fifths in the next five years, the last three being subject to the fulfilment of multiannual objectives.
2. Mr. Sergio Rial's share-based variable remuneration awarded in shares of Banco Santander (Brasil). He has the right to a maximum of 51,483 Santander shares and
269,148 options over Santander shares for his participation in the 2019 Digital Transformation Award.
In addition, Mr. Rodrigo Echenique maintains the right to a maximum of 518,517 shares arising from his participation in the corresponding plans during his term as
executive director.
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Maximum
number of
shares to be
delivered at
December 31,
2020
Instruments
matured but
not
consolidated
at January 1,
2021
Shares
delivered in
2021
(immediate
payment 2020
variable
remuneration)
Shares
delivered in
2021 (deferred
payment 2019
variable
remuneration)
Shares
delivered in
2021 (deferred
payment 2018
variable
remuneration)
Shares
delivered in
2021 (deferred
payment 2017
variable
remuneration)
Shares
delivered in
2021 (deferred
payment 2016
variable
remuneration)
Variable
remuneration
2021
(Maximum
number of
shares to be
delivered)
Maximum
number of
shares to be
delivered at
December 31,
2021
128,809
85,620
214,429
144,206
97,331
241,537
206,775
138,283
345,058
413,215
276,129
689,344
532,316
355,749
888,065
310,615
168,715
355,263
834,593
—
—
—
—
—
(34,177)
(23,067)
(57,244)
(112,692)
(75,364)
(188,057)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(124,246)
(67,486)
(142,105)
(333,837)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(103,304)
(69,032)
(172,336)
(106,463)
(71,150)
(177,613)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(72,102)
(48,667)
(120,769)
(68,925)
(46,094)
(115,019)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
128,809
85,620
214,429
37,927
25,597
63,524
25,158
16,825
41,983
309,911
207,097
517,008
425,853
284,599
710,452
186,369
101,229
213,158
500,756
1,480,622
1,480,622
999,259
625,000
999,259
625,000
3,104,881
3,104,881
In addition, the table below shows the cash delivered in 2021 and
2020, by way of either immediate payment or deferred payment, in
the latter case once the Board had determined, at the proposal of the
remuneration committee, that one-fifth relating to each plan had
accrued:
EUR thousand
Ms. Ana Botín-Sanz de Sautuola y O’Shea
Mr. José Antonio Álvarez Álvarez
Total
2021
2020
Cash paid (immediate
payment 2020 variable
remuneration)
334
181
515
Cash paid (deferred
payments from 2019,
2018, 2017 and 2016
variable remuneration)
1,550
1,037
2,586
Cash paid (immediate
payment 2019 variable
remuneration)
1,302
870
2,172
Cash paid (deferred
payments from 2018,
2017, 2016 and 2015
variable remuneration)
1,383
925
2,308
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iv) Information on former members of the Board of Directors
The chart below includes information on the maximum number of
shares to which former members of the Board of Directors who
ceased in office prior to 1 January 2020 are entitled for their
participation in the various deferred variable remuneration systems,
which instrumented a portion of their variable remuneration relating
to the years in which they were Executive Directors. Also set forth
below is information on the deliveries, whether in shares or in cash,
made in 2021 and 2020 to former board members, upon
achievement of the conditions for the receipt thereof (see note 46):
MAXIMUM NUMBER OF SHARES TO BE DELIVERED
Deferred conditional variable remuneration plan (2015)
Deferred conditional variable remuneration plan and linked to objectives (2016)
Deferred conditional variable remuneration plan and linked to objectives (2017)
Deferred conditional variable remuneration plan and linked to objectives (2018)
Deferred conditional variable remuneration plan and linked to objectives (2019)
NUMBER OF SHARES DELIVERED
Deferred conditional variable remuneration plan (2015)
Performance shares plan ILP (2015)
Deferred conditional variable remuneration plan and linked to objectives (2016)
Deferred conditional variable remuneration plan and linked to objectives (2017)
Deferred conditional variable remuneration plan and linked to objectives (2018)
Deferred conditional variable remuneration plan and linked to objectives (2019)
In addition, EUR 1,213 thousand and EUR 612 thousand relating to
the deferred portion payable in cash of the aforementioned plans
were paid each in 2021 and 2020.
2021
—
60,251
64,659
164,462
130,790
2021
92,557
—
60,254
32,330
54,821
32,698
2020
60,847
65,502
47,956
—
—
2020
60,847
—
32,751
35,132
—
—
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Appendix
f) Loans
Grupo Santander’s direct risk exposure to the bank’s directors and the
guarantees provided for them are detailed below. These transactions
were made on terms equivalent to those that prevail in arm’s-length
transactions or the related compensation in kind was recognized:
EUR thousand
2021
2020
Mrs Ana Botín-Sanz de Sautuola y O´Shea
Mr José Antonio Álvarez Álvarez
Mr Bruce Carnegie-Brown
Mr Javier Botín-Sanz de Sautuola y O´Shea
Mrs Sol Daurella Comadrán
Mrs Belén Romana García
Mr Ramiro Mato García-Ansorena
Mrs Homaira Akbari
Mr Álvaro Cardoso de Souza
Mr Henrique de Castro
Mrs Pamela Ann Walkden
Mr Luis Isasi Fernández de Bobadilla
Mr Sergio Agapito Lires Rial
Mr R. Martín Chávez Márquez
Mrs Gina Lorenza Díez Barroso
Loans and
credits Guarantees
—
—
—
—
—
—
—
—
25
4
—
16
69
—
—
—
—
—
—
—
1
—
—
115
—
—
—
—
—
—
—
—
Total
25
4
—
16
69
—
—
—
—
—
—
—
1
—
—
115
Loans and
credits Guarantees
—
—
—
—
—
—
—
—
14
5
—
2
22
—
—
—
—
—
—
—
—
—
6
49
—
—
—
—
—
—
—
—
Total
14
5
—
2
22
—
—
—
—
—
—
—
—
—
6
49
g) Senior managers
The table below includes the amounts relating to the short-term
remuneration of the members of senior management at 31
December 2021 and those at 31 December 2020, excluding the
remuneration of the executive directors, which is detailed above:
EUR thousand
Short-term salaries and deferred remuneration
Variable remuneration
(bonus) - Immediate
payment
Deferred variable
remuneration
Year
2021
2020
Number of
persons
15
18
Fixed
19,183
21,642
In cash
8,402
5,739
In shares2
8,402
5,740
In cash
3,648
2,470
In shares
3
3,648
2,471
Pensions
5,542
6,039
Other
1
remuneration
5,055
6,312
Total
53,880
50,413
1. Includes other remuneration items such as life and medical insurance premiums and localization aids.
2. The amount of immediate payment in shares for 2021 is 2,706,819 shares (2,135,700 Santander shares in 2020).
3. The deferred amount in shares not linked to long-term objectives for 2021 is 1,175,191 shares (919,308 Santander shares in 2020).
At the annual general meeting on 26 March 2021, shareholders
approved the 2021 Digital Transformation Incentive, a variable
remuneration scheme that delivers Santander shares and share
options if the group hits major milestones on its digital roadmap.
In 2021, no senior executives are included in this programme.
However, in 2020, three senior executives were included within this
plan (aimed at a group of up to 250 employees whose functions are
deemed essential to Santander Group’s growth and digital
transformation) and, thus, can receive a total of EUR 1,700 thousand
to be paid in thirds on the third, fourth and fifth anniversary of the
authorisation date (2024, 2025 and 2026). This amount was
implemented in 316,574 Santander shares and 944,445 options over
Santander shares, using for these purposes the fair value of the
options at the moment of their grant (EUR 0.90).
See note 46 to the 2021 Group's consolidated financial statements
for further information on the Digital Transformation Incentive.
In 2021, the ratio of variable to fixed pay components was 125% of
the total for senior managers, well within the maximum limit of
200% set by 2021 AGM.
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Notes to the consolidated
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Appendix
Also, the detail of the breakdown of the remuneration linked to long-
term objectives of the members of senior management at 31
December 2021 and 31 December 2020 is provided below. These
remuneration payments shall be received, as the case may be, in the
corresponding deferral periods, upon achievement of the conditions
stipulated for each payment (see note 46):
EUR thousand
Year
2021
2020
Number of
people
15
18
Variable remuneration
subject to long-term
objectives
1
Cash
payment
Share
payment
3,830
2,594
3,830
2,594
Total
7,660
5,188
1. Relates to the fair value of the maximum annual amounts for years 2025, 2026
and 2027 of the sixth cycle of the deferred conditional variable remuneration
plan (2024, 2025 and 2026 for the fifth cycle of the deferred variable
compensation plan linked to annual objectives for the year 2020).
Senior executive vice presidents who retired in 2021 and, therefore,
were not members of senior management at year-end, received in
2021 salaries and other remuneration amounting to EUR
5,294 thousand (EUR 5,984 thousand in 2020). Likewise, these same
individuals have generated as senior managers the right to obtain
variable remuneration linked to long-term objectives for a total
amount of EUR 55 thousand (this right has been generated in 2020
for a total amount of EUR 133 thousand).
The maximum number of Santander shares that the members of
senior management at each plan grant date (excluding executive
directors) were entitled to receive as of 31 December 2021 and 31
December 2020 relating to the deferred portion under the various
plans then in force is the following (see note 46):
Maximum number of shares to be delivered
Deferred conditional variable remuneration
plan (2015)
Deferred conditional variable remuneration
plan (2017)
Deferred conditional variable remuneration
plan (2018)
Deferred conditional variable remuneration
plan and linked to objectives (2016)
Deferred conditional variable remuneration
plan and linked to objectives (2017)
Deferred conditional variable remuneration
plan and linked to objectives (2018)
Deferred conditional variable remuneration
plan and linked to objectives (2019)
Deferred conditional variable remuneration
plan and linked to objectives (2020)
2021
2020
—
—
179,617
2,786
3,475
6,949
150,445
417,818
164,428
791,360
803,056 1,512,992
1,274,450 2,154,312
1,829,720
—
Since the conditions established in the corresponding deferred share-
based remuneration schemes for prior years had been met, the
following number of Santander shares was delivered in 2021 and
2020 to the senior management, in addition to the payment of the
related cash amounts:
Number of shares delivered
Deferred conditional variable remuneration plan
(2015)
Deferred conditional variable remuneration plan
(2017)
Deferred conditional variable remuneration plan
(2018)
Deferred conditional variable remuneration plan
and linked to objectives (2016)
Deferred conditional variable remuneration plan
and linked to objectives (2017)
Deferred conditional variable remuneration plan
and linked to objectives (2018)
2021
2020
146,930 179,614
2,786
2,786
3,474
3,474
131,938 170,185
79,104 219,363
267,686 342,884
Deferred conditional variable remuneration plan
and linked to objectives (2019)
321,006
Deferred conditional variable remuneration plan
and linked to objectives (2020)
1,742,419
—
—
As indicated in note 5.c above, senior management participate in the
benefit system created in 2012, which covers the contingencies of
retirement, disability and death. Banco Santander makes annual
contributions to the benefit plans of its senior managers. In 2012, the
contracts of the senior managers with benefit pension commitments
were amended to transform them into a contribution system. The
system, which is outsourced to Santander Seguros y Reaseguros,
Compañía Aseguradora, S.A., gives senior managers the right to
receive benefits upon retirement, regardless of whether or not they
are active at Banco Santander at such time, based on contributions to
the system. This new system replaced their previous right to receive
a pension supplement in the event of retirement. In the event of pre-
retirement, and up to the retirement date, senior managers
appointed prior to September 2015 are entitled to receive an annual
allowance.
In addition, further to applicable remuneration regulations, from
2016 (inclusive), a discretionary pension benefit component of at
least 15% of total remuneration in contributions to the pension
system has been included. Under the regime corresponding to these
discretionary benefits, the contributions that are calculated on
variable remunerations are subject to malus and clawback clauses,
subject to policies applicable at each time, and during the same
period in which the variable remuneration is deferred.
Likewise, the annual contributions calculated on variable
remunerations must be invested in Bank shares for a period of five
years from the date that the senior manager leaves the Group,
regardless of whether or not they leave to retire. Once that period
has elapsed, the amount invested in shares will be reinvested, along
with the remainder of the cumulative balance corresponding to the
senior manager, or it will be paid to the senior manager or to their
beneficiaries in the event of a contingency covered by the benefits
system.
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Appendix
The contracts of some senior executives were modified at the
beginning of 2018 with the same objective and changes indicated in
section c of this note for Ms Ana Botín and Mr José Antonio Álvarez.
The modifications, which are aimed at aligning the annual
contributions with the practices of comparable institutions and
reducing the risk of future obligations by eliminating the
supplementary scheme for death (widowhood and orphanhood) and
permanent disability in service without increasing the costs to the
bank, are as follows:
• Contributions to the pensionable bases were reduced. Gross
annual salaries were increased in the corresponding amount.
• The death and disability supplementary benefits were eliminated
since January 1, 2018. A fixed remuneration supplement reflected
in other remuneration in the table above was implemented on the
same date.
• The amounts insured for life and accident insurance were
increased.
All of the above was done without an increase in total cost for the
Bank.
The balance as of 31 December 2021 in the pension system for those
who were part of senior management during the year amounted to
EUR 64.3 million (EUR 59.4 million at 31 December 2020).
The net charge to income corresponding to pension and
supplementary benefits for widows, orphans and permanent
invalidity amounted to EUR 5.5 million in 2021 (EUR 6.4 million in 31
December 2020).
In 2021 and 2020 there have been no payments in the form of a
single payment of the annual voluntary pre-retirement allowance.
Additionally, the capital insured by life and accident insurance at 31
December 2020 of this group amounts to EUR 100 million (EUR
135.1 million at 31 December 2020).
h) Post-employment benefits to former Directors and
former senior executive vice presidents
The post-employment benefits and settlements paid in 2021 to
former directors of the Bank, other than those detailed in note 5.c
amounted to EUR 5.6 million and EUR 11.2 million in 2020,
respectively. Also, the post-employment benefits and settlements
paid in 2021 to former executive vice presidents amounted to EUR
51.6 million and EUR 10.26 million in 2020, respectively.
Contributions to insurance policies that hedge pensions and
complementary widowhood, orphanhood and permanent disability
benefits to previous members of the Bank’s board of directors,
amounted to EUR 0.17 million in 2021 (EUR 0.17 million in 2020).
Likewise, contributions to insurance policies that hedge pensions and
complementary widowhood, orphanhood and permanent disability
benefits for previous senior managers amounted to EUR 4.4 million
in 2021 (EUR 5.8 million in 2020).
During the 2021 financial year, no release or charge was recorded in
the consolidated income statement for pension commitments and
similar obligations held by the Group with previous former members
of the bank's board of directors (in 2020, five million releases were
recorded), and no provisions/releases has been recorded in respect of
former senior managers in 2021 and 2020.
In addition, 'Provisions - Pension Fund and similar obligations' in the
consolidated balance sheet as at 31 December 2021 included EUR
50 million in respect of the post-employment benefit obligations to
former Directors of the Bank (EUR 52 million at 31 December 2020)
and EUR 114 million corresponding to former senior managers (EUR
159 million at 31 December 2020).
i) Pre-retirement and retirement
The board of directors approved an amendment to the contracts of
the executive directors whereby:
• Ms Ana Botín ceases to have the right to pre-retire if she leaves the
Bank out of her own volition, keeping this right in case of
termination by the Bank until 1 September 2022. After this date,
she does not have the right to pre-retire. While she keeps this right
she will be entitled to an annual allotment equal to the sum of her
fixed remuneration and 30% of the average amount of her last
variable remuneration, to a maximum of three. This allotment is
subject to the malus and clawback provisions in place for a period
of five years.
• Mr. José Antonio Álvarez ceases to have the right to pre-retire in
case of termination of his contract.
j) Contract termination
The executive directors and senior managers have indefinite-term
employment contracts. Executive directors or senior managers
whose contracts are terminated voluntarily or due to breach of duties
are not entitled to receive any economic compensation. If Banco
Santander terminates the contract for any other reason, they will be
entitled to the corresponding legally-stipulated termination benefit,
without prejudice to any compensation that may for non-
competition obligations, as detailed in the directors' remuneration
policy.
If Banco Santander were to terminate her contract, Ms. Ana Botín-
Sanz de Sautuola y O'Shea would have to remain at Banco
Santander’s disposal for a period of 4 months in order to ensure an
adequate transition, and would receive her fixed salary during that
period.
k) Information on investments held by the directors in
other companies and conflicts of interest
None of the members of the board of directors have declared that
they or persons related to them may have a direct or indirect conflict
of interest with the interests of Banco Santander, S.A., as set forth in
Article 229 of the Corporate Enterprises Act.
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Notes to the consolidated
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Appendix
6. Loans and advances to central banks and credit
institutions
The detail, by classification, type and currency, of Loans and advances
to central banks and credit institutions in the consolidated balance
sheets is as follows:
EUR million
CENTRAL BANKS
Classification
Financial assets held for trading
Non-trading financial assets mandatorily at
fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets designated at fair value
through other comprehensive income
Financial assets at amortised cost
Type
Time deposits
Reverse repurchase agreements
Impaired assets
Valuation adjustments for impairment
CREDIT INSTITUTIONS
Classification
Financial assets held for trading
Non-trading financial assets mandatorily at
fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets designated at fair value
through other comprehensive income
Financial assets at amortised cost
Type
Time deposits
Reverse repurchase agreements
Non- loans advances
Impaired assets
Valuation adjustments for impairment
CURRENCY
Euro
Pound sterling
US dollar
Brazilian real
Other currencies
TOTAL
2021
2020
2019
3,608
—
—
—
15,657
19,265
13,275
5,990
—
—
19,265
10,397
—
3,152
—
39,169
52,718
10,684
18,853
23,188
1
(8)
52,718
24,286
3,228
12,639
24,011
7,819
71,983
—
—
9,481
—
12,499
21,980
11,757
10,223
—
—
21,980
3
—
—
—
6,473
—
18,474
24,947
17,533
7,414
—
—
24,947
—
—
12,136
21,649
—
37,838
49,977
7,338
20,862
21,784
1
(8)
49,977
22,260
4,127
13,209
26,437
5,924
71,957
—
40,943
62,592
9,699
31,180
21,726
1
(14)
62,592
32,248
3,659
14,442
30,919
6,271
87,539
The loans and advances to credit institutions classified under
'Financial assets at amortised' cost are mainly time accounts and
deposits.
Note 50 contains a detail of the residual maturity periods of 'Financial
assets at amortised cost'.
At 31 December 2021 the exposure by impairment stage of the
assets accounted for amounts to EUR 54,833, EUR 0 and EUR 1
million (EUR 50,344, EUR 0 and EUR 1 million in 2020 and EUR
59,430, EUR 0 and EUR 1 million in 2019), and the loan loss provision
by impairment stage amounts to EUR 8, EUR 0 and EUR 0 million
(EUR 8, EUR 0 and EUR 0 million in 2020 and EUR 14, EUR 0 and EUR
0 million in 2019) in stage 1, stage 2 and stage 3, respectively.
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Notes to the consolidated
financial statements
Appendix
7. Debt instruments
a) Detail
The detail, by classification, type and currency, of Debt instruments in
the consolidated balance sheets is as follows:
EUR million
Classification
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets designated at fair value through other comprehensive income
Financial assets at amortised cost
Type
Spanish government debt securities
Foreign government debt securities
Issued by financial institutions
Other fixed-income securities
Impaired financial assets
Impairment losses
Currency
Euro
Pound sterling
US dollar
Brazilian real
Other currencies
Debt securities excluding impairment adjustments
Impairment losses
In the last quarter of 2019, debt securities were transferred from the
'Financial asset at amortised cost' to the 'Financial asset at fair value
through other comprehensive income'. The fair value of these assets
at the date of the transfer being EUR 6,359 million.
As established in IFRS 9, the aforementioned transfer was made
prospectively, recognising the difference between the previous
amortised cost of the transferred financial assets and their fair value
in 'Other comprehensive income'. In application of this standard, the
effective interest rate and the measurement of expected credit losses
were not adjusted as a result of the reclassification.
The context of adapting the Group´s commercial strategy to the
changes in business models, in order to favour a greater alignment of
the sensitivity of the Bank's balance sheet masses to interest rates,
has led to a change in the assets related to these liabilities from a
business model whose objective is to collect the principal and
interest flows to a business model whose objective is achieved
through the collection of the principal and interest flows and the sale
of these assets.
At 31 December 2021, 2020 and 2019 the exposure by impairment
stage of the book assets under IFRS 9 amounted to EUR 133,437
million, EUR 134,792 million and EUR 147,575 million in stage 1; EUR
128 million, EUR 72 million and EUR 446 million in stage 2, and EUR
280 million, EUR 401 million and EUR 647 million in stage 3,
respectively.
2021
2020
2019
26,750
957
2,516
97,922
35,708
163,853
20,638
102,976
12,324
27,850
280
(215)
37,894
700
2,979
108,903
26,078
176,554
30,397
110,570
10,133
25,337
401
(284)
32,041
1,175
3,186
118,405
29,789
184,596
42,054
107,434
9,670
25,265
647
(474)
163,853
176,554
184,596
45,197
6,304
34,229
35,907
42,431
164,068
(215)
163,853
58,850
7,372
29,009
35,139
46,468
70,357
15,713
29,846
38,316
30,838
176,838
185,070
(284)
(474)
176,554
184,596
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Appendix
b) Breakdown
The breakdown, by origin of the issuer, of debt instruments at 31
December 2021, 2020 and 2019, net of impairment losses, is as
follows:
EUR million
Spain
United Kingdom
Portugal
Italy
Ireland
Poland
Other European
countries
United States
Brazil
Mexico
Chile
Other American
countries
Rest of the world
2021
2020
2019
Private
fixed-
income
Public
fixed-
income
Total
%
Private
fixed-
income
Public
fixed-
income
Total
%
Private
fixed-
income
Public
fixed-
income
Total
%
3,773
20,638
24,411 14.90%
1,588
30,397
31,985 18.12%
3,634
42,054
45,688 24.75%
3,334
3,008
1,215
4,759
2,097
3,845
1,531
5,431 3.31%
6,853 4.18%
2,746 1.68%
52
4,811 2.94%
3,099
3,095
1,047
2,924
2,795
6,462
4,688
5,894
3.34%
3,806
11,479
15,285
8.28%
9,557
5.41%
5,735
3.25%
2
2,926
1.66%
2,979
1,384
2,387
7,563
10,542
5.71%
3,620
5,004
2.71%
2
2,389
1.29%
2,848
12,727
15,575 9.51%
3,126
11,400
14,526
8.23%
460
9,361
9,821
5.32%
8,922
3,422
12,344 7.53%
8,211
2,891
11,102
6.29%
7,186
1,784
8,970
4.86%
5,634
21,465
27,099 16.54%
6,386
14,645
21,031 11.91%
5,915
15,609
21,524 11.66%
5,446
29,251
34,697 21.18%
5,179
33,316
38,495 21.80%
5,808
35,036
40,844 22.13%
517
14,572
15,089 9.21%
435
19,053
19,488 11.04%
708
13,234
13,942
7.55%
51
9,467
9,518 5.81%
41
8,082
8,123
4.60%
50
4,819
4,869
2.64%
655
77
2,128
2,419
2,783 1.70%
2,496 1.52%
274
182
3,098
4,138
3,372
1.91%
4,320
2.44%
605
186
1,095
3,832
1,700
0.92%
4,018
2.18%
40,239 123,614
163,853
100%
35,587 140,967 176,554
100%
35,108 149,488 184,596
100%
The detail, by issuer rating, of Debt instruments at 31 December
2021, 2020 and 2019 is as follows:
EUR million
AAA
AA
A
BBB
Below BBB
Unrated
2021
Private
fixed-
income
Public
fixed-
income
Total
%
2020
Private
fixed-
income
Public
fixed-
income
Total
%
2019
Private
fixed-
income
Public
fixed-
income
Total
%
15,956
1,773
17,729
10.82%
14,088
2,099
16,187 9.17%
14,737
1,085
15,822 8.57%
2,005
26,355
28,360
17.31%
1,714
18,784
20,498 11.61%
5,133
28,325
33,458 18.13%
8,594
44,359
52,953
32.32%
6,228
53,655
59,883 33.92%
3,238
59,744
62,982 34.12%
5,234
20,304
25,538
15.59%
6,515
31,204
37,719 21.36%
4,889
24,766
29,655 16.06%
3,584
30,823
34,407
21.00%
3,431
35,164
38,595 21.86%
1,244
35,466
36,710 19.89%
4,866
—
4,866
2.97%
3,611
61
3,672 2.08%
5,867
102
5,969 3.23%
40,239 123,614 163,853
100%
35,587 140,967 176,554
100%
35,108 149,488 184,596
100%
During 2021, 2020 and 2019, the distribution of the exposure by
rating level of the previous table has not been affected by ratings
reviews of the sovereign issuers.
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Notes to the consolidated
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Appendix
The detail, by type of financial instrument, of private fixed-income
securities at 31 December 2021, 2020 and 2019, net of impairment
losses, is as follows:
EUR million
Securitised mortgage bonds
Other asset-backed bonds
Floating rate debt
Fixed rate debt
Total
2021
2020
2019
5,806
6,304
8,081
5,926
5,479
7,829
5,494
6,388
10,348
20,048
16,353
12,878
40,239
35,587
35,108
c) Impairment losses
The changes in the impairment losses on debt instruments are
summarised below:
EUR million
Balance at beginning of year
Net impairment losses for the year*
Of which:
Impairment losses charged to
income
Impairment losses reversed with a
credit to income
2021
2020
284
28
474
79
2019
635
(170)
8. Equity instruments
a) Breakdown
The detail, by classification and type, of Equity instruments in the
consolidated balance sheets is as follows:
EUR million
Classification
Financial assets held for trading
Non-trading financial assets
mandatorily at fair value through
profit or loss
Financial assets designated at fair
value through other comprehensive
income
Type
Shares of Spanish companies
Shares of foreign companies
Shares of investment funds
2021
2020
2019
15,077
9,615
12,437
4,042
3,234
3,350
2,453
2,783
2,863
21,572
15,632
18,650
3,896
3,364
3,711
15,184
10,437
12,682
2,492
1,831
2,257
21,572
15,632
18,650
49
91
77
(21)
(12)
(247)
Note 29 contains a detail of the 'Other comprehensive income',
recognised in equity, on 'Financial assets designated at fair value
through other comprehensive income'.
Exchange differences and other items
Balance at end of year
(97)
215
(269)
284
9
474
b) Changes
The changes in 'Financial assets at fair value through other
comprehensive income' were as follows:
Of which:
By geographical location of risk:
European Union
Latin America
25
190
21
263
14
460
EUR million
* Of the EUR 28 million corresponding to net provisions for the year ended 31
December 2021 (EUR 79 million and EUR -170 million at 31 December 2020 and
2019, respectively), EUR 31 million relates to financial assets at amortized cost
(EUR 77 million and EUR -176 million at 31 December 2020 and 2019,
respectively) and EUR -3 million relates to financial assets designated at fair
value through other comprehensive income (EUR 2 million and EUR 6 million at
31 December 2020 and 2019, respectively).
At 31 December 2021, 2020 and 2019 the loan loss provision by
impairment stage of the assets accounted for under IFRS9 amounted
to EUR 26 million, EUR 25 million and EUR 22 million in stage 1, EUR
8 million, EUR 2 million and EUR 6 million in stage 2, and EUR 181
million, EUR 257 million and EUR 446 million in stage 3, respectively.
Balance at beginning of the year
Net additions (disposals)
Changes in the fair value of equity
instruments measured at fair value
through other comprehensive
income (EIGR)*
Changes in the RV hedged with
micro-hedging transactions
Balance at end of year
2021
2,783
(276)
2020
2,863
833
2019
2,671
177
(171)
(917)
(29)
117
4
44
2,453
2,783
2,863
* They do not include fair value movements for currency risk hedged with
hedging instruments.
c) Notifications of acquisitions of investments
The notifications of the acquisitions and disposals of holdings in
investees made by the Bank in 2021, in compliance with Article 155
of the Spanish Limited Liability Companies Law and Article 125 of
Spanish Securities Market Law 24/1998, are listed in appendix IV.
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financial statements
Notes to the consolidated
financial statements
Appendix
9. Trading Derivatives (assets and liabilities) and short
positions
a) Trading Derivatives
The detail, by type of inherent risk, of the fair value of the trading
derivatives arranged by the Group is as follows (see note 11):
10. Loans and advances to customers
a) Detail
The detail, by classification, of Loans and advances to customers in
the consolidated balance sheets is as follows:
EUR million
Interest
rate risk
Currency
risk
Price risk
Other
risks
2021
2020
2019
Debit
Credit
balance balance balance balance balance balance
Credit
Credit
Debit
Debit
31,884 30,192 43,832 41,085 42,614 40,956
19,823 21,894 21,162 22,028 18,085 19,870
1,498
891
1,931
944
2,329
1,772
EUR million
Financial assets held for trading
Non-trading financial assets
mandatorily at fair value through
profit or loss
Financial assets designated at fair
value through profit or loss
Financial assets at fair value through
other comprehensive income
Financial assets at amortized cost
1,087
589
212
412
369
418
54,292 53,566 67,137 64,469 63,397 63,016
Of which:
Impairment losses
2021
6,829
2020
296
2019
355
537
552
386
10,289
24,121
30,761
7,663
9,267
4,440
947,364 881,963 906,276
(22,964)
(23,595)
(22,242)
972,682 916,199 942,218
b) Short positions
Following is a breakdown of the short positions (liabilities):
Loans and advances to customers
disregarding impairment losses
995,646 939,794 964,460
EUR million
Borrowed securities
Debt instruments
Of which:
Banco Santander México, S.A.,
Institución de Banca Múltiple,
Grupo Financiero Santander
México
Equity instruments
Of which:
2021
2020
2019
Note 50 contains a detail of the residual maturity periods of 'Financial
assets.
825
625
390
Note 53 shows the Group’s total exposure, by geographical origin of
the issuer.
There are no loans and advances to customers for material amounts
without fixed maturity dates.
825
389
625
289
390
393
Banco Santander, S.A.
318
289
308
Short sales
Debt instruments
Of which:
Banco Santander, S.A.
Banco Santander (Brasil) S.A.
11,022
15,784
13,340
8,926
1,952
8,645
7,085
7,980
5,194
12,236
16,698
14,123
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
b) Breakdown
Following is a breakdown of the loans and advances granted to the
Group's customers, which reflect the Group's exposure to credit risk
in its main activity, without considering the balance of value
adjustments for impairment, taking into account the type and
situation of the transactions, the geographical area of their residence
and the type of interest rate on the transactions:
EUR million
Loan type and status
Commercial credit
Secured loans
Reverse repurchase agreements
Other term loans
Finance leases
Receivable on demand
Credit cards receivables
Impaired assets
Geographical area
Spain
European Union (excluding Spain)*
United States and Puerto Rico
Other OECD countries*
South America (non - OECD)
Rest of the world
Interest rate formula
Fixed rate
Floating rate
2021
2020
2019
49,603
37,459
37,753
542,404 503,014 513,929
33,264
35,702
45,703
269,526 269,143 267,154
38,503
36,251
35,788
10,304
7,903
7,714
20,397
19,507
23,876
31,645
30,815
32,543
995,646 939,794 964,460
216,741 215,330 204,810
190,032 192,988 460,338
102,491
93,405 100,152
374,729 338,362
86,327
94,010
79,629
92,145
17,643
20,080
20,688
995,646 939,794 964,460
593,645 550,883 546,619
402,001 388,911 417,841
995,646 939,794 964,460
* The amounts referring to the years 2021 and 2020 for the United Kingdom
have been considered in the line Other OECD countries, instead of in the
line European Union (excluding Spain) due to the leaving of the United
Kingdom from the European Union.
At 31 December 2021, 2020 and 2019 the Group had granted loans
amounting to EUR 14,131, 12,104 and 9,993 million to Spanish
public sector agencies which had a rating at 31 December 2021 of A
(ratings of A at 31 December 2020 and 31 December 2019), and EUR
10,263, 10,779, and 12,218 million to the public sector in other
countries (at 31 December 2021, the breakdown of this amount by
issuer rating was as follows: 1.2% AAA, 13.4% AA, 5.2% A, 69.9%
BBB, 9.7% below BBB and 0.5% without rating).
Without considering the public administrations, the amount of the
loans and advances at 31 December 2021, 2020 and 2019 amounts
to EUR 971,252 million, EUR 916,911 million and EUR
942,249 million, of which, EUR 939,645 million, EUR 886,118 million
and EUR 909,741 million are classified as performing, respectively.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Following is a detail, by activity, of the loans to customers at 31
December 2021, net of impairment losses:
EUR million
Secured loans
Net exposure
Without
collateral
Total
Of which Of which
other
property
collateral
collateral
Less than
or equal
to 40%
More
than
Loan-to-value ratio***
More
than
More
than
40% and 60% and 80% and
less than
less than
less than
or equal
or equal
or equal
to 100%
to 80%
to 60%
Public sector
22,152
21,359
180
613
68
81
26
608
More
than
100%
10
Other financial institutions (financial
business activity)
Non-financial corporations and individual
entrepreneurs (non-financial business
activity) (broken down by purpose)
Of which:
70,348
27,770
2,612
39,966
2,532
1,868
1,585
35,871
722
323,475
182,711
60,112
80,652
24,034
21,064
18,461
57,321
19,884
Construction and property development
Civil engineering construction
Large companies
SMEs and individual entrepreneurs
18,936
3,061
2,349
1,818
174,191
116,018
127,287
62,526
9,778
219
19,655
30,460
6,809
1,024
38,518
34,301
5,357
4,821
1,695
3,555
1,159
108
149
167
688
7,789
5,111
5,365
31,122
10,780
10,983
11,234
21,956
131
8,786
9,808
Households – other (broken down by
purpose)
540,339
96,351
360,447
83,541
98,463 117,198 138,456
55,419
34,452
Of which:
Residential
Consumer loans
Other purposes
Total*
Memorandum item
Refinanced and restructured transactions**
353,623
2,257
350,651
715
91,428 110,574 121,400
24,007
3,957
167,760
91,829
18,956
2,265
1,403
8,393
74,528
8,298
2,927
4,108
3,938
2,686
13,083
26,721
29,262
3,973
4,691
1,233
956,314
328,191
423,351
204,772
125,097 140,211 158,528 149,219
55,068
27,781
11,975
11,222
4,584
3,856
2,237
4,678
2,442
2,593
In addition, the Group has granted advances to customers amounting to EUR 16,368 million, bringing the total of loans and advances to EUR 972,682 million.
Includes the net balance of the impairment of the accumulated value or accumulated losses in the fair value due to credit risk.
*
**
*** The ratio is the carrying amount of the transactions at 31 December 2021 provided by the latest available appraisal value of the collateral.
Note 53 contains information relating to the forborne loan portfolio.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
2019
EUR million
Balance at the beginning of
year
Movements
Transfers
To stage 2 from stage 1
To stage 3 from stage 1
To stage 3 from stage 2
To stage 1 from stage 2
To stage 2 from stage 3
To stage 1 from stage 3
Net changes on financial
assets
Write-offs
Exchange differences and
others
Balance at the end of the
year
Stage 1 Stage 2 Stage 3
Total
795,829
52,183
33,461 881,473
(28,369) 28,369
(4,101)
4,101
(13,240) 13,240
12,436
(12,436)
2,439
(2,439)
488
(488)
—
—
—
—
—
—
61,581
(8,092)
(3,608)
49,881
—
—
(12,593)
(12,593)
12,075
1,253
163
13,491
849,939
50,476
31,837 932,252
In addition, at 31 December 2021, the Group had EUR 420 million
(EUR 497 million at 31 December 2020 and EUR 706 million at 31
December 2019) of exposure in assets purchased with impairment of
which EUR 358 million still show signs of impairment, which
correspond mainly to the business combinations carried out by the
Group.
Following is the movement of the gross exposure broken down by
impairment stage of loans and advances to customers recognised
under "Financial assets at amortised cost" and “Financial assets at fair
value through other comprehensive income” during 2021, 2020 and
2019:
2021
EUR million
Balance at the beginning of
year
Movements
Transfers
To stage 2 from stage 1
To stage 3 from stage 1
To stage 3 from stage 2
To stage 1 from stage 2
To stage 2 from stage 3
To stage 1 from stage 3
Net changes on financial
assets
Write-offs
Exchange differences and
others
Balance at the end of the
year
2020
EUR million
Balance at the beginning of
year
Movements
Transfers
To stage 2 from stage 1
To stage 3 from stage 1
To stage 3 from stage 2
To stage 1 from stage 2
To stage 2 from stage 3
To stage 1 from stage 3
Net changes on financial
assets
Write-offs
Exchange differences and
others
Balance at the end of the
year
Stage 1 Stage 2 Stage 3
Total
817,906
66,104
30,318 914,328
(33,051) 33,051
(6,617)
6,617
(5,836)
5,836
17,796
(17,796)
1,865
(1,865)
271
(271)
—
—
—
—
—
—
62,629
(11,629)
(719) 50,281
—
—
(9,089)
(9,089)
19,766
1,825
460
22,051
878,700
67,584
31,287 977,571
Stage 1 Stage 2 Stage 3
Total
849,939
50,476
31,837 932,252
(43,170) 43,170
(5,120)
5,120
(8,734)
8,734
13,459
(13,459)
1,831
(1,831)
578
(578)
—
—
—
—
—
—
53,555
(2,951)
(659)
49,945
—
—
(8,930)
(8,930)
(51,335)
(4,229)
(3,375)
(58,939)
817,906
66,104
30,318 914,328
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
c) Impairment losses on loans and advances to customers
at amortised cost and at fair value through other
comprehensive income
The changes in the impairment losses on the assets making up the
balances of financial assets at amortised cost and at fair value
through other comprehensive income - Loans and advances -
Customers:
EUR million
Amount at beginning of the year
Impairment losses charged to income
for the year
Of which:
Impairment losses charged to profit
or loss
Impairment losses reversed with a
credit to profit or loss
Change of perimeter
Write-off of impaired balances against
recorded impairment allowance
Exchange differences and other
changes
Amount at end of the year
Which correspond to:
Impaired assets
Other assets
Of which:
Individually calculated
Collective calculated
2021
2020
2019
23,595
22,242
23,307
8,762
13,385
11,108
18,240
20,909
19,192
(9,478)
(7,524)
(8,084)
—
(82)
—
(9,089)
(8,930)
(12,593)
(304)
(3,020)
420
22,964
23,595
22,242
13,550
13,658
13,933
9,414
9,937
8,309
2,496
2,679
3,555
20,468
20,916
18,687
In addition, provisions for debt securities amounting to EUR 28
million were recorded at 31 December 2021 (provisions amounting
to EUR 79 million and releases amounting EUR 170 million as of 31
December 2020 and 2019, respectively), written-off assets
recoveries have been recorded in the year amounting to EUR 1,383
million at 31 December 2021 (EUR 1,221 million and EUR 1,586
million at 31 December 2020 and 2019, respectively) and EUR 0
million were recorded in the account for losses on renegotiation or
contractual modification at 31 December 2021 (EUR 139 million and
EUR 0 million at 31 December 2020 and 2019, respectively). With
this, the impairment recorded in Impairment or reversal of
impairment at financial assets not measured at fair value through
profit or loss and net gains and losses from changes: 'Financial assets
at fair value through other comprehensive income' and 'Financial
assets at amortised cost'; amounts EUR 7,407 million at 31
December 2021 (EUR 12,382 million and EUR 9,352 million at 31
December 2020 and 2019, respectively).
Following is the movement of the loan loss provision broken down by
impairment stage of loans and advances to customers during 2021,
2020 and 2019:
2021
EUR million
Loss allowance at the
beginning of the year
Transfers
To stage 2 from stage 1
To stage 3 from stage 1
To stage 3 from stage 2
To stage 1 from stage 2
To stage 2 from stage 3
To stage 1 from stage 3
Net changes of the
exposure and modifications
in the credit risk
Write-offs
FX and other movements
Loss allowance at the end
of the year
2020
EUR million
Stage 1 Stage 2 Stage 3
Total
4,265
5,672
13,658
23,595
2,968
(578)
(237)
2,209
(1,086)
2,474
254
(1,025)
216
8
(760)
(67)
2,390
1,972
1,388
(771)
(544)
(59)
617
(1,557)
5,326
4,386
—
(141)
—
38
(9,089)
(9,089)
(201)
(304)
4,188
5,226
13,550
22,964
Loss allowance at the
beginning of the year
Transfers
To stage 2 from stage 1
To stage 3 from stage 1
To stage 3 from stage 2
To stage 1 from stage 2
To stage 2 from stage 3
To stage 1 from stage 3
Net changes of the exposure
and modifications in the
credit risk
Write-offs
FX and other movements
Loss allowance at the end of
the year
Stage 1 Stage 2 Stage 3
Total
3,835
4,474
13,933
22,242
(1,040)
2,880
(255)
294
53
(971)
(976)
303
1,840
2,131
1,095
(682)
(424)
(85)
2,386
2,066
(727)
(138)
1,966
535
7,009
9,510
—
—
(8,930)
(8,930)
(588)
(573)
(1,941)
(3,102)
4,265
5,672
13,658
23,595
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Stage 1 Stage 2 Stage 3
Total
Set forth below for each class of impaired asset are the gross
amount, associated allowances and information relating to the
collateral and/or other credit enhancements obtained at 31
December 2021:
3,658
4,743
14,906
23,307
EUR million
2019
EUR million
Loss allowance at the
beginning of the year
Transfers
To stage 2 from stage 1
To stage 3 from stage 1
To stage 3 from stage 2
To stage 1 from stage 2
To stage 2 from stage 3
To stage 1 from stage 3
Net changes of the exposure
and modifications in the
credit risk
Write-offs
FX and other movements
Loss allowance at the end of
the year
3,235
(964)
(214)
1,296
(3,065)
5,612
301
(1,048)
381
29
(817)
(123)
2,271
1,082
2,547
(747)
(436)
(94)
1,119
(182)
5,548
6,485
—
(94)
—
(12,593)
(12,593)
410
104
420
3,835
4,474
13,933
22,242
d) Impaired assets and assets with unpaid past-due
amounts
The detail of the changes in the balance of the financial assets
classified as 'Financial assets Loans to customers' considered to be
impaired due to credit risk is as follows:
EUR million
Balance at beginning of year
Net additions
Written-off assets
Changes in the scope of
consolidation
Exchange differences and other
Balance at end of year
2021
2020
2019
30,815
32,543
34,218
9,390
10,577
10,755
(9,089)
(8,930)
(12,593)
—
(39)
—
529
(3,336)
163
31,645
30,815
32,543
This amount, after deducting the related allowances, represents the
Group’s best estimate of the discounted value of the flows that are
expected to be recovered from the impaired assets.
At 31 December 2021, the Group’s written-off assets totalled EUR
40,585 million (EUR 39,087 million and EUR 46,209 million at 31
December 2020 and 2019, respectively).
Without associated real
collateral
With real estate collateral
With other collateral
Total
Gross
amount
Allowance
recognised
Estimated
collateral
value*
13,327
12,907
5,411
31,645
7,416
3,540
2,594
—
9,054
2,317
13,550
11,371
* Including the estimated value of the collateral associated with each loan.
Accordingly, any other cash flows that may be obtained, such as those arising
from borrowers’ personal guarantees, are not included.
When classifying assets in the previous table, the main factors
considered by the Group to determine whether an asset has become
impaired are the existence of amounts past due —assets impaired
due to arrears— or other circumstances may be arise which will not
result in all contractual cash flow being recovered, such as a
deterioration of the borrower’s financial situation, the worsening of
its capacity to generate funds or difficulties experienced by it in
accessing credit.
e) Transferred credits
'Loans and advances to customers' includes, inter alia, the securitised
loans transferred to third parties on which the Group has retained the
risks and rewards, albeit partially, and which therefore, in accordance
with the applicable accounting standards, cannot be derecognised.
This is mainly due to mortgage loans, loans to companies and
consumer loans in which the group retains subordinate financing
and/or grants some kind of credit enhancement to new holders.
Securitisation is used as a tool for the management of regulatory
capital and as a means of diversifying the Group's liquidity sources.
The breakdown of securitized loans held on the balance sheet,
according to the nature of the financial instrument in which they are
originated, is shown below:
EUR million
Retained on the balance sheet
80,600
88,662
93,553
2021
2020
2019
Of which
Securitised mortgage assets
19,523
30,145
31,868
Of which: UK assets
Other securitised assets
Total*
5,295
9,034
13,002
61,077
58,517
61,685
80,600
88,662
93,553
* Note 22 details the liabilities associated with these securitisation transactions.
At 31 December 2021, Grupo Santander had loans that had been
fully derecognised and for which it retained servicing amounting to
EUR 14,141 million (EUR 13,999 million and EUR 16,786 million at
31 December 2020 and 2019, respectively).
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
11. Trading derivatives
The detail of the notional amounts and the market values of the
trading derivatives held by the Group in 2021, 2020 and 2019 is as
follows:
EUR million
Trading derivatives
Interest rate risk
Forward rate agreements
Interest rate swaps
Options, futures and other derivatives
Credit risk
Credit default swaps
Foreign currency risk
2021
2020
2019
Notional
amount
Market
value
Notional
amount
Market
value
Notional
amount
Market
value
147,603
3,920,945
508,723
(11)
515,889
—
218,252
1,931
3,789,169
3,638
4,322,199
(228)
698,500
(891)
794,140
(8)
2,573
(907)
13,571
436
12,378
(133)
23,701
(71)
Foreign currency purchases and sales
Foreign currency options
Currency swaps
Securities and commodities derivatives and other
Total
329,781
49,680
430,644
69,850
5,470,797
(664)
(114)
(1,293)
669
726
304,280
45,074
394,178
70,861
(45)
(7)
(814)
920
325,720
44,763
379,176
61,966
5,830,329
2,668
6,169,917
(441)
(182)
(1,162)
579
381
12. Non-current assets
The detail of Non-current assets held for sale in the consolidated
balance sheets is as follows:
EUR million
Tangible assets
Of which:
Foreclosed assets
Of which property assets in Spain*
Other tangible assets held for sale
Other assets
Total
2021
2020
2019
4,089
4,445
4,588
3,651
3,120
438
—
4,081
3,485
364
—
4,485
3,667
103
13
4,089
4,445
4,601
* During 2019, the sale of real estate assets to Cerberus from foreclosures
materialized, generating losses of EUR 180 million.
At 31 December 2021, the allowances recognised for the total non-
current assets held for sale represented 48% (48% at 31 December
2020 and 2019). The charges recorded in those years amounted to
EUR 239 million, EUR 250 million and EUR 279 million, respectively,
and the recoveries during these exercises are amounted to EUR 98
million, EUR 35 million and EUR 133 million, respectively.
Annual report 2021 617
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
13. Investments
a) Breakdown
The detail, by company, of Investments is as follows:
b) Changes
The changes in the investments were as follows:
EUR million
2021 2020 2019
5,833 6,130 7,447
Balance at beginning of year
Acquisitions (disposals) of companies and
capital increases (reductions)
1,640 1,581 1,511
Of which:
2021
2020
2019
7,622
8,772
7,588
94
676
(123)
Ebury Partners Limited (note 3)
Santander Vida Seguros y Reaseguros,
S.A. (note 3)
—
—
409
219
—
—
EUR million
Associated entities
Merlin Properties, SOCIMI, S.A.
Metrovacesa, S.A.
Caceis (note 3)
Zurich Santander Insurance
America, S.L. - Consolidated
CNP Santander
Ebury Partners Limited (note 3)
Popular Spain Holding de Inversiones, S.L.U.
(former Allianz Popular, S.L.) (note 3)
Project Quasar Investment 2017 S.L.*
Other companies
1,087 1,157 1,226
975 1,077 1,010
826
418
394
—
—
955 1,009
439
388
402
—
—
409
— 1,351
493
533
529
Joint Ventures entities
1,692 1,492 1,325
Santander Vida Seguros y Reaseguros, S.A.
(note 3)
Santander Caceis Latam Holding 1, S.L. -
Consolidated (previously Santander Securites
Services Latam Holding, S.L)
U.C.I., S.A. - Consolidated
Fortune Auto Finance Co., ltd
Hyundai Capital UK Limited
Banco RCI Brasil S.A.
Other companies
378
381
170
334
228
222
201
92
326
168
172
151
88
237
206
349
206
155
135
116
194
Total Associated entities and Joint ventures
7,525 7,622 8,772
* At 31 December 2021 and 2020, the Group did not hold significant influence
over this company, despite holding a 49% interest in it, since it did not meet any
of the requirements established in the Standard by which an entity is considered
to exercise significant influence over another.
Changes in the consolidation method
(note 3)
Of which:
Project Quasar Investments 2017, S.L.
Popular Spain Holding de Inversiones,
S.L.U. (former Allianz Popular, S.L.)
(note 3)
Caceis
Santander CACEIS Latam Holding 1,
S.L. - Consolidado (former Santander
Securities Services Latam Holding, S.L.)
Effect of equity accounting
Dividends distributed and
reimbursements of share premium
Of which:
Zurich Santander Insurance America
S.L. - Consolidated
Caceis
CNP Santander
Metrovacesa, S.A.
Santander Vida Seguros y Reaseguros,
S.A.- Consolidado
Merlin Properties, SOCIMI, S.A.
Popular Spain Holding de Inversiones,
S.L.U. (former Allianz Popular, S.L.)
(note 3)
—
(1,359)
1,368
—
(956)
—
—
—
(409)
—
—
1,010
—
432
—
(96)
349
324
(662)
(186)
(407)
(230)
(144)
(60)
(60)
(31)
(52)
—
(13)
52
(80)
(158)
—
—
—
(37)
(17)
—
(1)
(184)
—
(37)
(25)
(29)
(53)
(52)
5
17
7,525
7,622
8,772
Of the entities included above, at 31 December 2021, the entities
Merlin Properties, SOCIMI, S.A, Metrovacesa S.A. and Compañía
Española de Viviendas en Alquiler, S.A. are the only listed companies.
Other global result
Exchange differences and other changes
Balance at end of year
Below is a breakdown of the Goodwill of the main investments in
joint ventures and associates included in the balance of this heading:
EUR million
Goodwill
Of which:
2021
1,723
2020
1,862
2019
2,043
Zurich Santander Insurance
America, S.L. - Consolidated
Caceis
526
337
526
337
526
466
c) Impairment adjustments
During the years 2021, 2020 and 2019 there was no evidence of
significant impairment in the Group's associated interests.
Annual report 2021 618
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
d) Other information
A summary of the financial information at the end of December 2021
of the main associates and joint ventures (obtained from the
information available at the date of preparation of the consolidated
financial statements) is shown below:
EUR million
Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total liabilities
Attributable profit for
the period
Other accumulated
comprehensive
income
Rest of equity
Total Equity
Total liabilities and
equity
Ordinary activities
income
Profit (loss) from
continuing operations
Profit (loss) for the
year from
discontinuing
operations
Associates
Joint ventures
Zurich
Santander
Insurance
América, S.L. -
Consolidated
Ebury
Partners
Limited
(note 3)**
Santander
Caceis Latam
Holding, S.L. -
Consolidated
CNP
Santander
U.C.I., S.A. -
Consolidated
Hyundai
Capital UK
Limited
Santander
Vida Seguros
y Reaseguros,
S.A.-
Consolidated
(note 3)
Fortune
Auto
Finance
Co., LTD
Merlin
Properties,
SOCIMI,
S.A.*
416
13,062
13,478
180
6,602
6,782
Metrovacesa,
S.A.*
2,452
475
Caceis
(note 3)
51,995
70,137
2,927
122,132
485
262
747
7,708
110,259
117,967
704
12,785
13,489
259
12,441
12,700
155
2,174
2,329
19
1,878
1,897
688
93
781
768
28
796
56
(164)
187
291
86
(69)
(16)
6,656
6,696
—
2,344
2,180
24
3,954
4,165
(675)
1,173
789
2
344
432
1
53
(15)
368
10,963
11,331
55
10,856
10,911
1,837
2,501
4,338
1,619
2,317
3,936
670
2,511
3,181
34
2,702
2,736
112
1,666
1,778
193
932
1,125
Banco RCI
Brasil S.A.
5
1,694
1,699
50
1,408
1,458
6
79
61
76
25
(11)
425
420
5
318
402
25
359
445
1
576
653
(228)
444
241
151
385
536
124
9
133
39
(288)
652
403
13,478
2,927
122,132
13,489
2,329
781
536
11,331
4,338
3,181
1,778
1,699
417
56
150
2,196
3,841
785
124
(164)
187
291
86
(69)
115
39
239
845
278
763
165
6
79
61
76
25
—
—
—
—
—
—
—
—
—
—
—
—
* Data as of 31 December 2020, latest accounts available.
** Data as of 30 April 2021, latest accounts available.
14. Insurance contracts linked to pensions
The detail of Insurance contracts linked to pensions in the
consolidated balance sheets is as follows:
EUR million
Assets relating to insurance
contracts covering post-
employment benefit plan
obligations:
Banco Santander, S.A.
2021
2020
2019
149
149
174
174
192
192
Annual report 2021 619
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Liabilities and assets under insurance contracts
.
15
and re
insurance assets
The detail of Liabilities under insurance contracts and reinsurance
assets in the consolidated balance sheets (see note 2.j) is as follows:
EUR million
Technical provisions for:
Unearned premiums and
unexpired risks
Life insurance
Unearned premiums and
risks
Mathematical provisions
Claims outstanding
Bonuses and rebates
Other technical provisions
2021
2020
2019
Direct
insurance
and
reinsurance
assumed
Reinsurance
ceded
Total
(balance
payable)
Direct
insurance
and
reinsurance
assumed
Reinsurance
ceded
Total
(balance
payable)
Direct
insurance
and
reinsurance
assumed
Reinsurance
ceded
Total
(balance
payable)
56
209
146
63
451
20
34
770
(50)
(150)
(130)
(20)
(55)
(11)
(17)
6
59
16
43
396
9
17
(283)
487
51
189
126
63
561
23
86
910
(45)
(137)
(122)
(15)
(59)
(11)
(9)
6
52
4
48
502
12
77
(261)
649
59
206
139
67
399
22
53
739
(52)
(151)
(132)
(19)
(55)
(10)
(24)
7
55
7
48
344
12
29
(292)
447
Annual report 2021 620
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
16. Tangible assets
a) Changes
The changes in Tangible assets in the consolidated balance sheets
were as follows:
EUR million
Tangible assets
Leased
out under
an operating
lease
For own use
Investment
property
Total For own use
Of which:
For leasing
Leased
out under
an operating
lease
Investment
property
Cost
Balances at 1 January 2019
Additions / disposals (net) due to change
in the scope of consolidation
Additions / disposals (net)
Transfers, exchange differences and
other items
Balance at 31 December 2019
Additions / disposals (net) due to change
in the scope of consolidation
Additions / disposals (net)
Transfers, exchange differences and
other items
Balance at 31 December 2020
Additions / disposals (net) due to change
in the scope of consolidation
Additions / disposals (net)
Transfers, exchange differences and
other items
Balance at 31 December 2021
Accumulated depreciation
Balances at 1 January 2019
Disposals due to change in the scope of
consolidation
Disposals
Charge for the year
Transfers, exchange differences and
other items
Balance at 31 December 2019
Disposals due to change in the scope of
consolidation
Disposals
Charge for the year
Transfers, exchange differences and
other items
Balance at 31 December 2020
Disposals due to change in the scope of
consolidation
Disposals
Charge for the year
Transfers, exchange differences and
other items
Balance at 31 December 2021
25,428
25,087
2,378
52,893
6,693
(5)
1,863
—
3,148
(15)
(20)
(310)
4,701
(178)
27,108
(3,781)
24,454
(603)
(4,562)
1,450
53,012
—
(997)
(10)
5,686
(16)
827
(3,023)
24,896
66
781
(214)
25,529
1,082
512
(1,844)
24,204
(257)
(1,076)
1,552
24,423
7
1,073
(29)
1,310
(37)
(1,339) *
32
(4,835)
1,460
50,560
(362)
3,948
—
(64)
(191)
(359)
1
96 *
141
1,479
1,537
51,489
384
4,429
—
—
37
(10,524)
(8,404)
(199)
(19,127)
3
356
(2,021)
—
2,149
—
6
32
9
2,537
(14)
(2,035)
(807)
212
(11,974)
1,045
(5,210)
31
1,288
(144) (17,328)
(40)
527
(1,906)
—
2,387
—
—
11
(40)
2,925
(8)
(1,914)
5
(765)
(3)
167
(706)
1,850
(11,543)
(2,762)
(5,585)
8
(904)
90
(133) (17,261)
(1,217)
(1)
733
(1,733)
40
3,390
—
—
3
39
4,126
—
44
(10)
(1,743)
(612)
529
(12,015)
(3,083)
(5,238)
(9)
(2,563)
(4)
(149) (17,402)
(1,789)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
6,693
—
(997)
(10)
5,686
(37)
(1,339)
(362)
3,948
1
96
384
4,429
—
—
37
(807)
5
(765)
(3)
167
(706)
90
(1,217)
—
44
(612)
(4)
(1,789)
* Includes contract extensions on operating leases and repurchases.
Annual report 2021 621
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Impairment losses
Balances at 1 January 2019
Impairment charge for the year
Releases
Disposals due to change in the scope of
consolidation
Exchange differences and other
Balances at 31 December 2019
Impairment charge for the year
Releases
Disposals due to change in the scope of
consolidation
Disposals
Exchange differences and other
Balances at 31 December 2020
Impairment charge for the year
Releases
Disposals due to change in the scope of
consolidation
Disposals
Exchange differences and other
Balances at 31 December 2021
Tangible assets, net
Balances at 31 December 2019
Balances at 31 December 2020
Balances at 31 December 2021
Tangible assets
Leased
out under
an operating
lease
Investment
property
For own use
Total For own use
Of which:
For leasing
Leased
out under
an operating
lease
Investment
property
(61)
(14)
8
—
(26)
(93)
(104)
4
—
20
33
(140)
(144)
10
—
61
(42)
(255)
(239)
(12)
6
—
222
(23)
(70)
2
—
—
31
(60)
(17)
4
—
—
(616)
(916)
(36)
3
—
316
(333)
(11)
5
—
3
(28)
(364)
(8)
5
—
3
(62)
17
—
512
(449)
(185)
11
—
23
36
(564)
(169)
19
—
64
(29)
(102)
(44)
(408)
(115)
(765)
—
—
—
—
—
—
(4)
1
—
—
(6)
(9)
(13)
1
—
7
(1)
(15)
15,041
13,213
13,259
19,221
18,559
19,083
973 35,235
963 32,735
979 33,321
4,921
2,722
2,625
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
—
—
—
—
—
—
(4)
1
—
—
(6)
(9)
(13)
1
—
7
(1)
(15)
4,921
2,722
2,625
Annual report 2021 622
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
b) Tangible assets - For own use
The detail, by class of asset, of 'Property, plant and equipment' which
is owned by the Group in the consolidated balance sheets is as
follows:
EUR million
Land and buildings
IT equipment and fixtures
Furniture and vehicles
Construction in progress and other items
Balances at 31 December 2019
Land and buildings
IT equipment and fixtures
Furniture and vehicles
Construction in progress and other items
Balances at 31 December 2020
Land and buildings
IT equipment and fixtures
Furniture and vehicles
Construction in progress and other items
Balances at 31 December 2021
The carrying amount at 31 December 2021 in the foregoing table
includes the following approximate amounts EUR 6,753 million (EUR
6,299 million at 31 December 2020 and EUR 7,737 million at 31
December 2019) relating to property, plant and equipment owned by
group entities and branches located abroad.
c) Tangible assets - Leased out under an operating lease
Grupo Santander has assets leased out under operating leases where
the company is the lessor and do not meet the accounting
requirements to be classified as finance leases. The net cost of these
leases is recorded as an asset and depreciated on a straight-line basis
over the contractual term of the lease to the expected residual value.
The expected residual value and, consequently, the monthly
depreciation expense may change during the term of the lease. The
Group estimates expected residual values using independent data
sources and internal statistical models. It also assesses the estimate
of the residual value of these leases and adjusts the depreciation rate
in line with the change in the expected value of the asset at the end
of the lease.
Grupo Santander periodically assesses its investment in operating
leases for impairment in certain circumstances, such as a systemic
and material decrease in the values of used vehicles. If assets leased
out under operating leases are deemed to be impaired, impairment is
measured as the amount by which the carrying amount of the assets
exceeds the fair value as estimated by discounted cash flows.
Tangible assets for own use
Accumulated
depreciation
Impairment
losses
Carrying
amount
Of which:
for leasing
(2,889)
(4,808)
(4,216)
(61)
(93)
10,990
4,908
—
—
—
1,187
2,736
128
2
11
—
Cost
13,972
5,995
6,952
189
27,108
(11,974)
(93)
15,041
4,921
13,081
5,562
6,085
168
(3,215)
(4,416)
(3,854)
(58)
(133)
—
—
(7)
9,733
1,146
2,231
103
2,716
1
5
—
24,896
(11,543)
(140)
13,213
2,722
13,855
5,543
5,982
149
(3,675)
(4,335)
(3,954)
(51)
25,529
(12,015)
(240)
—
—
(15)
(255)
9,940
1,208
2,028
83
2,570
42
12
—
13,259
2,625
Of the EUR 19,083 million that the Group had assigned to operating
leases at 31 December 2021 (EUR 18,559 million and EUR
19,221 million at 31 December 2020 and 2019, respectively), EUR
12,977 million (EUR 13,455 million and EUR 14,799 million at 31
December 2020 and 2019, respectively ) relate to vehicles of
Santander Consumer USA Holdings Inc. The variable lease payments
of various items of this entity are not representative.
In addition, the maturity analysis of the payments for assets leased
out under operating leases from Santander Consumer USA Holdings
Inc. is as follows:
EUR million
Maturity Analysis
2022
2023
2024
2025
2021
3,030
3,814
5,644
872
Annual report 2021 623
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
d) Tangible assets - Investment property
The fair value of investment property at 31 December 2021, 2020,
2019 amounted to EUR 1,088, 1,055 and 1,076 million, respectively.
A comparison of the fair value of investment property at 31
December 2021, 2020 and 2019 with the net book value shows
gross unrealised gains of EUR 109, 92 and 103 million, respectively,
attributed completely to the group.
The rental income earned from investment property and the direct
costs related both to investment properties that generated rental
income in 2021, 2020 and 2019 and to investment properties that
did not generate rental income in those years are not material in the
context of the consolidated financial statements.
17. Intangible assets – Goodwill
The detail of goodwill, based on the cash-generating units giving rise
thereto, is as follows:
EUR million
Banco Santander (Brasil)
SAM Investment Holdings Limited
Santander Consumer Germany
Santander Bank Polska
Santander Portugal
Santander España
Santander Consumer USA
Santander Bank, National Association
Santander UK
Banco Santander - Chile
Grupo Financiero Santander (México)
Santander Consumer Nordics
Other companies
Total Goodwill
2021
2020
2019
3,219
3,109
4,388
1,444
1,444
1,173
1,304
1,314
1,236
1,095
1,104
2,427
1,040
1,040
1,040
1,027
1,027
1,027
979
643
633
516
435
224
154
904
594
592
571
399
216
157
2,143
1,828
7,147
589
460
496
292
12,713 12,471 24,246
The changes in goodwill were as follows:
EUR million
Balance at beginning of year
Additions (note 3)
Of which:
SAM Investment Holdings Limited
Santander España
Impairment losses
Of which:
Santander UK
Santander Bank Polska
Santander Bank, National
Association
Santander Consumer USA
Santander Consumer Nordics
Disposals or changes in scope of
consolidation
Exchange differences and other items
Balance at end of year
2021
2020
2019
12,471
24,246
25,466
81
429
41
—
—
271
—
—
4
(6) (10,100)
(1,491)
—
—
—
—
—
—
(6,101)
(1,491)
(1,192)
(1,177)
(1,153)
(277)
—
—
—
—
—
—
167
(2,104)
230
12,713 12,471
24,246
Grupo Santander has goodwill generated by cash-generating units
located in non-euro currency countries (mainly Brazil, Poland, the
United States, the United Kingdom, Chile, Mexico, Norway and
Sweden) and, therefore, this gives rise to exchange differences on the
translation to euros, at closing rates, of the amounts of goodwill
denominated in foreign currencies. Accordingly, in 2021 there was an
increase of EUR 167 million (a decrease of EUR 2,104 million in 2020
and an increase of EUR 230 million in 2019), due to exchange
differences and other items which, pursuant to current standards,
were recognised with a change to 'Other comprehensive income -
Items that may be reclassified to profit or loss - Exchange differences
in other comprehensive income in the consolidated statement of
recognised income and expense' (see note 29.d).
At least once per year (or whenever there is any indication of
impairment), Grupo Santander performs an analysis of the potential
impairment of its recorded goodwill with respect to its recoverable
amount. The first step that must be taken in order to perform this
analysis is the identification of the cash-generating units, which are
the Group's smallest identifiable groups of assets that generate cash
inflows that are largely independent of the cash flows of other assets
or groups of assets.
The amount to be recovered of each cash-generating unit is
determined taking into consideration the carrying amount (including
any fair value adjustment arising on the business combination) of all
the assets and liabilities of all the independent legal entities
composing the cash-generating unit, together with the related
goodwill.
The amount to be recovered of the cash-generating unit is compared
with its recoverable amount in order to determine whether there is
any impairment.
Grupo Santander's directors assess the existence of any indication
that might be considered to be evidence of impairment of the cash-
generating unit by reviewing information including the following
(i) certain macroeconomic variables that might affect its investments
(population data, political situation, economic situation —including
banking concentration level—, among others) and (ii) various
microeconomic variables comparing the investments of the Group
with the financial services industry of the country in which the cash-
generating unit carries on most of its business activities (balance
sheet composition, total funds under management, results,
efficiency ratio, capital adequacy ratio, return on equity, among
others).
Regardless of whether there is any indication of impairment,
every year the Group calculates the recoverable amount of each
cash-generating unit to which goodwill, has been allocated and, to
this end, it uses price quotations, market references (multiples),
internal estimates and valuations performed by internal and external
experts.
Firstly, the Group determines the recoverable amount by calculating
the fair value of each cash-generating unit on the basis of the quoted
price of the cash-generating units, if available.
Annual report 2021 624
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
In addition, the Group performs estimates of the recoverable
amounts of certain cash-generating units by calculating their value in
use using discounted cash flow projections. The main assumptions
used in this calculation are (i) earnings projections based on the
financial budgets approved by the Group’s directors which cover
between three and five year periods (unless a longer time horizon
can be justified), (ii) discount rates determined as the cost of capital
taking into account the risk-free rate of return plus a risk premium in
line with the market and the business in which the units operate and
(iii) constant growth rates used in order to extrapolate earnings in
perpetuity which do not exceed the long-term average growth rate
for the market in which the cash-generating unit in question
operates.
The cash flow projections used by Group management to obtain the
values in use are based on the financial budgets approved by both
local management of the related local units and the Group’s
directors. The Group’s budgetary estimation process is common for
all the cash-generating units. The local management teams prepare
their budgets using the following key assumptions:
a) Microeconomic variables of the cash-generating unit:
management takes into consideration the current balance sheet
structure, the product mix and the business decisions taken by
local management in this regard.
b) Macroeconomic variables: growth is estimated on the basis of the
changing environment, taking into consideration expected GDP
growth in the unit’s geographical location and forecast trends in
interest and exchange rates. These data, which are based on
external information sources, are provided by the Group’s
economic research service.
c) Past performance variables: in addition, management takes into
consideration in the projection the difference (both positive and
negative) between the cash-generating unit’s past performance
and budgets.
During 2021, the Group recognised impairment losses of EUR
6 million of immaterial goodwill which were recognised under
'Impairment or reversal of impairment of non-financial assets, net -
Intangible assets'. Goodwill is deducted from CET1 for regulatory
purposes and therefore an impairment of goodwill has no impact on
the Group's capital ratios.
In 2020, considering the economic and business environment
resulting from covid-19, market conditions and the existing economic
uncertainty, an impairment test was performed for certain CGUs
during the second quarter. As a result, the Group recognised goodwill
impairment of EUR 10,100 million, mainly associated with Santander
UK, Santander Bank Polska, Santander Bank, National Association,
Santander Consumer USA and Santander Consumer Nordics.
In 2019, the Group recorded an impairment of goodwill associated
with Santander UK amounting to EUR 1,491 million considering the
following reasons: decrease in the profit generation capacity of the
cash generating unit in contrast to the forecast made in previous
years, the general competitive environment in the UK, the impact of
the banking reform on retail businesses and the impact of the
uncertainty generated by Brexit on the country's economic growth.
Annual report 2021 625
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
2021
Discount rate*
Nominal
perpetual
growth rate
9.2%
10.3%
10.6%
11.6%
8.3%
10.4%
9.7%
9.9%
2.3%
3.5%
1.5%
3.0%
1.8%
2.5%
1.8%
2.0%
2019
2.5%
3.5%
1.5%
3.6%
2.5%
2.5%
2.0%
2.5%
Following is a detail of the main assumptions taken into account in
determining the recoverable amount, at 2021 year-end, of the most
significant cash-generating units which were valued using the
discounted cash flow method:
Santander UK
Santander Bank Polska
Santander Consumer USA
Santander Bank, National Association**
Santander Consumer Germany
SAM Investment Holdings, Limited
Santander Portugal
Santander Consumer Nordics
Projected period
5 years
5 years
3 years
5 years
5 years
5 years
5 years
5 years
Post-tax discount rate.
*
** Weighted information of the main assumptions of the segments to which goodwill has been allocated.
The discount and nominal perpetual growth rates taken into account
in 2020 and 2019 are presented below for comparison purposes:
Santander UK
Santander Bank Polska
Santander Consumer USA
Santander Bank, National Association**
Santander Consumer Germany
SAM Investment Holdings, Limited
Santander Portugal
Santander Consumer Nordics
Discount rate*
2020
9.5%
10.0%
10.7%
11.6%
9.0%
10.1%
9.8%
10.1%
2019
8.5%
9.2%
9.5%
9.6%
8.2%
10.0%
8.9%
8.6%
Nominal
perpetual
growth rate
2020
2.3%
3.5%
1.5%
2.5%
1.8%
2.5%
1.8%
2.0%
Post-tax discount rate.
*
** Weighted information of the main assumptions of the segments to which goodwill has been allocated.
Given the degree of uncertainty of the above key assumptions on
which the recoverable amount of the cash-generating units is based,
the Group performs a sensitivity analysis which consisted of adjusting
+/- 50 basis points the discount rate, adjusting +/- 50 basis points
the growth rate in perpetuity and reducing the cash flow projections
by 5%. These changes in the key assumptions in isolation mean that
the recoverable amount of all the cash-generating units continues to
exceed their amount to be recovered and have been considered by
the Group to be reasonably possible in a stable economic
environment and in which non-recurring events unrelated to the
business operations of the cash-generating units are not
contemplated.
The recoverable amount of Banco Santander - Chile, Grupo
Financiero Santander (México) and Banco Santander (Brasil) was
calculated as the fair values of the aforementioned cash-generating
units obtained from the quoted market prices of their shares at year-
end. This value exceeded the amount to be recovered. A significant
reduction in the quoted market prices of these cash generating unit
could result in an indication of impairment which in turn may lead to
a goodwill impairment charge in the future.
Annual report 2021 626
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
18. Intangible assets - Other
intangible assets
The detail of Intangible assets - Other intangible assets in the
consolidated balance sheets and of the changes therein in 2021,
2020, and 2019 is as follows:
EUR million
Cost
Brand names
IT developments
Other
Accumulated amortisation
Development
Other
Impairment losses
Of which addition
Liberation
EUR million
Cost
Brand names
IT developments
Other
Accumulated amortisation
Development
Other
Impairment losses
Of which addition
Liberation
Estimated
useful life
31
December
2020
3 -7 years
9,376
37
7,900
1,439
(5,809)
(5,307)
(502)
(130)
—
—
Net
additions
and
disposals
1,409
—
1,325
84
—
—
—
—
—
—
3,437
1,409
31
Estimated December
2019
useful life
3-7 years
9,263
42
7,945
1,276
(5,686)
(5,139)
(547)
(136)
—
—
Net
additions
and
disposals
1,451
—
1,123
328
35
—
35
—
—
—
3,441
1,486
Change in
scope of
consolidation
Amortization
and
impairment
Application of
amortization
and
impairment
Exchange
differences
and other
31
December
2021
5
—
4
1
(2)
(1)
(1)
—
—
—
3
—
—
—
—
(1,013)
(922)
(91)
(65)
(65)
—
(1,078)
(293)
(34)
(212)
(47)
232
178
54
61
—
—
—
215
1
172
42
(115)
(97)
(18)
—
—
—
10,712
4
9,189
1,519
(6,707)
(6,149)
(558)
(134)
—
—
100
3,871
Change in Amortization
and
impairment
scope of
consolidation
Application of
amortization
Exchange
31
and differences December
2020
and other
impairment
(33)
—
(34)
1
49
49
—
—
—
—
16
—
(241)
(1,064)
9,376
—
(224)
(17)
105
88
17
136
—
—
—
(5)
(910)
(149)
584
487
97
12
—
—
37
7,900
1,439
(5,809)
(5,307)
(502)
(130)
—
—
(468)
3,437
(896)
(792)
(104)
(142)
(142)
—
(1,038)
Annual report 2021 627
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Cost
Brand names
IT developments
Other
Accumulated amortisation
Development
Other
Impairment losses
Of which addition
Liberation
31
Estimated December
2018
useful life
3-7 years
8,680
36
7,134
1,510
(5,432)
(4,743)
(689)
(154)
—
—
Net
additions
and
disposals
1,377
2
1,374
1
—
—
—
—
—
—
Change in Amortization
and
impairment
scope of
consolidation
(41)
2
(19)
(24)
8
4
4
—
—
—
—
(966)
(874)
(92)
(73)
(75)
2
3,094
1,377
(33)
(1,039)
In 2021, 2020 and 2019, impairment losses of EUR 65 million, EUR
142 million and EUR 73 million, respectively, were recognised under
Impairment or reversal of impairment on non-financial assets, net –
intangible assets. This impairment losses are related mainly to the
decline in or loss of the recoverable value of certain computer
systems and applications as a result of the processes initiated by the
Group to adapt to the various regulatory changes and to transform or
integrate businesses.
19. Other assets
The detail of 'Other assets' is as follows:
EUR million
Transactions in transit
Net pension plan assets (note 25)
Prepayments and accrued income
Other (note 2.n)
2021
2020
2019
157
1,990
88
635
157
903
2,610
2,806
3,129
3,683
7,362
5,752
8,440 10,891 9,941
Application of
amortization
Exchange
31
and differences December
2019
and other
impairment
(887)
—
(639)
(248)
806
570
236
81
—
—
—
134
2
95
37
(102)
(96)
(6)
10
—
—
42
9,263
42
7,945
1,276
(5,686)
(5,139)
(547)
(136)
—
—
3,441
Annual report 2021 628
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
20. Deposits from central banks and credit institutions
21. Customer deposits
The detail, by classification, counterparty, type and currency, of
Deposits from central banks and 'Deposits from credit institutions' in
the consolidated balance sheets is as follows:
The detail, by classification, geographical area and type, of Customer
deposits is as follows:
EUR million
CENTRAL BANKS
Classification
Financial liabilities held for trading
Financial liabilities designated at fair
value through profit or loss
Financial liabilities at amortized cost
Type
Deposits on demand
Time deposits
Reverse repurchase agreements
CREDIT INSTITUTIONS
Classification
Financial liabilities held for trading
Financial liabilities designated at fair
value through profit or loss
Financial liabilities at amortized cost
Type
Deposits on demand
Time deposits
Reverse repurchase agreements
Subordinated deposits
Currency
Euro
Pound sterling
US dollar
Brazilian real
Other currencies
TOTAL
2021
2020
2019
1,038
—
—
607
2,490
12,854
139,757 112,804
62,468
141,402 115,294
75,322
10
10
5
134,439 108,090
67,424
6,953
7,194
7,893
141,402 115,294
75,322
6,488
—
—
1,064
6,765
9,340
52,235
62,620
90,501
59,787
69,385
99,841
6,139
5,727
9,136
37,332
43,308
61,406
16,198
20,179
29,115
118
171
184
59,787
69,385
99,841
107,908 104,499
79,008
42,451
23,339
18,129
24,012
26,581
53,403
11,297
12,356
13,022
15,521
17,904
11,601
201,189
184,679
175,163
In 31 December 2021, the balance of the conditional long-term
financing of the European Central Bank (TLTRO- Targeted Long-Term
Refinancing Operation-) amounted to EUR 88,894 million, all
corresponding to TLRTO III (EUR 77,732 million and EUR 46,201
million at 31 December 2020 and 2019, respectively).
In December 2021, the income recognized in the consolidated
income statement corresponding to TLTRO III amounts to EUR 868
million (EUR 391 million at 31 December 2020).
Grupo Santander´s deposits with central banks in 2021 amounted to
EUR 193,102 million (EUR 137,047 million and EUR 75,353 million in
2020 and 2019), of which EUR 99,530 million with the European
Central Bank (EUR 71,324 million and EUR 28,182 million in 2020
and 2019, respectively), at an average effective cost of -0.40%.
Note 50 contains a detail of the residual maturity periods of financial
liabilities at amortised cost.
EUR million
Classification
Financial liabilities held for trading
Financial liabilities designated at fair
value through profit or loss
Financial liabilities
at amortized cost
Geographical area
Spain
European Union (excluding Spain)*
United States and Puerto Rico
Other OECD countries*
South America
Type
Demand deposits-
Current accounts
Savings accounts
Other demand deposits
Time deposits-
Fixed-term deposits and other term
deposits
Home-purchase savings accounts
Discount deposits
Hybrid financial liabilities
Subordinated liabilities
Repurchase agreements
2021
2020
2019
6,141
—
—
25,608
34,343
34,917
886,595 814,967 789,448
918,344 849,310 824,365
319,565 294,516 271,103
112,361 106,013 334,542
73,814
59,057
60,011
321,607 306,243
71,235
90,997
83,481
87,474
918,344 849,310 824,365
717,728 642,897 588,533
482,649
418,752
373,146
227,318
216,500
208,701
7,761
7,645
6,686
164,259 171,939 196,921
162,172 170,127 194,163
38
3
43
3
44
3
1,906
1,743
2,711
140
23
—
36,357
34,474
38,911
918,344 849,310 824,365
* The amounts referring to 2021 and 2020 exercises for the United Kingdom
geographical area have been considered in the line Other OECD countries,
instead of in the line European Union (excluding Spain) due to the leaving of the
United Kingdom from the European Union.
Note 50 contains a detail of the residual maturity periods of financial
liabilities at amortised cost.
Annual report 2021 629
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
22. Marketable debt securities
a) Breakdown
The detail, by classification and type, of Marketable debt securities is
as follows:
EUR million
Classification
Financial liabilities
held for trading
Financial liabilities designated
at fair value through profit or loss
Financial liabilities
at amortized cost
Type
Bonds and debentures outstanding
Subordinated
Notes and other securities
2021
2020
2019
—
—
—
5,454
4,440
3,758
240,709
230,829
258,219
246,163
235,269
261,977
194,362
191,577
208,455
25,938
21,686
20,878
25,863
22,006
32,644
246,163
235,269
261,977
The distribution of the book value of debt securities issued by
contractual maturity at 31 December 2021 is shown below:
EUR million
On Within 1
month
demand
1 to 3
months
3 to 12
months
Subordinated debt
Senior unsecured debt
Senior secured debt
Promissory notes and other securities
Debt securities issued
—
—
—
—
—
—
3,033
1,673
9,201
49
3,734
5,271
9,304
130
10,621
12,364
7,358
The distribution by contractual maturity of the notional amounts of
these debt securities issued at 31 December 2021 is as follows:
EUR million
On Within 1
month
demand
1 to 3
months
3 to 12
months
Subordinated debt
Senior unsecured debt
Senior secured debt
Promissory notes and other securities
Debt securities issued
—
—
—
—
—
—
3,063
1,663
9,341
49
3,771
5,241
9,447
129
10,725
12,293
7,471
13,907
18,358
30,473
72,949
46,222
64,254
246,163
1 to 3
years
656
38,731
33,562
—
3 to 5
years
6,167
26,715
13,340
—
More than
5
years
18,936
28,600
16,718
—
Total
25,938
111,434
82,928
25,863
1 to 3
years
652
39,110
33,369
—
3 to 5
years
6,128
26,976
13,263
—
More than
5
years
18,816
28,880
16,622
—
Total
25,774
112,525
82,451
26,259
14,067
18,508
30,618
73,131
46,367
64,318
247,009
Annual report 2021 630
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
b) Bonds and debentures outstanding
The detail, by currency of issue, of 'Bonds and debentures outstanding' is as follows:
Currency of issue
Euro
US dollar
Pound sterling
Brazilian real
Chilean peso
Other currencies
Balance at end of year
EUR million
2021
90,348
66,581
13,340
9,131
3,757
11,205
2020
89,031
61,174
16,569
8,398
5,624
10,781
2021
Outstanding issue amount
in foreign currency
(Million)
90,348
75,406
11,206
57,702
3,623,635
2019
89,008
64,952
20,178
15,292
6,848
12,177
Annual
interest rate
(%)
1.06 %
2.39 %
2.13 %
1.99 %
5.03 %
194,362
191,577
208,455
Annual report 2021 631
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The changes in 'Bonds and debentures outstanding' were as follows:
EUR million
Balance at beginning of year
Net inclusion of entities in the Group
Issues
Of which:
Santander Consumer USA Holdings Inc.
Banco Santander (Brasil) S.A.
Banco Santander, S.A.
Santander UK Group Holdings plc
Santander Consumo 4, F.T.
SC Germany S.A. (New Compartment: Consumer 2021-1)
Santander Consumer Finance, S.A.
Banco Santander - Chile
Santander International Products, Plc.
Auto ABS French Lease Master Compartiment 2016
Santander Factoring Sp. z o.o.
PSA Banque France
Santander Consumer Bank AS
PSA Bank Deutschland GmbH
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México
PSA Financial Services, Spain, E.F.C, S.A.
Santander Holdings USA, Inc.
SC Germany S.A., Compartment Consumer 2020-1
SCF Rahoituspalvelut IX DAC
Santander Consumer Bank AG
SCF Rahoituspalvelut VIII DAC
Redemptions and repurchases
Of which:
Banco Santander (Brasil) S.A.
Santander Consumer USA Holdings Inc.
Santander UK Group Holdings plc
Santander Consumer Finance, S.A.
Banco Santander, S.A.
Banco Santander - Chile
Santander Factoring Sp. z o.o.
Auto ABS French Lease Master Compartiment 2016
Santander Holdings USA, Inc.
PSA Bank Deutschland GmbH
Santander Consumer Bank AS
Santander International Products, Plc.
PSA Banque France
Banco Santander Totta, S.A.
Exchange differences and other movements
Balance at year-end
2021
2020
2019
191,577
208,455
195,498
—
785
—
59,937
54,905
64,184
15,771
12,246
15,631
14,996
11,036
13,227
11,766
10,220
12,066
3,372
1,531
1,496
1,169
1,158
914
900
819
815
779
600
541
—
—
—
—
—
—
6,320
4,547
—
—
2,394
766
1,588
300
391
385
773
—
1,770
605
1,269
1,800
650
500
—
—
—
5,150
1,644
848
300
375
1,132
1,572
1,104
577
—
2,778
—
—
750
799
(61,846)
(62,699)
(52,462)
(15,182)
(14,211)
(12,817)
(15,151)
(13,959)
(14,517)
(14,695)
(14,102)
(9,115)
(3,779)
(4,371)
(2,550)
(3,185)
(5,991)
(3,303)
(1,030)
(1,974)
(299)
—
(848)
(407)
—
(1,201)
(1,990)
—
(936)
(324)
(684)
(784)
(902)
(1,551)
(722)
—
(739)
(920)
(900)
(778)
(580)
(348)
(345)
(335)
(9)
4,694
(9,869)
1,235
194,362
191,577
208,455
Annual report 2021 632
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
c) Notes and other securities
These notes were issued basically by Santander Consumer Finance,
S.A., Santander UK plc, Banco Santander (México), S.A. Institución de
Banca Múltiple, Grupo Financiero Santander México, Banco
Santander, S.A., Santander Consumer Bank AG, PSA Banque France,
Banco Santander - Chile, Santander Bank Polska S.A. and Banco
Santander S.A. - Uruguay.
d) Guarantees
Set forth below is information on the liabilities secured by assets:
EUR million
Asset-backed securities
Of which, mortgage-backed
securities
2021
2020
2019
40,519
35,753
38,616
1,487
2,274
3,819
Other mortgage securities
41,779
49,425
50,269
Of which: mortgage-backed bonds
23,197
24,736
24,736
Territorial covered bond
630
869
1,270
82,928
86,047
90,155
The main characteristics of the assets securing the aforementioned
financial liabilities are as follows:
1. Asset-backed securities
a. Mortgage-backed securities- these securities are secured by
mortgage assets (see Note 10.e) with average maturities of
more than ten years that must: be a first mortgage for
acquisition of principal or second residence, be current in
payments, have a loan-to-value ratio below 80% and have a
liability insurance policy in force covering at least the appraisal
value. The value of the financial liabilities broken down in the
foregoing table is lower than the balance of the assets securing
them —securitised assets retained on the balance sheet—
mainly because the Group repurchases a portion of the bonds
issued, and in such cases they are not recognised on the liability
side of the consolidated balance sheet.
b. Other asset - backed securities: includes asset-backed securities,
notes issued by securitization funds collateralized mainly by
mortgage loans that do not meet the above requirements and
other loans (mainly personal loans with an average maturity of
five years and loans to SMEs with average maturities of seven
years) and private issues of Santander Consumer USA Holdings
Inc collateralized by vehicles assigned under operating leases.
2. Other mortgage securities include mainly: (i) mortgage-backed
bonds with average maturities of more than ten years that are
secured by a portfolio of mortgage loans and credits (included in
secured loans —see note 10.b—) which must: not be classified
as of procedural stage; have available appraisals performed by
specialised entities; have a loan-to-value (LTV) ratio below 80%
in the case of home loans and below 60% for loans for other
assets and have sufficient liability insurance, (ii) other debt
securities issued as part of the Group’s liquidity strategy in the
UK, mainly covered bonds in the UK secured by mortgage loans
and other assets.
The fair value of the guarantees received by the Group (financial and
non-financial assets) which the Group is authorised to sell or pledge
even if the owner of the guarantee has not defaulted is scantly
material taking into account the Consolidated financial statements as
a whole.
e) Spanish mortgage-market issues
The members of the board of directors hereby state that the Group
entities operating in the Spanish mortgage-market issues area have
established and implemented specific policies and procedures to
cover all activities carried on and guarantee strict compliance with
mortgage-market regulations applicable to these activities as
provided for in Royal Decree 716/2009, of 24 April implementing
certain provisions of Mortgage Market Law 2/1981, of 25 March, and,
by application thereof, in Bank of Spain Circulars 7/2010 and 5/2011,
and other financial and mortgage system regulations. Also, financial
management defines the Grupo Santander's funding strategy.
The risk policies applicable to mortgage market transactions
envisage maximum loan-to-value (LTV) ratios, and specific policies
are also in place adapted to each mortgage product, which
occasionally require the application of stricter limits.
Grupo Santander’s general policies in this respect require the
repayment capacity of each potential customer (the effort ratio in
loan approval) to be analysed using specific indicators that must be
met. This analysis must determine whether each customer’s income
is sufficient to meet the repayments of the loan requested. In
addition, the analysis of each customer must include a conclusion on
the stability over time of the customer’s income considered with
respect to the life of the loan. The aforementioned indicator used to
measure the repayment capacity (effort ratio) of each potential
customer takes into account mainly the relationship between the
potential debt and the income generated, considering on the one
hand the monthly repayments of the loan requested and other
transactions and, on the other, the monthly salary income and duly
supported income.
Grupo Santander entities have specialised document comparison
procedures and tools for verifying customer information and
solvency (see note 53).
Grupo Santander entities’ procedures envisage that each mortgage
originated in the mortgage market must be individually valued by an
appraisal company not related to the Group.
In accordance with Article 3 of Mortgage Market Law 41/2007, any
appraisal company approved by the Bank of Spain may issue valid
appraisal reports. However, as permitted by this same article, the
Group entities perform several checks and select, from among these
companies, a small group with which they enter into cooperation
agreements with special conditions and automated control
mechanisms. The Group’s internal regulations specify, in detail, each
of the internally approved companies, as well as the approval
requirements and procedures and the controls established to uphold
them. In this connection, the regulations establish the functions of an
appraisal company committee on which the various areas of the
Group related to these companies are represented. The aim of the
committee is to regulate and adapt the internal regulations and the
activities of the appraisal companies to the current market and
business situation (see note 2.i).
Annual report 2021 633
Contents
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Basically, the companies wishing to cooperate with the Group must
have a significant level of activity in the mortgage market in the area
in which they operate, they must pass a preliminary screening
process based on criteria of independence, technical capacity and
solvency -in order to ascertain the continuity of their business- and,
lastly, they must pass a series of tests prior to obtaining definitive
approval.
In order to comply in full with the legislation, any appraisal provided
by the customer is reviewed, irrespective of which appraisal company
issues it, to check that the requirements, procedures and methods
used to prepare it are formally adapted to the valued asset pursuant
to current legislation and that the values reported are customary in
the market.
The information required by Bank of Spain circulars 7/2010 and
5/2011, by application of Royal Decree 716/2009, of 24 April is as
follows:
EUR million
Face value of the outstanding
mortgage loans and credits that
support the issuance of mortgage-
backed and mortgage bonds
pursuant to Royal Decree 716/2009
(excluding securitised bonds)
Of which:
Loans eligible to cover issues of
mortgage-backed securities
Transfers of assets retained on
balance sheet: mortgage-backed
certificates and other securitised
mortgage assets
Mortgage-backed bonds
2021
2020
2019
83,088
76,554
84,720
64,896
57,382
59,517
11,133
17,610
14,569
The mortgage-backed bonds ('cédulas hipotecarias') issued by the
Group entities are securities the principal and interest of which are
specifically secured by mortgages, there being no need for
registration in the property register, by mortgage on all those that at
any time are recorded in favour of the issuer and are not affected by
the issuance of mortgage bonds and / or are subject to mortgage
participations, and / or mortgage transfer certificates, and, if they
exist, by substitution assets eligible to be hedged and for the
economic flows generated by derivative financial instruments linked
to each issue, and without prejudice to the issuer’s unlimited liability.
The mortgage bonds include the credit right of its holder against the
issuing entity, guaranteeing in the manner provided for in the
previous paragraph, and involve the execution to claim from the
issuer the payment after due date. The holders of these securities are
recognised as preferred creditors, singularly privileged, with the
preference, included in number 3º of article 1,923 of the Spanish Civil
Code against any other creditor, in relation with the entire group of
loans and mortgage loans registered in favour of the issuer, except
those that act as coverage for mortgage bonds and / or are subject to
mortgage participations and / or mortgage transfer certificates.
In the event of insolvency, the holders of mortgage-backed bonds, as
long as they are not considered 'person especially related' to the
issuing entity in accordance with Royal Legislative Decree 1/2020, of
5 May, approving the revised text of the Bankruptcy Law , will enjoy
the special privilege established in Article 270.1.1 of the
aforementioned Bankruptcy Law. Without prejudice to the foregoing,
in accordance with Article 242.10 of the Bankruptcy Law, during the
insolvency proceedings, the payments relating to the repayment of
the principal and interest of the bonds issued and outstanding at the
date of the insolvency filing will be settled up to the amount of the
income received by the insolvent party from the mortgage loans and
credits and, where appropriate, from the replacement assets backing
the bonds and from the cash flows generated by the financial
instruments associated with the issues (Article 14 of Law 2/1981 of
25 March 1981 regulating the mortgage market).
If, due to a timing mismatch, the income received by the insolvent
party is insufficient to meet the payments described in the preceding
paragraph, the insolvency managers must settle them by realising
the replacement assets set aside to cover the issue and, if this is not
sufficient, they must obtain financing to meet the mandated
payments to the holders of the mortgage-backed bonds, and the
finance provider must be subrogated to the position of the bond-
holders.
In the event that it would be necessary to proceed in accordance with
the terms of Article 212.1 and, in accordance with the requirements
of Article 413 of the Insolvency Law, the payments to all holders of
the mortgage-backed bonds issued would be made on a pro-rata
basis, irrespective of the issue dates of the bonds. If the same credit
or loan is subject to the payment of bonds and a mortgage bond
issue, it will be paid first to the holders of the bonds.
The outstanding mortgage-backed bonds issued by Grupo Santander
totalled EUR 23,197 million at 31 December 2021 (all of which were
denominated in euros), of which EUR 22,747 million were issued by
Banco Santander, S.A (with an outstanding face value of EUR
22,266 million), and EUR 450 million were issued by Santander
Consumer Finance, S.A. The issues outstanding at 31 December 2021
and 2020 are detailed in the separate financial statements of each of
these companies.
Mortgage-backed bond issuers have an early redemption option for
the purpose of complying with the limits on the volume of
outstanding mortgage-backed bonds stipulated by mortgage market
regulations. In addition, the issuing entity may advance the
mortgage-backed bonds, if this has been expressly established in the
final conditions of the issue in question and under the conditions set
out therein.
None of the mortgage-backed bonds issued by the Group entities had
replacement assets assigned to them.
Annual report 2021 634
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
23. Subordinated liabilities
a) Breakdown
The detail, by currency of issue, of Subordinated liabilities, deposits
and marketable debt securities, in the consolidated balance sheets is
as follows:
Currency of issue
Euro
US dollar
Pound sterling
Brazilian real
Other currencies
Balance at end of year
EUR million
2020
13,570
5,991
565
—
1,754
2021
13,857
8,236
1,535
879
1,689
2019
12,542
6,506
655
—
1,359
26,196
21,880
21,062
2021
Outstanding issue
amount in foreign
currency (million)
13,857
9,328
1,289
5,555
Annual interest
rate (%)
3.52 %
4.92 %
4.36 %
9.65 %
Note 50 contains a detail of the residual maturity periods of
subordinated liabilities at each year-end.
b) Changes
The movement in the balance of subordinated liabilities in the last
three years were as follows:
EUR million
Balance at beginning of year
Net inclusion of entities in the Group
(note 3)
Placements
Of which:
Banco Santander, S.A.
Banco Santander (Brasil) S.A.
Banco Santander - Chile
PSA Bank Deutschland GmbH
Banca PSA Italia S.p.a.
2021
2020
2019
21,880 21,062 23,820
—
—
—
5,340
4,075
1,090
4,469
3,722
1,056
871
—
—
—
—
353
—
—
—
—
23
11
Net redemptions and repurchases*
(1,500)
(2,838)
(4,009)
Of which:
Banco Santander, S.A.
Santander UK plc
Santander UK Group Holdings plc
Santander Bank, National Association
Banco Santander (Brasil) S.A.
Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo
Financiero Santander México
(1,500)
(1,671)
(3,782)
(740)
(316)
(111)
(16)
—
(19)
—
—
—
—
—
—
(69)
Exchange differences and other
movements
Balance at end of year
476
(419)
161
26,196 21,880 21,062
* The balance relating to issuances, redemptions and repurchases (EUR 3,840
million), together with the interest paid in remuneration of these issuances
including PPCC (EUR 1,184 million), is included in the cash flow from financing
activities.
c) Other disclosures
This caption includes contingent convertible or redeemable preferred
participations, as well as other subordinated financial instruments
issued by consolidated companies, which do not qualify as equity
(preferred shares).
Preferred shares do not have voting rights and are non-cumulative.
They have been subscribed by third parties outside the Group, and
except for the issues of Santander UK plc, the rest are redeemable by
decision of the issuer, according to the terms of each issue.
Banco Santander's contingently convertible preferred participations
are subordinated debentures and rank after common creditors and
any other subordinated credit that by law and/or by their terms, to
the extent permitted by Spanish law, ranks higher than the
contingently convertible preferred participations. Their remuneration
is conditioned to the obtainment of sufficient distributable profits,
and to the limitations imposed by the regulations on shareholders'
equity, and they have no voting rights. The other issues of Banco
Santander, S.A. mentioned in this caption are also subordinated
debentures and, for credit ranking purposes, they rank behind all the
common creditors of the issuing entities and ahead of any other
subordinated credit that ranks pari passu with the Bank's
contingently convertible preferred participations.
The main issues of subordinated debt securities issued, broken down
by company, are detailed below:
At 22 November 2021, Banco Santander, S.A. issued subordinated
debentures for a term of eleven years, with a redemption option on
the tenth anniversary of the issue date, in the amount of USD
1,000 million (EUR 1,007 million at the exchange rate on the day of
issue). The issue bears interest at an annual rate of 3.225%, payable
semi-annually, for the first ten years (then repricing at a margin of
160 points over the one-year U.S. government bond).
At 4 October 2021, Banco Santander, S.A. issued subordinated
debentures for a term of eleven years, with a redemption option on
the sixth anniversary of the issue date, amounting to GBP 850 million
(EUR 887 million at the exchange rate on the day of issue). The issue
bears interest at an annual rate of 2.25%, payable annually for the
first six years (then repricing at a margin of 165 points over the 5-
year UK government bond).
Annual report 2021 635
—
(124)
Issues by Banco Santander, S.A.
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
At 21 September 2021, Banco Santander, S.A. carried out a
placement of preferential shares contingently convertible into newly
issued ordinary shares of the Bank ('PPCC') for a nominal amount of
EUR 1,000 million (issue placed on the market EUR 997 million). The
issuance has been carried out at par and the remuneration of the
PPCC, whose payment is subject to certain conditions and is also
discretionary, has been set at 3.625% per year for the first eight
years, being reviewed every five years applying a margin of 376 basis
points over the 5-year Mid-Swap Rate.
At 11 September 2021, Banco Santander, S.A. proceeded to redeem
early and voluntarily the entire issue made on 11 September 2014 of
tier 1 contingently convertible preference shares (PPCC) with ISIN
code XS110729154 which are traded in the Irish Stock Exchange
Market 'Global Exchange Market', for a total nominal amount of EUR
1,500 million .
At 12 May 2021, Banco Santander placed the issue of preference
shares contingently convertible into newly issued ordinary shares of
the Bank, previously announced, for a total nominal amount of EUR
1,578 million, issued in a Series in Dollars of USD 1,000 million (EUR
828 million at the exchange rate on the day of issue) and a Series in
Euros for an amount of EUR 750 million. The issuance is carried out at
par and the remuneration of the PPCC, whose payment is subject to
certain conditions and is also discretionary, has been set (i) for the
Series in Dollars at 4.750% per annum for the first six years, being
revised every five years applying a margin of 375.3 basis points over
the 5-year UST rate and (ii) for the Series in Euros by 4.125% per
annum for the first seven years, being revised every five years
applying a margin of 431.1 basis points over the applicable 5-year
euro mid-swap.
At 3 December 2020, Banco Santander, S.A. issued subordinated
debentures with a ten-year term of USD 1,500 million (EUR 1,222
million at the date of issue). The issue bears interest at an annual rate
of 2.749%, payable semiannually.
At 22 October 2020, it carried out a ten-year subordinated debenture
issue for an amount of EUR 1,000 million. The issue bears interest at
an annual rate of 1.625%, payable annually.
At 12 March 2020, it proceeded to redeem early and voluntarily the
entire outstanding issue of Tier 1 Contingently Convertible Preferred
Participations Series I/2014, for a total nominal amount of EUR 1,500
million.
At 14 January 2020, it carried out a placement of contingently
convertible preferred participations into newly issued ordinary shares
of the Bank (the 'PPCCs'), excluding the pre-emptive subscription
rights of its shareholders and for a nominal amount of EUR 1,500
million (the 'Issue' and the 'PPCCs'). The Issue was made at par and
the remuneration of the PPCCs, the payment of which is subject to
certain conditions and is also discretionary, was set at 4.375% per
annum for the first six years, revised every five years thereafter by
applying a margin of 453.4 basis points over the 5-year Mid-Swap
Rate (5-year Mid-Swap Rate).
At 19 May 2019, the voluntary early redemption of the preferred
shares relating to the second issue made on 9 May 2014 (code ISIN
XS1066553329) was communicated for an amount of USD 1,500
million (EUR 1,345 million) at the redemption date.
At 8 February 2019, Banco Santander, S.A, carried out an issue of
PPCC for a nominal amount of USD 1,200 million (EUR 1,056 million).
The remuneration of the issues whose payment is subject to certain
conditions and is also discretionary was set at 7.50% per annum, for
the first five years (revised thereafter by applying a margin of 498.9
points over the mid-swap rate).
At 19 March 2018, a 'PPCC' issue was carried out, for a nominal
amount of EUR 1,500 million. The remuneration of the issue, the
payment of which is subject to certain conditions and is also
discretionary, was set at 4.75% per annum, payable quarterly, for the
first seven years (revised thereafter by applying a margin of 410 basis
points over the Mid-swap rate).
At 8 February 2018, a 10-year subordinated debenture issue of EUR
1,250 million was carried out. The issue accrues annual interest of
2.125% payable annually.
At 25 April and 29 September 2017, Banco Santander, S.A. carried
out issues of 'PPCCs', for a nominal amount of EUR 750 million, and
EUR 1,000 million respectively. The remuneration of the PPCCs, the
payment of which is subject to certain conditions and is also
discretionary, was set at 6.75% per annum for the first five years
(revised thereafter by applying a margin of 680.3 basis points over
the 5-year Mid-Swap Rate) for the issue disbursed in April, at 5.25%
per annum for the first six years (revised thereafter by applying a
margin of 499.9 basis points over the 5 years Mid-Swap Rate) for the
issue disbursed in September.)
Issues by Banco Santander - Chile
In June 2020, Banco Santander - Chile issued subordinated
debentures for a term of fifteen years, in the amount of UF 5 million
(equivalent to USD 185 million). The issue bears annual interest at
3.5%.
In April 2020, Banco Santander - Chile issued two subordinated
debentures, the first for a term of fourteen years, for an amount of
UF 3 million (equivalent to USD 100 million), bearing annual interest
at 3%, and the second for a term of nineteen years, for an amount of
UF 3 million (equivalent to USD 100 million), bearing annual interest
at 3.15%.
Issues Banco Santander (Brasil) S.A.
At the end of November 2021, Banco Santander (Brasil) S.A. carried
out an issue of Subordinated Financial Bills (TIER II) in its local market
for a 10-year term, with a repurchase option as of the fifth
anniversary of the issue date, in the amount of BRL 5,500 million. The
issue price was CDI +2% per annum, payable at maturity.
On 29 January 2014 Banco Santander (Brasil) S.A. issued Tier 1
perpetual subordinated notes for a nominal amount of USD 1,248
million and the Group acquired 89.6% of the issue. The notes are
perpetual and would be converted into common shares of Banco
Santander (Brasil) S.A. if the common equity Tier 1 ratio, calculated as
established by the Central Bank of Brazil, were lower than 5.125%.
This issue was fully redeemed in fiscal year 2019.
Annual report 2021 636
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Lease liabilities
The cash outflow of leases in 2021 was EUR 715 million (EUR 789
and EUR 946 million in 2020 and 2019, respectively).
The analysis of the maturities of lease liabilities at December 2021,
2020 and 2019 is shown below:
EUR million
Maturity Analysis - Discounted
payments
Within 1 year
Between 1 and 3 years
Between 3 and 5 years
Later than 5 years
2021
2020
2019
690
933
534
699
594
981
637
837
766
1,254
875
2,213
Total discounted payments at the end
of the year
2,856
3,049
5,108
During 2021, 2020 and 2019 there were no significant variable lease
payments not included in the valuation of lease liabilities.
Issues by Banco Santander México, S.A., Institución de Banca
Múltiple, Grupo Financiero Santander México
At 1 October 2018, a ten-year subordinated debenture issue was
made by Banco Santander México, S.A. Institución de Banca Múltiple,
Grupo Financiero Santander México for a nominal amount of USD
1,300 million and at an interest rate of 5.95%, with the group having
acquired 75% of the issue.
Additionally, at 30 December 2016, a nominal amount of USD 500
million was made, with the Group having acquired 88.2% of the
issue. The perpetual debentures are automatically converted into
shares when the Regulatory Capital Ratio (CET1) is equal to or less
than 5.125% at the conversion price.
Issues by Santander Bank Polska S.A.
At 20 April 2018, Santander Bank Polska S.A. carried out a ten-year
subordinated debenture issue with a redemption option on the fifth
anniversary of the issue date in the amount of PLN 1,000 million. The
issue bears floating interest at Wibor (6M) + 160 basis points payable
semi-annually.
The accrued interests from the subordinated liabilities during 2021
amounted to EUR 648 million (EUR 571 million and EUR 645 million
during 2020 and 2019, respectively).
In addition, interests from the PPCC during 2021 amounted to EUR
566 million (EUR 552 million and EUR 595 million in 2020 and 2019,
respectively).
24. Other financial liabilities
The detail of Other financial liabilities in the consolidated balance
sheets is as follows:
EUR million
Trade payables
Clearing houses
Tax collection accounts:
Public Institutions
Factoring accounts payable
Unsettled financial transactions
Lease liabilities (note 2.l)
Other financial liabilities
2021
2020
2019
1,475
1,177
1,279
650
599
165
5,315
4,122
4,122
275
3,779
2,856
222
409
5,080
3,693
3,049
5,108
15,523
12,719
15,459
29,873 26,968 30,235
Note 50 contains a detail of the residual maturity periods of other
financial liabilities at each year-end.
Annual report 2021 637
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
25. Provisions
a) Breakdown
The detail of Provisions in the consolidated balance sheets is as
follows:
EUR million
Provision for pensions and other
obligations post-employments
Other long term employee
benefits
Provisions for taxes and other
legal contingencies
Provisions for contingent liabilities
and commitments (note 2)
Other provisions
Provisions
2021
2020
2019
3,185
3,976
6,358
1,242
1,751
1,382
1,996
2,200
3,057
733
2,427
9,583
700
2,225
739
2,451
10,852
13,987
b) Changes
The changes in 'Provisions' in the last three years were as follows:
EUR million
2021
Post
employment
plans
Long term
employee
benefits
Contingent
liabilities and
commitments
Other
provisions
Balances at beginning of year
Additions charged to income
Interest expense (note 39)
Staff costs (note 47)
Provisions or reversion of provisions
Addition
Release
Other additions arising from insurance contracts linked to
pensions
Changes in value recognised in equity
Payments to pensioners and pre-retirees with a charge to
internal provisions
Payments to external funds
Amounts used
Transfer, exchange differences and other changes
Balances at end of year
3,976
100
78
67
(45)
21
(66)
(8)
(1,705)
(201)
(440)
—
1,463
3,185
1,751
101
13
6
82
154
(72)
—
—
(605)
—
—
(5)
1,242
700
29
—
—
29
473
(444)
—
—
—
—
—
4
733
4,425
2,748
—
—
2,748
3,065
(317)
—
—
—
—
Total
10,852
2,978
91
73
2,814
3,713
(899)
(8)
(1,705)
(806)
(440)
(2,961)
(2,961)
211
4,423
1,673
9,583
Annual report 2021 638
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
2020
2019
Post
employment
plans
Long term
employee
benefits
Contingent
liabilities and
commitments
Other
provisions
Total
Post
employment
plans
Long term
employee
benefits
Contingent
liabilities and
commitments
Other
provisions
Total
Balances at beginning of year
6,358
1,382
739
5,508 13,987
5,558
1,239
779
5,649 13,225
Incorporation of Group
companies, net
Additions charged to income
Interest expense (note 39)
Staff costs (note 47)
Provisions or reversion of
provisions
Addition
Release
Other additions arising from
insurance contracts linked to
pensions
Changes in value recognised in
equity
Payments to pensioners and pre-
retirees with a charge to internal
provisions
Benefits paid due to settlements
Insurance premiums paid
Payments to external funds
Amounts used
Transfer, exchange differences
and other changes
Balances at end of year
(5)
(217)
84
69
(370)
6
(376)
2
547
(303)
(1,551)
(1)
(333)
—
(521)
3,976
—
782
11
7
764
787
(23)
—
—
(408)
—
—
—
—
(5)
1,751
(1)
50
—
—
50
490
(440)
—
—
—
—
—
—
—
(2)
(8)
1,934
—
—
2,549
95
76
1,934
2,378
2,258
3,541
(324)
(1,163)
—
173
128
65
(20)
10
(30)
2
4
547
1,520
(711)
(1,551)
(1)
(333)
(2,485)
(2,485)
(331)
—
(1)
(455)
—
—
—
—
—
—
—
(1)
729
17
7
705
713
(8)
—
—
(612)
—
—
—
—
—
(31)
—
—
(31)
422
—
(1)
2,836
—
—
3,707
145
72
2,836
3,490
4,276
5,421
(453)
(1,440)
(1,931)
—
—
—
—
—
—
—
—
4
—
1,520
—
—
—
—
(943)
—
(1)
(455)
(2,907)
(2,907)
(88)
700
(530)
(1,144)
4,425 10,852
(110)
6,358
27
1,382
(9)
739
(70)
(162)
5,508 13,987
c) Provision for pensions and other obligations post –
employments and Other long term employee benefits
The detail of Provisions for pensions and similar obligations is as
follows:
EUR million
Provisions for post-employment plans
- Spanish entities
Provisions for other similar obligations
- Spanish entities
Of which pre-retirements
Provisions for post-employment plans
- United Kingdom
Provisions for post-employment plans
- Other subsidiaries
Provisions for other similar obligations
- Other subsidiaries
Provision for pensions and other
obligations post -employments and
Other long term employee benefits
Of which defined benefits
2021
2020
2019
1,709
1,881
3,951
1,188
1,176
1,695
1,676
1,321
1,303
44
449
329
1,432
1,646
2,078
54
56
61
4,427
5,727
7,740
4,419
5,719
7,731
i. Spanish entities - Post-employment plans and other similar
obligations
At 31 December 2021, 2020 and 2019, the Spanish entities had post-
employment benefit obligations under defined contribution and
defined benefit plans. In addition, in various years some of the
consolidated entities offered certain of their employees the
possibility of taking pre-retirement and, therefore, provisions are
recognised each year for the obligations to employees taking pre-
retirement -in terms of salaries and other employee benefit costs-
from the date of their pre-retirement to the agreed end date.
In 2019, the provisions accounted for benefit plans and contribution
commitments were EUR 688 million.
In December 2020, Banco Santander reached an agreement with the
workers' representatives to implement an early retirement and
incentivized dismissals plan, which was expected to benefit 3,572
employees during 2021, constituting a provision to cover these
commitments amounting to EUR 688 million. In addition to this plan,
in 2020, 443 employees took advantage of the offer of early
retirement and incentivized dismissals, increasing the provision made
to cover these commitments to EUR 84 million. In 2021, due to the
increase in the number of employees covered by the plan, a provision
of EUR 139 million has been recognised.
In December 2019 Banco Santander reached an agreement with the
workers' representatives to offer during 2020 to part of its passive
personnel, the possibility of receiving the pensionable rights derived
from the collective bargaining agreement in the form of a single
consideration or divided into a maximum of 5 equal annuities. The
proposal was also extended to personnel with pensionable rights
recognized under individual contracts or agreements. The number of
beneficiaries who exercised the voluntary option of accepting the
substitution of the life annuity for the payment of a lump sum in the
form of a capital sum or in instalments of a maximum of 5 annuities
amounted to 15,613 people. The effect of the reduction of the
aforementioned commitments is shown in the tables below under
the headings 'Benefits paid in settlement' in the amount of EUR
1,551 million and 'Effect of reduction/settlement' in the amount of
EUR 362 million.
Annual report 2021 639
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
On 8 July 2021, Banco Santander reached an agreement with the
employee representatives for the transformation of defined benefit
pension commitments into defined contributions for certain retired
personnel from Banco Popular and Banco Pastor. Through the
aforementioned Collective Agreement, it was agreed to carry out an
offer to replace the life annuities that the passive personnel included
in the scope of application of said Collective Agreement had been
receiving, for a capitalization fund in the Santander Employees
pension plan. The number of beneficiaries who exercised the
voluntary option to accept the substitution of the life annuity for a
capitalization fund in the Santander Employees pension plan
amounted to 1,468 people.
The effect of the reduction of the aforementioned commitments is
shown in the tables below under the headings 'Benefits paid by
settlement' amounting to EUR 166 million and 'Effect reduction /
settlement' amounting to EUR 36 million.
The expenses incurred by the Spanish companies in 2021, 2020 and
2019 in respect of contributions to defined contribution plans
amounted to EUR 91 million, EUR 89 million and EUR 89 million,
respectively.
The amount of the defined benefit obligations was determined on
the basis of the work performed by independent actuaries using the
following actuarial techniques.
1. Valuation method: projected unit credit method, which sees each
period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately.
2. Actuarial assumptions used: unbiased and mutually compatible.
Specifically, the most significant actuarial assumptions used in the
calculations were as follows:
Annual discount rate
Mortality tables
Cumulative annual CPI growth
Annual salary increase rate
Annual social security pension
increase rate
Annual benefit increase rate
Post-employment plans
2021
0.90%
2020
0.60%
PE2020 M/F Col.
Orden 1
PE2020 M/F
Col. Orden 1
2019
0.80%
PERM/F-2000
Other similar obligations
2021
0.90%
2020
0.60%
PE2020 M/F Col.
Orden 1
PE2020 M/F Col.
Orden 1
2019
0.80%
PERM/F-2000
1.00%
1.25%*
1.00%
1.00%
1.25%*
1.00%
1.00%
1.25%*
1.00%
N/A
N/A
N/A
1.00%
N/A
N/A
0%
1.00%
N/A
N/A
0%
1.00%
N/A
N/A
0 %
* Corresponds to the group’s defined-benefit obligations.
The discount rate used for the flows was determined by reference to
high-quality corporate bonds (at least AA in euros) matching the
durations of the commitments. From the bond portfolio considered,
callable, putable and sinkable bonds, which could distort the rates,
are excluded.
Any changes in the main assumptions could affect the calculation of
the obligations. At 31 December 2021, if the discount rate used had
been decreased or increased by 50 basis points (bp), there would
have been an increase or decrease in the present value of the post-
employment obligations of 5.00% (-50 bp) to -5.06% (+50
bp),respectively, and an increase or decrease in the present value of
the long-term obligations of 1.18% (-50 bp) to -1.18% (+50 bp),
respectively.
Annual report 2021 640
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
These changes would be offset in part by increases or decreases in
the fair value of the assets and insurance contracts linked to
pensions.
3. The estimated retirement age of each employee is the first at
which the employee is entitled to retire or the agreed-upon age, as
appropriate.
The fair value of insurance contracts was determined as the present
value of the related payment obligations, taking into account the
following assumptions:
Post-employment plans
2021
2020
2019
Other similar obligations
2021
2020
2019
Expected rate of return on plan assets
Expected rate of return on reimbursement rights
0.90%
0.90%
0.60%
0.60%
0.80%
0.80%
0.90%
N/A
0.60%
N/A
0.80%
N/A
The funding status of the defined benefit obligations in 2021 and the
two preceding years is as follows:
EUR million
Present value of the obligations
To current employees
Vested obligations to retired employees
To pre-retirees employees
Long-service bonuses and other benefits
Other
Less - Fair value of plan assets
Provisions - Provisions for pensions
Of which:
Internal provisions for pensions
Net pension assets
Insurance contracts linked to pensions (note 14)
Unrecognised net assets for pensions
The amounts recognised in the consolidated income statements in
relation to the aforementioned defined benefit obligations are as
follows:
EUR million
Current service cost
Interest cost (net)
Expected return on insurance contracts linked to pensions
Provisions or reversion of provisions
Actuarial (gains)/losses recognised in the year
Past service cost
Pre-retirement cost
Other*
*Including reduction/settlement effect
Post-employment plans
2021
2020
2019
Other similar obligations
2021
2020
2019
29
60
59
2,797
3,318
5,393
—
—
65
2,891
1,217
1,674
—
—
41
3,419
1,542
1,877
—
—
42
5,494
1,547
3,947
—
—
—
—
—
—
1,186
1,688
1,317
12
—
18
1
18
—
1,198
1,707
1,335
10
12
14
1,188
1,695
1,321
1,560
1,707
3,759
1,188
1,695
1,321
(30)
149
(5)
—
174
(4)
—
192
(4)
—
—
—
—
—
—
—
—
—
Post-employment plans
2021
2020
2019
Other similar obligations
2021
2020
2019
5
24
(1)
—
13
—
(39)
2
10
26
(1)
—
2
—
(372)
(335)
12
53
(2)
—
3
1
(29)
38
1
11
—
(15)
—
139
(55)
81
1
9
—
(3)
—
772
(15)
764
1
15
—
7
1
687
(2)
709
Annual report 2021 641
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
In addition, in 2021 'Other comprehensive income – Items not
reclassified to profit or loss – Actuarial gains or (-) losses on defined
benefit pension plans' has decreased by EUR 37 million with respect
to defined benefit obligations (increase of EUR 84 and EUR 278
million in 2020 and 2019, respectively).
The changes in the present value of the accrued defined benefit
obligations were as follows:
EUR million
Present value of the obligations at beginning of year
Incorporation of Group companies, net
Current service cost
Interest cost
Pre-retirement cost
Effect of curtailment/settlement
Benefits paid
Benefits paid due to settlements
Past service cost
Actuarial (gains)/losses
Demographic actuarial (gains)/losses
Financial actuarial (gains)/losses
Exchange differences and other items
Post-employment plans
2021
3,419
2020
5,494
2019
5,427
Other similar obligations
2021
2020
1,707
1,335
6
5
36
—
(61)
(248)
(166)
13
(121)
9
(130)
8
—
10
39
—
(372)
(359)
(1,551)
2
163
91
72
(7)
—
12
72
1
(29)
(400)
—
3
407
15
392
1
—
1
11
139
(55)
(589)
—
—
(15)
(8)
(7)
(1)
—
1
9
772
(15)
(392)
—
—
(3)
(8)
5
—
2019
1,204
(1)
1
15
687
(2)
(599)
—
1
7
(9)
16
22
Present value of the obligations at end of year
2,891
3,419
5,494
1,198
1,707
1,335
The changes in the fair value of plan assets and of insurance
contracts linked to pensions were as follows:
Plan Assets
EUR million
Fair value of plan assets at beginning of year
Incorporation of Group companies, net
Expected return on plan assets
Gains/(losses) on settlements
Benefits paid
Contributions/(surrenders)
Actuarial gains/(losses)
Exchange differences and other items
Fair value of plan assets at end of year
Insurance Contracts linked to pensions
EUR million
Fair value of insurance contracts linked to pensions
at beginning of year
Incorporation of Group companies, net
Expected return on insurance contracts linked to
pensions
Benefits paid
Paid premiums
Actuarial gains/(losses)
Fair value of insurance contracts linked to
pensions at end of year
Post-employment plans
Other similar obligations
2021
1,542
6
12
(22)
(263)
15
(76)
3
2020
1,547
—
13
—
(94)
5
76
(5)
2019
1,500
—
19
—
(108)
8
128
—
1,217
1,542
1,547
2021
2020
2019
12
—
—
—
(2)
—
—
—
10
14
—
—
—
(2)
—
—
—
12
15
—
—
—
(2)
—
—
1
14
Post-employment plans
Other similar obligations
2021
2020
2019
2021
2020
2019
174
—
1
(19)
1
(8)
192
—
1
(21)
—
2
210
—
2
(24)
—
4
149
174
192
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Annual report 2021 642
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Any changes in the main assumptions could affect the calculation of
the obligations. At 31 December 2021, if the discount rate used had
been decreased or increased by 50 basis points, there would have
been an increase or decrease in the present value of the obligations
of 9.74% (-50 bp) and -8.67% (+50 bp), respectively. If the inflation
assumption had been increased or decreased by 50 basis points,
there would have been an increase or decrease in the present value
of the obligations of 6.19% (+50 bp) and -6.00% (-50 bp),
respectively. These changes would be offset in part by increases or
decreases in the fair value of the assets.
The funding status of the defined benefit obligations in 2021 and the
two preceding years is as follows:
EUR million
Present value of the obligations
15,392
15,472
14,297
2021
2020
2019
Less-
Fair value of plan assets
Provisions - Provisions for pensions
Of which:
17,244
15,575
14,755
(1,852)
(103)
(458)
Internal provisions for pensions
44
449
329
Net assets for pensions
(1,896)
(552)
(787)
The amounts recognised in the consolidated income statements in
relation to the aforementioned defined benefit obligations are as
follows:
EUR million
Current service cost
Interest cost (net)
Provisions or reversal of provisions, net
Cost of services provided
Others
2021
2020
2019
33
(6)
6
—
33
30
(12)
27
(24)
—
(1)
17
—
—
3
In addition, in 2021 'Other comprehensive income – Items not
reclassified to profit or loss – Actuarial gains or (-) losses on defined
benefit pension plans' decreased by EUR 1,475 million with respect
to defined benefit obligations (increase of EUR 568 million and
decrease of EUR 601 million at 31 December 2020 and 2019,
respectively).
In view of the conversion of the defined-benefit obligations to
defined-contribution obligations, the Group has not made material
current contributions in Spain in 2021 to fund its defined-benefit
pension obligations.
The plan assets and the insurance contracts linked to pensions are
instrumented mainly through insurance policies.
The following table shows the estimated benefits payable at 31
December 2021 for the next ten years:
EUR million
2022
2023
2024
2025
2026
2027 to 2031
606
466
402
333
284
904
ii. United Kingdom
At the end of each of the last three years, the businesses in the
United Kingdom had post-employment benefit obligations under
defined contribution and defined benefit plans. The expenses
incurred in respect of contributions to defined contribution plans
amounted to EUR 89 million in 2021 (EUR 91 million in 2020 and EUR
93 million in 2019).
The amount of the defined benefit obligations was determined on
the basis of the work performed by independent actuaries using the
following actuarial techniques:
1. Valuation method: projected unit credit method, which sees each
period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately.
2. Actuarial assumptions used: unbiased and mutually compatible.
Specifically, the most significant actuarial assumptions used in the
calculations were as follows:
2021
2020
2019
Annual
discount rate
Mortality
tables
Cumulative
annual CPI
growth
Annual salary
increase rate
Annual
pension
increase rate
1.90 %
The S3 Middle
tables weighted
at 84% of the
CMI_2020
projection with
1.28 %
The S3 Middle
tables weighted
at 84% of the
CMI_2018
projection with
an initial addition an initial addition
of 0.15%,
smoothing
parameter 7 and
improving
1.25%.
of 0.15%,
smoothing
parameter 7 and
improving 1.25%.
2.11 %
The S3 Middle
tables weighted
at 84% of the
CMI_2018
projection with
an initial addition
of 0.15%,
smoothing
parameter 7 and
improving
1.25%.
3.37 %
1.00 %
2.95 %
1.00 %
3.01 %
1.00 %
3.21 %
2.85 %
2.91 %
The discount rate used for the flows was determined by reference to
high-quality corporate bonds (at least AA in pounds sterling) that
coincide with the terms of the obligations.
Annual report 2021 643
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
iii. Other foreign subsidiaries
Certain of the consolidated foreign entities have acquired
commitments to their employees similar to post-employment
benefits.
At 31 December 2021, 2020 and 2019, these entities had defined-
contribution and defined-benefit post-employment benefit
obligations. The expenses incurred in respect of contributions to
defined contribution plans amounted to EUR 106 million in 2021
(EUR 103 million at 31 December 2020 and EUR 110 million at 31
December 2019).
The actuarial assumptions used by these entities (discount rates,
mortality tables and cumulative annual CPI growth) are consistent
with the economic and social conditions prevailing in the countries in
which they are located.
Specifically, the discount rate used for the flows was determined by
reference to high-quality corporate bonds, except in the case of Brazil
where there is no extensive corporate bond market and, accordingly
the discount rate was determined by reference to the series B bonds
issued by the Brazilian National Treasury Secretariat for a term
coinciding with that of the obligations. In Brazil the discount rate
used was between 8.39% and 8.44%, the CPI 3.00% and the
mortality table the AT - 2000 Basic.
Any changes in the main assumptions could affect the calculation of
the obligations. At 31 December 2021, if the discount rate used had
been decreased or increased by 50 basis points, there would have
been an increase or decrease in the present value of the obligations
of 4.78% and -4.40%, respectively. These changes would be offset in
part by increases or decreases in the fair value of the assets.
The changes in the present value of the accrued defined benefit
obligations were as follows:
EUR million
Present value of the obligations at beginning
of year
Current service cost
Interest cost
Benefits paid
Contributions made by employees
Past service cost
Actuarial (gains)/losses
Demographic actuarial (gains)/losses
Financial actuarial (gains)/losses
Exchange differences and other items
Present value of the obligations at end
of year
2021
2020
2019
15,472 14,297 12,079
33
219
30
284
27
352
(465)
(445)
(441)
18
6
17
—
18
—
(933) 2,060
1,594
(17)
34
48
(916) 2,026
1,546
1,042
(771)
668
15,392 15,472 14,297
The changes in the fair value of the plan assets were as follows:
EUR million
2021
2020
2019
Fair value of plan assets at beginning of year
Expected return on plan assets
Benefits paid
Contributions
Actuarial gains/(losses)
Exchange differences and other items
15,575 14,755 12,887
225
296
376
(463)
(443)
(441)
285
541
274
1,492
1,081
(799)
244
993
696
Fair value of plan assets at end of year
17,244 15,575 14,755
In 2022 the Group expects to make current contributions to fund
these obligations for amounts similar to those made in 2021.
The main categories of plan assets as a percentage of total plan
assets are as follows:
Equity instruments
Debt instruments
Properties
Other
2021
2020
2019
10%
51%
10%
29%
9%
55%
10%
26%
12%
46%
11%
31%
The following table shows the estimated benefits payable at 31
December 2021 for the next ten years:
EUR million
2022
2023
2024
2025
2026
2027 to 2031
462
367
393
408
433
2,481
Annual report 2021 644
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The funding status of the obligations similar to post-employment
benefits and other long-term benefits in 2021 and the two
preceding years is as follows:
EUR million
Present value of the obligations
Less-
Of which: with a charge to the participants
Fair value of plan assets
Provisions - Provisions for pensions
Of which:
Internal provisions for pensions
Net assets for pensions
Unrecognised net assets for pensions
Of which
business in
Brazil
5,111
106
5,288
(283)
432
(46)
(669)
2021
8,018
106
7,167
745
1,478
(64)
(669)
2020
8,434
112
7,182
1,140
1,694
(83)
(471)
2019
10,717
176
8,826
1,715
2,129
(116)
(298)
The amounts recognised in the consolidated income statements in
relation to these obligations are as follows:
The changes in the present value of the accrued obligations were as
follows:
2021
2020
2019
EUR million
EUR million
Current service cost
Interest cost (net)
Provisions or reversion of provisions
(Actuarial gains)/losses recognised in the
year
Past service cost
Pre-retirement cost
Other
34
62
11
3
(24)
(3)
83
35
72
11
5
—
32
101
12
6
—
(5)
(1)
118
150
In addition, in 2021 'Other comprehensive income – Items not
reclassified to profit or loss – Actuarial gains or (-) losses on defined
benefit pension plans' decreased by EUR 193 million with respect to
defined benefit obligations (decreased EUR 105 million and increased
EUR 641 million in 2020 and 2019, respectively).
Present value of the obligations at
beginning of year
Incorporation of Group companies, net
Current service cost
Interest cost
Pre-retirement cost
Effect of curtailment/settlement
Benefits paid
Contributions made by employees
Past service cost
Actuarial (gains)/losses
Demographic actuarial (gains)/losses
Financial actuarial (gains)/losses
Exchange differences and other items
Present value of the obligations
at end of year
2021
2020
2019
8,434 10,717
9,116
(5)
34
429
(24)
(3)
(84)
35
465
—
(5)
—
32
651
—
(1)
(538)
(544)
(666)
3
3
3
5
5
6
(486)
176
1,652
16
23
3
(502)
153
1,649
171
(2,334)
(78)
8,018
8,434 10,717
The changes in the fair value of the plan assets were as follows:
EUR million
2021
2020
2019
Fair value of plan assets at beginning of year
Incorporation of Group companies, net
Expected return on plan assets
Benefits paid
Contributions
Actuarial gains/(losses)
Exchange differences and other items
Fair value of plan assets at end of year
7,182
8,826
7,743
(6)
411
(86)
410
—
573
(478)
(488)
(613)
152
63
214
(155)
536
1,021
61
(2,079)
(112)
7,167 7,182 8,826
In 2022 the Group expects to make contributions to fund these
obligations for amounts similar to those made in 2021.
Annual report 2021 645
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The main categories of plan assets as a percentage of total plan
assets are as follows:
The types of provision were determined by grouping together items
of a similar nature:
Equity instruments
Debt instruments
Properties
Other
2021
12%
83%
1%
4%
2020
2019
11%
84%
1%
4%
8%
84%
1%
7%
The following table shows the estimated benefits payable at 31
December 2021 for the next ten years:
EUR million
2022
2023
2024
2025
2026
2027 to 2031
538
544
550
555
560
2,870
d) Provisions for taxes and other legal contingencies and
Other provisions
'Provisions - Provisions for taxes and other legal contingencies' and
'Provisions - Other provisions', which include, inter alia, provisions for
restructuring costs and tax-related and non-tax-related proceedings,
were estimated using prudent calculation procedures in keeping with
the uncertainty inherent to the obligations covered. The definitive
date of the outflow of resources embodying economic benefits for
the Group depends on each obligation. In certain cases, these
obligations have no fixed settlement period and, in other cases,
depend on the legal proceedings in progress.
The detail, by geographical area, of Provisions for taxes and other
legal contingencies and Other provisions is as follows:
EUR million
Recognised by Spanish companies
Recognised by other EU companies
Recognised by other companies
Of which:
Brazil
2021
2020
2019
1,595
1,647
1,381
779
539
1,100
2,049
2,239
3,027
1,339
1,475
2,484
4,423 4,425 5,508
Set forth below is the detail, by type of provision, of the balance at 31
December 2021, 2020 and 2019 of Provisions for taxes and other
legal contingencies and Other provisions.
EUR million
Provisions for taxes
Provisions for employment-related
proceedings (Brazil)
Provisions for other legal proceedings
Provision for customer remediation
Regulatory framework-related provisions
Provision for restructuring
Other
2021
2020
2019
564
600
759
328
437
776
1,104
1,163
1,522
745
36
749
897
395
69
810
951
725
67
641
1,018
4,423 4,425 5,508
Relevant information is set forth below in relation to each type of
provision shown in the preceding table:
The provisions for taxes include provisions for tax-related
proceedings.
The provisions for employment-related proceedings (Brazil) relate to
claims filed by trade unions, associations, the prosecutor’s office and
ex-employees claiming employment rights to which, in their view,
they are entitled, particularly the payment of overtime and other
employment rights, including litigation concerning retirement
benefits. The number and nature of these proceedings, which are
common for banks in Brazil, justify the classification of these
provisions in a separate category or as a separate type from the rest.
The Group calculates the provisions associated with these claims in
accordance with past experience of payments made in relation to
claims for similar items. When claims do not fall within these
categories, a case-by-case assessment is performed and the amount
of the provision is calculated in accordance with the status of each
proceeding and the risk assessment carried out by the legal advisers.
The provisions for other legal proceedings include provisions for
court, arbitration or administrative proceedings (other than those
included in other categories or types of provisions disclosed
separately) brought against Santander Group companies.
The provisions for customer remediation include mainly the
estimated cost of payments to remedy errors relating to the sale of
certain products in the UK, as well as the impact of Swiss franc (CHF)
mortgage portfolios in Poland and the estimated amount related to
the floor clauses of Banco Popular Español, S.A.U. To calculate the
provision for customer remediation, the best estimate of the
provision made by management is used, which is based on the
estimated number of claims to be received and, of these, the number
that will be accepted, as well as the estimated average payment per
case.
The regulatory framework-related provisions include mainly the
provisions relating to the FSCS (Financial Services Compensation
Scheme), the Bank Levy in the UK and in Poland the provision related
to the Banking Tax.
The provisions for restructuring include only the costs arising from
restructuring processes carried out by the various Group companies.
Lastly, the 'Other' heading contains very atomized and individually
insignificant provisions, such as the provisions to cover the
operational risk.
Annual report 2021 646
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Qualitative information on the main litigation is provided in note 25.e
to the consolidated financial statements.
The group's general policy is to record provisions for tax and legal
proceedings in which we assess the chances of loss to be probable
and we do not record provisions when the chances of loss are
possible or remote. We determine the amounts to be provided for as
our best estimate of the expenditure required to settle the
corresponding claim based, among other factors, on a case-by-case
analysis of the facts and the legal opinion of internal and external
counsel or by considering the historical average amount of the loss
incurred in claims of the same nature. The definitive date of the
outflow of resources embodying economic benefits for the Group
depends on each obligation. In certain cases, the obligations do not
have a fixed settlement term and, in others, they depend on legal
proceedings in progress.
The main movements during the 2021 of the breakdown provisions
are shown below:
With respect to provisions for labor and other legal proceedings, in
Brazil, provisions of EUR 155 million and EUR 168 million were
recorded, making payments of EUR 289 million and EUR 205 million,
respectively.
With respect to provisions for customer compensation an amount of
EUR 319 million was provided in Poland to cover the CHF mortgage
portfolio in the year.
On the regulatory framework side, EUR 69 million was provisioned in
the United Kingdom and a utilization of EUR 104 million was made in
the year (Bank Levy). In addition, in Poland, EUR 131 million were
recorded under the regulatory framework and paid during the year.
In addition, the restructuring provision includes provisions of EUR 598
million mainly in the UK and Portugal, as well as the payments made
by the Group during the year.
e) Litigation and other matters
i. Tax-related litigation
At 31 December 2021 the main tax-related proceedings concerning
the Group were as follows:
• Legal actions filed by Banco Santander (Brasil) S.A. and other
Group entities to avoid the application of Law 9.718/98, which
modifies the basis to calculate PIS and COFINS social contribution,
extending it to all the entities income, and not only to the income
from the provision of services. In relation of Banco Santander
(Brasil) S.A. process, in May 2015 the Federal Supreme Court (FSC)
admitted the extraordinary appeal filed by the Federal Union
regarding PIS, and dismissed the extraordinary appeal lodged by
the Brazilian Public Prosecutor's Office regarding COFINS
contribution, confirming the decision of Federal Regional Court
favourable to Banco Santander (Brasil) S.A. of August 2007. The
appeals filed by the other entities before the Federal Supreme
Court, both for PIS and COFINS, are still pending. These claims are
fully provisioned.
• Banco Santander (Brasil) S.A. and other Group companies in Brazil
have appealed against the assessments issued by the Brazilian tax
authorities questioning the deduction of loan losses in their
income tax returns (IRPJ and CSLL) in relation to different
administrative processes of various years on the ground that the
requirements under the applicable legislation were not met. The
appeals are pending decision in CARF. No provision was recognised
in connection with the amount considered to be a contingent
liability.
• Banco Santander (Brasil) S.A. and other Group companies in Brazil
are involved in administrative and legal proceedings against
several municipalities that demand payment of the Service Tax on
certain items of income from transactions not classified as
provisions of services. There are several cases in different judicial
instances. A provision was recognised in connection with the
amount of the estimated loss.
• Banco Santander (Brasil) S.A. and other Group companies in Brazil
are involved in administrative and legal proceedings against the
tax authorities in connection with the taxation for social security
purposes of certain items which are not considered to be
employee remuneration. There are several cases in different
judicial instances. A provision was recognised in connection with
the amount of the estimated loss.
• In May 2003 the Brazilian tax authorities issued separate
infringement notices against Santander Distribuidora de Títulos e
Valores Mobiliarios, Ltda. (DTVM, actually Santander Brasil
Tecnología S.A.) and Banco Santander (Brasil) S.A. in relation to the
Provisional Tax on Financial Movements (CPMF) of the years 2000
to 2002. The administrative discussion ended unfavourably for
both companies, and on July 3, 2015, filed a lawsuit requesting the
cancellation of both tax assessments. The lawsuit was judged
unfavourably in first instance. Therefore, both plaintiffs appealed
to the court of second instance. On December 2020, the appeal
was decided unfavourably. Against the judgment, the bank filed a
motion for clarification which has not been accepted. Currently it is
appealed to higher courts. There is a provision recognized for the
estimated loss.
• In December 2010 the Brazilian tax authorities issued an
infringement notice against Santander Seguros S.A. (Brazil),
currently Zurich Santander Brasil Seguros e Previdência S.A., as the
successor by merger to ABN AMRO Brasil dois Participações S.A., in
relation to income tax (IRPJ and CSLL) for 2005, questioning the tax
treatment applied to a sale of shares of Real Seguros, S.A. The
administrative discussion ended unfavourably, and the CARF
decision has been appealed at the Federal Justice. As the former
parent of Santander Seguros S.A. (Brasil), Banco Santander (Brasil)
S.A. is liable in the event of any adverse outcome of this
proceeding. No provision was recognised in connection with this
proceeding as it is considered to be a contingent liability.
• In November 2014 the Brazilian tax authorities issued an
infringement notice against Banco Santander (Brasil) S.A. in
relation to corporate income tax (IRPJ and CSLL) for 2009
questioning the tax-deductibility of the amortisation of the
goodwill of Banco ABN AMRO Real S.A. performed prior to the
absorption of this bank by Banco Santander (Brasil) S.A., but
accepting the amortisation performed after the merger. Actually it
is appealed before the Higher Chamber of CARF. No provision was
recognised in connection with this proceeding as it was considered
to be a contingent liability.
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• Banco Santander (Brasil) S.A. has also appealed against
infringement notices issued by the tax authorities questioning the
tax deductibility of the amortisation of the goodwill arising on the
acquisition of Banco Comercial e de Investimento Sudameris S.A
from years 2007 to 2012. No provision was recognised in
connection with this matter as it was considered to be a contingent
liability.
• Banco Santander (Brasil) S.A. and other companies of the Group in
Brazil are undergoing administrative and judicial procedures
against Brazilian tax authorities for not admitting tax
compensation with credits derived from other tax concepts, not
having registered a provision for the amount considered to be a
contingent liability.
• Banco Santander (Brasil) S.A. is involved in appeals in relation to
infringement notices initiated by tax authorities regarding the
offsetting of tax losses in the CSLL (‘Social Contribution on Net
Income’) of year 2009. The appeal is pending decision in CARF. No
provision was recognised in connection with this matter as it is
considered to be a contingent liability.
• Brazilian tax authorities have issued infringement notices against
Getnet Adquirência e Serviços para Meios de Pagamento S.A and
Banco Santander (Brasil) S.A. as jointly liable in relation to
corporate income tax (IRPJ and CSLL) for 2014 to 2018 questioning
the tax-deductibility of the amortization of the goodwill from the
acquisition of Getnet Tecnologia Proces S.A., considering that the
company would not have complied with the legal requirements
for such amortization. A defense against the tax assessment
notices were submitted, and the appeal is pending decision in
CARF. No provision was recognized as it is considered to be a
contingent liability.
The total amount for the aforementioned Brazil lawsuits that are
fully provisioned is EUR 848 million, and for lawsuits that qualify
as contingent liabilities is EUR 3,690 million.
• Legal action brought by Sovereign Bancorp, Inc. (currently
Santander Holdings USA, Inc.) claiming its right to take a foreign
tax credit for taxes paid outside the United States in fiscal years
2003 to 2005 as well as the related issuance and financing costs.
On 17 July 2018, the District Court finally ruled against Santander
Holdings USA, Inc. On September 5, 2019 the Federal District
Court in Massachusetts entered a judgement resolving the
Company’s tax liability for fiscal years 2003 to 2005, which had no
effect on income. The Company has agreed to resolve the
treatment of the same transactions for 2006 and 2007, consistent
with the September 5, 2019 judgment. The Congressional Joint
Committee on Taxation has completed its review of the proposed
resolution of the 2006 and 2007 tax years, with no objection. The
IRS finalized its administrative process to close-out the issue,
which resulted in no impact on net income.
• Banco Santander appealed before European Courts the Decisions
2011/5/CE of 28 October 2009 (First Decision), and 2011/282/UE
of 12 January 2011 (Second Decision) of the European
Commission, ruling that the deduction of the financial goodwill
regulated pursuant to Article 12.5 of the Corporate Income Tax
Law constituted illegal State aid. On October 2021 the Court of
Justice has definitively confirmed these Decisions. The dismissal of
the appeal, that only affects these two decisions, has no effect on
equity.
At the date of approval of these interim financial statements certain
other less significant tax-related proceedings are also in progress.
ii. Non-tax-related proceedings
At 31 December 2021 the main non-tax-related proceedings
concerning the Group were as follows:
• Payment Protection Insurance (PPI): In recent years Santander UK
plc has processed customer claims associated with the sale of
payment protection insurance (PPI), derived from the Financial
Conduct Authority guidelines. As of 31 December 2021 there is no
provision related to those claims as the deadline for presenting
them has already expired. However, customers can still commence
in-court litigation for the mis-sale of PPI and a provision for the
best estimate of any obligation to pay compensation in respect of
current and future claims is recognized for this purpose.
In addition, there is a legal dispute regarding allocation of liability
for pre-2005 PPI policies underwritten by two entities (Axa France)
that Axa Group acquired from Genworth Financial International
Holdings, Inc. in September 2015. The dispute involves Santander
Cards UK Limited (formerly known as GE Capital Bank Limited
which was acquired by Banco Santander, S.A. from GE Capital
group in 2008) which was the distributor of the policies in dispute
and Santander Insurance Services UK Limited (the Santander
Entities).
In July 2017, the Santander Entities notified Axa France that they
did not accept liability for losses on PPI policies relating to the
referred period. Santander UK plc entered in a Complaints
Handling Agreement –that included a standstill agreement-
agreeing to handle complaints on Axa France, whilst Axa France
accepted paying redress assessed to be due to relevant
policyholders on a without prejudice basis.
After the termination of the Complaints Handling Agreement, on
30 December 2020 Axa France provided written notice to the
Santander Entities to terminate the standstill agreement. On 5
March 2021, the Santander Entities were served with a Claim Form
and Brief Details of Claim by Axa France, claiming that the
Santander Entities are liable to reimburse Axa France for pre-2005
PPI mis-selling losses, currently estimated at GBP 636 million (EUR
739 million). On 22 March 2021, the Santander Entities
acknowledged service of the claim and notified the court of their
intention to defend the claim in full and issued an application for
Axa Frances’s claim to be struck out/summarily dismissed, which is
being heard by the Commercial Court on 22 and 23 February 2022.
Decision is not expected until second quarter 2022.
In the event the claim is not dismissed, there are still ongoing
factual issues to be resolved during the trial, which may have legal
consequences including in relation to liability. These issues create
uncertainties which mean that it is difficult to reliably predict the
outcome or the timing of the resolution of the matter. The
provision includes our best estimate of the Santander Entities’
liability for this matter.
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• Delforca: dispute arising from equity swaps entered into by
Gaesco (now Delforca 2008, S.A.) on shares of Inmobiliaria
Colonial, S.A. Banco Santander, S.A. is claiming to Delforca before
the Court of Barcelona in charge of the bankruptcy proceedings, a
total of EUR 66 million from the liquidation resulting from the
early termination of financial transactions due to Delforca's non-
payment of the equity swaps. In the same bankruptcy proceedings,
Delforca and Mobiliaria Monesa have in turn claimed the Bank to
repay EUR 57 million, which the Bank received for the
enforcement of the agreed guarantee, as a result of the
aforementioned liquidation. On 16 September 2021 the
Commercial Court Number 10 of Barcelona has ordered Delforca
to pay the Bank EUR 66 million plus EUR 11 million in interest and
has dismissed the claims filed by Delforca. This decision has been
appealed by Delforca, Mobiliaria Monesa and the bankruptcy
administrator. The appeal which the Bank has already opposed to
will be resolved by the Provincial Court of Barcelona.
Separately, Mobiliaria Monesa, S.A. (parent of Delforca) filed in
2009 a civil procedure with the Courts of Santander against the
Bank claiming damages that have not been specified to date. The
procedure is suspended.
• Former employees of Banco do Estado de São Paulo S.A.,
Santander Banespa, Cia. de Arrendamiento Mercantil: claim
initiated in 1998 by the association of retired Banespa employees
(AFABESP) requesting the payment of a half-yearly bonus
contemplated in the by-laws of Banespa in the event that Banespa
obtained a profit and that the distribution of this profit were
approved by the Board of Directors. The bonus was not paid in
1994 and 1995 since Banespa had not made a profit during those
years. Partial payments were made from 1996 to 2000, as
approved by the Board of Directors. The relevant clause was
eliminated in 2001. The Tribunal Regional do Trabalho (Regional
Labour Court) and the High Employment Court (TST) ordered
Santander Brazil, as successor to Banespa, to pay this half-yearly
bonus for the period from 1996 to the present. On 20 March 2019,
the Supreme Federal Court (STF) rejected the extraordinary appeal
filed by Santander Brazil.
Santander Bank Brazil filed a rescissory action before the TST to
nullify the decisions of the main proceedings and suspend the
execution of the judgment, which was deemed inadmissible,
therefore its execution was suspended. The rescissory action was
dismissed and a motion for clarification was filed, due to the
absence of an explicit argument to deny the rescissory action filed
by Santander Brazil. After the decision of the motion for
clarification, Santander Brazil filed an extraordinary appeal in the
rescissory action in February 2021, which was denied in an
interlocutory decision in June 2021 by the TST. As Santander Brazil
understands there is a conflict between the TST decision and the
doctrine set by the STF, Santander Brazil has appealed this
decision. This appeal is pending.
In August 2021, a first instance court has ruled that the
enforcement of the TST decision shall be carried out individually, at
the jurisdiction pertaining to each person. AFABESP appealed this
decision. In December 2021, the Regional Labor Court denied the
appeal filed by AFABESP. This decision has not been appealed by
AFABESP, and therefore it has become firm.
Santander Brazil external advisers have classified the risk as
probable. The recorded provisions are considered sufficient to
cover the risks associated with the legal claims that are being
substantiated as of 31 December 2021.
• 'Planos Económicos': like the rest of the banking system in Brasil,
Santander Brazil has been the target of customer complaints and
collective civil suits stemming mainly from legislative changes and
its application to bank deposits ('economic plans'). At the end of
2017, an agreement between regulatory entities and the Brazilian
Federation of Banks (Febraban) with the purpose of closing the
lawsuits was reached and was approved by the Supremo Tribunal
Federal. Discussions focused on specifying the amount to be paid
to each affected client according to the balance in their notebook
at the time of the Plan. Finally, the total value of the payments will
depend on the number of adhesions there may be and the number
of savers who have demonstrated the existence of the account and
its balance on the date the indexes were changed. In November
2018, the STF ordered the suspension of all economic plan
proceedings for two years from May 2018. On 29 May 2020, the
STF approved the extension of the agreement for 5 additional
years starting from 3 June 2020. Condition for this extension was
to include in the agreement actions related to the “Collor I Plan”.
On 31 December 2021, the provision recorded for the economic
plan proceedings amounts to EUR 277 million.
• Floor clauses: as a consequence of the acquisition of Banco
Popular Español, S.A.U. the Group has been exposed to a material
number of transactions with floor clauses. The so-called "floor
clauses" are those under which the borrower accepts a minimum
interest rate to be paid to the lender, regardless of the applicable
reference interest rate. Banco Popular Español, S.A.U. included
"floor clauses" in certain asset-side transactions with customers. In
relation to this type of clauses, and after several rulings made by
the Court of Justice of the European Union and the Spanish
Supreme Court, and the extrajudicial process established by the
Spanish Royal Decree-Law 1/2017, of 20 January, Banco Popular
Español, S.A.U. made provisions that were updated in order to
cover the effect of the potential return of the excess interest
charged for the application of the floor clauses between the
contract date of the corresponding mortgage loans and May 2013.
At 31 December 2021, after having processed most of the
customer requests, the potential residual loss associated with
ongoing court proceedings is estimated at EUR 46 million, amount
which is fully covered by provisions.
• Banco Popular´s acquisition: considering the declaration setting
out the resolution of Banco Popular Español, S.A.U., the
redemption and conversion of its capital instruments and the
subsequent transfer to Banco Santander, S.A. of the shares
resulting from this conversion in exercise of the resolution
instrument involving the sale of the institution's business, in
application of the single resolution framework regulation, some
investors have filed claims against the EU’s Single Resolution
Board decision, the FROB's resolution executed in accordance to
the aforementioned decision, and claims have been filed and may
be filed in the future against Banco Santander, S.A. or other
Santander Group companies deriving from or related to the
acquisition of Banco Popular Español, S.A.U..
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At this stage, it is not possible to foresee the total number of claims
that could be filed by the former holders of shares and capital
instruments (arising from the acquisition by investors of such
shares and capital instruments of Banco Popular prior to resolution,
including in particular, without limitation, the shares acquired in
the context of the capital increase with pre-emptive subscription
rights carried out in 2016), and their economic implications
(especially considering that the decision to resolve in application of
the new regulation has no precedent, and that it may be possible
that future claims do not specify a specific amount, put forward
new legal interpretations or involve a large number of parties).
In this respect, on 2 September 2020, the Provincial Court of La
Coruña has referred a preliminary ruling to the Court of Justice of
the European Union (“CJEU”) asking for the correct interpretation of
Article 60(2) of Directive 2014/59/EU of the European Parliament
and of the Council, dated 15 May 2014, which establishes a
framework for the restructuring and resolution of credit
institutions and investment firms. This article establishes that, in
cases of redemption of capital instruments in a bank resolution, no
liability shall remain in relation to the amount of the instrument
that has been redeemed. On 2 December 2021, the CJEU Advocate
General issued his opinion, considering that the Directive precludes
former Banco Popular shareholders from bringing claims for
compensation against Banco Santander. The judgement of the
CJEU in this case is still pending and is likely to condition the
outcome on the judicial proceedings that are currently ongoing.
Likewise, the Central Court of Instruction 4 is currently conducting
preliminary proceedings 42/2017, in which, amongst other things,
is being investigated the following: (i) the accuracy of the
prospectus for the capital increase with subscription rights carried
out by Banco Popular in 2016; and (ii) the alleged manipulation of
the share price of Banco Popular until the resolution of the bank, in
June 2017. During the course of the proceedings, on 30 April 2019,
the Spanish National Court, ruled in favour of Banco Santander, S.A.
declaring that Banco Santander, S.A. cannot inherit Banco Popular’s
potential criminal liability. This ruling was appealed before the
Supreme Court, which rejected it. In this proceedings, Banco
Santander, S.A. could potentially be subsidiarily liable for the civil
consequences.
The estimated cost of any compensation to shareholders and
bondholders of Banco Popular recognized in the 2017 accounts
amounted to EUR 680 million, of which EUR 535 million were
applied to the commercial loyalty program. At 31 December 2021,
the provisions recorded are considered sufficient to cover the risks
associated with the court claims that can be estimated to date.
However, if additional amounts have to be paid for claims already
raised with an undetermined economic interest or for new claims
which cannot be reliably estimated because of their specific
circumstances, this could have a significant adverse effect on the
Santander Group's results and financial situation.
• German shares investigation: the Cologne Public Prosecution
Office is conducting an investigation against the Bank, and other
group entities based in UK - Santander UK plc, Santander Financial
Services Plc and Cater Allen International Limited -, in relation to a
particular type of tax dividend linked transactions known as cum-
ex transactions.
The Group is cooperating with the German authorities. According to
the state of the investigations, the result and the effects for the
Group, which may potentially include the imposition of material
financial penalties, cannot be anticipated. For this reason, the Bank
has not recognized any provisions in relation to the potential
imposition of financial penalties.
• Banco Santander, S.A. has been sued in a legal proceeding in which
the plaintiff alleges that a contract was concluded whereby he
would be entrusted with the functions of CEO of the Bank. In the
complaint, the claimant mainly requests a declaratory ruling that
affirms the validity and conclusion of such contract and its
enforcement together with the payment of certain amounts. If the
main request is not granted, the claimant sought a compensation
for a total amount of approximately EUR 112 million or, an
alternative relief for other minor amounts. Banco Santander, S.A.
answered to the complaint stating that the conditions to which the
appointment was subject to were not met and that the contract
required by law was not concluded. On 17 May 2021, the plaintiff
reduced his claims for compensation to EUR 61.9 million.
On 9 December 2021, the Court has rendered its decision ordering
the Bank to compensate the plaintiff in the amount of EUR
67.8 million. On 13 January 2022, the Court has corrected and
supplemented its judgment, reducing the total amount to EUR
51.4 million and establishing that part of this amount (EUR
18.6 million) would have to be paid in shares of Banco Santander
and subject to the application of the same terms provided in the
applicable Santander executives’ remuneration program (on a
deferred basis, and in accordance with the applicable plan in the
offer). The Bank will file appeal against the judgment before the
Provincial Court of Madrid. The provisions recorded are considered
to be sufficient to cover the risks deriving from this claim.
• Universalpay Entidad de Pago, S.L. has filed a lawsuit against Banco
Santander, S.A. for breach of the marketing alliance agreement
(MAA) and claim payment (EUR 1,050 million). The claim is being
processed in the Court of First Instance no. 81 of Madrid. The MAA
was originally entered into by Banco Popular Español, S.A.U. and its
purpose is the rendering of acquiring services (point of sale
payment terminals) for businesses in the Spanish market. The
lawsuit is mainly based on the potential breach of clause 6 of the
MAA, which establishes certain obligations of exclusivity, non-
competition and customer referral. The claim is at a very early
stage, and there are factual issues pending resolution, which may
have legal consequences and affect any potential liability. This
uncertainty makes it impossible to reliably predict the resolution of
the issue, the timing or the significance of the potential economic
impact. The Bank has answered the complaint. The pretrial hearing
could not take place on 16 December 2021 and has been
rescheduled on 11 March 2022.
• CHF Polish Mortgage Loans: On 3 October 2019, the Court of
Justice of the European Union (CJEU) rendered its decision in
relation to a judicial proceeding against an unrelated bank in
Poland considering that certain contractual clauses in CHF-indexed
loan agreements were abusive. The CJEU has left to Polish courts
the decision on whether the whole contract can be maintained
once the abusive terms have been removed, which should in turn
decide whether the effects of the annulment of the contract are
prejudicial to the consumer. In case of maintenance of the contract,
the court may only integrate the contract with subsidiary provisions
of national law and decide, in accordance with those provisions, on
the applicable rate.
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On 2 September 2021, the Supreme Court was expected to take a
position regarding the key issues in disputes concerning loans
based on foreign currency, clarifying the discrepancies and unifying
case law. The resolution was not adopted and instead, the
Supreme Court referred questions to the CJEU on constitutional
issues of the Polish judiciary system. No new date for consideration
of the issue has been set and no comprehensive decision by the
Supreme Court on CHF of the issue is expected in the near future.
In the absence of a comprehensive position of the Supreme Court,
it is difficult to expect a full unification of judicial decisions, and
decisions of the Supreme Court and CJEU issued on particular
issues may be important for shaping further case law on CHF
matters.
As of 31 December 2021, Santander Bank Polska S.A. and
Santander Consumer Bank S.A. maintain a portfolio of mortgages
denominated in or indexed to CHF for an approximate amount of
9,265 million zlotys (EUR 2,083 million). During the year,
provisions recorded amounted to 1,453 million zlotys (EUR
319 million), leaving the provision fund as of 31 December 2021 at
2,056 million zlotys (EUR 447 million). This provision represents
the best estimate at 31 December 2021 given the difficulty to
predict the financial impact, as it is for national courts to decide the
relevant issues and the process of analyzing and deciding on the
KNF proposal described below has not yet been completed.
Santander Bank Polska and Santander Consumer Bank Poland will
continue to monitor and assess appropriateness of those
provisions.
In December 2020, the Chairman of the Polish Financial
Supervision Authority (KNF) presented a proposal for voluntary
settlements between banks and borrowers under which CHF loans
would be retrospectively settled as PLN loans bearing an interest
rate based on WIBOR plus margin. This proposal is currently under
analysis within Santander Bank Polska S.A. and Santander
Consumer Bank S.A., depending on the results of this analysis,
Santander Bank Polska and Santander Consumer Bank Poland will
decide whether to adhere to this proposal and will proceed to
include additional scenarios in the models for calculating
provisions and reflect the estimated impact on their level.
While the above referred events could lead to significant changes
in the level of expected provisions, in the opinion of Santander Bank
Polska S.A. and Santander Consumer Bank S.A., it is not possible to
reliably estimate the value of their impact on their financial
position at 31 December 2021.
• Banco Santander Mexico. Dispute regarding a testamentary trust
constituted in 1994 by Mr. Roberto Garza Sada in Banca Serfin
(currently Santander Mexico) in favor of his four sons in which he
affected shares of Alfa, S.A.B. de C.V. (respectively, "Alfa" and the
"Trust"). During 1999, Mr. Roberto Garza Sada instructed
Santander México in its capacity as trustee to transfer 36,700,000
shares from the Trust's assets to his sons and daughters and
himself. These instructions were ratified in 2004 by Mr. Roberto
Garza Sada before a Notary Public.
Mr. Roberto Garza Sada, passed away on 14 August 2010 and
subsequently, in 2012, his daughters filed a complaint against
Santander Mexico alleging it had been negligent in its trustee role.
The lawsuit was dismissed at first instance in April 2017 and on
appeal in 2018. In May 2018, the plaintiffs filed an appeal (recurso
de amparo) before the First Collegiate Court of the Fourth Circuit
based in Nuevo León, which ruled in favor of the plaintiffs on 7 May
2021, annulling the 2018 appeal judgment and condemning
Santander Mexico to the petitions claimed, consisting of the
recovery of the amount of 36,700,000 Alfa shares, together with
dividends, interest and damages.
On 7 June 2021, Santander México filed an appeal for
constitutional review against the decision of the Collegiate Court
before the Supreme Court of Justice of the Nation, considering that
this court was not empowered to resolve substantive issues that
had not been raised by the parties, lack of procedural standing, and
the absence of a decision imposing the plaintiffs to pay costs. This
appeal was rejected by the President of the Supreme Court of
Justice of the Nation on 1 October 2021 on the grounds that the
matter, although it refers to constitutional matters, is not of
exceptional interest.
On 6 October 2021, Santander México filed an appeal against this
decision before the Supreme Court itself, which was rejected in
limine by the President of the Court by order dated 11 October
2021, considering that against the dismissal of the appeal for
constitutional review, there is no possible appeal pursuant to the
Constitutional Reform of March 2021. Against this decision, on 8
December 2021, a new appeal was filed for this matter to be
reviewed by the First Chamber of the Supreme Court of Justice of
the Nation, considering that the failure to accept the appeal
constitutes a retroactive application of the law, and that this
violates the transitory fifth article of the reform of the “Ley de
Amparo” published on 7 June 2021.
In compliance with the aforementioned ruling of 7th May 2021, the
Seventh Civil Chamber of the Superior Court of Justice of Nuevo
León has issued a judgement imposing Santander Mexico to pay
the benefits claimed by the plaintiffs. As a result of this judgement,
Santander Mexico has filed a new appeal (recurso de amparo) and
will request that it be resolved by the Supreme Court of Justice of
the Nation.
Santander México estimates that the actions taken should prevail
and reverse the decision against it. However, given the procedural
stage of the case, Santander México has classified this risk as
possible. The impact of a potential unfavorable resolution for
Santander México will be determined in a subsequent proceeding
and will also depend on the additional actions that Santander
México may take in its defense, so it is not possible to determine it
at this time.
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• URO Property Holdings, SOCIMI SA: In December 2021, BNP
Paribas Trust Corporation UK Limited (“BNP”) informed Uro
Property Holdings SOCIMI, SA (“Uro”) – subsidiary from Banco
Santander, S.A.-, that it is considering taking legal action against
Uro. On 16 February 2022, BNP commenced legal proceedings
against Uro in the Commercial Court in London. On 31 December
2021, Uro lost its status as a SOCIMI (Sociedad Anónima Cotizada
de Inversión Inmobiliaria). The potential litigation concerns certain
terms of a financing granted to Uro which was supported by a
bond issue in 2015. BNP, acting as trustee on behalf of the
bondholders, claims that based on those terms, and in relation to
the loss of SOCIMI status, Uro would be obliged to pay an
additional premium above the nominal value of the financing
repayment. Uro denies being liable to pay that additional premium
and intends to defend the claim. It is estimated that the maximum
loss associated with this possible contingency, amounts to
approximately EUR 250 million. There is no date for trial hearing
yet.
Banco Santander and the other Group companies are subject to
claims and, therefore, are party to certain legal proceedings
incidental to the normal course of their business including those in
connection with lending activities, relationships with employees and
other commercial or tax matters additional to those referred to here.
With the information available to it, the Group considers that, at 31
December 2021, it had reliably estimated the obligations associated
with each proceeding and had recognized, where necessary,
sufficient provisions to cover reasonably any liabilities that may arise
as a result of these tax and legal risks. Disputes in which provisions
have been registered but are not disclosed is justified on the basis
that it would be prejudicial to the proper defense of the Group.
Subject to the qualifications made, it also believes that any liability
arising from such claims and proceedings will not have, overall, a
material adverse effect on the Group’s business, financial position, or
results of operations.
26. Other liabilities
The detail of Other liabilities in the consolidated balance sheets is as
follows:
EUR million
Transactions in transit
Accrued expenses and deferred income
Other
2021
2020
2019
545
498
663
7,084
6,309
6,909
5,069
5,529
5,220
12,698 12,336 12,792
27. Tax matters
a) Consolidated Tax Group
Pursuant to current legislation, the Consolidated Tax Group includes
Banco Santander, S.A. (as the parent) and the Spanish subsidiaries
that meet the requirements provided for in Spanish legislation
regulating the taxation of the consolidated profits of corporate
groups (as the controlled entities).
The other Group companies file income tax return in accordance with
the tax regulations applicable to them.
b) Years open for review by the tax authorities
In June and November 2021 acts with agreement, conformity and
non-conformity relating to the corporate income tax financial years
2012 to 2015 were formalised. The adjustments signed in
conformity and with agreement had not impact on results and, in
relation to the concepts signed in disconformity both in this year and
in previous years (corporate income tax 2003 to 2011), Banco
Santander, S.A., as the Parent of the Consolidated Tax Group,
considers, in accordance with the advice of its external lawyers, that
the adjustments made should not have a significant impact on the
consolidated financial statements, as there are sound arguments as
proof in the appeals filed against them pending at the National
Appellate Court (tax years 2003 to 2011) and at different
administrative instances (tax years 2012-2015). Consequently, no
provision has been recorded for this concept. It should also be noted
that, in those cases where it has been considered appropriate, the
mechanisms available to avoid international double taxation have
been used. At the date of approval of these accounts, the Corporate
Income Tax and other taxes audit for periods 2017 to 2019 are
ongoing, and subsequent years up to and including 2021, are subject
to review.
Likewise, relating the Consolidated Tax Group of which Banco
Popular Español, S.A.U. was the parent, during 2019, a certificate of
disconformity was drawn up for 2017 corporate income tax, with no
impact on profit, and the final assessment was appealed. In relation
to this Consolidated Tax Group, the years 2016 and 2017 inclusive
are subject to review. On 1 January 2018 those entities that were
part of the aforementioned Consolidated Tax Group were integrated
in the Consolidate Tax Group which parent company is Banco
Santander.
The other entities have the corresponding years open for review,
pursuant to their respective tax regulations.
Because of the possible different interpretations which can be made
of the tax regulations, the outcome of the tax audits of the rest of
years subject to review might give rise to contingent tax liabilities
which cannot be objectively quantified. However, the Group’s tax
advisers consider that it is unlikely that such tax liabilities will
materialize, and that in any event the tax charge arising therefrom
would not materially affect the Group’s consolidated financial
statements.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
c) Reconciliation
The reconciliation of the income tax expense calculated at the tax
rate applicable in Spain (30%) to the income tax expense recognised
and the detail of the effective tax rate are as follows:
d) Tax recognised in equity
In addition to the income tax recognised in the consolidated income
statement, the Group recognised the following amounts in
consolidated equity in 2021, 2020 and 2019:
EUR million
EUR million
Other comprehensive income
Items not reclassified to profit or loss
Actuarial gains or (-) losses on defined
benefit pension plans
Changes in the fair value of equity
instruments measured at fair value
through other comprehensive income
Financial liabilities at fair value with
changes in results attributable to
changes in credit risk
Items that may be reclassified to profit
or loss
Cash flow hedges
Changes in the fair value of debt
instruments through other
comprehensive income
Other recognised income and expense of
investments in subsidiaries, joint
ventures and associates
Total
2021
2020
2019
(510)
(82)
500
(530)
(165)
499
(13)
92
(42)
33
(9)
43
1,136
208
(832)
278
5
(17)
857
195
(811)
1
626
8
(4)
126
(332)
Consolidated profit (loss) before tax:
From continuing operations
From discontinued operations
Income tax at tax rate applicable in
Spain (30%)
By the effect of application of the
various tax rates applicable in each
country*
Of which:
Brazil
United Kingdom
United States
Chile
Effect of profit or loss of associates
and joint ventures
Effect of reassessment of deferred
taxes
Permanent differences
and other **
Current income tax
Effective tax rate
Of which:
Continuing operations
Discontinued operations
(note 37)
Of which:
Current taxes
Deferred taxes
Income tax (receipts)/payments
2021
2020
2019
14,547
(2,076) 12,543
—
—
—
14,547
(2,076) 12,543
4,364
(623) 3,763
210
362
243
634
(158)
(179)
(34)
560
502
(43)
(71)
(24)
(80)
(71)
(35)
(130)
29
(97)
9
2,500
(612)
441
3,364
1,130
4,894
33.64 %
5,632
4,427
—
35.29%
4,894
5,632
4,427
—
—
—
3,799
1,095
4,012
4,214
3,962
1,418
465
2,946
2,593
* Calculated by applying the difference between the tax rate applicable in Spain
and the tax rate applicable in each jurisdiction to the profit or loss contributed to
the Group by the entities which operate in each jurisdiction.
** In 2020 and 2019 it includes mainly the impairment of goodwill.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
e) Deferred taxes
'Tax assets' in the consolidated balance sheets includes debit
balances with the Public Treasury relating to deferred tax assets. 'Tax
liabilities' includes the liability for the Group’s various deferred tax
liabilities.
On 26 June 2013, the Basel III legal framework was included in
European law through Directive 2013/36 (CRD IV) and Regulation
575/2013 on prudential requirements for credit institutions and
investment firms (CRR), directly applicable in every member State as
from 1 January 2014, albeit with a gradual timetable with respect to
the application of, and compliance with, various requirements.
This legislation establishes that deferred tax assets, the use of which
relies on future profits being obtained, must be deducted from
regulatory capital.
In this regard, pursuant to Basel III, in recent years several countries
have amended their tax regimes with respect to certain deferred tax
assets so that they may continue to be considered regulatory capital
since their use does not rely on the future profits of the entities that
generate them (referred to hereinafter as 'monetizable tax assets').
Italy had a very similar regime to that described above, which was
introduced by Decree-Law no. 225, of 29 December 2010, and
amended by Law no. 10, of 26 February 2011. In addition, in 2013 in
Brazil, by means of Provisional Measure no. 608, of 28 February
2013, that become Ordinary Law 12838/2013, and, in Spain, through
Royal Decree Law 14/2013, of 29 November confirmed by Law
27/2014, of 27 November, tax regimes were established whereby
certain deferred tax assets (arising from provisions to allowances for
loan losses in Brazil and provisions to allowances for loan losses,
provisions to allowances for foreclosed assets and provisions for
pension and pre-retirement obligations in Spain) may be converted
into tax receivables in specific circumstances. As a result, their use
does not rely on the entities obtaining future profits and, accordingly,
they are exempt from deduction from regulatory capital.
In 2015 Spain completed its regulations on monetizable tax assets
with the introduction of a financial contribution which involves the
payment of 1.5% per annum, in order to maintain the right to
monetise which applies to the portion of the deferred tax assets that
qualify under the legal requirements as monetizable assets
generated prior to 2016.
In a similar manner, Italy, by decree of 3 May 2016 has introduced a
fee of 1.5% annually to maintain the monetizable of part of the
deferred tax assets.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The detail of deferred tax assets, by classification as monetizable or
non-monetizable assets, and of deferred tax liabilities at 31
December 2021, 2020 and 2019 is as follows:
EUR million
Tax assets
Tax losses and tax credits
Temporary differences
Of which:
Non-deductible provisions
Valuation of financial instruments
Loan losses
Pensions
Valuation of tangible and intangible
assets
Tax liabilities
Temporary differences
Of which:
Valuation of financial instruments
Valuation of tangible and intangible
assets
Investments in Group companies
2021
Monetizable*
10,473
—
10,473
—
—
6,888
3,585
—
—
—
—
—
—
Other
8,967
1,249
7,718
2,256
600
988
669
1,509
6,462
6,462
1,419
3,081
337
2020
Monetizable*
10,721
—
10,721
—
—
7,134
3,587
—
—
—
—
—
—
Other
8,525
1,093
7,432
2,139
483
1,007
875
1,373
5,933
5,933
1,791
2,311
440
2019
Monetizable*
11,233
—
11,233
—
—
7,645
3,587
—
—
—
—
—
—
Other
11,525
3,428
8,097
2,751
400
1,086
1,009
1,317
6,522
6,522
2,073
1,962
831
*
Banco Popular Español, S.A.U. considered that part of its monetizable assets were converted into credit against the Tax Administration in 2017 Income Tax return, as
the circumstances of the aforementioned regulations were met at the end of that year (EUR 995 million). The Spanish tax authorities have expressly confirmed the
nature of these assets as monetizable, but they consider that conditions for conversion are not met at the end of 2017, without prejudice to the conversion in future
years. Likewise, Grupo Santander, due to losses incurred in 2020, converted EUR 642 million of monetizable tax assets into credit against the Tax Administration in its
Corporate Income Tax return. This tax return is subject to review by the Tax Authorities.
Grupo Santander only recognises deferred tax assets for temporary
differences or tax loss and tax credit carryforwards where it is
considered probable that the consolidated entities that generated
them will have sufficient future taxable profits against which they
can be utilised.
a) Microeconomic variables of the entities that make up the fiscal
group in each location: the existing balance structure, the mix of
products offered and the commercial strategy at each moment
defined by local directions are taken into account, based on the
competition, regulatory and market environment.
The deferred tax assets and liabilities are reassessed at the reporting
date in order to ascertain whether any adjustments need to be made
on the basis of the findings of the analyses performed.
These analyses take into consideration all evidence, both positive and
negative, of the recoverability of such deferred tax assets, among
which we can find, (i) the results generated by the different entities in
previous years, (ii) the projections of results of each entity or fiscal
group, (iii) the estimation of the reversal of the different temporary
differences according to their nature and (iv) the period and limits
established under the applicable legislation of each country for the
recovery of the different deferred tax assets, thus concluding on the
ability of each entity or fiscal group to recover the deferred tax assets
registered.
The projections of results used in this analysis are based on the
financial budgets approved by both the local directions of the
corresponding units and by the Group's administrators. The Group's
budget estimation process is common for all units. The Group's
management prepares its financial budgets based on the following
key assumptions:
b) Macroeconomic variables: estimated growths are based on the
evolution of the economic environment considering the expected
evolution in the gross domestic product of each location, and the
forecasts of interest rates, inflation and exchange rates
fluctuations. These data is provided by the Group’s Studies Service,
based on external sources of information.
Additionally, the Group performs retrospective contrasts
(backtesting) on the variables projected in the past. The differential
behaviour of these variables with respect to the real market data is
considered in the projections estimated in each fiscal year. Thus, and
in relation to Spain, the deviations identified by the Directors in recent
past years are due to non-recurring events outside the operation of
the business, such as the impacts due to the first application of new
regulations, the costs assumed for the acceleration of the
restructuring plans and the changing effect of the current
macroeconomic environment.
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financial statements
Notes to the consolidated
financial statements
Appendix
During 2020, taking into account the uncertainties about the
economic impacts derived from the covid-19 health crisis, the Group
reassessed the ability to generate future taxable income in relation to
the recoverability of deferred tax assets recorded in the main Group
companies. Management considered that the recovery period of
these assets would not be affected and that it was not necessary to
make adjustments to the deferred tax assets recognised in the Group
on the basis of the results of the analyses performed, except in Spain,
where the changes in the key assumptions on which the projected
results of its tax group are based, arising from the impact of covid-19,
resulted in the recognition of an impairment of EUR 2,500 million of
deferred tax assets under 'Income Tax' in the income statement.
Finally, and given the degree of uncertainty of these assumption on
the referred variables, the Group conducts a sensitivity analysis of the
most significant assumptions considered in the deferred tax assets’
recoverability analysis, considering any reasonable change in the key
assumptions on which the projections of results of each entity or
fiscal group and the estimation of the reversal of the different
temporary differences are based.
In relation to Spain, the sensitivity analysis has consisted of adjusting
50 basis points for growth (gross domestic product) and adjusting 50
basis points for inflation. Following the sensitivity analysis
performed, the Group estimate that the maximum recovery period of
the deferred tax assets recognized as of 31 December 2021 would be
15 years.
Relevant information is set forth below for the main countries which
have recognised deferred tax assets:
Spain
The deferred tax assets recognised at the Consolidated Tax Group
total EUR 9,954 million, of which EUR 7,420 million were for
monetizable temporary differences with the right to conversion into
a credit against the Public Finance, EUR 1,902 million for other
temporary differences and EUR 632 million for tax losses and credits.
The Group estimates that the recognised deferred tax assets for
temporary differences will be recovered in a maximum period of 15
years. This period would also apply to the recovery of the recognised
tax loss and tax credit carryforwards.
Brazil
The deferred tax assets recognised in Brazil total EUR 5,204 million,
of which EUR 2,909 million were for monetizable temporary
differences, EUR 1,984 million for other temporary differences and
EUR 311 million for tax losses and credits.
Grupo Santander estimates that the recognised deferred tax assets
for temporary differences, tax losses and credits will be recovered in
approximately 10 years.
United States
The deferred tax assets recognised in the United States total EUR
1,503 million, of which EUR 1,215 million were for temporary
differences and EUR 288 million for tax losses and credits. The Group
estimates that the recognised deferred tax assets for temporary
differences, tax losses and credits will be recovered in a period of 15
years.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The changes in Tax assets - Deferred and Tax liabilities - Deferred in
the last three years were as follows:
EUR million
Deferred tax assets
Tax losses and tax credits
Temporary differences
Of which monetizable
Deferred tax liabilities
Temporary differences
EUR million
Deferred tax assets
Tax losses and tax credits
Temporary differences
Of which monetizable
Deferred tax liabilities
Temporary differences
EUR million
Deferred tax assets
Tax losses and tax credits
Temporary differences
Of which monetizable
Deferred tax liabilities
Temporary differences
Foreign currency
balance
(Charge)/
translation
Credit to differences and
other items
income
(Charge)/Credit to
asset and liability
valuation
adjustments
Balances at 31
December 2020
Acquisition
for the year
(net)
Balances at 31
December
2021
19,246
1,093
18,153
10,721
(5,933)
(5,933)
(209)
129
(338)
(273)
(886)
(886)
13,313
(1,095)
193
28
165
25
(170)
(170)
23
209
—
209
—
528
528
737
1
—
1
—
(1)
(1)
0
19,440
1,250
18,190
10,473
(6,462)
(6,462)
12,978
Foreign currency
balance
(Charge)/
translation
Credit to differences and
other items
income
(Charge)/Credit to
asset and liability
valuation
adjustments
Balance at 31
December 2019
Acquisition
for the year
(net)
Balance at 31
December
2020
22,758
3,427
19,331
11,233
(6,522)
(6,522)
(1,016)
(2,065)
1,049
613
(402)
(402)
(2,465)
(266)
(2,199)
(1,125)
851
851
16,236
(1,418)
(1,614)
38
—
38
—
156
156
194
(69)
(3)
(66)
—
(16)
(16)
(85)
19,246
1,093
18,153
10,721
(5,933)
(5,933)
13,313
Balances at 31
December 2018
(Charge)/
Credit to
income
Foreign
currency
balance
translation
differences and
other items
(Charge)/Credit to
asset and liability
valuation
adjustments
Acquisition
for the year
(net)
Balance at 31
December
2019
23,258
4,276
18,982
10,866
(5,568)
(5,568)
17,690
215
(301)
516
427
(680)
(680)
(465)
(610)
(548)
(62)
(60)
92
92
(518)
(92)
—
(92)
—
(366)
(366)
(458)
(13)
—
(13)
—
0
—
(13)
22,758
3,427
19,331
11,233
(6,522)
(6,522)
16,236
Also, the Group did not recognise deferred tax assets relating to tax
losses and deductions and other incentives amounting to
approximately EUR 9,800 million, the use of which EUR 375 million is
subject, among other requirements, to time limits.
Annual report 2021 657
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
f) Tax reforms
The following significant tax reforms were approved in 2021 and
previous years:
In Spain, Royal Decree-Law 3-2016 was approved in December 2016,
which meant the reduction of the limits for the integration of
deferred monetizable tax assets and for the set-off of negative tax
bases and deductions in order to avoid double taxation as well as the
compulsory impairment reversion for deductible participations in
previous years in five years, and the non deductibility of the losses
generated from the transmission of participations. In 2020 the
General State Budget Law for 2021 established, among other tax
measures, the non deductibility in Corporation Tax of management
fees on participations whose dividends or capital gains are exempt,
determining the amount of these expenses as a 5% of the dividends
or capital gains. Likewise in 2021 the General State Budget Law for
2022 was approved. This law establishes a minimum effective tax
rate of 15% (18% for financial entities) on Corporation Tax base.
In the United Kingdom, in March 2021 it was announced that the
main Corporation Tax rate will increase from 1 April 2023 to 25%
from 19%. This increase was enacted in Finance Act 2021.
In Brazil, the Constitutional Amendment 103/19 was adopted on 12
November 2019, modifying the social security system, including,
among other measures, an increase in the CSLL tax rate for banks
from 15% to 20%, effective 1 March 2020. This increase lifted the
aggregate tax rate -sum of CSLL and the corporate income tax
(Imposto de Renda Pessoa Jurídica; IRPJ)- for banks from 40% to
45%. In addition, in 2021, the provisional measure (Medida
Provisoria) 1,034/2021, temporarily increases, from 1 July 2021 to
31 December 2021, the rate of a Social Contribution on the Net
Income (CSLL) of the banks to 25% from 20%, and for other financial
institutions to 20% from 15%, being the joint taxation for banks 50%
(25% IR and 25% CSLL), and 45% for other financial institutions. In
the IOF (Tax on financial operations) on credit operations, as of 1
January 2021 the rate of 0,38% (0% for part of 2020) is reinstated,
and for settled transactions from 20 September to 31 December
2021, a temporary increase in the IOF rates applicable for credit
transactions was approved (annual rate 1.5%% to 2.04%% for legal
persons and 3% to 4.8% for natural persons).
In Argentina, Law n.º 27630 (BOE of 16 June 2021) amended, with
retroactive effect to 1 January 2021, the rate applicable to the
Corporate Income Tax, establishing a progressive rate scale which for
Banco Santander Río S.A. represents an increase from 30% to 35%. In
addition, the 7% withholding on dividend distribution is maintained
(however, the distribution of pre-2018 reserves is not subject to
withholding tax). In addition, during the first quarter of the year, there
was an increase in the tax on gross income to financial institutions in
both, the City of Buenos Aires (from 7% to 8%) and the Province of
Buenos Aires (from 7% to 9%). Additionally, the adjustment for tax
inflation that was to be applied on a transitional basis in 1/3 of 2019,
has been lowered to 1/6 in 2019, with the rest being deferred over
the next five years
On 27 November 2019 entered into force the Protocol amending the
Convention between the United States of America and the kingdom
of Spain for the Avoidance of Double Taxation (DTT). The revision of
the Convention introduces substantial reductions in the withholding
rates that apply to different types of income, highlighting the
reduction of the withholding rate on dividends to 5% for
shareholdings of more than 10%, the elimination of withholding for
shareholdings greater than 80% and elimination of withholding at
source on interests and royalties. Build Back Better Act, approved in
the House of Representatives on November 19, 2021, includes
significant tax increases and measures impacting large corporations
and other high-income taxpayers, such as the introduction of a 15%
Minimum Tax on Financial Statement Pre-Tax Book Income, changes
to the Base Erosion Anti-Abuse Tax and a new excise tax on Share
Buy-Backs. Build Back Better Act is pending to be passed by the
Senate
In Chile, Law n.º 21,210 on modernization of Chilean tax law was
enacted in 2020. It includes several modifications to different tax
laws in force in Chile. Among the aspects included, it is worth
highlighting the substitute tax that on a temporary basis until 30 April
2022 allows taxing at 30% (instead of the generally applicable 35%)
with a credit of the first category tax paid, the tax profits generated
up to the 31 December 2016, reducing the fiscal cost of its
distribution and other measures about asset depreciation and indirect
taxes.
On 22 December 2021, the European Commission has proposed a
Directive ensuring a minimum effective tax rate for the global
activities of large multinational groups. The proposal follows closely
the OECD/G20 Inclusive Framework on Base Erosion and Profit
Shifting and sets out how the principles of the 15% effective tax rate
– agreed by 137 countries – will be applied in practice within the
European Union (EU). It includes a common set of rules (GloBe Rules)
on how to calculate this effective tax rate, so that it is properly and
consistently applied across the EU.
g) Other information
In compliance with the disclosure requirement established in the
listing rules instrument 2005 published by the UK Financial Conduct
Authority, it is hereby stated that shareholders of the Bank resident in
the United Kingdom will be entitled to a tax credit for taxes paid
abroad in respect of withholdings that the Bank has to pay on the
dividends to be paid to such shareholders if the total income of the
dividend exceeds the amount of exempt dividends of GBP 2,000 for
the year 2021/22. The shareholders of the Bank resident in the
United Kingdom who hold their ownership interest in the Bank
through Santander Nominee Service will be informed directly of the
amount thus withheld and of any other data they may require to
complete their tax returns in the United Kingdom. The other
shareholders of the Bank resident in the United Kingdom should
contact their bank or securities broker.
Banco Santander, S.A., is part of the Large Business Forum and has
adhered since 2010 to the Code of Good Tax Practices in Spain. Also
Santander UK is a member of the HMRC’s Code of Practice on
Taxation in the United Kingdom, actively participating in both cases in
the cooperative compliance programs being developed by these Tax
Administrations.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
b) Changes
The changes in Non-controlling interests are summarised as follows:
EUR million
Balance at the end of the previous year
Balance at beginning of year
Other comprehensive income*
Other
Profit attributable to non-controlling
interests
Modification of participation rates**
Change of perimeter
Dividends paid to minority shareholders
Changes in capital and other concepts*
2021
2020
2019
9,846 10,588 10,889
9,846 10,588 10,889
(304)
(818)
581
76
310
(611)
1,529
1,063
1,601
(390)
(632)
(1,623)
(5)
(54)
110
(648)
(465)
(895)
95
164
196
Balance at end of year
10,123
9,846 10,588
* Mainly due to exchange differences.
** Includes the effect of the Public Offers for the acquisition of shares of Banco
Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero
Santander México in 2021 and 2019 (see note 3.c).
The foregoing changes are shown in the consolidated statement of
changes in total equity.
28. Non-controlling interests
Non-controlling interests include the net amount of the equity of
subsidiaries attributable to equity instruments that do not belong,
directly or indirectly, to the Bank, including the portion attributed to
them of profit for the year.
a) Breakdown
The detail, by Group company, of 'Equity - Non-controlling interests'
is as follows:
EUR million
Santander Bank Polska S.A.
Grupo PSA
Santander Consumer USA Holdings Inc.
Banco Santander - Chile
Banco Santander (Brasil) S.A.
Banco Santander México, S.A. Institución
de Banca Múltiple, Grupo Financiero
Santander México
Other companies*
2021
2020
2019
1,559
1,676
1,597
1,543
1,622
1,569
1,255
986
1,565
1,042
1,218
1,101
1,023
1,014
1,167
202
461
333
1,970
1,806
1,655
8,594
8,783
8,987
Profit/(Loss) for the year attributable to
non-controlling interests
1,529
1,063
1,601
Of which:
Santander Consumer USA Holdings Inc.
Grupo PSA
Banco Santander - Chile
Banco Santander (Brasil) S.A.
Santander Bank Polska S.A.
Banco Santander México, S.A.
Institución de Banca Múltiple, Grupo
Financiero Santander México
Other companies
494
311
292
251
75
62
44
201
255
198
233
81
61
34
230
266
283
373
162
195
92
TOTAL
10,123
9,846 10,588
* Includes a Santander UK plc issuance of perpetual convertible equity
instruments, at the option of Santander UK plc, into preference shares of
Santander UK itself for a nominal amount of GBP 2,200 million (the Group
having acquired GBP 1,050 million). Carrying amount of EUR 1,363 million in
2021 (EUR 1,275 million and EUR 1,346 million in 2020 and 2019, respectively).
Annual report 2021 659
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financial statements
Notes to the consolidated
financial statements
Appendix
c) Other information
The financial information on the subsidiaries with significant non-
controlling interests at 31 December 2021 is summarised below:
EUR million*
Total assets
Total liabilities
Net assets
Total income
Total profit
Santander Bank
Polska S.A.
Banco Santander
(Brasil) S.A.
Banco Santander
(Chile), S.A.
Grupo Financiero
Santander México,
S.A.B. de C.V.
Santander Consumer
USA
49,788
45,071
4,717
1,646
230
159,447
146,662
12,785
10,884
2,589
71,987
67,282
4,705
2,457
928
78,383
71,162
7,221
3,579
896
43,966
35,064
8,902
4,725
2,510
* Information prepared in accordance with the segment reporting criteria described in note 51 and, therefore, it may not coincide with the information published separately
by each entity.
29. Other comprehensive income
The balances of 'Other comprehensive income' include the amounts,
net of the related tax effect, of the adjustments to assets and
liabilities recognised in equity through the consolidated statement of
recognised income and expense. The amounts arising from
subsidiaries are presented, on a line by line basis, in the appropriate
items according to their nature.
Respect to items that may be reclassified to profit or loss, the
consolidated statement of recognised income and expense includes
changes in other comprehensive income as follows:
• Revaluation gains (losses): includes the amount of the income, net
of the expenses incurred in the year, recognised directly in equity.
The amounts recognised in equity in the year remain under this
item, even if in the same year they are transferred to the income
statement or to the initial carrying amount of the assets or
liabilities or are reclassified to another line item.
• Amounts transferred to income statement: includes the amount of
the revaluation gains and losses previously recognised in equity,
even in the same year, which are recognised in the income
statement.
• Amounts transferred to initial carrying amount of hedged items:
includes the amount of the revaluation gains and losses previously
recognised in equity, even in the same year, which are recognised
in the initial carrying amount of assets or liabilities as a result of
cash flow hedges.
• Other reclassifications: includes the amount of the transfers made
in the year between the various valuation adjustment items.
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
a) Breakdown of Other comprehensive income - Items
that will not be reclassified in results and Items that can
be classified in results
EUR million
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial gains and losses on defined benefit pension plans
Non-current assets held for sale
Share in other income and expenses recognised in investments, joint ventures and associates
Other valuation adjustments
Changes in the fair value of equity instruments measured at fair value with changes in other
comprehensive income
Inefficiency of fair value hedges of equity instruments measured at fair value with changes in other
comprehensive income
Changes in the fair value of equity instruments measured at fair value with changes in other
comprehensive income (hedged item)
Changes in the fair value of equity instruments measured at fair value with changes in other
comprehensive income (hedging instrument)
Changes in the fair value of financial liabilities measured at fair value through profit or loss attributable
to changes in credit risk
Items that may be reclassified to profit or loss
Hedges of net investments in foreign operations (Effective portion)
Exchange differences
Hedging derivatives. Cash flow hedges (Effective portion)
Changes in the fair value of debt instruments measured at fair value with changes in other
comprehensive income
Hedging instruments (items not designated)
Non-current assets classified as held for sale
Share in other income and expenses recognised in investments, joint ventures and associates
2021
2020
2019
(32,719)
(33,144)
(24,168)
(4,241)
(3,986)
(5,328)
(5,002)
(4,288)
(4,764)
—
(8)
—
—
(2)
—
—
1
—
(157)
(308)
514
—
275
—
159
(275)
(159)
(90)
(16)
—
44
(44)
(39)
(28,478)
(27,816)
(19,880)
(4,283)
(3,124)
(5,464)
(23,887)
(26,911)
(16,701)
(276)
295
300
436
—
—
2,411
2,321
—
—
—
—
(468)
(487)
(336)
b) Other comprehensive income- Items not reclassified to
profit or loss – Actuarial gains or (-) losses on defined
benefit pension plans
'Other comprehensive income —Items not reclassified to profit or
loss— Actuarial gains or (-) losses on defined benefit pension plans'
include the actuarial gains and losses and the return on plan assets,
less the administrative expenses and taxes inherent to the plan, and
any change in the effect of the asset ceiling, excluding amounts
included in net interest on the net defined benefit liability (asset).
Its variation (decrease of EUR 1,567 million in the year) is shown in
the consolidated statement of recognised income.
The release against equity in 2021 amounts to EUR 1,705 million -
see note 25.b -, with the following breakdown:
• Reduction of EUR 37 million in the accumulates actuarial losses
relating to the Group´s entities in Spain, mainly due to the
evolution experienced by the discount rate -increase from 0.60%
to 0.90%.
• Reduction of EUR 1,475 million in the cumulative actuarial losses
relating to the Group´s businesses in the UK, mainly due to the
evolution experienced by the discount rate– increase from 1.28%
to 1.90%.
• Reduction of EUR 91 million in accumulated actuarial losses
corresponding to the Group’s business in Brazil, mainly due to the
increase in the discount rate -from 6.82% to 8.39% in pension
benefits and 7.14% to 8.44% in medical benefits-.
• Reduction of EUR 102 million in the accumulated actuarial losses
corresponding to the Group's businesses in other geographical
areas.
The other modification in accumulated actuarial profit or losses is an
increase of EUR 138 million as a result of the evolution of exchange
rates, mainly in United Kingdom (appreciation of the pound sterling).
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
c) Other comprehensive income - Items that will not be
reclassified in results - Changes in the fair value of equity
instruments measured at fair value with changes in other
comprehensive income
Since the entry into force of IFRS 9, no impairment analysis is
performed of equity instruments recognised under 'Other
comprehensive income'. IFRS 9 eliminates the need to carry out the
impairment estimate on this class of equity instruments and the
reclassification to profit and loss on the disposal of these assets,
being recognised at fair value with changes in equity.
The following is a breakdown of the composition of the balance as of
31 December 2021, 2020 and 2019 under 'Other comprehensive
income - Items that will not be reclassified to profit or loss - Changes
in the fair value of equity instruments measured at fair value with
changes in other global result' depending on the geographical origin
of the issuer:
EUR million
Equity instruments
Domestic
Spain
International
Rest of Europe
United States
Latin America and rest
Of which:
Publicly listed
Non publicly listed
EUR million
Equity instruments
Domestic
Spain
International
Rest of Europe
United States
Latin America and rest
Of which:
Publicly listed
Non publicly listed
Capital gains by
valuation
Capital losses by
valuation
Net gains/losses by
valuation
Fair Value
2021
25
39
13
496
573
500
73
(663)
(58)
(4)
(5)
(730)
(44)
(686)
2020
(638)
(19)
9
491
(157)
456
(613)
759
170
31
1,493
2,453
1,521
932
Capital gains by
valuation
Capital losses by
valuation
Net gains/losses by
valuation
Fair Value
28
65
7
525
625
525
100
(849)
(76)
(4)
(4)
(933)
(31)
(902)
(821)
(11)
3
521
(308)
494
(802)
1,032
314
25
1,412
2,783
1,424
1,359
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Consolidated
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Notes to the consolidated
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Appendix
EUR million
Equity instruments
Domestic
Spain
International
Rest of Europe
United States
Latin America and rest
Of which:
Publicly listed
Non publicly listed
Capital gains by
valuation
Capital losses by
valuation
Net gains/losses by
valuation
Fair Value
2019
21
68
15
934
1,038
936
102
(445)
(72)
(3)
(4)
(524)
(14)
(510)
(424)
(4)
12
930
514
922
(408)
184
379
44
2,256
2,863
2,283
580
d) Other comprehensive income - Items that may be
reclassified to profit or loss - Hedge of net investments in
foreign operations (effective portion) and exchange
differences
The change in 2021 reflects the positive effect of the generalized
appreciation of some currencies, especially the pound sterling and
the US dollar, whereas the change in 2020 reflected the negative
effect of the generalized depreciation of the main currencies,
especially the Brazilian real, the pound sterling and the US dollar. The
change in 2019 showed the positive effect of the appreciation of the
pound sterling and the US dollar and the negative effect of the
depreciation of the Brazilian real.
Of the change in the balance in these years, a profit of EUR 167
million, a loss of EUR 2,104 million and a profit of EUR 230 million in
2021, 2020 and 2019, respectively relate to the measurement of
goodwill.
The detail, by country is as follows:
EUR million
Net balance at end of year*
(28,170)
(30,035)
(22,165)
2021
2020
2019
Of which:
Brazilian real
Pound sterling
Mexican peso
Argentine peso*
Chilean peso
US dollar
Polish zloty
Other
(17,440)
(17,417)
(13,579)
(3,415)
(3,088)
(2,109)
(2,039)
1,536
(809)
(806)
(4,205)
(3,091)
(2,288)
(1,776)
387
(788)
(857)
(3,135)
(2,439)
(2,094)
(1,560)
1,654
(501)
(511)
*
Grupo Santander changed its accounting policy in relation to the presentation
of exchange differences and the effects of hyperinflation of the operations
generated in Argentina, reclassifying at 1 January 2019 an amount of EUR
-1,984 million from the heading 'Other reserves' to 'Accumulated other
comprehensive income' (see note 2.a and 33.b).
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Consolidated
financial statements
Notes to the consolidated
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Appendix
The breakdown of translation differences by currency is as follows:
EUR million
2021
Currency
Brazilian real
Pound sterling
Mexican peso
Argentine peso
Chilean peso
US dollar
Polish zloty
Other
Total Group
Balance at the Balance at the end
beginning of the year
of the year Movement
(16,032)
(15,913)
(4,602)
(2,393)
(2,287)
(1,450)
1,253
(638)
(762)
(3,504)
(2,012)
(2,109)
(1,852)
2,775
(678)
(594)
119
1,098
381
178
(402)
1,522
(40)
168
(26,911)
(23,887)
3,024
Of which:
From goodwill
From results*
From net assets
30
41
26
—
(55)
125
(9)
9
167
19
38
29
—
(43)
102
(1)
11
155
70
1,019
326
178
(304)
1,295
(30)
148
2,702
*
Profit and loss items are translated into euros at the average exchange rate for the year as described in note 2 a) ii.
EUR million
2020
Currency
Brazilian real
Pound sterling
Mexican peso
Argentine peso
Chilean peso
US dollar
Polish zloty
Other
Total Group
Balance at the Balance at the end
beginning of the year
of the year Movement
Of which:
From goodwill
From results*
From net assets
(10,704)
(16,032)
(3,329)
(1,547)
(2,094)
(1,181)
2,833
(249)
(430)
(4,602)
(2,393)
(2,287)
(1,450)
1,253
(638)
(762)
(5,328)
(1,273)
(846)
(193)
(269)
(1,580)
(389)
(332)
(1,280)
(455)
(59)
—
(18)
(143)
(133)
(16)
(190)
(3,858)
(4)
(2)
—
15
(58)
(5)
(10)
(814)
(785)
(193)
(266)
(1,379)
(251)
(306)
(7,852)
(16,701)
(26,911)
(10,210)
(2,104)
(254)
*
Profit and loss items are translated into euros at the average exchange rate for the year as described in note 2 a) ii.
e) Other comprehensive income -Items that may be
reclassified to profit or loss - Hedging derivatives – Cash
flow hedges (Effective portion)
Other comprehensive income – Items that may be reclassified to
profit or loss - Cash flow hedges includes the gains or losses
attributable to hedging instruments that qualify as effective hedges.
These amounts will remain under this heading until they are
recognised in the consolidated income statement in the periods in
which the hedged items affect it (see note 11).
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
f) Other comprehensive income - Items that may be
reclassified to profit or loss – Changes in the fair value of
debt instruments measured at fair value with changes in
other comprehensive income
Includes the net amount of unrealised changes in the fair value of
assets classified as Changes in the fair value of debt instruments
measured at fair value with changes in other comprehensive income
(see note 7).
The breakdown, by type of instrument and geographical origin of the
issuer, of 'Other comprehensive income – Items that may be
reclassified to profit or loss - Changes in the fair value of debt
instruments measured at fair value with changes in other
comprehensive income' at 31 December 2021, 2020 and 2019 is as
follows:
EUR million
Debt instruments
Government debt securities and debt Instruments issued by
central banks
Spain
Rest of Europe
Latin America and rest of the world
Private-sector debt securities
EUR million
Debt instruments
Government debt securities and debt Instruments issued by
central banks
Spain
Rest of Europe
Latin America and rest of the world
Private-sector debt securities
EUR million
Debt instruments
Government debt securities and debt Instruments issued by
central banks
Spain
Rest of Europe
Latin America and rest of the world
Private-sector debt securities
Revaluation gains
Revaluation losses
Net revaluation gains/
(losses)
Fair value
31 December 2021
271
544
334
80
1,229
—
(118)
(438)
(237)
(793)
271
426
(104)
(157)
436
12,917
20,397
49,847
22,424
105,585
Revaluation gains
Revaluation losses
Net revaluation gains/
(losses)
Fair value
31 December 2020
693
915
785
181
2,574
—
(69)
(73)
(21)
(163)
693
846
712
160
2,411
19,314
23,116
51,026
24,714
118,170
Revaluation gains
Revaluation losses
Net revaluation gains/
(losses)
Fair value
31 December 2019
947
664
839
81
2,531
(2)
(38)
(121)
(49)
(210)
945
626
718
32
32,413
19,052
51,284
20,096
2,321
122,845
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Since the entry into force of IFRS 9, the Group estimates the expected
losses on debt instruments measured at fair value with changes in
other comprehensive income. These losses are recorded with a
charge to the consolidated income statement for the period.
At the end of the years 2021, 2020 and 2019, the Group recorded
under 'Impairment or reversal of impairment on financial assets not
measured at fair value through profit or loss', net due to modification
of the consolidated income statement, in the line of financial assets
at fair value with changes in other comprehensive income a provision
of EUR 19 million, EUR 19 million and EUR 12 million in 2021, 2020
and 2019, respectively.
g) Other comprehensive income - Items that may be
reclassified to profit or loss and Items not reclassified to
profit or loss - Other recognised income and expense of
investments in subsidiaries, joint ventures and associates
The changes in other comprehensive income - Entities accounted for
using the equity method were as follows:
EUR million
Balance at beginning of year
Revaluation gains/(losses)
Net amounts transferred to profit or loss
Balance at end of year
Of which:
2021 2020 2019
(489)
(335)
7
6
(170)
16
(320)
(22)
7
(476)
(489)
(335)
Zurich Santander Insurance América, S.L.
(332)
(298)
(171)
30. Shareholders’ equity
The changes in Shareholders' equity are presented in the
consolidated statement of changes in total equity. Significant
information on certain items of Shareholders' equity and the changes
during the year are set forth below.
31. Issued capital
a) Changes
At 31 December 2018, Banco Santander’s share capital consisted of
16,236,573,942 shares with a total par value of EUR 8,118 million.
On 10 September 2019, a capital increase of EUR 191 million was
carried out with the issuance of 381,540,640 shares (2.35% of the
Bank's share capital), to meet the takeover bid for 16.69% of the
share capital of Banco Santander México, S.A., Institución de Banca
Múltiple, Grupo Financiero Santander México. (see Note 3.a).
Therefore, Banco Santander’s new capital consisted of EUR
8,309 million at 31 December 2019, represented by 16,618,114,582
shares of EUR 0.50 of nominal value each one and all of them from a
unique class and series.
On 3 December 2020, a capital increase of EUR 361 million was
made, with a charge to the share premium, through the issue of
722,526,720 shares (4.35% of the share capital).
Therefore, Banco Santander's share capital at 31 December 2020
consisted of EUR 8,670 million, represented by 17,340,641,302
shares of EUR 0.50 of nominal value each and all of them of a unique
class and series.
Equally, Banco Santander's share capital at 31 December 2021
consisted of EUR 8,670 million, represented by 17,340,641,302
shares of EUR 0.50 of nominal value each and all of them of a unique
class and series. Includes 259,930,273 shares corresponding to the
first share repurchase program for which it has been agreed
(together with the shares that are finally to be acquired under the
second share repurchase program) to submit their redemption to the
general shareholders meeting subject to the pertinent regulatory
authorizations (see notes 4 and 34).
Banco Santander’s shares are listed on the Spanish Stock Market
Interconnection System and on the New York, London, Mexico and
Warsaw Stock Exchanges, and all of them have the same features
and rights. Santander shares are listed on the London Stock Exchange
under Crest Depository Interest (CDI), each CDI representing one
Bank’s share. They are also listed on the New York Stock Exchange
under American Depositary Receipts (BDR), each BDR representing
one share. During 2019 and 2018 the number of markets where the
Bank is listed was reduced; the Bank's shares was delisted from
Buenos Aires, Milan, Lisboa and São Paulo's markets.
At 31 December 2021, no shareholder held more than 3% of Banco
Santander’s total share capital (which is the threshold generally
provided under Spanish regulations for a significant holding in a
listed company to be disclosed). Even though at 31 December 2021,
certain custodians appeared in our shareholder registry as holding
more than 3% of our share capital, we understand that those shares
were held in custody on behalf of other investors, none of whom
exceeded that threshold individually. These custodians were State
Street Bank (13.35%), Chase Nominees Limited (9.15%), The Bank of
New York Mellon Corporation (5.21%), Citibank New York (3.74%)
and EC Nominees Limited (3.34%).
On 24 October 2019, BlackRock Inc. reported to the CNMV its
significant holding of voting rights in Banco Santander (5.426%). It
also specified that it was holding shares on behalf of a number of
funds or other investment entities, none of which exceeded 3%
individually. No changes have been communicated since then. There
may be some overlap in the holdings declared by the above
mentioned custodians and asset manager.
At 31 December 2021, neither Banco Santander's shareholder
registry nor the CNMV's registry showed any shareholder residing in
a non-cooperative jurisdiction with a shareholding equal to, or
greater than, 1% of our share capital (which is the other threshold
applicable under Spanish regulations).
b) Other considerations
Under Spanish law, only shareholders at the general meeting have
the authority to increase share capital. However, they may delegate
the authority to approve or execute capital increases to the board of
directors. Banco Santander´s Bylaws are fully aligned with Spanish
law and do not establish any different conditions for share capital
increases.
At 31 December 2021 the shares of the following companies were
listed on official stock markets: Banco Santander Río S.A.; Banco
Santander México, S.A., Institución de Banca Múltiple, Grupo
Financiero Santander México; Banco Santander - Chile; Banco
Santander (Brasil) S.A., Santander Bank Polska S.A. (former Bank
Zachodni WBK S.A.) and Santander Consumer USA Holdings Inc. and
Getnet Adquirência e Serviços para Meios de Pagamento S.A.
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financial statements
Notes to the consolidated
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Appendix
At 31 December 2021 the number of Banco Santander shares owned
by third parties and managed by Group management companies
(mainly portfolio, collective investment undertaking and pension
fund managers) or jointly managed was 45 million shares, which
represented 0.26% of Banco Santander’s share capital (39 and
40 million shares, representing 0.22% and 0.24% of the share capital
in 2020 and 2019, respectively). In addition, the number of Banco
Santander shares owned by third parties and received as security was
231 million shares (equal to 1.33% of the Bank’s share capital).
At 31 December 2021 the capital increases in progress at Group
companies and the additional capital authorised by their
shareholders at the respective general meetings were not material at
Group level (see appendix V).
32. Share premium
Share premium includes the amount paid up by the Bank’s
shareholders in capital issues in excess of the par value.
The Corporate Enterprises Act expressly permits the use of the share
premium account balance to increase capital at the entities at which
it is recognised and does not establish any specific restrictions as to
its use.
The change in the balance of share premium corresponds to the
capital increases detailed in note 31.a).
The increased produced in 2019 was a consequence of the increase
of EUR 1,491 million to cope with the capital increase for the
acquisition of Banco Santander México, S.A, Institución de Banca
Múltiple, Grupo Financiero Santander México shares on 10
September 2019.
The decrease in 2020 was due to the reduction of EUR 361 million to
cover the capital increase on 3 December (see note 31).
The decreased produced in 2021 for an amount of EUR 4,034 million
has been the consequence of applying the result obtained by Banco
Santander during the financial year 2020, consisting of losses of EUR
3,557 million, as reflected in the consolidated statements of changes
in total equity, and the charge of the dividend for the fiscal year 2020
for an amount of EUR 477 million (see note 4.a and consolidated
statements of changes in total equity).
Also, in 2020 and 2019 an amount of EUR 72 million and EUR
38 million, respectively, were transferred from the Share premium
account to the Legal reserve (see note 33.b.i).
33. Accumulated retained earnings
a) Definitions
The balance of 'Equity - Accumulated gains and Other reserves'
includes the net amount of the accumulated results (profits or
losses) recognised in previous years through the consolidated income
statement which in the profit distribution were allocated in equity,
the expenses of own equity instrument issues, the differences
between the amount for which the treasury shares are sold and their
acquisition price, as well as the net amount of the results
accumulated in previous years, generated by the result of non-
current assets held for sale, recognised through the consolidated
income statement.
b) Breakdown
The detail of Accumulated retained earnings and Reserves of entities
accounted for using the equity method is as follows:
EUR million
Restricted reserves
Legal reserve
Own shares
Revaluation reserve Royal Decree-Law
7/1996
Reserve for retired capital
Unrestricted reserves
Voluntary reserves*
Consolidation reserves attributable to the
Bank
Reserves of subsidiaries
Reserves of entities accounted for using
the equity method
2021
2020
2019
2,543
2,460
2,595
1,734
1,734
1,662
755
672
879
43
11
43
11
43
11
4,243 10,422 10,664
6,123
6,128
4,603
(1,880) 4,294
6,061
47,438 47,601 43,449
1,572
1,504
1,210
55,796 61,987 57,918
* In accordance with the commercial regulations in force in Spain.
i. Legal reserve
Under the Consolidated Spanish Corporate Enterprises Act, 10% of
net profit for each year must be transferred to the legal reserve.
These transfers must be made until the balance of this reserve
reaches 20% of the share capital. The legal reserve can be used to
increase capital provided that the remaining reserve balance does not
fall below 10% of the increased share capital amount.
In 2020 and 2019, Banco Santander transferred EUR 72 million and
EUR 38 million, respectively, from the Share premium account to the
Legal reserve.
Consequently, once again, after the capital increases described in
note 31 had been carried out, the balance of the legal reserve
reached 20% of the share capital, and at 31 December 2021 the
Legal reserve was of the stipulated level.
ii. Reserve for treasury shares
According to the Consolidated Text of the Corporate Enterprises Act,
an unavailable reserve equivalent to the amount for which Banco
Santander's shares owned by subsidiaries are recorded. This
reservation shall be freely available when the circumstances which
have obliged its constitution disappear. In addition, this reserve
covers the outstanding balance of loans granted by the Group with
Banco Santander's share guarantee and the amount equivalent to the
credits granted by the Group companies to third parties for the
acquisition of own shares.
iii. Revaluation reserve Royal Decree Law 7/1996, of 7 June
The balance of Revaluation reserve Royal Decree-Law 7/1996 can be
used, free of tax, to increase share capital. From 1 January 2007, the
balance of this account can be taken to unrestricted reserves,
provided that the monetary surplus has been realised. The surplus
will be deemed to have been realised in respect of the portion on
which depreciation has been taken for accounting purposes or when
the revalued assets have been transferred or derecognised.
If the balance of this reserve were used in a manner other than that
provided for in Royal Decree law 7/1996, of 7 June, it would be
subject to taxation.
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financial statements
Notes to the consolidated
financial statements
Appendix
iv. Reserves of subsidiaries
The detail, by company, of Reserves of subsidiaries, based on the
companies’ contribution to the Group (considering the effect of
consolidation adjustments) is as follows:
EUR million
Banco Santander (Brasil) S.A.
(Consolidated Group)
Santander UK Group
Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo
Financiero Santander México
Santander Consumer Finance Group
Banco Santander - Chile
Banco Santander Totta, S.A.
(Consolidated Group)
Group Santander Holdings USA
Banco Santander Río S.A.
Santander Bank Polska S.A.
Santander Investment, S.A.
Santander Seguros y Reaseguros,
Compañía Aseguradora, S.A.
Banco Santander International SA
(former Banco Santander (Suisse) SA)
Other companies and consolidation
adjustments
Of which, restricted
2021
2020
2019
14,325 14,067 12,400
8,558
8,447
8,079
4,913
4,230
3,810
4,753
4,186
4,012
3,502
3,404
3,116
3,194
2,960
2,823
2,940
4,793
4,528
2,318
2,161
1,895
1,990
1,748
1,738
1,307
1,335
146
869
695
823
277
247
348
(1,508)
(672)
(269)
47,438 47,601 43,449
3,392
3,155
3,193
34. Other equity instruments and own shares
a) Equity instruments issued not capital and other equity
instruments
Other equity instruments includes the equity component of
compound financial instruments, the increase in equity due to
personnel remuneration, and other items not recognised in other
“Shareholders’ equity” items.
On 8 September 2017, Banco Santander, S.A. issued contingent
redeemable perpetual bonds (the fidelity bonds) amounting to EUR
981 million nominal value -EUR 686 million fair value. On 31
December 2021 amounted to EUR 658 million.
Additionally, at 31 December 2021 the Group had other equity
instruments amounting to EUR 152 million.
b) Own shares
'Shareholders’ equity - Own shares' includes the amount of own
equity instruments held by all the Group entities.
Transactions involving own equity instruments, including their
issuance and cancellation, are recognised directly in equity, and no
profit or loss may be recognised on these transactions. The costs of
any transaction involving own equity instruments are deducted
directly from equity, net of any related tax effect.
At December 31, 2020, the number of treasury shares held by the
Group was 28,439,022 (0.164% of the issued share capital).
During 2021, 524,312,848 shares of the Bank were acquired at an
average price of EUR 3.14 per share, of which 259,930,273 shares
(1.499% of the issued share capital) relate to the First Share Buyback
Program at a weighted average price of EUR 3.235 per share (note 4);
and 275,159,930 shares were transferred at an average price of EUR
3.10 per share - of which 55,750,000 shares correspond to two
extraordinary donations made by Banco Santander to the Banco
Santander Foundation.
As of December 31, 2021, the Group holds 277,591,940 shares of
the Bank's issued share capital (1.60%).
The effect on equity, net of tax, arising from the purchase and sale of
Bank shares is of EUR 23 million profit in 2021 (EUR 1 million profit
and EUR 6 million loss in 2020 and 2019, respectively).
35. Memorandum items
Memorandum items relates to balances representing rights,
obligations and other legal situations that in the future may have an
impact on net assets, as well as any other balances needed to reflect
all transactions performed by the consolidated entities although they
may not impinge on their net assets.
a) Guarantees and contingent commitments granted
Contingent liabilities includes all transactions under which an entity
guarantees the obligations of a third party and which result from
financial guarantees granted by the entity or from other types of
contract. The detail is as follows:
2021
2020
2019
Loans commitment granted
262,737 241,230 241,179
Of which doubtful
615
274
352
Financial guarantees granted
10,758
12,377
13,650
Of which doubtful
Financial guarantees
Credit derivatives sold
Other commitments granted
Of which doubtful
Technical guarantees
Other
188
124
154
10,715
12,358
13,619
43
19
31
75,733
64,538
68,895
781
548
747
40,158
33,526
33,890
35,575
31,012
35,005
The breakdown as at 31 December 2021 of the exposures and the
provision fund (see note 25) out of balance sheet by impairment
stage is EUR 337,113 million and EUR 372 million (EUR 310,435
million and EUR 377 million in 2020 and EUR 316,116 million and
EUR 417 million in 2019) in stage 1, EUR 10,531 million and EUR
200 million (EUR 6,764 million and EUR 182 million in 2020 and EUR
6,355 million and EUR 145 million in 2019) in stage 2 and EUR 1,584
million and EUR 161 million (EUR 946 million and EUR 141 million in
2020 and EUR 1,253 million and EUR 177 million in 2019) in stage 3,
respectively.
Income from guarantee instruments is recognised under 'Fee and
commission income' in the consolidated income statements and is
calculated by applying the rate established in the related contract to
the nominal amount of the guarantee.
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i. Loan commitments granted
Loan commitments granted: firm commitments of grating of credit
under predefined terms and conditions, except for those that comply
with the definition of derivatives as these can be settled in cash or
through the delivery of issuance of another financial instrument.
They include stand-by credit lines and long-term deposits.
• Fair value hedges: cover the exposure to the variation in the fair
value of assets or liabilities, attributable to an identified and
hedged risk. This covers the interest risk of assets or liabilities
(bonds, loans, bills, issues, deposits, etc.) with coupons or fixed
interest rates, interests in entities, issues in foreign currencies and
deposits or other fixed rate liabilities.
ii. Financial guarantees granted
Financial guarantees includes, inter alia, financial guarantee
contracts such as financial bank guarantees, credit derivatives sold,
and risks arising from derivatives arranged for the account of third
parties.
iii. Other commitments granted
Other contingent liabilities include all commitments that could give
rise to the recognition of financial assets not included in the above
items, such as technical guarantees and guarantees for the import
and export of goods and services.
b) Memorandum items
• Hedging of net investments abroad: cover the exchange rate risk of
the investments in subsidiaries domiciled in a country with a
different currency from the functional one of the Group.
Due to the replacement of the current rates by the alternative rates
defined in the note 1 of this report, in the section 'Amendments to
IFRS 9, IAS 9 and IFRS 7 on reference interest rates (IBOR Reform
Phase I and II)',the nominal amount of hedging instruments
corresponding to the hedging relationships directly affected by the
uncertainties related to the IBOR reforms is shown below. The
percentage of the nominal amount of derivatives affected with a
maturity date after the transition date of the reform represents
4.85% of the total hedging derivatives:
i. Off-balance-sheet funds under management
The detail of off-balance-sheet funds managed by the Group and by
joint ventures is as follows:
EUR million
EUR million
Investment funds
Pension funds
Assets under management
2021
2020
2019
145,987
131,965
142,988
16,078
15,577
11,843
24,862
20,712
22,079
186,927 168,254 176,910
ii. Non-managed marketed funds
At 31 December 2021 there are non-managed marketed funds
totalling EUR 48,385 million (EUR 38,563 million and EUR 49,490
million at 31 December 2020 and 2019, respectively).
c) Third-party securities held in custody
At 31 December 2021 the Group held in custody debt securities and
equity instruments totalling EUR 236,153 million (EUR 209,269
million and EUR 229,381 million at 31 December 2020 and 2019,
respectively) entrusted to it by third parties.
36.
Hed
ging derivatives
Grupo Santander, within its financial risk management strategy, and
in order to reduce asymmetries in the accounting treatment of its
operations, enters into hedging derivatives on interest, exchange
rate, credit risk or variation of stock prices, depending on the nature
of the risk covered.
Based on its objective, Grupo Santander classifies its hedges in the
following categories:
• Cash flow hedges: cover the exposure to the variation of the cash
flows associated with an asset, liability or a highly probable
forecast transaction. This cover the variable-rate issues in foreign
currencies, fixed-rate issues in non-local currency, variable-rate
interbank financing and variable-rate assets (bonds, commercial
loans, mortgages, etc.).
Total hedging instruments affected
Fair value hedges
Interest rate risk
Cash flow hedges
Interest rate risk
Post-transition date agreement
Fair value hedges
Interest rate risk
Cash flow hedges
Interest rate risk
USD LIBOR
14,223
14,223
12,034
12,034
26,257
11,241
11,241
7,830
7,830
19,071
As for the hedged items directly affected by the uncertainties related
to the IBOR reforms, their nominal amount is shown below, which
represents 2.02% of the total notional amount hedged:
EUR million
Total hedge items directly affected
Fair value hedges
Interest rate risk
Cash flow hedges
Interest rate risk
Post-transition date agreement
Fair value hedges
Interest rate risk
Cash flow hedges
Interest rate risk
USD LIBOR
190
190
11926
11,926
12,116
190
190
7732
7,732
7,922
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Appendix
The following tables contains the detail of the hedging derivatives
according to the type of hedging, the hedge risk and the main
products used as of 31 December 2021, 2020 and 2019:
Million euros
2021
Carrying amount
Assets
Liabilities
Changes in fair value used
for calculating hedge
ineffectiveness
Fair value hedges
Interest rate risk
Of which:
Interest rate swap
Call money swap
Exchange rate risk
Fx forward
Future interest rate
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Credit risk
Cash flow hedges
Interest rate risk
Of which:
Future interest rate
Interest rate swap
Call money swap
Exchange rate risk
Of which:
FX forward
Currency swap
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Of which:
Currency swap
Equity risk
Hedges of net investments in foreign
operations
Exchange rate risk
FX forward
Nominal
value
206,957
176,176
66,904
97,321
21,238
13,909
7,329
9,326
1,650
7,397
44
173
2,528
2,227
1,668
1
7
7
—
294
12
281
—
—
2,656
1,778
920
734
423
423
—
452
9
443
1
2
160,397
99,648
2,034
156
2,157
420
7,652
69,471
16,846
27,343
8,381
15,004
21,609
3,604
17,005
11,741
10,503
56
25,594
25,594
25,594
—
70
20
396
280
100
1,425
95
1,330
52
51
5
199
199
199
—
155
182
657
42
606
400
2
393
679
678
1
650
650
650
392,948
4,761
5,463
1,079
591
(377)
714
287
22
265
200
(7)
192
—
1
(1,703)
(526)
(155)
(212)
(409)
(112)
26
(133)
(815)
(112)
(702)
(247)
(232)
(3)
—
—
—
(624)
Balance sheet line items
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
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EUR million
Fair value hedges
Interest rate risk
Of which:
Interest rate swap
Call money swap
Exchange rate risk
Of which:
FX forward
Interest rate and exchange rate risk
Of which:
Currency swap
Credit risk
Cash flow hedges
Interest rate risk
Of which:
Future interest rate
Interest rate swap
Call money swap
Exchange rate risk
Of which:
FX forward
Currency swap
Interest rate and exchange rate risk
Of which:
Currency swap
Inflation risk
Of which:
Interest rate swap
Currency swap
Equity risk
Hedges of net investments in foreign
operations
Exchange rate risk
FX forward
2020
Carrying amount
Assets
Liabilities
4,199
3,528
4,671
3,850
2,985
2,747
184
293
210
378
370
—
886
47
47
771
757
3
Nominal
value
199,260
181,582
94,713
69,740
9,037
8,422
8,434
7,704
207
139,156
74,731
3,436
478
1,739
522
7,492
46,547
12,123
23,483
9,151
13,425
27,021
19,682
13,907
5,218
10,206
14
22,210
22,210
22,210
—
237
204
555
265
283
2,362
2,100
36
262
26
5
690
690
690
322
108
7
802
195
600
275
264
140
—
136
—
459
459
459
360,626
8,325
6,869
Changes in fair value used
for calculating hedge
ineffectiveness
(451)
(456)
(27)
(486)
11
11
(11)
(4)
5
232
75
(208)
135
145
(401)
(155)
(103)
679
550
(129)
129
(132)
8
3
3
—
(216)
Balance sheet line items
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
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EUR million
Fair value hedges
Interest rate risk
Of which:
Future interest rate
Interest rate swap
Call money swap
Exchange rate risk
Of which:
Fx forward
Interest rate and exchange rate risk
Of which:
Currency swap
Inflation risk
Credit risk
Cash flow hedges
Interest rate risk
Of which:
Futures
Interest rate swap
Call money swap
Exchange rate risk
Of which:
FX forward
Currency swap
Futures
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Of which:
FX forward
Currency swap
Equity risk
Hedges of net investments in foreign
operations
Exchange rate risk
FX forward
2019
Carrying amount
Assets
Liabilities
3,570
3,032
3,649
3,160
—
32
2,651
2,297
91
73
49
465
449
—
—
472
55
54
428
423
0
6
Nominal
value
202,548
183,586
12,325
117,439
44,791
10,006
9,722
8,698
7,552
0
258
135,439
55,810
3,398
277
1,618
261
21,655
21,492
6,164
31,803
10,595
11,030
9,290
38,938
7,347
27,044
8,830
2,230
6,511
58
24,477
24,477
24,477
33
99
30
463
237
214
—
2,625
133
2,492
33
5
28
—
248
248
248
147
97
12
660
216
433
—
640
5
622
53
4
42
4
781
781
781
Changes in fair value used
for calculating hedge
ineffectiveness
(1,522)
(1,346)
(476)
(429)
(295)
(60)
(60)
(116)
(67)
5
(5)
(1,540)
(267)
(93)
(105)
8
(405)
(145)
(365)
113
(826)
201
(1,020)
(44)
4
(44)
2
0
0
—
362,464
7,216
6,048
(3,062)
Balance sheet line items
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
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Appendix
Considering the main entities or groups within the Group by the
weight of their hedging, the main types of hedging that are being
carried out in Santander UK Group Holdings plc group and Banco
Santander, S.A.
Santander UK Group Holdings plc group enters into fair value and
cash flow hedging derivatives depending on the exposure of the
underlying. Only designated risks are hedged and therefore other
risks, such as credit risk, are managed but not hedged.
Within fair value hedges, Santander UK Group Holdings plc group has
portfolios of assets and liabilities at fixed rate that are exposed to
changes in fair value due to changes in market interest rates. These
positions are managed by contracting mainly interest rate swaps.
Effectiveness is assessed by comparing the changes in the fair value
of these portfolios generated by the hedged risk with the changes in
the fair value of the derivatives contracted.
Santander UK Group Holdings plc group also has access to
international markets to obtain financing by issuing fixed-rate debt in
its functional currency and other currencies. As such, they are
exposed to changes in interest rates and exchange rates, mainly in
EUR and USD. This risk is mitigated with cross currency swaps e
interest rate swaps in which they pay a fixed rate and receive a
variable rate. Effectiveness is evaluated using linear regression
techniques to compare changes in the fair value of the debt at
interest and exchange rates with changes in the fair value of interest
rate swaps o loss cross currency swaps.
Within the cash flow hedges, Santander UK Group Holdings plc group
has portfolios of assets and liabilities at variable rates, normally at
SONIA or LIBOR. To mitigate this market rate variability risk, it
contracts interest rate swaps.
As Santander UK Group Holdings plc group obtains financing in the
international markets, it assumes a significant exposure to currency
risk mainly USD and EUR. In addition, it also holds debt securities for
liquidity purposes which assume exposure mainly in JPY. To manage
this exchange rate risk, spot, forward y cross currency swap are
contracted to match the cash flow profile and the maturity of the
estimated interest and principal repayments of the hedged item.
Effectiveness is assessed by comparing changes in the fair value of
the derivatives with changes in the fair value of the hedged item
attributable to the hedged risk by applying a hypothetical derivative
method using linear regression techniques.
In addition, within the hedges that cover equity risk, Santander UK
Group Holdings plc group offers employees the opportunity to
purchase shares of the Bank at a discount under the sharesave
scheme, exposing the Bank to share price risk. As such, options are
purchased allowing them to purchase shares at a pre-set price.
Banco Santander, S.A. covers the risks of its balance sheet in a variety
of ways. On the one hand, documented as fair value hedges, it covers
the interest rate, foreign currency and credit risk of fixed-income
portfolios at a fixed rate (REPOs are included in this category).
Resulting, in an exposure to changes in their fair value due to
variations in market conditions based on the various risks hedged,
which has an impact on Banco Santander's income statement. To
mitigate these risks, Banco Santander contracts derivatives, mainly
interest rate swaps, cross currency swaps, cap&floors, forex forward
y credit default swaps.
On the other hand, the interest and exchange rate risk of loans
granted to corporate clients at a fixed rate is generally covered. These
hedges, are carried out through interest rate swaps, cross currency
swaps and exchange rate derivatives (forex swaps and forex
forward).
In addition, Banco Santander, S.A. manages the interest and
exchange risk of debt issues in its various categories (issuing covered
bonds, perpetual, subordinated and senior bond) and in different
currencies, denominated at fixed rates, and therefore subject to
changes in their fair value. These issues are covered through interest
rate swaps, cross currency swaps or a mix of both by applying
differentiated fair value hedging strategies for interest rate risk and
cash flow hedging strategies to hedge foreign exchange risk.
The methodology used by Banco Santander, S.A. to measure the
effectiveness of fair value hedges is based on comparing the market
values of the hedged items (based on the objective risk of the hedge)
and of the hedging instruments in order to analyse whether the
changes in the market value of the hedged items are offset by the
market value of the hedging instruments, thereby mitigating the
hedged risk and minimizing volatility in the income statement.
Prospectively, the same analysis is performed, measuring the
theoretical market values in the event of parallel variations in the
market curves of a positive basis point.
There is a macro hedge of structured loans in which the interest rate
risk of fixed-rate loans (mortgage, personal or with other guarantees)
granted to legal entities in commercial or corporate banking and
wealth clients in the medium-long term is hedged. This hedge is
instrumented as a macro hedge of fair value, the main hedging
instruments being interest rate swap and cap&floors. In case of total
or partial cancellation or early repayment, the customer is obliged to
pay/receive the cost/income of the cancellation of the interest rate
risk hedge managed by the Bank.
Regarding cash flow hedges, the objective is to hedge the cash flow
exposure to changes in interest rates and exchange rates.
For retrospective purposes, the hypothetical derivative methodology
is used to measure effectiveness. By means of this methodology, the
hedged risk is modelled as a derivative instrument -not real-, created
exclusively for the purpose of measuring the effectiveness of the
hedge, and which must comply with the fact that its main
characteristics coincide with the critical terms of the hedged item
throughout the period for which the hedging relationship is
designated. This hypothetical derivative does not incorporate
characteristics that are exclusive to the hedging instrument.
Additionally, it is worth mentioning that any risk component not
associated with the hedged objective risk and effectively documented
at the beginning of the hedge is excluded for the purpose of
calculating the effectiveness. The market value of the hypothetical
derivative that replicates the hedged item is compared with the
market value of the hedging instrument, verifying that the hedged
risk is effectively mitigated and that the impact on the income
statement due to potential ineffectiveness is residual.
Prospectively, the variations in the market values of the hedging
instrument and the hedged item (represented by the hypothetical
derivative) are measured in the event of parallel shifts of a positive
basis point in the affected market curves.
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There is another macro-hedge, this time of cash flows, the purpose
of which is to actively manage the risk-free interest rate risk
(excluding credit risk) of a portion of the floating rate assets of Banco
Santander, S.A., through the arrangement of interest rate derivatives
whereby the bank exchanges floating rate interest flows for others at
a fixed rate agreed at the time the transactions are arranged. The
items affected by the Macro-hedging have been designated as those
in which their cash flows are exposed to interest rate risk, specifically
the floating rate mortgages of the Banco Santander, S.A. network
referenced to Euribor 12 Months or Euribor Mortgage, with annual
renewal of rates, classified as sound risk and which do not have a
contractual floor (or, if not, this floor is not activated). The hedged
position affecting the Macro Cash Flow Hedge at the present time is
EUR 7,000 million.
Regarding net foreign investments hedges, basically, they are
allocated in Banco Santander, S.A. and Santander Consumer Finance
Group. Grupo Santander assumes as a priority risk management
objective to minimize -to the limit determined by the Group's
Financial Management- the impact on the calculation of the capital
ratio of its permanent investments included within the Group's
consolidation perimeter, and whose shares or equity interests are
legally denominated in a currency other than that of the Group's
parent company. For this purpose, financial instruments (generally
derivatives) are contracted to hedge the impact on the capital ratio of
changes in forward exchange rates. Grupo Santander mainly hedges
the risk for the following currencies: BRL, CLP, MXN, CAD, COP, CNY,
GBP, CHF, NOK, USD, and PLN. The instruments used to hedge the
risk of these investments are forex swaps, forex forward and spot
currency purchases/sales.
For this type of hedges, ineffectiveness scenarios are considered to
be of low probability, given that the hedging instrument is
designated considering the position determined and the spot rate at
which the position is located.
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The following table sets out the maturity profile of the hedging
instruments used in Grupo Santander non-dynamic hedging
strategies:
Up to one
month
One to three Three months t
o one year
months
One year to
five years
More than five
years
31 December 2021
EUR million
Fair value hedges
Interest rate risk
Of which:
Interest rate swap
Call money swap
Exchange rate risk
Fx forward
Future interest rate
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Credit risk
Cash flow hedges
Interest rate risk
Of which:
Future interest rate
Interest rate swap
Call money swap
Exchange rate risk
Of which:
FX forward
Currency swap
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Of which:
Currency swap
Equity risk
Hedges of net investments in foreign operations:
Exchange rate risk
FX forward
5,546
4,324
267
3,716
598
598
—
624
—
624
—
—
17,674
13,047
7,097
2,336
1,202
3,438
2,406
1,032
860
—
860
329
82
—
4,097
4,097
4,097
11,786
9,978
2,138
7,527
1,712
1,712
—
77
—
72
—
19
3,208
1,061
—
310
751
1,348
1,309
39
336
—
336
463
339
—
5,346
5,346
5,346
27,317
20,340
45,119
33,873
4,189
25,588
11,013
11,013
—
199
—
198
—
34
114,828
103,216
42,398
56,120
5,550
586
4,964
5,898
1,232
4,437
44
120
29,678
24,785
17,912
4,370
2,365
—
2,365
2,528
418
2,066
—
—
Total
206,957
176,176
66,904
97,321
21,238
13,909
7,329
9,326
1,650
7,397
44
173
20,459
9,875
102,833
68,867
16,223
6,798
160,397
99,648
244
7,759
858
3,195
1,947
1,248
5,924
—
5,924
1,463
597
2
13,235
13,235
13,235
78,813
311
58,930
7,920
15,506
2,719
9,885
11,165
2,505
7,660
7,246
7,245
49
2,916
2,916
2,916
—
136
6,115
3,856
—
2,800
3,324
1,099
2,225
2,240
7,652
69,471
16,846
27,343
8,381
15,004
21,609
3,604
17,005
11,741
2,240
10,503
5
—
—
—
56
25,594
25,594
25,594
220,577
45,901
392,948
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financial statements
Notes to the consolidated
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Appendix
EUR million
Fair value hedges
Interest rate risk
Of which:
Interest rate swap
Call money swap
Exchange rate risk
Of which:
Fx forward
Interest rate and exchange rate risk
Of which:
Currency swap
Credit risk
Cash flow hedges
Interest rate risk
Of which:
Future interest rate
Interest rate swap
Call money swap
Exchange rate risk
Of which:
FX forward
Currency swap
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Of which:
Currency swap
Equity risk
Hedges of net investments in foreign operations:
Exchange rate risk
FX forward
Up to one
month
One to three Three months t
o one year
months
One year to
five years
More than five
years
31 December 2020
7,132
5,616
3,943
1,021
1,516
901
—
—
—
14,221
9,667
4,804
4,662
4,264
4,264
282
282
8
10,489
6,019
11,629
6,707
5,213
806
—
1,746
1,532
214
1,691
816
875
1,033
33
—
2,435
2,435
2,435
—
4,626
1,502
2,336
2,243
93
972
—
972
1,614
181
—
5,086
5,086
5,086
44,897
39,921
24,807
11,241
3,257
3,257
1,711
1,711
8
44,127
33,070
—
29,511
1,550
4,616
3,040
1,576
5,634
981
4,653
807
229
—
12,831
12,831
12,831
95,343
90,913
33,333
49,624
—
—
37,667
35,465
27,826
3,192
—
—
4,239
2,202
2,104
—
Total
199,260
181,582
94,713
69,740
9,037
8,422
8,434
7,704
207
3,607
191
61,186
26,959
2,279
11,219
7,890
13,071
2,336
9,828
15,687
2,402
11,164
5,456
4,766
13
1,858
1,858
1,858
11,725
1,976
139,156
74,731
—
385
1,181
1,714
—
1,714
3,037
1,019
2,018
4,997
7,492
46,547
12,123
23,483
9,151
13,425
27,021
5,218
19,682
13,907
4,997
10,206
1
—
—
—
14
22,210
22,210
22,210
20,056
30,936
101,855
158,387
49,392
360,626
Annual report 2021 676
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Fair value hedges
Interest rate risk
Of which:
Future interest rate
Interest rate swap
Call money swap
Exchange rate risk
Of which:
Fx forward
Interest rate and exchange rate risk
Credit risk
Cash flow hedges
Interest rate risk
Of which:
Futures
Interest rate swap
Call money swap
Exchange rate risk
Of which:
Future interest rate
FX forward
Currency swap
Interest rate and exchange rate risk
Of which:
Interest rate swap
Currency swap
Inflation risk
Of which:
FX forward
Currency swap
Equity risk
Hedges of net investments in foreign operations
Exchange rate risk
FX forward
Up to one
month
One to three
months
Three months
to one year
One year
to five years
More than five
years
31 December 2019
5,816
5,468
16
734
4,674
333
329
15
—
16,506
13,023
12,304
460
—
2,300
—
2,173
127
1,086
—
1,086
97
—
97
—
2,735
2,735
2,735
14,591
9,055
—
3,532
5,318
4,090
4,090
1,432
14
5,912
2,179
385
864
398
43,236
37,627
606
24,382
12,085
5,172
5,082
437
—
38,678
13,011
3,196
7,441
1,253
2,572
14,324
—
1,746
826
308
—
308
853
117
736
—
4,191
4,191
4,191
9,290
3,404
1,630
9,221
1,917
5,553
2,114
1,205
909
8
14,192
14,192
14,192
96,106
25,057
24,694
90,707
86,119
6,066
62,474
14,653
411
221
3,933
244
62,119
26,332
5,770
12,585
3,925
11,753
—
3,272
7,593
20,782
2,880
15,106
3,204
908
2,207
48
3,359
3,359
3,359
48,198
45,317
5,637
26,317
8,061
—
—
2,881
0
Total
202,548
183,586
12,325
117,439
44,791
10,006
9,722
8,698
258
12,224
1,265
135,439
55,810
—
142
588
854
—
—
854
7,541
2,550
4,991
2,562
—
2,562
2
—
—
—
21,655
21,492
6,164
31,803
9,290
10,595
11,030
38,938
7,347
27,044
8,830
2,230
6,511
58
24,477
24,477
24,477
156,185
60,422
362,464
Annual report 2021 677
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Additionally, for Santander UK Group Holdings plc and Banco
Santander, S.A., both the maturity profile, the average interest and
exchange rate of hedging instruments by maturity buckets are
shown:
Santander UK Group Holdings plc group
Fair value hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Average fixed interest rate (%) EUR
Average fixed interest rate (%) USD
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average fixed interest rate (%) EUR
Cash flow hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Foreign exchange risk
Exchange and interest rate instruments
Nominal
Average GBP/JPY exchange rate
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Average fixed interest rate (%) GBP
31 December 2021
EUR million
Up to one
month
One to three
months
Three months
to one year
One year
to five years
More than five
years
Total
3,716
0.590
0.510
1.910
—
—
—
7,408
0.420
1.740
0.960
—
—
—
25,525
53,427
0.090
1.080
1.440
127
1.205
3.290
0.910
0.810
2.760
683
1.159
2.030
1,203
1.970
572
0.440
1,036
0.080
8,967
1.290
3,218
—
1.165
1.344
739
1.277
—
2.260
1,114
142.905
—
1.342
2,448
148.856
1.185
1.332
—
—
—
—
1,000
1.386
—
1.170
10,897
—
1.159
1.339
8,112
1.202
1.609
2.720
96,018
975
17,893
21,261
12,711
5,942
3.130
2.610
4.050
165
1.171
2.620
6,115
0.970
3,584
—
1.174
1.388
2,860
1.200
1.381
3.410
Annual report 2021 678
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Fair value hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Average fixed interest rate (%) EUR
Average fixed interest rate (%) USD
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average fixed interest rate (%) EUR
Cash flow hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Foreign exchange risk
Exchange and interest rate instruments
Nominal
Average GBP/JPY exchange rate
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Average fixed interest rate (%) GBP
31 December 2020
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
2,704
0.690
1.180
1.870
—
—
—
—
—
1,602
—
—
1.293
1,630
—
1.465
2.010
8,481
0.650
0.230
1.720
—
—
—
30,946
53,170
0.820
3.020
2.890
147
1.141
4.640
0.730
0.980
2.490
776
1.170
1.780
999
0.460
2,815
0.570
8,869
1.450
2,244
137.977
—
1.316
4,317
135.607
—
1.323
—
—
—
—
3,858
1.354
—
3.180
8,328
132.271
1.163
1.304
11,816
1.253
1.609
2.480
104,351
1,183
13,863
17,737
20,096
9,050
3.720
2.340
4.160
260
1.167
3.560
1,180
1.330
1,246
—
1.179
—
2,792
1.197
1.381
3.390
Annual report 2021 679
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Fair value hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Average fixed interest rate (%) EUR
Average fixed interest rate (%) USD
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Average fixed interest rate (%) EUR
Average fixed interest rate (%) USD
Cash flow hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Foreign exchange risk
Exchange and interest rate instruments
Nominal
Average GBP/JPY exchange rate
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Average fixed interest rate (%) GBP
31 December 2019
EUR million
Up to one
month
One to three
months
Three months
to one year
One year
to five years
More than five
years
Total
5,118
0.770
(0.410)
—
—
—
—
—
—
—
—
1,395
—
—
1.286
954
1.274
—
2.490
6,822
0.900
0.290
1.540
887
—
1.511
—
2.380
32,210
51,307
15,397
110,854
0.880
2.210
1.990
—
—
—
—
—
1.330
1.360
2.690
394
1.178
—
3.520
—
3.000
2.360
4.560
738
1.160
—
2.120
—
2,019
398
0.760
1,253
0.820
5,490
1.460
588
0.400
7,729
2,491
145.928
1.144
1.252
4,417
143.086
1.117
1.293
—
—
—
—
7,626
1.169
1.536
2.160
7,019
140.815
1.153
1.299
15,089
1.311
1.581
2.870
15,322
30,960
—
—
—
—
7,291
1.209
1.450
2.960
Annual report 2021 680
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Banco Santander, S.A.
Fair value hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Average fixed interest rate (%) JPY
Average fixed interest rate (%) USD
Average fixed interest rate (%) RON
Foreign exchange risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average USD/EUR exchange rate
Average CNY/EUR exchange rate
Average PEN/USD exchange rate
Average JPY/EUR exchange rate
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average fixed interest rate (%) AUD/EUR
Average fixed interest rate (%) CZK/EUR
Average fixed interest rate (%) RON/EUR
Average fixed interest rate (%) HKD/EUR
Average fixed interest rate (%) JPY/EUR
Average fixed interest rate (%) NOK/EUR
Average fixed interest rate (%) CHF/EUR
Average fixed interest rate (%) USD/COP
Average fixed interest rate (%) COP/USD
Average fixed interest rate (%) USD/CLP
Average AUD/EUR exchange rate
Average CZK/EUR exchange rate
Average EUR/GBP exchange rate
Average EUR/USD exchange rate
Average HKD/EUR exchange rate
Average JPY/EUR exchange rate
Average MXN/EUR exchange rate
Average NOK/EUR exchange rate
Average RON/EUR exchange rate
Average CHF/EUR exchange rate
Average USD/CLP exchange rate
Average NZD/EUR exchange rate
Average USD/MXN exchange rate
Credit risk
Credit risk instruments
Nominal
31 December 2021
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
3,038
—
(0.031)
—
—
3.459
—
10,350
0.865
1.180
7.412
—
—
53
—
—
—
—
—
—
—
9.470
—
—
—
—
—
—
—
—
14.696
—
—
—
—
—
—
21,507
10,031
36,412
13,073
5,812
2.139
1.212
0.828
0.465
2.737
4.211
586
0.876
—
—
—
—
3,255
4.000
0.860
4.849
2.580
0.730
—
0.760
6.789
(0.140)
3.450
1.499
25.506
—
0.891
8.782
132.966
—
—
4.815
1.092
0.001
—
0.050
1.750
1.532
0.403
—
3.374
3.200
—
—
—
—
—
—
1,279
4.661
—
—
—
1.144
3.605
1.243
7.153
—
—
1.529
—
—
—
—
126.605
—
9.606
4.927
1.105
—
1.666
—
14
—
3.859
—
—
4.746
—
1,822
—
0.989
—
—
1.449
—
503
—
1.187
7.859
—
132.688
1,634
0.882
1.172
7.717
4.003
130.741
116
1,109
—
—
—
—
—
—
—
5.140
—
—
—
—
1.176
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19
34
120
—
173
Annual report 2021 681
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Cash flow hedges
Interest rate and foreign exchange rate risk
Interest rate and foreign exchange rate instruments
Nominal
Average fixed interest rate (%) EUR/PEN
Average fixed interest rate (%) EUR/AUD
Average fixed interest rate (%) AUD/EUR
Average EUR/GBP exchange rate
Average EUR/USD exchange rate
Average AUD/EUR exchange rate
Average RON/EUR exchange rate
Average JPY/EUR exchange rate
Average CHF/EUR exchange rate
Average NOK/EUR exchange rate
Average CZK/EUR exchange rate
Average EUR/PEN exchange rate
Average EUR/AUD exchange rate
Interest rate risk
Bond Forward instruments
Nominal
Average fixed interest rate (%) EUR
Average fixed interest rate (%) USD
Average fixed interest rate (%) AUD
Hedges of net investments in foreign operations
Exchange rate risk
Exchange and interest rate instruments
Nominal
Average BRL/EUR exchange rate
Average CLP/EUR exchange rate
Average COP/EUR exchange rate
Average GBP/EUR exchange rate
Average MXN/EUR exchange rate
Average PLN/EUR exchange rate
Average USD/EUR exchange rate
31 December 2021
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,279
—
—
—
3,778
6.663
943.354
—
0.854
25.541
4.592
—
9
—
1.632
—
—
—
—
—
—
—
—
—
—
0.624
—
—
—
—
1,169
3.441
—
—
1.102
—
—
—
—
—
—
—
0.208
—
1,848
—
—
0.305
1.113
0.882
1.604
4.885
120.568
—
—
26.131
—
—
5,191
(0.465)
1.765
—
38,314
(0.258)
—
1.650
4,848
6.758
929.690
—
0.857
25.335
4.582
—
11,815
6.841
949.615
4,538.997
0.855
25.192
4.634
1.167
2,916
—
—
—
0.875
—
—
1.233
408
—
—
—
—
—
1.562
—
—
1.102
10.242
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,434
47,784
23,357
Annual report 2021 682
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
31 December 2020
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
Fair value hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Average fixed interest rate (%) JPY
Average fixed interest rate (%) USD
Average fixed interest rate (%) RON
Foreign exchange risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average USD/EUR exchange rate
Average COP/USD exchange rate
Average CNY/EUR exchange rate
Average SAR/EUR exchange rate
Average PEN/USD exchange rate
Average AUD/EUR exchange rate
Average JPY/EUR exchange rate
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average fixed interest rate (%) AUD/EUR
Average fixed interest rate (%) CZK/EUR
Average fixed interest rate (%) EUR/COP
Average fixed interest rate (%) RON/EUR
Average fixed interest rate (%) HKD/EUR
Average fixed interest rate (%) JPY/EUR
Average fixed interest rate (%) NOK/EUR
Average fixed interest rate (%) CHF/EUR
Average fixed interest rate (%) USD/COP
Average fixed interest rate (%) COP/USD
Average fixed interest rate (%) USD/CLP
Average AUD/EUR exchange rate
Average COP/USD exchange rate
Average CZK/EUR exchange rate
Average EUR/GBP exchange rate
Average EUR/USD exchange rate
Average HKD/EUR exchange rate
Average JPY/EUR exchange rate
Average MXN/EUR exchange rate
Average NOK/EUR exchange rate
Average RON/EUR exchange rate
Average CHF/EUR exchange rate
Average USD/CLP exchange rate
Average USD/MXN exchange rate
2,073
—
0.647
—
—
0.698
—
409
—
0.551
—
—
0.570
—
833
—
1.165
3,628.140
8.108
4.484
—
—
—
4,149
0.901
1.171
3,603.595
8.102
4.514
3.609
1.609
124.612
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
282
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.113
—
—
—
—
—
—
—
—
—
2,165
—
0.388
—
—
2.031
—
3,008
0.916
1.178
—
7.997
—
—
—
—
818
—
—
4.380
—
—
2.195
—
—
8.030
6.000
0.930
—
3,437.200
—
—
—
—
113.370
—
—
—
—
0.001
0.050
17,430
14,294
36,371
7,990
4,804
1.375
0.820
0.800
0.465
3.004
3.610
—
—
—
—
—
—
—
—
—
2,621
4.000
0.860
—
4.849
2.580
0.568
—
—
6.659
—
—
1.499
—
25.539
—
0.891
8.782
133.840
14.696
—
4.727
1.092
—
—
4.072
1.927
0.403
—
3.562
—
—
—
—
—
—
—
—
—
—
1,083
4.660
—
—
—
—
1.281
3.605
1.243
7.231
—
—
1.508
—
—
—
—
—
125.883
—
9.606
—
1.105
—
—
Annual report 2021 683
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Credit risk
Credit risk instruments
Nominal
Cash flow hedges
Interest rate and foreign exchange rate risk
Interest rate and foreign exchange rate instruments
Nominal
Average EUR/GBP exchange rate
Average EUR/USD exchange rate
Average AUD/EUR exchange rate
Average RON/EUR exchange rate
Average JPY/EUR exchange rate
Average CHF/EUR exchange rate
Interest rate risk
Bond Forward instruments
Nominal
Average fixed interest rate (%) EUR
Hedges of net investments in foreign operations
Exchange rate risk
Exchange and interest rate instruments
Nominal
Average BRL/EUR exchange rate
Average CLP/EUR exchange rate
Average COP/EUR exchange rate
Average GBP/EUR exchange rate
Average MXN/EUR exchange rate
Average PLN/EUR exchange rate
31 December 2020
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
—
8
8
191
—
207
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,247
1.080
—
—
—
—
—
3,242
1.102
0.882
1.625
4.810
120.568
—
3,164
—
5,000
(0.258)
23,000
(0.250)
4,279
(0.236)
2,229
5.270
869.633
—
0.909
23.121
4.427
4,554
5.308
861.546
—
0.916
25.456
4.420
11,570
6.332
864.339
4.471
0.907
26.788
4.516
1,858
—
932.215
—
—
—
—
4,697
35,443
20,211
208
—
—
—
—
—
1.102
—
—
—
—
—
—
—
—
—
Annual report 2021 684
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Fair value hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) GBP
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Average fixed interest rate (%) JPY
Average fixed interest rate (%) USD
Foreign exchange risk
Exchange and interest rate instruments
Nominal
Average GBP/EUR exchange rate
Average USD/EUR exchange rate
Average USD/CLP exchange rate
Average CNY/EUR exchange rate
Average SAR/EUR exchange rate
Interest rate and foreign exchange rate risk
Exchange and interest rate instruments
Nominal
Average fixed interest rate (%) AUD/EUR
Average fixed interest rate (%) CZK/EUR
Average fixed interest rate (%) EUR/COP
Average fixed interest rate (%) RON/EUR
Average fixed interest rate (%) HKD/EUR
Average fixed interest rate (%) JPY/EUR
Average fixed interest rate (%) NOK/EUR
Average fixed interest rate (%) CHF/EUR
Average fixed interest rate (%) USD/COP
Average AUD/EUR exchange rate
Average CZK/EUR exchange rate
Average EUR/GBP exchange rate
Average HKD/EUR exchange rate
Average JPY/EUR exchange rate
Average MXN/EUR exchange rate
Average NOK/EUR exchange rate
Average RON/EUR exchange rate
Average CHF/EUR exchange rate
Average USD/MXN exchange rate
31 December 2019
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
8
—
5.300
—
—
—
106
—
2.410
—
—
—
211
—
—
747.720
—
4.160
3,903
0.860
1.120
747.900
7.910
0.042
14
—
—
—
—
—
—
—
—
7.540
—
—
—
—
—
—
—
—
—
—
289
—
—
—
—
—
—
—
—
—
—
—
1.171
—
—
—
—
—
—
—
1,406
—
3.200
—
—
2.050
4,777
0.870
1.120
746.700
8.010
—
346
—
—
6.160
—
2.520
0.540
—
—
5.670
—
—
—
8.719
130.470
—
—
—
—
—
16,707
10,219
28,446
8,891
4,197
1.430
0.790
0.800
0.460
3.120
—
—
—
—
—
—
2,599
4.000
0.860
—
4.850
2.580
0.660
—
—
7.620
1.499
25.407
—
8.782
132.461
14.696
—
4.727
1.092
0.052
6.820
2.580
0.400
—
3.930
—
—
—
—
—
—
949
4.660
—
—
—
—
1.280
3.610
1.240
7.220
1.508
26.030
—
—
125.883
—
9.606
—
1.105
—
Annual report 2021 685
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
31 December 2019
EUR million
Up to one
month
One to three
months
Three months
to one year
One year to
five years
More than five
years
Total
—
13
—
244
—
257
Credit Risk
Credit risk instruments
Nominal
Cash flow hedges
Interest rate and foreign exchange rate risk
Interest rate and foreign exchange rate instruments
Nominal
Interest rate risk
Bond Forward instruments
Nominal
Hedges of net investments in foreign operations
Exchange rate risk
Exchange and interest rate instruments
Nominal
Average BRL/EUR exchange rate
Average CLP/EUR exchange rate
Average COP/EUR exchange rate
Average GBP/EUR exchange rate
Average MAD/EUR exchange rate
Average MXN/EUR exchange rate
Average PLN/EUR exchange rate
—
11,626
2,592
4.590
822.130
—
0.890
—
23.490
4.370
Other geographies
Consumer Group entities mainly have loans portfolios at fixed
interest rates and are therefore, exposed to changes in fair value due
to movements in market interest rates. The entities manage this risk
by contracting interest rate swaps in which they pay a fixed rate and
receive a variable rate. Interest rate risk is the only one hedged and,
therefore, other risks, such as credit risk, are managed but not
hedged by the entities. The interest rate risk component is
determined as the change in fair value of fixed rate loans arising
solely from changes in a reference rate. This strategy is designated as
a fair value hedge and its effectiveness is assessed by comparing
changes in the fair value of loans attributable to changes in reference
interest rates with changes in the fair value of interest rate swaps.
In addition, in order to access international markets with the aim of
obtaining sources of financing, some Consumer Group´s entities issue
fixed rate debt in their own currency and in other currencies that
differ from their functional currency. Therefore, they are exposed to
changes in both interest rates and exchange rates, which they
mitigate with derivatives (interest rate swaps, fx forward and cross
currency swaps) in which they receive a fixed interest rate and pay a
variable interest rate, implemented with a fair value hedge.
The cash flow hedges of the Santander Group´s entities hedge the
foreign currency risk of loans and financing.
Finally, it has hedges of net investments abroad to hedge the foreign
exchange risk of the shareholding in NOK and CNY currencies.
—
—
353
4,410
207
4,970
1,792
5,443
—
18,861
23,384
3,838
4.740
822.320
—
0.910
10.770
23.100
4.380
13,595
4.740
811.640
3,828.610
0.940
10.870
23.270
4.390
3,359
4.880
824.360
—
—
—
—
—
—
—
—
—
—
—
—
—
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo
Financiero Santander México has mainly long-term loan portfolios at
fixed interest rates, portfolios of short-term deposits in local
currency, portfolios of Mexican Government bonds and corporate
bonds in currencies other than the local currency and are therefore
exposed to changes in fair value due to movements in market
interest rates, as well as these latter portfolios also to variations in
exchange rates. The entity manages this risk by contracting
derivatives (interest rate swaps or cross currency swaps) in which
they pay a fixed rate and receive a variable rate. Only the interest rate
and exchange rate risk is hedged, if applicable, and therefore other
risks, such as credit risk, are managed but not hedged by the entity.
The interest rate risk component is determined as the change in the
fair value of fixed rate loans arising solely from changes in a
reference rate. This strategy is designated as a fair value hedge and
its effectiveness is assessed by comparing changes in the fair value of
loans attributable to changes in benchmark interest rates with
changes in the fair value of interest rate swaps.
Regarding cash flow hedges, Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander México
has a portfolio of unsecured bonds issued at a variable rate in its local
currency, which it manages with an Interest Rate Swap in which it
receives a variable rate and pays a fixed rate. On the other hand, it
also has different items in currencies other than the local currency:
unsecured fixed rate bonds, commercial bank loans at variable rates,
fixed rate issues, Mexican and Brazilian government bonds at fixed
rates. In all these portfolios, the Bank is exposed to exchange rate
variations, which it mitigates by contracting cross currency swaps or
fx forward.
Annual report 2021 686
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Banco Santander (Brasil) S.A. has, on the one hand, fixed-rate
government bond portfolios and, therefore, they are exposed to
changes in fair value due to movements in market interest rates. The
entity manages this risk by contracting derivatives (interest rate
swaps or futures) in which they pay a fixed rate and receive a variable
rate. The interest rate risk is the only one hedged and consequently
other risks, such as credit risk, are managed but not hedged by the
entity. This strategy is designated as a fair value hedge and its
effectiveness is evaluated by comparing by linear regression the
changes in the fair value of the bonds with the changes in the fair
value of the derivatives.
On the other hand, as part of the fair value hedge strategy, it has
corporate loans in different currencies than the local one and is
therefore exposed to changes in fair value due to exchange rates.
This risk is mitigated by contracting cross currency swaps. Its
effectiveness is evaluated by comparing changes in the fair value of
loans attributable to changes subject of hedge with changes in the
fair value of derivatives.
Finally, it also holds a portfolio of long-term corporate bonds with
inflation-indexed rates, thus exposed to changes in market value due
to changes in market inflation rates. In order to achieve its mitigation,
they contract futures in which they pay the indexed inflation and
receive variable interest rates. Its effectiveness is assessed by
comparing through lineal regression the changes in the fair value of
the bonds to the changes in fair value of the derivatives.
In the hedge of cash flows, Banco Santander (Brasil) S.A. has
portfolios of loans and government bonds in different currency than
the entity's functional currency and, therefore, it is subject to the risk
of changes in currency rates. This exposure will be mitigated by hiring
cross currency swaps and futures. Its effectiveness is assessed by
comparing changes in fair value of loans and bonds, caused by the
hedge risk, to changes in fair value of such derivatives.
Finally, they have a portfolio of variable rate government bonds, so
they are exposed to changes in the value due to changes in interest
rates. In order to mitigate these changes, a future is hired in which a
variable rate is paid and a fixed rate is received. Its effectiveness is
assessed by comparing changes in the fair value loans and bonds to
changes in the fair value of the futures.
Annual report 2021 687
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Regarding the hedged items, the products that are being hedged are
mainly: borrowed deposits, financial deposits, loans, government
bonds as assets and financial bonds as liabilities. The following table
shows the detail of the type of hedging, the risk that is hedged and
which products are being hedged at 31 December 2021, 2020 and
2019:
EUR million
31 December 2021
Carrying amount of
hedged items
Accumulated amount
of fair value
adjustments on the
hedged item
Assets Liabilities
Assets
Liabilities
Balance sheet line item
Change in fair value
of hedged item for
ineffectiveness
assessment
Cash flow reserves or
conversion reserves
Continuing
hedges
Discontinued
hedges
Fair value hedges
Interest rate risk
Exchange rate risk
Interest and Exchange rate
risk
Inflation risk
Credit risk
193,949
51,395
125,479
64,531
47,347
—
3,714
46
179
4,048
—
—
462
727
(282)
15
—
2
453
366
—
87
—
—
Loans and advances / Deposits
and Debt securities / Debt
securities issued
Deposits and loans and
advances / Debt securities /
Variable income portfolio / Rest
of other assets and liabilities
3,282
3,282
—
—
—
—
197,231
51,395
462
—
—
453
Equity instruments
EUR million
31 December 2020
Carrying amount of
hedged items
Accumulated amount
of fair value
adjustments on the
hedged item
Assets Liabilities
Assets
Liabilities
Balance sheet line item
Change in fair value
of hedged item for
ineffectiveness
assessment
Cash flow reserves or
conversion reserves
Continuing
hedges
Discontinued
hedges
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest and Exchange rate
risk
Inflation risk
Equity risk
Net foreign investments
hedges
Exchange rate risk
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest and Exchange rate
risk
Inflation risk
Equity risk
Net foreign investments
hedges
Exchange rate risk
Fair value hedges
Interest rate risk
Exchange rate risk
141,608
52,055
128,279
8,718
48,137
—
Interest and Exchange rate
risk
Credit risk
4,391
220
3,918
—
3,369
3,183
40
143
3
2,914
2,727
—
187
—
Loans and advances / Deposits
and Debt securities / Debt
securities issued
Deposits and loans and
advances / Debt securities /
Variable income portfolio /
Rest of other assets and
liabilities
22,150
22,150
—
—
—
—
—
—
163,758
52,055
3,369
2,914
Equity instruments
(1,061)
(543)
(343)
(173)
—
(2)
1,538
400
440
69
628
1
—
—
477
—
—
—
—
—
—
(414)
(540)
81
330
(289)
4
0
—
(414)
—
—
—
—
—
—
(150)
(54)
8
—
(104)
0
3
3
(147)
553
469
(13)
100
(3)
532
314
204
(87)
105
(4)
—
—
1,085
—
—
—
—
—
420
(87)
(68)
680
(111)
6
(11)
(11)
409
—
—
—
—
—
(43)
(11)
—
—
(32)
—
14
14
(29)
Annual report 2021 688
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
31 December 2019
Carrying amount of
hedged items
Accumulated amount
of fair value
adjustments on the
hedged item
Assets Liabilities
Assets
Liabilities
Balance sheet line item
Change in fair value
of hedged item for
ineffectiveness
assessment
Cash flow reserves or
conversion reserves
Continuing
hedges
Discontinued
hedges
Fair value hedges
Interest rate risk
Exchange rate risk
Interest and Exchange rate
risk
Inflation risk
Credit risk
134,958
60,487
122,560
8,613
55,538
—
3,532
—
253
4,949
—
—
2,768
2,764
19
(21)
—
6
2,298
2,099
—
199
—
—
Loans and advances / Deposits
and Debt securities / Debt
securities issued
Deposits and loans and
advances / Debt securities /
Variable income portfolio /
Rest of other assets and
liabilities
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest and Exchange rate
risk
Inflation risk
Equity risk
Other risks
Net foreign investments
hedges
Exchange rate risk
1,070
1,070
—
—
—
—
—
—
136,028
60,487
2,768
2,298
Equity instruments
1,583
1,370
58
154
(4)
5
(204)
(128)
(32)
(169)
20
7
98
—
—
1,379
—
—
—
—
—
—
522
4
130
510
(22)
(2)
(98)
—
—
522
—
—
—
—
—
—
(79)
(74)
(4)
—
—
(1)
—
—
—
(79)
Annual report 2021 689
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The cumulative amount of adjustments of the fair value hedging
instruments that remain in the balance for hedges items that are no
longer adjusted by profit and loss of coverage as at 31 December
2021 is EUR 460 million (EUR 729 million in 2020 and EUR
340 million in 2019).
The net impact of the hedges are shown in the following table:
EUR million
31 December 2021
Earnings/
(losses)
recognised
in another
cumulative
overall
result
(941)
(494)
155
(350)
(249)
(3)
(941)
Earnings/
(losses)
recognised
in another
cumulative
overall
result
(67)
69
(194)
170
(121)
9
3
3
(64)
Fair value hedges
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Inflation risk
Equity risk
Fair value hedges
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Credit risk
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Inflation risk
Equity risk
Net foreign investments
hedges
Exchange rate risk
Ineffective
recognised
in the Line of the income statement
that includes the
ineffectiveness of cash flows
income
statement
Reclassified amount of reserves to the income
statement due to:
Cover transaction
affecting the income
statement
Line of the income
statement that
includes reclassified
items
Gains or losses financial
assests/liabilities
Gains or losses financial
assests/liabilities
18
46
(55)
27
(63)
(33)
2
(35)
3
—
(45)
EUR million
31 December 2020
Interest margin/Gains
or losses financial
assests/liabilities
(801)
269
(262)
(350)
(458)
—
(801)
Ineffective
coverage
recognised
in the Line of the income statement
that includes the
ineffectiveness of cash flows
income
statement
Gains or losses financial
assests/liabilities
Gains or losses financial
assests/liabilities
Gains or losses financial
assests/liabilities
104
9
1
92
2
(53)
7
9
(62)
(7)
—
—
—
51
Reclassified amount of reserves to the income
statement due to:
Cover transaction
affecting the income
statement
Line of the income
statement that
includes reclassified
items
Interest margin/Gains
or losses financial
assests/liabilities
851
118
(132)
844
21
—
—
—
851
Annual report 2021 690
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
31 December 2019
Reclassified amount of reserves to the income
statement due to:
Earnings/
(losses)
recognised
in another
cumulative
overall
result
8
(263)
145
168
(44)
2
—
—
8
Fair value hedges
Interest rate risk
Risk of Exchange rate
Risk of interest rate and exchange rate
Inflation risks
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate and exchange rate risk
Inflation risk
Equity risk
Net foreign investments
hedges
Exchange rate risk
Ineffective
coverage
recognised
in the Line of the income statement
that includes the
ineffectiveness of cash flows
income
statement
Cover transaction
affecting the income
statement
Gains or losses financial
assests/liabilities
Gains or losses financial
assests/liabilities
Gains or losses financial
assests/liabilities
58
5
(3)
56
—
(86)
1
(34)
(53)
—
—
—
—
(28)
(1,112)
8
(364)
(769)
13
—
—
—
(1,112)
Line of the income
statement that
includes reclassified
items
Interest margin/Gains
or losses financial
assests/liabilities
Annual report 2021 691
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
(225)
185
(256)
EUR million
The following table shows the movement in the impact of equity for
the year:
EUR million
Balance at beginning of year
Cash flow hedges
Interest rate risk
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
2021
2020
2019
295
300
277
(494)
67
(264)
(269)
(118)
(8)
Exchange rate risk
155
(194)
146
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
262
132
364
(107)
(326)
(218)
Interest rate and exchange rate risk
(350)
170
168
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
Inflation risk
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
Equity risk
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
Net foreign investments hedges
Exchange rate risk
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
Non-controlling interest
Taxes
Balance at end of year
350
(844)
769
(700) 1,014
(601)
(249)
(121)
(44)
458
(21)
(13)
(3)
—
(3)
—
—
—
92
278
9
—
9
3
—
3
56
5
2
—
2
—
—
—
32
(17)
(276)
295
300
37. Discontinued operations
No operations were discontinued in 2021, 2020 or 2019.
(707)
(100)
(31)
39. Interest expense
38. Interest income
Interest and similar income in the consolidated income statement
comprises the interest accruing in the year on all financial assets with
an implicit or explicit return, calculated by applying the effective
interest method, irrespective of measurement at fair value; and the
rectifications of income as a result of hedge accounting. Interest is
recognised gross, without deducting any tax withheld at source.
The detail of the main interest and similar income items earned in
2021, 2020 and 2019 is as follows:
Loans and advances, central banks
Loans and advances, credit institutions
Debt instruments
Loans and advances, customers
Other interest
2021
2020
2019
476
916
431
894
1,314
1,785
5,724
5,022
6,378
38,649 38,788 46,180
698
606
1,128
46,463 45,741 56,785
Most of the interest and similar income was generated by the
Group’s financial assets that are measured either at amortised cost or
at fair value through Other comprehensive income.
Interest expense and similar charges in the consolidated income
statement includes the interest accruing in the year on all financial
liabilities with an implicit or explicit return, including remuneration in
kind, calculated by applying the effective interest method,
irrespective of measurement at fair value; the rectifications of cost as
a result of hedge accounting; and the interest cost attributable to
provisions recorded for pensions.
The detail of the main items of interest expense and similar charges
accrued in 2021, 2020 and 2019 is as follows:
EUR million
Central banks deposits
Credit institution deposits
Customer deposits
Debt securities issued and subordinated
liabilities
Marketable debt securities
Subordinated liabilities (note 23)
Provisions for pensions (note 25)
Lease Liabilities
Other interest expense
2021
2020
2019
338
366
468
1,140
1,652
2,576
5,452
5,599 10,137
4,838
5,119
6,679
4,190
4,548
6,034
648
91
125
1,109
571
95
186
730
645
145
273
1,224
13,093 13,747 21,502
Most of the interest expense and similar charges was generated by
the Group’s financial liabilities that are measured at amortised cost.
Annual report 2021 692
40. Dividend income
42. Commission expense
Dividend income includes the dividends and payments on equity
instruments out of profits generated by investees after the
acquisition of the equity interest.
Commission expense shows the amount of all fees and commissions
paid or payable by the Group in the year, except those that form an
integral part of the effective interest rate on financial instruments.
The detail of Income from dividends as follows:
The detail of commission expense is as follows:
EUR million
EUR million
Dividend income classified as:
Financial assets held for trading
Non-trading financial assets
mandatorily at fair value through
profit or loss
Financial assets at fair value through
other comprehensive income
2021
2020
2019
369
272
388
32
31
34
112
513
88
391
111
533
41. Commission income
Commission income comprises the amount of all fees and
commissions accruing in favour of the Group in the year, except those
that form an integral part of the effective interest rate on financial
instruments.
The detail of fee and commission income is as follows:
Commissions assigned to third parties
Cards
By collection and return of effects
Other fees assigned
Other commissions paid
Brokerage fees on lending and deposit
transactions
Sales of insurance and pension funds
Other fees and commissions
2021
2020
2019
1,993
1,355
16
622
1,856
1,249
12
595
2,350
1,616
12
722
1,317
1,153
1,220
60
341
916
26
248
879
27
232
961
3,310
3,009
3,570
43. Gains or losses on financial assets and liabilities
The following information is presented below regarding the gains or
losses recorded for financial assets or liabilities:
a) Breakdown
The detail, by origin, of Gains/losses on financial assets and liabilities:
EUR million
Coming from collection and payment
services
Bills
Demand accounts
Cards
Orders
Cheques and other
Coming from non-banking financial
products
Investment funds
Pension funds
Insurance
Coming from Securities services
Securities underwriting and placement
Securities trading
Administration and custody
Asset management
Other
Foreign exchange
Financial guarantees
Commitment fees
Other fees and commissions
2021
2020
2019
EUR million
Gains or losses on financial assets and
liabilities not measured at fair value
through profit or loss, net
Financial assets at amortized cost
Other financial assets and liabilities
Of which debt instruments
Gains or losses on financial assets and
liabilities held for trading, net*
Gains or losses on non-trading financial
assets and liabilities mandatory at fair
value through profit or loss
Gains or losses on financial assets and
liabilities measured at fair value
through profit or loss, net*
Gains or losses from hedge accounting,
net
2021
2020
2019
628
89
539
567
1,107
1,136
(31)
1,138
1,179
308
828
804
1,141
3,211
1,349
132
82
292
270
(171)
(286)
(46)
51
(28)
2,125
4,280
2,463
* Includes the net result obtained by transactions with debt securities, equity
instruments, derivatives and short positions included in this portfolio when the
Group jointly manages its risk in these instruments.
214
1,408
3,138
503
139
265
1,284
2,986
484
110
328
1,382
3,858
478
155
5,402
5,129
6,201
992
161
2,467
3,620
888
170
2,289
3,347
943
180
2,631
3,754
431
319
402
369
394
316
336
316
364
281
485
293
1,521
1,362
1,423
522
415
442
500
409
366
612
521
293
1,890
3,269
1,911
3,186
2,545
3,971
13,812
13,024
15,349
Annual report 2021 693
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
As explained in note 44, the above breakdown should be analysed in
conjunction with the 'Exchange differences, net':
The detail of the amount of the liability balances is as follows:
EUR million
Exchange differences, net
2021
2020
(562)
(2,093)
2019
(932)
b) Financial assets and liabilities at fair value through
profit or loss
The detail of the amount of the asset balances is as follows:
EUR million
Loans and receivables:
Central banks
Credit institutions
Customers
Debt instruments
Equity instruments
Derivatives
2021
2020
2019
34,812
46,589
59,624
3,608
9,481
6,473
13,549
12,139
21,649
17,655
24,969
31,502
30,223
41,573
36,402
19,119
12,849
15,787
54,292
67,137
63,397
138,446 168,148 175,210
Grupo Santander mitigates and reduces this exposure as follows:
• With respect to derivatives, the Group has entered into framework
agreements with a large number of credit institutions and
customers for the netting-off of asset positions and the provision
of collateral for non-payment.
At 31 December 2021 the exposure to credit risk of the derivatives
presented in the balance sheet is not significant because they are
subject to netting and collateral agreements (see note 2.f).
• Loans and advances to credit institutions and Loans and advances
includes reverse repos amounting to EUR 26,060 million at 31
December 2021.
Also, mortgage-backed assets totalled EUR 1,299 million.
• Debt instruments include EUR 24,117 million of Spanish and
foreign government securities.
At 31 December 2021 the amount of the change in the year in the
fair value of financial assets at fair value through profit or loss
attributable to variations in their credit risk (spread) was not
material.
EUR million
Deposits
Central banks
Credit institutions
Customer
Marketable debt securities
Short positions
Derivatives
Other financial liabilities
2021
2020
2019
40,946
43,598
57,111
1,645
7,552
2,490
6,765
12,854
9,340
31,749
34,343
34,917
5,454
4,440
3,758
12,236
16,698
14,123
53,566
64,469
63,016
—
—
126
112,202 129,205 138,134
At 31 December 2021, the amount of the change in the fair value of
financial liabilities at fair value through profit or loss attributable to
changes in their credit risk during the year is not material.
In relation to liabilities designated at fair value through profit or loss
where it has been determined at initial recognition that the credit risk
is recorded in accumulated 'Other comprehensive income' (see
'Statement of recognised income and expense') the amount that the
Group would be contractually obliged to pay on maturity of these
liabilities at 31 December 2021 is EUR 81 million lower than their
carrying amount (EUR 119 million at 31 December 2020 and EUR
26 million at 31 December 2019).
Within Deposits, there are repurchase agreements amounting to EUR
14,057 million at 31 December 2021.
44. Exchange differences, net
Exchange differences shows basically the gains or losses on currency
dealings, the differences that arise on translations of monetary items
in foreign currencies to the functional currency.
Grupo Santander manages the currencies to which it is exposed
together with the arrangement of derivative instruments and,
accordingly, the changes in this line item should be analysed
together with those recognised under 'Gains/losses on financial
assets and liabilities' (see note 43).
Annual report 2021 694
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
45. Other operating income and expenses
46. Staff costs
Other operating income and Other operating expenses in the
consolidated income statements include:
a) Breakdown
The detail of Staff costs is as follows:
EUR million
Insurance activity
Income from insurance and reinsurance
contracts issued
Of which:
Insurance and reinsurance premium
income
Reinsurance income (note 15)
Expenses of insurance and reinsurance
contracts
Of which:
Claims paid, other insurance-related
expenses and net provisions for
insurance contract liabilities
Reinsurance premiums paid
Other operating income
Non- financial services
Other operating income
Other operating expense
Non-financial services
Other operating expense:
Of which, credit institutions deposit
guarantee fund and single resolution
fund
2021
211
2020
210
2019
120
1,516
1,452
2,534
EUR million
Wages and salaries
Social Security costs
2021
2020
2019
8,466
8,070
8,987
1,323
1,277
1,426
1,381
1,349
2,404
135
103
130
(1,305)
(1,242)
(2,414)
(1,097)
(1,063)
(2,183)
(208)
(179)
(231)
Additions to provisions for defined benefit
pension plans (note 25)
73
76
72
Contributions to defined contribution
pension funds
Other Staff costs
286
283
292
1,068
1,077
1,364
11,216 10,783 12,141
b) Headcount
The average number of employees in the Group and Banco
Santander, S.A., by professional category, was as follows:
2,255
1,920
1,797
Average number of employees
291
362
379
1,964
1,558
1,418
Banco Santander, S.A.
(2,442)
(2,342)
(2,138)
(283)
(350)
(351)
(2,159)
(1,992)
(1,787)
(1,016)
(1,005)
24
(212)
(911)
(221)
Executive directors and Senior
management
Other line personnel
Branches abroad
Rest of Spain
Santander UK plc
Santander Brasil
Other companies*
2021
2020
2019
24,512
27,503
30,009
19
21
20
23,343
26,527
29,147
1,150
955
842
10,348
8,878
8,269
15,463
16,790
17,961
46,269
44,554
47,253
95,913
96,166
97,622
192,505 193,891 201,114
Most of Banco Santander’s insurance activity is carried on in life
insurance.
The amount of the Group recognises in relation to income from sub-
leases of rights of use is not material.
* Does not include staff affected by discontinued operations.
The number of employees, at the end of 2021, 2020 and 2019, was
197,070, 191,189 and 196,419, respectively.
Annual report 2021 695
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The functional breakdown (final employment), by gender, at 31
December 2021 is as follows:
FUNCTIONAL BREAKDOWN BY GENDER
Europe
North America
South America
Senior executives
Other executives
Other personnel
Men
1,039
223
318
1,580
Women
390
60
115
565
Men
6,865
1,181
2,955
11,001
Women
3,926
583
1,934
6,443
Men
29,934
18,299
29,137
77,370
Women
37,773
23,226
39,112
100,111
The same information, expressed in percentage terms at 31
December 2021 is as follows:
Functional breakdown by gender
Europe
North America
South America
Senior executives
Other executives
Other personnel
Men
73%
79%
73%
74%
Women
27%
21%
27%
26%
Men
64%
67%
60%
63%
Women
36%
33%
40%
37%
Men
44%
44%
43%
44%
Women
56%
56%
57%
56%
The labour relations between employees and the various Group
companies are governed by the related collective agreements or
similar regulations.
c) Share-based payments
The main share-based payments granted by the Group in force at 31
December, 2021, 2020 and 2019 are described below.
The number of employees in the Group with disabilities, distributed
by professional categories, at 31 December 2021, is as follows:
Number of employees*
Senior management
Management
Collaborators
2021
10
115
3,578
3,703
* An employee with disabilities is considered to be a person who is recognised by
the State or the company in each jurisdiction where the Group operates and that
entitles them to receive direct monetary assistance, or other types of aid such
as, for example, reduction of their taxes. In the case of Spain, employees with
disabilities have been considered to be those with a degree of disabilities
greater than or equal to 33%.
The number of Group employees with disabilities at 2020 and 2019,
was 3,577 and 3,584, respectively.
Likewise, the average number of employees of Banco Santander, S.A.
with disabilities, equal to or greater than 33%, during 2021 was 288
(319 and 318 employees during 2020 and 2019). At the end of fiscal
year 2021, there were 307 employees (317 and 295 employees at
31 December, 2020 and 2019, respectively).
i. Bank
The variable remuneration policy for the Bank’s executive directors
and certain executive personnel of the Bank and of other Group
companies includes Bank share-based payments, the
implementation of which requires, in conformity with the law and
the Bank’s Bylaws, specific resolutions to be adopted by the general
meeting.
Were it necessary or advisable for legal, regulatory or other similar
reasons, the delivery mechanisms described below may be adapted
in specific cases without altering the maximum number of shares
linked to the plan or the essential conditions to which the delivery
thereof is subject.
These adaptations may involve replacing the delivery of shares with
the delivery of cash amounts of an equal value.
The plans that include share-based payments are as follows:
(i) Deferred and Conditional Variable Remuneration Plan; (ii) Deferred
Multiyear Objectives Variable Remuneration Plan; (iii) Digital
Transformation Award. The characteristics of the plans are set forth
below:
Annual report 2021 696
Deferred
variable
remuneration
systems
(i) Deferred and
conditional
variable
remuneration
plan (2015,
2016, 2017,
2018, 2019,
2020 and 2021)
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Description and plan beneficiaries
Conditions
Calculation Base
The purpose of these cycles is to
defer a portion of the variable
remuneration of the beneficiaries
over a period of three years for the
sixth cycles, and over three or five
years for the fifth, seventh, eighth,
ninth, tenth and eleventh cycles, for it
to be paid, where appropriate, in cash
and in Santander shares; the other
portion of the variable remuneration
is also to be paid in cash and
Santander shares, upon
commencement of the cycles, in
accordance with the rules set forth
below.
For the fifth and sixth cycles (2015 to 2016), the accrual
of deferred compensation is conditioned, in addition to
the requirement that the beneficiary remains in the
Group's employ, with the exceptions included in the plan
regulations upon none of the following circumstances
existing during the period prior to each of the deliveries,
pursuant to the provisions set forth in each case in the
plan regulations:
i.
ii.
Poor financial performance of the Group.
breach by the beneficiary of internal regulations,
including, in particular, those relating to risks.
iii. material restatement of the Group's consolidated
financial statements, except when it is required
pursuant to a change in accounting standards.
iv. Significant changes in the Group’s economic capital
Fifth cycles (2015):
• Executive directors and members of the Identified
Staff with total variable remuneration higher than 2.6
million euros: 40% paid immediately and 60%
deferred over3 years (fourth cycle) or 5 years (fifth
cycle).
• Division managers, country heads, other executives of
the Group with a similar profile and members of the
Identified Staff with total variable remuneration
between 1.7 million euros (1.8 million in fourth cycle)
and 2.6 million euros: 50% paid immediately and 50%
deferred over 3 years(fourth cycle) or 5 years (fifth
cycle)
• Other beneficiaries: 60% paid immediately and 40%
deferred over 3 years.
Beneficiaries:
• Executive directors and certain
executives (including senior
management) and employees
who assume risk, who perform
control functions or receive an
overall remuneration which puts
them on the same remuneration
level as senior executives and
employees who assume risks
(fifth cycle)
•
In the case of the sixth, seventh,
eighth, ninth, tenth and eleventh
cycle, the beneficiaries are
Material Risk Takers (Identified
staff) that are not beneficiaries of
the Deferred Multiyear Objectives
Variable Remuneration Plan.
or risk profile
In the case of the seventh, eighth, ninth, tenth and
eleventh cycles (2017 to 2021), the accrual of deferred
compensation is conditioned, in addition to the
permanence of the beneficiary in the Group, with the
exceptions contained in the plan's regulations, to no
assumptions in which there is a poor performance of the
entity as a whole or of a specific division or area of the
entity or of the exposures generated by the personnel,
and at least the following factors must be considered:
v.
significant failures in risk management committed
by the entity , or by a business unit or risk control
unit.
the increase suffered by the entity or by a business
unit of its capital needs, not foreseen at the time of
generation of the exposures.
vi.
vii. Regulatory sanctions or judicial sentences for
Sixth cycle (2016):
• 60% of bonus will be paid immediately and 40%
deferred over a three years period.
Seventh, eighth, ninth, tenth and eleventh cycle (2017,
2018, 2019, 2020 and 2021):
• Beneficiaries of these plans with target total variable
remuneration higher or equal to 2.7 million euros:
40% paid immediately and 60% deferred over 5
years
• Beneficiaries of these plans with target total variable
remuneration between 1.7 million euros and 2.7
million euros: 50% paid immediately and 50%paid
over 5 years
• Other beneficiaries of these plans: 60% paid
immediately and 40% deferred over 3 years.
events that could be attributable to the unit or the
personnel responsible for those. Also, the breach of
internal codes of conduct of the entity.
viii. Irregular behaviours, whether individual or
collective, considering in particular the negative
effects derived from the marketing of inappropriate
products and the responsibilities of the persons or
bodies that made those decisions.
Annual report 2021 697
Deferred
variable
remuneration
systems
(ii)Deferred
Multiyear
Objectives
Variable
Remuneration
Plan (2016,
2017, 2018,
2019, 2020 and
2021)
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Description and plan beneficiaries
Conditions
Calculation Base
The aim is simplifying the
remuneration structure, improving
the ex ante risk adjustment and
increasing the impact of the long-
term objectives on the Group’s most
relevant roles. The purpose of these
cycles is to defer a portion of the
variable remuneration of the
beneficiaries over a period of three or
five years, for it to be paid, where
appropriate, in cash and in Santander
shares; the other portion of the
variable remuneration is also to be
paid in cash and Santander shares,
upon commencement of the cycles,
in accordance with the rules set forth
below. The accrual of the last third of
the deferral (in the case of 3 years
deferral) of the last three fifths (in
the case of 5 years deferral) is also
subject to long-term objectives.
Beneficiaries
Executive directors, senior managers
and certain executives of the Group’s
first lines of responsibility.
In 2016 the accrual is conditioned, in addition to the
permanence of the beneficiary in the Group, with the
exceptions contained in the plan’s regulations that none
of The following circumstances during the period prior
to each of the deliveries in the terms set forth in each
case in the plan’s regulations:
i.
ii.
Poor performance of the Group.
breach by the beneficiary of the internal
regulations, including in particular that relating to
risks.
iii. material restatement of the Group’s consolidated
financial statements, except when appropriate
under a change in accounting regulations.
iv. Significant changes in the Group’s economic capital
or risk profile.
In 2017, 2018, 2019, 2020 and 2021 the accrual is
conditioned, in addition to the beneficiary permanence
in the Group, with the exceptions contained in the plan’s
regulations, to the non-occurrence of instances of poor
financial performance from the entity as a whole or of a
specific division or area thereof or of the exposures
generated by the personnel, at least the following
factors must be considered:
v.
Significant failures in risk management committed
by the entity, or by a business unit or risk control
unit.
the increase suffered by the entity or by a business
unit of its capital needs, not foreseen at the time of
generation of the exposures.
vi.
vii. Regulatory sanctions or court rulings for events
that could be attributable to the unit or the
personnel responsible for those. Also, the breach
of internal codes of conduct of the entity.
viii. Irregular behaviours, whether individual or
collective, considering in particular negative effects
derived from the marketing of inappropriate
products and responsibilities of persons or bodies
that made those decisions.
Paid half in cash and half in shares.
The maximum number of shares to be delivered is
calculated by taking into account the weighted average
daily volume of weighted average prices for the fifteen
trading sessions prior to the previous Friday (excluding)
on the date on which the board decides the bonus for
the Executive directors of the Bank.
First cycle (2016):
• Executive directors and members of the Identified
Staff with total variable remuneration higher than or
equal to 2.7 million euros: 40% paid immediately and
60% deferred over a 5 years period.
• Senior managers, country heads of countries
representing at least 1% of the Group´s capital and
other members of the identified staff whose total
variable remuneration is between 1.7 million and 2.7
million euros: 50% paid immediately and 50%
deferred over a 5 years period.
• Other beneficiaries: 60% paid immediately and 40%
deferred over a 3 years period.
The second, third, fourth, fifth and sixth cycles (2017,
2018, 2019,2020 and 2021 respectively) are under the
aforementioned deferral rules, except that the variable
remuneration considered is the target for each executive
and not the actual award.
In 2016 the metrics for the deferred portion subject to
long-term objectives (last third or last three fifths,
respectively, for the cases of three years and five years
deferrals) are:
• Earnings per share (EPS) growth in 2018 over 2015.
• Relative Total Shareholder Return (TSR) in the
2016-2018 period measured against a group of
credit institutions.
• Compliance with the fully-loaded common equity
tier 1 (“CET1”) ratio target for financial year 2018.
• Compliance with Santander Group’s underlying
return on risk-weighted assets (“RoRWA”) growth
target for financial year 2018 compared to financial
year 2015.
In the second, third, fourth fifth and sixth cycle (2017,
2018, 2019, 2020 and 2021) the metrics for the
deferred portion subject to long-term objectives (last
third or last three fifths, respectively, for the cases of
three years and five years deferrals) are:
• EPS growth in 2019, 2020, 2021, 2022 and 2023
(over 2016, 2017, 2018, 2019 and 2020, for each
respective cycle)
• Relative Total Shareholder Return (TSR) measured
against a group of 17 credit institutions (second and
third cycles) in the periods 2017-2019 and
2018-2019, respectively, and against a group of 9
entities (fourth, fifth and sixth cycle) for the
2019-2021, 2020-2022 and 2010-2023 period.
• Compliance with the fully-loaded common equity
tier 1 (“CET1”) ratio target for financial years 2019,
2020, 2021,2022 and 2023, respectively.
Annual report 2021 698
Deferred
variable
remuneration
systems
(iii) Digital
Transformation
Award (2019,
2020 and 2021)
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Description and plan beneficiaries
Conditions
Calculation Base
The 2019, 2020 and 2021 Digital
Transformation Incentive (the “Digital
Incentive”) is a variable remuneration
system that includes the delivery of
Santander shares and share options.
The aim of the Digital Incentive is to
attract and retain the critical skill sets
to support and accelerate the digital
transformation of the Group. By
means of this program, the Group
offers a remuneration element which
is competitive with the remuneration
systems offered by other market
operators who also compete for
digital talent.
The number of beneficiaries is limited
to a maximum of 250 employees and
the total amount of the incentive is
limited to 30 million euros.
The funding of this incentive is subject to meeting
important milestones that are aligned with the Group´s
digital roadmap and have been approved by the board of
directors, taking into account the digitalization strategy
of the Group, with the aim of becoming the best open,
responsible global financial services platform.
Performance of incentive shall be measured based on
achievement of the following milestones:
1. Launch of a Global Trade Services (GTS) platform.
2. Launch of a Global Merchant Services (GMS)
platform.
3. Migration of our fully digital bank, OpenBank, to a
"next generation" platform and launch in 3 markets.
4. Extension of SuperDigital in Brazil to at least one
other country.
5. Launch of our international payments app based on
blockchain Pago FX to non-Santander customers.
The milestones for the 2020 Digital Transformation
Award were: (i) rolling out the global merchant services
(GMS) platform in 3 new geographies, enhancing the
platform functionality and achieving volume targets for
transactions and participating merchants; (ii) doing the
commercial rollout of the global trade services (GTS)
platform in 8 new geographies, enhancing platform
functionality, and achieving volume targets for on-
boarded clients and monthly active users; (iii) launching
OpenBank in a new market and migrating the retail
banking infrastructure to “new-mode” bank; (iv) launch
the global platform SuperDigital in at least 4 countries,
driving target active user growth; (v) deploying machine
learning across pre-defined markets for 4 priority use
cases, rolling out Conversion Rate Optimization (Digital
marketing) for at least 40 sales programs, delivering
profit targets, and driving reduction of agent handled
calls in contact centers; (vi) successfully implementing
initiatives related to on-board and identity services,
common API (application programming interface) layer,
payment hubs, mobile app for SMEs and virtual
assistant services; and (vii) launching the PagoFX global
platform in at least 4 countries.
The milestones for 2021 are: (i)in relation to Pago Nxt
Consumer payment platform: implementation of
Superdigital platform in seven countries, acquisition of
over 1.5 million active customer base and accelerating
growth through B2B (business to business) and B2B2C
(business to business to customer) partnerships,
acquiring more than 50% of the new customers through
these channels, which are more cost-effective; (ii)in
relation to Digital Consumer Bank: launching online API
for checkout lending in the European Union and
completion of controllable items for Openbank launch in
USA; (iii)in relation to One Santander strategy:
implementation in Europe of One Common Mobile
Experience and, specifically, implementation of Europe
ONE app for individual customers in at least three of the
four countries by December 2021; and be among the
three-top rated entities in terms of Mobile NetPromoter
Score (Mobile NPS) in at least two of the four countries
by December 2021; (iv) In relation to cloud adoption:
host 75% of migratable virtual machines on cloud
technology (either public cloud or OHE) by December
2021. For these purposes, mainframes, physical servers
and servers with non-x86 operating systems will be
considered non-migratable.
The Digital Incentive is structured 50% in Santander
shares and 50% in options over Santander shares, taking
into account the fair value of the option at the moment
in which they are granted. For Material Risk Takers
subject to five years deferrals, the Digital Incentive
(shares and options over shares) shall be delivered in
thirds, on the third, fourth and fifth anniversary from
their granting. For Material Risk Takers subject to three
years deferrals and employees not subject to deferrals,
delivery shall be done on the third anniversary from
their granting.
Any delivery of shares, either directly or via exercise of
options overs shares, will be subject generally to the
Group’s general malus & clawback provisions as
described in the Group’s remuneration policy and to the
continuity of the beneficiary within the Santander Group.
In this regard, the board may define specific rules for
non-Identified Staff.
Vested share options can be exercised until maturity,
with all options lapsing after ten years (for granting the
2019 incentive) and eight years (for granting the 2020
and 2021 incentive).
The total achievement for 2021 Digital Incentive was
77.5% (85% en 2020 and 83% en 2019).
Annual report 2021 699
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
ii. Santander UK plc
The long-term incentive plans on shares of the Bank granted by
management of Santander UK plc to its employees are as follows:
Plans outstanding at 01/01/2019
Options granted (sharesave)
Options exercised
Options cancelled (net) or not exercised
Plans outstanding at 31/12/2019
Options granted (sharesave)
Options exercised
Options cancelled (net) or not exercised
Plans outstanding at 31/12/2020
Options granted (sharesave)
Options exercised
Options cancelled (net) or not exercised
Plans outstanding at 31/12/2021
Exercise
price in
pounds
sterling*
Year
granted
Employee
group
Number of
persons**
Date of
commencement
of exercise period
Date of
expiry of
exercise
period
2.83
2019
Employees
5,606
01/11/19
01/11/19
01/11/22
01/11/24
2.83
3.42
1.65
2020
Employees
5,012
01/11/20
01/11/20
01/11/23
01/11/25
2.75
2.96
2.43
2021
Employees
4,142
11/01/21
11/01/21
11/01/24
11/01/26
1.86
2.95
Number of
shares (in
thousand)
26.838
9,594
(7,978)
(5,081)
23,373
11,642
(860)
(12,993)
21,162
9,414
(48)
(4,592)
25,936
* At 31 December, 2021, 2020 and 2019, the euro/pound sterling exchange rate was EUR 1.1904 GBP 1, EUR 1.1168 GBP 1; EUR 1.1754 GBP 1, respectively.
** Number of accounts/contracts. A single employee may have more than one account/contract.
In 2008 the Group launched a voluntary savings scheme for
Santander UK employees (Sharesave Scheme) whereby employees
who join the scheme see deducted between GBP 5 and GBP 500 from
their net monthly pay over a period of three or five years. At the end
of the chosen period, the employee may choose between collecting
the amount contributed, the interest accrued and a bonus (tax-
exempt in the United Kingdom) or exercising options on shares of the
Bank in an amount equal to the sum of such three amounts at a fixed
price. The exercise price will be the result of reducing by up to 20%
the average purchase and sale prices of the Bank shares in the three
trading sessions prior to the approval of the scheme by the UK tax
authorities (HMRC). This approval must be received within 21to 41
days following the publication of the Group’s results for the first half
of the year. This scheme was approved by the Board of Directors, at
the proposal of the appointments and remuneration committee, and,
since it involved the delivery of Bank shares, its application was
authorized by the Annual General Meeting held on June 21, 2008.
Also, the scheme was authorized by the UK tax authorities (HMRC)
and commenced in September 2008. In subsequent years, at the
Annual General Meetings held on June 19, 2009, June 11, 2010, June
17, 2011, March 30, 2012, March 22, 2013, March 28, 2014, March
27, 2015, March 18, 2016, April 7, 2017, March 23, 2018, April 12,
2019, April 3, 2020 and March 26, 2021, respectively, the
shareholders approved the application of schemes previously
approved by the board and with similar features to the scheme
approved in 2008.
iii. Fair value
The fair value of the performance share plans was calculated as
follows:
a) Deferred variable compensation plan linked to multi-year
objectives 2019, 2020 and 2021:
The Group calculates at the grant date the fair value of the plan
based on the valuation report of an independent expert, Willis
Towers Watson. According to the design of the plan for 2019, 2020
and 2021 and the levels of achievement of similar plans in
comparable entities, the expert concludes that the reasonable range
for estimating the initial achievement ratio is around 60%-80%. It has
been considered that the fair value is 70% of the maximum.
b) Santander UK sharesave plans:
The fair value of each option at the date of grant is estimated using
an analytical model that also reflects the correlation between EUR
and GBP. This model uses assumptions on the share price, the EUR/
GBP FX rate, the EUR/GBP risk-free interest rate, dividend yields, the
expected volatilities of both the underlying shares and EUR/GBP for
the expected lives of options granted. The weighted average grant-
date fair value of options granted during the year was GBP 0.20 (GBP
0.21 and GBP 0.49 reported in 2020 and 2019, respectively).
Annual report 2021 700
Contents
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
1,830
7,443
1,900
7,537
1,872
8,138
Spain
Group
47. Other general administrative expenses
a) Breakdown
The detail of Other general administrative expenses is as follows:
EUR million
Technology and systems
Property, fixtures and supplies
(note 2.k)
Technical reports
Taxes other than income tax
Advertising
Communications
Surveillance and cash courier services
Insurance premiums
Per diems and travel expenses
Other administrative expenses
2021
2020
2019
2,182
2,119
2,161
789
689
558
510
401
306
109
69
827
672
537
523
473
325
88
73
975
677
522
685
518
416
86
226
The payments associated with short-term leases (leases less than or
equal to 12 months) and leases of low-value assets, that the Group
recognises as an expense in the income statement is not material.
b) Technical reports and other
Technical reports includes the fees paid by the various Group
companies (detailed in the accompanying appendices) for the
services provided by their respective auditors, the detail being as
follows:
EUR million
Audit fees
Audit-related fees
Tax fees
All other fees
Total
2021
2020
2019
103.7
99.4
102.4
6.0
0.7
2.4
6
0.8
1.2
7.8
0.7
2.3
112.8 107.4 113.2
The 'Audit fees' heading includes mainly, audit fees for the Banco
Santander, S.A. individual and consolidated financial statements, of
the companies forming part of the Group, the integrated audits
prepared for the annual report filling in the Form 20-F required by
the U.S. Securities and Exchange Commission (SEC) for those entities
currently required to do so, the internal control audit (SOx) for those
required entities, the limited review of the financial statements and
the regulatory reports required by the auditor corresponding to the
different locations of Grupo Santander.
The main concepts included in 'Audit-related fees' correspond to
aspects such as the issuance of Comfort letters, or other reviews
required by different regulations in relation to aspects such as, for
example, Securitization.
The services commissioned from the Group's auditors meet the
independence requirements stipulated by the Audit Law, the US SEC
rules and the Public Company Accounting Oversight Board (PCAOB),
applicable to the Group, and they did not involve in any
case the performance of any work that is incompatible with the audit
function.
Lastly, the Group commissioned services from audit firms other than
PwC amounting to EUR 263.8 million in 2021 (EUR 172.4 million and
EUR 227.6 million in 2020 and 2019, respectively).
The Audit fees and Audit-related fees caption includes the fees
corresponding to the audit for the year, regardless of the date on
which the audit was completed. In the event of subsequent
adjustments, which are not significant in any case, and for purposes
of comparison, they are presented in this note in the year to which
the audit relates. The rest of the services are presented according to
their approval by the Audit Committee.
c) Number of branches
The number of offices at 31 December 2021, 2020 and 2019 is as
follows:
Number of branches
Group
2020
2021
2019
1,998
2,989
3,286
7,881
8,247
8,666
9,879 11,236 11,952
48. Gains or losses on non financial assets, net
The detail of Gains/ (losses) on disposal of assets not classified as
non-current assets held for sale is as follows:
EUR million
Gains
Tangible and intangible assets
Investments
Of which:
Custody Business (note 3)
Prisma
Losses
Tangible and intangible assets
Investments
2021
2020
2019
87
2
—
—
89
(36)
—
(36)
53
89
60
131
1,219
—
—
989
194
149
1,350
(34)
(1)
(35)
(55)
(4)
(59)
114 1,291
49. Gains or losses on non-current assets held for sale
not classified as discontinued operations
The detail of Gains/(losses) on non-current assets held for sale not
classified as discontinued operations is as follows:
EUR million
Net balance
Tangible assets
Impairment
Gain (loss) on sale
Other gains and other losses
2021
2020
2019
(52)
(171)
(232)
(141)
(215)
(146)
89
9
44
—
(86)
—
(43)
(171)
(232)
Annual report 2021 701
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
50. Other disclosures
a) Residual maturity periods
The detail, by maturity, of the balances of certain items in the
consolidated balance sheet at 31 December 2021, 2020 and 2019 is
presented below:
Assets
Cash, cash balances at Central Banks and
other deposits on demand
Financial assets at fair value through other
comprehensive income
Debt instruments
Loans and advances
Customers
Financial assets
at amortized cost
Debt instruments
Loans and advances
Central banks
Credits institutions
Customers
Liabilities
Financial liabilities
at amortized cost
Deposits
Central banks
Credit institutions
Customer deposits
Marketable debt
securities* **
Other financial liabilities
Difference (assets less liabilities)
31 December 2021
EUR million
On
demand
Within
1 month
1 to 3
months
3 to 12
months
1 to 3
years
3 to 5 More than
5 years
years
Total
210,689
—
—
—
—
—
—
210,689
—
—
—
—
10,378
10,352
26
26
9,507
9,246
261
261
10,447
9,609
838
838
20,001
19,133
868
868
17,745
16,494
1,251
1,251
37,507
105,585
33,088
97,922
4,419
4,419
7,663
7,663
35,520
89,819
72,018
121,272
154,345
130,456
434,468 1,037,898
—
35,520
—
11,849
23,671
2,229
87,590
14,544
11,042
62,004
1,983
4,171
2,205
15,388
9,732
35,708
70,035
117,101
152,140
115,068
424,736 1,002,190
—
—
9,760
4,542
—
93
—
150
1,113
1,733
15,657
39,169
60,275
112,559
152,047
114,918
421,890
947,364
246,209
100,197
81,525
131,719
174,346
148,201
471,975 1,354,172
718,435
711,377
92
12,854
98,928
81,269
4,657
3,493
698,431
73,119
70,085
45,687
1,204
12,715
31,768
99,223
194,879
64,096
117,585
2,130
91,651
12,507
49,459
4,712
21,222
10,664
98,210
52,658
40,013
1,981
69,409 1,349,169
5,915 1,078,587
10
139,757
3,973
1,932
52,235
886,595
—
13,599
17,951
29,798
71,333
45,198
62,830
240,709
7,058
4,060
718,435
98,928
(472,226)
1,269
6,447
70,085
11,440
5,329
5,961
354
664
29,873
99,223
194,879
98,210
69,409 1,349,169
32,496
(20,533)
49,991
402,566
5,003
* Includes promissory notes, certificates of deposit and other short-term debt issues.
** See breakdown by type of debt (subordinated debt, senior unsecured debt, senior secured debt, notes and other securities) (see note 22).
Grupo Santander has accounted as "On demand", those financial
liabilities assumed, in which the counterparty may require the
payments.
In addition, when Grupo Santander is committed to have amounts
available in different maturity periods, these amounts have been
accounted for in the first year, in which they may be required.
Additionally, for issued financial guarantee contracts, the Group has
recorded the maximum amount of the financial guarantee issued, in
the first year in which the guarantee could be executed.
Annual report 2021 702
Contents
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Assets
Cash, cash balances at Central Banks and other
deposits on demand
Financial assets at fair value through other
comprehensive income
Debt instruments
Loans and advances
Customers
Financial assets
at amortized cost
Debt instruments
Loans and advances
Central banks
Credits institutions
Customers
Liabilities
Financial liabilities
at amortized cost
Deposits
Central banks
Credit institutions
Customer deposits
Marketable debt
securities*
Other financial liabilities
31 December 2020
EUR million
On
demand
Within
1 month
1 to 3
months
3 to 12
months
1 to 3
years
3 to 5 More than
5 years
years
Total
153,839
—
—
—
—
—
—
153,839
—
—
—
—
6,664
6,664
—
—
4,420
4,244
176
176
7,738
7,019
719
719
19,923
18,365
1,558
1,558
21,302
19,969
1,333
1,333
58,123
52,642
5,481
5,481
118,170
108,903
9,267
9,267
51,513
57,047
60,288
109,561
150,399
120,376
409,194
958,378
—
51,513
—
21,337
30,176
205,352
640,613
632,305
150
14,370
2,857
54,190
10,762
4,405
39,023
63,711
84,875
64,630
5,204
7,158
617,785
52,268
1,327
5,760
3,059
5,257
7,818
26,078
58,961
103,801
147,340
115,119
401,376
932,300
—
—
4,545
3,910
673
3,207
—
34
1,064
400
12,499
37,838
54,416
99,891
143,460
115,085
399,912
881,963
64,708
117,299
170,322
141,678
467,317
1,230,387
90,394
67,707
5,295
15,227
47,185
93,296
175,238
61,142
109,856
3,216
9,940
83,112
5,618
80,041
32,464
15,827
5,934
83,731
1,248,188
22,287
990,391
—
112,804
4,373
62,620
47,986
21,126
10,703
17,914
814,967
—
14,981
18,276
30,994
59,526
47,143
59,909
230,829
8,308
5,264
4,411
1,160
5,856
434
1,535
26,968
640,613
84,875
90,394
93,296
175,238
80,041
83,731
1,248,188
Difference (assets less liabilities)
(435,261)
(21,164)
(25,686)
24,003
(4,916)
61,637
383,586
(17,801)
*
Includes promissory notes, certificates of deposit and other short-term debt issues.
Annual report 2021 703
Contents
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Assets
Cash, cash balances at Central Banks and other
deposits on demand
Financial assets at fair value through other
comprehensive income
Debt instruments
Loans and advances
Customers
Financial assets
at amortized cost
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
Liabilities
Financial liabilities
at amortized cost
Deposits
Central banks
Credit institutions
Customer deposits
Marketable debt
securities*
Other financial liabilities
31 December 2019
EUR million
On
demand
Within
1 month
1 to 3
months
3 to 12
months
1 to 3
years
3 to 5 More than
5 years
years
Total
101,067
—
—
—
—
—
—
101,067
—
—
—
—
6,933
6,879
54
54
2,704
2,699
5
5
7,689
7,554
135
135
19,101
17,489
1,612
1,612
17,989
17,063
926
926
68,429
66,721
1,708
1,708
122,845
118,405
4,440
4,440
51,702
73,890
76,229
116,511
150,365
103,584
423,201
995,482
—
51,702
—
17,665
34,037
152,769
619,003
607,051
99
23,526
583,426
1,563
72,327
17,086
6,223
49,018
80,823
99,203
76,101
462
14,494
61,145
1,847
3,073
2,549
3,642
17,115
29,789
74,382
113,438
147,816
99,942
406,086
965,693
—
—
—
4,602
7,435
3,963
—
428
1,388
627
18,474
40,943
69,780
106,003
143,853
99,514
404,071
906,276
78,933
124,200
169,466
121,573
491,630
1,219,394
88,546
159,120
134,799
61,627
111,190
64
18,922
42,641
33,229
14,245
63,716
64,781
28,424
9,327
27,030
61,282
14,224
190
5,668
8,366
68,792
1,230,745
7,443
942,417
—
4,319
3,124
62,468
90,501
789,448
—
16,008
22,569
47,808
65,545
46,577
59,712
258,219
11,952
7,094
4,350
122
4,473
481
1,637
30,109
619,003
99,203
88,546
159,120
134,799
61,282
68,792
1,230,745
Difference (assets less liabilities)
(466,234)
(18,380)
(9,613)
(34,920)
34,667
60,291
422,838
(11,351)
* Includes promissory notes, certificates of deposit and other short-term debt issues.
Annual report 2021 704
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The detail of the undiscounted contractual maturities of the existing
financial liabilities at amortised cost at 31 December 2021, 2020 and
2019 is as follows:
Financial liabilities at amortized cost
Deposits
Central banks
Credit institutions
Customer
Marketable debt securities
Other financial liabilities
Financial liabilities at amortized cost
Deposits
Central banks
Credit institutions
Customer
Marketable debt securities
Other financial liabilities
.
Financial liabilities at amortized cost
Deposits
Central banks
Credit institutions
Customer
Marketable debt securities
Other financial liabilities
31 December 2021
EUR million
On
demand
Within
1 month
1 to 3
months
3 to 12
months
1 to 3
years
3 to 5 More than
5 years
years
Total
705,129
75,102
83
12,683
692,363
—
7,059
712,188
4,657
3,491
66,954
14,067
4,060
93,229
45,552
1,205
12,693
31,654
18,508
6,447
70,507
62,896
116,343
2,131
11,867
48,898
30,618
5,329
91,327
4,504
20,512
73,131
5,961
52,031
39,579
1,945
10,507
46,367
354
5,884
1,062,937
10
138,992
3,950
1,924
51,133
872,812
64,318
247,009
663
29,873
98,843
195,435
98,752
70,865
1,339,819
31 December 2020
EUR million
On
demand
Within
1 month
1 to 3
months
3 to 12
months
1 to 3
years
3 to 5 More than
5 years
years
Total
629,043
62,872
150
14,334
614,559
—
8,308
637,351
5,204
7,158
50,510
15,298
5,264
83,434
67,567
5,293
15,209
47,065
19,009
4,411
90,987
60,465
108,326
3,217
9,606
47,642
31,103
1,160
82,803
5,031
20,492
58,645
5,856
32,260
15,827
5,903
10,530
46,118
434
22,228
982,761
—
112,494
4,333
17,895
56,730
1,535
61,574
808,693
226,903
26,968
92,728
172,827
78,812
80,493
1,236,632
31 December 2019
EUR million
On
demand
Within
1 month
1 to 3
months
3 to 12
months
1 to 3
years
3 to 5 More than
5 years
years
Total
603,126
75,899
61,107
109,747
99
23,348
579,679
—
11,952
615,078
454
14,491
60,954
16,252
7,094
99,245
41
18,810
42,256
22,912
4,350
32,805
14,134
62,808
48,030
122
63,013
28,255
8,519
26,239
64,650
4,473
14,027
7,228
934,147
190
5,478
8,359
—
4,113
3,115
61,844
88,893
783,410
45,830
58,215
255,889
481
1,637
30,109
88,369
157,899
132,136
60,338
67,080
1,220,145
Annual report 2021 705
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Below is a breakdown of contractual maturities for the rest of
financial assets and liabilities as of 31 December 2021, 2020 and
2019 :
FINANCIAL ASSETS
Financial assets held for trading
Derivatives
Equity instruments
Debt instruments
Loans and advances
Central banks
Credits institutions
Customers
Financial assets designated at fair value through
profit or loss
Debt instruments
Loans and advances
Credit institutions
Customers
Non-trading financial assets mandatorily at fair
value through profit or loss
Equity instruments
Debt instruments
Loans and advances
Customers
Financial assets at fair value through other
comprehensive income
Equity instruments
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL ASSETS
Within 1
months
1 to 3
months
13,120
1,456
—
922
10,742
3,608
4,827
2,307
844
2
842
455
387
116
—
4
112
112
—
—
239
227
8,767
3,487
—
2,056
3,224
—
780
2,444
1,607
62
1,545
683
862
—
—
—
—
—
—
—
129
202
31 December 2021
EUR million
1 to 3
years
3 to 12
months
20,627
7,426
20,047
12,285
—
8,585
4,616
—
3,982
634
2,928
142
2,786
1,476
1,310
49
—
40
9
9
—
—
857
—
5,766
1,996
—
808
1,188
3,686
699
2,987
205
2,782
127
—
4
123
123
—
—
748
3 to 5 More than 5
years
years
Total
15,105
11,980
—
2,869
256
—
—
256
2,334
700
1,634
10
1,624
67
—
6
61
61
—
—
1,270
39,287
17,658
15,077
6,552
—
—
—
—
4,558
911
3,647
323
3,324
5,177
4,042
903
232
232
2,453
2,453
1,518
116,953
54,292
15,077
26,750
20,834
3,608
10,397
6,829
15,957
2,516
13,441
3,152
10,289
5,536
4,042
957
537
537
2,453
2,453
4,761
(11)
(304)
19
277
410
14,546
10,705
24,450
24,304
18,795
53,270
146,070
Annual report 2021 706
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report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Within 1
months
1 to 3
months
31 December 2021
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than 5
years
years
Total
FINANCIAL LIABILITIES
Financial liabilities held for trading
Derivatives
Shorts positions
Deposits
Central banks
Credits institutions
Customers
Financial liabilities designated at fair value
through profit or loss
Deposits
Central banks
Credits institutions
Customers
Marketable debt securities*
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL LIABILITIES
22,746
1,742
8,337
12,667
994
5,534
6,139
2,756
2,743
569
128
3,396
2,743
222
431
44
385
2
4,244
4,131
—
109
2,046
4,022
13
360
40
113
253
5
9,234
7,583
1,290
361
—
361
—
1,685
1,246
38
487
721
439
930
16
15,709
14,868
728
113
—
113
—
4,669
2,801
—
30
2,771
1,868
1,667
58
12,750
11,912
743
15,634
14,718
916
79,469
53,566
12,236
13,667
1,038
6,488
6,141
32,733
27,279
607
1,064
—
—
—
—
18,154
15,594
—
132
15,462
25,608
2,560
1,429
5,454
5,463
80
248
95
—
95
—
1,225
764
—
178
586
461
824
49
25,902
7,898
11,865
22,103
14,848
35,297
117,913
* Includes promissory notes, certificates of deposit and other short-term debt issues (see note 22).
Memorandum items
Loans commitment granted
Financial guarantees granted
Other commitments granted
MEMORANDUM ITEMS
Within 1
months
1 to 3
months
31 December 2021
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than 5
years
years
Total
116,823
2,414
46,614
6,706
1,203
5,745
165,851
13,654
27,587
4,251
12,008
43,846
51,999
49,781
9,841
262,737
1,749
7,297
687
1,539
454
2,530
10,758
75,733
61,045
52,007
12,825
349,228
In the Group’s experience, no outflows of cash or other financial
assets take place prior to the contractual maturity date that might
affect the information broken down above.
Annual report 2021 707
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Within
1 month
1 to 3
months
31 December 2020
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than
5 years
years
Total
FINANCIAL ASSETS
Financial assets held for trading
Derivatives
Equity instruments
Debt instruments
Loans and advances
Credits institutions
Customers
Financial assets designated at fair value through
profit or loss
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
Non-trading financial assets mandatorily at fair
value through profit or loss
Equity instruments
Debt instruments
Loans and advances
Central banks
Credits institutions
Customers
Financial assets at fair value through other
comprehensive income
Equity instruments
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL ASSETS
5,760
4,288
—
1,472
—
—
—
6,734
5,268
—
27,753
10,044
—
1,466
17,709
—
—
—
12,500
14,834
181
78
12,319
14,756
343
6,935
5,041
9,138
1,514
4,104
275
—
85
190
—
—
190
—
—
—
—
—
—
—
—
—
—
—
22,473
15,526
—
6,947
—
—
—
3,680
407
3,273
—
590
18,014
13,681
—
4,310
23
3
20
3,933
719
3,214
—
12
34,211
18,330
9,615
5,990
276
—
276
6,565
1,432
5,133
—
357
2,683
3,202
4,776
—
—
—
—
—
—
—
—
—
69
—
—
69
—
—
69
—
—
4,142
3,234
615
293
—
—
293
2,783
2,783
2,839
114,945
67,137
9,615
37,894
299
3
296
48,717
2,979
45,738
9,481
12,136
24,121
4,486
3,234
700
552
—
—
552
2,783
2,783
8,325
—
—
—
7,205
162
7,043
—
2,728
4,315
—
—
—
—
—
—
—
—
—
1,534
469
1,293
1,107
1,083
173
8
132
205
381
1,081
1,980
20,242
22,045
36,383
27,465
23,480
51,621
181,236
Annual report 2021 708
FINANCIAL LIABILITIES
Financial liabilities held for trading
Derivatives
Shorts positions
Deposits
Central banks
Credits institutions
Customers
Marketable debt securities
Other financial liabilities
Financial liabilities designated at fair value
through profit or loss
Deposits
Central banks
Credits institutions
Customers
Marketable debt securities
Other financial liabilities
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL LIABILITIES
Memorandum items
Loans commitment granted
Financial guarantees granted
Other commitments granted
MEMORANDUM ITEMS
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Within
1 month
1 to 3
months
31 December 2020
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than
5 years
years
Total
81,167
64,469
16,698
—
—
—
—
—
—
48,038
43,598
2,490
6,765
34,343
4,440
—
16,754
1,132
15,622
3,727
3,206
521
6,286
5,800
486
—
—
—
—
—
—
13,468
13,459
841
3,673
8,945
9
—
2,619
3
—
—
—
—
—
—
—
—
—
—
—
—
1,732
1,709
2,228
1,954
866
112
731
23
—
200
6
783
935
236
274
—
588
40
17,635
17,566
16,036
16,036
20,729
20,729
69
—
—
—
—
—
—
2,893
2,497
—
1,493
1,004
396
—
748
74
—
—
—
—
—
—
—
1,121
518
—
171
347
603
—
641
64
—
—
—
—
—
—
—
26,596
23,461
—
381
23,080
3,135
—
2,073
6,869
99
286
32,844
5,665
9,142
21,350
17,862
49,497
136,360
Within
1 month
1 to 3
months
31 December 2020
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than
5 years
years
Total
104,725
1,809
39,205
9,496
852
4,529
145,739
14,877
28,207
3,732
10,497
42,436
47,876
40,458
10,468
241,230
4,134
5,101
1,169
3,207
681
1,999
12,377
64,538
57,111
44,834
13,148
318,145
Annual report 2021 709
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Within
1 month
1 to 3
months
31 December 2019
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than
5 years
years
Total
FINANCIAL ASSETS
Financial assets held for trading
Derivatives
Equity instruments
Debt instruments
Loans and advances
Credits institutions
Customers
Financial assets designated at fair value through
profit or loss
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
Non-trading financial assets mandatorily at fair
value through profit or loss
Equity instruments
Debt instruments
Loans and advances
Central banks
Credits institutions
Customers
Financial assets at fair value through other
comprehensive income
Equity instruments
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL ASSETS
4,864
3,329
—
1,531
4
—
4
3,522
2,233
—
19,740
6,552
—
1,289
13,188
—
—
—
24,110
13,167
457
23,653
1,744
13,186
8,723
10
13,157
4,729
4,946
3,482
272
—
—
272
—
—
272
—
—
807
267
0
—
—
—
—
—
—
—
—
86
1
21,603
15,855
—
5,748
—
—
—
5,175
652
4,523
—
1,015
3,508
11
—
11
—
—
—
—
—
—
—
—
—
7,602
81
7,521
—
1,534
5,987
4
—
—
4
—
—
4
—
—
18,083
14,925
—
3,141
17
—
17
3,878
381
3,497
—
9
40,418
20,503
12,437
7,144
334
—
334
8,137
1,605
6,532
—
959
3,488
5,573
4,507
3,350
1,047
110
—
—
110
2,863
2,863
3,172
117
—
117
—
—
—
—
—
—
904
265
108,230
63,397
12,437
32,041
355
—
355
62,069
3,186
58,883
6,473
21,649
30,761
4,911
3,350
1,175
386
—
—
386
2,863
2,863
7,216
601
1,646
24
112
1,033
1,702
30,320
16,776
27,971
28,547
23,247
60,130
186,991
Annual report 2021 710
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
FINANCIAL LIABILITIES
Financial liabilities held for trading
Derivatives
Shorts positions
Deposits
Central banks
Credits institutions
Customers
Marketable debt securities
Other financial liabilities
Financial liabilities designated at fair value
through profit or loss
Deposits
Central banks
Credits institutions
Customers
Marketable debt securities
Other financial liabilities
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL LIABILITIES
Memorandum items
Loans commitment granted
Financial guarantees granted
Other commitments granted
MEMORANDUM ITEMS
Within
1 month
1 to 3
months
31 December 2019
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than
5 years
years
10,851
2,672
8,179
3,427
1,973
1,454
7,130
6,591
539
17,244
16,965
279
16,905
16,023
882
21,582
18,792
2,790
—
—
—
—
—
—
21,929
21,904
8,831
4,133
8,940
14
11
1,997
3
—
—
—
—
—
—
2,259
2,225
1,228
521
476
34
—
337
6
—
—
—
—
—
—
5,307
4,909
2,795
1,857
257
398
—
848
26
—
—
—
—
—
—
3,565
2,429
—
2,132
297
1,021
115
678
53
—
—
—
—
—
—
1,450
780
—
11
769
670
—
528
59
—
—
—
—
—
—
26,485
24,864
—
686
24,178
1,621
—
1,660
122
Total
77,139
63,016
14,123
—
—
—
—
—
—
60,995
57,111
12,854
9,340
34,917
3,758
126
6,048
269
34,780
6,029
13,311
21,540
18,942
49,849
144,451
Within
1 month
1 to 3
months
31 December 2019
EUR million
1 to 3
years
3 to 12
months
3 to 5 More than
5 years
years
Total
98,630
2,176
44,950
16,529
30,370
37,097
48,072
10,481
241,179
1,791
3,052
5,626
9,957
1,933
4,606
1,364
4,132
760
2,198
13,650
68,895
145,756
21,372
45,953
43,636
53,568
13,439
323,724
Annual report 2021 711
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
b) Equivalent euro value of assets and liabilities
The detail of the main foreign currency balances in the consolidated
balance sheet, based on the nature of the related items, is as follows:
Equivalent value in EUR million
Cash, cash balances at central banks and other deposits on
demand
Financial assets/liabilities held for trading
Non-trading financial assets mandatorily at fair value
through profit or loss
Other financial assets/liabilities at fair value through profit
or loss
Financial assets at fair value through other comprehensive
income
Financial assets at amortized cost
Investments
Tangible assets
Intangible assets
Financial liabilities at amortized cost
Liabilities under insurance contracts
Other
2021
2020
2019
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
105,457
—
76,882
—
65,205
—
65,345
49,314
66,448
50,494
60,526
45,262
2,460
—
2,248
—
2,611
—
1,230
9,103
24,015
18,347
25,938
29,593
78,086
680,774
1,666
22,350
10,066
—
—
—
—
—
79,688
610,152
1,671
21,617
9,609
—
—
—
—
—
76,402
656,564
1,355
24,662
21,942
—
—
—
—
—
—
—
796,395
10
—
—
726,516
13
—
—
752,188
13
22,631
20,420
26,433
22,801
25,410
23,428
990,065
875,242
918,763
818,171
960,615
850,484
c) Fair value of financial assets and liabilities not
measured at fair value
The financial assets owned by the Group are measured at fair value in
the accompanying consolidated balance sheet, except for cash, cash
balances at central banks and other deposits on demand, loans and
advances at amortised cost.
Similarly, the Group’s financial liabilities -except for financial
liabilities held for trading, those measured at fair value and
derivatives other than those having as their underlying equity
instruments whose market value cannot be estimated reliably- are
measured at amortised cost in the accompanying consolidated
balance sheet.
Following is a comparison of the carrying amounts of the Group’s
financial instruments measured at other than fair value and their
respective fair values at year-end:
i) Financial assets measured at other than fair value
EUR million
Assets
Loans and
advances
Debt
instruments
2021
2020
2019
Carrying
amount Fair value
Level 1
Level 2
Level 3
Carrying
amount Fair value
Level 1
Level 2
Level 3
Carrying
amount Fair value
Level 1
Level 2
Level 3
1,002,190 1,006,711
—
69,840 936,871
932,300
940,258
—
65,755 874,503
965,693
975,523
—
82,045 893,478
35,708
35,378 13,558
12,158
9,662
26,078
26,532
6,753
11,899
7,880
29,789
30,031
10,907
9,971
9,153
1,037,898 1,042,089 13,558
81,998 946,533
958,378
966,790
6,753
77,654 882,383
995,482 1,005,554
10,907
92,016 902,631
Annual report 2021 712
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
ii) Financial liabilities measured at other than fair value
EUR million
Liabilities*
Deposits
Debt
instruments
2021
2020
2019
Carrying
amount Fair value
Level 1
Level 2
Level 3
Carrying
amount Fair value Level 1
Level 2
Level 3
Carrying
amount Fair value
Level 1
Level 2
Level 3
1,078,587 1,076,876
— 286,613 790,263
990,391
990,807
— 263,517 727,290
942,417
942,397
— 245,143 697,254
240,709
246,697 109,346 115,034
22,317
230,829
241,174 91,771 125,031
24,372
258,219
266,784
84,793 149,516
32,475
1,319,296 1,323,573 109,346 401,647 812,580
1,221,220 1,231,981 91,771 388,548 751,662
1,200,636 1,209,181 84,793 394,659 729,729
* At 31 December 2021, Grupo Santander had other financial liabilities that amounted to EUR 29,873 million, EUR 26,968 million in 2020 and EUR 30,109 million in 2019.
The main valuation methods and inputs used in the estimates at 31
December 2021 of the fair values of the financial assets and liabilities
in the foregoing table were as follows:
• Financial assets at amortised cost: the fair value was estimated
using the present value method. The estimates were made
considering factors such as the expected maturity of the portfolio,
market interest rates, spreads on newly approved transactions or
market spreads -when available-.
• Financial liabilities at amortised cost:
i) Deposits: the fair value of short term deposits was taken to be their
carrying amount. Factors such as the expected maturity of the
transactions and the Group’s current cost of funding in similar
transactions are consider for the estimation of long term deposits
fair value. It had been used also current rates offered for deposits
of similar remaining maturities.
ii) Marketable debt securities and subordinated liabilities: the fair
value was calculated based on market prices for these
instruments -when available- or by the present value method
using market interest rates and spreads, as well as using any
significant input which is not observable with market data if
applicable.
iii) The fair value of cash, cash balances at central banks and other
deposits on demand was taken to be their carrying amount since
they are mainly short-term balances.
51. Primary and secondary segments reporting
Grupo Santander bases segment reporting on financial information
presented to the chief operating decision maker, which excludes
certain statutory results items that distort year-on-year comparisons
and are not considered for management reporting. This financial
information (underlying basis) is computed by adjusting reported
results for the effects of certain gains and losses (e.g. capital gains,
write-downs, impairment of goodwill, etc.). These gains and losses
are items that management and investors ordinarily identify and
consider separately to better understand the underlying trends in the
business.
Grupo Santander has aligned the information in this note with the
underlying information used internally for management reporting
and with that presented in Grupo Santander's other public
documents.
Grupo Santander executive committee has been determined to be its
chief operating decision maker. Grupo Santander's operating
segments reflect its organizational and managerial structures. Grupo
Santander 's executive committee reviews internal reporting based
on these segments to assess performance and allocate resources.
The segments are split by geographic area in which profits are earned
and type of business. Grupo Santander prepares the information by
aggregating the figures for Grupo Santander’s various geographic
areas and business units, relating it to both the accounting data of
the units integrated in each segment and that provided by
management information systems. The same general principles as
those used in Grupo Santander are applied.
On 9 April 2021, Grupo Santander announced that, starting and
effective with the financial information for the first quarter of 2021,
Grupo Santander would carry out a change in the reportable
segments to reflect our new organizational and management
structure.
These changes in the reportable segments aim to align the segment
information with their management and have no impact on the
group’s accounting figures.
The main changes, which have been applied to management
information for all periods included in the consolidated financial
statements, are the following:
1. Primary segments
– Creation of the new Digital Consumer Bank (DCB) segment, which
includes:
• Santander Consumer Finance (SCF), previously included in the
Europe segment, and the consumer finance business in the
United Kingdom, previously recorded in the country.
Annual report 2021 713
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
• Grupo Santander fully digital bank Openbank and the Open
Digital Services (ODS) platform, which were previously included
in the Santander Global Platform segment.
– Santander Global Platform (SGP), which incorporated our global
digital services under a single unit, is no longer a primary segment.
Its activities have been distributed as follows:
• Openbank and Open Digital Services (ODS), which, as mentioned
above, are now included under the new Digital Consumer Bank
reporting segment.
• The business recorded in Global Payment Services (Merchant
Solutions -GMS-, Trade Solutions -GTS- and Consumer
Solutions -Superdigital and Pago FX-) has been allocated to the
three main geographic segments, Europe, North America and
South America, with no impact on the information reported for
each country.
2. Secondary segments
– Creation of the PagoNxt segment, which incorporates simple and
accessible digital payment solutions to drive customer loyalty and
allows us to combine our most disruptive payment businesses into
a single autonomous company, providing global technology
solutions for our banks and new customers in the open market,
and which has been structured into three businesses, previously
included in SGP:
• Merchant Solutions: acquiring solutions for merchants.
• Trade Solutions: solutions for SMEs and companies operating
internationally.
• Consumer Solutions: payment solutions for individuals aimed at
underbanked populations.
– Annual adjustment of the perimeter of the Global Customer
Relationship Model between Retail Banking and Santander
Corporate & Investment Banking and between Retail Banking and
Wealth Management & Insurance.
– Elimination of the Santander Global Platform reporting segment:
• Openbank and ODS are now recorded in the Retail Banking
segment.
• The remaining Santander Global Platform businesses form the
new PagoNxt reporting segment.
Grupo Santander recasted the corresponding information of earlier
periods considering the changes included in this section. As stated
above, group consolidated figures remain unchanged.
a) Primary segments
This primary level of segmentation, which is based on the Group’s
management structure, comprises five reportable segments: four
operating areas plus the Corporate Centre. The operating areas are:
• Europe: which comprises all business activity carried out in the
region, except that included in Digital Consumer Bank. Detailed
financial information is provided on Spain, the UK, Portugal and
Poland.
• North America: which comprises all the business activities carried
out in Mexico and the US, which includes the holding company
(SHUSA) and the businesses of Santander Bank, Santander
Consumer USA, the specialized business unit Banco Santander
International, Santander Investment Securities (SIS) and the New
York branch.
• South America: includes all the financial activities carried out by
Grupo Santander through its banks and subsidiary banks in the
region. Detailed information is provided on Brazil, Chile, Argentina,
Uruguay, Peru and Colombia.
• Digital Consumer Bank: includes Santander Consumer Finance,
which incorporates the entire consumer finance business in
Europe, Openbank and ODS.
In addition to these operating units, which report by geographic area
and businesses, Grupo Santander continues to maintain the area of
Corporate Centre, that includes the centralized activities relating to
equity stakes in financial companies, financial management of the
structural exchange rate position, assumed within the sphere of
Grupo Santander’s assets and liabilities committee, as well as
management of liquidity and of shareholders’ equity via issuances.
As Grupo Santander’s holding entity, this area manages all capital
and reserves and allocations of capital and liquidity with the rest of
businesses. It also incorporates amortization of goodwill but not the
costs related to the Grupo Santander’s central services (charged to
the areas), except for corporate and institutional expenses related to
the Grupo Santander’s functioning.
With regard to the balance sheet, due to the required segregation of
the various business units (included in a single consolidated
balance sheet), the amounts lent and borrowed between the units
are shown as increases in the assets and liabilities of each business.
These amounts relating to intra-Group liquidity are eliminated and
are shown in the Intra-Group eliminations column in the table below
in order to reconcile the amounts contributed by each business unit
to the consolidated Grupo Santander's balance sheet.
There are no customers located in any of the areas that generate
income exceeding 10% of Total income.
Annual report 2021 714
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The condensed balance sheets and income statements of the various
primary segments are as follows:
EUR million
Balance sheet (condensed)
Total assets
Loans and advances to customers
Cash, balances at central banks and credit
institutions and other deposits on demand
Debt instruments
Other financial assets
Other asset accounts
Total liabilities
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities***
Other liabilities accounts****
Total equity
Other customer funds under management
Investment funds
Pension funds
Assets under management
Other non-managed marketed customer funds
Europe
North
America
South
America
2021
Digital
Consumer
Bank
Corporate
Centre
Intra-Group
eliminations
Total
981,154
244,734
257,805
159,683
215,467
(263,008) 1,595,835
590,610
137,428
123,920
113,937
6,787
—
972,682
256,433
67,068
37,250
29,793
34,857
38,500
12,555
21,394
43,134
51,451
23,809
15,491
33,482
5,280
47
88,918
(174,152)
282,672
1,554
2,203
—
—
163,853
75,864
6,937
116,005
(88,856)
100,764
936,057
215,955
237,364
147,108
136,450
(174,152) 1,498,782
619,486
121,989
120,500
193,307
73,629
38,706
10,929
45,097
114,698
82,641
15,994
16,063
25,572
35,059
38,061
14,652
6,194
28,779
13,949
12,112
84
1,753
20,213
44,303
23,461
40,490
8,610
20,441
57,428
51,234
—
6,194
103
55,327
49,109
36,710
1,397
4,565
1,042
53,563
74,302
430
7,113
—
918,344
(174,152)
201,189
—
—
—
246,163
95,675
37,411
97,053
186,927
145,987
16,078
24,862
48,385
12,575
79,017
(88,856)
852
—
—
852
2,497
—
—
—
—
—
—
—
—
—
—
*
**
Including Trading derivatives and Equity instruments.
Including Hedging derivatives, Changes in the fair value of hedged items in portfolio hedges of interest risk, Investments in joint ventures and associated entities,
Assets under insurance or reinsurance contracts, tangible assets, intangible assets, tax assets, other assets and non-current assets held for sale.
*** Including Trading derivatives, Short positions and Other financial liabilities.
**** Including Hedging derivatives, Changes in the fair value of hedged items in portfolio hedges of interest risk, Liabilities under insurance or reinsurance contracts,
provisions, tax liabilities, other liabilities and liabilities associated with non-current assets held for sale.
Annual report 2021 715
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Balance sheet (condensed)
Total assets
Loans and advances to customers
Cash, balances at central banks and credit
institutions and other deposits on demand
Debt instruments
Other financial assets*
Other asset accounts**
Total liabilities
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities***
Other liabilities accounts****
Total equity
Other customer funds under management
Investment funds
Pension funds
Assets under management
Other non-managed marketed customer funds
Europe
North
America
South
America
2020
Digital
Consumer
Bank
Corporate
Centre
Intra-Group
eliminations
Total
942,620
223,797
238,746
146,851
182,587
(226,351) 1,508,250
563,581
120,571
113,745
113,258
5,044
—
916,199
213,561
81,271
48,313
35,894
28,666
38,403
15,439
20,718
43,154
49,304
17,342
15,201
21,754
5,659
30
61,174
(142,513)
225,796
1,917
1,645
—
—
176,554
82,769
6,150
112,807
(83,838)
106,932
899,990
199,735
218,918
134,241
106,557
(142,513) 1,416,928
582,353
102,924
111,808
167,014
84,201
54,634
11,788
42,630
99,301
71,239
15,487
12,575
21,913
38,017
36,583
16,182
6,029
24,062
12,501
10,864
90
1,547
15,920
42,040
21,280
35,456
8,334
19,828
55,965
49,850
—
6,115
72
51,399
41,567
35,965
1,370
3,940
826
38,554
57,240
493
9,444
—
849,310
(142,513)
184,679
—
—
—
235,269
108,135
39,535
91,322
168,254
131,965
15,577
20,712
38,563
12,610
76,030
(83,838)
475
—
—
475
658
12
12
—
—
—
—
—
—
—
—
*
**
Including Trading derivatives and Equity instruments.
Including Hedging derivatives, Changes in the fair value of hedged items in portfolio hedges of interest risk, Investments in joint ventures and associated entities,
Assets under insurance or reinsurance contracts, tangible assets, intangible assets, tax assets, other assets and non-current assets held for sale.
*** Including Trading derivatives, Short positions and Other financial liabilities.
**** Including' Hedging derivatives', Changes in the fair value of hedged items in portfolio hedges of interest risk, Liabilities under insurance or reinsurance contracts,
provisions, tax liabilities, other liabilities and liabilities associated with non-current assets held for sale.
Annual report 2021 716
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Balance sheet (condensed)
Total assets
Loans and advances to customers
Cash, balances at central banks and credit
institutions and other deposits on demand
Debt instruments
Other financial assets*
Other asset accounts**
Total liabilities
Customer deposits
Central banks and credit institutions
Marketable debt securities
Other financial liabilities***
Other liabilities accounts****
Total equity
Other customer funds under management
Investment funds
Pension funds
Assets under management
Other non-managed marketed customer funds
Europe
North
America
South
America
2019
Digital
Consumer
Bank
Corporate
Centre
Intra-Group
eliminations
Total
926,768
223,972
253,919
140,273
168,352
(190,589) 1,522,695
563,101
133,727
125,122
114,504
5,764
—
942,218
171,974
101,189
53,918
36,586
22,904
33,749
10,822
22,770
51,379
45,622
14,864
16,932
17,440
3,196
37
32,804
(107,895)
188,606
840
2,406
—
—
184,596
82,047
5,096
126,538
(82,694)
125,228
882,479
199,993
231,361
128,107
77,991
(107,895) 1,412,036
559,720
156,201
94,882
59,241
12,435
44,289
86,558
62,203
11,746
12,609
32,707
98,915
38,952
44,097
11,773
6,256
23,979
14,319
11,703
98
2,518
15,872
114,817
41,999
29,840
34,072
10,633
22,558
76,023
69,071
—
6,952
60
50,120
33,652
38,661
1,652
4,022
793
12,254
54,497
636
9,811
—
824,365
(107,895)
175,163
—
—
—
261,977
107,374
43,157
12,166
90,361
(82,694)
110,659
—
—
—
—
851
11
11
—
—
—
—
—
—
—
—
176,911
142,988
11,844
22,079
49,490
*
**
Including 'Trading derivatives' and 'Equity instruments'.
Including 'Hedging derivatives', 'Changes in the fair value of hedged items in portfolio hedges of interest risk', 'Investments in joint ventures and associated entities'',
'Assets under insurance or reinsurance contracts', 'Tangible assets', 'Intangible assets', 'Tax assets', other assets and non-current assets held for sale.
*** Including Trading derivatives, Short positions and Other financial liabilities.
**** Including Hedging derivatives, Changes in the fair value of hedged items in portfolio hedges of interest risk, Liabilities under insurance or reinsurance contracts,
provisions, tax liabilities, other liabilities and liabilities associated with non-current assets held for sale.
Annual report 2021 717
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The condensed income statements for the primary segments are as
follows:
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Attributable profit to the parent
Europe North America
10,952
4,344
756
260
8,204
1,644
224
914
2021
South
America
11,323
3,721
716
(407)
16,312
10,986
15,353
(8,318)
7,994
(2,293)
(1,290)
4,411
(1,362)
3,049
—
3,049
71
2,978
(4,967)
6,019
(1,210)
(145)
4,664
(1,055)
3,609
—
3,609
556
3,053
(5,379)
9,974
(3,251)
(474)
6,249
(2,365)
3,884
—
3,884
556
3,328
Digital
Consumer
Bank
Corporate
centre
4,281
(1,390)
Total
33,370
10,502
1,563
969
(28)
(141)
(27)
(1,586)
46,404
(346)
(21,415)
(1,932)
24,989
(155)
(190)
(2,277)
242
(2,035)
—
(7,436)
(2,293)
15,260
(5,076)
10,184
—
(2,035)
10,184
2
(2,037)
1,530
8,654
821
8
229
5,339
(2,405)
2,934
(527)
(194)
2,213
(536)
1,677
—
1,677
345
1,332
*
**
***
****
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
'Net Operating Income' is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
'Net loan-loss provisions' refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes a release of EUR 29 million mainly corresponding to the results by commitments
and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except a release EUR 29 million mainly corresponding to the results by commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognised in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Annual report 2021 718
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Attributable profit to the parent
Europe North America
Digital
Consumer
Bank
Corporate
Centre
4,263
(1,374)
2020
South
America
10,723
3,589
765
(209)
8,470
1,684
251
628
11,033
14,868
(4,677)
6,356
(3,917)
(132)
2,307
(574)
1,733
—
1,733
261
1,472
(5,357)
9,511
(3,924)
(320)
5,267
(1,923)
3,344
—
3,344
437
2,907
771
16
116
5,166
(2,329)
2,837
(957)
49
1,929
(495)
1,434
—
1,434
301
1,133
9,912
4,000
868
(106)
14,674
(8,275)
6,399
(3,345)
(970)
2,084
(593)
1,491
—
1,491
78
1,413
Total
31,994
10,015
2,187
404
(29)
287
(25)
(1,141)
44,600
(329)
(20,967)
(1,470)
(31)
(412)
(1,913)
69
(1,844)
—
(1,844)
—
(1,844)
23,633
(12,174)
(1,785)
9,674
(3,516)
6,158
—
6,158
1,077
5,081
*
**
***
****
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
'Net Operating Income' is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
'Loan loss provisions' refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes a release of EUR 50 million mainly corresponding to the results by commitments
and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except a release of EUR 50 million mainly corresponding to the results by commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognised in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Annual report 2021 719
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Profit from continuing operations
Net profit from discontinued operations
Consolidated profit
Non-controlling interests
Attributable profit to the parent
Europe North America
10,072
4,423
1,045
399
15,939
(8,912)
7,027
(1,333)
(792)
4,902
(1,340)
3,562
—
3,562
167
3,395
8,926
1,776
229
673
11,604
(4,983)
6,621
(3,656)
(203)
2,762
(681)
2,081
—
2,081
426
1,655
2019
South
America
13,316
4,787
564
(242)
18,425
(6,673)
11,752
(3,789)
(749)
7,214
(2,640)
4,574
—
4,574
664
3,910
Digital
Consumer
Bank
Corporate
Centre
4,221
(1,252)
Total
35,283
11,779
1,531
901
(50)
(297)
(19)
(1,618)
49,494
(373)
(23,280)
(1,991)
26,214
(35)
(238)
(9,321)
(1,964)
(2,264)
14,929
157
(2,107)
—
(2,107)
(9)
(2,098)
(5,103)
9,826
—
9,826
1,574
8,252
843
(10)
90
5,144
(2,339)
2,805
(508)
18
2,315
(599)
1,716
—
1,716
326
1,390
*
**
***
****
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
'Net Operating Income' is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
'Net loan-loss provisions' refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes a release of EUR 31 million mainly corresponding to the results by commitments
and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except a release of EUR 31 million mainly corresponding to the results by commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognised in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Annual report 2021 720
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
b) Secondary segments
At this secondary level, Grupo Santander is structured into Retail
Banking, Santander Corporate & Investment Banking (SCIB), Wealth
Management & Insurance (WM&I) and PagoNxt.
• Retail Banking: this covers all customer banking businesses,
including consumer finance, except those of corporate banking
which are managed through Santander Corporate & Investment
Banking, asset management, private banking and insurance, which
are managed by WM&I. The results of the hedging positions in
each country are also included, conducted within the sphere of
their respective assets and liabilities committees.
• Santander Corporate & Investment Banking (SCIB): this business
reflects revenue from global corporate banking, investment
banking and markets worldwide including treasuries managed
globally (always after the appropriate distribution with Retail
Banking customers), as well as equity business.
• Wealth Management & Insurance: includes the asset
management business (Santander Asset Management), the
corporate unit of Private Banking and International Private Banking
in Miami and Switzerland (Santander Private Banking) and the
insurance business (Santander Insurance).
• PagoNxt: this includes digital payment solutions, providing global
technology solutions for Grupo Santander's banks and new
customers in the open market. It is structured in three businesses:
Merchant Solutions, International Trade and Consumer.
Although WM&I and PagoNxt do not meet the quantitative
thresholds defined in IFRS 8, these segments are considered
reportable by Grupo Santander and are disclosed separately because
Grupo Santander's management believes that information about
these segments are useful to users of the financial statements.
There are no customers located in a place different from the location
of the Group's assets that generate revenues in excess of 10% of
ordinary revenues.
Annual report 2021 721
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The condensed income statements are as follows:
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Profit/(loss) from continuing operations
Net profit/(loss) from discontinued operations
Consolidated profit/(loss)
Non-controlling interests
Attributable profit/(loss) to the parent
Retail
Banking
31,389
7,011
920
316
39,636
(17,193)
22,443
(7,114)
(2,064)
13,265
(4,052)
9,213
—
9,213
1,344
7,869
2021
Santander
Corporate &
Investment
Banking
Wealth
Management
& Insurance
PagoNxt
2,995
1,750
684
264
5,693
(2,301)
3,392
(130)
(10)
3,252
(938)
2,314
—
2,314
146
2,168
375
1,276
101
414
2,166
(902)
1,264
(27)
10
1,247
(304)
943
—
943
36
907
Corporate
centre
(1,390)
(28)
(141)
(27)
Total
33,370
10,502
1,563
969
(1,586)
46,404
(346)
(21,415)
(1,932)
24,989
(155)
(190)
(2,277)
242
(2,035)
—
(7,436)
(2,293)
15,260
(5,076)
10,184
—
(2,035)
10,184
1
493
(1)
2
495
(673)
(178)
(10)
(39)
(227)
(24)
(251)
—
(251)
2
(253)
(2,037)
2
1,530
8,654
*
**
***
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
Net Operating Income is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
**** Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes an addition of EUR 29 million mainly corresponding to the results by commitments
and contingent risks included in the line provisions or reversal of provisions, net of the statutory income statement.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except an addition of EUR 29 million mainly corresponding to the results by commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Annual report 2021 722
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Profit/(loss) from continuing operations
Net profit/(loss) from discontinued operations
Consolidated profit/(loss)
Non-controlling interests
Attributable profit/(loss) to the parent
2020
Santander
Wealth
Corporate &
Investment Management
Banking Banking (SCIB) & Insurance
Retail
PagoNxt
30,056
6,986
1,133
(153)
38,022
(17,285)
20,737
(11,633)
(1,237)
7,867
(2,525)
5,342
—
5,342
921
4,421
2,918
1,543
670
201
5,332
(2,038)
3,294
(470)
(135)
2,689
(773)
1,916
—
1,916
118
1,798
394
1,154
98
384
2,030
(872)
1,158
(29)
—
1,129
(270)
859
—
859
37
822
(1)
362
(1)
(3)
357
(443)
(86)
(12)
(2)
(100)
(15)
(115)
—
(115)
1
Corporate
Centre
(1,373)
(30)
287
(25)
Total
31,994
10,015
2,187
404
(1,141)
44,600
(329)
(20,967)
(1,470)
23,633
(30)
(411)
(1,911)
67
(1,844)
—
(1,844)
—
(12,174)
(1,785)
9,674
(3,516)
6,158
—
6,158
1,077
5,081
(116)
(1,844)
*
**
***
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
Net Operating Income is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
**** Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes a release of EUR 50 million mainly corresponding to the results by commitments
and contingent risks included in the line provisions or reversal of provisions, net of the statutory income statement.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except a release of EUR 50 million mainly corresponding to the results by commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Annual report 2021 723
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Profit/(loss) from continuing operations
Net profit/(loss) from discontinued operations
Consolidated profit/(loss)
Non-controlling interests
Attributable profit/(loss) to the parent
2019
Santander
Corporate &
Wealth
Investment Management
Banking Banking (SCIB) & Insurance
Retail
PagoNxt
33,308
8,663
1,025
291
43,287
(19,280)
24,007
(9,132)
(1,623)
13,252
(4,132)
9,120
—
9,120
1,364
7,756
2,728
1,520
689
289
5,226
(2,281)
2,945
(155)
(91)
2,699
(815)
1,884
—
1,884
171
1,713
479
1,190
117
340
2,126
(939)
1,187
23
(13)
1,197
(280)
917
—
917
50
867
20
456
(3)
—
473
(407)
66
(21)
—
45
(33)
12
—
12
(2)
14
Corporate
Centre
(1,252)
(50)
(297)
(19)
Total
35,283
11,779
1,531
901
(1,618)
49,494
(373)
(23,280)
(1,991)
26,214
(36)
(237)
(9,321)
(1,964)
(2,264)
14,929
157
(2,107)
—
(2,107)
(9)
(2,098)
(5,103)
9,826
—
9,826
1,574
8,252
*
**
***
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
Net Operating Income is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
**** Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes a release of EUR 31 million mainly corresponding to the results by commitments
and contingent risks included in the line provisions or reversal of provisions, net of the statutory income statement.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except a release of EUR 31 million mainly corresponding to the results by commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Annual report 2021 724
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
c) Reconciliations of reportable segment results
The tables below reconcile the underlying basis results to the
statutory results for each of the periods presented as required by
IFRS 8. For the purposes of these reconciliations, all material
reconciling items are separately identified and described.
Grupo Santander assets and liabilities for management reporting
purposes do not differ from the statutory reported figures and
therefore are not reconciled.
EUR million
Reconciliation of underlying results to statutory results
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Adjusted profit for the year from continuing operations
Profit from discontinued operations (net)
Consolidated profit/(loss)
Non-controlling interests
Attributable profit/(loss) to the parent
2021
Underlying
results
Adjustments
Statutory
results
33,370
10,502
1,563
969
46,404
(21,415)
24,989
(7,436)
(2,293)
15,260
(5,076)
10,184
—
10,184
(1,530)
8,654
—
—
—
—
—
—
—
—
(713)
(713)
182
(531)
—
(531)
1
(530)
33,370
10,502
1,563
969
46,404
(21,415)
24,989
(7,436)
(3,006)
14,547
(4,894)
9,653
—
9,653
(1,529)
8,124
*
**
***
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
Net Operating Income is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
**** Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes an addition of EUR 29 million mainly corresponding to the results by commitments
and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except for an addition of EUR 29 million mainly corresponding to results from commitments
and contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial
assets, net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Explanation of adjustments:
◦ Restructuring costs for net impact of EUR -530 million, mainly in
the United Kingdom and Portugal.
Annual report 2021 725
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
2020
Reconciliation of underlying results to statutory results
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Adjusted profit for the year from continuing operations
Profit from discontinued operations (net)
Consolidated profit/(loss)
Non-controlling interests
Attributable profit/(loss) to the parent
Underlying
results
Adjustments
Statutory
results
31,994
10,015
2,187
404
44,600
(20,967)
23,633
(12,174)
(1,785)
9,674
(3,516)
6,158
—
6,158
1,077
5,081
—
—
—
(321)
(321)
(163)
(484)
(258)
(11,008)
(11,750)
(2,116)
(13,866)
—
(13,866)
(14)
(13,852)
31,994
10,015
2,187
83
44,279
(21,130)
23,149
(12,432)
(12,793)
(2,076)
(5,632)
(7,708)
—
(7,708)
1,063
(8,771)
*
**
***
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
Net Operating Income is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
**** Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes an addition of EUR 50 million mainly corresponding to the results by commitments
and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except for an addition of EUR 50 million mainly corresponding to results from commitments
and contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial
assets, net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations
Explanation of adjustments:
• Adjustment to the valuation of goodwill arising from the Group's
acquisitions in the amount of EUR -10,100 million, which is
included in the line 'Other gains (losses) and provisions'.
• Adjustment to the valuation of the deferred tax assets of the
consolidated tax group in Spain in the amount of EUR
-2,500 million, which is included in the 'Tax on profit' line.
• Restructuring costs with a net impact of EUR -1,114 million, which
are included for their gross amount mainly in the line 'Other gains
(losses) and provisions'.
• Other charges of EUR -138 million (related to sales of non-
performing loans in Spain, cancellation of pension commitment
costs and other expenses), which are recorded gross in 'Other
gains (losses) and provisions', 'Net loan-loss provision' and
'Administrative expenses and depreciation and amortization'.
Annual report 2021 726
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
2019
Reconciliation of underlying results to statutory results
Net interest income
Net fee income
Gains (losses) on financial transactions*
Other operating income**
Total income
Administrative expenses, depreciation and amortisation
Net operating income***
Net loan-loss provisions****
Other gains (losses) and provisions*****
Operating profit/(loss) before tax
Tax on profit
Adjusted profit for the year from continuing operations
Profit from discontinued operations (net)
Consolidated profit/(loss)
Non-controlling interests
Attributable profit/(loss) to the parent
Underlying
results
Adjustments
Statutory
results
35,283
11,779
1,531
901
49,494
(23,280)
26,214
(9,321)
(1,964)
14,929
(5,103)
9,826
—
9,826
1,574
8,252
—
—
—
(265)
(265)
—
(265)
—
(2,121)
(2,386)
676
(1,710)
—
(1,710)
27
(1,737)
35,283
11,779
1,531
636
49,229
(23,280)
25,949
(9,321)
(4,085)
12,543
(4,427)
8,116
—
8,116
1,601
6,515
*
**
***
Gains (losses) on financial transactions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial
assets and liabilities held for trading, net, Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net, Gain or
losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net and Exchange differences, net.
Other operating income includes the following line items in the statutory income statement, which are presented net for internal reporting and management
reporting purposes: Dividend income; Income from companies accounted for using the equity method, Other operating income, Other operating expenses, Income
from assets under insurance or reinsurance contracts and Expenses from liabilities under insurance or reinsurance contracts.
Net Operating Income is used for the Group’s internal reporting and management reporting purposes but is not a line item in the statutory consolidated income
statement.
**** Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses
from changes line item in the statutory income statement. Additionally, includes a release of EUR 31 million mainly corresponding to the results by commitments
and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions.
***** Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and
management reporting purposes: Provisions or reversal of provisions except a release of EUR 31 million mainly corresponding to results from commitments and
contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets,
net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
Explanation of adjustments:
• Impairment of the goodwill assigned to Santander UK and
• Provisions related to intangible assets and others, amounting to
provisions for PPI in the UK, with a net impact of EUR
-1,491 million and EUR -183 million, respectively, reflected in the
line 'Other gains (losses) and provisions'.
• Restructuring costs with a net impact of EUR -864 million, which
are included in the line 'Other gains (losses) and provisions'.
• Losses related to real estate assets and holdings in Spain with a
net impact of EUR -405 million, which are included in the 'Other
operating income' and 'Other gains (losses) and provisions' lines.
EUR -174 million, which are included for their gross amount in the
line 'Other gains (losses) and provisions'.
• Capital gains on the sale of holdings in Prisma and on the
integration of the custody business, with a net impact of EUR
136 million and EUR 693 million respectively, which are reflected
at their gross amount in the line 'Other gains (losses) and
provisions'.
• Positive impact due to changes in tax regulations in Brazil for a net
amount of EUR 551 million, which is included in the line "Tax on
profit'.
Annual report 2021 727
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
52. Related parties
The parties related to the Group are deemed to include, in addition to
its subsidiaries, associates and joint ventures, the Bank's key
management personnel (the members of its board of directors and
the executive vice presidents, together with their close family
members) and the entities over which the key management
personnel may exercise significant influence or control.
Following below is the balance sheet balances and amounts of the
Group's income statement corresponding to operations with the
parties related to it, distinguishing between associates and joint
ventures, members of the Bank's board of directors, the Bank's
executive vice presidents, and other related parties. Related-party
transactions were made on terms equivalent to those that prevail in
arm's-length transactions or, when this was not the case, the related
compensation in kind was recognized.
EUR million
Assets
Cash, cash balances at central banks and other
deposits on demand
Loans and advances: credit institutions
Loans and advances: customers
Debt instruments
Others
Liabilities
Financial liabilities: credit institutions
Financial liabilities: customers
Marketable debt securities
Others
Income statement
Interest income
Interest expense
Gains/losses on financial assets and liabilities and
others
Commission income
Commission expense
Other
Financial guarantees granted and Others
Loan commitments and Other commitments
granted
Derivative financial instruments
Associates and joint
ventures
Members of the board
of directors
Executive
vicepresident Other related parties
2021
9,386
131
437
8,148
496
174
3,405
867
2,464
—
74
1,265
90
(13)
(32)
1,268
(48)
3,965
11
314
3,640
—
—
—
—
—
—
8
—
8
—
—
—
—
—
—
—
—
2
1
1
—
14
—
—
14
—
—
11
—
11
—
—
—
—
—
—
—
—
2
1
1
—
384
—
—
384
—
—
197
—
197
—
—
1
1
—
—
—
—
76
17
13
46
Annual report 2021 728
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Assets
Cash, cash balances at central banks and other
deposits on demand
Loans and advances: credit institutions
Loans and advances: customers
Debt instruments
Others
Liabilities
Financial liabilities: credit institutions
Financial liabilities: customers
Marketable debt securities
Others
Income statement
Interest income
Interest expense
Gains/losses on financial assets and liabilities and
others
Commission income
Commission expense
Other
Financial guarantees granted and Others
Loan commitments and Other commitments
granted
Derivative financial instruments
Associates and joint
ventures
Members of the board
of directors
Executive
vicepresident Other related parties
2020
8,473
151
562
6,934
423
403
3,593
944
2,557
12
80
1,269
106
(8)
49
1,154
(32)
4,097
14
253
3,830
—
—
—
—
—
—
4
—
4
—
—
—
—
—
—
—
—
1
—
1
—
24
—
—
24
—
—
16
—
16
—
—
—
—
—
—
—
—
1
—
1
—
95
—
—
95
—
—
159
—
159
—
—
3
2
—
—
1
—
52
3
13
36
Annual report 2021 729
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million
Assets
Cash, cash balances at central banks and other
deposits on demand
Loans and advances: credit institutions
Loans and advances: customers
Debt instruments
Others
Liabilities
Financial liabilities: credit institutions
Financial liabilities: customers
Marketable debt securities
Others
Income statement
Interest income
Interest expense
Gains/losses on financial assets and liabilities and
others
Commission income
Commission expense
Other
Financial guarantees granted and Others
Loan commitments and Other commitments
granted
Derivative financial instruments
Associates and joint
ventures
Members of the board
of directors
Executive
vicepresident Other related parties
2019
9,659
740
961
6,950
848
160
2,689
563
2,064
—
62
1,386
111
(15)
47
1,269
(26)
4,219
17
197
4,005
—
—
—
—
—
—
41
—
41
—
—
—
—
—
—
—
—
7
5
1
1
26
—
—
26
—
—
12
—
12
—
—
—
—
—
—
—
—
3
2
1
—
104
—
—
104
—
—
57
—
57
—
—
2
1
—
—
1
—
49
38
6
5
The remaining required information is detailed in notes 5, 14 and
46.c.
Annual report 2021 730
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
53. Risk management
a) Risk principles and culture
Grupo Santander´s risk principles below are compulsory. They
comply with regulatory requirements and are inspired by best
market practices:
1. All employees are risk managers who must understand the risks
associated with their functions and not assume risks with an
impact that exceeds the Group’s risk appetite or is unknown.
2. Involvement of senior managers, with consistent risk
management and control through their conduct, actions and
communications, as well as oversight of the risk culture and make
sure Grupo Santander maintain the risk profile within the defined
risk appetite.
3. Independent risk management and control functions, according
to the three lines of defence model of Grupo Santander.
4. A forward-looking, comprehensive approach to risk
management and control for all businesses and risk types.
5. Complete and timely information to identify, assess, manage and
disclose risks to the appropriate level.
Grupo Santander’s holistic control structure stands on these
principles and includes strategic tools and processes set out in the
risk appetite statement, such as annual planning and budget
planning, scenario analysis, the risk reporting structure and risk
identification and assessment.
1. Risk factors
Grupo Santander's risks categorization ensures effective risk
management, control and reporting. The risk framework
distinguishes these risk types:
• Credit risk relates to financial loss arising from the default or
credit quality deterioration of a customer or counterparty, to which
Santander has directly provided credit or assumed a contractual
obligation.
• Market risk results from changes in interest rates, exchange rates,
equities, commodities and other market factors, and from their
effect on profit or capital. It includes the structural risk relates to
market movements or balance sheets behaviour will change the
value or profit generation of assets or liabilities in the banking
book.
• Liquidity risk occurs if liquid financial resources are insufficient or
too costly to obtain in order to meet liabilities when they fall due.
• Capital risk is the risk that arises from the possibility of having an
inadequate quantity or quality of capital to meet internal business
objectives, regulatory requirements or market expectations in the
area of structural risk.
Grupo Santander also takes into account, on an ongoing basis in its
management of the risk function, operational, regulatory
compliance, model, reputational and strategic risks.
Besides, environmental and climate-related risk drivers are
considered as factors that could impact the existing risks in the
medium-to-long-term. These elements include, on the one hand,
those derived from the physical effects of climate change, generated
by one-off events as well as by chronic changes in the environment
and, on the other hand, those derived from the process of transition
to a development model with lower emissions, including legislative,
technological or behaviour of economic agents changes.
The analysis of climate change scenarios has continued to advance
during 2021 in the Group to try to cover the different casuistry
related to the risks of transition to a low-carbon economy and/or the
effects derived from the physical risk of possible climatic events in
certain geographies where the Group operates.
Grupo Santander continues to make progress in the credit granting
process following the EBA guidelines as well as in the development
of a more restrictive financing policy, taking special account of the
most sensitive sectors/activities, which includes ceasing to provide
financial services to medium term to electricity generation customers
with more than 10% of revenues dependent on coal and eliminate
exposure to coal mining production in the world.
Grupo Santander has scheduled a series of actions to continue
integrating climatic and environmental factors in the credit admission
process, through i) their incorporation in the assessment processes of
local credit committees, ii) their inclusion in the assignment of
corporate ratings in the wholesale market (with a future expansion to
retail banking) and in the process of setting prices through the
entities' own ratings and the specific pricing that already exists for
specific products with discount rates based on the fulfillment of
various conditions , and iii) the inclusion of energy certificates in the
valuation of collaterals.
Additionally, Grupo Santander has increased focus on the impact of
climate risk in relation to market, structural and liquidity risk, which
arise from the possibility that changes in climate may adversely
affect the value of a financial instrument, a portfolio or the Group as a
whole. This risk may have an impact both on financial instruments
value or portfolios and on Santander's liquidity. Grupo Santander
measures this risk through stress scenarios for both market and
liquidity risk, which arises from the possibility that climate change
may adversely affect the value of a financial instrument, a portfolio
or the Group as a whole
2. Risk governance
Grupo Santander robust risk and compliance governance structure
allows us to conduct effective oversight in line with our risk appetite.
It stands on three lines of defence, a structure of committees and
strong Group-subsidiary relations, guided by our risk culture, Risk
Pro.
2.1 Lines of defence
Grupo Santander model of three lines of defence effectively manages
and controls risks:
– First line: formed by businesses and functions that take or
originate exposure to risk, it recognizes, measures, controls,
monitors and reports on risks according to internal risk
management regulation. Risk origination must be consistent with
the approved risk appetite and related limits.
– Second line: formed by the Risk and Compliance and Conduct
functions, it independently oversees and challenges the first line’s
risk management. Its duties include ensuring that risks are
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managed according to the risk appetite defined by senior
management and strengthening our risk culture throughout Grupo
Santander.
– Third line: the Internal Audit function, which is independent to
ensure the board of directors and senior managers with high-
quality and efficient internal controls, governance and risk
management systems, helping to safeguard our value, solvency
and reputation.
The Risk, Compliance & Conduct and Internal Audit functions are
separate and independent. Each has direct access to the board of
directors and its committees.
2.2 Risk committee structure
The board of directors is ultimately responsible for risk and
compliance management and control. It revises and approves the
bank's risk frameworks and appetite, while promoting a strong risk
culture across the Group. The board relies on its risk supervision,
regulation and compliance committee for risk control and on the
group’s executive committee for risk approval.
The Group chief risk officer (Group CRO), who decides risk strategy
and promotes proper risk culture, is in charge of overseeing all risks
and challenging and advising business lines on risk management.
The Group chief compliance officer (Group CCO), who decides
compliance and conduct strategy, is in charge of controlling the risks
within their purview and must provide the Group CRO with a
complete overview on the situation of risks being monitored.
2.3 The Group's relationship with subsidiaries
In all subsidiaries, the risk and compliance management and control
model is consistent with the frameworks approved by Grupo
Santander's board of directors, which they adhere to through their
own boards and can only adapt according to local law and regulation.
In its duty to carry out aggregate risk oversight, Grupo Santander
validates and challenges subsidiaries’ internal regulation and
transactions, which results in a common risk management model
across the Group.
In 2021, Grupo Santander continued to strengthen the regional
subsidiary relations model, based on regions, to find synergies for
common operations and platforms building on the global and
regional scale; to streamline processes; and to tighten control
mechanisms so Grupo Santander's business can grow, allocate
capital more efficiently and offer the best service to customers.
In this sense, each local CRO interact regularly with their regional
head of risk, the Group CRO and the Group CCO in periodic regional or
country control meetings. Local and global Risk and Compliance
functions also hold follow-up meetings to address special matters.
The Group CRO and the Group CCO and regional heads of risk are
involved in appointing, setting of objectives, reviewing and
compensating their local counterparts to ensure proper risk
management.
Grupo Santander enhances its relations with subsidiaries and its
advanced risk management model through:
• Close collaboration between countries in the same region to carry
out common initiatives efficiently;
Both the Group CRO and the Group CCO have direct access and report
to the risk supervision, regulation and compliance committee and the
board of directors.
• structural change, subsidiary benchmarks and a strategic vision for
the function to implement advanced risk management
infrastructures and practices;
The executive risk, risk control and compliance and conduct
committees are executive committees and have been delegated
powers by the board.
Furthermore, risk functions have forums and regular meetings to
manage and control the risks within their purview. Executive
committees also delegate some duties to subordinate forums.
Their responsibilities include:
• Reporting to the Group CRO, the Group CCO, the risk control
committee and the compliance and conduct committee on risk
management according to risk appetite;
• monitoring and ensuring proper management of each risk factor;
and
• overseeing measures to comply with supervisors and auditors'
expectations.
Besides, Grupo Santander, in order to establish an adequate control
environment for the management of each risk factors, the Risk and
Compliance and Conduct functions have effective internal regulation
to create the right environment to manage and control all risks.
Grupo Santander can also dictate new governance measures for
special situations. During the Brexit crisis transition process, it set up
separate steering committees and working groups with Santander
UK. Also, to cope with the covid-19 crisis, it created special situation
forums, in which close coordination with subsidiaries, local
contingency plan activation and scenario analysis enhanced allocated
resources and governance.
• the exchange of best practices to strengthen processes and drive
innovation in order to achieve a quantitative impact.;
• identification of talent in risk and compliance teams, promoting
international mobility through a global risk talent programme and
tightening succession plans.
3. Management processes and tools
Grupo Santander has these effective risk management processes and
tools:
3.1 Risk appetite and structure of limits
Risk appetite is the volume and type of risks Grupo Santander deem
prudent for the business strategy, even in unforeseen circumstances.
It considers adverse scenarios that could have a negative impact on
capital, liquidity and profitability.
The board sets the Group's risk appetite statement (RAS) every year.
Grupo Santander subsidiaries' boards also set their own risk
appetites annually. Each of those risk appetites translates into risk
management limits and policies based on risk type, portfolio and
segment.
3.1.1. Business model and risk appetite fundamentals
Grupo Santander's risk appetite is consistent with the risk culture and
business model built on customer focus, scale and diversification. At
the core of Grupo Santander's risk appetite are:
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• A medium-low and predictable target risk profile that is centred on
retail and commercial banking, internationally diversified
operations and strong market share;
3.1.3. Structure of limits, monitoring and control
Risk appetite is expressed in qualitative terms and limits, structured
on these five core elements.
• Stable, recurrent earnings and shareholder remuneration,
sustained by a sound base of capital, liquidity and sources of
funding;
• Independent subsidiaries that manage their own capital and
liquidity, with risk profiles that do not compromise Grupo
Santander’s solvency;
• An independent risk function with involvement by senior
management to embed a strong risk culture and drive a
sustainable return on capital;
• A global and holistic vision through a meticulous control and
monitoring of risks, businesses and markets;
• A focus on products Grupo Santander know well;
• A conduct model that protects Grupo Santander`s customers; and
• A remuneration policy that aligns employees and executives'
interests with risk appetite and long-term results.
3.1.2. Corporate risk appetite principles
The principles that inform Grupo Santander's risk appetite are:
• The board and senior management's responsibility for risk
appetite;
• An enterprise-wide view of risk, back-testing and challenge of
risk profile based on quantitative metrics and qualitative
indicators;
• A forward-looking view based on plausible assumptions and
adverse/stress scenarios to reflect the desired risk profile in the
short and medium term;
• Strategic and business plans embedded in daily management
by policies and limits;
• Common standards that align each subsidiary's appetite with the
Group's; and
• Regular reviews, best practice and regulatory requirements,
with mechanisms in place to keep the risk profile stable and
mitigate non-compliance.
1 Earnings volatility
The maximum loss Grupo Santander can tolerate in an acute
-but- plausible stress scenario.
2 Solvency
• Minimum capital position Grupo Santander can tolerate in
a stress scenario.
• Maximum leverage Grupo Santander can tolerate in a
stress scenario.
3 Liquidity
• Minimum structural liquidity position.
• Minimum liquidity horizon Grupo Santander can tolerate in
peak stress scenario.
• Minimum liquidity coverage position.
4 Concentration
• Concentration in single names, industries and portfolios.
• Concentration in non-investment grade counterparties.
• Concentration in large exposures.
5 Non-financial risks
• Maximum operational risk losses.
• Maximum risk profile.
• Non-financial risk indicators:
◦ Financial crime compliance (FCC)
◦ Cyber and security risk
◦ Model risk
◦ Reputational risk
b) Credit risk
1. Introduction to the credit risk treatment
Credit risk refers to a potential financial loss from the default or
credit quality deterioration of a customer or other third party with
whom Grupo Santander has a contractual obligation. It is our most
important risk, both in terms of exposure and capital consumption. It
also includes counterparty risk, country risk and sovereign risk.
Credit risk management
Grupo Santander identifies, analyses, controls and decides on credit
risk based on holistic view of the credit risk cycle, which includes the
transaction, the customer and the portfolio.
Credit risk identification is key to managing and controlling Grupo
Santander's portfolios effectively. Grupo Santander classify external
and internal risks in each business and adopt corrective and
mitigating measures when needed through these processes:
1.1. Planning
Grupo Santander´s planning helps to set business targets and define
specific action plans within our risk appetite framework.
Strategic commercial plans (SCP) are a management and control tool
the business and risk areas prepare for Grupo Santander's credit
portfolios. They determine commercial strategies, risk policies,
resources and infrastructure, ensuring a holistic view of the
portfolios. They provide managers with an updated view of credit
portfolio quality to measure credit risk, run internal controls over the
defined strategy coupled with regular monitoring, detect significant
deviations in risk and potential impacts, and take corrective actions
when necessary. They also align with Grupo Santander's risk
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appetite and its subsidiaries’ capital targets, and are approved and
monitored by senior managers at each subsidiary before being
reviewed and validated by Grupo Santander.
1.2. Risk assessment and credit rating
To analyse customers’ ability to meet contractual obligations, Grupo
Santander uses valuation and parameter estimation models in each
of the segments. Grupo Santander's credit quality valuation models
are based on credit rating drivers, which Grupo Santander monitors
to calibrate and adjust the decisions and ratings they assign.
Depending on each segment, drivers can be:
• Rating: from mathematical algorithms that have a quantitative
model based on balance sheet ratios or macroeconomic variables,
and a qualitative module supplemented by the credit analyst’s
expert judgement. It is used for SCIB, corporate, institutional and
SME segments (with individualised treatment).
• Scoring: an automatic system to evaluate credit applications that
assigns an individual score to customers for subsequent decision-
making, generally in the retail and smaller SME segments.
Grupo Santander's parameter estimation models follow econometric
models built on Grupo Santander's portfolios' historical defaults and
losses. Grupo Santander uses them to calculate economic and
regulatory capital as well as IFRS 9 provisions for each portfolio.
Grupo Santander regularly monitoring and evaluate models'
appropriateness, predictive capacity, performance, granularity,
compliance with policies and other related factors. Grupo Santander
reviews ratings with the latest available financial and economic
information. Grupo Santander has also increased the reviews for
customers who are under closer observation or have automatic
warnings in the risk management systems.
1.3. Credit risk mitigation techniques
We approve risks generally on the basis of borrowers’ ability to pay in
fulfilment of financial obligations, notwithstanding any additional
collateral or personal guarantees we can require from them. To
determine this, we analyse funds or net cash flows from their
businesses or income with no guarantors or the assets pledged as
collateral. We always consider guarantors and collateral when
deciding to approve a loan as a secondary means of recourse if the
first channel fails.
In general, a guarantee is as a reinforcement measure added to a
credit transaction to mitigate a loss due to a failure to meet a
payment obligation.
Grupo Santander has credit risk mitigation techniques for various
types of customer and products. Some are for specific transactions
(e.g., property) while others apply to a series of transactions (e.g.,
derivatives netting and collateral). Grupo Santander can be grouped
into personal guarantees, guarantees in the form of credit derivatives
or collateral.
1.4. Definition of limits, pre-classifications and pre-approvals
Grupo Santander uses SCPs to manage credit portfolios, defining
limits for each of them and for new originations, in line with the
Group´s credit risk appetite and its target risk profile. Transposing the
risk appetite to portfolio management strengthens controls over our
credit portfolios.
Grupo Santander´s limits, pre-classifications and pre-approvals
processes determine the risk we can assume with each customer.
Limits are approved by the executive risk committee (or delegated
committees) and should reflect a transaction’s expected risk-return
Grupo Santander applies various limits models to each segment:
• Large corporate groups: are subject to a pre-classification model
based on a system for measuring and monitoring economic
capital. Pre-classification models express the level of risk Grupo
Santander is willing to assume in transactions with customers/
groups in terms of capital at risk, nominal cap and maximum
tenors. To manage limits with financial entities, Grupo Santander
uses Credit Equivalent Risk (CER), which includes actual and
expected risks with customers according to risk appetite and credit
policies.
• Corporates and institutions: that meet certain requirements
(strong relationships, rating, etc.): Grupo Santander uses simpler
pre-classification model with an internal limit. It establishes a
reference point in a customer's level of risk based on repayment
capacity, overall indebtedness and a pool of banks.
Transactions with large corporates, corporates and institutions above
certain limits or with special characteristics could require approval
from a senior credit analyst or a committee.
• For individual customers and SMEs with low turnover, Grupo
Santander manages large volumes of credit transactions with
automatic decision models to classify customers and transactions.
1.5. Scenario analysis
Grupo Santander´s scenario analyses determine the potential risks in
its credit portfolios and provide a better understanding of our
portfolios' performance under various macroeconomic conditions.
They allow us to anticipate management strategies that will avoid
future deviations from defined plans and targets. They simulate the
impact of alternative scenarios in portfolios’ credit parameters (PD,
LGD) and expected credit losses. We compare findings with
portfolios’ credit profile indicators to find the right measures for
managers to take. Credit risk management of portfolios and SCPs
incorporate scenario analyses.
1.6. Monitoring
Regularly monitoring business performance and comparing it to pre-
defined plans is key to our management of risk.
Grupo Santander's holistic monitoring of customers helps detect
impacts on risk performance and credit quality early.
Grupo Santander assigns customers a classification with a pre-
defined course of action and ad hoc measures to correct any
deviations.
Monitoring, which considers transaction forecasts and
characteristics, in addition to changes in classification, is performed
by local and global risk teams and is based on customer
segmentation:
• For SCIB, monitoring is initially a function of business managers
and risk analysts which provide an up-to-date view of customers’
credit quality to predict a potential customer's deterioration.
• For commercial banking, institutions and SMEs assigned a credit
analyst, Grupo Santander tracks customers requiring closer
monitoring and review their ratings based on relevant indicators.
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• Monitoring of individual customers, businesses and smaller SMEs
follows a system of automatic alerts to detect shifts in portfolios’
performance.
Monitoring uses the Santander Customer Assessment Note (SCAN)
tool. Grupo Santander fully rolled it out in our subsidiaries in 2019. It
helps set individual monitoring levels and frequencies, policies, and
actions for customers based on credit quality and particular
circumstances.
In addition to monitoring customer credit quality, Grupo Santander
defines control procedures to analyse portfolios and performance, as
well as any deviations from planning or approved alert levels.
1.7. Recovery and collections management
The Collections & Recoveries area carries out recoveries, which are
important to risk management. It defines a global, enterprise-wide
management strategy with guidelines and general lines of action for
Grupo Santander's subsidiaries based on the economic environment.
business model and other local recovery conditions. Recovery
management follows regulatory requirements set out in the EBA
Guidelines on the management of non-performing and forborne
exposures. In addition, Grupo Santander applies specific policies on
recovery management that include the principles of the different
strategies.
The Collections & Recoveries areas directly manage customers. As
sustained value creation is based on effective and efficient
collections, digital channels that develop new customer relations are
gaining importance. Grupo Santander's diverse customer base
requires segmentation to manage recoveries appropriately. The
highly technological and digital processes Grupo Santander follows
help us attend to large groups of customers with similar profiles and
products. Grupo Santander's personalized management, however,
focuses on customer profiles that require a special manager and
approach.
Grupo Santander splits recovery management into four phases:
arrears, credit impaired loans, write-offs and foreclosed assets.
Grupo Santander may uses mechanisms to rapidly reduce assets like
sales of foreclosed assets or credit impaired loans pool sales. Grupo
Santander constantly seeks alternatives to legal action in order to
collect debt.
Grupo Santander includes debt instruments as written-off loans
(even if they are not past-due) if an individual analysis of the solvency
of a transaction and the borrower leads us to believe recovery is
remote due to a notorious and unrecoverable impairment. Though
this may lead to full or partial cancellation and de-recognition of the
gross carrying amount of debt, it does not mean we interrupt
negotiations and legal proceedings to recover debt. In countries with
high exposure to real estate risk, we have efficient sales
management instruments that help maximize recovery and optimize
balance sheet stocks.
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2. Main aggregates and variations
Following are the main aggregates relating to credit risk from our
activities with customers:
MAIN CREDIT RISK PERFORMANCE METRICS FROM ACTIVITY WITH CUSTOMERS*
December data
Europe
Spain
UK
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Corporate Centre
Total Group
Credit risk with customers **
(EUR million)
2020
606,997
221,341
252,255
40,693
31,578
131,626
99,135
32,476
129,590
74,712
42,826
4,418
116,381
4,862
989,456
2021
636,123
221,100
262,869
41,941
33,497
149,792
112,808
36,984
141,874
85,702
41,479
5,481
117,049
6,277
1,051,115
2019
605,969
213,668
264,297
37,978
33,566
143,839
105,792
38,047
143,428
88,893
42,000
5,044
117,399
5,872
1,016,507
Credit impaired loans
(EUR million)
2020
20,272
13,796
3,138
1,584
1,496
2,938
2,025
913
5,688
3,429
2,051
93
2,525
344
31,767
2021
19,822
12,758
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
903
33,234
2019
21,054
14,824
2,736
1,834
1,447
3,165
2,331
834
6,972
4,727
1,947
171
2,470
138
33,799
NPL ratio (%)
2020
2021
3.12
5.77
1.43
3.44
3.61
2.42
2.33
2.73
4.50
4.88
4.43
3.61
2.13
14.38
3.16
3.34
6.23
1.24
3.89
4.74
2.23
2.04
2.81
4.39
4.59
4.79
2.11
2.17
7.08
3.21
2019
3.47
6.94
1.04
4.83
4.31
2.20
2.20
2.19
4.86
5.32
4.64
3.39
2.10
2.34
3.32
*Management perimeter according to the reported segments
** Includes gross lending to customers, guarantees and documentary credits.
Key figures by geographic region are described below at 31
December 2021:
Information on the estimation of impairment losses
Estimation of expected credit losses:
• Europe: the NPL ratio fell 22 bps to 3.12% from 2020 due to a
significant reduction in credit impaired loans in Spain and Poland,
offsetting the increase observed in the UK.
• North America: the NPL ratio increased 19 bps to 2.42% from
2020, mainly due to increases at SC USA. NPL stock rose 24% year-
on-year.
The covid-19 health crisis, since its beginning in 2020, was
unexpected, unpredictable and severe, but it is estimated to be of a
temporary nature. Grupo Santander's priority in these circumstances
has been to look after the health of its employees, customers and
shareholders, but also to help reduce the economic impact of the
pandemic. This includes trying to offer the best solutions to help
customers.
• South America: the NPL ratio rose 11 bps to 4.50%. comparing to
2020, due to the increase observed in Argentina (+150 bps) and
Brazil (+29 bps), offsetting the decrease in Chile (-36 bps).
• Digital Consumer Bank: The NPL ratio decreased 4 bp to 2.13%
comparing to 2020, despite the decrease in automobile financing.
Conceptually, the phases in managing the effects of covid-19 have
been:
– Identification of customers or groups affected or potentially
affected by the pandemic.
– Early relief of temporary financial difficulties caused by covid-19
through measures promoted by governments, central banks, and
financial institutions.
– Monitoring the evolution of customers, to ensure that they
continue to be provided with the best solution for their situation,
and also to guarantee that their potential impairment is correctly
reflected in the risk management and accounting. This point is
particularly relevant at the expiry of any moratorium or liquidity
support measures to which customers may have availed
themselves.
– Monitoring is accompanied by recovery management activities
when necessary.
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These conceptual phases do not occur sequentially but overlap in
time. Additionally, the continuous interaction and coordination
between the different subsidiaries proved to be a fundamental asset
in the management of this crisis. The experience obtained in the fight
against the health crisis and its financial consequences in our
different geographies, and the different speeds at which it has been
developing in each of them, allow us to share the best practices
identified and to implement in an agile and efficient manner those
strategies and concrete actions that have been most successful,
always adapted to the local reality of each market.
Estimation of expected loss
In the context described above on the measures taken in relation to
covid-19, many regulators and supervisors highlighted the
uncertainties surrounding the economic impacts of the health crisis.
This is also evident in the frequent updates of macroeconomic
forecasts, with different perspectives and views on the depth and
duration of the crisis. Thus, the general recommendation (including
IASB, ESMA, EBA and ECB) was not to mechanistically apply the usual
techniques for calculating expected losses under IFRS 9, in order to
avoid that this variability of economic conditions would translate into
volatility in results, with its potential pro-cyclical effects on the
economy.
Thus, Grupo Santander has analysed losses under IFRS 9 on the basis
of three types of elements:
1.Continuous monitoring of customers
Monitoring the credit quality of customers could have been more
complex in the current circumstances. For such monitoring, and in
addition to the application of internal customer monitoring policies,
all available information should be used. The availability of
information and its relevance is different in the various portfolios of
the different countries in which Grupo Santander operates, but it may
include, but is not limited to the following:
– The payment of interest in the case of principal-only shortfalls.
– The payment of other operations of the same client in the
institution (not subject to moratorium).
– Information on payment of loans in other entities (through credit
bureaus).
– Customer financial information: average balances in current
accounts, availability/use of limits, etc.
– Available behavioural elements (variables that feed the
behavioural scores, etc.).
– Information gathered from customer contacts (surveys, calls,
questionnaires, etc.). This may include: customers who have taken
up furlough programs, direct government aid, etc.
2. Forward-looking vision
As it was reflected by the IASB, macroeconomic uncertainty makes
the usual application of IFRS 9 expected loss calculation models
difficult but did not exempt the incorporation of the prospective
feature of the standard. To this end, the European Central Bank
recommended the use of a stable, long-term view (long-run) of the
macroeconomic forecasts, which takes into account in the
assessment the multiple support measures explained above.
During 2021, this uncertainty has been reduced as vaccination
progressed, hospitalisation rates gradually declined, allowing, in
some cases, for the reduction of restriction measures. In parallel,
support measures expired while maintaining the good performance
of the portfolios.
This implies that once the economic scenarios have been stabilising
and converging to their potential growth, these new economic
scenarios have been gradually updated in the models by returning to
the standard forward-looking calculation.
3. Additional elements
Additional elements will be required when necessary because they
have not been captured under the two previous elements. This has
included, among others, the analysis of sectors most affected by the
pandemic if their impacts are not sufficiently captured by the
macroeconomic scenarios. Also collective analysis techniques, when
the potential impairment in a group of clients cannot be identified
individually.
With the elements indicated above, Grupo Santander has evaluated
in each of the geographical areas the evolution of the credit quality of
its customers, for the purposes of their classification in Grupo
Santander financial statements.
In terms of classification, in 2021 Grupo Santander has maintained
the criteria and thresholds for classification applied prior to the start
of the pandemic, eliminating regulatory criteria of the effect of
moratorium classification as they have expired, as well as the
collective analyses associated with these groups of loans.
Regarding moratorium measures, a rigorous identification and
periodic monitoring of the credit quality of the clients and their
payment behaviour have been carried out and, through a specific
individual or collective evaluation, the timely detection of the
Significant Increase in Credit Risk (SICR).
As part of governance processes, Grupo Santander issued guideline
documents to all subsidiaries to ensure consistent standards and
governance in managing the new treatment and particular impacts
on pandemic-related provisions. The guidelines included instructions
on how to calculate the macroeconomic impact of the crisis using
overlay and potential collective assessments that considered
impairment caused by covid-19. Those documents also include a
monitoring guide to ensure the appropriateness of special insolvency
fund adjustments for covid-19-related situations and anticipate any
other necessary adjustment.
Regarding moratoria measures, a rigorous identification and regular
monitoring of customer credit quality and payment behavior have
been performed and through specific individual or collective
assessment, the timely detection of SICR have been assured.
Details of the exposure by stage can be found in notes 6, 7, 10, as
well as in this note of these consolidated annual accounts.
Grupo Santander estimates the impairment losses by calculating the
expected loss at 12 months or for the entire life of the transaction,
based on the stage in which each financial asset is classified in
accordance with IFRS 9.
Then, considering the most relevant units of the Group (United
Kingdom, Spain, United States, Brazil, also Chile, Mexico, Portugal,
Poland, Argentina and Santander Consumer Finance), which
represent approximately 96% of the total Group's provisions. The
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table below shows the impairment losses associated with each stage
as of 31 December 2021, 2020 and 2019.In addition, depending on
the transactions credit quality, the exposure is divided into three
categories according to Standard & Poor's rating scale:
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2021
Stage 1
Stage 2
Stage 3
Total
565,443
237,525
13,798
56,170
—
—
579,241
293,695
—
—
30,711
30,711
802,968
69,968
30,711
903,647
4,149
5,103
12,873
22,125
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2020
Stage 1
Stage 2
Stage 3
Total
489,518
9,124
276,516
55,838
—
—
498,642
332,354
—
—
30,436
30,436
766,034
64,962
30,436
861,432
4,458
5,461
13,503
23,422
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2019
Stage 1
Stage 2
Stage 3
Total
552,763
5,532
306,880
47,365
—
—
558,295
354,245
—
—
31,363
31,363
859,643
52,897
31,363
943,903
3,980
4,311
13,276
21,567
* Detail of credit quality ratings calculated for Group management purposes.
** Total exposure includes loan balances (drawn amounts) and off balance (letters
of credit + guarantees) and excludes REPOs, FV portfolio, trading portfolio and
undrawn commitments.
***Includes provisions for undrawn authorized lines (loan commitments)
The remaining units that form the totality of the Group exposure,
contributed EUR 102,631 million in stage 1; EUR 1,870 million in
stage 2, and EUR 2,522 million in stage 3 (in 2020 EUR
98,121 million in stage 1; EUR 3,613 million in stage 2, and EUR
1,322 million in stage 3. In 2019, EUR 38,174 million in stage 1; EUR
1,422 million in stage 2, and EUR 1,056 million in stage 3), and
impairment losses of EUR 408 million in stage 1; EUR 322 million for
stage 2, and EUR 841 million in stage 3 (in 2020, EUR 180 million,
EUR 393 million and EUR 277 million and in 2019, EUR 264 million,
EUR 306 million and EUR 91 million in stage 1, stage 2 and stage 3,
respectively).
The remaining exposure, including all financial instruments not
included before, amounts to EUR 349,228 million (EUR
478,093 million in 2020 and EUR 507,479 million in 2019), and it
includes all undrawn authorized lines (loan commitments).
As of 31 December 2021, the Group had EUR 420 million net of
provisions (EUR 497 million and EUR 706 million at 31 December
2020 and 2019, respectively) of purchased credit-impaired assets,
which relate mainly to the business combinations carried out by the
Group.
Regarding the evolution of credit risk provisions, the Group, in
collaboration with the main geographical areas, monitors them by
carrying out sensitivity analyses considering changes in
macroeconomic scenarios and main variables that have an impact on
the financial assets distribution in the different stages and calculating
credit risk provisions.
Additionally, based on consistent macroeconomic scenarios, the
Group also performs stress tests and sensitivity analysis in a regular
basis, such as ICAAP, strategic plans, budgets and recovery and
resolution plans. In this sense, a prospective view of the sensitivity of
each of the Group’s loan portfolio is created in relation to the possible
deviation from the base scenario, considering both the
macroeconomic developments in different scenarios and the three
year evolution of the business. These tests include potentially
adverse and favourable scenarios.
The transactions classification into the different IFRS 9 stages is
carried out in accordance with the regulation through the risk
management policies of our subsidiaries, which are consistent with
the risk management policies defined by the Group. 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 that guarantee that all financial
instruments are subject to this assessment, 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. All
is 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.
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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.
• Predictive power: it is expected that the SICR definition avoids, as
far as possible, direct migrations from stage 1 to stage 3 without
having been previously classified in stage 2.
• Time in stage 2: it is expected that the exposures do not remain
categorized as stage 2 for an excessive time.
The application of the aforementioned techniques, conclude in the
setting of one or several thresholds for each portfolio in each
geography. Likewise, these thresholds are subject to a regular review
by means of calibration tests, which may entail updating the
thresholds types or their values.
Covid-19 credit risk evolution and customer support programmes
In the context of the general response of Santander to the covid-19
pandemic, and specifically with the purpose to help the customers
from the credit perspective and foster their economic resilience
during the crisis, Grupo Santander implemented several actions in
addition to those listed above, the following:
• The severity of the pandemic's effects was significantly different
depending on the economic sector. Consequently, Santander
launched a process to identify those that could be more affected in
order to focus credit risk management on them.
• Due to the covid-19 crisis, great focus was placed on collections &
recoveries readiness across Grupo Santander to deal with the
impact expected on its portfolios once the support measures
granted have expired.
Since the start of the pandemic in 2020, at the end of December
2021, Grupo Santander granted a total of EUR 93,112 million in
payment moratoria, equivalent to 9.68% of the loan portfolio.
From the total moratoria, 99.8% had expired at 31 December 2021,
from which 74.6% were classified in stage 1, 18.7% in stage 2 and
6.7% in stage 3. At December 2020, 79.1% of total moratoria has
expired, from which 82.4% classified in stage 1, 14.5% in stage 2 and
3.1% in stage 3.
At the end of December 2021, total lending under government
liquidity programmes amounted to EUR 39,879 million. By
geography, Spain represent 68% of total exposure granted to these
types of programmes, with an average coverage of ICO guarantees of
77%. UK constitutes the 13% of total exposure with an average
coverage of 98%.
Quantification of additional provisions for covid-19
In relation to the measures in the insolvency funds, the Group set up
additional provisions during 2020 based on a collective analysis of
vulnerable sectors, and segments affected by the crisis derived from
the covid-19 pandemic, as well as an estimate of the additional
impairment of the loan and advance portfolio caused by the
economic effects of the pandemic, realistically reflecting the
structural deterioration of the economy at the date of construction of
the estimate. This estimate was made on the basis of the information
available at that date, which was affected by the high degree of
uncertainty at the time of the estimate, and was aligned with the
projections generated by the ECB. This macroeconomic scenario
included a balance between short- and long-term forecasts, without
being a 'through the cycle' scenario. The convergence of these
scenarios with pre-crisis paths was expected to occur in the first
quarter of 2022 for most macroeconomic indicators (except for
house prices, which were expected to converge in the first quarter of
2023).
Grupo Santander has continuously and regularly monitored the
following aspects during 2021 and 2020: (1) the evolution of the
pandemic and the macroeconomic outlook, (2) forecasts from
institutions and central banks, and (3) the evolution of portfolios in
each of the countries where Grupo Santander is present.
Based on that monitoring, the Group updates and evaluates the
adequacy of the macroeconomic scenarios in accordance with the
established governance, when reliable and supportable information
is available. At the end of 2021, we updated the most recent
scenarios to calculate IFRS 9 provisions by recalibrating and revising
the forward-looking information and risk model parameters.
Following that process, during 2021 the model update included the
macroeconomic scenarios. Out of the EUR 3,105 million at the end of
December 2020, EUR 1,235 million overlay remain in additional
provisions, motivated by several countries' government relief
measures, in particular income support measures in the US, payment
holiday extensions for longer periods in Portugal, and from continued
volatility in the UK.
3.Detail of the main geographical areas
Following is the risk information related to the most relevant
geographies in exposure and credit risk allowances.
This information includes sensitivity analysis, consisting on
simulations of +/-100 bp in the main macroeconomic variables. A set
of specific and complete scenarios is used in each geography, where
different shocks that affect both the reference variable as well as the
rest of the parameters is simulated. These shocks may be originated
by productivity, tax, wages or exchange and interest rates factors.
Sensitivity is measured as the average variation on expected loss
corresponding to the aforementioned scenarios. Following a
conservative approach, the negative movements take into account
one additional standard deviation in order to reflect the potential
higher variability of losses.
3.1. United Kingdom
Credit risk with customers in the UK grew 4.2% (-2.5% in local
currency) year-on-year to EUR 262,869 million. The UK accounts for
25% of Santander’s loan portfolio.
Since the pandemic began, Santander granted 368,000 moratoriums
and EUR 5,280 million in government-backed loans to help our
customers.
Annual report 2021 739
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financial statements
Notes to the consolidated
financial statements
Appendix
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2019
Stage 1
Stage 2
Stage 3
Total
238,985
2,032
40,281
12,543
—
—
279,266
14,575
—
—
2,821
2,821
241,017
52,824
2,821
296,662
117
470
588
1,175
* Detail of credit quality ratings calculated for Group management purposes.
** Total exposure includes loan balances (drawn amounts) and off balance (letters
of credit + guarantees) and excludes REPOs, FV portfolio, trading portfolio and
undrawn commitments.
***Includes provisions for undrawn authorized lines (loan commitments)
The Government support measures taken in the United Kingdom in
2020 as response to the covid-19 pandemic have gradually expired
and at the end of December 2021, Santander UK had granted, since
the start of the pandemic, a total amount of EUR 40,949 million
moratoriums, equivalent to 16.53% of the loan portfolio.
100% of the moratoriums granted had expired at 31 December
2021, from which 81.7% were in stage 1, 15.2% in stage 2 and 3.1%
in stage 3 (at the end of 2020, of the total moratoriums, 93.5% had
expired, of which 83.6% were in stage 1, 14.7% in stage 2 and 1.7%
in stage 3).
The NPL ratio in 2021, 1.43%, increased as compared to 2020 (+19
bps) due to the increase in SME segment, as well as the decrease of
the portfolio in the wholesale segment. The profile of the different
segments remains stable.
Mortgage portfolio
Because of its size, we closely monitor Santander UK’s mortgage
portfolio for the entity itself and Grupo Santander.
As of December 2021, it amounted to EUR 209,949 million, growing
by +4.3% in local currency. It comprises residential mortgages
granted to new and existing customers which are first lien
mortgages. There are no second or more liens on mortgaged
properties.
2021 was a year of strong mortgage activity, mainly due to the
higher demand after the covid-19 restrictions were lifted and the
reduction of the stamp duty rates up until September. As a
consequence, Santander UK achieved all-time high mortgage lending
origination levels in June.
In accordance with Santander's risk management principles,
properties are appraised independently before we approve a new
mortgage.
In line with market practice and legislation, property values used as
collateral for granted mortgages are updated quarterly by an
independent agency's automatic appraisal system.
Information on the estimation of impairment losses
The detail of Santander's UK exposure and impairment losses
associated with each of the stages at 31 December, 2021, 2020 and
2019, is shown below.
In addition, the exposure is divided in three tranches of the Standard
& Poor's rating scale, according to their current credit quality:
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2021
Stage 1
Stage 2
Stage 3
Total
210,418
9,088
13,063
11,601
—
—
223,481
20,689
—
—
3,508
3,508
219,506
24,664
3,508
247,678
135
372
460
967
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2020
Stage 1
Stage 2
Stage 3
Total
184,065
2,227
34,965
16,814
—
—
219,030
19,041
—
—
3,229
3,229
186,292
51,779
3,229
241,300
223
557
668
1,448
Annual report 2021 740
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Notes to the consolidated
financial statements
Appendix
For the estimation of expected losses, prospective information is
taken into account. Specifically, Santander UK considers five
macroeconomic scenarios, which are updated periodically. The
evolution forecasted in 2021 for the next five years of the main
macroeconomic indicators used by Santander UK to estimate
expected losses is presented below:
Variables
Interest rate
Unemployment rate
Housing price change
GDP growth
Pessimistic
scenario 3
-0.1 %
8.4 %
-5.0 %
—
Pessimistic
scenario 2
2.0 %
6.4 %
-3.0 %
1.0 %
2022 - 2026
Pessimistic
scenario 1
0.8 %
5.1 %
-1.5 %
1.3 %
Base scenario
0.7 %
4.4 %
2.2 %
2.2 %
Optimistic
scenario 1
1.1 %
4.0 %
1.5 %
2.6 %
Each of the macroeconomic scenarios is associated with a given
weight. In terms of allocation, Santander UK associates the highest
weighting to the base scenario, while it associates the lowest
weightings to the most extreme or severe scenarios. In addition, at
31 December 2021, the weights used by Santander UK reflect the
future prospects of the British economy in relation to its current
political and economic position so that higher weights are assigned
for negative scenarios:
Pessimistic scenario 3
Pessimistic scenario 2
Pessimistic scenario 1
Base scenario
Optimistic scenario 1
Optimistic scenario 2
2021
5 %
20 %
25 %
45 %
5 %
—
2020
10 %
25 %
15 %
45 %
5 %
—
2019
—
15 %
30 %
40 %
10 %
5 %
The sensitivity analysis of the main portfolios expected loss to
variations of +/-100 bp for the macroeconomic variables used in the
construction of the scenarios, as of December 2021, is as follows:
GDP Growth
-100 bp
100 bp
Housing price change
-100 bp
100 bp
Unemployment rate
-100 bp
100 bp
Change in Provision
Mortgages
Corporates
19.1 %
-6.7 %
4.0 %
-3.7 %
-9.6 %
21.0 %
5.7 %
-1.0 %
3.1 %
-0.6 %
-0.4 %
0.4 %
With regards to the determination of classification in stage 2, the
quantitative criteria applied by Santander UK are based on identifying
whether any increase in PD for the expected life of the transaction is
greater than both an absolute and a relative threshold (the PD used
in that assessment are adjusted to the transaction's remaining term
and also annualised in order to facilitate that the thresholds defined
cover the whole range of the transactions maturity dates). The
relative threshold established is common to all portfolios and a
transaction is considered to exceed this threshold when the PD for
the entire life of the transaction increases by 100% with respect to
the PD at the time of initial recognition. The absolute threshold, on
the other hand, is different for each portfolio depending on the
characteristics of the transactions, ranging between 360 bp and 30
bp.
In addition, for each portfolio, a series of specific qualitative criteria is
defined to indicate that the exposure has experienced a significant
increase in credit risk, regardless of the evolution of its PD since the
time of initial recognition. Santander UK, among other criteria,
considers that an operation presents a significant increase in credit
risk when it presents irregular positions for more than 30 days. These
criteria depend on the risk management practices of each portfolio.
3.2. Spain
Portfolio overview
Santander España’s credit risk totalled EUR 221,100 million (21% of
Grupo Santander’s total). It is appropriately diversified among
products and customer segments.
Amid economic and credit recovery, as macroeconomic figures
improved after the end of the covid-19 lockdowns in 2020, consumer
loans (especially mortgages) grew significantly, as the corporate and
SME lending remained below 2020 numbers, as we maintained
positions with customers in liquidity support programmes (i.e. ICO
lines of credit) without having to seek new financing.
Total credit risk decreased -0.1% from December 2020. The ICO
loans in Corporate and SME lending amounted to a significant EUR
27,294 (around half of them were extended according to the current
regulation).
The credit portfolio’s NPL ratio was 5.77%, 46 bp lower than in
December 2020. This better overall portfolio performance was
driven by customer support programmes; the regularization of
several restructured positions; and portfolio sales.
The additional provisions raised to mitigate the potential impacts
from the exceptional circumstances of the covid-19 pandemic,
increased the NPL coverage ratio to 52% (+5 bp vs. December 2020).
On the other hand, the non-performing portfolio declined mainly
from loans with the highest expected losses.
The cost of credit reflects the rise in Covid-19 provisions, with slight
improvement at the end of 2021 compared to December 2020.
Annual report 2021 741
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Notes to the consolidated
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Appendix
Information on the estimation of impairment losses
The detail of Santander Spain exposure and impairment losses
associated with each of the stages at 31 December, 2021, 2020 and
2019, is shown below. In addition, the exposure is divided in three
tranches of the Standard & Poor's rating scale, according to their
current credit quality:
EXPOSURE AND IMPAIRMENT LOSSES PER STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2021
Stage 1
Stage 2
Stage 3
Total
153,120
908
33,233
14,740
—
—
—
—
12,761
154,028
47,973
12,761
186,353
15,648
12,761
214,762
422
580
5,005
6,007
EXPOSURE AND IMPAIRMENT LOSSES PER STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2020
Stage 1
Stage 2
Stage 3
Total
146,992
1,517
40,630
11,541
—
—
—
—
13,762
148,509
52,171
13,762
187,622
13,058
13,762
214,442
479
732
5,277
6,488
EXPOSURE AND IMPAIRMENT LOSSES PER STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment
losses***
2019
Stage 1
Stage 2
Stage 3
Total
139,673
42,603
1,315
9,115
—
—
—
—
14,587
140,988
51,718
14,587
182,276
10,430
14,587
207,293
296
503
5,195
5,994
* Detail of credit quality ratings calculated for Group management purposes.
** Total exposure includes loan balances (drawn amounts) and off balance (letters
of credit + guarantees) and excludes REPOs, FV portfolio, trading portfolio and
undrawn commitments.
***Includes provisions for undrawn authorized lines (loan commitments)
The real estate unit in Spain (UAI) was consolidated within Santander
Spain in 2019, (this process was completed in 2020). Consequently,
unlike in 2019, in 2021 and 2020 the perimeter is aligned.
The remaining legal entities to reach the entire portfolio in Spain
contribute another EUR 5,693 million, EUR 445 million and EUR
237 million of exposure in 2019 in stage 1, stage 2 and stage 3
respectively, and impairment losses in the amount of EUR 55 million,
EUR 41 million and EUR 8 million in stage 1, stage 2 and stage 3,
respectively.
The Government support measures taken in Spain in 2020 as
response to the covid-19 pandemic have gradually expired and at the
end of December 2021 Santander Spain had granted, since the start
of the pandemic in 2020, a total amount of EUR 9,819 million
moratoriums, equivalent to 4.87% of the loan portfolio.
Of the total moratoriums, 99.6% had expired at 31 December 2021,
from which 75.6% was in stage 1, 14.9% in stage 2 and 9.5% in stage
3. At the end of 2020, of the total moratoria, 26.4% had expired, of
which 77.2% were in stage 1, 15% in stage 2 and 7.8% in stage 3.
For the estimation of the expected losses, the prospective
information is taken into account. Specifically, Santander Spain
considers three macroeconomic scenarios, which are updated
periodically. The projected evolution for a period of five years of the
main macroeconomic indicators used by Santander Spain for
estimating expected losses as of 2021, is presented below:
2022-2026
Variables
Interest rate
Unemployment rate
Housing price change
GDP growth
Pessimistic
scenario Base scenario
-0.2 %
13.0 %
2.6 %
2.9 %
0.6 %
18.3 %
1.6 %
1.1 %
Optimistic
scenario
-0.2 %
11.2 %
3.2 %
3.7 %
Each macroeconomic scenarios is associated with a given weight. As
for its allocation, Santander Spain associates the Base scenario with
the highest weight, while associating the lower weights to the most
extreme scenarios:
Pessimistic scenario
Base scenario
Optimistic scenario 1
2021
30 %
40 %
30 %
2020
30 %
40 %
30 %
2019
30 %
40 %
30 %
The sensitivity analysis of the main portfolios expected loss to
variations of +/-100 bp for the macroeconomic variables used in the
construction of the scenarios is as follows:
GDP Growth
-100 bp
100 bp
Housing price change
-100 bp
100 bp
Change in Provision
Mortgages Corporates
Others
11.9 %
-4.9 %
4.1 %
-2.5 %
5.4 %
-2.9 %
3.2 %
-1.7 %
4.9 %
-2.7 %
3.3 %
-1.4 %
With regards to the stage 2 classification determination, the
quantitative criteria applied in Santander Spain are based on
identifying whether an increase in the PD for the expected lifetime of
the transaction when compared to the one at its origination is greater
than an absolute threshold. The threshold established is different for
each portfolio based on the transactions characteristics, considering
that a transaction is above this threshold when the PD for the life of
the transaction increases by a certain quantity over the initial
recognized PD. The values of these thresholds depend on their
calibration, carried out periodically as indicated in the preceding
paragraphs, which currently ranges from 25% to 1%, depending on
the type of product and estimated sensitivity.
Annual report 2021 742
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Notes to the consolidated
financial statements
Appendix
In the case of non-retail portfolios, Santander Spain uses the
transaction's rating as a reference for its PD, taking into account its
rating at the time of origination and its current rating, setting
absolute thresholds for the different rating bands that depend on
each portfolio characteristics. A SICR implies changes in the rating
value between 0.1 and 4, depending on the portfolio and the
estimated sensitivity (from lower to higher credit quality, the rating
range goes from 1 to 9.3).
In addition, for each portfolio, a series of specific qualitative criteria
are defined indicating that the exposure experienced a significant
increase in credit risk, regardless of the evolution of its PD since the
time of initial recognition. Santander Spain, among other criteria,
considers that an operation presents a significant increase in credit
risk when positions have been past due for more than 30 days. These
criteria depend on the risk management practices of each portfolio.
Residential mortgage portfolio
Residential mortgages in Spain, including Santander Consumer
Finance business, amounted to EUR 62,324 million in 2021 (EUR
59,605 million and EUR 62,236 million in 2020 and 2019,
respectively), 99.33% of which have a mortgage guarantee ( 99.35%
and 99.51% in 2020 and 2019, respectively).
EUR Million
Home purchase loans to families
Without mortgage guarantee
With mortgage guarantee
2021
Gross amount
62,324
419
61,905
2020
EUR Million
Home purchase loans to families
Without mortgage guarantee
With mortgage guarantee
Gross amount
59,605
387
59,218
2019
EUR Million
Home purchase loans to families
Without mortgage guarantee
With mortgage guarantee
Gross amount
62,236
306
61,930
Of which:
impaired
1,860
115
1,745
Of which:
impaired
1,850
75
1,775
Of which:
impaired
2,649
14
2,635
The mortgage portfolio for the acquisition of homes in Spain is
characterised by its medium-low risk profile, which limits
expectations of any potential additional impairment:
• Principal is repaid on all mortgages from the start.
• Early repayment is common so the average life of the transaction
is well below that of the contract.
• High quality of collateral, concentrated almost exclusively in
financing for first homes.
• The average affordability rate stood at 27% (27% and 26% in 2020
and 2019, respectively).
• The 89.41% of the portfolio has a LTV below 80% calculated as
total risk/latest available house appraisal.
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Appendix
Breakdown of the credit with mortgage guarantee to households for
house acquisition, according to the percentage that the total risk
represents on the amount of the latest available valuation (loan to
value):
EUR Million
Gross amount
Of which impaired
2021
Loan to value ratio
Less than or
equal to 40%
More than
40% and less
than 60%
More than
More than 80% and less
than or equal
to 100%
60% and less
than 80%
16,479
187
19,391
240
19,479
349
4,376
313
More than
100%
2,180
656
Total
61,905
1,745
Businesses portfolio
Credit risk with SME and corporates amounted to EUR
117,544 million, 3.1% lower than in December 2020, mainly due to
the fall in the portfolio of SMEs. This is Santander Spain's main
lending segment, accounting for 51% of the total. Most of the
portfolio corresponds to customers with an assigned credit analyst to
monitor their loans throughout the risk cycle.
The portfolio is broadly diversified and not concentrated by sector of
activity. 2021 was a year of stability in the portfolio figures after the
significant growth in 2020 due to the liquidity support programmes
(ICO), which after the initial grace period have begun to be amortised.
The portfolio’s NPL ratio stood at 7.50% in December 2021. Even
though total risk decreased, the NPL ratio increased by 8 bp
compared to December 2020, due to lower portfolio volume, while
the stock of credit impaired loans slightly reduced.
Real estate activity
The Real Estate Unit in Spain (UAI) was consolidated within Santander
Spain in 2019 (this process was completed in 2020). The part of the
portfolio resulting from the past financial crisis and the new business
that is identified as viable should be differentiated. In both cases,
Santander has specialized teams that are in charge of their
management and risk areas that cover the entire life cycle of these
operations.
In recent years the Group's strategy has been geared towards
reducing these assets. The changes in gross property development
loans to customers were as follows:
EUR million
Balance at beginning of year
Foreclosed assets
Reductions
Written-off assets
Balance at end of year
2021
2,871
(1)
(230)
(15)
2,625
2020
2,939
(6)
(24)
(38)
2,871
2019
4,812
(29)
(1,685)
(159)
2,939
The NPL ratio of this portfolio ended the year at 5.07% (compared
with 6.13% and 9.73% at December 2020 and 2019, respectively)
due to the decrease of non-performing assets in the troubled loan
portfolio and, in particular, to the sharp reduction in lending in this
segment. The table below shows the distribution of the portfolio. The
coverage ratio of the real estate doubtful exposure in Spain stands at
30.08% (32.95% and 35.31% in 2020 and 2019, respectively).
2021
Excess of gross
exposure over
maximum
recoverable
amount of
effective
collateral
Specific
allowance
EUR Million
Gross amount
Financing for
construction and
property
development
(including land)
(business in
Spain)
Of which
impaired
Memorandum
items written-
off assets
2,625
133
650
380
22
—
53
40
—
Memorandum items: Data from the public con
solidated balance sheet
EUR Million
Total loans and advances to customers excluding
the Public sector (business in Spain) (Book value)
Total consolidated assets (Total business) (Book
value)
Impairment losses and credit risk allowances.
Coverage for unimpaired assets (business in
Spain)
2021
Carrying amount
239,328
1,595,835
1,472
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
At year-end, the distribution of this portfolio was as follows:
• Medium-high level projects, conducting to contracted demand and
EUR Million
1. Without mortgage guarantee
2. With mortgage guarantee
2.1 Completed buildings
2.1.1 Residential
2.1.2 Other
2.2 Buildings and other constructions under
construction
2.2.1 Residential
2.2.2 Other
2.3 Land
2.3.1 Developed consolidated land
2.3.2 Other land
Total
2021
Loans: gross amount
180
2,445
1,412
876
536
969
907
62
64
46
18
2,625
Policies and strategies in place for the management of these risks
The policies in force for the management of this portfolio are
periodically reviewed and approved on a regular basis by Santander's
senior management.
As has already been disclosed in this section, the Group’s anticipatory
management of these risks enabled it to significantly reduce its
exposure, and it has a granular, geographically diversified portfolio in
which the financing of second residences accounts for a very small
proportion of the total.
Mortgage lending on non-urban land represents a low percentage of
mortgage exposure to land, while the remainder relates to land
already classified as urban or approved for development.
The significant reduction of exposure in the case of residential
financing projects in which the construction work has already been
completed was based on various actions. As well as the specialised
marketing channels already in existence, campaigns were carried out
with the support of specific teams of managers for this function who,
in the case of the Santander network, were directly supervised by the
recoveries business area. These campaigns, which involved the direct
management of the projects with property developers and
purchasers, reducing sale prices and adapting the lending conditions
to the buyers’ needs, enabled loans already in force to be subrogated.
These subrogations enable the Group to diversify its risk in a business
segment that displays a clearly lower non-performing loans ratio.
In the case of construction-phase projects that are experiencing
difficulties of any kind, the policy adopted is to ensure completion of
the construction work so as to obtain completed buildings that can
be sold in the market. To achieve this aim, the projects are analysed
on a case-by-case basis in order to adopt the most effective series of
measures for each case (structured payments to suppliers to ensure
completion of the work, specific schedules for drawing down
amounts, etc.).
For the new post-crisis real estate business production, the
admission processes are managed by specialized teams that work in
direct coordination with the commercial teams, with clearly defined
policies and criteria:
• Property developers with a robust solvency profile and a proven
track record in the market.
significant cities.
• Strict criteria regarding the specific parameters of the transactions:
exclusive financing for the construction cost, high percentages of
accredited sales, principal residence financing, etc.
• Support of financing of government-subsidised housing, with
accredited sales percentages.
• Restricted financing of land purchases dealt with exceptional
nature.
In addition to the permanent control performed by its risk monitoring
teams, the Group has a specialist technical unit that monitors and
controls this portfolio with regard to the stage of completion of
construction work, planning compliance and sales control, and
validates and controls progress billing payments. The Group has
created a set of specific tools for this function. All mortgage
distributions, amounts drawn down of any kind, changes made to the
grace periods, etc. are authorised on a centralised basis.
Foreclosed properties
At 31 December 2021, the net balance of these assets amounted to
EUR 3,591 million gross amount: of EUR 7,364 million; recognised
allowance: of EUR 3,773 million, of which EUR 2,729 million related
to impairment after the foreclosure date. At 31 December 2020, the
net balance of these assets amounted to EUR 3,962 million (gross
amount: EUR 7,937 million; recognised allowance: EUR 3,975 million,
of which EUR 2,834 million related to impairment after the
foreclosure date). At 31 December, 2019, the net balance of these
assets amounted to EUR 4,190 million (gross amount: EUR
8,226 million; recognised allowance: EUR 4,036 million, of which
EUR 2,812 million related to impairment after the foreclosure date).
Annual report 2021 745
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The following table shows the detail of the assets foreclosed by the
businesses in Spain at the end of 2021:
EUR Million
Property assets arising from financing provided to construction and
property development companies
Of which:
Completed buildings
Residential
Other
Buildings under construction
Residential
Other
Land
Developed land
Other land
Property assets from home purchase mortgage loans to households
Other foreclosed property assets
Total property assets
In addition, the Group has shareholdings in entities holding
foreclosed assets amounting to EUR 701 million (mainly Project
Quasar Investment 2017, S.L. with EUR 655 million), and equity
instruments foreclosed or received in payment of debts amounting to
EUR 16 million.
In recent years, the Group has considered foreclosure to be a more
efficient method for resolving cases of default than legal
proceedings. The Group initially recognises foreclosed assets at the
lower of the carrying amount of the debt (net of provisions) and the
fair value of the foreclosed asset (less estimated costs to
sell).Subsequent to initial recognition, the assets are measured at the
lower of fair value (less costs to sell) and the amount initially
recognised.
The fair value of this type of assets is determined by the Group’s
directors based on evidence obtained from qualified valuers or
evidence of recent transactions.
The management of real estate assets on the balance sheet is carried
out through companies specializing in the sale of real estate that is
complemented by the structure of the commercial network. The sale
is realised with at prices in accordance with the market situation and
the offer of wholesale buyers.
2021
Gross carrying
amount
Valuation
adjustments
Of which
impairment
losses on assets
since time of
foreclosure
Net Carrying
amount
6,313
3,376
2,455
2,937
1,900
470
1,430
112
56
56
4,301
1,506
2,795
838
213
7,364
799
181
618
57
26
31
2,520
805
1,715
310
87
3,773
627
143
484
42
17
25
1,786
496
1,290
211
63
2,729
1,101
289
812
55
30
25
1,781
701
1,080
528
126
3,591
The gross movement in foreclosed properties were as follows (EUR
billion):
Gross additions
Disposals
Difference
EUR Billion
2020
0.5
(0.9)
(0.4)
2021
0.4
(1.1)
(0.7)
2019
0.7
(2.7)
(2.0)
3.3. United States
Santander US’s credit risk increased to EUR 112,808 million by the
end of December 2021. It makes up 11% of Grupo Santander's total
credit risk and includes these business units:
Santander Bank, National Association (SBNA)
At 78% of total credit risk, retail and commercial banking is
Santander Bank, National Association’s main business. 24% of the
portfolio is with individuals, and approximately 76% with corporates.
The bank's primary goals include expanding the SCIB business —
22% of total credit risk — by enhancing customer experience and
growing core customers and deposits through digital, branch and
commercial transformation initiatives; leveraging its deposit base to
support its commercial real estate business; and strengthening its
auto finance partnerships. Its 15.1% hike in lending spanned all
segments. Excluding the FX effect, the increase was lower, standing
at 9.2%.
The NPL ratio increased to 0.85% (+4 bp in the year) as of December
2021 the cost of credit fell to -0.06% due to the release of provisions
based on better-than-expected market performance, customer
behaviour (support programmes and fiscal stimulus) and greater
workout recoveries.
Annual report 2021 746
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Information on the estimation of impairment losses
The detail of Santander Bank, National Association exposure and
impairment losses associated with each of the stages at 31
December, 2021, 2020 and 2019, is shown below. In addition, the
exposure is divided in three tranches of the Standard & Poor's rating
scale, according to their current credit quality:
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
2021
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
Stage 1
Stage 2
Stage 3
Total
38,191
12,212
—
1,157
3,117
—
50,403
4,274
263
314
—
—
477
477
45
39,348
15,329
477
55,154
622
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
2020
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
Stage 1
Stage 2
Stage 3
Total
18,105
24,380
—
1,778
2,977
—
42,485
4,755
344
316
—
—
403
403
42
19,883
27,357
403
47,643
702
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
2019
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
Stage 1
Stage 2
Stage 3
Total
27,078
32,273
—
763
3,964
—
59,351
4,727
265
208
—
—
419
419
71
27,841
36,237
419
64,497
544
* Detail of credit quality ratings calculated for Group management purposes.
** Total exposure includes loan balances (drawn amounts) and off-balance
(letters of credit + guarantees) and excludes REPOs, FV portfolio, trading
portfolio and undrawn commitments.
***Includes provisions for undrawn authorized lines (loan commitments).
The Government support measures taken in the United States in
2020 as response to the covid-19 pandemic have gradually expired
and at the end of December 2021 SBNA had granted, since the start
of the pandemic in 2020, a total amount of EUR 3,723 million
moratoriums, equivalent to 7.32% of the loan portfolio.
Of the total moratoriums granted,99.9% expired at 31 December,
2021, from which 67.9% were in stage 1, 26.2% in stage 2 and 5.9%
in stage 3 (at the end of 2020, of the total moratoriums, 90% had
expired, of which 62.1% were in stage 1, 35.3% in stage 2 and 2.6%
in stage 3).
Total loans granted under government liquidity programmes in SBNA
amounted to EUR 221 million at 31 December 2021.
Annual report 2021 747
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financial statements
Notes to the consolidated
financial statements
Appendix
For the estimation of expected losses, prospective information is
taken into account. Specifically, Santander Bank, National Association
considers four macroeconomic scenarios, which are updated
periodically. The evolution projected in 2021 for a period of five years
of the main macroeconomic indicators used Santander Bank,
National Association to estimate expected losses is presented below:
Variables
Interest rate (annual averaged)
Unemployment rate
House price change
GDP growth
Each of the macroeconomic scenarios is associated with a given
weight. As for its allocation, Santander Bank, National Association
associates the highest weighting to the Base scenario, while
associates the lowest weightings to the most extreme scenarios:
Pessimistic scenario 2
Pessimistic scenario 1
Base scenario
Optimistic scenario
2021
18 %
20 %
33 %
30 %
2020
18 %
20 %
33 %
30 %
2019
18 %
20 %
33 %
30 %
In the case of SBNA, no additional 'long-run' scenario was generated
for the calculation of the post model adjustment The additional
provisions for covid-19 were calculated using the internal model.
The sensitivity analysis of the main portfolios expected loss to
variations of +/-100 bp for the macroeconomic variables used in the
construction of the scenarios as of 2021 is as follows:
GDP Growth
-100 bp
100 bp
Housing price change
-100 bp
100 bp
Unemployment rate
-100 bp
100 bp
Change in Provision
Mortgages
Corporates
2.0%
-1.4%
3.7%
-2.0%
-5.5%
6.6%
7.4%
-4.6%
12.4%
-6.3%
-15.1%
22.8%
In relation to the Stage 2 classification determination, the
quantitative criteria applied at SBNA for retail portfolios uses the FICO
(Fair Isaac Corporation) score at the time of origination and its current
value, establishing different absolute threshold for each portfolio
according to their characteristics. A SICR implies changes in that score
ranging from 120 bp to 20 bp In the case of some portfolios, the
behaviour score complements this criterion.
In the case of wholesale portfolios, SBNA uses the transaction's
rating as a reference for its PD, taking into account its rating at the
time of origination and its current rating, setting absolute thresholds
for the different rating bands that depend on each portfolio
characteristics. A SICR implies changes in the rating value between 2
and 0.1, depending on the portfolio and the estimated sensitivity
Pessimistic
scenario 2
0.2 %
6.6 %
1.2 %
2.3 %
2022 - 2026
Pessimistic
scenario 1 Base scenario
1.3 %
3.8 %
2.3 %
2.7 %
1.2 %
4.6 %
1.7 %
2.8 %
Optimistic
scenario
1.7 %
3.3 %
2.8 %
3.3 %
(from lower to higher credit quality, the rating range goes from 1 to
9.3).
Additionally, for each portfolio, a series of specific qualitative criteria
are defined, which indicate that the exposure has experienced a
significant increase in credit risk, regardless of the evolution of its PD
since the initial recognition. Santander Bank, National Association,
among other criteria, considers that a transaction presents a
significant increase in credit risk when it has arrears positions for
more than 30 days. These criteria depend on the risk management
practices of each portfolio.
Santander Consumer USA Inc.
Santander Consumer USA Inc. (SC USA) presents higher risk indicators
than other Santander US units due to the nature of its business,
which focuses on auto finance via loans and leasing.
The focus continues to be on managing the relationship between
profitability and risk, via management of prices adjusted to the credit
quality of the customer/transaction, while improving the dealers'
experience.
In 2021, loan originations grew more than 4% year-on-year,
returning to the pre-pandemic prime and non-prime mix on the back
of the commercial relationship we have with Stellantis Group. The
production mix resumed the segmentation between prime and non-
prime prior to the pandemic.
Auto originations continued to increase, driven mainly by hikes in
used car prices and demand.
As of December, the NPL ratio rose to 6.27% (+101 bp in the year)
and the cost of credit stood at 1.54% (-654 bp YoY). Annual net credit
losses fell year on year due to customer support programmes
(triggered by the health crisis), federal fiscal stimulus packages and
greater recovery driven by a surge in used car prices. Due to the
increase in defaults, the non-performing coverage ratio fell to 176%
(-54 bp in the year).
Furthermore, leases carried out exclusively under the Stellantis
Group agreement (primarily with highly creditworthy customers)
dropped 5% to EUR 13,600 million, providing stable and recurring
earnings. Risk management and residual value mitigation measures
remain a priority.
Information on the estimation of impairment losses
The detail of Santander Consumer USA Holding Inc. exposure and
impairment losses associated with each of the stages at 31
December 2021, 2020 and 2019, is shown below. In addition, the
Annual report 2021 748
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financial statements
Notes to the consolidated
financial statements
Appendix
exposure is divided in three tranches of the Standard & Poor's rating
scale, according to their current credit quality:
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
2021
Stage 1
Stage 2
Stage 3
1,218
39
18,876
7,861
—
20,094
524
—
7,900
1,741
Total
1,257
26,737
1,658
29,652
—
—
1,658
1,658
572
2,837
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
2020
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
Stage 1
Stage 2
Stage 3
1,689
12
21,491
4,831
—
—
Total
1,701
26,322
—
—
1,019
1,019
23,180
911
4,843
1,820
1,019
29,042
726
3,457
EXPOSURE AND IMPAIRMENT LOSSES BY STAGE
EUR million
2019
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
Stage 1
Stage 2
Stage 3
1,029
14
20,083
6,277
—
—
Total
1,043
26,360
—
—
1,600
1,600
21,112
859
6,291
1,503
1,600
29,003
731
3,093
* Detail of credit quality ratings calculated for Group management purposes.
** Total exposure includes loan balances (drawn amounts) and off-balance
(letters of credit + guarantees) and excludes REPOs, FV portfolio, trading
portfolio and undrawn commitments.
***Includes provisions for undrawn authorized lines (loan commitments).
Since the start of the pandemic in 2020, SC USA has granted a total
amount of EUR 5,370 million moratoriums, equivalent to 18.11% of
the loan portfolio, at the end of 31 December 2021.
100% of the moratoriums granted had expired at 31 December,
2021, which 2.8% were in stage 1, 68.7% in stage 2 and 28.5% in
stage 3 (at the end of 2020, of the total moratoriums, 89.8% had
expired, of which 78.5% were in stage 1, 14.6%in stage 2 and 6.9% in
stage 3).
Given the nature of its business focused on auto financing for
individuals, no loans were granted by liquidity programs in SC USA.
SC USA reassessed the suitability of macroeconomic scenarios and
adjusted them in light of new information. At the end of 2021, we
updated the most recent scenarios to calculate IFRS 9 provisions by
recalibrating and revising the forward-looking information and risk
model parameters. After this process, there are additional provisions
amounting to EUR 849 million mainly due to the volatility of used car
prices and the end of public aid. The car price index during 2021
presents an unusually high value, as a result of the exceptional
covid-19 context.
In relation to the methodology used to calculate impairment losses,
Santander Consumer USA Inc. uses a method for calculating expected
losses based on the use of risk parameters: EAD (exposure at
default), PD (probability of default) and LGD (loss given default). The
expected loss is calculated by adding the estimated monthly
expected losses for the entire life of the operation, unless the
operation is classified in Stage 1, which will correspond to the sum of
the estimated monthly expected losses during the following 12
months.
In general, there is an inverse relationship between the transactions
credit quality and the impairment losses projections so that
transactions with better credit quality require a lower expected loss.
Transactions credit quality, which is reflected in the internal rating
associated to each transaction or client, is shown in the probability of
default of the transactions.
For the expected losses estimation, prospective information should
be taken into account. Specifically, Santander Consumer USA
Holdings Inc. considers four macroeconomic scenarios, periodically
updated over a 5-year time horizon.
Annual report 2021 749
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Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The evolution forecasted in 2021 for a period of five years of the main
macroeconomic indicators used by in Santander Consumer USA
Holdings Inc in the estimation of expected losses is shown below:
Variables
Interest rate (annual averaged)
Unemployment rate
House price change
GDP growth
Manheim
A
index
A. US used vehicle price car index.
Each of the macroeconomic scenarios is associated with a given
weight. Santander Consumer USA Inc. associates the highest
weighting to the Base scenario, whereas it associates the lowest
weightings to the most extreme or acid scenarios:
Pessimistic scenario 2
Pessimistic scenario 1
Base scenario
Optimistic scenario
2021
18 %
20 %
33 %
30 %
2020
18 %
20 %
33 %
30 %
2019
18 %
20 %
33 %
30 %
In the case of SC USA, no additional 'long-run' scenario was
generated for the calculation of the post model adjustment. The
additional provisions for covid-19 were calculated using the internal
model.
The sensitivity analysis of the main portfolios expected loss to
variations of +/-100 bp for the macroeconomic variables used in the
construction of the scenarios at the end of 2021 is as follows:
Change in provision
SC Auto
Manheim index
-100 bp
100 bp
Unemployment Rate
-100 bp
100 bp
House Price Change
-100 bp
100 bp
GDP growth
-100 bp
100 bp
1.1 %
-0.7 %
-4.0 %
4.6 %
2.6 %
-1.5 %
1.8 %
-1.2 %
In relation to the stage 2 classification determination, the
quantitative criteria applied at SC USA uses the FICO (Fair Isaac
Corporation) score at the time of origination and its current value,
establishing different absolute threshold for each portfolio according
to their characteristics. A SICR implies changes in that score ranging
from 100 bp to 60 bp.
Pessimistic
scenario 2
0.2 %
6.6 %
1.2 %
2.3 %
-2.3 %
2022 - 2026
Pessimistic
scenario 1 Base scenario
1.3 %
3.8 %
2.3 %
2.7 %
-1.9 %
1.2 %
4.6 %
1.7 %
2.8 %
-1.9 %
Optimistic
scenario
1.7 %
3.3 %
2.8 %
3.3 %
-1.8 %
Additionally, for each portfolio, a series of specific qualitative criteria
are defined, which indicate that the exposure has had a significant
increase in credit risk, regardless of the evolution of its PD since the
initial recognition. Santander Consumer USA Holdings Inc. among
other criteria, considers that a transaction presents a significant
increase in credit risk when it has irregular positions for more than 30
days. These criteria depend on the risk management practices of
each portfolio.
3.4. Banco Santander (Brasil) S.A.
Positive economic recovery due to the reopening of the service
sector, in line with the advances in the vaccination campaigns and the
lift of restrictions, although international supply problems have
continued to hamper industry growth.
Santander Brasil's credit risk amounted to EUR 85,702 million. It
increased by 15% from 2020. Minus the exchange rate effect, it grew
by 13%. As of December 2021, Santander Brasil accounts for 8% of
Grupo Santander's loan book.
The SME portfolio (Varejo PJ) grew significantly due to the
contribution of the different billing clusters that make the portfolio
and its different products. State-backed guarantees to combat the
effects of the pandemic ended in December 2020, although a new
window opened in July 2021.
Net loan-loss provisions stood at EUR 2,715 million (-10% compared
to 2020), a decrease driven by additional provision made in 2020
related to covid-19. In local currency, provisions declined by 35%.
Cost of credit decreased to 3.73% from 4.35% at the end of 2020,
driven by the aforementioned provisions evolution.
Annual report 2021 750
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Information on the estimation of impairment losses
The detail of Banco Santander (Brasil) S.A. exposure and impairment
losses associated with each of the stages at 31December, 2021,
2020 and 2019, is shown below. In addition, the exposure is divided
in three tranches of the Standard & Poor's rating scale, according to
their current credit quality:
EXPOSURE AND IMPAIRMENT LOSSES
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
2021
Stage 1
Stage 2
Stage 3
Total
46,558
28,582
—
575
4,785
—
75,140
5,360
1,232
909
—
—
4,182
4,182
2,510
47,133
33,367
4,182
84,682
4,651
EXPOSURE AND IMPAIRMENT LOSSES
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
2020
Stage 1
Stage 2
Stage 3
Total
38,686
26,166
—
210
5,942
—
64,852
6,152
971
777
—
—
3,428
3,428
2,132
38,896
32,108
3,428
74,432
3,880
EXPOSURE AND IMPAIRMENT LOSSES
EUR million
Credit quality *
From AAA to BB
From BB- to CCC
Default
Total exposure **
Impairment losses***
2019
Stage 1
Stage 2
Stage 3
Total
45,765
32,698
—
308
5,393
—
78,463
5,701
1,054
732
—
—
4,727
4,727
2,931
46,073
38,091
4,727
88,891
4,717
* Detail of credit quality ratings calculated for Group management purposes.
** Total exposure includes loan balances (drawn amounts) and off-balance
(letters of credit + guarantees) and excludes REPOs, FV portfolio, trading
portfolio and undrawn commitments.
***Includes provisions for undrawn authorized lines (loan commitments).
The Government support measures taken in Brazil in 2020 as
response to the covid-19 pandemic have gradually expired and at the
end of December 2021, Santander Brazil had granted, since the start
of the pandemic, a total amount of EUR 3,835 million moratoriums,
equivalent to 5.35% of the loan portfolio.
Of the total moratoriums granted, 99.7% expired at 31 December
2021, from which 70.8% were in stage 1, 17.4% in stage 2 and
11.8% in stage 3. At the end of 2020, of the total moratoriums 92.4%
had expired, of which 75.6% were in stage 1, 17.6% in stage 2 and
6.8% of in stage 3.
Total loans granted by liquidity programmes in Brazil amounted to
EUR 1,563 million as of 31 December 2021.
For the expected losses estimation, prospective information is taken
into account. Particularly, Santander Brazil considers three
macroeconomic scenarios, periodically updated. The evolution for a
period of five years of the main macroeconomic indicators used to
estimate the expected losses in Santander Brazil is as follows:
Variables
Interest rate (annual
averaged)
Unemployment rate
House price change
GDP growth
Burden income
2022-2026
Pessimistic
scenario
Base
scenario
Optimistic
scenario
13.3 %
13.3 %
2.6 %
-1.0 %
38.9 %
6.7 %
12.1 %
8.7 %
2.1 %
34.9 %
4.8 %
8.8 %
13.2 %
4.5 %
29.2 %
Each macroeconomic scenario is associated with a given weight.
Regarding its assignation, Brazil links the highest weight to the base
scenario whilst links the lowest weights to the most extreme
scenarios:
Pessimistic scenario
Base scenario
Optimistic scenario
2021
10 %
80 %
10 %
2020
10 %
80 %
10 %
2019
10 %
80 %
10 %
The sensitivity analysis of the main portfolios expected loss to
variations of +/-100 bp for the macroeconomic variables used in the
construction of the scenarios is at the end of 2021 as follows:
GDP growth
-100 bp
100 bp
Burden income
-100 bp
100 bp
Interest rate (SELIC)
-100 bp
100 bp
Change in provision
Corporate
Consumer
0.4 %
-0.1 %
-0.3 %
0.7 %
-0.1 %
0.6 %
1.3 %
-0.6 %
-0.5 %
2.0 %
-0.5 %
2.9 %
Other
1.9 %
-0.9 %
-1.3 %
2.9 %
-0.8 %
3.6 %
Regarding the stage 2 classification determination, Santander Brazil
uses the transaction's rating as a reference for its PD, taking into
account its rating at the time of origination and its current rating,
setting different thresholds that depend on each portfolio
characteristics. SICR is determined by observing the rating's
evolution, considering that a significant increase in credit risk has
occurred when the rating reduction reaches values between 3.2 and
1, depending on the rating's value at the time of origination.
In addition, for every portfolio, a set of specific qualitative criteria are
defined to indicate that the exposure to credit risk has significantly
risen, regardless of the evolution of its PD since the initial
recognition. Santander Brazil, among other criteria, considers that an
operations involves a significant increase in credit risk when it
presents irregular positions for more than 30 days, but in Real State,
Consigned and Financial portfolios, where, due to their particular
attributes, they use a 60 days threshold. Such criteria depend upon
each portfolio’s risk management practices.
4. Other credit risk aspects
4.1. Credit risk by activity in the financial markets
This section covers credit risk generated in treasury activities with
customers, mainly with credit institutions. Transactions are
undertaken through money market financial products with different
financial institutions and through counterparty risk products, which
serve the Group’s customer needs.
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In line with these maximum levels and limits, the executive risk
committee establishes the risk policies and reviews the appropriate
exposure levels for the effective management of the degree of
concentration in Santander’s credit risk portfolios.
Grupo Santander must adhere to the regulation on large risks
contained in the CRR, according to which the exposure contracted by
an entity with a customer or group of associated customers will be
considered a large exposure when its value is equal to or greater than
10% of eligible capital.
In addition, in order to limit large exposures, no entity may assume
exposures exceeding 25% of its eligible capital with a single
customer or group of associated customers, having factored in the
credit risk mitigation effect contained in the regulation.
At the end of December, after applying risk mitigation techniques, no
group reaches the above-mentioned thresholds.
Regulatory credit exposure with the 20 largest groups within the
scope of large risks represented 5% of the outstanding credit risk
with customers (lending to customers plus off-balance sheet risks)
as of December 2021.
The detail, by activity and geographical area of the Group's risk
concentration at 31 December 2021 is as follows:
According to regulation (EU) n.º 575/2013, counterparty credit risk,
which includes derivative instruments, transactions with a
repurchase obligation, stock and commodities lending, transactions
with deferred repayment and financing of guarantees, arises from
the likelihood that a counterparty will default before the final
settlement of the transaction's cash flows.
There are two methodologies for measuring this exposure: (i) mark-
to-market (MtM) methodology (replacement value of derivatives)
plus potential future exposure (add-on); and the Montecarlo
simulation to calculate exposures for some countries and products.
We also calculate capital at risk and unexpected loss, which is the
difference between the economic capital, net of guarantees and
recoveries, and expected loss.
After market close, the exposures are recalculated by adjusting
transactions to their new time frame, adapting potential future
exposure and applying mitigation measures (netting, collateral, etc.)
to control exposures directly against the limits approved by senior
management. Grupo Santander runs risk control with an integrated
system in real time that enables us to know the exposure limit with
any counterparty, product and maturity and in any of Santander’s
subsidiaries at any time.
4.2. Concentration risk
Concentration risk control is a vital part of our management. The
Group continuously monitors the degree of concentration of its credit
risk portfolios using various criteria: geographic areas and countries,
economic sectors and groups of customers.
The board, via the risk appetite framework, determines the maximum
levels of concentration.
EUR million
Central banks and Credit institutions
Public sector
Of which:
Central government
Other central government
Other financial institutions (financial business activity)
Non-financial companies and individual entrepreneurs (non-
financial business activity) (broken down by purpose)
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual entrepreneurs
Households – other (broken down by purpose)
Of which:
Residential
Consumer loans
Other purposes
Total
Total
327,984
149,623
124,807
24,816
120,294
2021
Other EU
countries
59,499
26,276
24,525
1,751
40,344
Spain
93,520
35,258
23,188
12,070
14,228
America
81,647
82,194
71,639
10,555
35,818
415,297
121,795
86,183
141,139
21,523
5,857
248,955
138,962
543,804
353,752
169,897
20,155
3,607
2,397
58,030
57,761
88,763
63,487
18,078
7,198
3,392
2,442
49,343
31,006
95,458
35,978
56,879
2,601
7,309
847
94,496
38,487
122,809
236,774
40,265
75,837
6,707
214,022
19,103
3,649
1,557,002
353,564
307,760
463,607
432,071
Rest of the
world
93,318
5,895
5,455
440
29,904
66,180
7,215
171
47,086
11,708
* For the purposes of this table, the definition of risk includes the following items in the public balance sheet: 'Loans and advances to credit institutions', 'Loans and
advances to Central Banks', 'Loans and advances to Customers', 'Debt Instruments', 'Equity Instruments', 'Trading Derivatives', 'Hedging derivatives', 'Investments and
financial guarantees given'.
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4.3. Sovereign risk and exposure to other public sector entities
Sovereign risk occurs in transactions with a central bank. It includes
the regulatory cash reserve, issuer risk with the Treasury (public debt
portfolio) and risk from transactions with government institutions
whose funding only come from the state’s budgetary revenue and
not commercial operations.
The historic criteria of Grupo Santander can differ from regular EBA
stress test standards. Though the EBA does include national, regional
and local government institutions, it does not include deposits with
central banks, exposures with insurance companies, indirect
exposures via guarantees and other instruments.
Grupo Santander´s local sovereign exposure, in currencies other than
the official currency of the country of issuance, is not significant ( EUR
10,013 million, 2.6% of total sovereign risk) according to our
management criteria. Furthermore, exposure to non-local sovereign
1
is even less significant (EUR 7,011
issuers involving cross-border risk
million, 1.8% of total sovereign risk).
Sovereign exposure in Latin America is mostly in local currency, and is
recognised in the local accounts and concentrated in short- term
maturities.
Over the past few years, total exposure to sovereign risk has
remained in line with regulatory requirements and our strategy to
manage this portfolio.
The shifts observed in the different countries exposure is due to our
liquidity management strategy and the hedging of interest and
exchange rates risks. Santander's exposure spreads among countries
with varied macroeconomic outlooks and dissimilar scenarios in
terms of growth, interest and exchange rates.
Our investment strategy for sovereign risk considers country’s credit
quality to set the maximum exposure limits*:
AAA
AA
A
BBB
Less than BBB
*Internal ratings are applied.
2021
15 %
32 %
26 %
11 %
16 %
2020
18 %
25 %
25 %
14 %
18 %
2019
20 %
24 %
18 %
15 %
23 %
1
Countries that are not considered low risk by Banco de España.
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The exposure in the table below is disclosed following the latest
amendments of the regulatory reporting framework carried out by
the EBA, which entered into force in 2021:
2021
Portfolio
2020
Financial assets
designated at fair
value through profit
or loss
Financial assets at fair
value through other
comprehensive
income
Financial assets at
amortized cost
Non-trading
financial assets
mandatorily at
fair value
through profit or
loss
Total net direct
exposure
Total net direct
exposure
Country
Spain
Portugal
Italy
Greece
Ireland
Rest Eurozone
UK
Poland
Rest of Europe
US
Brazil
Mexico
Chile
Rest of America
Rest of the World
TOTAL
2,574
(20)
(73)
—
—
(233)
(538)
(15)
—
1,050
8,733
2,150
56
94
2
13,780
2,805
2,287
634
—
—
1,231
676
10,819
77
13,803
16,432
10,253
1,134
651
1,524
62,326
5. Forborne loan portfolio
Grupo Santander's internal forbearance policy acts as a reference for
our subsidiaries locally. It shares the principles of regulations and
supervisory expectations. It includes the requirements of the EBA
guidelines on management of non performing and forborne
exposures.
It defines forbearance as the modification of the payment conditions
of a transaction to allow a customer experiencing financial difficulties
(current or foreseeable) to fulfil their payment obligations. If
forbearance is not allowed, there would be reasonable certainty that
the customer would not be able to meet their financial obligations.
In addition, this policy also sets down rigorous criteria for evaluating,
classifying and monitoring forbearances to ensure the strictest
possible care and diligence in recovering due amounts. Thus, it
dictates that we must adapt payment obligations to customers'
current circumstances. Our forbearance policy also defines
classification criteria to ensure we recognize risks appropriately. They
must remain classified as non-performing or in watch-list for a
prudential period for reasonable certainty of repayment.
Forbearances may never be used to delay the immediate recognition
of losses or hinder the appropriate recognition of risk of default.
Total volume of forborne portfolio, at the end of December 2021,
stood at EUR 36,042 million. After years of decreases due to the
positive macroeconomic situation of the group's main geographies,
the forborne stock remained practically flat in 2020. The portfolio
increased by 24% in 2021, as a result of greater volume of
forbearance carried out to attend to the needs of customers facing
financial difficulties. In terms of credit quality, 43% of the loans is
classified as doubtful, with a coverage ratio of 41%.
14,178
4,277
323
—
9
2,631
228
489
1,291
7,616
3,394
1,106
4,881
680
1,811
42,914
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19,557
6,544
884
—
9
3,629
366
11,293
1,368
22,469
28,559
13,509
6,071
1,425
3,337
24,245
8,730
4,015
—
—
4,054
(97)
10,947
1,070
15,548
27,717
21,029
6,955
958
4,752
119,020
129,923
The following terms are used with the meanings specified below:
• Refinancing transaction: transaction that is granted or used, for
reasons relating to current or foreseeable financial difficulties of
the borrower, to repay one or more of the transactions granted to
it, or through which the payments on such transactions are
brought fully or partially up to date, in order to enable the
borrowers of the cancelled or refinanced transactions to repay
their debt (principal and interest) because they are unable, or
might foreseeably become unable, to comply with the conditions
there of in due time and form.
• Restructured transaction: transaction with respect to which, for
economic or legal reasons relating to current or foreseeable
financial difficulties of the borrower, the financial terms and
conditions are modified in order to facilitate the payment of the
debt (principal and interest) because the borrower is unable, or
might foreseeably become unable, to comply with the
aforementioned terms and conditions in due time and form, even
if such modification is envisaged in the agreement.
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Current refinancing and restructuring balances
Amounts in EUR million, except number of transactions that are in units
2021
Total
Without real guarantee
With real guarantee
Number of
transactions
—
Gross
amount
—
Number of
transactions
—
32
1,002
18
93
15
720
Maximum amount of the
actual collateral that can be
considered
Gross
amount
Real estate
guarantee
Rest of real
guarantees
—
7
200
—
2
102
—
—
79
248,375
11,548
47,865
8,915
5,517
1,206
8,576
113
1,321
550
390
3,650,507
3,899,916
4,491
451,930
16,150
500,530
10,771
19,893
6,063
11,684
40
3,615
4,900
—
—
—
—
—
—
Impairment of accumulated
value or accumulated losses in
fair value due to credit risk
—
4
30
4,367
176
3,860
8,261
—
Credit entities
Public sector
Other financial institutions and: individual
shareholder
Non-financial institutions and individual
shareholder
Of which financing for constructions and
property development
Other warehouses
Total
Financing classified as non-current assets and
disposable groups of items that have been
classified as held for sale
Current refinancing and restructuring balances
Amounts in EUR million, except number of transactions that are in units
2021
Of which, non-performing/Doubtful
Without real guarantee
With real guarantee
Maximum amount of the actual
collateral that can be considered
Number of
transactions
Gross amount
Number of
transactions Gross amount
Real estate
guarantee
Rest of real
guarantees
—
7
421
116,009
4,638
1,839,629
1,956,066
—
1
51
4,377
63
1,879
6,308
—
14
528
—
5
67
32,263
5,261
849
162,177
194,982
301
3,898
9,231
—
2
54
3,308
172
2,641
6,005
—
—
7
424
34
434
865
—
—
—
—
—
—
Credit entities
Public sector
Other financial institutions and:
individual shareholder
Non-financial institutions and
individual shareholder
Of which financing for constructions
and property development
Other warehouses
Total
Financing classified as non-current
assets and disposable groups of items
that have been classified as held for
sale
Impairment of accumulated
value or accumulated losses
in fair value due to credit risk
—
4
27
3,891
148
2,382
6,304
—
In 2021, the amortised cost of financial assets whose contractual
cash flows were modified during the year when the corresponding
loss adjustment was valued at an amount equal to the expected
credit losses over the life of the asset amounted to EUR 2,480
million, without these modifications having a material impact on the
income statement. Also, during 2021, the total of financial assets
that have been modified since the initial recognition, and whose
correction for expected loss has gone from being valued during the
entire life of the asset to the following twelve months, amounts to
EUR 1,868 million.
The transactions presented in the foregoing tables were classified at
31 December 2021 by nature, as follows:
• Non-performing: Operations that rest on an inadequate payment
scheme will be classified within the non-performing category,
regardless they include contract clauses that delay the repayment
of the operation throughout regular payments or present amounts
written off the balance sheet for being considered irrecoverable.
• Performing: Operations not classifiable as non-performing will be
classified within this category. Operations will also be classified as
normal if they have been reclassified from the non-performing
category for complying with the specific criteria detailed below:
a) A period of a year must have passed from the refinancing or
restructuring date.
b) The owner must have paid for the accrued amounts of the
capital and interests, thus reducing the rearranged capital
amount, from the date when the restructuring of refinancing
operation was formalised.
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c) The owner must not have any other operation with amounts
past due by more than 90 days on the date of the
reclassification to the normal risk category.
Attending to the credit attention 57% of the forborne loan
transactions are classified as other than non-performing. Particularly
noteworthy are the level of existing guarantees (46% of transactions
are secured by collateral) and the coverage provided by specific
allowances (representing 23% of the total forborne loan portfolio
and 41% of the non-performing portfolio).
c) Market, structural and liquidity risk
1. Activities subject to market risk and types of market risk
Activities exposed to market risk encompass transactions where risk
is assumed as a consequence of potential changes in interest rates,
inflation rates, exchange rates, stock prices, credit spreads,
commodity prices, volatility and other market factors; the liquidity
risk from our products and markets, and the balance-sheet liquidity
risk. Therefore, they include trading risks and structural risks.
◦ Interest rate risk arises from movements in interest rates that
reduce the value of a financial instrument, a portfolio or the Grupo
Santander. It can affect loans, deposits, debt securities, most
assets and liabilities held for trading, and derivatives.
◦ Inflation rate risk arises from movements in inflation that can
reduce the value of a financial instrument, a portfolio or the entire
group. It can affect loans, debt securities and derivatives (e.g.
inflation swaps and futures) whose profitability is linked to
inflation.
◦ Exchange rate risk is the possibility of loss because the currency of
a long or open position will depreciate against the base currency. It
can affect debt in subsidiaries whose local currency is not the euro,
as well as loans denominated in a foreign currency.
◦ Equity risk is the possibility of loss from open positions in securities
if their market price or expected future dividends fall. It affects
shares, stock market indices, convertible bonds and derivatives
with shares as the underlying asset (put, call, equity swaps, etc.).
• Credit spread risk is the possibility of loss from open positions in
fixed-income securities or credit derivatives if their yield curve, or
the recovery rate of their issuer or type change. A spread is the
yield difference between financial instruments against a
benchmark (e.g. the internal rate of return (IRR) of government
bonds and interbank interest rates).
• Commodity price risk is the possibility of loss from movements in
commodity prices. Grupo Santander's commodity exposure is
minor and stems mainly from commodity derivatives.
• Volatility risk is the possibility of loss caused by movements in
interest rates, exchange rates, the stock market, credit spreads and
other risk factors affecting portfolio value. It is inherent to all
financial instruments whose value considers volatility (especially
options contracts).
Derivative contracts (such as options, futures, forwards and swaps)
can mitigate market risks partially or fully.
Additionally, other more complex hedging market risks are
considered, such as correlation risk, market liquidity risk, prepayment
or cancellation risk, and underwriting risk.
Balance sheet liquidity risk (unlike market liquidity risk) is the
possibility of loss caused by forced disposal of assets or cash flow
imbalance if the bank meets its payment obligations late or at
excessive cost. It can cause losses by forced asset sales or impacts on
margins due to the mismatch between expected cash inflows and
outflows.
Pension and actuarial risks (explained at the end of this section) also
depend on market variables.
Grupo Santander aim to comply with the Basel Committee’s
Fundamental Review of the Trading Book (FRTB) and the EBA’s
Guidelines on the management of interest rate risk arising from non-
trading book activities. The purpose of several projects Grupo
Santander runs is to provide risk control managers and teams with
the best market risk management tools under the right governance
framework for the models Grupo Santander uses for metric
reporting; and to comply with regulation on the risks mentioned
above.
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Appendix
2. Trading market risk management
Setting market risk limits in a dynamic process according to the risk
appetite in the annual limits plan prepared by senior management
and extended to all subsidiaries.
The standard methodology for risk management and control in
trading, measures the maximum expected loss with a specific level of
confidence and time frame. The standard for historical simulation is a
confidence level of 99% over one day. We apply statistical
adjustments efficiently to incorporate recent developments affecting
our levels of risk. Our time frame is two years or at least 520 days
from the reference date of the VaR calculation.
The balance sheet items in the Group’s consolidated position that are
subject to market risk are shown below, distinguishing those
positions for which the main risk metric is VaR from those for which
risk monitoring is carried out using other metrics:
EUR million
Assets subject to market risk
Cash, cash balances at central banks and other deposits on demand
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets designated at fair value through other comprehensive income
Financial assets at amortized cost
Hedging derivatives
Changes in the fair value of hedged items in portfolio hedges of interest risk
Other assets
Total assets
Main market risk metric
Balance sheet
amount
VaR
Other
Main risk factor for
'Other' balance
210,689
210,689 Interest rate
116,953
116,953
4,042
5,489
2,453
1,494 Interest rate, spread
10,468 Interest rate, spread
105,585 Interest rate, spread
1,037,898 Interest rate, spread
4,761 Interest rate, exchange
rate
410 Interest rate
5,536
15,957
108,038
1,037,898
4,761
410
95,593
1,595,835
Liabilities subject to market risk
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Hedging derivatives
Changes in the fair value of hedged items in portfolio hedges of interest rate risk
Other liabilities
Total liabilities
Equity
79,469
32,733
79,469
390
1,349,169
5,463
248
31,700
1,498,782
97,053
32,343 Interest rate, spread
1,349,169 Interest rate, spread
5,463 Interest rate, exchange
rate
248 Interest rate
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The following table displays the latest and average VaR values at
99% by risk factor over the last three years. It also shows the
minimum and maximum VaR values in 2021 and 97.5% ES at the end
of December 2021:
VaR STATISTICS AND EXPECTED SHORTFALL BY RISK FACTOR
EUR million. VaR at 99% and ES at 97.5% with one day time horizon
2021
A
VaR (99%)
Min
Average
Max
Latest
ES
(97.5%)
Latest
2020
VaR
2019
VaR
Average
Latest
Average
Latest
Total Trading
Diversification effect
Interest rate
Equities
Exchange rate
Credit spread
Commodities
Total Europe
Diversification effect
Interest rate
Equities
Exchange rate
Credit spread
Commodities
Total North America
Diversification effect
Interest rate
Equities
Exchange rate
Total South America
Diversification effect
Interest rate
Equities
Exchange rate
Commodities
6.8
(6.3)
6.0
2.2
1.9
2.6
0.4
6.1
(5.2)
5.3
1.8
1.6
2.6
0.0
1.6
0.2
1.3
0.0
0.1
3.3
(1.2)
3.0
0.4
0.7
0.4
10.5
(12.9)
9.6
3.5
4.2
4.8
1.3
9.3
(9.3)
7.7
3.3
2.8
4.8
0.0
2.5
(0.7)
2.5
0.1
0.6
5.9
(4.9)
5.5
1.2
2.8
1.3
15.9
(26.6)
15.3
7.7
8.0
8.0
3.5
16.1
(16.9)
11.7
8.3
5.0
8.0
0.0
7.4
(2.9)
7.0
1.5
1.8
10.5
(16.0)
12.2
3.2
7.6
3.5
12.3
(13.4)
11.9
(15.0)
12.5
(13.0)
8.3
(11.8)
9.1
5.1
5.7
5.1
0.7
9.4
5.1
5.6
6.0
0.8
9.2
4.4
5.9
5.5
0.5
9.9
9.7
(12.6)
(13.1)
10.5
(10.7)
7.1
5.8
4.5
5.1
0.0
2.7
(0.6)
2.7
0.0
0.6
6.3
(5.1)
5.8
1.1
3.8
0.7
6.7
5.2
4.9
6.0
0.0
2.8
(0.5)
2.7
0.0
0.6
6.4
(3.8)
6.3
1.0
2.1
0.8
7.9
4.3
3.5
5.5
0.0
6.6
(2.2)
3.4
0.3
5.1
5.6
(3.8)
5.2
1.0
2.7
0.5
5.4
3.1
6.0
4.5
1.1
8.0
(8.9)
6.5
3.0
2.9
4.5
0.0
2.9
(1.0)
3.3
0.1
0.5
4.5
(5.4)
4.1
0.5
4.2
1.1
12.1
(8.1)
10.0
2.9
3.9
3.4
0.0
6.3
(6.9)
6.0
1.9
1.9
3.4
0.0
3.5
(1.3)
2.6
0.2
2.0
9.5
(2.9)
7.8
2.0
2.6
0.0
10.3
(9.8)
9.2
4.8
2.6
3.5
0.0
10.1
(8.4)
8.2
4.9
1.9
3.5
0.0
3.8
(2.1)
3.4
0.1
2.4
6.0
(3.7)
5.9
1.7
2.1
0.0
A. In South and North America, VaR levels of credit spreads and commodities are not shown separately due to their low or null materiality.
At the end of December, VaR had increased by EUR 4 million higher
than at the end of 2020; however, average VaR fell by EUR
2.0 million. Average VaR fell for most risk factors owing to low
market volatility throughout the year. By region, average VaR
decreased in Europe and especially in North America with lower
exchange rate volatility.
By risk factor, VaR has followed a generally stable trend in recent
years. For many factors, temporary VaR increases generally owe
more to short-term price volatility than to significant changes in
positions.
Backtesting
Actual losses can differ from predicted losses because of the VaR’s
limitations. Grupo Santander measures the accuracy of the VaR
calculation model to make sure it is reliable. The most important
tests Grupo Santander runs involve backtesting:
• Backtesting of hypothetical P/L and of the entire trading book
showed no exceptions to 99% VaR and VaE in 2021.
• The exceptions observed in the past year are consistent with the
assumptions of the VaR calculation model.
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IBOR Reform
Regulatory and supervisory context
In 2013, IOSCO published the Principles for Financial Benchmarks
(IOSCO Principles) that establish standards for the development of
benchmarks. Subsequently, the FSB established the Official Sector
Steering Group (OSSG) for the application of the IOSCO Principles to
the IBOR (Interbank Offered Rates) indices. Since then, the central
banks and regulators of various jurisdictions have organized working
groups to recommend alternative indices to indices such as the
EONIA (Euro Overnight Index Average) and the LIBORs (London
Interbank Offered Rates).
On 13 September 2018, the European Central Bank's working group
recommended that the euro short-term interest rate (€STR) replace
the EONIA. From 2 October 2019, the date on which the €STR was
made available, the EONIA changed its methodology to be calculated
as €STR plus a spread of 8.5 basis points. This change in the EONIA
methodology was intended to facilitate the transition of the EONIA
market to €STR before its definitive cessation on 3 January 2022.
On 5 March 2021, the Financial Conduct Authority (FCA) announced
the final dates for the cessation of LIBORs:
– On 31 December 2021, the publication of USD LIBOR (1 week and
2 months term), CHF LIBOR (all terms), GBP LIBOR (overnight term,
1 week, 2 months and 12 months), JPY LIBOR (overnight term, 1
week, 2 months, and 12 months) and EUR LIBOR (all terms).
– On 31 December 2021, the calculation methodology of some
LIBORs was reformed to publish temporary synthetic LIBORs that
became non-representative: GBP LIBOR (1-month, 3-month and 6-
month terms) and JPY LIBOR (1-month term, 3 months and 6
months).
– On 30 June 2023, the publication of the USD LIBOR will cease
(overnight terms, 1 month, 3 months, 6 months and 12 months).
In October 2020, the International Swaps and Derivatives Association
(ISDA) launched the fallbacks Protocol and Supplement for IBORs
(effective 25 January 2021), and provided market participants with of
new derivatives fallbacks of LIBORs (among others IBOR, such as
EURIBOR) for current derivative contracts and for new contracts.
Additionally, on 19 August 2021, ISDA launched a new protocol that
allowed entities to incorporate a fallback to the EONIA as the rate
applicable to collateral in ISDA collateral agreements (known as
CSAs). Banco Santander SA and various Santander Group entities
have adhered to these protocols.
On December 2020, the Council of the European Union endorsed the
modification of the EU Benchmark Regulation (BMR), giving the
European Commission the power to establish a legislative solution
that proposes a replacement rate to indices the cessation of which
could cause a significant disturbance to the functioning of financial
markets in the EU. In this context, on 14 and 21 October 2021, the
European Commission published the Implementing Regulations
regarding the designation of a substitute reference index for CHF
LIBOR and EONIA.
Given the relevance of the IBOR indices, the volume of contracts and
exposures is very high in the banking sector. Santander Group has a
significant number of contracts linked to these interest rates. The
most relevant are EURIBOR, EONIA, and LIBOR. These benchmarks
are widely used, including derivative products, corporate loans, retail,
discount products, deposits, repos, securities lending, collateral
agreements, and floating rate notes, among others.
LIBOR and EONIA Reform
The main risks to which Santander is exposed arising from the
transition of the EONIA and LIBORs are: (i) legal risks arising from
potential changes in the documentation required for new or existing
operations; (ii) financial and accounting risks derived from market risk
models and from the valuation, coverage, cancellation and
recognition of the financial instruments associated with the
reference indices; (iii) business risk that revenues from LIBOR-linked
products decline; (iv) pricing risks arising from how changes to
benchmark indices could impact pricing mechanisms on some
instruments; (v) operational risks arising from the potential
requirement to adapt IT systems, trade reporting infrastructure and
operational processes; (vi) conduct risks arising from the potential
impact of communications with customers during the transition
period and (vii) litigation risks regarding our existing products and
services, which could adversely impact our profitability.
In order to monitor the risks and address the challenges of the
transition, Santander launched the IBOR Transition Programme in
2019. The global program ensures that all affected business units
and subsidiaries have a consistent understanding of the risks
associated with the transition and can take appropriate steps to
mitigate them.
This transition program incorporates the recommendations,
guidelines and milestones defined by the regulators and working
groups of the different jurisdictions. The structure of the program
focuses on the following areas: Technology and Operations, Legal,
Customer Relations, Risk Management and Models, Conduct and
Communication, and Accounting and Finance.
During 2021, the IBOR Transition Program has focused on making all
the contractual, commercial, operational and technological changes
necessary to undertake the transition of the LIBOR and EONIA rates
that have been discontinued in 2021. In 2022, the program will
continue to attend to the next steps of the transition related to the
management of the contract history and the milestone of the
cessation of the LIBOR dollar of June 2023.
In addition, Grupo Santander continues to participate, throughout
2022, in the initiatives developed by the public and private sectors
related to the reform of the interest rate reference indices.
Additionally, see information included in notes 1.b and 36.
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3. Structural balance sheet risks
3.1. Main aggregates and variations
Consistent with previous years, the market risk profile of Grupo
Santander’s balance sheet remained moderate in 2021 in terms of
asset, shareholders’ equity and NII volumes. Each subsidiary’s finance
division manages interest rate risk from commercial banking and is
responsible for handling structural risk from interest rate
fluctuations.
To measure interest rate risk, Grupo Santander uses statistical
models based on strategies to mitigate structural risk with interest-
rate instruments (such as bonds and derivatives) to keep risk profile
within risk appetite.
The NII and EVE sensitivities below are based on scenarios of parallel
interest rate movements from -100 to +100 basis points.
Structural VaR
With such a homogeneous metric as VaR, we can fully monitor
market risk in the banking book We differentiate fixed income based
on interest rates and credit spreads in ALCO portfolios, FX rates and
shares.
In general, the structural VaR of Grupo Santander total assets and
equity is minor.
STRUCTURAL VaR
EUR million. Structural VaR 99% with a temporary horizon of one day.
2021
2020
2019
Min
Average
Max
Latest
Average
1,090.7
1,011.9
911.1
Latest
903.2
Average
511.4
Latest
729.2
(431.4)
(240.2)
(349.8)
(263.4)
(304.2)
(402.0)
540.5
655.2
326.4
287.8
655.2
309.1
465.1
499.9
295.9
345.5
502.6
318.5
345.6
308.1
161.9
629.7
331.7
169.8
Structural VaR
Diversification effect
VaR Interest Rate*
VaR Exchange Rate
VaR Equities
895.8
(158.8)
224.2
521.3
309.1
993.7
(327.3)
400.7
600.6
319.7
* Includes credit spread VaR on ALCO portfolios.
Structural interest rate risk
• Europe
In general, the NII and EVE of Grupo Santander's main balance sheets
(i.e. Santander España and Santander UK) show positive sensitivity to
rising interest rates. Across our footprint, exposure was moderate in
relation to annual budget and capital levels in 2021.
At the end of December 2021, under the scenarios previously
described, the most significant NII sensitivity risk concentration in
euros amounted to EUR 703 million; in pounds sterling, EUR
541 million; in Polish złoty EUR 65 million; and in the US dollar, EUR
54 million.
The most significant EVE risk concentration amounted to EUR
3,684 million; in the yield curve of the euro; of the pound sterling,
EUR 1,056 million ; of the US dollar, EUR 221 million; and of the
Polish zloty EUR 56 million, all relating to the interest rate cut risks.
• North America
In general, the NII and EVE of Grupo Santander's North American
balance sheets tend to show positive sensitivity to rising interest
rates. Exposure was moderate in relation to annual budget and
capital levels in 2021.
At the end of December, the most significant risk to NII was mainly in
the US and amounted to EUR 152 million.
• South America
The EVE and NII of our Grupo Santander's South American balance
sheets are positioned for interest rate cuts.
Exposure in all countries was moderate in relation to the annual
budget and capital levels in 2020.
In 2021, exposure was moderate in relation to annual budget and
capital levels. At the end of December, the most significant risks to
NII were mainly in Chile (EUR 86 million) and Brazil (EUR 83 million).
The most significant risks to EVE were recorded in Brazil (EUR
271 million) and Chile (EUR 258 million).
Structural foreign currency rate risk/results hedging
Grupo Santander's structural FX risk stems mainly from the income
and hedging of foreign currency transactions for permanent financial
investments. In the dynamic management of this risk, Grupo
Santander aims to limit the impact of FX rate movements on the core
capital ratio. In 2021, the hedged of the different currencies that have
an impact on our core capital ratio was close to 100%.
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In December 2021, the permanent exposures (with potential impact
on shareholders’ equity) were, from largest to smallest, in US dollars,
British pounds sterling, Brazilian reais, Mexican pesos, Chilean pesos
and Polish złoty.
Grupo Santander uses FX derivatives to hedge part of those
permanent positions. The Finance division manages FX risk and
hedging for the expected profits and dividends of subsidiaries whose
base currency is not the euro.
Structural equity risk
Grupo Santander holds equity positions in its banking and trading
books. They are either equity instruments or stock, depending on the
share of ownership or control.
By the end of December 2021, the equities and shareholdings in the
banking book were diversified among Spain, China, Morocco, Poland
and other countries. Most of them invest in the financial and
insurance sectors. Grupo Santander has minor equity exposure to
property and other sectors.
Structural equity positions are exposed to market risk. VaR is
calculated for these positions with a set of market prices and proxies.
At the end of December 2021, VaR at a 99% confidence level over a
one day horizon was EUR 325 million (EUR 319 million and EUR
170 million at the end of 2020 and 2019, respectively).
3.2. Methodologies
Structural interest rate risk
As part of structural risk, interest rate risk in the banking book (IRRBB)
is the main source of balance sheet risk.
Grupo Santander measures the potential impact of interest rate
movements on EVE and NII. Because changing rates may generate
impacts, Grupo Santander must manage and control many subtypes
of interest rate risk, such as repricing risk, curve risk, basis risk and
option risk (e.g. behavioural or automatic). Interest rate risk in the
balance sheet and market conditions and outlooks could necessitate
certain financial measures to achieve Grupo Santander's desired risk
profile (such as selling positions or setting interest rates on products
we market). The metrics Grupo Santander uses to monitor IRRBB
include NII and EVE sensitivity to interest rate movements.
• Net interest income sensitivity
Net interest income (NII) is the difference between interest income
from assets and the interest cost of liabilities in the banking book
over a typical one- to three-year horizon (one year being standard in
Grupo Santander). Because NII sensitivity is the difference in income
between a selected scenario and the base scenario, its values can be
as many as considered scenarios. It enables us to see short-term risks
and supplement economic value of equity (EVE) sensitivity.
• Economic value of equity sensitivity
Economic value of equity (EVE) is the difference between the current
value of all assets minus the current value of all liabilities in the
banking book. It does not include shareholders’ equity and non-
interest-bearing instruments. Because EVE sensitivity is the
difference in EVE between a selected scenario and the base scenario,
it can have as many values as considered scenarios. It enables us to
see long-term risks and supplement NII sensitivity.
Structural exchange-rate risk/hedging of results
Every day, Grupo Santander measures FX positions, VaR and P/L.
Structural equity risk
Grupo Santander measures equity positions, VaR and P/L.
4. Liquidity risk
Structural liquidity management aims to fund the Group’s recurring
activity optimising maturities and costs, while avoiding taking on
undesired liquidity risks.
Santander’s liquidity management is based on the following
principles:
• Decentralised liquidity model.
• Medium- and long-term (M/LT) funding needs must be covered by
medium- and long-term instruments.
• High contribution from customer deposits due to the retail nature
of the balance sheet.
• Diversification of wholesale funding sources by instruments/
investors, markets/currencies and maturities.
• Limited recourse to short-term funding.
• Availability of sufficient liquidity reserves, including standing
facilities/discount windows at central banks to be used in adverse
situations.
• Compliance with regulatory liquidity requirements both at Group
and subsidiary level, as a new factor conditioning management.
The effective application of these principles by all institutions
comprising the Group required the development of a unique
management framework built upon three fundamental pillars:
• A solid organisational and governance model that ensures the
involvement of the subsidiaries’ senior management in decision-
taking and its integration into the Group’s global strategy. The
decision-making process for all structural risks, including liquidity
and funding risk, is carried out by local Asset and Liability
Committees (ALCOs) in coordination with the global ALCO, which is
the body empowered by the Bank's board in accordance with the
corporate Asset and Liability Management (ALM) framework.
This governance model has been reinforced as it has been included
within Santander's Risk Appetite Framework. This framework meets
demands from regulators and market players emanating from the
financial crisis to strengthen banks’ risk management and control
systems.
• In-depth balance sheet analysis and measurement of liquidity
risk, supporting decision-taking and its control. The objective is to
ensure the Group maintains adequate liquidity levels necessary to
cover its short- and long-term needs with stable funding sources,
optimising the impact of their costs on the income statement.
Grupo Santander’s liquidity risk management processes are
contained within a conservative risk appetite framework
established in each geographic area in accordance with its
commercial strategy. This risk appetite establishes the limits
within which the subsidiaries can operate in order to achieve their
strategic objectives.
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• Management adapted in practice to the liquidity needs of each
business. Every year, based on business needs, a liquidity plan is
developed which seeks to achieve:
• a solid balance sheet structure, with a diversified presence in
the wholesale markets;
• the use of liquidity buffers and limited encumbrance of assets;
• compliance with both regulatory metrics and other metrics
included in each entity’s risk appetite statement.
Over the course of the year, all dimensions of the plan are monitored.
Grupo Santander continues to develop the ILAAP (Internal Liquidity
Adequacy Assessment Process), an internal self-assessment of
liquidity adequacy which must be integrated into the Group’s other
risk management and strategic processes. It focuses on both
quantitative and qualitative matters and is used as an input to the
SREP (Supervisory Review and Evaluation Process). The ILAAP
evaluates the liquidity position both in ordinary and stressed
scenarios.
i. Liquidity risk measurement
Grupo Santander measures liquidity risk with tools and metrics that
account for the appropriate risk factors.
a) Liquidity buffer
The liquidity buffer is the total liquid assets a bank has to cope with
cash outflows during periods of stress. The assets are free of
encumbrances and can be used immediately to generate liquidity
without losses or excessive discounts. The liquidity buffer is a tool for
calculating most liquidity metrics. It is also a metric with defined
limits for each subsidiary.
b) Liquidity Coverage Ratio (LCR)
The liquidity coverage ratio (LCR) is a regulatory metric. Its purpose is
to promote the short-term resilience of a bank’s liquidity profile and
make sure it has enough high-quality liquid assets to withstand a
considerable idiosyncratic or market stress scenario over 30 calendar
days.
c) Wholesale liquidity metric
The wholesale liquidity metric measures the number of days Grupo
Santander would survive if it used liquid assets to cover lost liquidity
from a wholesale deposit run-off (without possible renewal) over a
set time horizon. Grupo Santander also uses it as an internal short-
term liquidity metric to reduce risk from dependence on wholesale
funding.
d) Net Stable Funding Ratio (NSFR)
The net stable funding ratio (NSFR) is a regulatory metric we use to
measure long-term liquidity risk. It is the ratio of available stable
funding to required stable funding. It requires banks to keep a robust
balance sheet, with off-balance-sheet assets and operations financed
by stable liabilities.
e) Asset Encumbrance metrics
Grupo Santander calculates two metrics to measure asset
encumbrance risk. On the one hand, the asset encumbrance ratio
gives the proportion of encumbered assets to total assets; on the
other, the structural asset encumbrance ratio gives the proportion of
encumbered assets by structural funding transaction (namely long-
term collateralized issues and credit transactions with central banks).
f) Other additional liquidity indicators
In addition to traditional tools to measure short and long-term
liquidity and funding risk, Grupo Santander has a set of additional
liquidity indicators to complement those and to measure other non-
covered liquidity risk factors. These include concentration metrics,
such as the main and the five largest funding counterparties, or the
distribution of funding by maturity.
In addition, we calculate a number of metrics on the institution’s
ability to generate liquidity through collateralized financing, such as
overcollateralization, eligibility ratios assets without charges and
deadlines for their placement.
g) Liquidity scenario analysis
As liquidity stress tests, four standard scenarios have been defined:
i. An idiosyncratic scenario of events detrimental only to Santander;
ii. a local market scenario of events highly detrimental to a base
country’s financial system or real economy;
iii. a global market scenario of events highly detrimental to the global
financial system; and
iv.combined scenario consisting of a combination of more severe
idiosyncratic and market events (local and global) occurring
simultaneously and interactively.
Grupo Santander uses these stress test outcomes as tools to
determine risk appetite and support business decision-making.
h) Liquidity early warning indicators
The system of early warning indicators (EWI) consists of quantitative
and qualitative liquidity indicators that help predict stress situations
and weaknesses in the funding and liquidity structure of Grupo
Santander entities. External indicators relate to market-based
financial variables; internal indicators relate to our own performance.
i) Intraday liquidity metrics
Grupo Santander follows Basel regulation and calculates several
metrics and stress scenarios for intraday liquidity risk to maintain a
high level of control.
ii. Liquidity coverage ratio and net stable financing ratio
As regards the liquidity coverage ratio (LCR), the regulatory
requirement for this ratio, set at 100%, has been at its maximum
level since 2018.
Below is a breakdown of the composition of the Group's liquid assets
under the criteria set out in the supervisory prudential reporting
(Commission Implementing Regulation (EU) 2017/2114 of 9
November 2017) for the determination of high quality liquid assets
for the calculation of the LCR ratio (HQLA):
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EUR million
High-quality liquid assets-HQLAs
Cash and reserves available at
central banks
Marketable assets Level 1
Marketable assets Level 2A
Marketable assets Level 2B
Total high-quality liquid assets
2021
Amount
weighted
applicable
2020
Amount
weighted
applicable
206,507
81,925
3,422
5,446
149,893
104,270
5,272
4,200
297,300
263,635
In relation to the net stable funding ratio (NSFR), its definition was
approved by the Basel Committee in October 2014. The transposition
of this requirement to the European regulation took place in June
2019 with the publication in the Official Gazette of the European
Union of Regulation (EU) 2019/876 of the European Parliament and
of the Council of May 20, 2019. The Regulation establishes that
entities must have a net stable financing ratio, as defined in the
Regulation, higher 100% from June 2021. For this reason, the figures
for 2019 and 2020 for this ratio are calculated using the Basel
methodology, while those for 2021 already include the requirement
as transposed into European regulations.
The liquidity coverage ratio, broken down by component, and the net
stable funding ratio for the Group at year-end 2021 and 2020 are
presented below:
EUR million
High-quality liquid assets-HQLAs
(numerator)
Total net cash outflows (denominator)
Cash outflows
Cash inflows
LCR ratio (%)
NSFR ratio (%)
2021
2020
297,300
181,953
233,294
51,341
263,635
157,368
204,813
47,445
163%
126%
168%
120%
As regards the funding structure, given the predominantly
commercial nature of the Group's balance sheet, the loan portfolio is
mainly financed by customer deposits. Note 22) 'Debt securities'
shows the composition of these liabilities on the basis of their nature
and classification, the movements and maturity profile of the debt
securities issued by the Group, reflecting the strategy of
diversification by products, markets, issuers and maturities followed
by the Group in its approach to the wholesale markets.
iii. Asset encumbrance
In accordance with the guidelines established by the European
Banking Authority (EBA) in 2014 on committed and uncommitted
assets, the concept of assets committed in financing transactions
(asset encumbrance) includes both on-balance sheet assets provided
as collateral in transactions to obtain liquidity and off-balance sheet
assets that have been received and reused for similar purposes, as
well as other assets associated with liabilities for reasons other than
financing.
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The residual maturities of the liabilities associated with the assets
and guarantees received and committed are presented below, as of
31 of December of 2021 (EUR thousand million):
Residual
maturities of the
liabilities
Committed assets
Guarantees
received
committed
Unmatured
<=1month
>1 month
<=3
months
>3 months
<=12
months
>1 year
<=2 years
>2 years
<=3 years
3 years
<=5 years
5 years
<=10 years
>10 years
Total
39.5
32.7
8.2
29.6
106.8
37.1
80.1
20.7
10.4
365.1
24.2
15.3
12.8
25.8
1.9
0.4
0.4
—
—
80.8
The reported Group information as required by the EBA at 2021 year-
end is as follows:
ON-BALANCE-SHEET ENCUMBERED ASSETS
EUR billion
Loans and advances
Equity instruments
Debt securities
Other assets
Total assets
Carrying amount of
encumbered assets
Fair value of
encumbered assets
Fair value of non-
encumbered assets
262.8
8.4
61.0
32.9
365.1
8.4
61.1
984.4
13.1
102.9
130.3
1,230.7
Carrying amount of
non-encumbered
assets
13.1
102.8
ENCUMBRANCE OF COLLATERAL RECEIVED
EUR billion
Fair value of
encumbered
collateral received
or own debt
securities issued
Fair value of
collateral received
or own debt
securities issued
available for
encumbrance
Collateral received
Loans and advances
Equity instruments
Debt securities
Other collateral received
Own debt securities issued
other than own covered
bonds or ABSs
80.8
1.2
5.4
74.2
—
—
31.5
—
7.0
24.5
—
0.6
ENCUMBERED ASSETS AND COLLATERAL RECEIVED AND MATCHING
LIABILITIES
EUR billion
Matching
liabilities,
contingent
liabilities or
securities lent
Assets, collateral
received and own
debt securities
issued other than
covered bonds and
ABSs encumbered
325.2
445.9
Total sources of
encumbrance
(carrying amount)
On-balance-sheet encumbered assets amounted to EUR
365,100 million, of which 72% are loans (mortgage loans, corporate
loans, etc.). Guarantees received committed amounted to EUR
80,800 million, relating mostly to debt securities received as security
in asset purchase transactions and re-used.
Taken together, these two categories represent a total of EUR
445,900 million of encumbered assets, which give rise to EUR
325,200 million matching liabilities.
As of December 2021, total asset encumbrance in funding operations
represented 26.1% of the Group’s extended balance sheet under EBA
criteria (total assets plus guarantees received: EUR 1,708,000 million
as of December 2021). This percentage has decreased from 26.6%
that presented the Group as of December 2020, mainly as a result of
the increase in the balance sheet.
d) Capital risk
In the second line of defence, capital risk management can
independently challenge business and first-line activities by:
• Supervising capital planning and adequacy exercises through a
review of the main components affecting the capital ratios.
• Identifying key metrics to calculate the Group’s regulatory capital,
setting tolerance levels and analysing significant variations, as
well as single transactions with impact on capital.
• Reviewing and challenging the execution of capital actions
proposed in line with capital planning and risk appetite.
Grupo Santander commands a sound solvency position, above the
levels required by regulators and by the European Central bank.
Regulatory capital
At 1 January 2022, at a consolidated level, the Group must maintain a
minimum capital ratio of 8.85% of CET1 (4.50% being the
requirement for Pillar I, 0.84% being the requirement for Pillar 2R
(requirement), 2.50% being the requirement for capital
conservation buffer, 1.00% being the requirement for G-SIB and
0.01% being the requirement for anti-cyclical capital buffer).
Grupo Santander must also maintain a minimum capital ratio of
10.64% of tier 1 and a minimum total ratio of 13.01%.
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In 2021, the solvency target set was achieved. Santander’s CET1 ratio
1
stood at 12.51%
capacity to generate capital. The key regulatory capital figures are
indicated below:
at the close of the year, demonstrating its organic
RECONCILIATION OF ACCOUNTING CAPITAL WITH REGULATORY
CAPITAL
EUR million
Subscribed capital
Share premium account
Reserves
Treasury shares
Attributable profit
Approved dividend***
2021
2020
2019
8,670
8,670
8,309
47,979
52,013
52,446
56,606
62,777
56,526
(894)
(69)
(31)
8,124
(8,771)
6,515
(836)
—
(1,662)
Shareholders’ equity on public balance
sheet
Valuation adjustments
Non-controlling interests
Total Equity on public balance sheet
Goodwill and intangible assets
119,649 114,620 122,103
(32,719)
(33,144)
(22,032)
10,123
9,846
10,588
97,053
91,322 110,659
(16,132)
(15,711)
(28,478)
Eligible preference shares and
participating securities
Accrued dividend***
Other adjustments*
Tier 1**
10,050
9,102
9,039
(895)
(478)
(1,761)
(7,624)
(5,734)
(9,923)
82,452
78,501
79,536
*Fundamentally for non-computable non-controlling interests and deductions
and reasonable filters in compliance with CRR
** Figures calculated by applying the transitional provisions of IFRS 9.
***Assumes 20% of ordinary profit, see note 4.a for proposed distribution of
results.
The following table shows the capital coefficients and a detail of the
eligible internal resources of the Group:
Capital coefficients
Level 1 ordinary eligible capital (EUR
million)
Level 1 additional eligible capital
(EUR million)
2021
2020
2019
72,402
69,399
70,497
10,050
9,102
9,039
Level 2 eligible capital (EUR million)
Risk-weighted assets (EUR million)
14,865
12,514
11,531
578,930 562,580 605,244
Level 1 ordinary capital coefficient
(CET 1)
Level 1 additional capital coefficient
(AT1)
Level 1 capital coefficient (TIER1)
Level 2 capital coefficient (TIER 2)
Total capital coefficient
12.51% 12.34 %
11.65 %
1.73%
1.61 %
1.49 %
14.24 %
2.57 %
16.81 %
13.95 %
2.23 %
16.18 %
13.14 %
1.91 %
15.05 %
1. Figures calculated by applying the transitional provisions of IFRS 9
ELIGIBLE CAPITAL
EUR million
Eligible capital
Common Equity Tier I
Capital
(-) Treasure shares and own
shares financed
Share Premium
Reserves
Other retained earnings
Minority interests
Profit net of dividends
Deductions
2021
2020
2019
72,402
69,399
70,497
8,670
8,670
8,309
(966)
(126)
(63)
47,979
58,157
52,013
64,766
52,446
57,368
(34,784)
(34,937)
(22,933)
6,736
6,394
6,669
(9,249)
6,441
3,092
(19,784)
(18,407)
(34,163)
Goodwill and intangible assets
(16,064)
(15,711)
(28,478)
Others
Additional Tier I
Eligible instruments AT1
T1-excesses-subsidiaries
Residual value of dividends
Others
Tier II
Eligible instruments T2
Gen. funds and surplus loans
loss prov. IRB
T2-excesses - subsidiaries
Others
(3,720)
(2,696)
(5,685)
10,050
10,102
(52)
—
—
9,102
8,854
248
—
—
9,039
9,209
(170)
—
—
14,865
15,424
12,514
13,351
11,531
12,360
75
(634)
—
—
(837)
—
—
(829)
—
Total eligible capital
97,317
91,015
91,067
Note: Banco Santander, S.A. and its affiliates had not taken part in any State aid
programmes.
Leverage ratio
Basel III established the leverage ratio as a non-risk sensitive
measure aimed at limiting excessive balance sheet growth relative to
available capital.
The Group performs the calculation in accordance with Regulation
(EU) 2019/876 of 20 May 2019 amending Regulation (EU) No
575/2013 as regards the leverage ratio.
This ratio is calculated as tier 1 capital divided by leverage exposure.
Exposure is calculated as the sum of the following items:
• Accounting assets, excluding derivatives and items treated as
deductions from tier 1 capital (for example, the balance of loans is
included, but not that of goodwill) further excluding the exposures
referred to in Article 429a(1) of the regulation.
• Off-balance-sheet items (mainly guarantees, unused credit limits
granted and documentary credits) weighted using credit
conversion factors.
• Inclusion of net value of derivatives (gains and losses are netted
with the same counterparty, minus collaterals if they comply with
certain criteria) plus a charge for the future potential exposure.
• A charge for the potential risk of security funding transactions.
• Lastly, it includes a charge for the risk of credit derivative swaps
(CDS).
Annual report 2021 765
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
With the publication of Regulation (EU) 2019/876 of 20 May, 2019,
amending Regulation (EU) n.º 575/2013 as regards the leverage
ratio, the final calibration of the ratio is set at 3% for all entities and,
for systemic entities G-SIB, an additional surcharge is also
established which will be 50% of the cushion ratio applicable to the
EISM. In addition, modifications are included in its calculation,
including the exclusion of certain exposures from the total exposure
measure: public loans, transfer loans and officially guaranteed export
credits.
Banks implemented this final definition of the leverage ratio in June
2021, however, the new calibration of the ratio (the additional
surcharge for G-SIBs) will take effect from January 2023.
EUR million
Leverage
Level 1 Capital
Exposure
Leverage Ratio
2021
2020
2019
82,452
78,501
79,536
1,536,516
1,471,480
1,544,614
5.37 %
5.33 %
5.15 %
Global systemically important banks
Grupo Santander is one of 30 banks designated as global
systemically important banks (G-SIBs).
The designation as a systemically important entity is based on the
measurement set by regulators (the FSB and BCBS), based on 5
criteria (size, cross-jurisdictional activity, interconnectedness with
other financial institutions, substitutability and complexity).
This definition means it has to fulfil certain additional requirements,
which consist mainly of a capital buffer -1%, in TLAC requirements
(total loss absorbing capacity), that we have to publish relevant
information more frequently than other banks, greater regulatory
requirements for internal control bodies, special supervision and
drawing up of special reports to be submitted to supervisors.
The fact that Grupo Santander has to comply with these
requirements makes it a more solid bank than its domestic rivals.
54. Explanation added for translation to English
These accompanying Consolidated Financial Statements, translation
of the Consolidated Financial Statements originally issued in Spanish,
are presented on the basis of the regulatory financial reporting
framework applicable to the Group in Spain (see note 1.b).
Annual report 2021 766
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Appendix
Annual report 2021 767
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Appendix I
Subsidiaries of Banco Santander, S.A. 1
Company
2 & 3 Triton Limited
A & L CF (Guernsey) Limited (n)
A & L CF June (2) Limited (e)
A & L CF June (3) Limited (e)
A & L CF March (5) Limited (d)
A & L CF September (4) Limited (f)
Location
United
Kingdom
Guernsey
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect Year 2021 Year 2020 Activity
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
0.00% 100.00%
100.00%
100.00% Real estate
78
107
12
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
100.00% Leasing
Inactive
100.00%
0.00% 100.00%
100.00%
100.00% Leasing
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00%
Inactive
A3T Luxco 1 S.A.
A3T Luxco 2 S.A.
Luxembourg
0.00% 100.00%
100.00%
Luxembourg
100.00%
0.00%
100.00%
Abbey Business Services (India) Private
Limited (d)
India
0.00% 100.00%
100.00%
—
—
Holding
company
Holding
company
100.00% Holding
company
Abbey Covered Bonds (Holdings) Limited
Abbey Covered Bonds (LM) Limited
Abbey Covered Bonds LLP
United
Kingdom
United
Kingdom
United
Kingdom
Abbey National Beta Investments Limited United
Kingdom
Abbey National Business Office Equipment
Leasing Limited
United
Kingdom
—
(b)
—
—
Securitization
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
—
Securitization
75
168
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00%
Inactive
Abbey National International Limited
Jersey
0.00% 100.00%
100.00%
100.00% Financial
services
Abbey National Nominees Limited
Abbey National PLP (UK) Limited
Abbey National Property Investments
Abbey National Treasury Services
Investments Limited
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00% Finance
company
0.00% 100.00%
100.00%
100.00%
Inactive
Abbey National Treasury Services Overseas
Holdings
United
Kingdom
0.00% 100.00%
100.00%
Abbey National UK Investments
Abbey Stockbrokers (Nominees) Limited
Abbey Stockbrokers Limited
Abent 3T, S.A.P.I de C.V.
United
Kingdom
United
Kingdom
United
Kingdom
Mexico
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Holding
company
100.00% Finance
company
100.00% Securities
company
—
Electricity
production
100.00% Holding
company
Ablasa Participaciones, S.L.
Spain
100.00%
0.00%
100.00%
Aduro S.A.
Uruguay
0.00% 100.00%
100.00%
100.00% Payments and
collection
services
Aevis Europa, S.L.
AFB SAM Holdings, S.L.
Afisa S.A.
Spain
Spain
Chile
96.34%
0.00%
96.34%
96.34% Cards
1.00%
99.00%
100.00%
100.00% Holding
company
0.00% 100.00%
100.00%
100.00% Fund
Aljardi SGPS, Lda.
Portugal
0.00% 100.00%
100.00%
management
company
100.00% Holding
company
0
0
6
1
21
4
0
0
(2)
0
0
(1)
(18)
18
0
0
0
0
0
0
0
0
4
0
0
0
0
0
0
0
0
0
0
0
0
4
0
0
0
0
0
0
0
4
0
0
296
(3)
165
0
0
0
0
0
0
0
0
0
0
115
(18)
0
0
0
0
0
5
210
23
894
0
1
0
4
0
0
0
0
2
1
0
4
1,195
(3)
1,148
Annual report 2021 768
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A. 1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Allane Leasing GmbH
Location
Austria
Direct
0.00%
Indirect
46.95%
Year 2021
100.00%
Y
ear 2020 Activity
Renting
100.00%
Allane Location Longue Durée S.a.r.l.
France
0.00%
46.95%
100.00%
100.00%
Renting
Allane Mobility Consulting AG
Switzerland
0.00%
46.95%
100.00%
100.
00%
Allane Mobility Consulting B.V.
Netherlands
0.00%
46.95%
100.00%
100.
00%
Allane Mobility Consulting GmbH
Germany
0.00%
46.95%
100.00%
100.00%
Allane Mobility Consulting Österreich
GmbH
Allane Mobility Consulting S.a.r.l
Austria
France
0.00%
46.95%
100.00%
100.00%
0.00%
46.95%
100.00%
100.
00%
Consulting
services
Consulting
services
Consulting
services
Consulting
services
Consulting
services
Allane Schweiz AG
Switzerland
0.00%
46.95%
100.00%
100.
00%
Renting
Allane SE
Germany
0.00%
46.95%
92.
07%
92.
07%
Leasing
Allane Services GmbH & co. KG
Germany
0.00%
46.95%
100.00%
100.00%
Services
Allane Services Verwaltungs GmbH
Germany
0.00%
46.95%
100.00%
100.00%
Management
of portfolios
Alliance & Leicester Cash Solutions Limited
Alliance & Leicester Commercial Bank
Limited
Alliance & Leicester Investments
(Derivatives) Limited
Alliance & Leicester Investments (No.2)
Limited
Alliance & Leicester Investments Limited
Alliance & Leicester Limited
Alliance & Leicester Personal Finance
Limited
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
0.00%
100.00%
100.
00%
100.
00%
Inactive
0.00%
100.00%
100.00%
100.
00%
Inactive
0.00%
100.00%
100.00%
100.00%
Finance
company
0.00%
100.00%
100.00%
100.00%
Inactive
0.00%
100.00%
100.00%
100.00%
Inactive
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
Finance
company
Finance
company
Amazonia Trade Limited
AN (123) Limited
Andaluza de Inversiones, S.A.
ANITCO Limited
Apê11 Tecnologia e Negócios Imobiliários
S.A.
Aquanima Brasil Ltda.
Aquanima Chile S.A.
United
Kingdom
United
Kingdom
Spain
United
Kingdom
Brazil
Brazil
Chile
100.00%
0.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
Inactive
0.00%
80.92%
90.
00%
—
Real estate
0.00%
100.00%
100.00%
100.00%
E-commerce
0.00%
100.00%
100.00%
100.00%
Services
Aquanima México S. de R.L. de C.V.
Mexico
0.00%
100.00%
100.00%
100.00%
E-commerce
Aquanima S.A.
Artarien S.A. (o)
Argentina
0.00%
100.00%
100.00%
100.00%
Services
Uruguay
0.00%
100.00%
100.00%
—
Asto Digital Limited
United
Kingdom
0.00%
100.00%
100.00%
100.00%
Investment
fund
Holding
company
Holding
company
Holding
company
Insurance
auxiliary
services
Finance
company
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
(2)
10
1
(2)
1
0
(1)
13
192
1
0
0
0
0
0
0
0
(241)
0
3
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
75
0
0
37
0
6
2
2
2
0
0
3
0
0
0
0
0
1
1
1
0
0
39
(26)
0
0
0
0
0
0
0
0
175
0
0
0
0
0
0
0
0
0
0
75
0
0
27
0
9
0
0
2
0
0
0
Annual report 2021 769
Altamira Santander Real Estate, S.A.
Spain
100.00%
0.00%
100.00%
100.00%
Real estate
(369)
(161)
Alternative Leasing, FIL (Compartimento B)
Spain
100.00%
0.00%
100.
00%
99.99%
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Indirect Year 2021 Year 2020 Activity
Financial
100.00%
services
100.00%
100.00%
Direct
0.00%
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
0.00%
89.91%
100.00%
100.00%
0.00%
89.91%
100.
00%
100.
00%
Subsidiaries of Banco Santander, S.A. 1
Company
Athena Corporation Limited
Atlantes Azor No. 2
Atlantes Mortgage No. 2
Atlantes Mortgage No. 3
Atlantes Mortgage No. 4
Atlantes Mortgage No. 5
Atlantes Mortgage No. 7
Atual - Fundo de Invest Multimercado
Crédito Privado Investimento no Exterior
Location
United
Kingdom
Portugal
Portugal
Portugal
Portugal
Portugal
Portugal
Brazil
Atual Serviços de Recuperação de Créditos
e Meios Digitais S.A.
Brazil
Auto ABS Belgium Loans 2019, SA/NV
Auto ABS DFP Master Compartment
France 2013
Belgium
France
Auto ABS French Leases 2018
Auto ABS French Leases 2021
Auto ABS French Leases Master
Compartiment 2016
Auto ABS French Loans Master
Auto ABS French LT Leases Master
Auto ABS Italian Balloon 2019-1 S.R.L.
Auto ABS Italian Loans 2018-1 S.R.L.
Auto ABS Italian Rainbow Loans 2020-1
S.R.L.
Auto ABS Spanish Loans 2018-1, Fondo de
Titulización
Auto ABS Spanish Loans 2020-1, Fondo de
Titulización
Auto ABS UK Loans 2017 Holdings Limited
Auto ABS UK Loans 2017 Plc
Auto ABS UK Loans 2019 Holdings Limited
Auto ABS UK Loans 2019 Plc
Auto ABS UK Loans Holdings Limited
Auto ABS UK Loans PLC
Autodescuento, S.L.
France
France
France
France
France
Italy
Italy
Italy
Spain
Spain
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Spain
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Investment
fund
Financial
services
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
—
—
—
—
—
—
—
—
—
—
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
(9)
0
0
0
0
0
0
325
410
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(3)
0
0
0
0
0
0
0
0
18
15
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
1
0
1
5
4
18
0
(24)
0
0
1
1
7
0
0
0
0
0
0
0
308
383
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
18
0
5
28
6
25
8
42
3
1
2
3
19
Annual report 2021 770
0.00%
93.89%
93.
89%
93.
89%
Autohaus24 GmbH
Auttar HUT Processamento de Dados Ltda.
Germany
Brazil
0.00%
46.95%
100.00%
100.00%
0.00%
89.91%
100.
00%
100.
00%
Aviación Antares, A.I.E.
Aviación Británica, A.I.E.
Aviación Centaurus, A.I.E.
Aviación Comillas, S.L. Unipersonal
Aviación Intercontinental, A.I.E.
Aviación Laredo, S.L.
Aviación Oyambre, S.L. Unipersonal
Aviación Santillana, S.L.
Aviación Suances, S.L.
Aviación Tritón, A.I.E.
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
99.99%
0.01%
100.00%
100.00%
99.99%
0.01%
100.00%
100.00%
99.99%
0.01%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
99.97%
0.03%
100.00%
100.00%
99.00%
1.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
99.00%
1.00%
100.00%
100.00%
99.00%
1.00%
100.00%
100.00%
99.99%
0.01%
100.00%
100.00%
—
Securitization
(10)
Vehicles
purchase by
Internet
Renting
IT services
Renting
Renting
Renting
Renting
Renting
Air transport
Renting
Renting
Air transport
Renting
1
(2)
4
48
22
7
7
66
3
1
3
5
22
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Aymoré Crédito, Financiamento e
Investimento S.A.
Azor Mortgages PLC (j)
Banca PSA Italia S.p.A.
Banco Bandepe S.A.
Banco de Albacete, S.A.
Banco Hyundai Capital Brasil S.A.
Banco Madesant - Sociedade Unipessoal,
S.A.
Banco PSA Finance Brasil S.A.
Banco Santander - Chile
Banco Santander (Brasil) S.A.
Banco Santander (México), S.A., Institución
de Banca Múltiple, Grupo Financiero
Santander México como Fiduciaria del
Fideicomiso 100740
Banco Santander (México), S.A., Institución
de Banca Múltiple, Grupo Financiero
Santander México como Fiduciaria del
Fideicomiso 2002114
Banco Santander (México), S.A., Institución
de Banca Múltiple, Grupo Financiero
Santander México como Fiduciaria del
Fideicomiso GFSSLPT
Banco Santander de Negocios Colombia
S.A.
Banco Santander International
Banco Santander International SA
Banco Santander México, S.A., Institución
de Banca Múltiple, Grupo Financiero
Santander México
Banco Santander Perú S.A.
Banco Santander Río S.A.
Banco Santander S.A.
Banco Santander Totta, S.A.
Bansa Santander S.A.
BEN Benefícios e Serviços Instituição de
Pagamento S.A.
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Location
Brazil
Direct
0.00%
Indirect Year 2021 Year 2020 Activity
100.00% Finance
89.91%
100.00%
company
Ireland
Italy
Brazil
Spain
Brazil
Portugal
Brazil
Chile
Brazil
Mexico
—
(b)
—
—
Securitization
0.00%
50.00%
0.00%
89.91%
100.00%
0.00%
0.00%
44.96%
50.00%
100.00%
100.00%
50.00%
0.00% 100.00%
100.00%
50.00% Banking
100.00% Banking
100.00% Banking
50.00% Banking
100.00% Banking
0.00%
44.96%
0.00%
67.12%
0.04%
89.88%
50.00%
67.18%
90.50%
0.00%
96.24%
100.00%
50.00% Banking
67.18% Banking
90.58% Banking
100.00% Finance
company
Mexico
0.00%
96.47%
100.00%
100.00% Holding
company
Mexico
0.00%
96.64%
100.00%
100.00% Finance
company
Colombia
94.90%
5.10%
100.00%
100.00% Banking
United States
Switzerland
Mexico
0.00% 100.00%
0.00% 100.00%
21.19%
75.04%
100.00%
100.00%
96.24%
100.00% Banking
100.00% Banking
91.80% Banking
Peru
Argentina
Uruguay
Portugal
Chile
Brazil
100.00%
0.00%
100.00%
0.00%
99.31%
99.26%
97.75%
2.25%
100.00%
0.00%
99.86%
0.00% 100.00%
0.00%
89.91%
99.96%
100.00%
100.00%
Bilkreditt 6 Designated Activity Company
(j)
Ireland
Bilkreditt 7 Designated Activity Company
Bond Company Merger Sub LLC
Bond First Merger Sub Inc.
Bond Fourth Merger Sub LLC
Bond Second Merger Sub LLC
Bond Third Merger Sub LLC
BRS Investments S.A.
Ireland
United States
United States
United States
United States
United States
Argentina
—
—
(b)
(b)
0.00% 100.00%
0.00% 100.00%
0.00% 100.00%
0.00% 100.00%
0.00% 100.00%
5.10%
94.90%
—
—
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Cántabra de Inversiones, S.A.
Spain
100.00%
0.00%
100.00%
Cántabro Catalana de Inversiones, S.A.
Spain
100.00%
0.00%
100.00%
100.00% Holding
company
100.00% Holding
company
Canyon Multifamily Impact Fund IV LLC (c) United States
United States
Capital Street Delaware LP
0.00%
98.00%
98.00%
98.00% Real estate
0.00% 100.00%
100.00%
Capital Street Holdings, LLC
United States
0.00% 100.00%
100.00%
Capital Street REIT Holdings, LLC
United States
0.00% 100.00%
100.00%
100.00% Banking
99.26% Banking
100.00% Banking
99.96% Banking
100.00% Real estate
100.00% Payment
services
—
Securitization
—
—
—
—
—
—
Securitization
Inactive
Inactive
Inactive
Inactive
Inactive
100.00% Finance
company
100.00% Holding
company
100.00% Holding
company
100.00% Holding
company
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
205
160
0
320
832
14
51
0
72
24
0
5
328
0
153
770
9
25
1,076
(3)
1,073
37
2,963
4
803
18
2,827
10,104
2,373
10,795
66
11
74
8
14
134
1,110
1,113
6,376
194
1,532
359
3,857
21
11
0
0
0
0
0
0
0
0
1
6
85
49
778
37
92
69
7
14
141
1,195
815
7,425
122
550
191
303
3,415
1
(1)
0
0
0
0
0
0
0
22
9
0
0
0
0
0
0
0
35
187
267
27
0
14
1,213
41
23
(118)
262
275
26
0
14
1,212
3
0
0
0
1
Annual report 2021 771
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Capital Street S.A.
Location
Luxembourg
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect Year 2021 Year 2020 Activity
100.00% Finance
100.00%
0.00% 100.00%
company
Carfax (Guernsey) Limited (j) (n)
Guernsey
0.00% 100.00%
100.00%
100.00%
Insurance
brokerage
Mexico
0.00%
99.97%
99.97%
99.97% Securities
company
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00%
Inactive
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
0
0
55
0
0
0
0
2
0
0
0
0
58
0
0
0.00% 100.00%
100.00%
100.00% Banking
685
34
265
Casa de Bolsa Santander, S.A. de C.V.,
Grupo Financiero Santander México
Cater Allen Holdings Limited
Cater Allen International Limited
Cater Allen Limited
Cater Allen Lloyd's Holdings Limited
Cater Allen Syndicate Management
Limited
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
CCAP Auto Lease Ltd.
Centro de Capacitación Santander, A.C.
United States
Mexico
0.00% 100.00%
100.00%
100.00% Holding
company
0.00% 100.00%
100.00%
100.00%
Inactive
0.00%
80.22%
100.00%
100.00% Leasing
0.00%
96.24%
100.00%
Certidesa, S.L.
Chrysler Capital Auto Funding I LLC
Spain
United States
0.00% 100.00%
100.00%
0.00%
80.22%
100.00%
Chrysler Capital Auto Funding II LLC
United States
0.00%
80.22%
100.00%
Chrysler Capital Auto Receivables LLC
United States
0.00%
80.22%
100.00%
Chrysler Capital Master Auto Receivables
Funding 2 LLC
Chrysler Capital Master Auto Receivables
Funding 4 LLC
Chrysler Capital Master Auto Receivables
Funding LLC
United States
0.00%
80.22%
100.00%
United States
0.00%
80.22%
100.00%
United States
0.00%
80.22%
100.00%
Cobranza Amigable, S.A.P.I. de C.V.
Mexico
0.00%
85.00%
100.00%
United States
0.00%
96.00%
96.00%
Community Development and Affordable
Housing Fund LLC (c)
Compagnie Generale de Credit Aux
Particuliers - Credipar S.A.
Compagnie Pour la Location de Vehicules -
CLV
100.00% Non-profit
institute
100.00% Aircraft rental
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Collection
services
96.00% Asset
management
Compartment German Auto Loans 2021-1 Luxembourg
—
(b)
—
—
Securitization
Comunidad Laboral Trabajando Argentina
S.A. (j)
Consulteam Consultores de Gestão,
Unipessoal, Lda.
Argentina
0.00% 100.00%
100.00%
100.00% Services
Portugal
100.00%
0.00%
100.00%
100.00% Real estate
Consumer Lending Receivables LLC
United States
0.00%
80.22%
100.00%
Crawfall S.A. (g) (j)
Darep Designated Activity Company
Decarome, S.A.P.I. de C.V.
Uruguay
Ireland
Mexico
100.00%
0.00%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
Deva Capital Advisory Company, S.L.
Spain
0.00% 100.00%
100.00%
Deva Capital Holding Company, S.L.
Spain
100.00%
0.00%
100.00%
Deva Capital Investment Company, S.L.
Spain
0.00% 100.00%
100.00%
Deva Capital Management Company, S.L.
Spain
0.00% 100.00%
100.00%
100.00% Finance
company
100.00% Services
100.00% Reinsurances
100.00% Finance
company
100.00% Advisory
services
100.00% Holding
company
100.00% Holding
company
100.00% Advisory
services
France
0.00%
50.00%
100.00%
100.00% Banking
363
161
428
France
0.00%
50.00%
100.00%
100.00% Banking
20
0
0
182
1
(59)
30
4
0
0
0
162
0
(5)
24
(4)
0
(217)
(27)
(3)
(4)
61
48
4
0
0
0
0
0
276
1
0
0
0
0
0
0
0
3
0
2
0
0
0
0
0
0
5
1
(9)
4
26
0
0
0
0
0
7
51
2
228
111
0
0
0
0
0
8
50
1
226
111
17
(10)
7
Annual report 2021 772
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A. 1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Deva Capital Servicer Company, S.L.
Unipersonal
Location
Spain
Direct
0.00%
Indirect Year 2021 Year 2020 Activity
Holding
100.00%
100.00%
100.00%
company
Digital Procurement Holdings N.V.
Netherlands
0.00%
100.00%
100.00%
100.00%
Holding
company
Diners Club Spain, S.A. Unipersonal
Spain
100.00%
0.00%
100.00%
75.00%
Cards
Dirección Estratega, S.C.
Drive Auto Receivables Trust 2017-3
Drive Auto Receivables Trust 2018-1
Drive Auto Receivables Trust 2018-2
Drive Auto Receivables Trust 2018-3
Drive Auto Receivables Trust 2018-4
Drive Auto Receivables Trust 2018-5
Drive Auto Receivables Trust 2019-1
Drive Auto Receivables Trust 2019-2
Drive Auto Receivables Trust 2019-3
Drive Auto Receivables Trust 2019-4
Drive Auto Receivables Trust 2020-1
Drive Auto Receivables Trust 2020-2
Drive Auto Receivables Trust 2021-1
Drive Auto Receivables Trust 2021-2
Drive Auto Receivables Trust 2021-3
Ductor S.à r.l. (f)
EDT FTPYME Pastor 3 Fondo de
Titulización de Activos
Elcano Renovables, S.L
Electrolyser, S.A. de C.V.
Entidad de Desarrollo a la Pequeña y Micro
Empresa Santander Consumo Perú S.A.
Erestone S.A.S.
Esfera Fidelidade S.A.
Evidence Previdência S.A.
Eyemobile Tecnologia S.A.
F1rst Tecnologia e Inovação Ltda.
Financeira El Corte Inglés, Portugal, S.F.C.,
S.A.
Financiera El Corte Inglés, E.F.C., S.A.
Finsantusa, S.L. Unipersonal
First National Motor Business Limited (j)
First National Motor Contracts Limited (j)
First National Motor Facilities Limited (j)
First National Motor Finance Limited (j)
First National Motor Leasing Limited (j)
First National Motor plc
First National Tricity Finance Limited
Fondation Holding Auto ABS Belgium
Loans
Mexico
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
Luxembourg
Spain
Spain
Mexico
Peru
France
Brazil
Brazil
Brazil
Brazil
Portugal
Spain
Spain
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Belgium
Fondo de Titulización de Activos Santander
Consumer Spain Auto 2014-1
Spain
0.00%
100.00%
100.00%
100.00%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1 00.00 %
0.00
%
100.00
%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Services
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Holding
company
—
(b)
—
—
Securitization
0.00 %
70.00 %
70.00 %
—
0.00%
96.24%
100.00%
100.00%
1 00.00%
0.00%
100.00%
100.00%
0.00%
90.00%
90.00%
90.00%
0.00%
89.91%
100.00%
100.00%
0.00%
89.91%
100.00%
100.00%
Holding
company
Services
Finance
company
Inactive
Services
Insurance
0.00%
53.95%
60.00%
—
IT services
0.00%
89.91%
100.00%
100.00%
0.00%
51.00%
100.00%
100.00%
0.00%
51.00%
51.00%
51.00%
0.00%
100.00%
100.00%
100.00%
IT services
Finance
company
Finance
company
Holding
company
0.00%
100.00%
100.00%
100.00%
Leasing
0.00%
100.00%
100.00%
100.00%
Leasing
0.00%
100.00%
100.00%
100.00%
Leasing
0.00%
100.00%
100.00%
100.00%
Advisory
services
0.00%
100.00%
100.00%
100.00%
Leasing
0.00%
100.00%
100.00%
100.00%
Inactive
0.00%
100.00%
100.00%
100.00%
Finance
company
—
—
(b)
(b)
—
—
—
Securitization
—
Securitization
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
97
5
10
0
38
25
(6)
(31)
(41)
(37)
(29)
(51)
(69)
(92)
(122)
(135)
0
0
0
26
0
1
0
27
1
58
132
2
2
8
4
0
(1)
0
53
45
77
82
82
79
83
97
136
149
156
181
(115)
(310)
(275)
1
0
0
0
6
0
56
(12)
0
2
0
96
1
9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
20
0
1
0
33
1
102
95
1
4
4
260
59
140
1,259
(2)
1,020
0
0
0
0
0
0
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6
0
0
Annual report 2021 773
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A. 1
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
—
—
—
—
—
—
—
Indirect Year 2021 Year 2020 Activity
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
Securitization
Securitization
Securitization
Securitization
—
Securitization
—
Securitization
—
Securitization
0.00% 100.00%
100.00%
100.00% Fund
management
company
0.00% 100.00%
100.00%
100.00% Finance
company
—
(b)
—
—
Securitization
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.00% 100.00 %
100.00 %
100.00 % Securitization
(134)
136
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
—
Inactive
0.00% 100.00 %
100.00 %
100.00 % Securitization
—
—
—
(b)
(b)
(b)
—
—
—
—
Securitization
—
—
Investment
fund
Investment
fund
5
0
0
0
(6)
0
0
0
130
(6)
194
23
Location
Company
Fondo de Titulización PYMES Santander 13 Spain
Fondo de Titulización PYMES Santander 14 Spain
Fondo de Titulización PYMES Santander 15 Spain
Spain
Fondo de Titulización Santander Consumer
Spain Auto 2016-1
Fondo de Titulización Santander Consumer
Spain Auto 2016-2
Fondo de Titulización Santander
Financiación 1
Spain
Spain
Fondo de Titulización, RMBS Santander 7
Fondos Santander, S.A. Administradora de
Fondos de Inversión (en liquidación) (j)
Spain
Uruguay
Fortensky Trading, Ltd.
Fosse (Master Issuer) Holdings Limited
Fosse Funding (No.1) Limited
Fosse Master Issuer PLC
Fosse PECOH Limited
Fosse Trustee (UK) Limited
FTPYME Banesto 2, Fondo de Titulización
de Activos
Fundo de Investimento em Direitos
Creditórios Atacado- Não Padronizado
Fundo de Investimentos em Direitos
Creditórios Multisegmentos NPL Ipanema
VI – Não padronizado
Gamma, Sociedade Financeira de
Titularização de Créditos, S.A.
Ireland
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Spain
Brazil
Brazil
Portugal
0.00%
99.86 %
100.00 %
100.00 % Securitization
GC FTPYME Pastor 4 Fondo de Titulización
de Activos
Spain
—
(b)
—
—
Securitization
Gentium Payments Processing FZ-LLC
United Arab
Emirates
0.00% 100.00%
100.00%
—
Financial
services
Gesban México Servicios Administrativos Mexico
Globales, S.A. de C.V.
Gesban Santander Servicios Profesionales
Contables Limitada
Chile
Gesban Servicios Administrativos Globales,
S.L.
Spain
Gesban UK Limited
Gestión de Instalaciones Fotovoltaicas, S.L.
Unipersonal
Gestión de Inversiones JILT, S.A.
Unipersonal
United
Kingdom
Spain
Spain
0.00% 100.00%
100.00%
100.00% Services
0.00% 100.00%
100.00%
100.00% Accounting
services
99.99%
0.01%
100.00%
100.00% Services
0.00% 100.00%
100.00%
100.00% Payments and
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
Gestora de Procesos S.A. en liquidación (j)
Peru
0.00% 100.00%
100.00%
Getnet Adquirência e Serviços para Meios
de Pagamento S.A.
Brazil
0.04% 89.88%
89.91%
Getnet Europe, Entidad de Pago, S.L.
Spain
0.00% 100.00%
100.00%
Getnet Sociedade de Credito Direto S.A.
Brazil
0.00% 89.91%
100.00%
collection
services
100.00% Renewable
energies
100.00% Services
100.00% Holding
company
100.00% Payment
services
100.00% Payment
services
— Finance
company
7
0
4
1
1
5
1
1
5
0
340
215
12
0
0
(2)
0
0
0
0
0
(2)
0
75
6
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
2
0
0
1
0
0
5
0
297
218
12
Annual report 2021 774
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Gira, Gestão Integrada de Recebíveis do
Agronegócio S.A.
Location
Brazil
Golden Bar (Securitisation) S.R.L.
Golden Bar Stand Alone 2016-1
Golden Bar Stand Alone 2018-1
Golden Bar Stand Alone 2019-1
Golden Bar Stand Alone 2020-1
Golden Bar Stand Alone 2020-2
Golden Bar Stand Alone 2021-1
Grupo Empresarial Santander, S.L.
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Spain
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect Year 2021 Year 2020 Activity
0.00% 71.93%
80.00%
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
99.62%
0.38%
100.00%
Grupo Financiero Santander México, S.A.
de C.V.
Mexico
100.00%
0.00%
100.00%
Guaranty Car, S.A. Unipersonal
Hipototta No. 13
Hipototta No. 4 FTC
Hipototta No. 4 plc
Hipototta No. 5 FTC
Hipototta No. 5 plc
Holbah II Limited
Spain
Portugal
Portugal
Ireland
Portugal
Ireland
Bahamas
0.00% 100.00%
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
100.00%
—
—
—
—
—
0.00% 100.00%
100.00%
Holbah Santander, S.L. Unipersonal
Spain
0.00% 100.00%
100.00%
— Consulting
services
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
100.00% Holding
company
100.00% Holding
company
100.00% Automotive
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
100.00% Holding
company
100.00% Holding
company
Holmes Funding Limited
Holmes Holdings Limited
Holmes Master Issuer plc
Holmes Trustees Limited
Hyundai Capital Bank Europe GmbH
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Germany
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
— Securitization
(3)
0
0.00% 100.00%
100.00%
100.00% Securitization
(11)
0.00% 100.00%
100.00%
100.00% Securitization
0.00% 51.00%
51.00%
51.00% Banking
Ibérica de Compras Corporativas, S.L.
Spain
97.17%
2.83%
100.00%
100.00% E-commerce
Independence Community Bank Corp.
United States
0.00% 100.00%
100.00%
Insurance Funding Solutions Limited
Interfinance Holanda B.V.
United
Kingdom
Netherlands
Inversiones Capital Global, S.A.
Unipersonal
Inversiones Marítimas del Mediterráneo,
S.A.
Spain
Spain
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
0.00%
100.00%
100.00% Holding
company
100.00% Finance
company
100.00% Holding
company
100.00% Holding
company
0.00% 100.00%
100.00%
100.00%
Inactive
Isar Valley S.A.
Isla de los Buques, S.A.
Klare Corredora de Seguros S.A.
Landcompany 2020, S.L.
Langton Funding (No.1) Limited
Langton Mortgages Trustee (UK) Limited
Langton PECOH Limited
Langton Securities (2008-1) plc
Luxembourg
Spain
—
(b)
—
— Securitization
99.98%
0.02%
100.00%
100.00% Finance
company
Chile
Spain
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
0.00% 33.63%
50.10%
17.66% 82.34%
100.00%
0.00% 100.00%
100.00%
50.10%
Insurance
brokerage
100.00% Real estate
management
100.00% Securitization
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
— Inactive
0.00% 100.00%
100.00%
100.00% Securitization
EUR million (a)
Capital +
reserves
Net
results
Carrying
amount
1
0
0
0
0
0
0
0
(1)
0
0
0
0
0
0
0
2
0
0
0
0
0
0
0
3,348
637
2,406
4,837
584
4,510
2
0
(51)
(3)
(39)
(11)
404
1
0
(2)
(1)
(2)
(2)
0
213
349
11
0
(1)
0
(6)
1
0
701
7
2
0
0
0
0
0
557
785
0
0
0
0
391
6
3,501
85
3,587
0
0
105
5
0
1
6
0
0
(6)
(1)
0
0
(3)
0
0
111
0
0
1
1
1,779
(78)
1,704
(22)
22
0
0
1
0
0
(1)
0
0
0
0
Annual report 2021 775
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Merciver, S.L.
Spain
99.90%
0.10%
100.00%
Colombia
Mexico
0.00% 50.10%
100.00%
0.00% 50.10%
100.00%
Subsidiaries of Banco Santander, S.A.
1
Company
Langton Securities (2010-1) PLC
Langton Securities (2010-2) PLC
Langton Securities Holdings Limited
Laparanza, S.A.
Liderança Serviços Especializados em
Cobranças Ltda.
Liquetine, S.L
Liquidity Limited
Luri 1, S.A., en liquidación (j) (m)
Luri 6, S.A. Unipersonal
MAC No. 1 Limited
Master Red Europa, S.L.
Mata Alta, S.L.
Max Merger Sub, Inc.
Mercadotecnia, Ideas y Tecnología, S.A.
de C.V.
Location
United
Kingdom
United
Kingdom
United
Kingdom
Spain
Brazil
Spain
United
Kingdom
Spain
Spain
United
Kingdom
Spain
Spain
United
States
Mexico
Mercury Trade Finance Solutions S.A.S.
Mercury Trade Finance Solutions, S.A. de
C.V.
Mercury Trade Finance Solutions, S.L.
Mercury Trade Finance Solutions, S.p.A.
Merlion Aviation One Designated Activity
Company
Mortgage Engine Limited
Motor 2016-1 Holdings Limited
Motor 2016-1 PLC
Motor 2017-1 Holdings Limited
Motor 2017-1 PLC
Motor Securities 2018-1 Designated
Activity Company
Mouro Capital I LP
Multiplica SpA
Naviera Mirambel, S.L.
Naviera Trans Gas, A.I.E.
Naviera Trans Iron, S.L.
Naviera Trans Ore, A.I.E.
Naviera Transcantábrica, S.L.
Naviera Transchem, S.L. Unipersonal
NeoAuto S.A.C.
Spain
Chile
Ireland
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Ireland
United
Kingdom
Chile
Spain
Spain
Spain
Spain
Spain
Spain
Peru
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect
0.00% 100.00%
Year 2021 Year 2020 Activity
100.00%
100.00% Securitization
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
— Securitization
61.59%
0.00%
61.59%
0.00% 89.91%
100.00%
0.00% 70.00%
100.00%
0.00% 100.00%
100.00%
46.00%
0.00%
46.00%
100.00%
0.00%
100.00%
61.59% Agricultural
holding
— Collection
services
— Renewable
energies
100.00% Factoring
46.00% Real estate
100.00% Real estate
investment
—
(b)
—
— Mortgage
credit company
96.34%
0.00%
96.34%
96.34% Cards
0.00% 61.59%
100.00%
100.00% Real estate
0.00% 100.00%
100.00%
— Inactive
0.00% 70.00%
70.00%
— Payment
methods
100.00% Financial
advisory
— IT services
IT services
100.00%
IT services
IT services
100.00%
— Renting
100.00% Financial
services
— Securitization
0.00% 50.10%
50.10%
50.10%
0.00% 50.10%
(b)
—
100.00%
—
0.00% 100.00%
100.00%
—
(b)
—
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
— Securitization
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
— Securitization
EUR million (a)
Capital +
reserves
2
Net
results
(2)
Carrying
amount
0
0
0
28
(1)
0
(1)
0
0
0
0
2
0
0
0
0
0
16
1
1
0
0
1,366
(8)
1,373
0
1
0
0
1
1
0
0
10
1
25
0
0
0
0
3
0
0
0
1
0
6
(7)
(4)
0
0
0
(6)
(1)
0
0
0
6
(1)
0
1
0
0
15
1
0
0
24
0
0
0
0
0
0
0
0
0.00% 100.00%
100.00%
100.00%
Investment
fund
281
211
249
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
99.99%
0.01%
100.00%
100.00%
0.00%
100.00%
99.99%
0.01%
100.00%
100.00%
0.00%
100.00%
100.00%
0.00%
100.00%
100.00% Payment
services
100.00% Finance
company
100.00% Renting
100.00% Leasing
100.00% Renting
100.00% Leasing
100.00% Leasing
0.00% 55.00%
55.00%
55.00% Vehicles
purchase by
Internet
4
0
21
24
25
5
1
1
1
0
0
(3)
0
3
0
0
0
0
4
0
40
21
17
4
1
1
0
Annual report 2021 776
Newcomar, S.L., en liquidación (j)
Spain
40.00% 40.00%
80.00%
80.00% Real estate
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Location
Portugal
Direct
Indirect
0.00% 78.63%
Year 2021 Year 2020 Activity
78.74%
78.74%
Investment
fund
EUR million (a)
Capital +
reserves
254
Net
results
4
Carrying
amount
203
0.00% 100.00%
100.00%
100.00% E-commerce
Optimal Investment Services SA
Switzerland 100.00%
0.00%
100.00%
100.00% Fund
Subsidiaries of Banco Santander, S.A.
1
Company
Novimovest – Fundo de Investimento
Imobiliário
NW Services CO.
Open Bank Argentina S.A.
Open Bank, S.A.
Open Digital Market, S.L.
Open Digital Services Argentina S.A.U.
Open Digital Services, S.L.
Open Mx Servicios Administrativos, S.A.
de C.V.
Operadora de Carteras Gamma, S.A.P.I.
de C.V.
Optimal Multiadvisors Ireland Plc /
Optimal Strategic US Equity Ireland Euro
Fund (e) (p)
Optimal Multiadvisors Ireland Plc /
Optimal Strategic US Equity Ireland US
Dollar Fund (e) (p)
PagoFX Europe S.A.
PagoFX UK Ltd
PagoNxt Ltd
PagoNxt Merchant
SoluçõesTecnológicas Brasil Ltda.
United
Kingdom
United
Kingdom
Brazil
United
States
Argentina
Spain
Spain
Argentina
Spain
Mexico
0.00% 99.66%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
0.00 % 100.00 %
100.00%
100.00 %
99.97%
0.03%
100.00%
0.00% 100.00%
100.00%
Mexico
100.00%
0.00%
100.00%
100.00% Banking
100.00% Banking
100.00% Services
—
IT services
—
100.00% Services
Financial
services
100.00% Holding
company
Ireland
0.00%
0.00%
0.00%
54.10% Fund
management
company
Ireland
0.00%
0.00%
0.00%
51.93% Fund
management
company
Belgium
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
management
company
100.00% Payment
services
100.00% Payment
services
100.00% Holding
company
—
—
Financial
services
Financial
services
100.00% Payment
services
100.00% Services
IT services
100.00%
100.00% Holding
company
100.00% Holding
company
—
—
—
—
—
Logistics
services
Commerce
Securitization
Securitization
Securitization
—
Securitization
PagoNxt Merchant Solutions, S.L.
Spain
0.00% 100.00%
100.00%
PagoNxt One Trade UK Ltd
PagoNxt OneTrade España, E.D.E., S.L.
PagoNxt Solutions, S.L.
PagoNxt Trade Services, S.L.
PagoNxt Trade, S.L.
PagoNxt, S.L.
United
Kingdom
Spain
Spain
Spain
Spain
Spain
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
Parasant SA
Switzerland 100.00%
0.00%
100.00%
Paytec Logística e Armazém Ltda.
Brazil
0.00% 89.91%
100.00%
Paytec Tecnologia em Pagamentos Ltda. Brazil
PBD Germany Auto 2018 UG
(Haftungsbeschränkt)
PBD Germany Auto Lease Master 2019
PBD Germany Auto Lease Master S.A,
Compartment 2021-1
PBD Germany Auto Loan 2021 UG
(Haftungsbeschränkt)
PBE Companies, LLC
PECOH Limited
Pereda Gestión, S.A.
Germany
Luxembourg
Luxembourg
Germany
United
States
United
Kingdom
Spain
0.00% 89.91%
(b)
—
—
—
—
(b)
(b)
(b)
100.00%
—
—
—
—
0.00% 100.00%
100.00%
100.00% Real estate
110
0.00% 100.00%
100.00%
100.00%
Inactive
99.99%
0.01%
100.00%
100.00% Holding
company
Phoenix C1 Aviation Designated Activity
Company
Ireland
—
(b)
—
— Renting
6
35
451
0
0
0
(8)
10
0
0
176
(108)
0
8
33
0
0
2
5
0
0
1
9
0
0
(1)
(3)
0
2
33
462
0
0
18
0
6
29
0
0
1
2
0
913
(46)
938
0
0
90
197
244
0
0
(61)
(58)
(71)
0
0
29
140
172
1,815
(153)
1,838
1,162
(2)
927
0
3
0
0
0
0
0
45
13
0
0
0
0
0
0
0
0
35
4
0
3
0
0
0
0
110
0
4
0
Annual report 2021 777
100.00%
0.00%
100.00%
—
Holding
company
0.00% 100.00%
100.00%
100.00%
IT services
57
(20)
37
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Phoenix S.A.
Location
Uruguay
Direct
Indirect
0.00% 100.00%
Year 2021 Year 2020 Activity
— Payment
methods
100.00%
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
3
PI Distribuidora de Títulos e Valores
Mobiliários S.A.
Pingham International, S.A. (j)
Pony S.A.
Portal Universia Argentina S.A.
Portal Universia Portugal, Prestação de
Serviços de Informática, S.A.
Prime 16 – Fundo de Investimentos
Imobiliário
Brazil
0.00% 89.91%
100.00%
100.00% Securities
company
79
(6)
66
Uruguay
Luxembourg
Argentina
Portugal
0.00% 100.00%
(b)
—
100.00%
100.00%
—
—
0.00% 75.75%
75.75%
75.75%
0.00% 100.00%
100.00%
100.00%
Inactive
Securitization
Internet
Internet
0
0
0
0
0
0
0
0
0
0
0
0
Brazil
0.00% 89.91%
100.00%
100.00%
Investment
fund
31
(2)
24
PSA Bank Deutschland GmbH
PSA Banque France
PSA Consumer Finance Polska Sp. z o.o.
Germany
France
Poland
0.00% 50.00%
0.00% 50.00%
50.00%
50.00%
0.00% 40.22%
100.00%
PSA Finance Belux S.A.
Belgium
0.00% 50.00%
100.00%
PSA Finance Polska Sp. z o.o.
Poland
0.00% 40.22%
50.00%
PSA Finance UK Limited
PSA Financial Services Nederland B.V.
United
Kingdom
Netherlands
0.00% 50.00%
100.00%
0.00% 50.00%
100.00%
PSA Financial Services Spain, E.F.C., S.A.
Spain
0.00% 50.00%
50.00%
50.00% Banking
50.00% Banking
100.00% Finance
company
50.00% Finance
company
50.00% Finance
company
50.00% Finance
company
50.00% Finance
company
50.00% Finance
company
PSA Renting Italia S.p.A.
PSRT 2019-A
Punta Lima Wind Farm, LLC
Punta Lima, LLC
Retail Company 2021, S.L. Unipersonal
Retop S.A. (f)
Italy
United
States
United
States
United
States
Spain
Uruguay
0.00% 50.00%
(b)
—
100.00%
—
100.00% Renting
— Securitization
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Renewable
energies
100.00% Leasing
100.00%
0.00%
100.00%
— Real estate
100.00%
0.00%
100.00%
Return Capital S.A.
Brazil
0.00% 89.91%
100.00%
100.00% Finance
company
100.00% Collection
services
Riobank International (Uruguay) SAIFE (p) Uruguay
Roc Aviation One Designated Activity
Company
Roc Shipping One Designated Activity
Company
Rojo Entretenimento S.A.
SAM Asset Management, S.A. de C.V.,
Sociedad Operadora de Fondos de
Inversión
SAM Investment Holdings, S.L.
SANB Promotora de Vendas e Cobrança
S.A.
Sancap Investimentos e Participações
S.A.
Santander (CF Trustee Property
Nominee) Limited
Santander (CF Trustee) Limited (d)
Santander (UK) Group Pension Schemes
Trustees Limited (d)
Santander Ahorro Inmobiliario 1, S.A.
Ireland
Ireland
Brazil
Mexico
Spain
Brazil
Brazil
United
Kingdom
United
Kingdom
United
Kingdom
Spain
0.00% 100.00%
(b)
—
100.00%
—
100.00%
Inactive
— Renting
—
(b)
—
— Renting
0.00% 85.06%
94.60%
94.60% Services
0.00% 100.00%
100.00%
100.00% Fund
management
company
92.37%
7.63%
100.00%
0.00% 89.91%
100.00%
0.00% 89.91%
100.00%
100.00% Management
of funds
100.00% Finance
company
100.00% Holding
company
0.00% 100.00%
100.00%
100.00%
Inactive
—
(b)
—
— Inactive
0.00% 100.00%
100.00%
100.00%
Inactive
98.53%
0.00%
98.53%
98.53% Real estate
rental
99.91% Real estate
rental
Santander Ahorro Inmobiliario 2, S.A.
Spain
99.91%
0.00%
99.91%
517
1,068
3
91
33
339
52
739
9
58
44
44
262
14
(1)
0
(2)
(4)
21
20
57
74
1
15
5
65
17
53
11
53
(1)
(1)
(3)
14
4
0
(2)
0
0
21
229
463
0
52
10
181
32
363
3
0
43
43
262
45
3
0
0
0
17
162
1,326
74
1,597
3
139
(1)
39
2
142
0
0
0
1
1
0
0
0
0
0
0
0
0
1
1
Annual report 2021 778
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
Santander Asesorías Financieras
Limitada
Santander Asset Finance (December)
Limited
Santander Asset Finance plc
Santander Asset Management -
S.G.O.I.C., S.A.
Location
Chile
United
Kingdom
United
Kingdom
Portugal
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
0.00%
Indirect
67.44%
Year 2021 Year 2020 Activity
100.00%
100.00%
Securities
company
0.00%
1 00.00%
100.00%
100.00%
Leasing
0.00%
100.00%
100.00%
100.00%
Leasing
0.00%
100.00%
100.00%
100.00%
Santander Asset Management Chile S.A.
Chile
0.01%
99.94%
100.00%
100.00%
Santander Asset Management
Luxembourg, S.A.
Santander Asset Management S.A.
Administradora General de Fondos
Luxembourg
0.00%
100.00%
100.00%
100.00%
Chile
0.00%
100.00%
100.00%
100.00%
Santander Asset Management UK
Holdings Limited
Santander Asset Management UK
Limited
United
Kingdom
United
Kingdom
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
Santander Asset Management, LLC (j)
Santander Asset Management, S.A.,
S.G.I.I.C.
Santander Back-Offices Globales
Mayoristas, S.A.
Santander Banca de Inversión Colombia,
S.A.S.
Santander Bank & Trust Ltd.
Santander Bank Polska S.A.
Santander Bank, National Association
Santander Brasil Administradora de
Consórcio Ltda.
Santander Brasil Gestão de Recursos
Ltda.
Santander Capital Desarrollo, SGEIC, S.A.
Unipersonal
Puerto Rico
Spain
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
Spain
100.00%
0.00%
100.00%
100.00%
Colombia
100.00%
0.00%
100.00%
100.00%
Bahamas
Poland
United
States
Brazil
Brazil
Spain
0.00%
1 00.00%
100.00%
100.00%
67.41%
0.00%
67.41%
67.41%
0.00%
100.00%
100.00%
100.00%
0.00%
89.91%
100.00%
100.00%
Services
0.08%
99.92%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
Santander Capital Structuring, S.A. de
C.V.
Santander Capitalização S.A.
Santander Cards Ireland Limited
Santander Cards Limited
Santander Cards UK Limited
Santander Chile Holding S.A.
Mexico
0.00%
100.00%
100.00%
100.00%
Brazil
Ireland
United
Kingdom
United
Kingdom
Chile
0.00%
89.91%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
0.00%
1 00.00%
100.00%
100.00%
0.00%
1 00.00%
100.00%
100.00%
22.11%
77.73%
99.84%
99.84%
Santander Consulting (Beijing) Co., Ltd.
China
0.00%
100.00%
100.00%
100.00%
Santander Consumer (UK) plc
Santander Consumer Auto Receivables
Funding 2013-B2 LLC
Santander Consumer Auto Receivables
Funding 2013-B3 LLC
Santander Consumer Auto Receivables
Funding 2018-L1 LLC
Santander Consumer Auto Receivables
Funding 2018-L3 LLC
United
Kingdom
United
States
United
States
United
States
United
States
0.00%
100.00%
100.00%
100.00%
0.00%
80.22%
100.00%
100.00%
0.00%
80.22%
100.00%
100.00%
0.00%
80.22%
100.00%
100.00%
0.00%
80.22%
100.00%
100.00%
Fund
managemen
company
t
Securities
investment
t
t
Fund
managemen
company
Fund
managemen
company
Holding
company
Managemen
t
of funds and
portfolios
t
t
Managemen
Fund
managemen
company
Services
Advisory
services
Banking
Banking
Banking
Securities
investment
t
Managemen
company of
investment
entities
Investment
companies
Insurance
Cards
Cards
Finance
company
Holding
company
Advisory
services
Finance
company
Finance
company
Finance
company
Finance
company
Finance
company
EUR million (a)
Capital +
reserves
53
Net
results
2
Carrying
amount
37
73
287
7
(5)
4
13
195
41
0
248
2
2
5
11
5
0
4
9
5
15
(1)
61
1
0
0
173
12
0
0
132
186
201
0
393
1
2
66
4,984
10,197
(1)
22
199
444
4,270
1
0,637
107
396
5
11
9
(8)
100
163
53
30
0
0
58
0
0
0
144
470
3
0
60
0
100
115
1,490
310
1,208
9
0
4
853
296
310
(283)
200
101
182
63
70
75
49
0
0
0
0
Annual report 2021 779
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
Santander Consumer Auto Receivables
Funding 2018-L5 LLC
Santander Consumer Auto Receivables
Funding 2019-B1 LLC
Santander Consumer Auto Receivables
Funding 2019-L2 LLC
Santander Consumer Auto Receivables
Funding 2019-L3 LLC
Santander Consumer Auto Receivables
Funding 2020-B1 LLC
Santander Consumer Auto Receivables
Funding 2020-L1 LLC
Santander Consumer Auto Receivables
Funding 2020-L2 LLC
Santander Consumer Auto Receivables
Funding 2021-B1 LLC
Santander Consumer Auto Receivables
Funding 2021-B2 LLC
Santander Consumer Auto Receivables
Funding 2021-L1 LLC
Santander Consumer Auto Receivables
Grantor Trust 2021-D
Santander Consumer Auto Receivables
Trust 2021-D
Santander Consumer Bank AG
Santander Consumer Bank AS
Santander Consumer Bank GmbH
Santander Consumer Bank S.A.
Santander Consumer Bank S.p.A.
Santander Consumer Banque S.A.
Santander Consumer Credit Services
Limited
Santander Consumer Finance Global
Services, S.L.
Location
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
Germany
Norway
Austria
Poland
Italy
France
United
Kingdom
Spain
% of ownership
held by
Banco Santander
Direct
Indirect
0.00% 80.22%
Percentage of voting
power (k)
Year 2021 Year 2020 Activity
100.00% Finance
100.00%
company
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
0.00% 80.22%
100.00%
—
Inactive
0.00% 80.22%
100.00%
—
Inactive
0.00% 80.22%
100.00%
—
Inactive
0.00% 80.22%
100.00%
—
Inactive
0.00% 80.22%
100.00%
—
Inactive
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 80.44%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Banking
100.00% Banking
100.00% Banking
100.00% Banking
100.00% Banking
100.00% Banking
100.00% Finance
company
0.00% 100.00%
100.00%
100.00%
IT
Santander Consumer Finance Inc.
Canada
96.42%
0.00%
96.42%
Santander Consumer Finance Limitada
Chile
49.00% 34.23%
100.00%
Santander Consumer Finance Oy
Finland
0.00% 100.00%
100.00%
96.42% Holding
company
100.00% Finance
company
100.00% Finance
company
Santander Consumer Finance Schweiz
AG
Santander Consumer Finance, S.A.
Santander Consumer Financial Solutions
Sp. z o.o.
Switzerland
0.00% 100.00%
100.00%
100.00% Leasing
Spain
Poland
100.00%
0.00%
100.00%
0.00% 80.44%
100.00%
100.00% Banking
100.00% Leasing
Santander Consumer Finanse Sp. z o.o. w
likwidacji (j)
Poland
0.00% 80.44%
100.00%
100.00% Services
Santander Consumer Holding Austria
GmbH
Austria
0.00% 100.00%
100.00%
Santander Consumer Holding GmbH
Germany
0.00% 100.00%
100.00%
Santander Consumer Inc.
Canada
0.00% 96.42%
100.00%
100.00% Holding
company
100.00% Holding
company
100.00% Finance
company
100.00% Services
Santander Consumer International
Puerto Rico LLC
Santander Consumer Leasing GmbH
Santander Consumer Mobility Services,
S.A.
Santander Consumer Multirent Sp. z o.o. Poland
Puerto Rico
0.00% 80.22%
100.00%
Germany
Spain
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Leasing
100.00% Renting
Santander Consumer Operations
Services GmbH
Germany
0.00% 100.00%
100.00%
0.00% 80.44%
100.00%
100.00% Leasing
100.00% Services
EUR million (a)
Capital +
reserves
53
Net
results
99
Carrying
amount
0
(140)
190
58
32
(98)
71
7
0
0
0
0
0
3,313
2,540
399
743
824
544
(39)
6
63
63
314
50
87
36
82
39
11
0
0
0
0
0
461
202
45
35
178
40
0
2
0
20
54
7
0
0
0
0
0
0
0
0
0
0
0
5,070
2,313
363
484
603
492
0
5
94
41
165
60
8,807
601
10,022
2
16
0
0
2
12
364
20
518
5,564
309
6,077
66
9
20
12
27
11
16
0
109
0
4
1
46
7
101
12
5
18
Annual report 2021 780
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Location
Company
Santander Consumer Receivables 10 LLC United
States
Santander Consumer Receivables 11 LLC United
States
Santander Consumer Receivables 3 LLC United
States
Santander Consumer Receivables 7 LLC United
States
United
States
Spain
Santander Consumer Receivables
Funding LLC
Santander Consumer Renting, S.L.
% of ownership
held by
Banco Santander
Direct
Indirect
0.00% 80.22%
Percentage of voting
power (k)
Year 2021 Year 2020 Activity
100.00% Finance
100.00%
company
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
0.00% 80.22%
100.00%
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
0.00% 100.00%
100.00%
100.00% Leasing
Santander Consumer S.A.
Argentina
0.00% 99.31%
100.00%
100.00% Finance
company
Santander Consumer S.A. Compañía de
Financiamiento
Colombia
79.02% 20.98%
100.00%
—
Finance
company
Santander Consumer Services GmbH
Santander Consumer Services, S.A.
Austria
Portugal
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Services
100.00% Finance
company
Santander Consumer Spain Auto 2019-1,
Fondo de Titulización
Spain
Santander Consumer Spain Auto 2020-1,
Fondo de Titulización
Spain
Santander Consumer Spain Auto 2021-1,
Fondo de Titulización
Spain
—
—
—
(b)
(b)
(b)
—
—
—
—
—
—
Securitization
Securitization
Securitization
Santander Consumer Technology
Services GmbH
Germany
0.00% 100.00%
100.00%
100.00%
IT services
EUR million (a)
Capital +
reserves
764
Net
results
286
Carrying
amount
0
420
315
303
1
37
7
6
0
11
0
0
0
21
196
60
369
3
1
(2)
(1)
0
2
0
0
0
3
0
0
0
0
38
6
6
0
6
0
0
0
22
Santander Consumer USA Inc.
Santander Consumer USA Holdings Inc. United
States
United
States
Spain
Mexico
Santander Consumo 4, F.T.
Santander Consumo, S.A. de C.V.,
S.O.F.O.M., E.R., Grupo Financiero
Santander México
Santander Corredora de Seguros
Limitada
Santander Corredores de Bolsa Limitada Chile
Chile
Santander Corretora de Câmbio e
Valores Mobiliários S.A.
Santander Corretora de Seguros,
Investimentos e Serviços S.A.
Santander Customer Voice, S.A.
Santander de Titulización, S.G.F.T., S.A.
Santander Digital Assets, S.L.
Santander Drive Auto Receivables LLC
Santander Drive Auto Receivables Trust
2017-3
Santander Drive Auto Receivables Trust
2018-1
Santander Drive Auto Receivables Trust
2018-2
Santander Drive Auto Receivables Trust
2018-3
Santander Drive Auto Receivables Trust
2018-4
Santander Drive Auto Receivables Trust
2018-5
Brazil
Brazil
Spain
Spain
Spain
United
States
United
States
United
States
United
States
United
States
United
States
United
States
0.00% 80.22%
80.22%
0.00% 80.22%
100.00%
—
(b)
—
80.24% Holding
company
100.00% Finance
company
— Securitization
0.00% 96.24%
100.00%
100.00% Cards
4,688
2,871
6,705
5,257
(917)
3,481
0
1,123
0
222
0
1,295
0.00% 67.20%
100.00%
100.00%
Insurance
brokerage
0.00% 83.23%
100.00%
0.00% 89.91%
100.00%
0.00% 89.91%
100.00%
99.50%
0.50%
100.00%
81.00% 19.00%
100.00%
100.00% Securities
company
100.00% Securities
company
100.00% Holding
company
100.00% Services
100.00% Fund
management
company
IT services
100.00%
100.00% Finance
company
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
100.00%
0.00%
100.00%
0.00% 80.22%
100.00%
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
— Securitization
(4)
72
47
114
567
2
5
0
0
52
41
18
1
4
2
2
13
166
0
3
2
0
29
39
37
52
46
50
50
40
115
656
1
2
4
0
0
0
0
0
0
0
Annual report 2021 781
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
EUR million (a)
Year 2021 Year 2020 Activity
—
Securitization
—
Securitization
—
Securitization
Net
results
58
Carrying
amount
0
Capital +
reserves
(15)
(23)
(38)
80
86
Direct
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Indirect
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Securitization
(111)
134
—
Securitization
(131)
175
—
Securitization
(241)
271
—
Securitization
(242)
233
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Inactive
—
Inactive
—
Inactive
—
Inactive
0
0
0
0
0
0
0
0
(43)
(162)
(263)
(272)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Subsidiaries of Banco Santander, S.A.
1
Company
Santander Drive Auto Receivables Trust
2019-1
Santander Drive Auto Receivables Trust
2019-2
Santander Drive Auto Receivables Trust
2019-3
Santander Drive Auto Receivables Trust
2020-1
Santander Drive Auto Receivables Trust
2020-2
Santander Drive Auto Receivables Trust
2020-3
Santander Drive Auto Receivables Trust
2020-4
Santander Drive Auto Receivables Trust
2021-1
Santander Drive Auto Receivables Trust
2021-2
Santander Drive Auto Receivables Trust
2021-3
Santander Drive Auto Receivables Trust
2021-4
Santander Drive Auto Receivables Trust
2022-1
Santander Drive Auto Receivables Trust
2022-2
Santander Drive Auto Receivables Trust
2022-3
Santander Drive Auto Receivables Trust
2022-4
Santander Equity Investments Limited
Santander España Servicios Legales y de
Cumplimiento, S.L.
Santander Estates Limited
Santander European Hospitality
Opportunities
Location
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
Kingdom
Spain
0.00%
1 00.00%
100.00%
100.00%
Finance
company
99.97%
0.03%
100.00%
100.00%
Services
United
Kingdom
Luxembourg
0.00%
1 00.00%
100.00%
100.00%
Real estate
100.00%
0.00%
100.00%
—
Investment
fund
41
(11)
35
9
3
1
0
1
(10)
0
0
8
0
1
0
Santander F24 S.A.
Poland
0.00%
67.41%
100.00%
100.00%
Finance
company
Santander Facility Management España,
S.L. Unipersonal
Spain
100.00%
0.00%
100.00%
100.00%
Real estate
417
(3)
392
Santander Factoring S.A.
Santander Factoring Sp. z o.o.
Chile
Poland
0.00%
99.84%
100.00%
100.00%
0.00%
67.41%
100.00%
100.00%
Factoring
Financial
services
Santander Factoring y Confirming, S.A.,
E.F.C.
Santander Finance 2012-1 LLC
Santander Financial Exchanges Limited
Santander Financial Services plc
Santander Financial Services, Inc.
Spain
100.00%
0.00%
100.00%
100.00%
Factoring
United
States
United
Kingdom
United
Kingdom
Puerto Rico
0.00%
100.00%
100.00%
100.00%
Financial
services
100.00%
0.00%
100.00%
100.00%
Inactive
0.00%
100.00%
100.00%
100.00%
Banking
0.00%
100.00%
100.00%
100.00%
Finance
company
Santander Financiamientos S.A.
Peru
100.00%
0.00%
100.00%
—
Finance
company
Santander Financing S.A.S.
Colombia
100.00%
0.00%
100.00%
100.00%
Santander Finanse Sp. z o.o.
Poland
0.00%
67.41%
100.00%
100.00%
Santander Fintech Holdings, S.L.
Spain
100.00%
0.00%
100.00%
100.00%
Financial
advisory
Financial
services
Holding
company
37
27
208
3
0
356
22
8
1
60
79
0
11
70
0
0
37
1
126
3
0
32
401
(7)
(1)
(1)
7
(14)
14
8
1
19
61
Annual report 2021 782
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
Santander Fintech Limited
Santander Fundo de Investimento
Santillana Multimercado Crédito Privado
Investimento No Exterior (e)
Santander Fundo de Investimento SBAC
Referenciado di Crédito Privado (h)
Santander Gestión de Recaudación y
Cobranzas Ltda.
Santander Global Cards & Digital
Solutions Brasil S.A.
Location
United
Kingdom
Brazil
Brazil
Chile
Brazil
Santander Global Consumer Finance
Limited
Santander Global Facilities, S.A. de C.V. Mexico
United
Kingdom
Santander Global Facilities, S.L.
Santander Global Services S.A. (j)
Santander Global Sport, S.A.
Santander Global Technology and
Operations Brasil Ltda.
Santander Global Technology and
Operations Chile Limitada
Santander Global Technology and
Operations, S.L.
Santander Green Investment, S.L.
Santander Guarantee Company
Santander Hipotecario 1 Fondo de
Titulización de Activos
Santander Hipotecario 2 Fondo de
Titulización de Activos
Santander Hipotecario 3 Fondo de
Titulización de Activos
Santander Holding Imobiliária S.A.
Santander Holding Internacional, S.A.
Santander Holdings USA, Inc.
Santander Inclusión Financiera, S.A. de
C.V., S.O.F.O.M., E.R., Grupo Financiero
Santander México
Santander Insurance Agency, U.S., LLC
United
States
Santander Insurance Services UK Limited United
Santander Intermediación Correduría de
Seguros, S.A.
Spain
Uruguay
Spain
Brazil
Chile
Spain
Spain
United
Kingdom
Spain
Spain
Spain
Brazil
Spain
United
States
Mexico
Kingdom
Spain
% of ownership
held by
Banco Santander
Direct
100.00%
Indirect
0.00%
Percentage of voting
power (k)
Year 2021 Year 2020 Activity
100.00% Finance
100.00%
—
(b)
—
company
— Investment
fund
0.00% 89.91%
100.00%
100.00%
Investment
fund
0.00% 99.84%
100.00%
100.00% Financial
services
0.00% 100.00%
100.00%
100.00%
IT consulting
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
100.00% Finance
company
100.00% Real estate
management
100.00% Real estate
100.00% Services
100.00% Sports activity
0.00% 100.00%
100.00%
100.00%
IT services
0.00% 100.00%
100.00%
100.00%
IT services
100.00%
0.00%
100.00%
100.00%
IT services
99.97%
0.03%
100.00%
— Holding
company
0.00% 100.00%
100.00%
100.00% Leasing
—
—
—
(b)
(b)
(b)
—
—
—
— Securitization
— Securitization
— Securitization
0.00% 89.91%
100.00%
99.95%
0.05%
100.00%
100.00%
0.00%
100.00%
0.00% 96.24%
100.00%
100.00% Real estate
100.00% Holding
company
100.00% Holding
company
100.00% Finance
company
0.00% 100.00%
100.00%
100.00%
Insurance
100.00%
0.00%
100.00%
100.00% Asset
management
100.00%
0.00%
100.00%
100.00%
Insurance
brokerage
Santander International Products, Plc. (l)
Ireland
99.99%
0.01%
100.00%
Santander Inversiones S.A.
Chile
0.00% 100.00%
100.00%
Santander Investment Bank Limited
Santander Investment Chile Limitada
Bahamas
Chile
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
Santander Investment Securities Inc.
Santander Investment, S.A.
Santander Investments GP 1 S.à.r.l.
United
States
Spain
Luxembourg
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
Santander Inwestycje Sp. z o.o.
Poland
0.00% 67.41%
100.00%
100.00% Finance
company
100.00% Holding
company
100.00% Banking
100.00% Finance
company
100.00% Securities
company
100.00% Banking
100.00% Management
of funds
100.00% Securities
company
EUR million (a)
Capital +
reserves
218
Net
results
(7)
Carrying
amount
144
413
19
432
1,440
11
1,303
6
0
7
125
73
0
21
3
22
434
14
5
0
0
0
71
4,031
0
0
0
3
2
0
(2)
0
2
5
0
7
127
70
0
19
1
20
19
370
0
0
0
0
0
1
14
3
0
0
0
65
26
2,247
17,120
2,633
12,579
14
1
44
24
1
968
577
473
456
1,408
1
17
(7)
0
0
2
0
7
1
44
18
0
201
1,032
15
6
32
77
0
1
529
321
488
245
1
7
Annual report 2021 783
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
Santander ISA Managers Limited
Santander Lease, S.A., E.F.C.
Santander Leasing Poland Securitization
01 Designated Activity Company
Santander Leasing S.A.
Santander Leasing S.A. Arrendamento
Mercantil
Santander Leasing, LLC
Santander Lending Limited
Santander Mediación Operador de
Banca-Seguros Vinculado, S.A.
Location
United
Kingdom
Spain
Ireland
Poland
Brazil
United
States
United
Kingdom
Spain
% of ownership
held by
Banco Santander
Direct
Indirect
0.00% 100.00%
100.00%
—
0.00%
(b)
Percentage of voting
power (k)
Year 2021 Year 2020 Activity
100.00%
100.00% Management
of funds and
portfolios
100.00%
100.00% Leasing
—
—
Securitization
0.00% 67.41%
100.00%
0.00% 89.91%
100.00%
100.00% Leasing
100.00% Leasing
0.00% 100.00%
100.00%
100.00% Leasing
0.00% 100.00%
100.00%
100.00% Mortgage
credit company
100.00%
0.00%
100.00%
100.00%
Insurance
intermediary
Santander Merchant Platform
Operations, S.A. de C.V.
Santander Merchant Platform Services, Mexico
S.A. de C.V.
Mexico
0.00% 98.16%
100.00%
0.00% 98.16%
100.00%
Santander Merchant Platform Solutions
México, S.A. de C.V.
Santander Merchant Platform Solutions
S.A.
Santander Merchant Platform Solutions
Uruguay S.A.
Mexico
0.00% 98.16%
100.00%
Argentina
0.00% 99.66%
100.00%
Uruguay
0.00% 100.00%
100.00%
Santander Merchant S.A.
Argentina
5.10% 94.90%
100.00%
100.00% Financial
services
100.00% Financial
services
100.00% Holding
company
100.00% Payment
methods
100.00% Payment
methods
100.00% Finance
company
100.00% Financial
services
100.00% Pension fund
management
company
100.00% Pension fund
management
company
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
management
company
100.00% Finance
company
100.00% Holding
company
Santander Mortgage Holdings Limited
Santander Paraty Qif PLC
United
Kingdom
Ireland
0.00% 100.00%
100.00%
(1)
(23)
0.00% 89.91%
100.00%
100.00%
Investment
companies
Santander Pensiones, S.A., E.G.F.P.
Spain
0.00% 100.00%
100.00%
Santander Pensões - Sociedade Gestora
de Fundos de Pensões, S.A.
Portugal
100.00%
0.00%
100.00%
Santander Prime Auto Issuance Notes
2018-A Designated Activity Company
Santander Prime Auto Issuance Notes
2018-B Designated Activity Company
Santander Prime Auto Issuance Notes
2018-C Designated Activity Company
Santander Prime Auto Issuance Notes
2018-D Designated Activity Company
Santander Prime Auto Issuance Notes
2018-E Designated Activity Company
Santander Private Banking Gestión, S.A.,
S.G.I.I.C.
Santander Private Banking s.p.a. in
Liquidazione (j)
Santander Private Banking UK Limited
Santander Private Real Estate Advisory &
Management, S.A.
Santander Private Real Estate Advisory,
S.A.
Ireland
Ireland
Ireland
Ireland
Ireland
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
Spain
100.00%
0.00%
100.00%
100.00% Fund
Italy
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
United
Kingdom
Spain
99.99%
0.01%
100.00%
100.00% Real estate
Spain
100.00%
0.00%
100.00%
100.00% Real estate
Spain
Santander Real Estate, S.A.
Santander Retail Auto Lease Funding LLC United
States
100.00%
0.00%
100.00%
0.00% 80.22%
100.00%
Inactive
100.00%
100.00% Finance
company
EUR million (a)
Capital +
reserves
37
Net
results
8
Carrying
amount
6
11
0
9
51
0
28
59
1,590
61
0
133
1,709
0
243
49
1
1
119
15
5
1
261
83
3
(15)
(17)
(6)
(24)
(10)
52
13
304
4
14
1
0
1
10
1
1
0
28
(6)
0
0
0
16
0
10
(12)
(1)
(2)
(4)
2
247
3
2
1
134
10
5
2
0
235
184
3
0
0
0
0
0
12
35
1
0
0
1
0
0
7
414
4
15
1
0
Annual report 2021 784
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Santander Retail Auto Lease Trust 2019-
A
Location
United
States
Direct
—
Indirect
(b)
Year 2021 Year 2020
EUR million (a)
Activity
Securitization
Capital +
reserves
67
Net
results
89
Carrying
amount
0
—
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Inactive
—
Inactive
—
Inactive
42
45
48
26
0
0
0
0
0
0
71
59
33
40
63
63
88
0
0
0
—
Securitization
(112)
111
—
Inactive
0
6
0
3
0
0
0
39
0
7
0
1
0
0
0
4
Securities
company
Securitization
Fund
management
company
Holding
company
Securities
company
0
0
0
0
0
0
0
0
0
0
0
0
3
0
4
0
0
0
43
Santander Retail Auto Lease Trust 2019-
B
Santander Retail Auto Lease Trust 2019-
C
Santander Retail Auto Lease Trust 2020-
A
Santander Retail Auto Lease Trust 2020-
B
Santander Retail Auto Lease Trust 2021-
A
Santander Retail Auto Lease Trust 2021-
B
Santander Retail Auto Lease Trust 2021-
C
Santander Retail Auto Lease Trust 2022-
A
Santander Retail Auto Lease Trust 2022-
B
Santander Retail Auto Lease Trust 2022-
C
Santander Revolving Auto Loan Trust
2019-A
Santander Revolving Auto Loan Trust
2021-A
Santander Río Asset Management
Gerente de Fondos Comunes de
Inversión S.A.
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
United
States
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
Argentina
0.00% 100.00%
100.00%
100.00% Fund
management
company
Santander Río Trust S.A.
Santander Río Valores S.A.
Argentina
Argentina
0.00%
99.97%
100.00%
100.00%
Services
5.10%
94.25%
100.00%
100.00%
Santander RMBS 6, Fondo de Titulización
Santander S.A. Sociedad Securitizadora
Spain
Chile
—
(b)
—
—
0.00%
67.24%
100.00%
100.00%
Santander Secretariat Services Limited
Santander Securities LLC
Santander Seguros y Reaseguros,
Compañía Aseguradora, S.A.
Santander Servicios Corporativos, S.A. de
C.V.
Santander Servicios Especializados, S.A.
de C.V.
Santander Technology USA, LLC
Santander Tecnología Argentina S.A.
Santander Tecnología México, S.A. de
C.V.
Santander Tecnología y Operaciones
España, S.L.
Santander Totta Seguros, Companhia de
Seguros de Vida, S.A.
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
United
Kingdom
United
States
Spain
Mexico
0.00% 96.24%
100.00%
100.00% Services
Mexico
0.00% 96.24%
100.00%
100.00% Services
United
States
Argentina
Mexico
0.00% 100.00%
100.00%
100.00%
IT services
0.00%
99.35%
100.00%
100.00%
0.00%
96.24%
100.00%
100.00%
IT services
IT services
Spain
100.00%
0.00%
100.00%
100.00%
IT services
Portugal
0.00%
99.91%
100.00%
100.00%
Insurance
Santander Totta, SGPS, S.A.
Portugal
99.91 %
0.00 %
99.91 %
99.91 % Holding
company
100.00%
0.00%
100.00%
100.00%
Insurance
1,434
191
1,188
11
3
80
3
45
46
117
3,550
0
0
(12)
2
1
(4)
25
54
11
3
69
4
45
37
47
5,351
Annual report 2021 785
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
Santander Towarzystwo Funduszy
Inwestycyjnych S.A.
Santander Trade Services Limited
Santander UK Group Holdings plc
Santander UK Investments
Santander UK Operations Limited
Santander UK plc
Santander UK Technology Limited
Santander Wealth Management
International SA
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Location
Poland
Direct
Indirect
50.00 % 33.70 %
Year 2021 Year 2020 Activity
100.00 % 100.00 % Fund
management
company
EUR million (a)
Capital +
reserves
4
Net
results
25
Carrying
amount
15
Hong Kong
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Switzerland
0.00 % 100.00 %
77.67 % 22.33 %
100.00 %
0.00 %
0.00 % 100.00 %
100.00 % 100.00 % Inactive
100.00 % 100.00 % Finance
company
100.00 % 100.00 % Finance
company
100.00 % 100.00 % Services
19
3
16
14,302
1,783
16,444
53
27
(2)
2
48
18
0.00 % 100.00 %
100.00 % 100.00 % Banking
16,029
937
15,741
0.00 % 100.00 %
100.00 % 100.00 % IT services
0.00 % 100.00 %
100.00 % 100.00 % Asset
management
39
0
4
0
7
0
Santusa Holding, S.L.
Spain
69.76 % 30.24 %
100.00 % 100.00 % Holding
company
8,423
637
6,524
Securitization
Securitization
Securitization
0
0
0
Securitization
(1)
SC Austria Finance 2020-1 Designated
Activity Company
Ireland
SC Germany Auto 2014-2 UG
(haftungsbeschränkt)
SC Germany Auto 2016-2 UG
(haftungsbeschränkt)
SC Germany Auto 2018-1 UG
(haftungsbeschränkt)
SC Germany Auto 2019-1 UG
(haftungsbeschränkt)
SC Germany Consumer 2014-1 UG
(haftungsbeschränkt)
SC Germany Consumer 2018-1 UG
(haftungsbeschränkt)
SC Germany Mobility 2019-1 UG
(haftungsbeschränkt)
SC Germany S.A.
SC Germany S.A., Compartment
Consumer 2020-1
SC Germany S.A., Compartment
Consumer 2021-1
SC Germany S.A., Compartment Mobility
2020-1
SC Germany Vehicles 2013-1 UG
(haftungsbeschränkt)
SC Germany Vehicles 2015-1 UG
(haftungsbeschränkt)
SC Poland Consumer 15-1 Sp. z.o.o. (j)
SC Poland Consumer 16-1 Sp. z o.o.
SCF Ajoneuvohallinto I Limited (j)
SCF Ajoneuvohallinto II Limited (j)
SCF Ajoneuvohallinto IX Limited
SCF Ajoneuvohallinto KIMI VI Limited (j)
SCF Ajoneuvohallinto VII Limited
SCF Ajoneuvohallinto VIII Limited
SCF Ajoneuvohallinto X Limited
SCF Eastside Locks GP Limited
SCF Rahoituspalvelut I Designated
Activity Company (j)
SCF Rahoituspalvelut II Designated
Activity Company (j)
SCF Rahoituspalvelut IX DAC
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Germany
Germany
Poland
Poland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
United
Kingdom
Ireland
Ireland
Ireland
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
—
—
—
—
—
—
Securitization
Securitization
Securitization
Securitization
Securitization
Securitization
— Securitization
— Securitization
— Securitization
0.00% 100.00%
100.00%
—
—
—
(b)
(b)
(b)
—
—
—
100.00% Real estate
management
— Securitization
— Securitization
— Securitization
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Annual report 2021 786
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
SCF Rahoituspalvelut KIMI VI Designated
Activity Company (j)
Location
Ireland
SCF Rahoituspalvelut VII Designated
Activity Company
SCF Rahoituspalvelut VIII Designated
Activity Company
SCF Rahoituspalvelut X DAC
SCM Poland Auto 2019-1 DAC
SDMX Superdigital, S.A. de C.V.
Secucor Finance 2013-I Designated
Activity Company (i) (j)
Ireland
Ireland
Ireland
Ireland
Mexico
Ireland
Ireland
Secucor Finance 2021-1, DAC
Services and Promotions Delaware Corp. United
States
United
States
Spain
Services and Promotions Miami LLC
Servicio de Alarmas Controladas por
Ordenador, S.A.
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
—
—
—
—
—
Indirect
(b)
(b)
(b)
(b)
(b)
Year 2021 Year 2020 Activity
—
—
—
—
—
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
0.00% 100.00%
100.00%
—
—
(b)
(b)
—
—
0.00% 100.00%
100.00%
100.00% Payment
platform
— Securitization
— Securitization
100.00% Holding
company
0.00% 100.00%
100.00%
100.00% Real estate
99.99%
0.01%
100.00%
100.00% Security
Servicios de Cobranza, Recuperación y
Seguimiento, S.A. de C.V.
Sheppards Moneybrokers Limited
Shiloh III Wind Project, LLC
Silk Finance No. 5
SMPS Merchant Platform Solutions
México, S.A de C.V
Sociedad Integral de Valoraciones
Automatizadas, S.A.
Sociedad Operadora de Tarjetas de Pago
Santander Getnet Chile S.A.
Mexico
0.00% 85.00%
85.00%
85.00% Finance
company
United
Kingdom
United
States
Portugal
Mexico
Spain
Chile
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
—
(b)
—
0.00% 98.16%
100.00%
100.00% Renewable
energies
— Securitization
100.00% Payments and
collection
services
100.00%
0.00%
100.00%
100.00% Appraisals
0.00% 67.12%
100.00%
100.00% Payments and
Socur S.A. (f)
Uruguay
100.00%
0.00%
100.00%
collection
services
100.00% Finance
company
Solarlaser Limited
Solution 4Fleet Consultoria Empresarial
S.A.
Sovereign Community Development
Company
Sovereign Delaware Investment
Corporation
Sovereign Lease Holdings, LLC
Sovereign REIT Holdings, Inc.
Sovereign Spirit Limited (n)
SSA Swiss Advisors AG
United
Kingdom
Brazil
United
States
United
States
United
States
United
States
Bermudas
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 71.93%
80.00%
— Vehicle rental
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Holding
company
100.00% Holding
company
100.00% Financial
services
100.00% Holding
company
0.00% 100.00%
100.00%
100.00% Leasing
Switzerland
0.00% 100.00%
100.00%
Sterrebeeck B.V.
Netherlands
100.00%
0.00%
100.00%
Suleyado 2003, S.L. Unipersonal
Summer Empreendimentos Ltda.
Super Pagamentos e Administração de
Meios Eletrônicos S.A.
Spain
Brazil
Brazil
0.00% 100.00%
100.00%
0.00%
89.91%
100.00%
0.00% 100.00%
100.00%
— Asset
management
100.00% Holding
company
100.00% Securities
investment
100.00% Real estate
management
100.00% Payment
services
Superdigital Argentina S.A.U.
Superdigital Colombia S.A.S.
Argentina
Colombia
0.00% 100.00%
100.00%
100.00%
0.00% 100.00%
100.00%
99.97%
IT services
IT services
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
0
0
0
0
0
0
0
58
51
2
34
0
324
1
112
1
20
43
0
3
38
134
221
0
0
0
0
0
0
0
2
3
0
1
0
1
9
27
1
(8)
0
0
0
0
2
0
0
60
53
1
32
0
325
0
141
1
8
23
59
0
0
1
1
1
0
2
39
135
221
7,501
74
7,575
0
0
0
0
0
3
4,058
713
10,331
25
3
30
1
0
0
0
(7)
(1)
0
24
3
79
1
0
Annual report 2021 787
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Superdigital Holding Company, S.L.
Location
Spain
Direct
Indirect
0.00% 100.00%
Year 2021 Year 2020 Activity
100.00% Holding
100.00%
company
Superdigital Perú S.A.C.
Suzuki Servicios Financieros, S.L.
Svensk Autofinans WH 1 Designated
Activity Company
Peru
Spain
Ireland
0.00% 100.00%
100.00%
100.00% Financial
services
0.00%
—
51.00%
(b)
51.00%
—
51.00%
Intermediation
— Securitization
Swesant SA
Switzerland
0.00% 100.00%
100.00%
SX Negócios Ltda.
Tabasco Energía España, S.L. Unipersonal Spain
Brazil
0.00%
89.91%
100.00%
100.00%
0.00%
100.00%
Portugal
0.00%
99.87%
100.00%
50.00%
50.00%
100.00%
0.00% 100.00%
100.00%
Taxagest Sociedade Gestora de
Participações Sociais, S.A.
Teatinos Siglo XXI Inversiones S.A.
Tekutina Private Limited
The Alliance & Leicester Corporation
Limited
The Best Specialty Coffee, S.L.
Unipersonal
Time Retail Finance Limited (j)
TIMFin S.p.A.
Chile
India
United
Kingdom
Spain
United
Kingdom
Italy
0.00% 100.00%
100.00%
100.00% Real estate
100.00%
0.00%
100.00%
100.00% Restaurant
services
0.00% 100.00%
100.00%
100.00% Services
0.00%
51.00%
51.00%
Tonopah Solar I, LLC
United States
0.00% 100.00%
100.00%
Tornquist Asesores de Seguros S.A. (j)
Argentina
Toro Corretora de Títulos e Valores
Mobiliários Ltda.
Toro Investimentos S.A.
Brazil
Brazil
0.00%
99.99%
0.00%
53.95%
99.99%
60.00%
0.00%
53.95%
100.00%
Totta (Ireland), PLC (h)
Ireland
0.00%
99.86%
100.00%
Totta Urbe - Empresa de Administração e
Construções, S.A.
Trabajando.com Mexico, S.A. de C.V. en
liquidación (j)
Trade Maps 3 Hong Kong Limited
Trade Maps 3 Ireland Limited (j)
Trans Rotor Limited (j)
Portugal
0.00%
99.86%
100.00%
100.00% Real estate
Mexico
0.00% 100.00%
100.00%
100.00% Services
Hong-Kong
Ireland
United
Kingdom
—
—
(b)
(b)
—
—
—
—
Securitization
Securitization
100.00%
0.00%
100.00%
100.00% Renting
Transolver Finance EFC, S.A.
Tresmares Growth Fund Santander, SCR,
S.A.
Tresmares Santander Direct Lending,
SICC, S.A.
Spain
Spain
Spain
Tuttle and Son Limited
Universia Brasil S.A.
Universia Chile S.A.
Universia Colombia S.A.S.
Universia España Red de Universidades,
S.A.
United
Kingdom
Brazil
Chile
Colombia
Spain
0.00%
51.00%
51.00%
100.00%
0.00%
100.00%
99.60%
0.00%
99.60%
51.00% Leasing
100.00% Holding
company
99.60% Management
of funds
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00%
0.00%
86.84%
86.84%
86.84%
0.00% 100.00%
100.00%
100.00%
0.00%
89.45%
89.45%
89.45%
Internet
Internet
Internet
Internet
100.00% Holding
company
100.00% Telemarketing
100.00% Holding
company
100.00% Holding
company
100.00% Holding
company
—
Financial
services
51.00% Finance
company
100.00% Holding
company
99.99%
Inactive
—
—
Securities
investment
Consulting
services
100.00% Finance
company
EUR million (a)
Capital +
reserves
103
Net
results
3
Carrying
amount
106
1
9
0
19
10
6
56
0
3
0
42
2
0
0
0
0
0
0
11
0
0
1,497
277
2,064
1
14
3
0
53
5
0
11
5
451
102
0
0
0
0
67
32
414
0
0
0
0
2
0
0
0
0
(8)
0
0
(2)
(1)
9
(5)
0
0
0
0
4
0
6
0
0
0
0
0
1
14
2
0
28
5
0
5
2
450
100
0
0
0
0
17
32
413
0
0
0
0
2
Universia Holding, S.L.
Spain
100.00%
0.00%
100.00%
100.00% Holding
company
19
(3)
17
Annual report 2021 788
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Subsidiaries of Banco Santander, S.A.
1
Company
Universia México, S.A. de C.V.
Universia Perú, S.A.
Universia Uruguay, S.A.
Uro Property Holdings, SOCIMI, S.A.
(c)
Verbena FCVS - Fundo de
Investimentos em Direitos
Creditórios
Wallcesa, S.A.
Wave Holdco, S.L.
Location
Mexico
Peru
Uruguay
Spain
Brazil
Spain
Spain
% of ownership
held by
Banco Santander
Direct
Indirect
0.00% 100.00%
0.00%
99.76%
0.00% 100.00%
Percentage of voting
power (k)
100.00%
Year 2021 Year 2020 Activity
Internet
Internet
Internet
100.00%
100.00%
100.00%
100.00%
99.76%
99.99%
0.00%
99.99%
—
(b)
—
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
99.99% Real estate
investment
—
Investment
fund
100.00% Financial
services
100.00% Holding
company
100.00% Holding
company
100.00% Advisory
services
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
0
0
163
(3)
(936)
0
9
0
15
19
0
0
9
3
9
0
0
0
1
0
0
179
0
0
0
9
0
9
(1)
18
Waypoint Insurance Group, Inc.
United States
0.00% 100.00%
100.00%
WIM Servicios Corporativos, S.A. de
C.V.
WTW Shipping Designated Activity
Company
Mexico
0.00% 100.00%
100.00%
Ireland
100.00%
0.00%
100.00%
100.00% Leasing
Yera Servicer Company 2021, S.L.
Unipersonal
Spain
0.00% 100.00%
100.00%
—
Real estate
management
a. Amount according to the provisional books of each company at the date of publication of these annexes generally referring to 31 December 2021 without taking into
account, where applicable, interim dividends paid during the year. In the carrying amount (cost net of provision), the Group's percentage ownership has been applied to
the figure for each holding company, disregarding goodwill impairments made in the consolidation process. The figures for foreign companies are converted into euros
at the year-end exchange rate.
b. Companies over which effective control is maintained.
c. Data as at 31 December 2020, latest available accounts.
d. Data as at 31 March 2021, latest accounts available.
e. Data as at 30 June 2021, last accounts available.
f. Data as at 30 September 2021, last accounts available.
g. Data as at 31 July 2021, last accounts available.
h. Data as at 30 November 2021, last accounts available.
i. Data as at 31 January 2021, latest available accounts.
Company in liquidation as at 31 December 2021.
j.
k. Pursuant to Article 3 of Royal Decree 1159/ 2010, of 17 September, approving the rules for the preparation of consolidated annual accounts, in order to determine the
voting rights, voting rights held directly by the parent company have been added to those held by companies controlled by the parent company or by other persons
acting in their own name but on behalf of a Group company. For these purposes, the number of votes corresponding to the parent company, in relation to the
companies indirectly dependent on it, is that corresponding to the dependent company that directly participates in the share capital of the latter.
Company resident for tax purposes in Spain.
l.
m. See note 2.b.i.
n. Company resident for tax purposes in the United Kingdom.
o. Data as at 28 February 2021, last accounts available.
p. Companies in liquidation. Pending registration.
(1) Companies issuing preference shares are listed in Annex III, together with other relevant information.
Annual report 2021 789
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Appendix II
Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
Company
Abra 1 Limited (k)
Location
Caymand
Island
% of ownership
held by Banco
Santander
Direct
—
Indirect
(h)
Percentage of
voting power (f)
Year
2021
—
Year
2020
—
Activity
Leasing
Achmea Tussenholding, B.V. (b)
Netherlands
8.89%
0.00%
8.89%
8.89% Holding
company
Type of
company
Joint
venture
-
EUR million (a)
Capital +
Asset reserves
—
—
Net
results
—
356
356
20
Administrador Financiero de
Transantiago S.A.
Chile
0.00% 13.42%
20.00%
20.00% Payment and
Associated
56
18
Aegon Santander Portugal Não Vida Portugal
- Companhia de Seguros, S.A.
0.00% 48.95%
49.00%
49.00%
Portugal
0.00% 48.95%
49.00%
49.00%
Insurance
Portugal
0.00% 19.97%
20.00%
20.00%
Inactive
collection
services
Insurance
Aegon Santander Portugal Vida -
Companhia de Seguros Vida, S.A.
Aeroplan - Sociedade Construtora
de Aeroportos, Lda. (e)
Aguas de Fuensanta, S.A. (e) (k)
Alcuter 2, S.L. (k)
Alma UK Holdings Ltd
Altamira Asset Management, S.A.
(consolidado)
Apolo Fundo de Investimento em
Direitos Creditórios
Arena Communications Network,
S.L. (consolidado) (b)
Spain
Spain
United
Kingdom
Spain
Brazil
Spain
56
129
0
—
—
4
14
23
0
—
—
4
3
36.78%
0.00%
36.78%
37.23%
0.00%
37.23%
36.78% Food
37.23% Technical
services
30.00%
0.00%
30.00%
—
Holding
company
Joint
venture
0.00% 15.00%
15.00%
15.00% Real estate
-
236
0.00% 29.97%
33.33%
33.33%
Investment
fund
Joint
venture
454
421
20.00%
0.00%
20.00%
20.00% Advertising
Associated
296
99
Attijariwafa Bank Société Anonyme Morocco
(consolidado) (b)
0.00%
5.10%
5.10%
5.11% Banking
Autopistas del Sol S.A. (b)
Argentina
0.00% 14.17%
14.17%
14.17% Motorway
concession
Banco RCI Brasil S.A.
Brazil
0.00% 35.87%
39.89%
39.89% Banking
Mexico
0.00% 50.00%
50.00%
50.00% Banking
54,011
4,809
352
169
82
1,699
217
157
67
0.00% 20.00%
20.00%
20.00% Finance
company
Associated
1,369
120
6.54%
0.00%
6.54%
6.54% Banking
-
342,252
23,563
2,903
CACEIS (consolidado)
France
0.00% 30.50%
30.50%
30.50% Custody
services
Associated
122,132
3,979
187
Brazil
0.00% 16.07%
17.87%
17.65% Payment and
-
342
235
69
Banco S3 Caceis México, S.A.,
Institución de Banca Múltiple
Bank of Beijing Consumer Finance
Company
Bank of Shanghai Co., Ltd.
(consolidado) (b)
China
China
Câmara Interbancária de
Pagamentos - CIP
Cantabria Capital, SGEIC, S.A.
Spain
Car10 Tecnologia e Informação S.A. Brazil
50.00%
0.00%
50.00%
50.00% Venture capital Associated
collection
services
0.00% 41.96%
46.67%
—
Internet
2
9
18
0
—
—
(1)
(2)
33
(6)
0
25
4
8
Joint
venture
Joint
venture
-
-
-
-
-
Joint
venture
Joint
venture
Joint
venture
Joint
venture
CCPT - ComprarCasa, Rede Serviços Portugal
Imobiliários, S.A.
0.00% 49.98%
49.98%
49.98% Real estate
services
Centro de Compensación
Automatizado S.A.
Centro para el Desarrollo,
Investigación y Aplicación de Nuevas
Tecnologías, S.A. (b)
CNP Santander Insurance Europe
Designated Activity Company
CNP Santander Insurance Life
Designated Activity Company
CNP Santander Insurance Services
Ireland Limited
Chile
0.00% 22.37%
33.33%
33.33% Payment and
Associated
14
collection
services
Spain
0.00% 49.00%
49.00%
49.00% Technology
Associated
3
Ireland
Ireland
49.00%
0.00%
49.00%
49.00%
49.00%
0.00%
49.00%
49.00%
Insurance
brokerage
Insurance
brokerage
Associated
1,004
Associated
1,294
Ireland
49.00%
0.00%
49.00%
49.00% Services
Associated
Comder Contraparte Central S.A
Chile
0.00%
8.37%
12.47%
Companhia Promotora UCI
Brazil
0.00% 25.00%
25.00%
12.47% Financial
services
25.00% Financial
services
Associated
Joint
venture
0
8
0
31
34
1
0
2
0
9
2
191
151
4
11
(1)
0
(1)
0
3
0
42
43
1
1
0
Annual report 2021 790
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
% of ownership
held by Banco
Santander
Percentage of
voting power (f)
Location
Spain
Direct
20.18%
Indirect
0.00%
Year
2021
20.18%
Spain
23.33%
0.55%
23.88%
Year
2020
Activity
20.18% Finance
company
23.88% Credit
insurance
-
-
EUR million (a)
Type of
company
Asset
153
Capital +
reserves
Net
results
140
942
385
Spain
24.07%
0.00%
24.07%
24.07% Real estate
Associated
528
333
Company
Compañia Española de Financiación
de Desarrollo, Cofides, S.A., SME (b)
Compañía Española de Seguros de
Crédito a la Exportación, S.A.,
Compañía de Seguros y Reaseguros
(consolidado) (b)
Compañía Española de Viviendas en
Alquiler, S.A.
6
2
20
163
6
55
0
0
0
0
0
0
0
46
—
0
1
0
0
0
1
0
0
0
57
—
105
0
Compañía para los Desarrollos
Inmobiliarios de la Ciudad de
Hispalis, S.L., en liquidación (l) (e)
Connecting Visions Ecosystems, S.L. Spain
Spain
21.98%
0.00%
21.98%
21.98% Real estate
development
-
19.90%
0.00%
19.90%
19.90% Consulting
services
Joint
venture
Corkfoc Cortiças, S.A. (c)
Corridor Texas Holdings LLC
(consolidado) (b)
Portugal
United States
0.00% 27.55%
27.58%
0.00% 33.40%
33.40%
Desarrollo Eólico las Majas VI, S.L.
Spain
45.00%
0.00%
45.00%
27.58% Cork industry
36.30% Holding
company
-
-
—
Renewable
energies
Joint
venture
38
2
3
190
28
0.00% 44.06%
51.28%
50.41% Payment
services
Associated
781
Ebury Partners Limited
(consolidado) (d) (m)
Energias Renovables de Ormonde
25, S.L.
Energias Renovables de Ormonde
26, S.L.
Energias Renovables de Ormonde
27, S.L.
Energias Renovables de Ormonde
30, S.L.
United
Kingdom
Spain
Spain
Spain
Spain
0.00% 55.00%
55.00%
0.00% 55.00%
55.00%
0.00% 55.00%
55.00%
0.00% 55.00%
55.00%
Energias Renovables de Titania, S.L. Spain
0.00% 55.00%
55.00%
Energias Renovables Gladiateur 45,
S.L.
Spain
0.00% 55.00%
55.00%
Energias Renovables Prometeo, S.L. Spain
0.00% 55.00%
55.00%
—
Renewable
energies
— Renewable
energies
— Renewable
energies
— Renewable
energies
— Renewable
energies
— Renewable
energies
— Renewable
energies
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Euro Automatic Cash Entidad de
Pago, S.L.
European Hospitality Opportunities
S.à r.l. (o)
Spain
50.00%
0.00%
50.00%
Luxembourg
0.00% 49.00%
49.00%
Evolve SPV S.r.l.
Italy
—
(h)
—
50.00% Payment
services
Associated
—
—
Holding
company
Securitizations
Joint
venture
Joint
venture
FAFER- Empreendimentos
Urbanísticos e de Construção, S.A.
(b) (e)
Federal Reserve Bank of Boston (b) United States
Portugal
Fondo de Titulización de Activos UCI
11
Fondo de Titulización de Activos UCI
14
Fondo de Titulización de Activos UCI
15
Fondo de Titulización de Activos UCI
16
Fondo de Titulización de Activos UCI
17
Fondo de Titulización Hipotecaria
UCI 12
Fondo de Titulización, RMBS Prado
III
Fondo de Titulización, RMBS Prado
IV
Fondo de Titulización, RMBS Prado
IX
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
0.00% 36.57%
36.62%
36.62% Real estate
0.00% 20.09%
(h)
—
—
—
—
—
—
—
—
—
(h)
(h)
(h)
(h)
(h)
(h)
(h)
(h)
20.09%
25.73% Banking
—
—
—
—
—
—
—
—
—
— Securitizations
— Securitizations
—
Securitizations
—
Securitizations
—
Securitizations
—
Securitizations
—
Securitizations
—
Securitizations
—
Securitizations
-
-
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
10
34
14
0
(1)
0
(5)
0
(69)
0
0
0
0
0
0
0
(12)
—
7
0
194,429
1,573
(1)
133
346
426
597
517
189
0
288
499
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Annual report 2021 791
EUR million (a)
Capital +
reserves
Net
results
Type of
company
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Associated
Joint
venture
Joint
venture
Joint
venture
Asset
309
340
481
467
0
0
0
0
3,181
384
2
186
158
833
14
0
21
25
0
14
1
0
0
1
0
1
0
1
0
(112)
0
(6)
0
3
0
1
0
0
0
0
61
(3)
(10)
13
0
(2)
0
0
0
(1)
0
(2)
0
0
10
34
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
Company
Fondo de Titulización, RMBS Prado V
Location
Spain
Fondo de Titulización, RMBS Prado
VI
Fondo de Titulización, RMBS Prado
VII
Fondo de Titulización, RMBS Prado
VIII
Spain
Spain
Spain
% of ownership
held by Banco
Santander
Direct
Indirect
—
—
—
—
(h)
(h)
(h)
(h)
Percentage of
voting power (f)
Year
2021
—
Year
2020
—
Activity
Securitizations
—
—
—
—
Securitizations
—
Securitizations
—
Securitizations
Fortune Auto Finance Co., Ltd
China
0.00% 50.00%
50.00%
Fremman limited
Gestora de Inteligência de Crédito
S.A.
United
Kingdom
Brazil
33.00%
0.00%
4.99%
0.00% 17.98%
20.00%
20.00% Collection
50.00% Finance
company
4.99% Finance
company
Gire S.A.
Argentina
0.00% 57.93%
58.33%
58.33% Payment and
Associated
HCUK Auto Funding 2017-2 Ltd
United
Kingdom
—
(h)
—
—
collection
services
Securitizations
Joint
venture
United States
0.00% 22.37%
22.37%
22.37% Real estate
-
Healthy Neighborhoods Equity Fund
I LP (b)
Hyundai Capital UK Limited
United
Kingdom
0.00% 50.01%
50.01%
50.01% Finance
company
4,338
323
79
Hyundai Corretora de Seguros Ltda. Brazil
0.00% 44.96%
50.00%
50.00%
Insurance
brokerage
Imperial Holding S.C.A. (e) (i)
Luxembourg
0.00% 36.36%
36.36%
Imperial Management S.à r.l. (b) (e)
Luxembourg
0.00% 40.20%
40.20%
36.36% Securities
investment
40.20% Holding
company
-
-
Indice Iberoamericano de
Investigación y Conocimiento, A.I.E.
Inmoalemania Gestión de Activos
Inmobiliarios, S.A.
Innohub S.A.P.I. de C.V.
Inverlur Aguilas I, S.L.
Inverlur Aguilas II, S.L.
Inversiones Ibersuizas, S.A. (b)
Inversiones ZS América Dos Ltda.
Spain
Spain
Mexico
Spain
Spain
Spain
Chile
0.00% 51.00%
51.00%
51.00%
Information
system
Joint
venture
0.00% 20.00%
20.00%
0.00% 20.00%
20.00%
0.00% 50.00%
50.00%
20.00% Holding
company
IT services
20.00%
50.00% Real estate
0.00% 50.00%
50.00%
50.00% Real estate
-
Associated
Joint
venture
Joint
venture
25.42%
0.00%
25.42%
0.00% 49.00%
49.00%
25.42% Venture capital -
49.00% Real estate and
Associated
31
269
19
269
securities
investment
Inversiones ZS América SpA
Chile
0.00% 49.00%
49.00%
49.00% Real estate and
Associated
395
396
35
J.C. Flowers I L.P. (b)
United States
0.00% 11.10%
0.00%
JCF AIV P L.P. (b)
Canada
0.00%
7.67%
4.99%
securities
investment
0.00% Holding
company
4.99% Holding
company
-
-
LB Oprent, S.A.
Loop Gestão de Pátios S.A.
Spain
Brazil
40.00%
0.00%
40.00%
38.33%
Industrial
machinery rent
Associated
0.00% 32.10%
35.70%
35.70% Business
services
Joint
venture
Portugal
0.00% 49.94%
49.99%
49.99%
Insurance
Associated
Mapfre Santander Portugal -
Companhia de Seguros, S.A.
Massachusetts Business
Development Corp. (consolidado)
(b)
United States
0.00% 21.61%
21.61%
MB Capital Fund IV, LLC (b)
United States
0.00% 21.51%
21.51%
Merlin Properties, SOCIMI, S.A.
(consolidado) (b)
Spain
19.07%
5.70%
24.77%
21.61% Finance
company
21.51% Finance
company
24.81% Real estate
investment
-
-
2
5
4
7
13
55
2
5
1
2
8
11
18
17
(1)
0
1
(1)
(3)
1
1
Associated
13,478
6,640
56
Annual report 2021 792
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
EUR million (a)
Type of
company
Associated
Capital +
reserves
Net
results
2,343
(164)
Asset
2,927
-
-
-
-
Associated
Associated
Joint
venture
Associated
Associated
Joint
venture
-
-
Joint
venture
Joint
venture
Joint
venture
% of ownership
held by Banco
Santander
Percentage of
voting power (f)
Company
Metrovacesa, S.A. (consolidado) (b)
Location
Spain
Indirect
Direct
31.94% 17.50%
Year
2021
49.44%
New PEL S.à r.l. (c) (e)
Luxembourg
0.00%
7.67%
0.00%
NIB Special Investors IV-A LP (n)
Canada
0.00%
0.00%
0.00%
NIB Special Investors IV-B LP (n)
Canada
0.00%
0.00%
0.00%
Niuco 15, S.L. (k)
Ocyener 2008, S.L.
Spain
Spain
37.23%
0.00%
37.23%
0.00% 45.00%
45.00%
Operadora de Activos Beta, S.A. de
C.V.
Mexico
49.99%
0.00%
49.99%
Year
2020
49.45% Real estate
Activity
development
0.00% Holding
company
4.99% Holding
company
4.99% Holding
company
37.23% Technical
services
— Holding
company
49.99% Finance
company
Pag10 Fomento Mercantil Eireli
Brazil
0.00% 41.96%
46.67%
— Factoring
Payever GmbH
Play Digital S.A.
POLFUND - Fundusz Poręczeń
Kredytowych S.A.
Germany
Argentina
0.00% 10.00%
10.00%
10.00% Software
0.00% 15.59%
15.70%
— Payment
platform
Poland
0.00% 33.70%
50.00%
50.00% Management
Associated
Portland SPV S.r.l.
Italy
—
(h)
—
—
Securitizations
Procapital - Investimentos
Imobiliários, S.A. (c) (e)
Portugal
0.00% 39.96%
40.00%
40.00% Real estate
Project Quasar Investments 2017,
S.L. (consolidado) (b)
Promontoria Manzana, S.A.
(consolidado) (b)
PSA Corretora de Seguros e Serviços
Ltda.
Spain
Spain
Brazil
49.00%
0.00%
49.00%
20.00%
0.00%
20.00%
49.00% Holding
company
20.00% Holding
company
0.00% 44.96%
50.00%
50.00%
Insurance
PSA Insurance Europe Limited
Malta
0.00% 50.00%
50.00%
50.00%
Insurance
PSA Life Insurance Europe Limited Malta
0.00% 50.00%
50.00%
50.00%
Insurance
Redbanc S.A.
Redsys Servicios de Procesamiento,
S.L. (consolidado)
Chile
Spain
0.00% 22.44%
33.43%
24.90%
0.06%
24.96%
33.43% Services
20.06% Cards
Associated
Associated
Relevante e Astuto, S.A.
Portugal
0.00% 70.00%
70.00%
—
Real estate
management
Retama Real Estate, S.A.
Spain
0.00% 50.00%
50.00%
50.00% Services
Joint
venture
Joint
venture
Rías Redbanc S.A.
RMBS Green Belem I
Uruguay
Portugal
0.00% 25.00%
(h)
—
25.00%
—
S3 Caceis Brasil Distribuidora de
Títulos e Valores Mobiliários S.A.
Brazil
0.00% 50.00%
50.00%
S3 Caceis Brasil Participações S.A.
Brazil
0.00% 50.00%
50.00%
25.00% Services
-
—
Securitizations
50.00% Securities
investment
50.00% Holding
company
Joint
venture
Joint
venture
Joint
venture
Sancus Green Investments II, S.C.R.,
S.A. (o)
Spain
0.00% 43.29%
43.29%
—
Venture capital -
Santander Alternatives SICAV RAIF
(c)
Luxembourg
0.00% 48.03%
48.03% 100.00%
Santander Assurance Solutions, S.A. Spain
0.00% 66.67%
66.67%
73.99%
Santander Auto S.A.
Santander Aviva Towarzystwo
Ubezpieczeń na Życie S.A.
Santander Aviva Towarzystwo
Ubezpieczeń S.A.
Santander Caceis Colombia S.A.
Sociedad Fiduciaria
Brazil
Poland
0.00% 44.96%
50.00%
50.00%
0.00% 33.03%
49.00%
49.00%
Poland
0.00% 33.03%
49.00%
49.00%
Insurance
Associated
Colombia
0.00% 50.00%
50.00%
50.00% Finance
company
Joint
venture
Investment
company
-
Insurance
intermediary
Joint
venture
Insurance
Insurance
Associated
Associated
Associated
1,068
319
(38)
0
—
—
—
2
0
0
3
11
28
234
2
0
—
—
—
1
0
0
2
23
20
0
13
0
—
—
—
1
0
0
0
(12)
0
0
0
6,984
2,638
(1,852)
0
59
13
9
71
0
0
26
20
1
4
0
(45)
(1)
0
254
110
29
108
5
30
3
309
1
0
207
143
163
145
—
13
10
25
299
94
7
—
12
4
5
20
39
7
0
0
18
18
—
0
1
2
21
12
(1)
Annual report 2021 793
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
% of ownership
held by Banco
Santander
Percentage of
voting power (f)
EUR million (a)
Company
Santander Caceis Latam Holding 1,
S.L.
Santander Caceis Latam Holding 2,
S.L.
Santander Generales Seguros y
Reaseguros, S.A.
Santander Mapfre Seguros y
Reaseguros, S.A.
Santander Vida Seguros y
Reaseguros, S.A.
Sedesa Seguros de Depósitos S.A.
(b)
Sepacon 31, S.L. (k)
Servicios de Infraestructura de
Mercado OTC S.A
Spain
Spain
Spain
Spain
Spain
Chile
Location
Spain
Indirect
Direct
0.00% 50.00%
Year
2021
50.00%
Capital +
reserves
Net
results
Asset
722
716
Year
2020
Activity
50.00% Holding
company
50.00% Holding
company
Type of
company
Joint
venture
Joint
venture
Joint
venture
0.00% 50.00%
50.00%
2
2
0.00% 49.00%
49.00%
49.00%
Insurance
732
206
39
0.00% 49.99%
49.99%
49.99%
Insurance
Associated
90
57
(13)
0.00% 49.00%
49.00%
49.00%
Insurance
Joint
venture
1,036
367
36
Argentina
0.00% 13.47%
13.56%
37.23%
0.00%
37.23%
—
Fund
management
37.23% Technical
services
-
-
0.00%
8.37%
12.48%
12.48% Services
Associated
Associated
673
SIBS-SGPS, S.A. (b)
Portugal
0.00% 16.52%
16.55%
16.55% Portfolio
management
Siguler Guff SBIC Fund LP (b)
United States
0.00% 20.00%
20.00%
20.00%
Investment
fund
-
-
Sistema de Tarjetas y Medios de
Pago, S.A. (b)
Sistemas Técnicos de Encofrados,
S.A. (consolidado) (b)
Sociedad Conjunta para la Emisión y
Gestión de Medios de Pago, E.F.C.,
S.A.
Sociedad de Garantía Recíproca de
Santander, S.G.R. (b)
Sociedad de Gestión de Activos
Procedentes de la Reestructuración
Bancaria, S.A. (b)
Spain
Spain
Spain
Spain
Spain
Sociedad Interbancaria de Depósitos
de Valores S.A.
Chile
20.61%
0.00%
20.61%
27.15%
0.00%
27.15%
45.70%
0.00%
45.70%
25.35%
0.25%
25.60%
22.21%
0.00%
22.21%
0.00% 19.66%
29.29%
18.11% Payment
methods
27.15% Building
materials
45.70% Payment
services
25.73% Financial
services
22.21% Financial
services
29.29% Securities
deposit
Ireland
—
(h)
—
—
Leasing
Solar Maritime Designated Activity
Company (b)
Stephens Ranch Wind Energy
Holdco LLC (consolidado) (b)
Tbforte Segurança e Transporte de
Valores Ltda.
Tbnet Comércio, Locação e
Administração Ltda.
Tecban Serviços Integrados Ltda.
Tecnologia Bancária S.A.
Tikgi Aviation One Designated
Activity Company
Tonopah Solar Energy Holdings I,
LLC (consolidado) (b)
Brazil
Brazil
Brazil
Brazil
Ireland
United States
0.00% 17.10%
17.10%
19.20% Renewable
energies
-
0.00% 17.06%
18.98%
19.81% Security
Associated
101
0.00% 17.06%
18.98%
19.81% Telecommunic Associated
ations
0.00% 17.06%
18.98%
—
IT services
0.00% 17.06%
(h)
—
19.81%
19.81% ATM
—
—
Renting
-
United States
0.00% 26.80%
26.80%
Trabajando.com Chile S.A.
Transbank S.A.
Chile
Tresmares Growth Fund II, SCR, S.A. Spain
Chile
0.00% 33.33%
33.33%
0.00% 16.78%
25.00%
40.00%
0.00%
40.00%
Tresmares Growth Fund III, SCR, S.A. Spain
40.00%
0.00%
40.00%
U.C.I., S.A.
Spain
50.00%
0.00%
50.00%
UCI Hellas Credit and Loan
Receivables Servicing Company S.A.
Greece
0.00% 50.00%
50.00%
UCI Holding Brasil Ltda.
Brazil
0.00% 50.00%
50.00%
26.80% Holding
company
33.33% Services
25.00% Cards
40.00% Holding
company
40.00% Holding
company
50.00% Holding
company
50.00% Financial
services
50.00% Holding
company
UCI Mediação de Seguros
Unipessoal, Lda.
Portugal
0.00% 50.00%
50.00%
50.00%
Insurance
brokerage
-
Joint
venture
-
-
Associated
Joint
venture
Associated
Associated
Joint
venture
Associated
Associated
-
-
Joint
venture
Joint
venture
Joint
venture
Joint
venture
5
0
0
—
0
41
0
0
0
1
0
2
2
0
26
1
0
1
(13)
(2)
(2)
(6)
0
0
0
17
11
27,586
230
(1,073)
7
113
6
(7)
1
0
218
208
(7)
2
—
37
365
8
89
107
69
0
428
224
0
2
1,366
49
38
2
—
13
59
1
4
14
36
62
66
0
115
(2)
0
(1)
101
45
34
448
127
1
1
0
1
0
0
Annual report 2021 794
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
% of ownership
held by Banco
Santander
Percentage of
voting power (f)
EUR million (a)
Company
UCI Servicios para Profesionales
Inmobiliarios, S.A.
Unicre-Instituição Financeira de
Crédito, S.A.
Location
Spain
Indirect
Direct
0.00% 50.00%
Year
2021
50.00%
Portugal
0.00% 21.83%
21.86%
Unión de Créditos Inmobiliarios, S.A.,
EFC
Spain
0.00% 50.00%
50.00%
Year
2020
50.00% Real estate
Activity
services
21.86% Finance
company
50.00% Mortgage
credit company
VCFS Germany GmbH
Germany
0.00% 50.00%
50.00%
50.00% Marketing
Venda de Veículos Fundo de
Investimento em Direitos
Creditórios
Volvo Car Financial Services UK
Limited
Webmotors S.A.
Zurich Santander Brasil Seguros e
Previdência S.A.
Brazil
—
(h)
—
—
Securitizations
United
Kingdom
Brazil
0.00% 50.01%
50.01%
50.00% Leasing
0.00% 62.94%
70.00%
70.00% Services
Capital +
reserves
Net
results
Type of
company
Joint
venture
Asset
1
Associated
409
0
99
Joint
venture
Joint
venture
Joint
venture
Joint
venture
Joint
venture
11,294
459
1
0
107
103
927
54
81
32
0
20
7
0
4
(4)
10
Brazil
0.00% 48.79%
48.79%
48.79%
Insurance
Associated
11,892
365
106
Zurich Santander Brasil Seguros S.A. Brazil
Spain
Zurich Santander Holding (Spain),
S.L.
Zurich Santander Holding Dos
(Spain), S.L.
Zurich Santander Insurance
América, S.L.
Spain
Spain
0.00% 48.79%
48.79%
0.00% 49.00%
49.00%
0.00% 49.00%
49.00%
49.00%
0.00%
49.00%
Insurance
48.79%
49.00% Holding
company
49.00% Holding
company
49.00% Holding
company
Associated
Associated
156
1,182
(2)
936
29
246
Associated
587
384
204
Associated
1,996
1,490
475
Zurich Santander Seguros Argentina
S.A. (j)
Zurich Santander Seguros de Vida
Chile S.A.
Zurich Santander Seguros Generales
Chile S.A.
Zurich Santander Seguros México,
S.A.
Zurich Santander Seguros Uruguay
S.A.
Argentina
0.00% 49.00%
49.00%
49.00%
Insurance
Associated
Chile
Chile
0.00% 49.00%
49.00%
49.00%
Insurance
Associated
0.00% 49.00%
49.00%
49.00%
Insurance
Associated
Mexico
0.00% 49.00%
49.00%
49.00%
Insurance
Associated
Uruguay
0.00% 49.00%
49.00%
49.00%
Insurance
Associated
60
213
249
887
32
18
23
45
34
14
18
30
13
88
7
a. Amount according to the provisional books at the date of publication of these annexes of each company generally referring to 31 December 2021, unless otherwise
indicated because the annual accounts have not yet been prepared. Data for foreign companies are converted into euros at the year-end exchange rate.
b. Data as at 31 December 2020, latest available accounts.
c. Data as at 31 December 2019, latest available accounts.
d. The Group is entitled to receive 51.28% of the dividends distributed by the company.
e. Company in liquidation as at 31 December 2021.
f. Pursuant to Article 3 of Royal Decree 1159/ 2010, of 17 September, approving the rules for the preparation of consolidated annual accounts, in order to determine the
voting rights, voting rights held directly by the parent company have been added to those held by companies controlled by the parent company or by other persons acting
in their own name but on behalf of a group company. For these purposes, the number of votes corresponding to the parent company, in relation to the companies
indirectly dependent on it, is that corresponding to the dependent company that directly participates in the share capital of the latter.
g. Excluding the Group companies listed in Appendix I, as well as those which are of negligible interest with respect to the true and fair view that the consolidated financial
statements must give (in accordance with articles 48 of the Commercial Code and 260 of the Spanish Companies Act).
h. Companies over which joint control is maintained.
i. Data as at 31 October 2020, latest available accounts.
j. Data as at 30 June 2021, latest available accounts.
k. Company with no financial information available.
l. Data as at 30 November 2018, latest available accounts.
m. Data as at 30 April 2021, latest available accounts.
n. Company in liquidation. Pending registration.
o. Company recently incorporated, no accounts available.
Annual report 2021 795
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Appendix III
Issuing subsidiaries of shares and preference shares
% of ownership held by
Banco Santander
Company
Emisora Santander España, S.A. Unipersonal Spain
Location
Santander UK (Structured Solutions) Limited United
Sovereign Real Estate Investment Trust
Kingdom
United States
Direct
100.00%
0.00%
0.00%
Indirect
Activity
0.00% Finance
company
100.00% Finance
company
100.00% Finance
company
EUR million (a)
Capital
2
Cost of
Reserves preferred
0
0
Net
results
0
0
0
4,931
(3,219)
0
43
0
74
a. Amount according to the books of each interim company as at 31 December 2021, converted into euro (in the case of foreign companies) at the year-end exchange rate.
Annual report 2021 796
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Appendix IV
Notifications of acquisitions and disposals of investments
in 2021
Details of the notifications of acquisitions and disposals of
participations for 2021 in accordance with Article 125 of the
Securities Market Law may be found below:
On 10 May 2021, Banco Santander, S.A. notified to the CNMV of the
increase of its stake in REPSOL above the 3% threshold up to 3.584%,
dated as of 4 May 4 2021.
On 25 June 2021, Banco Santander, S.A. notified to the CNMV of the
decrease of its stake in REPSOL, S.A. below the 3% threshold up to
2.718%, dated as of 21 June 2021.
On 26 November 2021, Banco Santander, S.A. notified to the CNMV
of the increase of its stake in REPSOL above the 3% threshold up to
3.829%, dated as of 22 November 2021.
In relation to the information required by 155 of the Corporate
Enterprises Act, on the shareholdings in which Grupo Santander
owns more than 10% of the capital of another company, and the
successive acquisitions of more than 5% of the share capital, see
appendices I, II and III.
Annual report 2021 797
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
Appendix V
Other information on the Group’s banks
Following is certain information on the share capital of
the Group’s main banks based on their total assets.
1. Santander UK plc
a) Number of financial equity instruments held by the Group.
At 31 December 2021, the Company was a subsidiary of Banco
Santander, S.A. and Santusa Holding, S.L.
On 12 November 2004 Banco Santander, S.A. acquired the then
entire issued ordinary share capital of 1,485,893,636 Ordinary shares
of 10p. each. On 12 October 2008 a further 10 billion Ordinary shares
of 10p. each were issued to Banco Santander, S.A. and an additional
12,631,375,230 Ordinary shares of 10p. each were issued to Banco
Santander, S.A. on 9 January on 2009. On 3 August 2010,
6,934,500,000 Ordinary shares of 10p. each were issued to Santusa
Holding, S.L. With effect from 10 January 2014, Santander UK Group
Holdings Limited, a subsidiary of Banco Santander, S.A. and Santusa
Holding, S.L., became the beneficial owner of 31,051,768,866
Ordinary shares of 10p. each, being the entire issued ordinary share
capital of the Company, by virtue of a share exchange agreement
between Santander UK Group Holdings Limited, Banco Santander,
S.A. and Santusa Holding, S.L. Santander UK Group Holdings Limited
became the legal owner of the entire issued Ordinary share capital of
the Company on 1 April 2014 and on 25 March 2015 became a public
limited company and changed its name from Santander UK Group
Holdings Limited to Santander UK Group Holdings plc. In addition to
this, there are 325,000,000 Non-Cumulative Non-Redeemable
10.375% and 8.625% Sterling Preference Shares of GBP 1.00 each. In
addition to this there were 13,780 Series A Fixed (6.222%)/Floating
Rate Non-Cumulative Callable Preference Shares of GBP 1.00 each
which were redeemed and cancelled in their entirety on 24 May
2019. The legal and beneficial title to the entire issued Preference
share capital is held by third parties and is not held by Banco
Santander, S.A.
b) Capital increases in progress
At 31 December 2021, there were no approved capital increases.
c) Share capital authorised by the shareholders at the general
meeting
The shareholders resolved at the Annual General Meeting held on 18
March 2021, to authorise unconditionally, the company to carry out
the following repurchases of the share capital:
(1) To buy back its own 8.625% Sterling Preference shares on the
following terms:
(a) The Company may buy back up to 125,000,000 8.625% Sterling
Preference shares;
(b) The lowest price which the Company can pay for 8.625%
Sterling Preference shares is 75% of the average of the market
values of the preference shares for five business days before the
purchase is made; and
(c) The highest price (not including expenses) which the Company
can pay for each 8.625% Sterling Preference share is 125% of
the average of the market values of the preference shares for
five business days before the purchase is made.
This authority shall begin on the date of the passing of this resolution
and end on the conclusion of the next Annual General Meeting of the
Company. The Company may agree, before this authorisation ends,
to buy back its own 8.625% preference shares even though the
purchase may be completed after this authorisation ends.
(2) To buy back its own 10.375% Sterling Preference shares on the
following terms:
(a) The Company may buy up to 200,000,000 10.375% Sterling
Preference shares;
(b) The lowest price which the Company can pay for 10.375%
Sterling Preference shares is 75% of the average of the market
values of the preference shares for five business days before the
purchase is made; and
(c) The highest price (not including expenses) which the Company
can pay for each 10.375% Sterling Preference share is 125% of
the average of the market values of the preference shares for
five business days before the purchase is made.
This authority shall begin on the date of the passing of this resolution
and end on the conclusion of the next Annual General Meeting of the
Company. The Company may agree, before this authorisation ends,
to buy back its own 10.375% preference shares even though the
purchase may be completed after this authorisation ends.
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
e) Specific circumstances that restrict the availability of reserves
Not applicable.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Quoted equity instruments
The preference share capital of Santander UK plc is traded on the
London Stock Exchange under the following details:
• 10.375% Sterling Preference - ISIN: GB0000064393
• 8.625% Sterling Preference - ISIN: GB0000044221
2. Santander Financial Services plc
a) Number of financial equity instruments held by the Group
The Group holds ordinary shares amounting to GBP 249,998,000
through Santander UK Group Holdings plc (249,998,000 ordinary
shares with a par value of GBP 1 each).
The Group also holds 1,000 tracker shares (shares without voting
rights but with preferential dividend rights) amounting to GBP 1,000
and 1,000 B tracker shares amounting to GBP 1,000 through
Santander UK Group Holdings plc, both with a par value of GBP 1
each.
b) Capital increases in progress
No approved capital increases are in progress.
c) Capital authorised by the shareholders at the general meeting
Not applicable.
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
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Appendix
e) Specific circumstances that restrict the availability of reserves
Not applicable.
b) Capital increases in progress
No approved capital increases are in progress.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Quoted equity instruments
Not applicable.
3. Banco Santander (Brasil) S.A.
a) Number of financial equity instruments held by the Group
The Group holds 3,440,170,512 ordinary shares and 3,273,507,089
preference shares through Banco Santander, S.A. and its subsidiaries
Sterrebeeck B.V., Grupo Empresarial Santander, S.L., Banco
Santander, S.A..
The shares composing the share capital of Banco Santander (Brasil)
S.A. have no par value and there are no pending payments. At 2021
year-end, the bank’s treasury shares consisted of 15,755,205
ordinary shares and 15,755,205 preferred shares, with a total of
31,510,410 shares.
In accordance with current Bylaws (Article 5.7), the preference shares
do not confer voting rights on their holders, except under the
following circumstances:
a)
b)
In the event of transformation, merger, consolidation or spin-off
of the company.
In the event of approval of agreements between the company
and the shareholders, either directly, through third parties or
other companies in which the shareholders hold a stake,
provided that, due to legal or bylaw provisions, they are
submitted to a general meeting.
c)
In the event of an assessment of the assets used to increase the
company’s share capital.
The General Assembly may, at any moment decide to convert the
preference shares into ordinary shares, establishing a reason for the
conversion.
However, the preference shares do have the following advantages
(Article 5.6):
a)
Their dividends are 10% higher than those distributed to
ordinary shares.
b) Priority in the dividends distribution.
c)
Participation, on the same terms as ordinary shares, in capital
increases resulting from the reserves and profits
capitalization and in the distribution of bonus shares arising
from the capitalization of retained earnings, reserves or any
other funds.
d) Priority in the reimbursement of capital in the event
company’s dissolution.
e)
In the event of a public offering due to a change in control of
the company, the holders of preferred shares are guaranteed
the right to sell the shares at the same price paid for the block
of shares transferred as part of the change of control, i.e. they
are treated the same as shareholders with voting rights.
c) Capital authorised by the shareholders at the general meeting
The company is authorised to increase share capital, subject to
approval by the Board of Directors, up to a limit of 9,090,909,090
ordinary shares or preferred shares, and without need to maintain
any ratio between any of the different classes of shares, provided
they remain within the limits of the maximum number of preferred
shares provided in Law.
As of 31 December 2021, the share capital consists of 7,498,531,051
shares (3,818,695,031 ordinary shares and 3,679,836,020 preferred
shares).
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
At the general meeting held on 21 December 2016 the shareholders
approved the rules relating to the deferred remuneration plans for
the directors, management and other employees of the company and
of companies under its control. Shares delivery is linked to
achievement of certain targets.
e) Specific circumstances that restrict reserves availability
The only restriction on the availability of Banco Santander (Brasil)
S.A.’s reserves is connected to the requirement for the legal reserve
formation (restricted reserves), which can only be used to offset
losses or to increase capital.
The legal reserve requirement is set-forth in Article 193 of the
Brazilian Corporations Law, which establishes that before allocating
profits to any other purpose, 5% of profits must be transferred to the
legal reserve, which must not exceed 20% of the company’s share
capital.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Listed capital instruments
All the shares are listed on the São Paulo Stock Exchange ( B3 - Brasil,
Bolsa, Balcão) and the shares deposit certificates (American
Depositary Receipts - ADR) are listed on the New York Stock Exchange
(NYSE).
4. Santander Bank, National Association
a) Number of financial equity instruments held by the Group
At 31 December 2021, the Group held 530,391,043 ordinary shares
that carry the same voting and dividend acquisition rights over
Santander Holdings USA, Inc. (SHUSA). This holding company and
Independence Community Bank Corp. (ICBC) hold 1,237 ordinary
shares with a par value of USD 1 each, which carry the same voting
rights. These shares constitute all the share capital of Santander
Bank, National Association (SBNA). SHUSA holds an 80.84%
ownership interest in SBNA, and the remaining 19.16% belongs to
ICBC. ICBC is wholly owned by SHUSA. There is no shareholders’
meeting for the ordinary shares of SBNA.
b) Capital increases in progress
At 31 December 2021 there were no approved capital increases.
c) Capital authorised by the shareholders at the general meeting
Not applicable.
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Notes to the consolidated
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Appendix
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
e) Specific circumstances that restrict the availability of reserves
Not applicable.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Quoted equity instruments
Not applicable.
5. Banco Santander México, S.A., Institución de Banca
Múltiple, Grupo Financiero Santander México
a) Number of financial instruments of capital held by the group.
On December 8, 2021 the period for the acceptance of the public
offering to acquire up to 561,353,228 shares of Banco Santander
México that were not held directly by Banco Santander, S.A., which
represented the 8.27% of the capital stock Banco Santander Méxcio.
As a result of the offer Banco Santander, S.A. increased its position in
Banco Santander México from 91.64% to 96.15%, with the
remaining 3.76% held by minority shareholders, 0.08% in own
shares and 0.01% to Gesban México Servicios Administrativos
Globales, S.A. de C.V.
On June 15, 2020, Gesban México Servicios Administrativos Globales,
S.A. de C.V., acquired the 1,340 shares of Banco Santander México
owned by Santander Global Facilities, S.A. de C.V.
As a result Grupo Financiero Santander México, S.A. de C.V. ('Grupo
Financiero') and Gesban México Servicios Administrativos Globales,,
S.A. de C.V. (México), hold 5,087,801,602 shares which represent the
74.97% of the capital stock of Banco Santander México and Banco
Santander, S.A. holds 1,438,256,710 shares which represent the
21.19% of such capital stock.
On September 30, 2020, the General Extraordinary Shareholders'
Meetings of Banco Santander México and Santander Vivienda, S.A. de
C.V., SOFOM E.R., GFSM, were held. In such meetings the merger by
absorption of Banco Santander México with Santander Vivienda, S.A.
de C.V., SOFOM E.R., GFSM, was approved. This merger did not result
in a movement of the share capital of Banco Santander México, since
it was a shareholder of 99.99998% of the shares representative of
the share capital of Santander Vivienda , S.A. de C.V., SOFOM, E.R.,
GFSM, and such circumstance results in the material and legal
impossibility for Banco Santander México, S.A., Institución de Banca
Multiple, Grupo Financiero Santander México to perform the
redemption of the shares, since these shares are already integrated
into the assets of the merger.
b) Ongoing capital stock increases.
To this date there are not on going capital stock increases.
c) Authorized Capital by the Shareholders Meeting.
The capital stock of the Bank is 32,485,600,110.00 Mexican pesos
(thirty-two thousand four hundred eighty-five million six hundred
thousand one hundred ten Mexican pesos) represented by a total of
8,592,294,357 (eight thousand five hundred ninety-two million two
hundred ninety-four thousand three hundred fifty-seven) shares with
a nominal value of 3.780782962 Mexican pesos (three Mexican
pesos 780782962/1000000000) each one; divided in 4,385,824,012
(four thousand three hundred eighty-five million eight hundred
twenty-four thousand twelve) stocks “F” Series and 4,206,470,345
four thousand two hundred six million four hundred seventy
thousand three hundred forty-five) shares “B” Series. The capital
stock is constituted as follows:
• Paid-in and subscribed capital of the Bank is 25,660,152,629.00
Mexican pesos (twenty five thousand six hundred sixty million one
hundred fifty two thousand six hundred and twenty nine Mexican
pesos) represented by a total of 6,786,994,357 (six thousand
seven hundred eighty six million nine hundred ninety four
thousand three hundred and fifty seven) shares with a nominal
value of 3.780782962 Mexican pesos (three Mexican pesos
780782962/1000000000) each one; divided in 3,464,309,145
(three thousand four hundred sixty four million three hundred and
nine thousand one hundred and forty five) shares “F” Series and
3,322,685,212 (three thousand three hundred twenty two million
six hundred eighty five thousand two hundred and twelve) shares
Series.
• The authorized capital stock for the conversion of obligations into
shares of the Company is 6,825,447,481.00 Mexican pesos, (six
thousand eight hundred twenty-five million four hundred forty-
seven thousand four hundred eighty-one), represented by a total
of 1,805 ,300,000 (one thousand eight hundred five million three
hundred thousand) shares with a nominal value of 3,780782962
Mexican pesos (three pesos 780782962/1000000000 ) each;
divided into 921,514,867 (nine hundred twenty-one million five
hundred fourteen thousand eight hundred sixty-seven) Series “F”
shares and 883,785,133 (eight hundred eighty-three million seven
hundred eighty-five thousand one hundred thirty-three) Series “B
shares ". which are kept in the treasury of the Bank.
d) Rights incorporated into parts of founder, bonds or debt,
convertible obligations and securities or similar rights.
(i)
The Board of Directors on its meeting held on October 22, 2015,
was updated regarding the situation of the debt issuance of
Banco Santander Mexico, S.A. , which had been previously
ratified in the meeting held on October 17, 2013, in order to
issue debt for the amount of 6,500 million dollars in local or
international markets, for a maximum period of 15 years, senior
or subordinated debt including debt instruments qualifying for
purposes of capital in accordance with the legislation in force,
which can be implemented individually or through several
issuance programs.
The approved debt issuance of Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander México is
currently composed as follows:
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Instrument
Issuance Program of unsecured bonds and
unsecured certificates of deposit
Type
Revolving
Term
4-Mar-26
Amount
55,000 million Mexican pesos, or its $27,461 million Mexican
equivalent in UDIs, dollars or any
other foreign currency
Available
pesos
Private banking structured bonds Act
Not
Revolving*
16-Ago-34 20,000 million Mexican pesos
Structured bonds without public offering
Senior Bonds
Capital Notes (Tier 2 Capital)
Senior notes 144.ª/RegS
16-Feb-32 10,000 million Mexican pesos
Not
Revolving
Not Revolving 09-Nov-22 1,000 million American dollars
Not Revolving 1-Oct-2028 1,300 million American dollars
1,750 million American dollars
Not Revolving 17-
Subordinated Notes, perpetual and
convertible (Tier 1)
Not
Revolving
700 million American dollars
N/A
Abr-2025
Perpetual
With fix rate according to
Banxico 31/Dec/ 2021
$3,356 million Mexican pesos
$10,000 million Mexican
pesos
N/A
N/A
N/A
* The issuance of the structured private banking bonds isn’t revolving. Once placed the amount laid down in the corresponding brochure a new certificate will be issued on
the authorized amount.
(ii) The Board of Directors on its meeting held on January 27, 2011
approved the general conditions for the senior debt issue
among international markets. On October 18, 2012 such
issuance was approved on the amount of 500 and 1000 million
American dollars, for a term of 5 to 10 years. The issuance was
approved with the purpose of obtaining resources to finance the
increase in business assets and the liquidity of the Bank. Under
these agreements adopted by the Board of Directors, the debt
was issued for an amount of 1,000 million American dollars on
November 9, 2012.
(iii) On December 27, 2013 Banco Santander México, S.A., issued
subordinated notes (subordinated notes 2013) for a total
amount of 1,300,000,000 American dollars, in accordance with
the capital requirements established in the Basilea III criteria for
complementary capital/ Tier 2 at a rate of 5.95% with
redemption date of January, 30, 2024. The controlling
shareholder, Banco Santander, S.A., agreed to buy 975,000,000
American dollars of such notes equivalent to the 75% of the
latter.
Such notes were offered through a private offering only to qualified
institutional buyers, in accordance with Rule 144A of the U.S.
Securities Act of 1933 and it´s modifications, and outside the U.S.
under the Regulation S of the Market Law.
The issuance was approved with the purpose of increasing the
efficiency of the capital of the Bank, to adequate its capital profile to
its main competitors, as well as to increase the cost effectiveness of
resources with the same capital strength and capacity for growth in
risk-weighted assets.
(iv)
The Board of Director on its meeting held on October 27, 2016
approved the issuance in Mexico of debt up to 500 million
American dollars or its equivalent in Mexican pesos. The
Ordinary and Extraordinary Shareholder´s meeting held on
December 5, 2016, approved to issuance of a financial
instrument complying with the requirements of regulatory
capital established in Basilea III, which was considered as not
fundamental basic capital, for up to 500 million American
dollars.
On December 29, 2016, Banco Santander México made an overseas
private offering of subordinated, non preferred, perpetual and
convertible obligations (“2016 Obligations”) representing the share
capital by a total amount of 500,000,000 American dollars, which
had the character of a ‘mirror issuance‘( back-to-back), as a
guarantee of liquidity of the subordinated non preferred perpetual
and convertible obligations, issued by Grupo Financiero Santander
Mexico.
It is worth mentioning that in September, 2019, it was requested
before the Registro Nacional de Valores of the National Banking and
Securities Commission (Comision Nacional Bancaria y de Valores)
(“CNBV”), the registry cancellation of the above mentioned 2016
Obligations, as well as the list cancellation of such notes in the Bolsa
Mexicana de Valores, S.A.B. de C.V. (“BMV”). By means of official note
No. 153/12251/2019 dated November 4, 2019, CNBV authorized
such cancellation.
(v)
(vi)
As a result of the corporate restructure which included, among
others, the merger of Banco Santander México, as the merging
entity with Grupo Financiero Santander Mexico as the merged
entity, the subordinated obligations referred to in paragraph (iv),
were acquired entirely by Banco Santander México; therefore
the subordinate obligations of Banco Santander Mexico became
extinct by confusion of rights and obligations, since the Bank as
a merging party met the quality of debtor and creditor in these
instruments at the moment that the merger was finalized.
On September 20, 2018, Banco Santander México, issued and
placed equity instruments, subordinated, preferential, and not
convertible into shares, governed by foreign law, representative
of the complementary part of the net capital of Banco
Santander Mexico (Tier 2 subordinated preferred capital notes),
for the amount of 1,300,000,000.00 American dollars (the
“Instruments”), whose resources were used mainly for the
acquisition of the 94.07% of the Subordinated Notes 2013.
The amount issued of 1,300,000,000.00 American dollars covers in
full the sum of the repurchase of the Subordinated Notes 2013, for
1,222,907,000.00 American dollars.
Regarding the acquisition of the Subordinated Notes 2013: (a) the
acquired total amount was 1,222,907,000.00 American dollars
(nominal value), at a price of 1,010.50 American dollars and (b) the
amount acquired by Banco Santander, S.A. (Spain), was a nominal
1,078,094,000.00 American dollars.
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Notes to the consolidated
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Appendix
In connection with the issuance of the Instruments, the total amount
distributed with Banco Santander, S.A. (Spain), was 75% of such
issuance; that is, the placed amount was 975,000,000.00.
Therefore, the Bank’s General Extraordinary Shareholder´s Meeting
held on September 10, 2018, among other subjects, approved to
ratify the issuance limit for up to 6,500 million and a term of 15
years, senior or subordinate, in local and/or international markets,
instrumented individually or through issuance programs, which was
previously authorized by the Board of Directors on its meeting held
on April 26, 2018.
On January 30, 2019, Banco Santander México paid off the total
remaining due amount of the Subordinated Notes 2013.
On April 17th., 2020, Banco Santander Mexico issued an international
Senior Note, due on five years in the global market, on the amount of
1,750 million dollars, with a rate of 5.375 per cent, whereas the
demand exceeded three times the placed amount. The due date of
such notes will be April 17th, 2025.
On September 15, 2021, Banco Santander Mexico issued abroad the
“Perpetual Subordinated Non-Preferred Contingent Convertible
Additional Tier 1 Notes”, up to an amount of 700,000,000.00.
American dollars. On the same date, the Bank paid the “2016
Obligations” above mentioned, on a fixed initial rate of 4.625% up to
an amount of 700,000,000.00.American dollars.
e) Specific circumstances restricting the availability of reserves.
According to the Law of Financial Institutions, general dispositions
applicable to financial institutions, General Corporations law and the
bylaws, the Bank has to constitute or increase its capital reserves to
ensure the solvency to protect the payments system and the public
savings.
The Bank increases its legal reserve annually accordingly to the
results obtained in the fiscal year (benefits).
The Bank must constitute the different reserves established in the
legal provisions applicable to financial institutions, which are
determined accordingly to the qualification granted to credits and
they are released when the credit rating improves, or when it is
settled.
c) Capital authorised by the shareholders at the general meeting
Not applicable.
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
e) Specific circumstances that restrict the availability of reserves
Under Article 296 of the Portuguese Companies’ Code, the legal and
merger reserves can only be used to offset losses or to increase
capital.
Non-current asset revaluation reserves are regulated by Decree- Law
31/98, under which losses can be offset or capital increased by the
amounts for which the underlying asset is depreciated, amortised or
sold.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Equity instruments
Not applicable.
7. Santander Consumer Bank AG
a) Number of financial equity instruments held by the Group
At 31 December 2021, through Santander Consumer Holding GmbH,
the Group held 30,002 ordinary shares with a par value of EUR 1,000
each, all of which carry the same voting rights.
b) Capital increases in progress
Not applicable.
c) Capital authorised by the shareholders at the general meeting
Not applicable.
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
e) Specific circumstances that restrict the availability of reserves
Not applicable.
f) Entities outside the Group which own, directly or through
subsidiaries, a stake equal to or greater than 10% of the equity.
Not applicable.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Equity instruments admitted to trading.
Not applicable.
6. Banco Santander Totta, S.A
g) Quoted equity instruments
Not applicable.
8. Banco Santander - Chile
a) Number of equity instruments held by the Group
The Group holds 1,256,195,888 ordinary shares through its
subsidiaries: Santander Totta, SGPS, S.A. with 1,241,179,513 shares,
Taxagest Sociedade Gestora de Participações Sociais, S.A. with
14,593,315 shares, and Banco Santander Totta, S.A. with 423,060
treasury shares, all of which have a par value of EUR 1 each and
identical voting and dividend rights and are subscribed and paid in
full.
a) Number of equity instruments held by the Group
The Group holds a 67.18% ownership interest in its subsidiary in
Chile corresponding to 126,593,017,845 ordinary shares of Banco
Santander - Chile through its subsidiaries: Santander Chile Holding
S.A. with 66,822,519,695 ordinary shares, Teatinos Siglo XXI
Inversiones S.A., with 59,770,481,573 ordinary shares and Santander
Inversiones S.A. with 16,577 fully subscribed and paid ordinary
shares that carry the same voting and dividend rights.
b) Capital increases in progress
At 31 December 2021, there were no equity increases in progress.
b) Capital increases in progress
At 31 December 2021, there were no approved capital increases.
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Appendix
c) Capital authorised by the shareholders at the general meeting
Share capital at 31 December 2021 amounted to CLP
891,302,881,691.
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
e) Specific circumstances that restrict the availability of reserves
Remittances to foreign investors in relation to investments made
under the Statute of Foreign Investment (Decree-Law 600/1974) and
the amendments thereto require the prior authorisation of the
foreign investment promotion agency.
f) Non-Group entities which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Quoted equity instruments
All the shares are listed on the Chilean stock exchanges and, through
American Depositary Receipts (ADRs), on the New York Stock
Exchange (NYSE).
9. Santander Bank Polska S.A.
a) Number of financial equity instruments held by the Group
At 31 December, 2021, Banco Santander, S.A. held 68,880,774
ordinary shares with a par value of PLN 10 each, all of which carry the
same voting rights.
b) Capital increases in progress
At 31 December, 2021, there were no equity increases in progress.
c) Capital authorised by the shareholders at the general meeting
There was no share capital increase in 2021.
d) Rights on founder’s shares, “rights” bonds, convertible
debentures and similar securities or rights
Not applicable.
e) Specific circumstances that restrict the availability of reserves
Not applicable.
f) Non-Group entities, which hold, directly or through subsidiaries,
10% or more of equity
Not applicable.
g) Quoted equity instruments
All the shares of Santander Bank Polska S.A. are listed on the Warsaw
Stock Exchange.
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Consolidated
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Notes to the consolidated
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Appendix
Appendix VI
Annual banking report
Grupo Santander’s total tax contribution (taxes incurred directly and
by third parties, generated in the course of business) is around EUR
16,200 million, including more than EUR 7,600 million in taxes
incurred directly (corporate income tax, non-recoverable VAT and
other indirect taxes, employer Social Security contributions, payroll
taxes and other taxes and levies).
This report complies with Article 89 of Directive 2013/36/EU of the
European Parliament and of the Council of 26 June 2013 on access to
the activity of credit institutions and the prudential supervision of
credit institutions and investment firms, and its transposition into
Spanish law pursuant to Article 87 of Act 10/2014 of 26 June on the
regulation, supervision and capital adequacy of credit institutions.
The criteria used to prepare this report were:
a) Name(s), activities and location
Appendices I to III to the consolidated financial statements contain
details of the companies operating in each jurisdiction, including their
name(s), location and activities.
Santander main activity in the jurisdictions where operate is
commercial banking. The Group primarily operates in ten markets
through subsidiaries that are autonomous in capital and liquidity. This
has clear strategic and regulatory advantages, since it limits the risk
of contagion between units, imposes a double layer of global and
local oversight, and facilitates crisis management and resolution.
b) Turnover and profit or loss before tax
Turnover in this report is Total income, and profit or loss before tax,
Operating profit/(loss) before tax, both as defined and presented in
the consolidated income statement that forms part of the
consolidated financial statements.
c) Number of full time equivalent employees
The data on full-time equivalent employees stem from the average
headcount of each jurisdiction.
d) Tax on profit or loss
In the absence of specific criteria, we have included the amount
effectively paid (EUR 4,012 million in 2021, with an effective tax rate
of 27.6%) in respect of taxes whose effect is recognized under
Income tax in the consolidated income statement.
Taxes effectively paid by the companies in each jurisdiction include:
• Supplementary payments relating to income tax returns, usually
for prior years.
• Advances, prepayments, withholdings made or borne in respect of
tax on profit or loss for the year. We included taxes borne abroad in
the jurisdiction of the company that bore them.
• Refunds received with respect to prior years’ returns.
• Where appropriate, the amount payable from assessments and
litigation relating to these taxes.
The foregoing form part of the cash flow statement and differ from
the corporate income tax expense recognized in the consolidated
income statement (EUR 4,894 million in 2021, representing an
effective rate of 33.6%, or, discounting extraordinary results, EUR
5,076 million, which represents an effective rate of 33.3%, see note
27 and 51.c). This is because each country’s tax regulations establish:
• when taxes must be paid. There is often a mismatch between the
payment dates and the generation of the income bearing the tax.
• their own calculation criteria to define temporary or permanent
restrictions on expense deduction, exemptions and relief or
deferrals of certain income, generating the differences between
the accounting profit (or loss) and taxable profit (or tax loss) which
is ultimately taxed; tax loss carry forwards from prior years, tax
credits and/or relief, etc., must also be added. In certain cases,
special regimes such as the tax consolidation of companies in the
same jurisdiction are established.
e) Public subsidies
In the context of the legally-required disclosures, this was
interpreted as any aid or subsidy in line with the European
Commission’s Guidance on the notion of State aid. Grupo Santander
did not receive public subsidies in 2021.
Annual report 2021 804
Contents
Auditor's
report
Consolidated
financial statements
Notes to the consolidated
financial statements
Appendix
The breakdown of information is as follows :
Jurisdiction
Germany
Argentina
Austria
Bahamas
Belgium
1
Brazil
Canada
Chile
China
Colombia
United Arab Emirates
2
Spain
United States
Denmark
Finland
France
Greece
Hong Kong
India
Ireland
Isle of Man
Italy
Jersey
Luxembourg
Mexico
Norway
Netherlands
Peru
Poland
Portugal
Puerto Rico
United Kingdom
Singapore
Sweden
Switzerland
Uruguay
Consolidated Group Total
Turnover (millions of
euros)
1,659
Employees
5,097
Gross profit or loss before
tax (EUR million)
650
Tax on profit or loss (EUR
million)
204
2021
1,362
177
4
75
10,585
55
2,406
22
49
—
7,026
7,389
176
117
823
—
94
—
(37)
15
507
36
179
3,529
255
95
110
1,929
1,371
4
5,722
12
180
138
340
46,404
8,637
348
26
171
45,191
203
10,334
72
334
24
33,408
14,994
218
166
975
18
172
47
2
67
937
73
18
25,428
524
268
292
12,314
6,189
18
20,820
19
251
280
1,457
189,392
274
86
(2)
58
4,383
20
1,140
1
6
(2)
(1,588)
3,693
113
64
474
(4)
13
—
(31)
5
279
21
158
1,086
95
55
56
435
477
(12)
2,292
6
58
45
143
14,547
115
17
2
3
1,385
5
180
—
4
—
399
376
10
14
93
—
3
—
1
1
46
1
41
207
22
51
26
206
17
—
525
1
26
4
27
4,012
1.
2.
Including the information relating to a branch in the Cayman Islands, the profits of which are taxed in full in Brazil. The contribution of this branch profit before tax from
continuing operations is EUR 432 million.
Includes the Corporate Centre.
At 31 December 2021, the Group’s return on assets (ROA)
was 0.62%.
Annual report 2021 805
Pursuant to Article 253, section 1 of the revised Spanish Companies Act (Ley de Sociedades de Capital), the board of
directors of Banco Santander, S.A. draws up the consolidated financial statements (comprising the consolidated balance
sheet, income statement, statement of recognized income and expense, statement of changes in total equity, statement
of cash flows and the notes to the consolidated financial statements) and the consolidated directors’ report for the 2021
fiscal year in eXtensible HyperText Markup Language (XHTML) format and, with respect to the main financial statements,
with tags in the standard eXtensible Business Reporting Language (XBRL), all of which conforms to the single electronic
reporting format required under Directive 2004/109/EC and Delegated Regulation (EU) 2019/815.
The directors of Banco Santander, S.A., listed below with an indication of their respective positions, declare that, to the best
of their knowledge, the company's consolidated financial statements for the 2021 financial year were drawn up in
accordance with the applicable accounting principles and give a true and fair view of the assets, liabilities, financial position
and profit or loss of the company and of the undertakings included in the consolidation taken as a whole, and that the
consolidated directors’ report includes a fair review of the development, performance and position of the company and of
the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face.
Boadilla del Monte (Madrid), 24 February 2022
ANA PATRICIA BOTÍN-SANZ DE SAUTUOLA Y O’SHEA
Chair
BRUCE CARNEGIE-BROWN
JOSÉ ANTONIO ÁLVAREZ ÁLVAREZ
Vice Chair
Vice Chair and Chief Executive Officer
Annual report 2021 806
HOMAIRA AKBARI
LUIS ISASI FERNÁNDEZ DE BOBADILLA
MEMBERS:
FRANCISCO JAVIER BOTÍN-SANZ DE
SAUTUOLA Y O’SHEA
HENRIQUE MANUEL DRUMMOND BORGES
CIRNE DE CASTRO
SOL DAURELLA COMADRÁN
SERGIO AGAPITO LIRES RIAL
GINA DÍEZ BARROSO
R. MARTÍN CHÁVEZ MÁRQUEZ
RAMIRO MATO GARCÍA-ANSORENA
BELÉN ROMANA GARCÍA
ÁLVARO ANTONIO CARDOSO DE SOUZA
PAMELA ANN WALKDEN
Annual report 2021 807
General information
Corporate information
Banco Santander, S.A. is a Spanish bank, incorporated as sociedad
anónima in Spain and is the parent company of Grupo Santander.
Banco Santander, S.A. operates under the commercial name
Santander.
The Bank’s Legal Entity Identifier (LEI) is
5493006QMFDDMYWIAM13 and its Spanish tax identification
number is A-39000013. The Bank is registered with the
Companies Registry of Cantabria, and its Bylaws have been
adapted to the Spanish Companies Act by means of the notarial
deed instrument executed in Santander on 29 July 2011 before the
notary Juan de Dios Valenzuela García, under number 1209 of his
book and filed with the Companies Registry of Cantabria in volume
1006 of the archive, folio 28, page number S-1960, entry 2038.
The Bank is also registered in the Official registry of entities of
Bank of Spain with code number 0049.
The Bank’s registered office is at:
Paseo de Pereda, 9-12
39004 Santander
Spain
The Bank’s principal executive offices are located at:
Santander Group City
Avda. de Cantabria s/n
28660 Boadilla del Monte
Madrid
Spain
Telephone: (+34) 91 259 65 20
Corporate history
The Bank was established in the city of Santander by public deed
before the notary José Dou Martínez on 3 March 1856, which was
later ratified and amended in part by a second public deed dated
21 March 1857 executed before the notary José María Olarán. The
Bank commenced operations upon incorporation on 20 August
1857 and, according to article 4 of the Bylaws, its duration shall be
for an indefinite period. It was transformed into a credit
corporation (sociedad anónima de crédito) by public deed,
executed
before notary Ignacio Pérez, on 14 January 1875 and registered in
the Companies Registry Book of the Government’s Trade
Promotion Section in the province of Santander. The Bank
amended its Bylaws to conform to the Spanish public companies
act of 1989 by means of a public deed executed in Santander on 8
June 1992 before the notary José María de Prada Díez and
recorded in his notarial record book under number 1316.
On 15 January 1999, the boards of directors of Santander and
Banco Central Hispanoamericano, S.A. agreed to merge Banco
Central Hispanoamericano, S.A. into Santander, and to change
Banco Santander’s name to Banco Santander Central Hispano, S.A.
The shareholders of Santander and Banco Central
Hispanoamericano, S.A. approved the merger on 6 March 1999, at
their respective general meetings and the merger became
effective in April 1999.
The Bank’s general shareholders’ meeting held on 23 June 2007
approved the proposal to change back the name of the Bank to
Banco Santander, S.A.
As indicated above, the Bank brought its Bylaws into line with the
Spanish Companies Act by means of a public deed executed in
Santander on 29 July 2011.
The Bank’s general shareholders’ meeting held on 22 March 2013
approved the merger by absorption of Banco Español de Crédito,
S.A.
On 7 June 2017, Santander acquired the entire share capital of
Banco Popular Español, S.A. in an auction in connection with a
resolution plan adopted by the European Single Resolution Board
(the European banking resolution authority) and executed by the
FROB (the Spanish banking resolution authority) following a
determination by the European Central Bank that Banco Popular
was failing or likely to fail, in accordance with Regulation (EU)
806/2014 establishing a framework for the recovery and
resolution of credit institutions and investment firms. On 24 April
2018, the Bank announced that the boards of directors of Banco
Santander, S.A. and Banco Popular Español, S.A.U. had agreed to an
absorption of Banco Popular by Banco Santander. The legal
absorption was effective on 28 September 2018.
Annual report 2021 808
Customer service department
Calle Princesa, 25
Edificio Hexágono, 2ª planta
28008 Madrid
Spain
Telephone: (+34) 91 759 48 36
atenclie@gruposantander.com
Banking Ombudsman in Spain
(Defensor del cliente en España)
Mr José Luis Gómez-Dégano
Apartado de Correos 14019
28080 Madrid
Spain
Shareholder and investor relations
Santander Group City
Pereda, 2ª planta
Avda. de Cantabria, s/n
28660 Boadilla del Monte
Madrid
Spain
Telephone: (+34) 91 259 65 14
investor@gruposantander.com
Hard copies of the Bank’s annual report can be requested
by shareholders free of charge at the address and phone
number indicated above.
Media enquiries
Santander Group City
Arrecife, 2ª planta
Avda. de Cantabria, s/n
28660 Boadilla del Monte
Madrid
Spain
Telephone: (+34) 91 289 52 11
comunicacion@gruposantander.com
Annual report 2021 809