For a brighter
tomorrow
2022 Annual report
santander.com
2022
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. If the contents of such other documents and
websites refer to this annual report, they are not nor should
be considered part of it.
Unless the context suggests otherwise, 'Banco Santander'
means Banco Santander, S.A., and 'Santander', 'the Group'
and 'Grupo Santander' mean Banco Santander, S.A. and
subsidiaries.
Consolidated directors' report
7 Business model and strategy
17 Responsible banking
Consolidated non-financial information
statement
20 2022 Overview
23 Our ESG strategy
30 Building a more responsible bank
76 Our progress in figures
92 Further information
104 ESG reporting standards and references
154 Independent verification report
157 Corporate Governance
160 2022 Overview
166 Ownership structure
172 Shareholders. Engagement and general
meeting
179 Board of directors
227 Management team
229 Remuneration
256 Group structure and internal governance
259 Internal control over financial reporting (ICFR)
266 Other corporate governance information
303 Economic and financial review
305 Economic, regulatory and competitive context
309 Group selected data
311 Group financial performance
356 Financial information by segments
399 Research, development and innovation
(R&D&I)
401 Significant events since year end
402 Trend information 2023
410 Alternative performance measures (APM)
419 Risk management and compliance
421 Risk management and compliance
429 Risk management and control model
436 Credit risk
455 Market, structural and liquidity risk
468 Capital risk
470 Operational risk
477 Compliance and conduct risk
484 Model risk
486 Strategic risk
487 Climate and environmental risk
Auditor's report and consolidated
financial statements
503 Auditor's report
497 Glossary
513 Consolidated financial statements
529 Notes to the consolidated financial
statements
765 Appendix
808 General information
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
2022 consolidated
directors’ report
This report was approved unanimously by our board
of directors on 27 February 2023
Our approach to this document
We changed the layout of our consolidated directors’ report in
2018 to include the contents previously provided in these
documents, which we no longer prepare separately:
• Annual report
• Consolidated directors’ report
• Annual corporate governance report (CNMV format
document)
• Board committee reports
• Sustainability report
• Annual report on our directors’ remuneration (CNMV format
document)
Auditors’ reviews
As required by law, our 2022 consolidated directors’ report was
subject to three reviews by our independent statutory auditors,
PricewaterhouseCoopers Auditores, S.L. They can be
summarized as follows:
• PricewaterhouseCoopers Auditores, S.L. verified that the
information in this report is consistent with our consolidated
financial statements and that its contents comply with
applicable regulation. For more details, see 'Other
information: Consolidated management report section of the
'Auditor’s report' within 'Auditor's report and consolidated
annual accounts'.
Non-IFRS and alternative performance measures
This report contains financial information prepared according to
International Financial Reporting Standards (IFRS) and taken
from our consolidated financial statements, as well as
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. The APMs and non-IFRS
measures were calculated with information from Grupo
Santander; however, they are neither defined or detailed in the
applicable financial reporting framework nor audited or
reviewed by our auditors.
We use the APMs and non-IFRS measures when planning,
monitoring and evaluating our performance. We consider them
to be useful metrics for our management and investors to
compare operating performance between accounting periods.
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 (NFI).
• PricewaterhouseCoopers Auditores, S.L. issued a verification
report, with limited assurance, on the non-financial and
diversity information indicators as required by Spanish Act
11/2018 and included in this consolidated directors' report. To
read the verification report, see the 'Independent verification
report' in the 'Responsible banking' chapter.
• PricewaterhouseCoopers Auditores, S.L. issued an
independent reasonable assurance report on the design and
effectiveness of Banco Santander's internal control over
financial reporting, which can be found in section 8.6 of the
'Corporate governance' chapter.
Nonetheless, the APMs and non-IFRS measures are
supplemental information; their purpose is not to substitute the
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'.
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2022 Annual report
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Non-financial information
This report contains, in addition to financial information, non-
financial information (NFI), including environmental, social and
governance-related metrics, statements, goals, commitments
and opinions. The NFI can be found throughout the report but
mostly in the 'Responsible banking' chapter.
NFI is included to comply with Spanish Act 11/2018 on non-
financial information and diversity and to provide a broader
view of our impact. NFI is not audited nor, save as expressly
indicated under ‘Auditors’ reviews’, reviewed by an external
auditor. NFI is prepared following various external and internal
frameworks, reporting guidelines and measurement, collection
and verification methods and practices, which are materially
Forward-looking statements
Banco Santander hereby warns that this annual report contains
“forward-looking statements”, as defined by the US Private
Securities Litigation Reform Act of 1995. Such statements can
be understood through words and expressions like "expect",
"project", "anticipate", "should", "intend", "probability", "risk",
“VaR”, “RoRAC”, “RoRWA”, “TNAV”, "target", "goal", "objective",
"estimate", "future", “commitment”, “commit”, “focus”,
“pledge” and similar expressions. They include (but are not
limited to) statements on future business development,
shareholder remuneration policy and NFI. However, risks,
uncertainties and other important factors may lead to
developments and results that differ materially from those
anticipated, expected, projected or assumed in forward-looking
statements.
The important factors below (and others described elsewhere in
this report), as well as other unknown or unpredictable factors,
could affect our future development and results and could lead
to outcomes materially different from what our forward-
looking statements anticipate, expect, project or assume:
• general economic or industry conditions (e.g., an economic
downturn; higher volatility in the capital markets; inflation;
deflation; changes in demographics, consumer spending,
investment or saving habits; and the effects of the war in
Ukraine or the COVID-19 pandemic in the global economy) in
areas where we have significant operations or investments;
• climate-related conditions, regulations, targets and weather
events;
• exposure to market risks (e.g., risks from interest rates,
foreign exchange rates, equity prices and new benchmark
indices);
• potential losses from early loan repayment, collateral
depreciation or counterparty risk;
• political instability in Spain, the UK, other European countries,
Latin America and the US;
• legislative, regulatory or tax changes (including regulatory
capital and liquidity requirements), especially in view of the
UK's exit from the European Union and greater regulation
prompted by financial crises;
different from those applicable to financial information and are
in many cases emerging and evolving. NFI is based on various
materiality thresholds, estimates, assumptions, judgments and
underlying data derived internally and from third parties. NFI is
thus subject to significant measurement uncertainties, may not
be comparable to NFI of other companies or over time or across
periods and its inclusion is not meant to imply that the
information is fit for any particular purpose or that it is material
to us under mandatory reporting standards. NFI is for
informational purposes only, without any liability being
accepted in connection with it except where such liability cannot
be limited under overriding provisions of applicable law.
• acquisition integration and challenges arising from deviating
management’s resources and attention from other strategic
opportunities and operational matters;
• uncertainty over the scope of actions that may be required by
us, governments and other to achieve goals relating to
climate, environmental and social matters, as well as the
evolving nature of underlying science and industry and
governmental standards and regulations; and
• changes affecting our access to liquidity and funding on
acceptable terms, especially due to credit spread shifts or
credit rating downgrade for the entire group or core
subsidiaries.
Forward looking statements are based on current expectations
and future estimates about Santander’s and third-parties’
operations and businesses and address matters that are
uncertain to varying degrees, including, but not limited to
developing standards that may change in the future; plans,
projections, expectations, targets, objectives, strategies and
goals relating to environmental, social, safety and governance
performance, including expectations regarding future execution
of Santander’s and third parties’ energy and climate strategies,
and the underlying assumptions and estimated impacts on
Santander’s and third-parties’ businesses related thereto;
Santander’s and third-parties’ approach, plans and expectations
in relation to carbon use and targeted reductions of emissions;
changes in operations or investments under existing or future
environmental laws and regulations; and changes in
government regulations and regulatory requirements, including
those related to climate-related initiatives.
Forward-looking statements are aspirational, should be
regarded as indicative, preliminary and for illustrative purposes
only, speak only as of the date of approval of this annual report
and are informed by the knowledge, information and views
available on such date and are subject to change without notice.
Banco Santander is not required to update or revise any
forward-looking statements, regardless of new information,
future events or otherwise, except as required by applicable
law.
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2022 Annual report
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Past performance does not indicate future outcomes
Statements about historical performance or growth rates must
not be construed as suggesting that future performance, share
price or earnings (including earnings per share) will necessarily
be the same or higher than in a previous period. Nothing in this
annual report should be taken as a profit and loss forecast.
To view the XBRL tags, you must open this document with an
appropriate viewer. You can find this document with an XBRL
viewer on Banco Santander's corporate website.
XHTML electronic format and XBRL tags
This annual report was 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.
Not a securities offer
This annual report and the information it contains does not
constitute an offer to sell, nor a solicitation of an offer to buy
any securities.
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2022 Annual report
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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.
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Our business model | Our customer focus, global scale and diversification are the
foundations for generating value for our shareholders
01. Customer focus
Digital bank
with branches
→ Santander provides access to financial services for our customers through
several channels (universal branches, specialist centres, contact centres, etc.)
and supports customers with more digital services and products.
→ We continue to enhance customer experience
A
reflected in growth in customers and NPS
improvement.
and satisfaction. All this is
A
Top 3 in customer satisfaction
→ Our focus is to further transform our business and operating model through
our global technology initiatives with the aim to build a Digital bank with
branches.
A. NPS – internal benchmark of individual customers’ satisfaction audited by Stiga/Deloitte H2’22.
02. Scale
In-market &
global
→ In-market scale in each of our core markets in volumes in each of our core
markets combined with our global scale support greater profitability and
provide a competitive advantage over local peers.
→ Global scale and network business: SCIB and WM&I coupled with our
capabilities in auto and payments drive in-market and Group profitable
growth and value.
A
Top 3 in lending
in 10 of our markets
DCB
A. Market share data latest available. Spain includes Santander España + Hub Madrid + SCF España + Openbank and Other Resident sectors in deposits. The UK: includes mortgages and retail
deposits. Poland: including SCF business in Poland. The US: retail auto loans includes Santander Consumer USA and Chrysler Capital combined. Deposits considering all states where Santander
Bank operates. Brazil: deposits including debenture, LCA (agribusiness notes), LCI (real estate credit notes), financial bills (letras financeiras) and COE (certificates of structured operations).
03. Diversification
Geographical
Business
Balance sheet
→ Our diversified geographical footprint is well balanced between developing
and mature markets.
→ Business diversification between customer segments (individuals, SMEs,
mid-market companies and large corporates).
→ Diversification delivers recurrent pre-provision profit with low volatility.
Our aim is to have a rock-solid, diversified balance sheet which reduces risk
and further contributes to profitability.
Contribution
A
to Group's profit
A. 2022 underlying attributable profit by region percentage of operating areas excluding Corporate Centre.
Group net operating income (pre-provision profit)
EUR billion
Our strong model is reflected
in the resilience of our net
operating income. It is a
competitive strength that
continues to differentiate us.
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2022 Annual report
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2022 results: our success shows our business model works
Over the past seven years, we have laid the foundations and have reinforced our business model, based on customer
focus, scale and diversification, which has resulted in a strong operating performance.
Our Aim, our Purpose and How we do things remained the same: to be the best open financial services platform by
acting responsibly and earning the lasting loyalty of our people, customers, shareholders and communities; to help
people and businesses prosper; and to aspire to make all of what we do Simple, Personal and Fair.
In 2022, we delivered record attributable profit of EUR 9.6 bn, supported by strong net operating income, translated into
increased profitability and cash dividend per share (DPS), and all of this, with sound credit quality, liquidity and capital
positions.
Our strategy execution delivered record results
with an 18%
increase in attributable profit
A
Delivered record year in profit
Attributable profit EUR 9.6 bn
Increased profitability, shareholder value and returns
Further strengthened our rock-solid balance sheet
Customer focus and scale drove profitable growth
RoTE
EPS
FL CET1
CoR
Customers
Total revenue
A
13.4%
+23%
12.04%
0.99%
+7 mn
+12%
The increase in profitability enabled us to grow our business,
strengthen our balance sheet and generate value for our shareholders
Note: FY’22 data or year-on-year changes.
A. In euros. In constant euros: attributable profit +8%, total revenue +6%.
I
We achieved our 2019 medium-term and 2022 Group financial targets
In 2022, we delivered strong financial results, while reaching the targets we set for ourselves at the beginning of the
year: mid-single digit revenue growth in constant euros (+6%), contained cost of risk (below 1%), capital level (FL CET1
over 12%) and profitability (RoTE over 13%). We ended very close to our efficiency target of 45%, demonstrating an
improvement compared to the previous year, and in a year with considerable inflationary pressures.
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We have a strong track record in delivering on our targets. We also met our 2019 Investor Day medium-term targets.
We believe our success shows our business model works.
Our 2022 and 2019 medium-term Group financial targets
2019
medium-term targets
2022
targets
Mid-single digit
growth
A
2022
results
+6%
42-45%
~45%
45.8%
<1%
0.99%
13-15%
>13%
13.4%
Revenue
Efficiency
ratio
CoR
RoTE
FL CET1
11-12%
~12%
12.04%
Payout
40-50%
40%
B
40%
A. In constant euros.
B. Subject to approval of the final dividend at the 2023 AGM and completion of the Second 2022 Buyback Programme under the terms agreed by the
board (see section 3.3 ‘Dividends and shareholder remuneration’ in the ‘Corporate Governance’ chapter).
Our customer focus, scale and diversification drive profitable growth and doing so in the right way
In a challenging year, we were able to increase profitability and shareholder remuneration. We believe our
diversification also allowed us to further strengthen our strong balance sheet. We have a high-quality, simple balance
sheet that we believe is well prepared to face the current uncertain environment. At the same time, we have built a solid
capital level.
We believe in-market scale and operational improvements allowed us to be leaders in profitability, whilst our global
network (global businesses combined with our Auto and Payments capabilities across our footprint) increased Group
value added to the countries where we operate.
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2022 results by region
We leveraged our strategy to improve the operational performance and results of our three geographical regions and
Digital Consumer Bank.
Europe
2022 Key data and highlights
Loans
EUR 579 bn
Customer funds
EUR 737 bn
Efficiency
47.3%
Cost of risk
0.39%
Profit
EUR 3.8 bn
A
RoTE
9.3%
→ Business transformation to deliver accelerated growth, a more
efficient operating model and increased customer satisfaction.
→ Customers, loans and deposits up in most countries.
→ Double-digit profit growth (+38% in constant euros) supported
by strong NII performance, cost control and contained CoR.
→ Costs decreased 7% in real terms and efficiency improved 5 pp,
reflecting the structural changes in our operating model.
A. Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 12.5%.
North America
2022 Key data and highlights
Loans
EUR 157 bn
Customer funds
EUR 164 bn
Efficiency
47.7%
Cost of risk
1.49%
Profit
EUR 2.9 bn
A
RoTE
11.1%
→ Larger customer base and enhanced customer experience
through tailored products and services.
→ Overall volumes growth, driven by most segments in Mexico
and by CIB, Commercial Real Estate (CRE) and Auto in the US.
→ Profitability remained high driven by outstanding results in
Mexico and high profit in the US.
A. Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 20.5%.
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South America
2022 Key data and highlights
Loans
EUR 152 bn
Customer funds
EUR 183 bn
Efficiency
37.0%
Cost of risk
3.32%
Profit
EUR 3.7 bn
A
RoTE
18.8%
→ Strengthening the connection and sharing best practices
among units, capturing new business opportunities.
→ Customer base growth (+7mn year-on-year).
→ Profit up year-on-year boosted by revenue and a lower tax
burden, more than offsetting inflationary pressures and
higher LLPs.
→ High profitability, with double-digit RoTEs in all countries.
A. Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 25.1%.
Digital Consumer Bank
2022 Key data and highlights
Loans
EUR 125 bn
Customer funds
EUR 62 bn
Efficiency
46.7%
Cost of risk
0.45%
Profit
EUR 1.3 bn
A
RoTE
13.7%
→ Value proposition further expanded with new commercial
alliances, leasing, subscription and BNPL services.
→ Significant market share gains as new lending increased
(+10% year-on-year).
→ Revenue up (leasing and fees) more than absorbed negative
sensitivity to interest rate rises and new TLTRO conditions.
→ Costs grew well below inflation (-6% in real terms).
→ Credit quality remains solid; NPL down to 2.06% and CoR
low at 0.45%.
A. Underlying RoTE. RoTE adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12% would be 14.4%.
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2022 results by global businesses
Our SCIB, WM&I and Payments businesses increased Group value added to the countries where we operate.
Santander Corporate & Investment Banking
2022 Key data and highlights
Revenue
EUR 7.4 bn
Fee income
EUR 2.0 bn
Profit
EUR 2.8 bn
RoTE
22.0%
→ SCIB´s client centric transformation from lenders to strategic partners is
yielding strong results.
→ Further diversified business model across clients, countries and
products. Accelerated capital rotation.
→ Robust operating performance driven by double-digit growth in all core
businesses, especially Markets, Global Debt Financing (GDF) and Global
Transactional Banking (GTB).
Wealth Management & Insurance
2022 Key data and highlights
Assets under
management (AuMs)
EUR 401 bn
A
Total fees
EUR 3.7 bn
→ Strong growth in contribution to Group profit in a challenging market.
B
→ Private Banking: recognized as a Top 3 Best Global Private Bank
by
Euromoney and achieved a record year in results and cross-border business.
Profit
EUR 1.1 bn
Contribution to
Group's profit
EUR 2.7 bn
A
RoTE
59.7%
→ SAM showed resilience despite market turmoil maintaining
contribution to profit level.
→ Insurance: sustained growth in gross written premiums: +24%.
A. Including fees generated by asset management and insurance ceded to the commercial network.
B. Clients up to USD 250 million.
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2022 payments businesses results
PagoNxt
2022 Key data and highlights
PagoNxt revenue performanceA
Merchant TPV
EUR 165 bn
Active merchants (#)
1.32 bn
A. Constant EUR mn and year-on-year changes in constant euros.
Cards & Digital Solutions
2022 Key data and highlights
A
Revenue performance
Turnover
EUR 302 bn
# Transactions
+13%
A. Constant EUR mn and year-on-year changes in constant euros.
→ PagoNxt's revenue rose 72% in constant euros, achieving our +50%
target set for 2022 earlier this year.
→ Growth due to overall increase in activity and volumes in all regions.
→ Merchants: in merchant acquiring, Total Payments Volume (TPV) rose 27%
backed by Brazil (+16%), Europe (+39%) and Mexico (+35%).
→ International Trade: over 30k active customers in Ebury and One Trade.
→ 97 million cards managed globally (+4% in 2022).
→ Revenue grew 19% in constant euros, boosted by a 14% rise in total
turnover and a +13% increase in the number of transactions.
→ High profitability with a RoTE of approximately 30%.
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Our actions are enabling us to deliver on our customer and digital targets while
supporting the transition to a green economy
We have an opportunity and a responsibility to do everything in the right way, so our ESG approach is embedded in all
our businesses. We have a competitive advantage in supporting our customers in their green transitions.
Note: 2022 figures, unless stated otherwise.
A. Cumulative since 2019. Public target of EUR 120 bn by 2025 and EUR 220 bn by 2030.
B. According to Infralogic Dec-22.
C. Includes bicycles, solar panels, electric chargers, green heating systems, etc.
D. 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.
Supporting our teams, strengthening our culture and promoting financial inclusion
At the core of our success is our effort and ability to attract a diverse and talented workforce, our culture of teamwork
and our promotion of financial inclusion.
Note: 2022 figures.
A. Senior positions make up 1.2% of the total workforce.
B. Employee net promoter score. According to external benchmark Workday Peakon Employee Voice.
For more details, see the 'Responsible banking' chapter.
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In summary, the Group’s business model drove another strong year where we have
delivered on profitability, capital and CoR targets
We continue to serve more customers while maintaining a rock-solid balance sheet
→ +7 million customers in 2022
→ Top 3 by NPS in 8 markets
→ FL CET1 above 12%, while delivering on CoR target (<1%)
As a result, 2022 was a record year
→ Double-digit growth in revenue (+6% in constant euros) and profit
→ RoTE 13.4% and EPS +23% year-on-year
→ Increased shareholder remuneration: cash DPS +18% year-on-year
Note: our 2022 shareholder remuneration policy consists of distributing approximately 40% of the Group's attributable underlying profit split in approximately equal parts
in cash dividend and share buybacks. The dividend against 2022 results has been submitted to the 2023 AGM for approval. In the last two years, we have repurchased 5%
of our outstanding shares (including share buybacks completed in November 2021, May 2022 and January 2023).
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 network
across all the countries and businesses, and improving 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.
In summary, we believe we are well positioned to drive profitable growth in 2023.
2023 financial targets
We are confident that our customer focus and consistent track record
in increasing profitability will enable us to achieve the following 2023 targets:
Note: Targets are market dependent.
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Responsible
banking
Consolidated non-financial information statement
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About this chapter
GRI 1, 2-2, 2-3, 2-5
This chapter is the consolidated non-financial information statement of
Banco Santander, S.A. and its 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 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 from 1 January to 31 December 2022 (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 information according to the bank’s
accounting principles. Social and environmental information has
been prepared according to the same definition, where
available. Significant criteria differences from the 2021
Responsible banking chapter are explained in the related section
as well as in the Global Reporting Initiative (GRI) Content Index.
Regulation, reporting standards and other
references that this chapter addresses
This chapter meets the Spanish Act 11/2018, UE 2017/C215/01
Guidelines on non-financial reporting, European Taxonomy
regulation (Regulation (EU) 2020/852 and Commission
Delegated Regulations 2021/2139 and 2021/2178), GRI
Standards, and the GRI G4 guidelines on financial services
disclosures.
It also takes into account 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 Global
Compact, UNEP FI Principles for Responsible Banking, the TCFD
recommendations and the UN Sustainable Development Goals.
Each section of the chapter relates to GRI and SASB indicators to
which the content responds. Likewise, section 6. ESG reporting
standards and references provides the regulation, reporting
standards and other references mentioned above; with tables
showing where information on each one can be found in the
report.
Material aspects and stakeholder involvement
Santander maintains an active dialogue with its stakeholders to
understand their expectations. It conducts a materiality
assessment of ESG matters and closely monitors questionnaires
and recommendations of ESG ratings (MSCI, Sustainalytics,
CDP, S&P-DJSI, ISS, Moody's, FTSE4Good, Bloomberg Gender
Equality Index and Shareaction), as well as 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 our materiality
assessment findings, see '5.1 Stakeholder engagement' and '5.2
Materiality assessment' sections of this chapter.
External verification
PricewaterhouseCoopers Auditores, S.L., an independent firm
charged with auditing the financial statements of Banco
Santander S.A., issued a verification report, with limited
assurance, on the non-financial information required under Act
11/2018 and the GRI standards found in this chapter. The
report’s conclusion can be found in the “Independent
verification report” at the end of the chapter. For more details
on the preparation and oversight of non-financial information,
see the “Non-financial information” section in the introductory
pages of the 2022 consolidated management report.
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.
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4. Our progress in figures
4.1 Employees
4.2 Customers
4.3 Tax contribution
4.4 Green transition
4.5 Equator Principles
4.6 Financial inclusion
4.7 Community investment
5. Further information
5.1 Stakeholder engagement
5.2 Materiality assessment
5.3 Risk and opportunities
5.4 EU taxonomy
5.5 Sustainable finance classification system
5.6 Country by country report
6. ESG reporting standards and references
6.1 Non-financial information Act11/2018
content index
6.2 UN Global Compact content index
6.3 UNEP FI Principles for Responsible Banking
reporting index
6.4 Global Reporting Initiative (GRI) content
index
6.5 Sustainability Accounting Standards Board
(SASB) content index
6.6 Stakeholder Capitalism Metrics content index
6.7 Task Force on Climate-related Financial
Disclosure (TCFD) content index
6.8 SDGs contribution content index
7. Independent verification report
1. 2022 overview
1.1 Highlights 2022
2. Our ESG strategy
2.1 Materiality matrix
2.2 Risk and opportunities
2.3 Our ESG agenda
2.4 Policies
2.5 Governance
2.6 Shareholder value
3. Building a more responsible bank
3.1 A strong and inclusive culture
3.1.1 Our corporate culture
3.2 Conduct and ethical behaviour
3.2.1 General code of conduct
3.2.2 Financial crime compliance
3.2.3 Environmental, social and climate
change risk management
3.2.4 Principles of action in tax matters
3.2.5 Ethical channels
3.2.6 Relations with political parties
3.3 A talented and motivated team
3.3.1 Putting the employee at the centre
3.3.2 Ensuring we have the right talent
and skills
3.3.3 Supporting to the needs of the teams
3.4 Acting responsibly towards customers
3.4.1 Customer experience and satisfaction
3.4.2 Product governance and consumer
protection
3.4.3 Privacy, data protection and
cybersecurity
3.5 Responsible procurement
3.6 Supporting the green transition
3.6.1 Our ambition and strategy
3.6.2 Governance
3.6.3 Risk management
3.6.4 Metrics and targets
3.6.5 Supporting our customers in the
transition
3.6.6 Our approach to nature and
biodiversity
3.6.7 Reducing our environmental footprint
3.7 Socially responsible investment
3.8 Financial inclusion and empowerment
3.9 Support to higher education and other
local initiatives
20
21
23
23
24
25
26
27
28
30
31
31
32
32
33
33
35
36
36
37
37
42
44
47
47
48
50
51
52
53
55
56
57
61
64
65
67
69
72
76
77
85
87
88
90
90
91
92
92
95
97
99
101
102
104
105
110
111
129
143
146
151
152
154
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1. 2022 Overview
Helping people and businesses prosper
People
EUR 12,547 million Staff costs
Customers
EUR 1,036,004 million loans outstanding (net)
→ EUR 562,078 million to households
→ EUR 345,083 million to companies
→ EUR 24,436 million to government agencies
A
→ EUR 104,407 million to others
Helping to address society’s challenges
Shareholders
B
~40% payout policy
Suppliers
EUR 14,065 million paid to suppliers
Tax contribution
EUR 9,734 million total taxes paid by the group
Environmental
EUR 28.8 bn in green finance raised
C
and facilitated in 2022
EUR 53.2 bn assets under
management in socially responsible
investments
58% reduction of CO2 emissions in our
D
internal operations
. 88% of the
E
electricity used from renewable sources
Social
54% of our workforce are women;
29.3% of women in senior positions
EUR 950 million credit disbursed to
1.6 million micro-entrepreneurs
EUR 163 million invested in
communities, including EUR 100 million
to promote higher education,
employability and entrepreneurship.
Governance
66.67% independent directors
40% of members of the board are
women
Measures to address cost of living crisis
In 2022, inflation has been one of the most urgent challenges to tackle. Rising costs of energy bills and shopping basket and increases
in interest rates impact people and businesses. The cost of living is the main concern for citizens in well above all other issues.
Santander response has included tailored measures in on six aspects:
→ Support measures for employees
→ Price caps for basic services
→ Financial inclusion measures
→ Promotion of Energy Efficiency
→ Mortgage relief
→ Special attention to vulnerable
customers
Including financial business activities and customer prepayments.
For more detail on our contribution to UN SDGs see 6.8 SDGs contribution content index of this chapter.
A.
B. Payout of approximately 40% of ordinary profit, divided in approximately equal parts between a cash dividend and a share buyback. Subject to approval of the final dividend
at the 2023 AGM and completion of the Second 2022 Buyback Programme under the terms agreed by the board (see section 3.3 ‘Dividends and shareholder remuneration’
in the ‘Corporate Governance’ chapter).
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
C.
D. At Banco Santander, we define "own emissions" as direct "Scope 1" emissions and indirect emissions from power consumption and employee travel. Comparing these
emissions with 2019 annual report data, employee travel emissions have been reduced by 33%, and total emissions have been reduced by 58%. A 2021-2022 comparison
is available in section 4. 'Our progress in figures' of this chapter.
In countries where we can verify electricity from renewable sources at Banco Santander properties.
E.
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1.1 Highlights 2022
E
Support transition to
a low carbon
economy
A
→ We disclosed our Sustainable Finance Classification System, TCFD
→ We set three new interim targets to decarbonize our portfolios by 2030: -29% absolute emissions
financed in the energy (oil & gas) sector; -33% emissions intensity in the aviation sector and -32%
emissions intensity in the steel sector. In 2021 we set a target of -46% emissions financed in the power
generation sector.
report and third Green bond report.
→ We financed more than 150,000 electric vehicles for a volume of more than €4.8 billion.
→ We created a new function to drive the Green Finance business across Retail & Commercial Banking,
leveraging on synergies with SCIB (Santander corporate and Investment banking).
→ We completed the acquisition of 80% of WayCarbon, a leading Brazil-based ESG consultancy firm to
continue to support our customers in their energy transition.
→ Together with five other major companies, we created Biomas in Brazil, a new forest carbon company
with the ambition to protect and restore 4 million hectares of native vegetation..
→ Santander Universities launched the Santander X Global Challenge | Countdown to Zero to help society
find the most innovative and sustainable solutions.
S
Promote inclusive
Growth
B
→ We ranked in the Top 3 in NPS
→ We registered the highest score in the finance industry and the second highest overall worldwide in the
in 8 markets.
Bloomberg Gender Equality Index.
→ We enhanced our "active listening" mechanism for employees to be constant and scalable.
→ We created accessibility programmes for vulnerable groups, especially elderly people.
→ We met ahead of plan our goal of financially empowering 10 million people between 2019-2025. We
were named as Best Bank in Financial Inclusion by Euromoney for second year in a row, and by The
Banker for the first time.
→ We are launching Everyday banking proposals in all European countries where every customer will get
access to a financial advisor, to foster the financial health of our entire customer base.
→ Santander Asset Management launched Santander Prosperity, its first social investment fund classified
under article 9 of the Sustainable Finance Disclosure Regulation (SFDR).
→ Santander Universities launched the Santander X Global Challenge | Blockchain and Beyond and the
Santander X Global Challenge | Food for the future to seek startups and scale ups with innovative and
scalable solutions using food technology.
→ We supported the humanitarian response to the war in Ukraine, particularly in Poland, where we worked
with the UN Refugee Agency (UNHCR). Thus, Euromoney named us Central & Eastern Europe’s Best Bank
for Corporate Responsibility.
→ We revised our corporate behaviours (called “TEAMS”) to enhance our culture and better respond our
stakeholders needs.
→ We overhauled our General Code of Conduct, making it easier to understand, accessible and didactic.
→ We included ESG criteria in long-term incentives and short-term remuneration schemes, for the 1st &
3rd year respectively.
→ We created a new Talent and Culture function that report to the Executive Chair.
→ We strengthened ESG risk management, with a new ESG risk function under Chief Risk Officer.
→ We enhanced due diligence with revised socio-environmental surveys for customer-facing operations
and vendor certification.
→ We implemented the Data Ethics Guide and trained employees on how to use data and advanced
analytics in an ethical manner.
→ We developed our internal regulation to clarify roles and responsibilities in developing responsible
banking strategy.
G
Strong governance
and culture across
the organization
A. Task Force on Climate related financial Disclosure.
B. NPS –internal benchmark of individual customers’ satisfaction audited by Stiga/Deloitte H2'22.
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Meeting our public targets
Following the UN Principles for Responsible Banking, of which
we are a founding member, we have set targets in those areas
where we have the greatest potential impact. Thanks to the
progress we have made towards some of the targets we set in
2019, we are considering revising our ambition in a few of
them.
Green finance raised and facilitated
(cumulative)(EUR)A
Socially Responsible Investments
AuMs
Electricity used from renewable
B
energy sources
Thermal coal-related power & mining
phase-out (EUR)
Emissions intensity of power
generation portfolio
C,D
Absolute emissions of energy (oil &
C
gas) portfolio
Emissions intensity of aviation
portfolio
C
Emissions intensity of steel portfolioC
2018
2019
2020
2021
2022
Target
19 bn
33.8 bn
65.7 bn
94.5 bn
120 bn by 2025
220 bn by 2030
27.1 bn
53.2 bn
100 bn by 2025
43%
50%
57%
75%
88%
100% by 2025
7 bn
5.9 bn
0 by 2030
0.21
0.17
23.84
92.47
1.58
0.11 tCO2e /
MWh in 2030
16.98 mtCO2e
in 2030
61.71 grCO2e /
RPK in 2030
1.07 tCO2e / tS
in 2030
E
Women in senior positions (%)
F
Equal pay gap
20%
3%
Financially empowered people
(cumulative)
G
22.7%
23.7%
26.3%
29.3%
30% by 2025
2%
2%
1%
1%
~0% by 2025
2.0 mn
4.9 mn
7.5 mn
11.8 mn
10 mn by 2025
Cumulative target
From… to…
In 2022, we also continued to:
→ Have a board of directors with 40-60% women members.
→ Not provide single-use plastics in our buildings and offices.
H
→ Be carbon neutral in our operations.
A.
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.
In countries where we can verify electricity from renewable sources at Banco Santander properties.
B.
C. The figures displayed are the latest available. Given limited data availability from customers to assess financed emission, we plan to provide target progress update in the
June 2023 – Climate Finance Report”. Banco Santander's internal calculation methodology has been used, based on the Partnership for Carbon Accounting Financials
(PCAF). See more information in section "3.6 Supporting the transition to a green economy".
In 2021 Annual report and Climate Finance report, we assessed the 2019 financed emissions of our power generation portfolio, including guarantees and other types of off-
balance exposure to our customers that do not entail current funding. Because, according to the PCAF standard, such exposure should not be calculated if its attribution
factor is “outstanding”, we were over-attributed with our corporate customers’ emissions. Therefore, the 2019 baseline emissions intensity has been restated from 0.23 to
0.21. The target and climate ambition remains for this sector.
D.
E. Senior positions make up 1% of the total workforce
F. Equal pay gap based on same jobs, levels and functions
G. Unbanked, underbanked and financially vulnerable individuals who receive tailored finance solutions and become more aware and resilient through financial education.
H. In our core markets (G10)
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2. Our ESG strategy
2.1 Materiality matrix
GRI 3-2
Our materiality assessment identified 15 ESG topics we should
focus on.
Results
The Group Materiality Matrix reflects trends relating to
geopolitical tensions; inequality; the rising cost of living; stricter
regulation; and other aspects that impact on our markets. It also
takes inputs from subsidiaries on digitalization, innovation,
human rights; regulation; and other issues. The assessment
prompted these changes compared with previous matrix:
• Net zero by 2050 now includes portfolio alignment and
operational footprint.
• Financial empowerment is split between financial health and
financial inclusion.
Customer experience and satisfaction; green finance and
socially responsible investment; environmental and social risk
management and culture, conduct, and ethical behaviour saw
no change in relevance.
We explain further minor amendments to nomenclature and
topic definitions in 5.2 materiality assessment section of this
chapter.
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2.2 Risk and opportunities
GRI 3-1
The assessment identified four areas which are highly relevant
to Santander in term of both risk and opportunity.
Risk and opportunities
Real and potential impacts
Environmental
The environmental, economic and
social effects of climate change can
potentially lead to financial loss.
• Physical risk of customers’ assets
and businesses being damaged due
to their location.
• Transition risk that stems from how
customers react to policies, new
technology, market shifts and our
climate change response.
Physical risk impact:
→ High impact: Rising costs if customers’ assets are damaged or lose value as a
result of hurricanes, floods, heatwaves and other extreme weather events.
→ Chronic impact: Customers’ potential loss of income in the long-term due to
rising sea levels, higher average temperatures and other consequences of
climate change.
Transition risk impact:
→ Carbon pricing: Rising costs of emissions that cause operating costs to rocket
for customers in CO2-intensive industries.
→ Shift in demand for our products and services, which would affect our bottom
line.
The transition to a low-carbon
economy opens up opportunities in
“green” products, sustainable finance
and customer advisory services.
→ Offer sustainable finance and create products to meet the current needs of our
customers and attract new ones.
→ Position Santander as a sustainable and responsible bank.
For more details see 3.6 Supporting the green transition section in this chapter; and 10. Climate and environmental risk
section in Risk management and compliance chapter.
Customers’ lower purchasing power
could lead to greater risk of default.
→ Losses due to debtors’ inability to pay.
→ Drop in profits if customers feel the bank is not doing enough to tackle social
issues.
Financial inclusion initiatives developed → Tailor-made financial products and services to help people prosper.
to make our services available to
underserved communities and boost
economic and social progress.
→ A sound strategy and social purpose that positions Santander as a bank people
can trust.
Climate
change
Social
Financial
health &
inclusion
For more details see 3.8 Financial inclusion and empowerment section in this chapter
Failure to adapt to new ways of
working and poor management of our
people could lead to a loss of talent or
a disengaged workforce.
→ Lack of pride to be part of Santander can harm profitability.
→ Need to boost knowledge and skills amid constant changes to the environment
and ways of working.
→ Questionable succession plans and leadership due to a failure to attract and
retain talented professionals.
Quality
employment
A skilled and motivated team boosts
business performance and customer
service.
→ An engaged workforce can increase customer loyalty and help attract new
customers.
→ Retaining diverse talent makes overcoming challenges easier and leads to
better results.
→ Santander’s scale means we can develop top employees in all the markets
where we operate.
For more details see 3.3 A talented and motivated team section in this chapter
Governance
Responsible
management
and business
development
Market instability, current competitive
environment, more regulation and
higher cybersecurity risk can hamper
Santander’s operations and
performance.
Good governance and proper
adaptation to a changing environment
to ensure business continuity and
stakeholder loyalty.
→ Less capacity to generate liquidity and capital and to enhance our operations in
a testing environment.
→ Losses on the back of breaches of information due to cyber attacks and fraud.
→ Fines for malfeasance.
→ Business continuity and sustainable profit generation with a strong balance
sheet.
→ Positive stakeholder perception of Santander to avoid reputational risk.
For more details see Business model and strategy, Corporate governance and Risk management and compliance chapters
Additional details on how we ran this exercise see 5.3 Risk and opportunities analysis section in this chapter.
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2.3 Our ESG agenda
GRI 2-22, 2-23
Our ESG agenda focuses on Santander most material issues. The
aim is to minimize associated risk and maximize commercial
opportunities. Our agenda should be viewed alongside the
Group's approach to topics such as customer experience and
satisfaction or privacy, data protection and cybersecurity, that
are also covered in this report
Our ESG agenda contributes to several United Nations'
1
Sustainable Development Goals
Agreement.
and to the Paris Climate
Our ambition
Our goals
Priority action plans
E
Support the transition
to a low carbon
economy
Deliver our net zero ambition by
2050.
Set targets in our portfolios to align with pathways to net zero
while taking into consideration other environmental goals as
Nature.
Support customers in accelerating their transition, engaging with
them and developing a best-in-class sustainable finance and
investment proposition.
S
Promote inclusive
Growth
Support inclusive growth across
our main stakeholders:
employees, customers and
communities.
Diverse and inclusive workplace that fosters employees' well-
being.
Support financial inclusion and financial health promoting access
to financial products and services and offering financial Education.
Support communities, with focus on Education, Employability and
Entrepreneurship.
G
Strong governance and
culture across the
organization
Incorporate ESG in behaviours,
policies, processes and
governance throughout the
Group.
Drive culture, conduct and ethical behaviour.
Integrate ESG into strategic processes, Risk Management & rest of
relevant units and build capabilities.
We drive our responsible banking agenda through a number of local and international initiatives and working groups, including:
→ UNEP Finance Initiative;
→ United Nations Global Compact;
→ World Business Council for Sustainable Development
(WBCSD);
→ Glasgow Financial Alliance for Net Zero, Net Zero Banking
Alliance (NZBA) and Net Zero Asset Managers (NZAMi);
→ Banking Environment Initiative (BEI);
→ CEO Partnership for Economic Inclusion.
The complete list can be found on
5.1 Stakeholder engagement section of
this chapter.
.
1
An analysis of the contribution of our activity an investments can be found on SDGs contribution content index section of this chapter
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2.4 Policies
GRI 2-23, 2-24, 3-3, FS1
In 2022, we continued to simplify and implement best practices
in our internal regulations to ensure we have suitable
responsible banking guidelines in place and; and to embed
responsible banking and ESG standards in all Group processes
and our day to day operations.
Core policies that integrate ESG criteria into our business model to make us a more responsible bank
General code of
conduct
A,B,C
Corporate culture
A,B,C,D
policy
Brings together the
ethical principles our
employees must
follow and is central
to our compliance
function.
Establishes the
guidelines and
standards to ensure
a consistent group
culture.
Responsible Banking
and Sustainability
policy
A,B,C
Environmental, Social and
Climate Change Risk
Management policy
A,B,C
Financing for
Sensitive Sectors
Policy
A,B
Outlines our
Responsible Banking
and Sustainability
principles,
commitments,
objectives and
strategy with regard
to our stakeholders
including human
rights protection.
Details how we identify
and manage risks from
activities that require
special attention and
prohibited activities: oil
and gas, energy, mining
and metals, and soft
commodities.
Provides guidelines
for our involvement
in industries that are
considered sensitive
and carry
reputational risk.
Other policies that support our responsible banking strategy
Conduct Risk with
Customers
Management
B,E
Model
Conflicts of interest
B,C
policy
Code of conduct in
A,C
security markets
Cybersecurity
A
Framework
Third-party
F
certification policy
Tax policy
A,B,G
Financing of
political parties
policy
C
Policy on
contributions for a
C
social purpose
Global health,
safety and
C
wellbeing policy
Global mobility
policy
B
A. Policies approved by board of directors.
B. Updated in 2022 (or 2023)
C. Available on our corporate website.
D. Includes Banco Santander's Diversity & Inclusion Principles and the Corporate Volunteering Standard.
E. Includes principles for managing conduct risk with customers. These principles are publicly available on our corporate website.
F. Includes principles on the responsible behaviour of suppliers. These principles are publicly available on our corporate website.
G. Our tax strategy and an extract of our Tax policy are available on our corporate website.
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2.5 Governance
GRI 2-9, 2-12, 2-13, 2-14, 3-3, FS1, FS2, FS3
Board level
Board of directors
Responsible banking,
sustainability and culture
committee
Risk supervision, regulation and
compliance committee
Executive committee
Executive level
Fora
Management meeting
Responsible banking forum
Board of directors
Approves and supervises the implementation of general policies
and strategies related to our corporate culture, values,
responsible business practices and sustainability; 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”)
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 2022´ in the Corporate governance chapter
Management meeting
Chaired by the CEO, it discusses our progress on the responsible
banking agenda, especially as regards to climate change, TCFD
and ESG business opportunities.
In 2022, the committee was informed four times on progress
made with the responsible banking agenda.
Responsible banking forum2
Executes the responsible banking agenda across the Group;
drives decision-making on responsible banking issues; ensures
the execution of any mandates from the RBSCC, other board
committees and the board of directors; and ensures alignment
with key issues, including the review and escalation of reports
to the RBSCC.
The Group‘s responsible banking corporate unit and RB network
work jointly to deliver on our strategy in a co-ordinated way
across the Group:
Group responsible banking unit
Coordinates and drives the responsible banking agenda, with
support from a senior adviser on responsible business practices
who reports directly to the executive chair.
Responsible banking network
Our subsidiaries' Responsible banking teams execute the
agenda according to our corporate strategy and policies. They
are led by a senior manager in 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.
Corporate and subsidiary responsible banking units hold regular
bilateral meetings.
Working groups on financial education, training, sustainable
finance, microfinance and climate change help agree actions
and align efforts.
In 2022, the network held six virtual meetings to discuss
progress on the Group's agenda. The network also ran the
fourth Responsible Banking workshop, which representatives
from all businesses and geographies attended over two days.
Our management focus in 2022
In 2022, in line with our ESG agenda, our management focused on: 1) Our climate strategy, including our pledge to be net zero by
2050; 2) Our sustainable finance and investment value proposition and transition plans to a low-carbon economy; 3) the integration
of climate and social criteria into risk management; 4) the extension of our financial empowerment proposition; and 5) the
mobilization and use of enablers to integrate ESG criteria into everything we do in the Group.
2
The Forum’s 11 permanent members are the regional head of Europe (rotating chair); the regional head of North America (rotating chair); the Regional head of South America
(rotating chair); Group Head of Strategy, Corporate Development & Financial Planning; Group Head of Human Resources; Group Chief Risk Officer; Group Chief Compliance
Officer; Global Head of Wealth Management & Insurance; Global Head of Santander Corporate and Investment Banking; Group Head of Communications, Corporate
Marketing and Research; and the senior adviser to the executive Chair on responsible business practices.
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2.6 Shareholder value
GRI 2-29, FS5
Shareholder remuneration
On September 2022, the board agreed to pay an interim cash
dividend of 5.83 euro cents per share entitled to receive
dividends, against 2022 results, which was paid on 2 November
2022. It also agreed to implement a first buyback programme
worth approximately 979 million euros as maximum, approved
by the ECB.
On 27 February 2023 the board decided to submit a resolution
at the 2023 AGM to approve a final cash dividend in the gross
amount of 5.95 euro cents per share entitled to receive
dividends and a Second 2022 Buyback Programme worth 921
million euros and for which the regulatory approval has already
been obtained.
Once the above mentioned actions are completed, the
shareholder remuneration for 2022 will have been EUR 3,842
million (approximately 40% of the underlying profit in 2022)
split in approximately equal parts in cash dividends (EUR 1,942
million) and share buybacks (EUR 1,900 million).
Shareholder engagement
As a responsible bank, we earn the trust and loyalty of our
almost 4 million shareholders, and prioritize:
• maximizing value;
• upholding shareholder rights;
• encourage them to participate in the bank's management and
general shareholders' meetings, with several ways for them
to get involved;
• ensure information is fully transparent, promote direct
engagement and dialogue with stakeholders through our
channels, and enhance our digital channels with cutting-edge
technology;
• giving efficient and timely personal assistance at all times;
• facilitating mutually enriching relations between Santander’s
shareholders and top management;
• boosting the Group's image in bond and equity markets; and
• reporting on the financial and non-financial benefits of being a
Santander shareholder.
We have the highest rating in AENOR's Good Corporate
Governance Index.
The shareholder remuneration policy the board has approved
for the 2023 results is to pay out a shareholder remuneration of
approximately 50% of the Group reported profit (excluding non-
cash, non-capital ratios impact items), distributed in
approximately 50% in cash dividend and 50% in share
buybacks.
The implementation of the shareholder remuneration policy is
subject to future corporate and regulatory approvals.
For more details, see sections 2.1. 'Share capital', '2.6
"Stock market information', and '3.3 Dividends and
shareholder remuneration' in the Corporate Governance
chapter.
Communication with shareholders, investors and analysts
GRI FS5
→ 276,198 responses from shareholders and investors through
studies and qualitative surveys
→ 862 engagements with institutional investors (including 73
meetings focused on ESG)
→ >800 communications (mainly on digital channels) and
163,761 queries answered by digital channels and telephone.
→ 201 events with shareholders
For more details on Santander's shareholder engagement, see sections
'1.4 Engagement with our shareholders' and 3. Shareholder.
Engagement and general meeting' in the Corporate Governance chapter.
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ESG ratings
We engage with ESG ratings to signal our progress and keep
improving with their feedback.
Highlights in 2022:
→ We maintained our positioning on the MSCI World Index. And
we’ve consecutively featured in the S&P DJSI World and
Europe indices since 2002 and in the FTSE4Good since 2003.
→ CDP. We were placed in the highest score band (Climate
Change A List - Leadership level), improving on governance,
risk disclosure, targets and portfolio impact.
→ Sustainalytics We improved to 22.4 points, maintaining on
"medium risk", improving on business ethics, ESG integration,
data privacy and human capital.
→ ESG Corporate Rating by ISS. We improved to 55.6 points,
maintaining the ESG performance on “C”, above the sector-
specific “Prime” threshold;
→ Bloomberg Gender Equality Index (BGEI). We improved to
92.87 points, above the financial sector average (74.11).
Highest ranked among banks and second company overall.
Positioning in ESG ratings
MSCIA
Sustainalytics
B
CDP
C
S&P DJSI
ISS-ESG
Moodys
D
FTSE4Good
BGEI
Shareaction
2022
MSCI Index
AA
22.4
A
World & Europe
Index
83
C (55.6)
61 (Advanced)
FTSE4Good Index
4.2
2021
MSCI Index
AA
23.9
evol.
=
p
A-
C (51.8)
World & Europe
Index
86
p
=
=
61 (Advanced) =
=
FTSE4Good Index
4.5
92.87
92
90.26
89
p
p
A. Read the MSCI disclaimer on page 18.
B. Sustainalytics risk rating: the lower, the better.
C. Top scores in environmental and social reporting, financial inclusion and tax
strategy. We improved our scores in corporate governance; business ethics;
policy influence; sustainable finance; climate strategy; labor practice; talent
attraction & retention; corporate citizenship; customer relationship and privacy
protection.
D. Not rated in 2022
29
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
3. Building a more responsible bank
3.5
Responsible
procurement
3.1
A strong and inclusive
3.3
A talented and
motivated team
3.2
Conduct and
ethical behaviour
3.4
Acting responsibly
towards customers
culture: The Santander Way +
+
+
+
+
+
+
+
and other local initiatives +
3.7
Socially responsible
investment
3.8
Financial inclusion
and empowerment
3.9
Support for higher education
3.6
Supporting the
green transition
Our strong corporate culture is critical to succeeding in
today’s competitive, fast-moving environment.
Our business complies with the highest standards of
conduct and ethical behaviour.
To succeed in the new business environment, and to earn
and keep our customers' loyalty, we need a diverse
workforce that is both talented and engaged.
We develop our products and services responsibly, and
aspire to deliver excellent customer service.
We integrate environmental, social and governance
criteria into our supply chain, supporting our suppliers in
their sustainable transition.
We're fully committed to helping meet Paris agreement
goals while supporting our customers' transition to a low-
carbon economy
We embed ESG in our decision-making, offering a
sustainable value proposition for customers, and an active
ESG engagement.
We help people access the financial system, set up and
grow micro-businesses, and learn how to manage their
finances.
We support the communities where we operate, with a
special focus on higher education as the driving force
behind society's progress.
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3.1 A strong and inclusive culture:
The Santander Way
Our Way is the Santander Way…
Living our Values of
Simple | Personal | Fair
Daily, through our Corporate Behaviours:
And, through our solid culture
of Risk Management:
We also ran developmental training in the behaviours of our risk
culture. We continued to develop courses on our learning digital
ecosystem according to employees’ skills gaps.
We ran initiatives to enhance how we measure adherence to our
risk culture. We revised risk culture questions in our new
continuous listening survey, Your Voice, as well as Risk Pro
scorecard indicators, with thresholds set for most metrics to
monitor them across our footprint more consistently.
3.1.1 Our corporate culture
GRI 3-3
The Santander Way is our approach to business.
In 2022, we launched new corporate behaviours that we call
"TEAMS": Think customer, Embrace change, Act now, Move
together and Speak up. To promote TEAMS, we ran employee
workshops and other events with our Executive Chair, CEO and
country heads across our footprint.
More details about our corporate behaviours are available on
our corporate website:www.santander.com/en/about-us/
corporate-culture
9 (out of 10)
A
Employees are fully aware of our TEAMS behaviours
A. Workday-Peakon, aggregated results for the last 12 months.
Risk Pro: our risk culture
SASB FN-CF-230a.2, FN-CF-230a.3
The Group's risk culture, Risk Pro, is central to the Santander
Way and to our purpose of helping people and businesses
prosper. It makes risk management the responsibility of all
employees. Our performance review system, MyContribution,
assigns all Santander employees a common risk objective that is
10% of their review. In 2022, we made risk training a
mandatory part of Corporate Centre employees' and unit
directors' risk objective.
Risk Pro is part of all stages of the employee cycle. We impart
Risk Pro through constant communication, leading by example,
support from senior management and speaking up.
In 2022, we made further headway in rolling out our risk culture
target operating model, which is mainly based on the best
practices identified in the different subsidiaries where we
operate. Its main target is consolidate the risk culture across the
Group.In November, we celebrated Risk Pro Month at the
Corporate Centre. And we had our second global Risk Pro Week
to raise employees’ awareness of why they should manage risk
in their day-to-day.
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3.2 Conduct and ethical
behaviour
3.2.1 General code of conduct
GRI 2-15, 2-25, 3-3, 205-2, 205-3, 406-1, 415-1, FS1
Our new General code of conduct (GCC), approved by the board
in July 2022, is now simpler and more accessible for our
employees and stakeholders, with easy-to-understand,
inclusive language set out in an appealing, digital format to
enhance user experience.
The GCC promotes such values as equal opportunity, diversity
and non-discrimination, zero tolerance for sexual or work-
related harassment, respect for others, work-life balance, and
human rights. Its guidelines address day to day situations. It is
also one the core elements to prevent penal Risk (more details,
see section 7.2. 'Compliance and conduct risk management' in
the `Risk management and compliance' chapter).
The Internal Audit area regularly reviews compliance with the
GCC, with autonomy to check that it and subsidiary-level
versions are appropriate and effective.
Core initiatives
We ran these initiatives to strengthen our corporate culture of
ethical conduct and compliance:
→ #yourconductmatters: campaigns via email, Intranet and
other media to boost employees’ awareness of the GCC and
related policy.
→ Services to answer employees’ queries on ethics and rules in
the GCC.
→ Recommendations to prevent conflicts of interest between
employees and the Group, and to review and manage
conflicts.
→ A whistleblowing channel, Canal Abierto, to handle
complaints and enhance processes based on lessons learned.
→ Common action plans for receiving courtesies or invitations
from third parties, and require they be recorded for due
diligence.
Training
Our employees undergo mandatory training to refresh their
understanding of the GCC’s guidelines; why every employee's
conduct matters in shielding the Group from liability; and how
to handle conflicts of interest, or gifts and invitations from
people outside Grupo Santander.
In 2022, units ran information sessions with core vendors to
explain the compliance culture and ethical behaviours that we
hold all business partners to.
Procurement management policy
Our procurement management policy dictates how employees
negotiating with suppliers should conduct themselves to
prevent conflict of interest and keep information confidential
while procuring goods and services (see the Group's policy on
conflict of interest, available on the corporate website
www.santander.com).
Code of Conduct in Securities Markets (CCMV)
Approved by the board in 2020, it sets out the standards that
board members 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.
Our core units have tools to help detect potential market abuse
and ensure the consistent management of those risks across the
Group.
Anyone bound to the CCMV must do regular training on market
abuse. Once a year, they demonstrate their understanding of
Santander and its employees' key obligations and penalties for
failing to fulfil them.
For more details, see section
7.2. 'Compliance and conduct risk
management' in the `Risk management
and compliance' chapter
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3.2.2 Financial crime compliance (FCC)
GRI 205-2
SASB FN-AC-510a.1, FN-CB-510a.1, FN-IB-510a.1
FCC for vulnerable customers
Introduced in 2021, FCC due diligence of customer life cycle has
a special section for vulnerable customers. It supports the
Group's commitment to “reducing the stigma in providing
financial services to vulnerable customers”, with a compliance
framework for business units to mitigate financial crime risk in a
responsible manner. In 2022, we demonstrated our
commitment by welcoming refugees from Ukraine, who came
to the EU with little information and most of their money in
cash. Early in the crisis, the Group's FCC area published special
guidelines for branches to set up accounts for refugees in line
with regulation, as smoothly as possible (More information on
our support for Ukrainian refugees see section 3.4 Acting
responsibly towards customers and 3.9 Support to higher
education and other local initiatives of this chapter).
FCC for anti-bribery and corruption
The updated Corporate Framework on Financial Crime
Prevention that the board approved in 2021 addresses bribery
and corruption as a financial crime risk. It describes core aspects
of the Group's programme to fight bribery and corruption. In
3.2.3 Environmental, social and climate
change risk management
GRI 2-23, 2-24, 2-25, 3-3, 411-1, 413-2, FS2, FS3, FS10, FS11
We embed environmental and social standards in risk
management, in accordance with a sectorial prioritization, 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 (ESCC) risk
management policy sets out standards for investing in, and
3
to, companies and
providing financial products and services
customers who engage in sensitive activities in the oil and gas,
power generation and transmission, mining and metals, and
soft commodities industries (especially retail customers
involved in farming and ranching in the Amazon). 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 ESCC 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 International Finance
Corporation Performance Standards. Following our
environmental and social (including human rights) due diligence
of projects, we set out corrective measures based on their risk
rating.
We apply our ESCC risk management policy in conjunction with
our Responsible banking and sustainability policy. In addition,
the ESCC risk and compliance departments carry out extra due
diligence on cases with red flags. The findings, which provide
further input for decision-making, are submitted to risk
approval committees.
particular, it requires core processes and control to deal with the
risk of bribery and corruption with third parties; and in
sponsorship, charity, campaign donations, joint ventures, main
investment, travel, courtesies, marketing, employment and
worker relations. In 2022, we updated our policy on preventing
bribery and corruption and reintroduced it to subsidiaries, with
guidelines and special training to handle the risk of bribery and
corruption.
FCC for training
We advanced our strategic plan and training to transform our
financial crime and conduct area in 2022. In particular, our post-
pandemic programme at the Corporate Centre was entirely in
person, with intensive monthly courses, mini-working groups
and experts from Santander and elsewhere to talk about
terrorism financing, bribery, corruption, fraud, major regulation
reform and other important topics. We have a yearly program to
train our board of directors on this topic.
For more details on financial crime
compliance, see section 7.2. 'Compliance
and conduct risk management' in the 'Risk
management and compliance' chapter
In 2022, we developed a methodology to analyze client´s
climate transition plans. During the annual analysis of
environmental, social and climate change risks in selected
sectors (Oil&Gas; Power Generation; Automakers; Steel;
Cement and Airlines) clients were tiered according to current
GHG emissions, governance of climate transition risks and
future emissions targets.
The Group follows the precautionary principle, analysing and
managing key environmental and social 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.
In 2022, the ESCC Risk and Compliance departments (in
coordination with the Business) have also worked on
strengthening the ESCC risk governance and the management
of ESCC risks in sustainable finance transactions, and continue
enhancing the integration of environmental, social and climate
change risk factors in market and operational risk management.
For more details on environmental, social
and climate change risk management, see
'Risk management and compliance' chapter
of this report.
Our Environmental, Social and Climate
Change risk management, and sustainability
policies are available on our corporate
website www.santander.com.
3
Defined as transactions giving rise to credit risk, insurance, asset management, equity and advisory services
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Equator Principles
We have applied the Equator Principles to project-related
transactions (especially project finance) since 2009.
In 2022, we analysed 45 projects that fall within the scope of
the Equator Principles (see table 35. Equator Principles in '4.
Our progress in figure' 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 various public-private partnerships as part of
our commitment to detect, disrupt and deter environmental
crime. In 2022, our Head of Financial Crime Compliance
Framework & Policies remained the chair of the quarterly
United Nations Office on Drugs and Crime's (UNODC) Private
Sector Dialogue on the Disruption of Financial Crimes Related to
Forestry Crimes, which continued to bring 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. Santander
also remains an active member of the United for Wildlife’s
Financial Taskforce against illegal wildlife trade.
Protection of human rights
Our board-approved Responsible banking and sustainability
policy illustrates ESG Santander’s commitments including
human rights protection of our employees, customers, suppliers
and the communities we serve.
• We run initiatives to combat discrimination, forced labour,
child exploitation and other affronts to people's dignity, as
well as to preserve freedom of association and collective
bargaining, our employees’ health, and decent employment
(see the contents relating to Diversity, equity and inclusion;
Employees’ health and well-being; and Social dialogue at 3.3
A talented and motivated team section in this chapter).
• We protect our customers’ human rights through responsible
business practices, and grating their data protection (see 3.4
Acting responsibly towards customers section in this chapter).
• We improved our vendors questionnaires to ensure respect for
human rights along our supply chain (see section ‘3.5
Responsible procurement’ in this chapter).
• We're also enhancing human rights questionnaires including
risks in the supply chain to clients under Environmental, Social
and Climate Change Risk Management policy. As a result, a
strengthened analysis of client´s exposure to social risks was
achieved.
• We assess Human Rights impacts over transactions under the
scope of Equator Principles
In 2022, we included awareness on human rights into Global
Mandatory Training. We also added human rights into
Environmental, social and climate change risk management in
our refreshed material topics for greater focus (see section ‘5.2
Materiality assessment’ in this chapter).
> Complaints
In 2022 none attributed human rights violations to any Group
entities has been reported on our whistleblowing channel, (see
section on Ethical channels in next page).
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3.2.4 Principles of action in tax matters
GRI 207-1, 207-2, 207-3
The board of directors approves Santander’s tax strategy and
revises it regularly. This strategy sets tax principles that the
entire Group must follow. In October, the board updated the tax
strategy, which can be found on our website
(www.santander.com).
The Group’s tax risk management and control, which draws on
our internal control model, must be consistent with the
principles in the tax strategy.
Since 2010, we've abided by Spain's Code of Good Tax Practices
and the UK's Code of Practice on Taxation for Banks.
Furthermore, we participate in cooperative compliance
initiatives led by tax authorities. Since 2015, we've voluntarily
submitted an annual tax transparency report to Spain's Tax
Authority.
Total tax contribution data is available in 4. Our progress in
figures section.
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 tax advice or planning strategies when marketing and
selling financial products and services. Not engage in
transactions or activities that facilitate unlawful avoidance of
taxes by our customers
→ Communicate Santander's total tax contribution clearly,
distinguishing between taxes borne by the Group and by third
parties for each jurisdiction as well as any other information
necessary to comply with generally accepted reporting
standards on sustainability.
→ Not create or acquire entities registered in offshore
jurisdictions without board approval; and adequately monitor
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.
A. By the end of 2022, we had one subsidiary and three branches in offshore jurisdictions. See detailed information on offshore entities in note 3 c) to the consolidated
financial statements.
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Issues received
Issues deemed well-founded for investigation
Disciplinary actions
which led to dismissal
2022
3,935
3,477
907
387
2021
4,338
3,628
1,196
312
By category, the main concerns reported related to issues of
workplace harassment, breaches of corporate behaviour (SPF)
and labour regulations, as well as internal fraud and marketing
of products and services.
In 2022, 93 equal opportunity and non-discrimination
complaints were received in the Group, 11 of which resulted in
disciplinary action, including 8 dismissals. We are not aware of
any complaints initiated by any employee or their
representative in relation to incidents of discrimination or
4
violation of fundamental rights in Banco Santander, S.A.
.
We also received reports of 18 alleged cases of corruption in the
year, resulting in 1 dismissal.
TYPES OF ISSUES RECEIVED
3.2.5 Ethical channels
GRI 2-26, 205-3, 406-1
Canal Abierto is our global ethical, anonymous and 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.
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.
The average processing time was 34 days.
3.2.6 Relations with political parties
GRI 3-3, 415-1
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. These principles reject any act of corruption
by Santander’s employees and managers.
In 2016, our board executive committee-approved Santander’s
policy on financing political parties (available on our corporate
website) that has been applied to all our subsidiaries
worldwide. It prohibits making monetary or in-kind election
donations and contributions. However, it allows sponsorship by
subsidiaries of special events or activities, provided they have
been approved by the Group's executive committee and are
consistent with Santander's objectives and operations.
Santander US participates in a US Political Action Committee
compliant with US law and with full transparency.
Grupo Santander may only finance political parties on
exceptional and limited terms approved by the Group's
executive committee and on an arm's length basis. The policy
prohibits total or partial debt forgiveness to political parties and
their affiliates. While the terms of the debt may be negotiated,
the interest rate charged may never be below the market rate.
In addition, this policy applies to electoral candidates of political
parties to the extent provided by local law.
4
More details on fines and sanctions received in section 6.4 'Global Reporting Initiative (GRI) content index' (2-27)
36
8.2%4.4%9.7%25.8%23.9%6.8%5.9%4.1%11.2%Marketing of products and servicesPrivacy/security and confidentiality of informationInternal fraudWorkplace harassmentSPF + labour regulationsMoney laundering and terrorist financing and sanctionsConflicts of interest/non-group activitiesCybersecurityOther typologies
2022 Annual report
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3.3 A talented and motivated team
We want to be an employer of choice. Our approach strategy is based on three pillars.
ó
Putting the employee at the center
of all we do
ó
Ensuring we have the right talent
and skills in place to ensure the
Bank’s transformation
ó
Aligning with the business to ensure
we add value proactively and help
deliver the strategic objectives
Ensuring that we have the best
culture, and a great employee
experience – delivered through
initiatives such as diversity, equity
& inclusion, culture, health
& wellbeing
Attracting and engaging the best
talent and encouraging our
people to learn through great
leadership, a strong focus on
development and having a strong
employee value proposition
Having the best organisation design,
making data driven decisions, and,
utilizing new ways of working to drive
value for all stakeholders
3.3.1 Putting the employee at the centre
GRI 2-7, 2-30, 3-3, 401-1, 401-2, 403-2, 403-3, 403-5, 403-6, 403-9, 403-10, 405-1, 405-2
Diversity, equity and inclusion
SASB FN-AC-330a.1, FN-IB-330a.1
We continue to cultivate a workplace where our people can be
themselves and reflect the diverse society we live in.
We do so via following Group networks:
• Global executive DE&I working group, which brings together
senior positions from 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 sharing best practice.
In 2022, important highlights were:
• Holding the first global DEI awards to recognize best inclusive
behaviours within the Group.
5
, including the two e-
• Mandatory training for top managers
workouts, “Cultural connection” and “Listening to everyone”,
to continue to raise awareness.
• Creating the role of Bias Champion across the Group to fix
implicit bias in the calibration of people’s potential and
performance. The Bias Champions were previously trained on
implicit bias.
5
Promontorio, Faro and Solaruco level
• We included questions in our engagement survey about
inclusion, to be aware and take action if any underrepresented
group is not feeling equally considered and part of Santander.
38.4
Average age of the
workforce, -0.2 pp vs 2021
54%
of employees are women
equal vs 2021
Data at year end.
2.0%
of employees have a disability,
+0,1 pp vs. 2021
8.8 (out of 10)
Employees' assessment of whether Santander supports Diversity and
Inclusion (in terms of gender, ethnic diversity, disability, socio-
A
economic status, etc.)
A. Workday-Peakon, aggregated results for the last 12 months.
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% of women in top management and other senior positions
Women members
on our board
Our target:
Our progress:
40-60% 40%
Women in senior
D
positions
Our target:
30%
Our progress:
29.3%
D. Senior positions are 1% of total headcount.
Grupo Santander features in the
Bloomberg Gender-Equality Index
and is its highest-scoring bank
Persons with disabilities
Our diversity, equality and inclusion strategy has a specific focus
on the inclusion of persons with disabilities.
In Argentina, Brazil, Mexico, Spain, the UK and the US,
Santander has networks for employees with disabilities to share
ideas, point out needs and areas for improvement and promote
active listening as the way to root out stereotypes and biases
that undermine inclusion.
Access to employment and education are two major obstacles
for persons with disabilities. Santander’s main ally in changing
that reality is Fundación Universia.
In 2022, we held local and global events to celebrate
International day of persons with disabilities.
Santander is part of Valuable 500, a cause that puts disability on
the agenda of business leadership, striving for full accessibility
at work, in communications and in the awareness of everyone in
the countries where it operates.
for more details see 3.9 Support to higher education and other
local inititatives section in this chapter or go to
www.fundacionuniversia.net
Gender equity
Santander fosters equal opportunity between all genders. While
women make up 54% of our workforce, their presence in senior
positions is less. In 2022, 29.3% of the Group's management
positions are held by women, which represents an increase of 3
percentage points compared to 2021 and 5.6 compared to
2020.
We're taking action to have more women at all levels of senior
positions.
• We focus on equal consideration of both genders in hiring and
promotion, in learning and development programmes, and
especially, in senior-level succession plans.
• We have minimum standards for parental leave of 14 weeks
for primary leave and 4 for secondary leave.
Our Santander Women’s Network grew year-on-year.
LGTBI+
In 2022, we prioritized spreading awareness and inclusive
communication and building up our Embrace network.
We commemorate LGBTI+ Pride Day, with several events to
share stories and experiences inside the Group and out.
Some highlights from the year are:
• In the UK, we increased our Evolving Minds LGBTI+ library. It
includes “Pride stories” by colleagues, as well as an LGBTI+
calendar and alphabet, to better understand little known or
misunderstood LGBTI+ identities. We also take part in Tent
and Stonewall’s mentorship programme for LGBTI+ refugees,
aiming at supporting more than 50 LGBTI+ refugees by 2024.
• In Spain, we ran an anonymous survey to understand needs
and expectations and take concrete measures in terms of
awareness, inclusive communication and protocol to assist
LGBTI+ people.
Ethnic and cultural diversity
In 2022, we promoted visibility and awareness of cultural
diversity and the influence of implicit bias on people’s actions
and decisions. Top management undertook a mandatory
training session, called “Cultural connection” to help teams look
past cultural differences and get the best from all backgrounds.
Key local initiatives:
• In Brazil, we held workshops on ethnic awareness for mid-
level managers. We also launched the anti-racist Black Allies
initiative and saw an increase in the hiring, satisfaction and
retention of black employees.
• In the UK, we participated in Solaris, an external development
programme for black women executives. We held ethnicity
listening circles with our Ethnicity@Work network to hear the
stories of people belonging to ethnic minorities from all over
the Group. We also wrapped up the first “Accelerating You:
Black Talent Programme” to drive black talent.
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Equal pay
Gender pay gap: 30.2%
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.
We maintain rigorous standards for hiring, promotions,
succession planning, and talent pipelines to strengthen
diversity. We also promote implicit bias training,
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 pay gap has decreased significantly compared to the
previous year (32.3% in 2021) showing the effect of the
structural measures taken in the Group.
Equal pay gap: 1%
What it measures:
The equal pay gap measures the "equal pay for equal work" for
women and men in the same job at the same level. Our
comparison does not consider such factors as tenure, length 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.
Gender and equal pay gap figures match 2021 trends, on the
back of a firm commitment and ambitious action plans assumed
throughout the Group.
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 to conduct robust
reviews and analyses of pay data to detect, understand and act
on any gaps.
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Employees’ health and well-being
Our health and well-being strategy sets out how we protect the
health, safety and well-being of all employees, associates and
customers; promote a healthy lifestyle; and create long-term
value.
It includes a set of common guidelines to ensure a consistent,
group-wide approach to mental and emotional health, digital
downtime, nutrition and obesity and other matters. In 2022, we
published our Global Health, Safety and Well-being policy,
which can be found on our corporate website.
We regularly check our employees’ satisfaction with internal
surveys that ask them about general health and well-being,
physical health, mental and emotional health, social care and
Santander’s support.
Covid-19
In 2022, we adapted our Covid-19 strategy to address the
severity of the Omicron variant early in the year before the
pandemic began to subside.
We continued to develop a response based on protocols and
prevention measures to ensuring the health of our employees,
consistent with domestic and international guidelines and
recommendations on public health and safety.
We undertook a gradual process to normalize our operations
and return to the office, cutting back our COVID-related
measures strictly within the labour laws in each country.
Occupational health
We have collective agreements at bank and sector level, under
which employee health and occupational risk prevention are
considered. We offer employees check-ups either regularly or
after extended absence. We cooperate with competent local
institutions on public health initiatives.
We also revise occupational risk prevention plans regularly with
employees' legal counsel. We implement them through:
• regular workplace assessments of health and safety risks and
preventative measures to handle or eliminate them;
• prevention measures when designing, procuring or acquiring
offices, furniture, equipment, products and IT equipment;
• procedures to guarantee safe working conditions. The
Occupational Risk Prevention area draws up the plans with
other units, with measures to prevent or minimize the risks
they detect and review;
• employee awareness and continuous training; and
• occupational risk prevention in all operations that may impact
on employees' health and safety.
Our offices have achieved several security, quality and
sustainability certifications, such as LEED O+M , Gold Level in
the US, or ISO 14001 in Brazil. In 2022, our corporate centre, the
Santander Group City, obtained ISO 45001 certification.
8.1 (out of 10)
Average rating from employees about the statement
“Employees’ health and well-being is a priority at
Santander” — 0.2 above the finance industry
benchmark
A
A. 2022 Peakon survey
BeHealthy
We’re committed to being one of the world's healthiest
companies. We foster our employees´ health and wellness,
raising awareness through our global health and wellness
benefits. We also raise awareness through our global
BeHealthy programme, which celebrated its sixth year in
2022.
Its four pillars are: know your numbers; eat well; move; and
be balanced. Throughout 2022, hundreds of initiatives and
events have taken place around the world, involving
thousands of employees. In April, we held BeHealthy Week,
with daily, in-person and virtual events that covered the
programme’s four pillars.
At the same time, we launched an online campaign,
#SantanderBeHealthy, which encouraged employees from
Banco Santander's country units and divisions to share their
own healthy habits, achieving 3 million impacts.
For more details on absenteeism data, see the
'Our progress in figures' section in this chapter.
We also joined global initiatives run by the World Health
Organization, including Global Mental Health Week,
Women’s Health Month and Men’s Health Month. Pau Gasol
joined us for a global event to celebrate World Nutrition Day
with some 1,500 employees.
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.
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Our listening strategy
SASB FN-AC-510a.2, FN-CB-510a.2, FN-IB-510a.2
In 2022 we set out a new strategy to listen to employees on a
more frequent basis. We changed our annual employee
listening survey to a more regular listening model called “Your
Voice”, with cutting-edge technology.
We ran Your Voice three times in the year, gaining more regular
and deeper insights.
• Managers can access Your Voice results in real time and
review qualitative opinions and sensitive observations to
pinpoint areas with a high risk of employees leaving and the
drivers to boost higher engagement. It helps managers
promote dialogue, trust and transparency to raise employees'
performance and reduce resignation and absenteeism.
Santander Group - 2022 Your Voice result in a nutshell
• Employees can give feedback more often and leave comments
on every question while preserving anonymity at all times.
Your Voice surveys only take a few minutes to complete.
The surveys we ran in 2022 showed positive results overall.
For more details, see ‘Ethical
channels' in '3.2 Conduct and ethical
behaviour' section in this chapter.
8.3
Engagement
54
eNPS
A
In line with benchmark for Finance, and
all sector companies
Stable across all three rounds in 2022
14 above Finance benchmark
16 above all companies benchmark
Top 10% of the Finance sector
• Strengths
1) Meaningful work
2) Peer and team relationships
3) Goal-alignment and feedback
4) Diversity and inclusiveness
• Opportunities
1) Autonomy
2) Simplification
eNPS distribution
25%
Passives
65%
Promoters
10%
Detractors
A. eNPS (employee Net Promoter Score) is a method of measuring employees' satisfaction levels
89%
Aggregated participation
1.9Mn
Comments provided
Volunteering
Santander has a volunteering programme in every country
where we operate. We focus on:
• Promoting financial education.
• Preventing early school-leaving and boosting the job skills of
young people at risk of social exclusion.
• Supporting people with disabilities, women and children in
difficulty, and other vulnerable groups.
Subsidiaries’ also develop programmes based on local needs.
> Programmes for children in Latin America
In Brazil, volunteers took part in financial education initiatives.
The Bank also held the 20th edition of the Amigo de Valor
program.
In Mexico, we supported Fideicomiso Por los Niños de México
(FPNM) (employees donate part of their salary to help
disadvantaged children) and Fundación QUIERA to boost young
people’s financial skills and to improve their emotional health.
In Chile, volunteers helped children through tutorials, school-
based support, sporting and cultural activities, and camps.
> Europe and Ukrainian refugees
In Poland, numerous volunteers took part in an project relief
programmes that benefited over 1,000 people.
In the UK, employees joined customers in donating money to
the Red Cross and UNHCR. Some employees volunteered to
fundraise and shelter refugees in their homes.
In Spain, volunteers helped Ukrainian refugees at our Corporate
Centre. They taught Spanish and ran activities for children.
In Germany, volunteers collaborated to collect refugees at the
border with Poland. Some employees also took refugees into
their homes.
+25,000
employees
participating in
community activities
+77,400
hours volunteered
For more details on our social contribution to
communities, see the '3.9 Support to higher education
and other local initiatives' section in this chapter
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3.3.2 Ensuring we have the right talent
and skills
GRI 2-17, 3-3, 404-1, 404-2, 404-3, FS4
Our talent strategy focus on talent attraction and retention.
Strategy Workforce Planning exercises helps us to understand
our current skills base and future needs (aligned to the business
strategy).
Talent attraction & acquisition
Talent attraction
Our talent attraction strategy is focused on positioning the
Santander Group as one of the world's leading technology
financial groups, one of the BigFinTech, ensuring a great
candidate experience, and moving fast.
In 2022 we focused on digital transformation. We embedded a
Acquisitions Tracking System (ATS) in all our core units for
faster selection, a sound experience for candidates and
managers, and efficiency, group-wide. We also began a pilot
scheme to help us quickly screen applications for mass
vacancies. Moving forward, we plan to roll out candidate
screening technology to more areas as well as machine learning
solutions to assist with candidate selection. Digitalization will
also remain a priority.
Attracting and retaining
We implemented a strategy based on a strong employee value
proposition (EVP) for STEM talent. It includes:
1. Global BeTech! programme, to develop Santander’s image as
a tech company with a market leading proposition of flexible
work, meaningful projects, DE&I, agile work, etc. We reinforced
our EVP with hybrid working models for tech teams and more
agile ways of working, as well as running these initiatives:
• “Women in Tech”, which aims to enhance the visibility and
leadership of women in the tech field through roundtables
and event sponsorship.
• “DiverTechies”, to help people with disabilities enter the job
market and build a more inclusive tech industry.
• We reinforced our EVP with hybrid working models for tech
teams and more agile ways of working.
A global careers strategy we have implemented offers talented
STEM professionals the option of working in the gig economy on
Talent retention
Mobility
Our global career strategy sets out the principles to generate
purpose-driven mobility, unlock the Group’s talent and provide
clear standards for our managers and employees.
We have simplified the internal mobility offering with four
simple and transparent forms of mobility that align with
business and employee needs:
1. International assignments (EXPATS)
2. Permanent movements
3. Project-based assignments (Mundo Santander)
4. SWAP programme
short-term, project-based assignments, plus swap programmes
where they and a colleague switch roles for a set period.
2. The Community of digital professionals.
A key part of the Global BeTech! strategy was to create a
community of digital professionals who act as Santander
ambassadors online. Since our employees are the most effective
champions of our culture and work environment, their role as
“micro-influencers” is helping us get our message out and
attract new talent.
3. The new Global landing page
A new landing page has been launched in December 2022 for
digital & tech talent to apply in the different open positions in
most of our units (www.betechwithsantander.com). This way
we show the candidates the strength of our global presence,
our many opportunities, and the international careers that could
be available by joining us.
4. New Learning program to join technology and business
Under our learning and development strategy, we worked with
some of the world's leading universities and with such technical
schools as Ironhack, The Bridge and Immune Institute, to launch
upskilling and reskilling programmes. We also implemented the
new Be Tech & Business programme to help gifted STEM
professionals gain a interdisciplinary knowledge in tech and
business, with an emphasis on artificial intelligence, market
places, DeFi and emerging technology. We also fine-tuned
compensation schemes to better attract and retain our STEM
talent and launched an innovative value creation plan for
PagoNxt based on best practice in FinTech.
We promote internal mobility as the best way to meet business
needs and offer real opportunities to our employees, with
internal vacancies posted on our Global Job Posting site. We
refreshed our first global project marketplace, Mundo
Santander, to offer employees temporary mobility and
development opportunities: any business or support area may
propose a project, which will be posted in Job Posting, and any
employee from the Group who meets the requirements may
apply. We also developed the SWAP programme for
professionals with similar backgrounds to change roles for a
short period as a way to share best practices and new ways of
working and gain global perspective.
In 2022 we reviewed the Global international mobility policy
and created a separate guide for each mobility type.
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Learning and development
Our Global learning and development policy sets the standards
for designing, reviewing, launching, overseeing and enhancing
training and development programmes. We are developing a
common catalogue of learning solutions that focuses on the
most critical skills our business demands, based on input from
strategic workforce planning tool, the employees' skills gap
assessment and the business challenges identified with
subsidiaries’ L&D teams and business stakeholders through the
learning needs assessment.
We encourage our employees to take the lead in their own
learning development and we ensure that their skills and
knowledge stay relevant. We promote employee learning on
our digital ecosystem for lifelong learning, with a vast array of
study plans and “roadmaps” for employees to upskill and reskill
and be in charge of their training and personal development.
Present and Future Leaders
Our development programmes for employees include:
• Young Leaders, a global programme for young, talented
employees to continue developing to meet the demands of a
changing world. We launched its third iteration in 2022, with a
focus on cultural intelligence, “think customer” and future
design.
Global training
We build skills from the ground up with on-demand and
sequential learning. We use proven, easy-to-follow, self-paced
learning paths so employees can form a knowledge base, build
proficiencies and develop new skills — their way.
Our main focus is on :
• Fostering innovation: We carry out expert programmes and
bootcamps focused on data analytics, programming,
computational thinking, cybersecurity, futures design, hyper-
personalization, innovation and service design, which are key
disciplines in employee upskilling and reskilling.
• New ways of working: The Agile Academy umbrella provides
us an extensive catalogue of contents and certifications on
agile culture and roles.
• IT skills: Our learning plans cover different technologies, with
a specific website for cloud-related issues.
• Core banking skills: We continue to develop core knowledge
through our Global Risk and Internal Audit schools.
• Global mandatory training: According to our Risk culture and
strategy, we deliver required pills and e-learning courses
quickly to impart knowledge on regulation, risk, cyber
security, code of conduct, responsible banking, and financial
crime. In addition, each subsidiary has mandatory courses on
the law and regulation of its jurisdiction.
• Elevate: our global executive learning ecosystem for senior
officers to participate in a 14-week hybrid learning experience
on “evolving customer”, “caring leadership”, “responsible
banking” and “building the future of Santander”.
Talent Management
Our learning and development strategy strengthens talent
management across our footprint to select candidates for
leadership initiatives. In 2022, our talent management included:
• Succession planning: We enhanced our succession planning by
focusing on diversity, ensuring cross-pollination and using more
data-driven analytics.
• Skills model: We designed and launched a skills model that
helps us reskill and upskill employees (which we’ve already
rolled out to most units).
• Potential assessment: We created a Common Potential Model
and implemented a technology solution to assess our
employees’ potential. We assessed our senior officers in 2022
and will extend the model to all employees in 2023.
• Responsible banking: We have progressed on the 3 level
training strategy we defined in 2021:
◦ We launched the first global mandatory training in ESG for
all employees, “Sustainability for all”.
◦ We created ESG Talks, a series of online recordings available
on our learning digital ecosystem, with internal experts
from SCIB, Risk, Human Resources, Consumer Finance and
Retail Banking for the areas involved in our sustainability
agenda.
◦ We provided the contents for employees to obtain
Santander ESG Commitment Fundamentals, International
Sustainable Finance Specialist-IASE level II and other ESG
expert certifications.
Some subsidiaries and global businesses provided additional
training on climate change, sustainability, sustainable finance,
sustainable investment, diversity and inclusion.
In 2022, the Board of Directors completed training programmes
on climate change, with modules on the Paris Agreement, net
zero, portfolio alignment, climate risk management, transition
plans, regulation and reporting, and biodiversity.
We also trained our employees on diversity and inclusion,
health and safety, customer and supplier relations, the
environment and anti-corruption.
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3.3.3 Supporting to the needs of the teams
GRI 2-17, 2-19, 3-3, 404-1, 404-2, 404-3
Performance review and remuneration
Our comprehensive remuneration framework combines fixed
and variable pay schemes based on targets for employees and
the Group. Short- and long-term variable remuneration reflects
what we have accomplished and how, according to group-wide
quantitative and qualitative targets as well as individual and
team targets, behaviour, leadership, sustainability,
commitment, growth and risk management. It includes 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 jurisdiction where we
operate.
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
1,039 employees subject to a deferred variable pay scheme
because their decisions can have a material impact on equity.
The policy defers a significant amount of their variable pay
(40%-60% depending on remit) for four to seven years, in
accordance with internal and local regulation. 50% of variable
pay is delivered to them in shares and subject to potential
reduction ("malus") or recovery ("clawback"). However,
executive directors receive 50% in instruments (25% in shares
and 25% in share options), unless they choose to receive
options only.
MyContribution
MyContribution is our common performance management
model. We update it regularly, and it applies to all employees.
Key initiatives in 2022
→ The executive director remuneration policy for 2022 included
variable, multi-year remuneration (2023-2025) based on
relative total shareholder return, return on tangible equity
and ESG metrics. We measure our progress in ESG against
these four lines of action and their related metrics: (1)
percentage of women in senior positions; (2) financial
inclusion; (3) green finance and socially responsible
investment; and (4) exposure to thermal coal.
→ In 2022 we began developing a new variable pay platform as
part of our commitment to better employee experience and
best market practice.
→ We made progress with gender pay gap monitoring and
analysis.
→ Our remuneration policy outlines our commitment to
avoiding gender bias and removing inequality.
For more details on board
remuneration, see section 6 of the
'Corporate governance chapter'.
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Corporate benefits
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.
Transforming the way we work
From early 2022, with different Covid infection and vaccination
rates in our markets, we had to remain responsible, vigilant and
flexible to rollout a “post-pandemic” work model. We focused
on two key areas:
1. Return to office, with the objective of gradually bringing
everyone back as the pandemic subsided.
2. A flexible working model that is fit for the future and
responds to business needs.
We also continue to promote our employee’s work-life balance
through flexible working, health & well-being programmes and
office safety measures.
A new way of working
We implemented a global framework for managing hybrid
working based on productivity, engagement and attractiveness.
It enabled each subsidiary to deliver a consistent model to
employees that they could adapt to local needs:
• For productivity, we created a new dashboard to measure the
new ways of working across the Group and measured KPIs for
contact centres and operations.
• For engagement, we asked employees to provide feedback on
the new ways of working.
• For attractiveness, we followed up with job applicants to learn
their views on our new ways of working.
Agile Way of Working
We have been implementing agile methodologies and
organizational structures across the business to ensure a strong
customer focus and promote a more collaborative and
multidisciplinary way of working. To enable change, we created
an Agile Transformation Blueprint and practices to help
subsidiaries facilitate business agility.
And we have booster our Agile Training Academy with several
learning modules available for all levels and specializations of
employees.
For more details on our initiatives promoting
employees' wellbeing, see "Employee
wellbeing" in this section
8.4 (out of 10)
Employees' assessment of whether they
believed they had the necessary flexibility to
A
be able to balance work and family life.
A. Workday-peakon survey 2022
We set out five "ways of working" principles
→ The customer comes first. Behind any Way of
Working arrangement customer and business
impact MUST be considered at the first place.
→ Managers are playing critical role in the
organizing teams work. Productivity of the
teams and individuals are key decision's factors
when building the models of work.
→ Office is our main place to work. Workspaces
are no longer just a place of work but a social
destination bringing people business together,
and supporting different working needs, with
the best opportunity for collaboration,
innovation and creativity. Building critical social
mass at the premises is key for our culture.
→ Testing and learn approach trough constant
listening evolving over the time with the focus
on customer, individual performance,
productivity outputs, and employer branding.
→ Flexibility, fairness, inclusion and equal
opportunity are guiding principles in decision-
making.
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Enabling the business
Enabling the business to take key decisions and manage human
capital, was a key human strategy and objective for us in 2022
and will continue to be in the future. We want our people to
make smarter, faster decisions about their teams and their
needs. We are contributing value with our global technology
platforms and giving the business data at their fingertips
through::
• Enhance user experience through new solutions such as
OneHR portal, OneHR Support, chatbots and mobile first
technology.
• Maximize the potential of our platforms, having added such
end-to-end processes to them in 2022 as the skill model,
talent review, succession planning and time tracking.
Social dialogue
In 2022, we continued to guarantee freedom of association and
the right to collective bargaining. Our Responsible Banking and
Sustainability 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
unions, 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 in bilateral and special committee meetings
where all parties could discuss reporting, queries and
negotiations about work conditions and employee benefits.
• Create global data and data quality governance and new
reporting dashboards, and used analytical and predictive
models to harness HR Analytics for more insightful people
management.
• Simplify and automate back-end processes by moving
towards more global shared service centres in Human
Resources.
Meetings we held in 2022:
• Occupational health and safety committees
• Equality plan follow-up committee
• Santander employees pension plan control committee
• Training committee
• Other meetings
◦ Employee listening
◦ Banco Santander mass redundancy agreement follow-up
committee
◦ Registration of working hours
◦ Corporate behaviors
◦ Flexiworking policy
◦ Capitalization of pension supplements agreement follow-up
meetings
◦ Meetings with subsidiaries’ union committees
– Bilateral meetings with trade union representatives
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3.4 Acting responsibly
towards customers
Our customers are at the centre
of everything we do
ó
Providing the best experience
ó
Strengthening our customer-
obsessed culture
ó
Introducing consumer protection
principles into our practices
ó
Designing products to meet their
needs and aid their sustainable
transition
ó
Protecting privacy and personal
data and using them
appropriately
ó
Cyber as a culture driver to protect
our customers’ information
3.4.1 Customer experience and satisfaction
GRI 2-29, 3-3, FS5, FS6
Transforming customer experience
Our aim is to offer customers a great service and experience
that produces optimal business outcomes.
We created local and global opportunities to transform
customer experience (CX), with the oversight of our
management committees.
In 2022 we focused on:
1) CX strategy: Develop skills, processes and tools to manage CX
within our Global CX management framework, which our core
country units helped create.
2) Create a Centre of Excellence for Behavioural Economics to
better understand people’s choices.
3) Customer-centric culture: A community to share know-how
and innovation to develop subsidiary-level CX plans to raise
NPS. We have a monthly newsletter and hold special workshops
and training sessions.
Customer satisfaction
In 2022, we conducted over five million surveys to monitor
customer feedback about Santander and find out how we can
improve our products and services and, ultimately, their
experience.
In 2022, we ranked in the top 3 in NPS in 8 of our markets (For
more detail see tables 27, 28 and 29 on 4. Our progress in
figures section in this chapter).
In 2022, among others, we ran these initiatives:
• “Serve from the heart” (SFTH), which brought us closer to
customers’ real needs and problems. It is running at branches,
contact centres and central offices in the US, Brazil, Chile,
Argentina, Uruguay and Portugal, and includes videos and
podcasts.
• Also, in the US, we ran digital interaction initiatives and
created a customer ombudsman programme to enhance
claims and complaint resolution, which boosted CX.
• In the UK, we use customer voice analyses to perform quick
tactical testing. Initiatives also include gamified
communication, proactive apology messages for
unsatisfactory service and calls to detractors.
• In Poland, the COMPASS methodology ensures that new
products and solutions will prove useful to both the business
and the customer, mitigating risks and boosting customer
satisfaction. Also, our plain language communication policy
boosts CX, our reputation for transparency, honesty, and
straightforward terms of service.
• In Brazil, we developed an AI-driven “speech-to-text” (STT)
program that leverages our ability to listen to our customers,
bringing insights that allow us to improve our customers
experience.
We also continue working on the accessibility of our products
and services, including our channels as branches, App y Webs.
Top 3
A
in NPS in 8 countries
A.Santander US has a differentiated objective and does not compute.
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3.4.2 Product governance and consumer
protection
GRI 2-26, 3-3, 416-1, 417-1, FS15
Customer conduct risk model
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.
Our customer conduct risk model sets out the lines of action and
standards for managing and mitigating conduct risk in service
design, sales, post-sales and execution.
The Product Governance & Consumer Protection area pinpoints
risk from banking regulation and good practice. It also conducts
thematic reviews to avoid problems that might affect our
customers and to ensure excellence. 2022 thematic reviews
focused on pricing, account closure, services for elderly
customers, care for victims of fraud, and payment protection
insurance. We found over 100 areas of improvement.
Product governance
Santander’s governance structure enables it to safeguard
customers' interests.
Our product governance forum ensures the products and
services we market meet the needs of specific target segments
and are reasonably and clearly priced.
Transforming sales culture
Training is central to Group Santander's strategy for a strong
risk culture and sound risk management. All our employees
complete a mandatory course on conduct risk management. We
also run special training programmes for our sales teams to
learn skills to sell our products and services properly.
Those programmes, plus the practices and controls we
promote, ensure we offer products and services that are
consistent with customers' needs and preferences. We avoid
pressure selling and other inappropriate practices, and only
offer product and service bundles if they add value for
customers, who always sign up to them at their own discretion.
We explain products and services to customers in a clear and
thorough manner throughout the customer cycle, with quality
and conduct controls for marketing and sales material,
brochures and contracts according to Santander’s standards.
We design customer-focused remuneration models to ensure
quality sales processes and to promote sustainable business.
In 2022, we verified that at least 40% of sales units' variable
pay was based on customer satisfaction and quality metrics. We
drew up plans to enhance pay schemes that promote suitable
fixed and variable pay ratios and linear business objectives that
will help avoid conflicts of interest and ensure sales will meet
customers’ needs and profiles.
We continued implementing Rating de Oficina project to give
branches a customer conduct and quality rating that impacts on
employees’ pay, with technology to review real-time metrics for
greater awareness and management of conduct-related risk.
In 2022, we reviewed the pay schemes of call centre employees
involved in sales and customer engagement, in addition to
others working in credit approval, loan monitoring, recoveries
and collections, to make sure good conduct and service quality
were engrained in their objectives.
Vulnerable customers
In 2022 we made headway with the management of vulnerable
customers and prevention of over-indebtedness in all our core
markets. Each subsidiary has a roadmap to roll out a Group-
wide model for training customer-facing employees to
recognize vulnerable customers, escalate cases, and design
products and services in such high-impact procedures as
collections, fraud management and services for senior citizens.
We focused heavily on vulnerable customer identification
through internal awareness campaigns and metrics.
In 2022:
• We implemented protocols for elderly customers to avoid
exclusion and improve the experience of these customers.
• We were awarded in UK to be certificated by International
Standard on Consumer Vulnerability and the Inclusive Service
(ISO 22458).
Conduct in collections and recoveries
In 2022, we used customer conduct metrics to monitor
recoveries in all our markets every month. We also checked
employee training and quality control.
Customer complaints regarding recoveries fell 26% against the
previous year (despite the Covid crisis and the war in Ukraine)
on the back of the ethical standards we continued to implement
and oversee since 2021.
Conduct in fraud management
Santander invests in advanced systems to protect itself and its
customers from the devastating effects of fraud.
In 2022, we conducted a Group-wide analysis of how we
manage fraud with customers. We reviewed regulatory trends,
as well as our end-to-end processes, product and service
design, claims handled, customer communications and control.
Our findings helped us draw up action plans to boost our fraud
management in 2023.
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Complaints management
Handling customer issues and complaints proactively and
effectively, analysing disgruntlement and applying lessons
learned are vital to continuous improvement, innovation, and to
strong customer satisfaction and loyalty.
Our complaints analysis and management are consistent with
the Group’s Simple, Personal and Fair strategy, with standards
for all units to properly handle complaints and offer the best
customer service. We use analyses to enhance products and
services, with an early warning system to identify risks.
In 2022 we reviewed complaints management and root-cause
analysis in all our core markets to identify common
workstreams, good practice and areas of improvement. In 2023
we will run initiatives on customer service excellence.
We continued our holistic analysis of customer surveys and
consumer protection, with artificial intelligence to report root
cause, maximize oversight (e.g. pilot schemes in Brazil and
Mexico with over 27 million sets of data), avoid issues
reoccurring and follow best practice.
Our methodology harnesses the benefits of customer survey
algorithms to get the most out of structured and unstructured
data on our systems.
In 2022 we received few complaints from senior citizens and
new customers in our core markets relative to our total
customer base.
We also use special taxonomies to track fraud-related
complaints in all geographies. In Mexico, cases of fraud, which
account for c.50% complaints there, have been falling
significantly, thanks to a new task force and the measures we're
taking.
In 2022, the average time taken to resolve complaints was 10.5
days.
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 complaintsA,B
(%)
Resolution
(%)
A,B
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).
49
22.5%32.0%2.5%30.9%7.5%4.7%Banking proceduresLoansInvestmentsPayments methodsOthersInsurance80%20%In favour of the BankIn favour of the customer
2022 Annual report
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3.4.3 Privacy, data protection and
cybersecurity
GRI 418-1
Privacy and data protection
Our standards afford people greater control over their data,
ensuring we only use their data strictly necessary and for the
specific and dully informed 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
Cybersecurity
Our culture promotes behaviours to protect customers’
information and the Group. We help our customers and broader
society stay safe and prosper online. We’re working with public-
and private-sector organizations to combat cyber crime through
knowledge sharing on cyber security.
At Santander cybersecurity is embedded in our culture. It is a
part of our employee performance reviews.
In 2022, we made our teams more aware of cybersecurity, with:
• an update to our mandatory cybersecurity course;
• special or extra cybersecurity training for payment agents, IT
professionals and developers, board members and executives;
• awareness campaigns about new hacking techniques; and
• regular phishing testing that helps us become more resilient
to threats and encourages employees to report incidents or
suspicious messages through the relevant channels.
We ran initiatives to help our customers and society stay safe
online:
• “Cyber Heroes” interactive training, where our employees and
the general public can test their knowledge of online safety.
Available in Argentina, Brazil, Portugal, Spain and the UK, it
has a rating of 9 out of 10.
• Awareness workshops for retail and corporate customers at
our branches to explain online threats and how they can
reduce them.
• Por una vida online y corriente (“An ordinary life online”), a
new global cybersecurity awareness campaign about healthy
online habits and protection against fraud. As part of our
corporate sponsorship of Rafael Nadal, it consists of special
websites, social media content, targeted announcements and
online workshops to reach the widest possible audience.
We also cooperated on cybersecurity matters with public and
private organizations, helping combat cyber crime:
• Santander played a pivotal role in creating the Financial
Services Information Sharing and Analysis Center (FS-ISAC) for
intelligence sharing in Europe. Headquartered in The Hague, it
has over 1,000 members from 174 entities that include
leading banks, Swift and Europol.
• Santander is part of the leadership team of the US
Ransomware Task Force, whose aim is to bolster the
prevention of, and response to, ransomware attacks at all
stages of the supply chain.
• Santander supports the World Economic Forum’s (WEF)
Cybercrime Atlas initiative to clamp down on cyber criminal
networks.
For more details on our cybersecurity initiatives in 2022,
see ‘Cybersecurity’ in section 5 ‘Research, development
and innovation (R+D+i)’.
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3.5 Responsible procurement
GRI 3-3, 204-1, 308-1, 308-2, 414-1, 414-2
Being responsible also
involves our suppliers
v Third-party certification policy
ó v Responsible behaviour principles for suppliers
v Risk control
Our corporate third-party certification policy provides a
methodology for all subsidiaries to select, approve and evaluate
vendors. In addition to traditional criteria such as price and
quality of service, it includes sustainability criteria as human
rights or diversity and inclusion, for suppliers providing risk
services to the Group. Risk services refer to those that manage
very sensitive data or disruption in their services could severely
damage the business.
ESG standards in procurement
We continued to review the adoption of ESG standards along
our supply chain.
• During 2022, 3,222 vendors which represent 52% of those
providing risk services were approved under ESG standards.
These standards assess the adherence to the UN Global
Compact, codes of conduct, anti-corruption policies and
freedom of association.
• In addition, for those most critical suppliers providing risk
services, we assessed 482 according to whether they include
ESG criteria in their processes. The scope of this included
Colombia, Peru and Uruguay for the first time, in addition to
the core markets.
The assessment consists of a questionnaire on carbon
footprint, gender and disability inclusion, flexible working,
minimum wage, good corporate governance and other
factors.
The response rate grew 2% year on year and we found
significantly better use of whistleblowing channels, as well as
more gender diversity, health and safety policies. However,
there is still a significant number of suppliers with room for
improvement in the integration of ESG criteria. We are jointly
working with them on remediation plans and specific training
on the subjects.
ESG supplier standards
We identified ESG best practices from some key vendors in
product categories who have the greatest environmental and
social impact to gain a better idea of ESG positioning and
performance along our supply chain. Our tender questionnaires
require information from vendors on their environmental, social
and ethical behaviour.
We’re setting sustainability standards for each product and
service category to include them in the selection requirements.
As part of our support to the local economy, 60% of our vendors
are based in the same location where we procure services; they
6
account for 85%
of our total turnover procurement.
Risk control
→ In 2022, we finished rolling out our supplier risk management
platform in our core markets. Designed to rationalize vendor
management and critical reporting, it enables us to
consolidate certification information for all vendors.
→ We implemented a new corporate tool to homogenize risk
services vendor certification in all our core markets as well as
to review such key risks as cybersecurity, business continuity,
physical security, facilities and data protection. We also
included Anti-Bribery and Corruption, data integrity and other
additional risks.
→ We created specialized regional teams to issue ESG
certification to our selected vendors for providing the most
critical services for the Group.
→ We work on roll out our ethical channels for vendors to the
rest of our core markets next year.
6
The reduction in turnover at local suppliers (-11 p.p.) is due to a reduction in the number of local suppliers (-34 p.p.) because of the inclusion of new suppliers in the
reporting scope.
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3.6 Supporting the green transition
Tackling climate change is a key priority at Santander. We support
the Paris Agreement goals. Our ambition is to achieve net zero
carbon emissions by 2050. We will do this, and support the green
transition, in four ways:
ó
Aligning our portfolio
with the Paris Agreement
goals
ó
Supporting our customers
in the transition
ó
Reducing
our environmental
impact
ó
Embedding climate in
risk management
Contribute to
limiting temperature
increases to 1.5ºC in line
with the NZBA
and NZAMi
7
Our targets:
Support our customers
transition to a low-carbon
economy
Remain carbon neutral
and consume 100%
electricity from
renewable sources
by 2025
Manage climate and
environmental
risk according to
regulatory and
supervisory expectations
Electricity from renewable sources
43%
2018
2019
50%
2020
57%
2021
75%
2022
88%
19 bn
33.8 bn
65.7 bn
94.5 bn
Carbon neutral in our own
operations
Green finance raised and
8
facilitated (EUR)
AuMs in Socially Responsible
Investments (EUR)
Thermal coal-related power
& mining phase out (EUR)
Emissions intensity of power
9
generation portfolio
0.21
0.17
New
in
2022
Absolute emissions of energy (oil &
9
gas) portfolio
Emissions intensity of aviation
portfolio
9
9
Emissions intensity of steel portfolio
23.84
92.47
1.58
2025/2030 target
100%
Every year
120 bn by 2025
220 bn by 2030
27.1 bn
53.2 bn
100 bn by 2025
7 bn
5.9 bn
0 by 2030
0.11 tCO2e /
MWh in 2030
16.98 mtCO2e in
2030
61.71 grCO2e/
RPK in 2030
1.07 tCO2e/
tS in 2030
From…To
Cumulative target
Commitment Achieved
7
8
9
NZBA: Net Zero Banking Alliance. NZAMi: Net Zero Asset Managers initiative.
In 2022, SCIB contributed EUR 28.8 billion to the green finance target, including EUR 4.8 bn in Project Finance (MLA); EUR 7.2 bn in financial advice; EUR 5 bn in green bonds
(DCM); EUR 21 mn in project bonds; EUR 1.5 bn in export finance (ECAs); EUR 8.5 bn in M&A; and EUR 1.8 bn from equity capital markets, according to Dealogic, Inframation
news, TXF and Mergermarket league tables. This refers to all roles undertaken by Banco Santander in the same project. It does not include financial inclusion and
entrepreneurship. Green Finance raised and facilitated is not a synonym of EU Taxonomy. Please refer to specific section on EU taxonomy-related requirements for further
details in this regard.
Given limited data availability from customers to assess financed emission, we plan to provide target progress update in the “June 2023 – Climate Finance Report”
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3.6.1 Our ambition and strategy
GRI 2-24, 2-25, 3-3
Santander aims 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 are a founding member of the Net Zero Banking
Alliance (NZBA, under the United Nations Environment
Programme Finance Initiative), committing the Group to:
→ transition operational and attributable greenhouse gas
(GHG) emissions from lending and investment portfolios
towards pathways to net zero by mid-century;
→ set intermediate targets for priority GHG emitting sectors
for 2030 (or sooner); and
→ prioritize client engagement with products and services
that facilitate the necessary transition in the real economy.
Santander Asset Management (SAM) aims to achieve net zero
greenhouse gas emissions with its assets under management
by 2050. SAM joined the global Net Zero Asset Managers
initiative (NZAMi) as part of its commitment to fighting climate
change, and set an interim target to halve net emissions for
50% of its AUM in scope by 2030.
We have a four-pronged climate strategy to support the green
transitions and achieve net zero carbon emissions by 2050:
1) align our portfolio with the Paris Agreement goals and set
sector- portfolio alignment targets in line with the NZBA and
with NZAMi to help limit warming to a 1.5ºC rise above pre-
industrial levels.
2) help customers transition to a low-carbon economy, with the
target to raise or facilitate EUR 120 bn in green finance
between 2019 and 2025 and EUR 220 bn by 2030; offer our
customers guidance, advice and specific business solutions;
and enable them to invest in a wide-range of products
according to their sustainability preferences, with the target
of reaching EUR 100 bn AuM ESG Socially Responsible
Investment by 2025.
3) reduce our impact on the environment, implementing
efficiency measures, sourcing all our electricity from
renewable energy by 202510
our operational footprint.
and remaining carbon neutral in
4) embed climate in risk management; understand and manage
the sources of climate change risks in our portfolios.
More details on our Climate Report 2021-June
2022 and the net zero announcement press
release, available on our corporate website
See more details of the SAM strategy under
'Our net zero strategy' in the Sustainable
Investment section.
Our approach
Our approach to decarbonization is to focus on the most
material, high-emitting sectors portfolios. The methodologies
we have developed inform our plans to decarbonize our credit
portfolios, especially ones directly related to fossil fuels.
Progress in our three climate-related projects (portfolio
alignment, sustainable finance classification system and climate
risk management) is reviewed regularly at key governance
bodies as detailed below.
The Group’s climate risk management performs a climate
transition assessment for wholesale corporate customers in the
oil and gas, power generation, metals and mining, auto
manufacturing, aviation and cement sectors, which are highly
prone to transition risk.
Disclosing our approach is key to helping markets and other
stakeholders assess how we embed climate in our processes
and policies. We use the TCFD as reference. See our latest
update on the TCFD's four-pillar framework (Strategy,
Governance, Risk management and Metrics & Targets) below.
10
In countries where we can verify electricity from renewable sources at Banco Santander properties
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2022 highlights
→ We raised or facilitated EUR 28.8 bn (EUR 94.5bn since 2019)
and took advantage of climate finance opportunities to
progress on our green finance target (See 'Supporting our
customers in the transition').
→ We began to implement action plans to decarbonize power
generation and thermal coal credit portfolios. They include
special risk appetite limits and customer engagement on
climate goals and planning.
◦ The greenfield renewable energy projects we financed or
advised on will have enough installed capacity to power
10.1 million homes a year and avoid 152 million tons of CO2
emissions
during the their useful life.
A
→ We're expanding our range of ESG products in Wealth
Management. As of December 2022, we had over EUR 53.2bn
Socially Responsible Investment (SRI) AuM: EUR 37.5bn in
Santander Asset Management and EUR 15.5bn from third
party funds in Private Banking.
→ We set decarbonization targets for 2030 against 2019, for
energy - oil & gas (-29% absolute emissions), aviation (-33%
emissions intensity) and steel (-32% emissions intensity). In
2021 we set a target for 2030 against 2019, for power
generation (-46% emissions intensity).
→ We disclosed the financed emissions (absolute and emissions
intensity) for the power generation, energy (oil and gas),
aviation and steel sectors.
→ We have put in place our climate customer engagement
framework to facilitate the achievement of our emissions
target for the power generation sector. This is based on our
customers' greenhouse gas emissions profile alignment and a
quality assessment of their transition plans.
→ Climate change risk and opportunity assessments, which
inform our three-year financial planning and five-year
strategizing, enable us to measure three-year projections
including the decarbonization targets, green finance and AuM
from sustainable funds.
→ Santander's employee pension funds managers took action
needed to align funds with the net zero target.
→ Santander launched key strategic initiatives on nature-based
solutions in the Amazon in Brazil. Biomas aims to protect and
restore 4 million hectares; and IFACC Alliance aims to
accelerate financing for sustainable production and bring
together complementary capabilities to design and scale up
such mechanisms.
→ We continued to implement our plan to curb deforestation
and protect biodiversity (especially in the Amazon), which is
critical to tackle climate change (See our webpage on
'Santander and the Brazilian Amazon').
→ Santander joined the Taskforce for Nature-related Financial
Disclosures (TNFD) forum and is assessing the impacts and
dependencies on our portfolio for nature-related impacts.
A. Emissions to be avoided over the estimated lifetime of projects that we financed or advised on in 2022. Emission factors and household consumption data from the
International Energy Agency (source updated in 2022 with 2020 data) have been used. The estimated share attributed to Santander is 51.6 million tons of CO2.
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3.6.2 Governance
201-2, FS1, FS2, FS3
Climate change and green transition oversight bodies:
• The Responsible Banking Forum (RBF) discussed climate
• The Board of directors, the Board risk committee and the
executive committee discuss and oversee climate change and
green transition. In 2022 these topics were discussed by the
Board in four of its meetings, and discussed by the Board risk
committee in six of its meetings, including disclosure reports,
new alignment targets, or the Climate Risk Stress Test
Update. Additionally, business units and global businesses
report annually to the Board including their main ESG
initiatives.
• The Responsible Banking, Sustainability and Culture
Committee (RBSCC) discussed climate change at the five
meetings it held in 2022. It reviewed the climate change
projects: progress on power generation and thermal coal
portfolio alignment targets; latest targets for disclosure of
energy (oil & gas), steel and aviation and progress on other
sectors; the organizational model, key priorities, and next
steps of the Green Finance unit and its progress; main results,
lessons learnt and expected developments from the
supervisory activity (including the ECB 2022 Climate Stress
Test and Thematic Review); data disclosure on the Green bond
report; and future developments and ideas on better climate
reporting.
change and green finance in five of its six meetings in 2022. As
this body ensures alignment on key issues, it reviewed and
escalated the above-mentioned topics, among other such as,
the environmental risk policy revision, and carbon footprint
and offsetting process.
• The management meeting, chaired by the CEO, received four
status reports on the responsible banking agenda regarding
climate change and green finance.
• These bodies, along with the audit, risk, and other Board
committees discuss climate-related matters which arise from
the work carried out by the different areas, detailed below
For more details on the RBSCC and RBF
discussed topics and actions taken, see
section 4.9 'Responsible banking,
sustainability and culture committee' in the
Corporate governance chapter.
For more details on climate Governance
bodies, and its composition, see our Climate
Report 2021-June 2022 available on our
corporate website.
For additional information on ESG training,
see the Global Training section on 3.3 'A
talented and motivated team'
Main areas involved in the implementation of the climate change strategy
Pillar of the
climate change
strategy
Aligning our portfolio
with the Paris
Agreement goals
Supporting our
customers in the
transition
Reducing our
environmental impact
Embedding climate in
risk management
Main areas
Responsible banking,
global businesses and
local units set
alignment targets
SCIB (Green finance
and ESG solutions),
Santander Consumer
Finance and Wealth
management.
Facilities, General
services and
Responsible banking
Global and local teams
across all areas of Risk
and Compliance
• In 2022 we continued to embed climate management in
business-as-usual across SCIB, Risk and Responsible Banking.
We created two new positions: Risks Head of ESG & New
Business (who reports directly to the CRO), and Global Head
of Green finance (who reports directly to the CEO). For detail,
please see Global Green Finance unit in Retail and Commercial
Banking.
• Annual risk assessment and internal audit planning touch on
climate risk. In 2022, our Internal Audit area audited climate
risk management, verifying that the Group’s initiatives are
progressing according to plan. It also suggested some
improvements to strengthen governance and controls, and to
roll out initiatives in subsidiaries. It will continue to monitor
this in 2023.
• Other corporate-level initiatives and groups, which support
governance, meet regularly to implement or advise on our
climate change agenda. For example, our public policy
sustainability working group advises on regulation, the
environmental footprint working group measures our
footprint and reviews ways to reduce it. The sustainable
bonds working group oversees sustainable bonds issues.
• A board resolution to add ESG metrics covering green finance,
decarbonization and other ESG targets to senior executives’
long-term incentives passed at the 2022 AGM. This is
consistent with our targets (see section 6.4 ‘Directors’
remuneration policy’).
For more details on ESG in remuneration
schemes, see section 6.4 'Directors’
remuneration policy'.
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3.6.3 Risk management
GRI 2-25, 201-2
• In 2022, we made progress in embedding climate and
environmental risk in our core risk management. We designed
an additional quantitative metric related to the power
generation sector that complements our metric for thermal
coal, which will be included in our risk appetite statement in
2023.
• The Risk area developed a target operating model (TOM),
which aligns our credit approval processes with our strategy
and regulatory requirements regarding climate and
environmental risk.
• In 2022, the European Central Bank tightened its supervision
with a thematic review, stress testing and on-site inspections.
We expect the regulatory and supervisory agenda to continue
to get bigger.
• Grupo Santander has completed satisfactorily the European
Central Bank’s climate stress test for the banking industry.
The climate stress test was a valuable lesson to the sector,
having prompted banks to adopt more advanced management
models.
• We evolved our control environment questionnaire (Risk
Profile Assessment) related to climate risk bearing in mind the
latest regulatory and management developments. Results
helped us identify gaps and areas for improvement.
• We conducted materiality assessments every quarter to
identify the most climate material portfolios. They cover more
than 80% of our balance sheet. Advances in the level of
granularity, covering most segments of our portfolio.
• We also identified credit portfolios with major biodiversity risk
in our preliminary materiality assessment of environmental
risk (going beyond climate).
• Our first ESG Pillar III disclosures covered the new
sustainability requirements for greater transparency between
financial institutions.
The tools for assessing climate risks and their impact on our
portfolio are the following:
◦ KLIMA: Tool for climate and environmental risk detection
and assessment, featuring our risk taxonomy and heat maps
to review and manage transition and physical risk exposures
uniformly in the short, mid and long term. Additionally, it
includes scenario analysis to visualize portfolio evolution.
◦ Advanced models: We performed internal climate scenario
analysis and stress testing through internal models and a
platform acquired from an external vendor, which is based
on the UNEP FI methodology, incorporating external and
internal information to complete models. This platform has
been embedded into the credit risk management of our
portfolios prospectively through sensitivity analysis and
quantitative materiality assessment bearing in mind sectors
and geographies.
MATERIALITY ASSESSMENT - CLIMATE RISK ANALYSIS AND
HEAT MAPPING OF PORTFOLIOS
September 2022 - EUR billion
Power (conventional)
of which power generation
clients with > 10% of revenues
coming from coal
Power (Renewables - Project
Finance)
Oil & gas
Mining & metals
of which clients with thermal
coal mining
Transport
Real estate
Agriculture
Construction
Manufacturing
Water supply
Climate sectors
Other sectors
Total portfolio
TR PR
SCIB
27
Other
segments
2
4
11
25
15
3
30
8
3
18
50
3
190
55
245
0
0
1
8
0
105
398
8
14
29
1
566
224
790
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 and, since
2022, some SMEs.
0 exposure amounts to exposures below EUR 500 mn.
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 2021-
June2022, see our corporate website.
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3.6.4 Metrics and targets
GRI 2-24, 3-3, 201-2
Santander aims to be net zero in carbon emissions by 2050. Our
initial focus is on the most material sectors and on lending,
which is our most material financial activity.
We disclose scope 1, 2 and 3 emissions performance data (see
'Environmental footprint') and other climate relevant metrics
(e.g. energy consumption). We report on our renewable energy
and carbon neutrality targets. We also began to disclose
financed scope 3 emissions (category 15) in 2021, following the
standard of the Partnership for Carbon Accounting Financials
(PCAF, of which we are a member).
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’re a founding member of
the UNEP FI Net Zero Banking Alliance (NZBA) as a key initiative
to help us drive progress with our net zero ambition.
We fulfilled the first round of target-setting as part of our UNEP
FI NZBA commitments. We addressed most of the material and
high-emitting sectors we financed, provided data and
methodologies were available.
We base our work on NZBA guidelines and recommendations,
the PCAF standard, GFANZ (Glasgow Financial Alliance for Net
Zero) publications, SBTi (Science Based Targets initiative)
recommendations and other standards that enrich our internal
methodologies.
We rely 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 them 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 finances.
We’re setting alignment strategies and decarbonization targets
based on customer emissions data, which are accurate to
monitor real progress. We’re improving data with external
databases and models.
We’re also working to gauge financed emissions for our balance
sheet, but with lower-quality emissions data to meet certain
disclosure requirements.
> Roadmap for delivery on net zero
• Our materiality assessment of physical and transition risks
enabled us to focus on high GHG emission intensity sectors
and start developing specific decarbonization strategies for
sectors defined within NZBA.
• We aim to set decarbonization targets for mortgages, auto-
loans, auto-manufacturing, cement, commercial real estate,
agriculture and other NZBA sub-sectors by March 2024 or
before. Action plans will be published 12 months after target
disclosure.
• We’ll also update set targets as needed, as new
methodologies and more precise and timely information
become available in the market.
The decarbonization of portfolios (especially retail) will require
advanced scenarios, Nationally Determined Contributions
(NDCs) that will limit warming to 1.5ºC, and effective policy for
an orderly transition.
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Decarbonization targets
We have decarbonization targets for five climate material
sectors, according to the internal roadmap in our Climate
Finance Report from 2021. The targets were presented to our
key climate governance bodies and approved by our board of
directors.
Emissions accounting and science-based decarbonization target
methodologies are new areas that are advancing quickly to
meet climate ambitions. We will update and reinforce our
methodologies and processes to include these future
enhancements.
Santander’s activities covered by our targets: According to the
PCAF ’s global GHG accounting and reporting standard, we
assess the financed emissions of the sectors our targets cover
based on on-balance credit exposure.
Sector boundaries: We focus on where the significant share of
emissions come from along each sector’s value chain, which are
the upstream/generation business in power generation;
upstream companies and integrated companies producing their
own upstream oil and gas in energy; steel producers; and
commercial airlines.
Given financial institutions with strong climate commitments
can help industries decarbonize, we find emissions intensity to
be the best metric for every sector but energy (for which we use
absolute emissions). Our climate strategy to help customers
transition to a low-carbon economy prioritizes engagement
over divestment.
As published in our "June 2022 Climate finance report", the
estimated exposure to power generation, thermal coal, energy
(oil & gas), aviation and steel sectors is 3.5% of on-balance-
sheet credit and 74% of SCIB’s credit risk from climate-material
11
sectors.
Sector
Scenario
Emissions
Metric
2019 baseline
2030 targets
Power generation
IEA Net Zero 2050
Scope 1
tCO2e/MWh
0.21*
0.11 (-46%)
Energy (Oil & Gas)
IEA Net Zero 2050
Scope 1 + 2 + 3**
mtCO2e
23.84
16.98 (-29%)
Aviation
Steel
Thermal coal
IEA Net Zero 2050
Scope 1 + 2
grCO2e/RPK
92.47
61.71 (-33%)
IEA Net Zero 2050
Scope 1 + 2
tCO2e/tS
1.58
1.07 (-32%)
Phase-out targets to eliminate exposure by 2030 to:
• Power generation customers with a revenue dependency on coal of over 10%
• coal mining
* In 2021 Annual report and Climate Finance report, we assessed the 2019 financed emissions of our power generation portfolio, including guarantees and other types of
off-balance exposure to our customers that do not entail current funding. Because, according to the PCAF standard, such exposure should not be calculated if its
attribution factor is “outstanding”, we were over-attributed with our corporate customers’ emissions. Therefore, the 2019 baseline emissions intensity has been
updated from 0.23 to 0.21. The target and climate ambition remains for this sector.
** Use of sold products.
2019 financed emissions*:
Sector
Power generation
Energy (Oil & Gas)
Aviation
Steel
* In the case of corporate business loans, Banco Santander calculates the Total Value of the Company (used to obtain the emission attribution factor) by adding the total
Overall PCAF score**
2.67
3.4
3.3
3
Absolute emissions
(mtCO2e)
5.41
23.84
1.81
2.62
Physical emissions
intensity
0.21 tCO2e/MWh
73.80 tCO2e/TJ
92.47 grCO2e/RPK
1.58 tCO2e/tS
Financial emissions
intensity (mtCO2e/
EUR bn lent)
0.51
3.1
1.17
1.74
equity and debt of the company (PCAF exception scenario), in order to avoid the high volatility in market capitalization.
**Obtaining emissions data from our customers is a challenge. As they disclose more non-financial information worldwide, the quality of our reporting on financed
emissions will improve. The PCAF scores illustrate the data quality used to calculate the financed emissions (with 1 being the best).
Financed emissions information comes from a wide range of sources on emissions, physical intensity and production data. Trucost is the main source for fossil fuels
emission and production. We used Asset Resolution and annual report fillings as secondary sources to cover information gaps. As well as the Transition Pathway as a
third option to measure physical emission intensity for certain sectors, including O&G and Steel.
11
“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. As it was published in our June 2022 Climate Finance Report.
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Energy
The world needs to ramp up renewable energy capacity and act
now to decarbonize the economy. But for the global energy
sector to decarbonize, all energy-intensive sectors and activities
must be transformed. Our role is to support our customers’
transition and, as one of the world’s top lenders in renewable
energy, we’re increasing the volume of green finance to support
this transformation.
Energy security is key to an orderly transition. While we
increase renewable capacity, energy prices must be affordable
and reliable. As the IEA states, oil and gas will continue to play a
role in powering the world’s economy during the transition.
Across the Group’s footprint, economies are at different stages
on the path to net zero. We aim to ensure the transition is fair
for all communities.
During 2022 we have temporarily increased our overall
exposure to the energy sector (oil and gas) due to the liquidity
needs arising from the volatility of energy commodities prices;
exchange rates; and the energy crisis. Our long-term climate
ambition remains and a significant part of our lending exposure
has a short-term maturity.
To know more about our position regarding
the energy sector see our Climate Report
2021 - June 2022, in our corporate website.
Mortgages
We're working with our most material mortgage portfolios in
the Group, which are in the UK and Spain and respectively make
up over 60% and 17% of the Group's mortgage exposure.
To obtain the best possible measurement of financed emissions
from residential properties, we need specific data on each type
of collateral. In some countries, where it is required by
regulation, it is possible to have the energy performance
certifications (EPCs). When data is not available for specific
properties, there are models that allow for an EPC to be
assigned to the remaining assets in our portfolio based on
existing data. EPCs are not comparable across geographies as
measurement scales are defined locally, depending on local
policy, weather conditions and other variables.
On the UK EPC scale of A (“best performing”) to G “worst
performing”), the estimate 2022 energy efficiency labels (EPCs)
for our mortgage collateral in the UK as a percentage of the
total number of mortgages are:
For Santander España, the estimate of the 2022 portfolio EPC
distribution weighted by energy consumption, according to
Spain's EPCs local scale, is:
Our mortgage portfolios in the UK and Spain are broadly
consistent with each country’s general EPC profile.
Based on EPC data models for the UK and Spain, we’re assessing
financed emissions and decarbonization strategies for mortgage
portfolios to achieve net zero. We can already affirm that if
banks are to achieve the net zero ambition stronger national
regulation is needed to ensure countries meet their climate
targets, such as the greening of the grid and the availability of
EPCs.
Agriculture
In 2022, we contributed with other banks to the “Introductory
Guide for Net Zero Target Setting for Farm-Based Agricultural
Emissions”, as part of the Banking for Impact on Climate in
Agriculture initiative launched by WBCSD, UNEP FI and PCAF.
Agriculture in Brazil is vital to the national economy and central
to Santander's net zero plan. Our first challenge was collecting
tangible data on farms to establish a baseline. Other challenges
included finding realistic paths to decarbonization, getting
producers willing to decarbonize, adopting better, less costly
practices and finding additionality.
Source: Landmark
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Customer engagement in SCIB
Our customer engagement approach aims to facilitate the
achievement of our emissions targets while enabling us to
develop a deep understanding of our customers’ transition
strategies and support their transition to low carbon business
models.
For our power generation portfolio we have defined a customer
engagement approach, which will form the basis for
subsequent engagement plans for sectors where we set
decarbonization targets. For our power generation portfolio we
have established a two-step approach to categorize our
customers according to both their emissions pathway and
perceived quality of their transition plans.
The output tiering system has four categories (Leader, Strong,
Moderate and Weak) that will inform how we prioritize
engagement topics and enrich dialogue with our customers,
while contributing to meeting our own portfolio emissions
targets.
Tiering will allow for tailored, meaningful transition dialogue
and support to help our clients navigate the low carbon
transition, with the expectation that initially lower-tiered
customers will migrate to higher tiers and therefore alignment
with net zero over time.
Our first step assesses how our customers’ emissions trajectory
aligns with our current and future alignment targets for each
sector. The second step to assess transition plan quality focuses
on four pillars: Targets, Action Plan, Disclosure and Governance.
Our methodology draws on established transition plan
assessment frameworks
customer’s transition plan to be across each pillar will influence
how we ultimately tier them.
. How strong we perceive each
12
Tiering system based on two factors
Tier Categories
Description
GHG emissions
profile alignment
Transition plan
quality assessment
• Current baseline GHG emissions
profile
• Future targeted GHG emissions
trajectory
• Assessment of alignment with
Santander pathway
• Internal methodology to assess
perceived quality of transition
plans
• Developed using established
transition plan assessment
methodologies
Transition Pillar
Overview
1. Targets
Quality and ambition of quantitative
targets to reduce GHG emissions
Tier 1
Leader
Tier 2
Strong
Tier 3
Moderate
2. Action plan
Depth of decarbonization strategy to
achieve GHG emissions reduction
targets
Tier 4
Weak
3. Disclosure
Transparency on GHG emissions
reporting across relevant scopes
4. Governance
Management oversight and
governance of transition strategy
• Emissions profile fully aligned
with Santander pathway
• Strong transition plan
• Emissions profile fully aligned
with Santander pathway but
improvement needed in
transition plan; or
• Strong transition plan but
emissions profile partially
aligned with Santander pathway
• Emissions profile partially
aligned with Santander pathway,
but improvement needed in
transition plan; or
• Emissions profile not aligned
with Santander pathway, but
strong transition plan
• Emissions profile not aligned
with Santander pathway
• Weak transition plan
12
Such as TPI (Transition Pathway Initiative), CDP, ACT (Assessing Low Carbon Transition), Climate Action 100+, as well as other climate risk disclosure frameworks such
as the TCFD
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3.6.5 Supporting our customers in the transition
GRI 3-3, 306-1, 306-2, FS8, 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 encourage more people and businesses to
go green. Enhancing our sustainable finance and advisory
proposition in all our divisions and regions is critical to meeting
our climate and green transition.
C
Greenfield
(Total installed
GW financed
or advised)D
C
Brownfield
(Total installed
GW financed
D
or advised)
Corporate and Investment Banking (SCIB)
In 2022, SCIB continued building its ESG platform and
embedding ESG in the organization. We integrated ESG experts
within business, risk, portfolio management and compliance
areas.
We implemented the sustainable finance classification system
(SFCS), as well as governance to check that our sustainable
finance activity was consistent with our core integrity principles.
We trained 300 senior employees on ESG and client
engagement.
A global leader in renewable energy finance
Santander has been a leader in renewable energy finance for
more than past 10 years. We’re among the top 2 banks in
number of deals and deal value globally.
The greenfield renewable energy projects we financed or
advised on in 2022 have a total installed capacity of 15.6 GW
A
and prevent the emission of 152 million tons of CO2.
We also
helped expand, enhance and sustain renewable energy
brownfield projects with a total installed capacity of 14.8 GW.
GLOBAL RENEWABLE ENERGY PROJECT FINANCE VOLUME
BY MLA - FY 2022A
Rank Mandated Arranger
1
2
3
4
5
6
7
8
9
10
Bank 1
Banco Santander
Bank 2
Bank 3
Bank 4
B
Peer 1
Bank 5
Bank 6
Bank 7
Bank 8
Vol. (EURm) Nº.
5,868
5,161
4,797
3,171
3,078
2,947
2,719
2,712
2,634
2,457
%share
4.87%
4.38%
3.97%
2.63%
2.57%
2.49%
2.26%
2.24%
2.18%
2.06%
81
78
58
56
37
41
28
45
33
34
A. In the lead arranger category of Infralogic 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.
Wind
energy
21% 45%
2022
Solar
energy
77% 33%
2022
Others
E 2% 22%
2022
Greenfield Brownfield
The renewable energy projects we financed or
advised on in 2022 could power 10.1 million
B
households per year.
A. Emissions prevented during the projects' estimated useful lifespans, based on
emissions factors figures from the International Energy Agency (updated in 2022
with data from 2020).The estimated allocation to the amount financed by
Santander is 51.6 million tons of CO2.
B. Based on final electricity consumption data published by the International Energy
Agency (updated in 2022 with data from 2020).
C. Greenfield = new projects to be built. Brownfield = projects already existing and
producing electricity at the financing date. Installed capacity based on Infralogic
and complemented by internal data.
D. Of the megawatts attributable to Banco Santander in 2022, 70% were from
Greenfield finance and 30% were from Brownfield finance.
E. Includes, among others, hydropower, battery energy storage, mix solar-biomass
and energy from waste
Partnerships and inorganic initiatives that add unique
ESG capabilities
→ Partnership with InnoEnergy to accelerate the energy
transition.
→ Collaboration with Enel to support its clean energy transition.
→ Acquisition of 80% of WayCarbon, a leading ESG consultancy
firm from Brazil.
→ Santander signed a partnership with Ecovadis as an
alternative to structure Sustainability-linked Supply Chain
Finance transactions for our SCIB Clients.
→ Santander is an active member of the Core Working Group
that has produced the new “Standards for Sustainable Trade
and Trade Finance” published by the ICC (International
Chamber of Commerce).
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SCIB highlights
>Project Finance (PF)
Santander acted as mandated lead arranger, financial model
coordinator and insurance bank for Eoliennes Flottantes du Golf
de Lyon (EFGL), a 30 MW pilot offshore floating wind project,
supporting project sponsors OceanWinds and Caisse des Dépôts
et Consignations.
Santander was coordinating lead arranger in the USD 2.3-billion
construction financing of energy storage projects for Intersect
Power, a clean energy company that offers innovative and
scalable low-carbon solutions.
Santander recently acted as Exclusive Financial Advisor, as well
as Bookrunner, Mandated Lead Arranger and Hedge Provider in
the financing of Project Gauss, the 2.3 bn EUR refinancing of the
c. 1,600 MW wind portfolio in Iberia of Finerge, a renewables
platform owned by funds managed by Igneo Infrastructure. The
first-of-a-kind innovative financial structure includes a variable
amortization feature which modulates debt repayment as a
function of the electricity produced – which is primarily linked to
wind variation.
>Debt Capital Markets (DCM)
Santander has continued to be active in helping clients develop
their sustainable financing capacity in 2022, executing 122 ESG-
labelled bond issuances totalling over EUR 72bn equivalent, and
assisting issuers to structure their ESG funding frameworks.
Amongst these are a number of landmark transactions, in
particular our bookrunner and ESG Structuring roles for the USD
1.5bn 12-year sustainability-linked bond from the Oriental
Republic of Uruguay, who issued the first of this type with a
coupon step-up and step-down structure seen in international
USD, EUR or GBP markets; the USD 1.75bn dual-tranche
sustainability bonds from Comisión Federal de Electricidad
(CFE), the largest ESG transaction to date by a non-sovereign
Latin American issuer, followed by their local currency four-
tranche green and social bonds deal; and the inaugural ESG
transaction out of the new ‘Santander Group Green, Social &
Sustainability Funding Global Framework’, that aligns to best
practices in the sustainable capital markets and facilitates
issuance of a wider scope of instruments for all Santander
entities globally: the USD 500m 4NC3 sustainability bond from
Santander Holdings USA (SHUSA).
Retail and commercial banking
Building on the Green and Social Book offering of ESG-oriented
products we launched in 2019, we continue to enhance
dedicated purpose lending and sustainability-linked loans in our
sustainable finance proposition.
Playing our part in supporting the global economy to be net
zero by 2050, as a bank we must take advantage of our global
presence and provide the right advice, services and products to
help our customers go green, from individuals to bigger
enterprises, covering the entire value chain.
The global Green Finance team we formed in April 2022 aims at
embedding green finance and implementing complete value
proposition for our Retail and Commercial banking customers,
leveraging on the Group´s best practices, transferring intra-
Group synergies and scale. The major focus of the unit is the
implementation of complete value Green Finance proposition
>Global Transaction Banking (GTB)
Santander continued to embed sustainability in its Global
Transaction Banking products. In Export Finance, we issued
Iberdrola’s largest green loan worth EUR 1 billion (backed by a
European Export Credit Agency). Iberdrola will use the proceeds
to finance turbines for offshore and onshore wind farm projects
in Germany, Greece, Poland, Spain and the UK.
Our innovative solution for supply chain finance for Sonae
Portugal, based on Ecovadis’s supplier assessment, won two
awards in 2022 from the Supply Chain Finance (SCF)
Community, including Best ESG Supply Chain Finance
transaction of the Year.
We also structured a novel, sustainability-linked pre-delivery
payment facility for Mexican airline Volaris’s fleet renewal
programme to develop its sustainability strategy with more
fuel-efficient aircrafts.
>Mergers & Acquisitions (M&A)
In 2022 Santander was adviser to 15 M&A deals in the
renewable energy sector. This cemented our leadership on the
Iberian Peninsula and in Poland in offshore wind as an asset
class.
We were sell side advisor to Hornsea One, the largest offshore
M&A to date; and to Wikinger, the largest offshore M&A in the
Baltic Sea.
We advised Global Infrastructure Partners on the acquisition of
New Suez, a carved-out water and waste management
company in France.
The ESG Sustainable Tech team advised BioTech Foods in the
sale of a majority stake to Brazilian group JBS. This key deal was
the first one in the cultured meat sector whereby an industrial
group acquired a majority stake, positioning Santander as a key
advisor in the alternative protein sector. BioTech Foods is
southern Europe’s only dedicated cultured meat producer. Its
technology to generate meat protein from animal cells
produces an ecological and sustainable product without
intensive livestock farming. JBS’s investment will enable
BioTech Foods to build an industrial plant that will bring its
products to the final consumer.
for our clients and Retail and Commercial banking customers,
leveraging on the Group´s best practices, transferring intra-
Group synergies and scale. It keeps our green finance
proposition under the same umbrella, making sure it stays
consistent and thriving upon the Group’s scale.
As well, we have set up a direct line of reporting of the Global
Head of Green Finance to the Group CEO to promote green
finance objectives.
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Global Green Finance unit in Retail and Commercial Banking
and its priorities:
1. Green finance value proposition
Growing green finance, with a group-wide strategy of end-to-
end solutions and well-trained retail and commercial banking
teams to meet customers’ and client´s needs.
→ Several strategic projects with focus on business, data and
infrastructure have been launched and business enablers
required to operationalize the commercial strategy have been
articulated.
2. Infrastructure
Building common infrastructure that will support green finance
across the Group, with the sustainable finance classification
system (SFCS) enhanced value proposition, reporting
capabilities and stronger controls against greenwashing risk.
→The Group is developing a common layer to manage Green
Finance necessities in a unique IT infrastructure ensuring
efficiency, homogeneous criterion and data quality. Both
business and regulatory reporting needs will be
contemplated in the IT solution.
3. Data and control
Developing an exhaustive control policy as we strive to be a
high-integrity provider. The Green Finance unit assists
subsidiary-level panels with highly green finance transactions
of diverse structure. We continuously work on data strategy
development to measure and track performance.
→ As part of a transversal initiative, the Green finance team
along with other corporate areas, has launched Green
Dashboard and ESG Data Hub, allowing us to track the
evolution of the business and the integrity of the data
measured.
We will help our customers' — big and small —
in their transition to a low-carbon economy,
with solutions, capital and advice.
Green solutions for our individual, SME and corporate customers
What do we finance?
What do our customers need?
Key geographies
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.
Sustainable agro
Sustainable and protected
agriculture. Land and forest
conservation. Sustainable farming.
Circular economy
Activities to adapt to, or mitigate,
climate change, preserve
biodiversity, boost the circular
economy and waste & water
management.
Financing of greenhouses, reduced
irrigation systems, efficient
machinery, reforestation and
reduced fertilizer use.
Financing of water, waste and soil
treatment, greater energy efficiency,
lower emissions and conservation.
Other global initiatives
>Carbon footprint calculator
We are pledging to support our customers´ transition to a low-
carbon economy a step further. A new feature launched in May
on our website and app enables retail customers in Spain to
measure the carbon footprint of their direct debits and
purchases with Santander cards and offers practical guidance on
how to reduce it. This in-house developed service is also
available in Santander Chile since 2019 and will go live as well
in Poland, Portugal and the UK.
>Strategic partnerships to drive transition
Santander continues to actively collaborate with Multilateral
Development Banks to finance the investment and liquidity
needs of the Group's clients in Latin America and Europe.
12 out of 19 new financing agreements signed in 2022 will
contribute to provide competitive financing for an amount up to
€1.535 million to projects that target low-carbon economy and
environmental sustainability, including among others,
renewable energy generation, water and energy efficiency
investments, green mortgages, or clean mobility.
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3.6.6 Our approach to nature and biodiversity
GRI 3-3, 304-2
Biodiversity underpins the provision of food and raw materials,
water, air quality and climate regulation, pollination, and
genetic resources for food security, medicines and virus
prevention.
Biodiversity is vulnerable to significant damage from climate
change but key to mitigating it.
The financial sector influences the sustainable use, protection
and restoration of nature. Santander must understand and
assess how our financing impacts on nature and how our
business depends on it.
We follow various initiatives and frameworks closely and
consider them for future implementation and mapping tools
Santander and the Amazon in Brazil
Santander is committed to protecting the Amazon rainforest
and promoting sustainable development, which is critical to
tackling climate change and conserving biodiversity. While we
need economic growth, it must be green.
For decades, deforestation has been destroying the Amazon in
Brazil. Property speculation, lack of clear land titles, cattle
ranching, agriculture, logging, mining, and large infrastructure
projects have all played a role.
Given the growing concerns about climate change and
biodiversity conservation, in addition to our global policy on
environmental, social and climate change risk management and
our commitment to the Equator Principles, are examples of how
we take extra care when lending to customers in Brazil with
operations in the Amazon:
• All loan requests by farmers and ranchers (not just those in
the Amazon) are checked for embargoes issued by the
government because of illegal deforestation, not only on the
property financed but also on nearby properties. Since Q1
2022, we’ve been running daily checks for recent
deforestation on farms and ranches we have lent to
(throughout the entire loan term), even before the
government has imposed fines. We also screen properties to
make sure they don’t encroach on officially recognized
indigenous land.
• We review clients’ practices in Brazil regularly. We conduct
annual ESG reviews of more than 2,000 customers, including
beef processors, soy traders and logging companies.
• In addition to the Plano Amazônia coalition, we are
collaborating with Brazil’s banking federation, Febraban, in
setting best practices for the financing of the meat sector so
that it does not contribute to deforestation.
For more details on "Santander and the Brazilian
Amazon", visit www.santander.com; and the Climate
Finance Report 2021-June 2022
and approaches to continue acting responsibly. We are also part
of the Task force on Nature-related Financial Disclosures (TNFD)
Forum and other working groups.
Aligned with the target 15 from recent Global Biodiversity
Framework adopted in COP15 we're conducting a biodiversity
and nature impact and dependencies assessment to identify
interactions between business and nature forms, enabling us to
understand how the drivers of biodiversity loss relate to our
lending portfolio. This will help us pinpoint the regions and
sectors we should focus on, and eventually perform more
detailed analysis. It will also help us respond to the growing
awareness that nature must form an integral part of corporate
decision making.
IFACC Alliance
In December 2022, Santander became the first bank to join the
Innovative Finance for the Amazon, Cerrado and Chaco (IFACC)
initiative. IFACC is supported by The Nature Conservancy, the
Tropical Forest Alliance, the World Economic Forum, and the
United Nations Environment Programme. Launched in Glasgow
in November 2021, it seeks to accelerate financing for
sustainable production and bring together complementary
capabilities to design and scale up such mechanisms as farm
loans, farmland investment funds, corporate debt instruments
and capital market offerings. IFACC also shares lessons learned
among members, who have committed USD 3 billion in
disbursements so far.
Amazon Journey Platform
The forest bioeconomy has great potential for changing the tide
of deforestation, increasing the value of standing forests and
creating jobs, sources of income and development.
Nevertheless, very few businesses can realize that potential at
speed and at scale. Alongside the Amazon Plan coalition, the
Certi Foundation and the Vale Fund, Santander launched the
Amazon Journey Platform in November 2022 to strengthen the
innovation ecosystem associated with the forest bioeconomy. It
poised to mobilize 20,000 skilled professionals from the region,
with training on entrepreneurship, innovation and the
bioeconomy. We expect at least 3,000 people will complete the
training. We will select the 200 most promising professionals
for financial, mentoring, and technical support to create start-
ups. From that ecosystem, we will identify 100 to help
strengthen their business models and products and reach
market actors and investors. We will also create a micro-
corporate venture structure to assist companies interested in
investing in and scaling up the start-ups. Finally, we will
enhance ten entities, including venture builders, accelerators,
and incubators, so they will be able support a growing number
of bioeconomy start-ups from the region. The Certi Foundation,
the implementing partner, was named “Top Innovator” in the
Amazon Bioeconomy Challenge 2022 at the World Economic
Forum.
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3.6.7 Reducing our environmental footprint
GRI 3-3, 301-1, 302-1, 302-2, 302-3, 302-4, 303-5, 305-1, 305-2, 305-3, 305-5,
306-1, 306-2, 306-3
Santander’s group-wide strategy to lessen the environmental
impact of our operations involves: reducing and offsetting CO2e
emissions; reducing and handling waste responsibly; and raising
employees’ and other stakeholders’ awareness of
environmental issues.
We’ve been measuring our environmental footprint (energy
consumption, paper and water consumption, waste generation
and emissions) since 2001. Since 2011, our energy efficiency
and sustainability initiatives have helped to reduce significantly
our impact on the environment, cutting down:
• electricity by 33%;
• CO2e emissions by 71%; and
• paper by 80%.
Our 2022-2025 Energy efficiency and sustainability plan
includes more than 100 measures that will enable us to reduce
our electricity consumption by 2.6% and our absolute CO2e
emissions by 35.4%. Some of them are:
• installing 1,250 free EV charging stations in our buildings in
various countries and shifting to hybrid and electric vehicles
and making them more available to employees to reduce our
emissions from business travel and commuting;
• and raising awareness among employees.
Our measures are consistent with Santander's public target to
remain carbon neutral: sourcing all our electricity from
13
renewable energy sources
reduce emissions, which remains being our main goal, and
remaining carbon neutral offsetting whatever emissions we’re
unable to reduce.
in addition to other measures to
We follow a strict selection process that includes due diligence
on compliance and consistency with our environmental policies.
The offset projects we chose are certified under some of the
industry's most well-known standards, like Gold Standard for
the Global Goals (GS), Verified Carbon Standard (VCS) or Kyoto
Protocol's Clean Development Mechanism (CDM). Country
standards, such as MITECO in Spain, are also considered.
• installing 8 MW solar panels in our buildings in Spain to
generate our own renewable energy for self-consumption;
We’re monitoring the voluntary carbon credit market closely to
adapt our offset strategy to best practices.
• purchasing renewable electricity in every country where it's
possible to certify its origin;
• using new technologies and implementing more practices to
reduce paper consumption and waste;
• obtaining ISO14001, ISO 50001, LEED, BREEAM and WEALTH
certifications for our buildings;
2022 Environmental footprint
14
Using energy from renewable sources
88% of the energy our buildings consume comes from
renewable sources; in Germany, Mexico, Portugal, Spain and the
UK, that figure is 100%. We continue to work on reaching 100%
group-wide by 2025
13
.
Buying renewable energy reduced our emissions from
electricity consumption by 83% and total emissions by 58%
compared to pre-pandemic levels.
1,887,857 m
3
water consumed from the supply system
Diff. 2021-2022 (%)
Comparative with pre-Covid: 2019-2022 (%)
15
4.4%
134,419 t CO2e
total emissions (market based)
-58.1%
843
million kWh
total electricity
5,849 t
total paper
consumption
4,124 t
paper and card waste
88%
renewable
energy
83%
recycled or
certified
paper
-5.2%
Scope 1
21,967 t CO2e
direct emissions
-20.4%
Scope 2 30,917 t CO2e
indirect emissions from electricity (market based)
-34.8%
3,431,272 GJ
total internal energy consumption
-6.5%
Scope 3
81,535 t CO2e
indirect emissions from employee travel
13
14
15
In countries where we can verify electricity from renewable sources at Banco Santander properties
A two-year environmental footprint table, showing employee consumption and emissions is available under Our progress in figures section in this chapter. Scope 3 -
Category 15 Investments (Financed emissions) is also disclosed in this section.
Group's total emissions increased in 2022 by 18%, due to the employee travel emissions. In the last two years the Covid-19 pandemic caused these emissions to plummet.
Comparing these emissions with 2019 annual report data, prior to this exceptional situation, employee travel emissions have been reduced by 33%, and total emissions
have been reduced by 58%. A 2021-2022 comparative is available under the Our progress in figures section in this chapter.
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Implementation and certification of environmental
management systems
The Group aims to have ISO 1400116
primary buildings it occupies. Over 30% of our employees
already work in ISO 14001 or ISO 50001-certified buildings.
Under our 2022-2025 Energy efficiency and sustainability plan,
we aim to increase this percentage to 36%.
certification for all the
Some buildings in Brazil, Germany, Poland and Spain are LEED
Gold or Platinum-certified, while the Santander Group City and
Santander España’s central services buildings have ‘Zero waste’
certification.
Single-use plastics
Since 2021, our offices and buildings in our core markets have
been free of single-use plastics in fulfilment of our public
target.
Climate awareness
Santander runs local and global employee awareness
campaigns on the importance of reducing consumption and
waste. Each subsidiary posts news and feature articles on the
environment and the Group’s ESG initiatives on its internal
portal. In 2022, for the thirteenth consecutive year, we have
observed Earth Hour, switching off the lights at the Group’s
most emblematic buildings.
Other Santander initiatives to mitigate climate change
Apart from those offsets we use to compensate our own carbon footprint, we’re also running several other offsetting initiatives:
→ At the COP 27 in Egypt, Santander announced the creation of Biomas, a new forest company with shareholders Vale, Marfrig,
Suzano, Itaú and Rabobank. With the planting of 2 billion native trees, Biomas aims to protect and restore 4 million hectares in
Brazil over the next 20 years and to reduce around 900 million tonnes of CO2e from the atmosphere. It will generate high-quality
carbon credits and employment in the regions most in need. The first stage of the project will be to prospect areas, scale up native
tree nurseries, engage local communities, discuss the use of public concessions as project development sites, and implement pilot
projects. Each shareholder is initially providing BRL 20 million in equity to set up operations.
→ Santander España through Motor Verde initiative will finance three new Santander forests stretching over 300 hectares, offsetting
82,000 tons of CO2e. This work will receive the highest standard certification of the Spanish Climate Change Office (OECC), the
certifying body of Spain’s Ministry for the Ecological Transition and Demographic Challenge.
→ Santander UK is a founder member of the National Parks UK ‘Net Zero With Nature’ initiative to attract private financing for
restoring peatland to prevent carbon emissions. The bank will be financing a pilot restoration project in the Cairngorms National
Park in Scotland.
16
We have ISO 14001 certification on our buildings in Argentina, Brazil, Chile, Mexico, Spain and the UK.
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3.7 Socially responsible investment
SASB FN-CB-240a.1, FN-CB-240a.3, FN-CB-240a.4,
3.7.1 Sustainability in investments
GRI FS8, FS11
We redoubled efforts to reach our goal of EUR 100 billion of
AUM in socially responsible investments (SRI) by 2025.
WMI SRI AUM (€ bn)
18
18
17
Our SRI AUM
at YE2022
grew +96% YoY to EUR 53.2 billion
on the back of our successful product strategy, which drew on
the Sustainable Finance Disclosure Regulation (SFDR) and Green
MiFID regulation in the European Union. We also launched
innovative investment solutions in different asset classes;
continued work on Net Zero Asset Managers (NZAMi) initiative
and Climate Action 100+; and more than doubled our dedicated
ESG teams.
3.7.2 Santander Asset Management
GRI FS8, FS11
We widened our SRI product offering and services, enhanced
our ESG strategy and methodologies, designed net zero plans,
and strengthened our leadership in the ESG investment
community. We transformed and launched products and
bolstered our voting policies and reporting on stewardship.
Also, we were leading sponsors of the Principles for Responsible
Investment event in Barcelona in November, where over 2,500
asset owners, asset managers and sustainable data providers
from all over the world gathered to hear some 150 speakers.
Innovating and transforming SRI products
We have EUR 37,5 billion in SRI AUM (+232% YoY) in 76
products and 85 mandates in seven countries. During the year,
we raised our SFDR-compliant product offering (Article 8 and 9
funds) mostly through fund transformation and embedded ESG
in our pension plans in Spain.
We launched the Prosperity Fund with the (RED) foundation, a
global multisector equity fund with a social objective, investing
in companies that create financial value while contribute to
society’s well-being. It will also donate money for healthcare
projects for vulnerable communities in Latin America and adds
to our solidarity funds, which have given over EUR 24 million
since inception to more than 25 NGOs working in the social
economy, employment training, health and financial education.
In 2022, these funds made special donations to support
Ukrainian refugees as part of Grupo Santander’s cooperation
with the Red Cross and UNHCR.
We also launched a venture capital climate tech fund with EIT
Innoenergy, which invests in start ups accelerating the energy
transition.
96%
2022 vs 2021
SAM's SRI products
Core SRI products in our 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
San Indice Euro ESG
4 Pension Funds
San Iberia renewable energy
85 Mandates
San Ethical Ações
Go Global Equity ESG
San Sustentàvel
SAM RV Global ESG
SAM ESG
San Sostenible RF 1-3
Go Global Equity ESG
Acciones Global
Desarrollado
Go Global Equity ESG
n Fixed income n Balanced
n Equity n Portfolios
17
18
Funds registered under article 8 and 9 (SFDR) in the EU, including third-party funds and SAM´s Latin American funds that meet equivalent criteria.
AuM exclude SAM funds distributed by Private Banking to avoid double counting.
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Team, methodology and policies
We´ve more than doubled the size of our global, fully dedicated
ESG team. We’re enhancing our ESG methodology (shared with
our Private Banking and Insurance businesses) and tools to
integrate ESG factors in our processes and optimize the impact
of our investment products, covering +25,000 companies and
190 governments.
We strengthened our engagement and voting strategies. We
promoted global bilateral actions to increase transparency
through Climate Action 100+ as a lead investor and published
our first stewardship report. We designed a plan to engage with
companies that represent 70% of our portfolio emissions to
deliver on our NZAMi commitment
19
.
3.7.3 Private Banking
GRI FS8, FS11
Our SAM and third-party funds SRI AUM amounted to EUR 24.9
billion by the end of 2022 (+42% YoY). We steered our global
list of funds under advisory towards a mix of mostly article 8
and 9 funds (c.80% of the total). We also increased Art 8 and 9
alternative investment options on our platform.
We held sustainability conferences with clients at our Wealth
Talks. In 2023, we will introduce client reports with key metrics
of environmental and social outcomes and outputs from their
portfolios in the first countries. By 2025, we aim to offer ESG
reporting in portfolio management and advisory services in
eight geographies.
In 2022 we were named Best Private Bank in ESG & Sustainable
Investing by Euromoney in Latam and also at local level in
Spain, Portugal, Poland, Mexico and Chile. Also Global finance
named us Best Private Bank for Sustainable Investing in Latin
America.
3.7.4 Insurance
At the end of 2022, we offered protection for sustainable assets,
activities and vulnerable individuals in 6 countries, based on the
Group´s sustainable finance classification system (SFCS)
20
.
In 2023, we´re working to extend that offer to all our countries.
We are also collaborating with partners to develop products
that adapt to sustainability trends, meet clients’ needs and
cover risks associated with:
→ assets and activities that the Group classifies as sustainable;
→ new and existing social challenges;
→ clients’ well-being; and
→ insurance-based investment products that comply with SFDR.
For more details on our ESG approach, see
www.santanderassetmanagement.com/sustainability
For more details see our stewardship activities report:
www.santanderassetmanagement.com/content/view/8573/
file/2021_Stewardship_Report_010926_vFin.pdf
For more details, see
www.santanderprivatebanking.com
C
Insurance products aligned with SFCS
Core insurance products in our geographies
Personal accident
insurance for Seniors
ECO Auto Insurance
Dependency
Insurance
Senior Home
Insurance
Life Insurance for
low income
Personal accident
insurance for low
income
Life Insurance for
low income
Health Insurance for
self employed or low
income
Life Insurance
for low income
women
Life Insurance
for micro-
entrepreneurs
Micro mobility
Insurance
Life Insurance for
low income
19
20
We are committed to halve emissions from 50% of our in scope AUM that have a net-zero methodology by 2030. This target could be scaled up based on increased data
availability. More detailed information see www.santanderassetmanagement.com/sustainability
C. For more details on our SFCS see section 5.5 Sustainable Finance Classification System (SFCS) of this chapter
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3.8 Financial inclusion
and empowerment
GRI 3-3, 203-1, 203-2, 413-1, FS7, FS13, FS14, FS16
Santander Finance for All is our initiative to support financial inclusion and
empowerment. We financially empower people in three ways:
ó
Access
ó
Finance
ó
Financial Education
We help people access and use
basic financial services through
simple payment platforms and
cash-in/cash-out services in
remote and small communities.
1.0 mn
people financially empowered
in 2022
We provide tailored finance to
individuals and SMEs with
difficulty accessing credit or that
are in financial distress.
We help people gain financial
knowledge, making economic
concepts more understandable
and enabling them to make
better financial decisions.
1.8 mn
people financially empowered
in 2022
2.7 mn
people financially empowered
in 2022
Our goal
A
Financially empowered people
2019
Target
achieved
three years
ahead of
schedule.
10 mn 11.8 mn
B
2025
Since 2019, we have financially empowered: 3.1 mn people through access initiatives; 3.6 mn people
through finance initiatives; and 5.1 mn people through financial education initiatives.
A. Calculated with customer data about our products and services; with certified data from third parties that we work with on
access and financial education initiatives; and with conservative estimates based on recognized conversion factors, according
to the Group Responsible Banking area's internal methodology. This methodology considers international best practice, has
been ratified by an independent third party, and includes the Group's common principles, definitions and standards to count
the number of people that our initiatives, products and services have empowered financially.
B. Cumulative since 2019.
We aim to address the financial inclusion challenges of the
markets where we have a presence. 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.
In 2022 our efforts were recognized by:
→ Euromoney, who named Santander "Best Bank for Financial
Inclusion" for second year in a row.
→ The Banker, who awarded Santander "Bank of the Year in
financial inclusion" in 2022.
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3.8.1 Access
GRI FS7,FS13, FS14
Promoting access to cash & transactions
We aim to ensure underserved communities can get
cash anywhere, through our remote branches and
agreements with private and state-run entities that
widen our footprint.
Branches in underbanked
and remote regionsA
Partnerships to reach
underserved communities
B
Promoting digital access
We help people access the banking system so they can
make payments; use basic, tailored financial services;
take greater control of their finances; and make faster
and more secure transactions.
Digital wallets and points
C
of sales
Basic bank accounts
D
Financial support to special groups
We offer financial support to special groups so
customers will not only have access to basic products,
but will also know how to use them.
Support to our senior
E
customers
We also have global initiatives such as GetNet to support merchants. It provides payment services improving the simplicity, speed,
and safety.
3.8.2 Finance
GRI 203-1, 203-2, 413-1, FS7, FS13. SASB FN-CB-240a.1, FN-CB-240a.3, FN-CB-240a.4,
Microfinance
We aim to foster social mobility by helping low-income and
underbanked entrepreneurs set up and grow their
businesses.
Microfinance programmes
Supporting customers in financial distress
We have debt relief programmes that include payment
deferrals and LOC extensions.
Supporting customers
in financial distressF
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
G
programmes
Credit support for low
income/ people with
difficulties accessing creditH
A.
In Spain, branches in sparsely populated regions to provide access to finance and fight social exclusion in communities with under 10k inhabitants. In Portugal, branches in
low income, small or isolated regions such as Azores and Madeira. In Argentina we have financial inclusion branches and remote agents
B. Agreements with Correos Cash in Spain and partnerships with retailers such as Oxxo/ 7Eleven in Mexico
C. Digital wallets such as Superdigital. Only Superdigital customers with a reported income below the country's minimum wage are considered financially empowered. In
D.
E.
Poland we include the Cashless Poland program to promote the usage of points of sales in locations where usage of digital means is low
In some countries, we have in place basic bank accounts that go beyond regulation aiming to serve the base of the pyramid. EG: Cuenta LIfe in Chile or in Spain the account
with no fees for vulnerable customers
In several countries we have in place value propositions targeting the seniors. Eg: tailored products for retirees in Mexico, services such as "Here & Now" in Portugal to
support elderly with low digital capabilities.
F. We have programs in place across many countries to give support to people with debt stress. In Portugal, we have the program Iris, to help customers manage
impairments. In the UK, we help vulnerable customers get out of arrears with self-service tools and direct financially and lend them a hand.
G. Banco Santander participates in "Fondo Social de Viviendas", in Spain to rent to low-income individuals. In addition, Banco Santander has homes to rent at affordable rate. In
the US, as part of its Inclusive Communities plan, Santander supports people through low interest mortgages and paid mortgage insurance for low-income homebuyers
H. We have initiatives to help collectives with difficulties in accessing credit, including: in Spain, loans to SMEs at their risk limit, in the US, we grant loans to small businesses
operating in low- to moderate income communities, or in Argentina we give loans to entrepreneurs with low credit history.
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Our micro-finance programmes in Latin America
Our microfinance programmes provide services to help
unbanked and underbanked micro-entrepreneurs set up
and grow their businesses.
The programmes include tailor-made micro-loans to
finance working capital needs, as well as saving
products, accounts, cards and micro-insurance. A large
part of our lending goes to women. The programmes'
Net Promoter Score of around 80 shows how highly
regarded they are.
1.6 million
micro-entrepreneurs supported in 2022
EUR 950 million
total credit disbursed to micro-entrepreneurs in 2022
(EUR 517 million in outstanding credit at the end of 2022)
70.7%
of micro-entrepreneurs supported in 2022 are women
3.8.3 Promoting financial education
GRI FS7 y FS16
Financial education is fundamental to the financial inclusion and
empowerment of society's most vulnerable. We aim to help
people better understand finance, banking products and risks
and make the right decisions for their financial health, while
promoting market stability.
In 2022, we ran financial literacy programmes and initiatives
across our markets. We apply our financial education guideline
with:
• the Group’s common action principles on financial education,
which are consistent with OCDE principles.
• Criteria for identifying and classifying initiatives based on:
◦ content, i.e., basic concepts, better use of banking products
and services; better personal finance management; use of
digital banking; responsible consumption and fraud
prevention; entrepreneurship/advice for SMEs; sustainable
finance; and behavioural economics; and
◦ target audience, i.e., the general public; children (aged 13
years and under); adolescents and young adults (aged 14 to
20 years); university students; elderly people (aged 65 years
and up); unbanked people; SMEs; and self-employed
workers.
• The methodology for counting digital non-digital users whom
we financially empower through financial education
initiatives.
We use applications and digital channels to ensure greater
access and impact. Our website provides a space with:
• articles on five topics, basic concepts, financial management,
digital banking, behavioural economics and sustainable
finance;
• news and highlights about Santander’s financial education
initiatives; and
• links to all the Group’s initiatives by unit.
For more details on financial education, visit https://
www.santander.com/en/our-approach/inclusive-and-
sustainable-growth/financial-education
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3.9 Support for higher education
and other local initiatives
2022 progress
GRI 3-3, 203-1, 203-2, 413-1
ó
More than 163 million euros
in total community investment in 2022
21
ó
Support for higher education, employability
and entrepreneurship
ó
Other community support
programmes
100 million
euros invested
63 million
euros invested
21
Ukrainian refugees (90 minors) from March to June. Among
them, 30 children with cancer or other illnesses were able to
resume treatment at hospitals in Madrid.
→ Integration. We promoted social integration through Spanish
lessons, a new employability hub for refugees (6,400 job
vacancies) and other initiatives.
→ Banking services. We removed fees, set up telephone
helplines and launched a current account for refugees.
We helped raise EUR 20 million in donations for NGOs22 23
• EUR 17.6 million from customers
• EUR 2.9 million from Santander
• Over EUR 550,000 from employees
Euromoney has assessed our efforts and has named Santander
Central & Eastern Europe’s Best Bank for Corporate
Responsibility in 2022
Santander remains firmly committed to building an inclusive,
equitable and sustainable society. Santander Universities,
Universia and Fundación Universia represent Santander’s unique
global initiative to support education, entrepreneurship and
employability. For over 25 years, Santander has invested over
2.2 billion euros in partnerships with nearly 1,000 universities
in 11 countries. Through Santander Universities alone, the bank
has awarded more than 1 million scholarships and grants to
students, professionals, entrepreneurs and SMEs.
We also support several local initiatives and programmes that
improve people's well-being within our communities. We focus
on childhood education, social welfare, and the arts and science.
Our response to the war in Ukraine
Since the war in Ukraine began, Santander has been promoting
initiatives to support Ukrainian refugees.
→ On the ground. Santander Polska has been supporting
refugee centres with technical assistance and transport. We
worked with the UN Refugee Agency (UNHCR) to develop a
technological solution to enable the fast and safe distribution
of financial aid.
→ Refugees corridor. We relocated 360 refugees from Warsaw
to Madrid and Lisbon.
→ Hosting. With the support of CEAR (Spanish Commission for
Refugees), Fundación Aladina and the Red Cross, the El
Solaruco hotel in the Santander Group City hosted 188
21
22
23
Includes social contributions of foundations. In addition, Banco Santander made two extraordinary donations in 2022 to Fundación Banco Santander of 36,700,000 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 note
'34. Other equity instruments and own shares' of the Consolidated financial statements.
EUR 1.8 additional millions in management costs (e.g. refugee accommodation, corridor, scholarships, cost of app development. ... ).
The funds were channelled mainly through the UNHCR and the Red Cross
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3.9.1 Support for higher education,
employability and entrepreneurship
GRI 3-3, 203-1, 203-2, 413-1
100
million of euros
1,306
partner universities and
institutions in 25
countries
24
266,027
beneficiaries of scholarships,
internships and entrepreneurship
programmes 25
Santander Universities, Universia and Fundación Universia represent Santander’s
unique global initiative to support education, entrepreneurship and employability
with the aim of helping people achieve brighter career prospects.
ó
Education & Employability
ó
Entrepreneurship
We provide unparalleled support for adult learning
through a wide variety of scholarships for students and
free upskilling and reskilling programmes for
professionals.
We support emerging ventures
through specialized training and
connections to the resources they
need to grow and prosper.
Santander Universities
Santander Scholarships
In 2022, Santander Scholarships continued to offer a
comprehensive selection of learning programmes to meet the
employability needs of our communities. Includes scholarships
to access higher education, mobility and academic research
grants, upskilling and reskilling trainings for professionals,
among many others programmes. With the aim to further meet
the varying needs of our communities, Learning Room was
launched to give our beneficiaries free access to learning
content at scale.
Santander Scholarships focuses on eight areas of high relevance
for employability:
→ Santander Tech.
→ Santander Skills.
→ Santander Women.
→ Santander Studies.
→ Santander Language.
→ Santander Internship.
→ Santander Research.
→ Santander Sustainability.
Below is a selection of some of the top programmes offered by
Santander Scholarships in 2022. The 2nd edition of Santander
Scholarships Languages | Online English Courses, a global
programme to award 5,000 scholarships to study English and
improve employability, and Santander Scholarships Languages
| UK English Summer Experience to allow 100 beneficiaries to
study English in the UK. Both programmes launched in
collaboration with British Council.
Santander Scholarships Sustainability | Skills for the Green
Transition, a programme launched jointly with Cambridge
Judge Business School, aimed at providing 1,000 beneficiaries
with the knowledge and tools to grow and reorient their careers
towards the field of Sustainability.
The 12th edition of Santander Scholarships Women | SW50
Leadership - LSE, a programme developed, in collaboration
with London School of Economics, to provide high performance
training and networking opportunities for women in senior
management positions. Additionally, in 2022 we held the first
Santander SW50 Summit in London, bringing together more
than 200 women and SW50 alumni from all over the world.
For more details visit www.becas-santander.com
24
25
This figure includes universities that have an agreement with Santander Universities, Universia and Fundación Universia. Taking Santander Universities alone, the figure is835
universities and academic institutions in 11 countries.
Seeking to maximise the reach of the programmes, in 2022 the number of beneficiaries has increased, especially in programmes aimed at improving employability, with the
greatest increase in Brazil and Mexico.
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Santander X
In 2022, Santander X continued to grow to support
entrepreneurship in all its phases, from pre-incubation to scale-
ups, by providing entrepreneurs with specialized training and by
connecting them with the resources their ideas and companies
need to scale.
We launched new editions of 'Santander X Explorer', 'Santander
X Prepare to Launch' in collaboration with Babson College, and
8 local and global awards to find, support and help accelerate
the best pre-incubation and early stage companies.
In partnership with Oxentia Foundation, we launched three
global challenges for startups and scaleups to support the
companies with the most innovative and scalable solutions to
address problems relevant to society.
→ Santander X Global Challenge | Blockchain and Beyond
seeks to find companies with the most innovative blockchain
solutions.
Other programmes to support the
employability of talented young people and
the inclusion of people with disabilities
Universia
In 2022, we maintains its goal of improving the employability of
junior talent, connecting them with professional opportunities
and networking events with companies, through guidance to
enhance their employability and connection with professional
opportunities.
Through our employment platform, we created networking
opportunities with events such as Metaworking, Top Talent and
Novo Nordisk’s ESG Challenge. Those events brought together
bright minds and fresh ideas from young professionals along
with HR leaders from top companies in the world.
For more details, visit www.universia.net
Fundación Universia
In 2022, we consolidate our position as a worldwide reference
entity in the field of diversity, equity and inclusion, with active
participation in international forums of the United Nations, the
International Labour Organization and UNESCO.
With the guarantee of the European Investment Found,
Fundación Universia promotes Plan Circular, a socially
responsible income-share agreement program and the support
of Santander Universities, with the aim of providing access to
digital specialization training with high employability ratios.
We continued working with universities through MetaRed TiC
(more than 900 universities), the largest network of university
CIOs in Ibero-America; MetaRed X (more than 480 universities),
which promotes the growth of entrepreneurship, and MetaRed
ESG, to accelerate the adoption of 2030 Agenda.
For more details, visit www.fundacionuniversia.net
→ Santander X Global Challenge | Countdown to Zero, in
collaboration with Formula 1 and Ferrari, to support
companies with the best solutions to combat climate change.
→ Santander X Global Challenge | Food for the future to seek
projects that address the global food crisis.
Additionally, in 2022 we launched Santander X 100, a prime
community to support the most promising startups and
scaleups of Santander X, promoting the network among its
members and connecting them with capital, clients, talent and
other valuable resources for them to keep prospering.
For more details, visit www.santanderx.com.
827partner
universities
in 22 countries
6,352 people
benefiting from Fundación
Universia's support
→ 431 scholarships for university
students with disabilities
→ 111 people with disabilities
hired in companies
145 people
supported by Plan Circular
74
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3.9.2 Other community
support programmes
GRI 3-3, 203-1, 203-2, 413-1
63
million euros in social
26
investment
2.3
million people helped
27
We aim to improve people's access to education, culture and support well-being in
three ways:
ó
ó
ó
Childhood education
Social welfare
The arts and sciences
Helping children and young people
to attain a well-rounded, quality
education.
Helping vulnerable people and
those at the risk of social exclusion.
Helping people access cultural
events and programmes.
We channel our investment through partnerships with NGOs
and humanitarian organizations. Some partnerships are with
the bank’s foundations in Argentina, Spain, the US, Portugal,
Poland and the UK.
In Spain, Fundación Banco Santander works to build a fair,
inclusive and sustainable society by financing and developing
various cultural, educational, social and environmental projects.
In 2022, Santander made two donations to Fundación Banco
Santander for a total of 36,700,000 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.
These include the management of the Bank's art collection and
the financing of various literary, educational, social, cultural and
environmental productions and activities, in which the new
reconfiguration of the Bank's headquarters on Paseo de Pereda
in Santander will play an important role, as well as relations
28
.
with Spanish universities. For more details see
www.fundacionbancosantander.com/en/home
The Bank plans to continue contributing to the Foundation
within the agreements adopted by the General Meeting of
Shareholders and the Board of Directors in order to support the
important work of the Foundation.
We also encourage employees and customers to get involved in
our initiatives and programmes. Volunteering is a core element
of our corporate culture and community investment strategy.
For more details, see the section on volunteering under section
3.3 'A talented and motivated team' in this chapter.
Links and descriptions of our main initiatives are available on
our corporate website and in our local responsible banking
reports (also available at www.santander.com).
26
27
28
Includes social contributions of foundations.
Calculated with partners’ certified data or with conservative estimates based on recognized conversion factors, according to the Group Responsible Banking area's internal
methodology. This methodology considers international best practice and has been ratified by an independent third party.
For more details, see note '34. Other equity instruments and own shares' of the Consolidated financial statements
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4. Our progress in figures
GRI 2-4
4.1 Employees
Table 1. Employees by region and gender
Table 2. Functional distribution by gender
Table 3. Workforce by age bracket
Table 4. Type of employment contract
Table 5. Yearly average of contracts by gender
Table 6. Yearly average of contracts by age bracket
Table 7. Yearly average of contracts by role
Table 8. Employees working in their home
countries
Table 9. Employees with disability by region
Table 10. Headcount covered by collective
agreement
Table 11. New hires by age bracket
Table 12. New hires by gender
Table 13. Dismissals
Table 14. External turnover rate by gender
Table 15. External turnover rate by age bracket
Table 16. Remuneration by role, gender and region
Table 17. Average remuneration of senior
management
Table 18. Ratio of the bank’s minimum annual
salary to the legal minimum annual
salary by country and gender
Table 19. Training
Table 20. Hours of training by category
Table 21. Hours of training by gender
Table 22. Absenteeism by gender and region
Table 23. Accident rate
Table 24. Occupational health and safety
77
77
77
77
78
78
79
79
79
79
80
80
80
81
81
81
82
82
83
83
84
84
84
84
84
4.2 Customers
Table 25. Group customers
Table 26. Dialogue by channel
Table 27. Group NPS
Table 28. Group NPS by channel
Table 29. Customers satisfaction
Table 30. Total complaints
4.3 Tax contribution
Table 31. Total taxes paid
4.4 Green transition
Table 32. Green finance
Table 33. Financing of renewables energies
Table 34. Environmental footprint
4.5 Equator principles
Table 35. Equator principles
4.6 Financial inclusion
Table 36. Financially empowered people
Table 37. Microfinance
4.7 Community investment
Table 38. Community investment
Table 39. Outputs and outcomes
85
85
85
86
86
86
87
87
88
88
88
88
89
90
90
90
90
90
91
91
91
The information on the number of employees and branches for the year ended 31 December 2021 has been restated for comparative
purposes in accordance with the Group's homogenisation criteria.
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4.1 Employees
GRI 2-7, 2-30, 202-1, 202-2, 401-1, 403-9, 403-10, 404-1, 405-1, 405-2
SASB FN-AC-330a.1, FN-IB-330a.1, FN0102-06
A
1. EMPLOYEES BY REGION AND GENDER
Region
Spain
Brazil
Chile
Poland
Argentina
Mexico
Portugal
UK
USA
SCF
OthersB
Total
No employees
2022
27,078
54,904
9,345
10,261
8,073
26,845
4,717
19,566
13,677
14,500
17,496
206,462
2021
26,249
52,041
9,950
10,050
8,525
25,957
4,818
19,153
15,024
14,270
13,140
199,177
% men
2022
51
44
44
32
52
46
53
43
42
49
57
46
2021
50
43
45
32
52
46
53
43
42
47
57
46
% women
2022
49
56
56
68
48
54
47
57
58
51
43
54
2021
% graduates
2022
2021
50
57
55
68
48
54
47
57
58
53
43
54
70
60
70
75
31
58
65
14
20
30
59
52
67
62
42
76
39
38
63
7
12
27
47
45
A. At year end. Employee data is broken down according to the criteria of legal entities and cannot be compared to the figures in the 'Economic and financial review' chapter,
which follow management criteria.
B. The increase in the number of employees is due to increased hiring in geographies such as Peru and Colombia and in companies such as PagoNxt.
A
2.1 FUNCTIONAL DISTRIBUTION BY GENDER 2022
Senior managers
B
Other managers
Other employees
Europe
North America
South America
Group total
Men
1,093
221
320
1,634
69.6%
77.0%
70.5%
70.7%
Women
478
66
134
678
30.4%
23.0%
29.5%
29.3%
Total
1,571
287
454
2,312
Men
6,779 63.5%
1,334 68.2%
3,147 60.0%
11,260 63.0%
Women
Total
3,893 36.5% 10,672
1,955
621 31.8%
2,096 40.0%
5,243
6,610 37.0% 17,870
Men
Women
33,041
18,300
31,108
82,449
44.7% 40,919
44.3% 23,055
43.8% 39,857
44.3% 103,831
Total
55.3% 73,960
55.7% 41,355
56.2% 70,965
55.7% 186,280
A. At year end.
B.
Includes Group Sr. Executive VP. Executive VP and Vice President.
A
2.2 FUNCTIONAL DISTRIBUTION BY GENDER 2021
Senior managers
B
Men
1,039
223
318
1,580
72.7%
78.8%
73.4%
73.7%
Women
390
60
115
565
27.3%
21.2%
26.6%
26.3%
Total
1,429
283
433
2,145
Europe
North America
South America
Group total
Other managers
Other employees
Men
Women
Men
Women
6,865
1,181
2,955
11,001
63.6%
67.0%
60.4%
63.1%
3,926
583
1,934
6,443
Total
36.4% 10,791
1,764
33.0%
39.6%
4,889
36.9% 17,444
30,702
18,299
29,137
78,138
44.0% 39,112
44.1% 23,226
42.7% 39,112
43.5% 101,450
Total
56.0% 69,814
55.9% 41,525
57.3% 68,249
56.5% 179,588
A. At year end.
B. The higher number of women senior managers is due to the progress made on the public Responsible Banking commitment regarding women in senior positions, which
aims to have women in 30% of senior management roles by 2025.
A
3.1. WORKFORCE BY AGE BRACKET 2022
Number and % of total
Europe
North America
South America
Group total
A. At year end.
aged <= 25
aged 26 - 35
aged 36 - 45
aged 46 - 50
age over 50
4,875
5,114
12,306
22,295
5.66%
11.73%
16.05%
10.80%
19,393
17,634
29,663
66,690
22.49%
40.45%
38.69%
32.30%
29,500
11,430
23,034
63,964
34.22%
26.22%
30.05%
30.98%
13,775
3,448
5,863
23,086
15.98%
7.91%
7.65%
11.18%
18,660
5,971
5,796
30,427
21.65%
13.70%
7.56%
14.74%
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3.2. WORKFORCE BY AGE BRACKET 2021
Number and % of total
AB
Europe
North America
South America
Group total
A. At year end.
aged <= 25
aged 26 - 35
aged 36 - 45
aged 46 - 50
age over 50
3,764
4,996
10,867
19,627
4.59%
12.21%
14.94%
9.85%
17,766
22,140
29,381
69,287
21.66%
40.89%
39.56%
34.79%
29,730
9,095
22,272
61,097
36.24%
25.11%
30.42%
30.67%
13,316
2,739
5,591
21,646
16.23%
8.04%
7.63%
10.87%
17,458
4,602
5,460
27,520
21.28%
13.74%
7.45%
13.82%
A
4.1. TYPE OF EMPLOYMENT CONTRACT IN 2022
Europe
North America
South America
Group total
Europe
United Kingdom
South America
Group total
A. At year end.
Permanent/Full-time
Men
Women
38,361 50.7%
19,408 45.7%
33,232 46.4%
91,001 47.9%
37,371 49.3%
23,054 54.3%
38,409 53.6%
98,834 52.1%
Total
75,732
42,462
71,641
189,835
Permanent/Part-time
Men
783 12.8%
104 23.2%
1,074 23.5%
1,961 17.6%
Women
5,332 87.2%
345 76.8%
3,499 76.5%
9,176 82.4%
Total
6,115
449
4,573
11,137
Temporary/Full-time
Temporary/Part-time
Men
1,608 40.4%
339 49.8%
245 61.7%
2,192 43.3%
Women
2,372 59.6%
342 50.2%
152 38.3%
2,866 56.7%
Total
Men
3,980
681
397
5,058
161 42.8%
60%
47%
188 43.5%
3
24
Women
215 57.2%
40%
53%
244 56.5%
2
27
Total
376
5
51
432
A
4.2. TYPE OF EMPLOYMENT CONTRACT IN 2021
Europe
North America
South America
Group total
Europe
United Kingdom
South America
Group total
A. At year end.
Permanent/Full-time
Men
Women
36,233 50.5%
19,222 45.5%
31,510 45.1%
86,965 47.3%
35,458 49.5%
23,031 54.5%
38,398 54.9%
96,887 52.7%
Total
71,691
42,253
69,908
183,852
Permanent/Part-time
Men
826 12.6%
119 21.0%
853 23.8%
1,798 16.8%
Women
5,706 87.4%
448 79.0%
2,725 76.2%
8,879 83.2%
Total
6,532
567
3,578
10,677
Temporary/Full-time
Temporary/Part-time
Men
1,398 42.0%
362 48.1%
47 55.3%
1,807 43.4%
Women
1,933 58.0%
390 51.9%
38 44.7%
2,361 56.6%
Total
3,331
752
85
4,168
Men
149 31.0%
0.0%
0.0%
149 31.0%
0
0
Women
331 69.0%
0.0%
0.0%
331 69.0%
0
0
Total
480
0
0
480
5. YEARLY AVERAGE 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
88,260
1,924
1,921
176
92,281
2022
Women
97,216
9,199
2,545
275
109,235
Total
185,476
11,123
4,466
451
201,516
2021
Women
93,699
9,645
1,803
296
105,443
Men
86,001
1,803
1,175
167
89,146
Total
179,700
11,448
2,978
463
194,589
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6.1. YEARLY AVERAGE OF CONTRACTS BY AGE BRACKET IN 2022
aged <= 25
16,667
3,169
1,153
150
21,139
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 26-35
59,627
2,554
1,966
144
64,291
aged 36-45
60,092
2,649
893
83
63,717
aged 46-50
21,592
904
208
16
22,720
aged over 50
27,498
1,847
246
58
29,649
Total
185,476
11,123
4,466
451
201,516
6.2. YEARLY AVERAGE OF CONTRACTS BY AGE BRACKET IN 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
aged <= 25
10,887
2,682
812
152
14,533
aged 26-35
57,223
2,968
1,319
162
61,672
aged 36-45
61,327
2,774
549
83
64,733
aged 46-50
22,026
938
139
13
23,116
aged over 50
28,237
2,086
159
53
30,535
Total
179,700
11,448
2,978
463
194,589
7. YEARLY AVERAGE OF CONTRACTS BY ROLE
2022
2021
Total
179,700
11,448
2,978
463
194,589
2021
95.72
99.69
98.18
97.50
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
Senior
Senior
Other
Other
managers managers employees
16,304
163
104
17
16,588
2,194
7
20
0
2,221
166,978 185,476
11,123
4,466
451
182,707 201,516
Other
Total managers managers employees
160,097
11,275
2,879
449
174,700
17,453
168
83
13
17,717
2,150
5
16
1
2,172
10,953
4,342
434
Other
8. EMPLOYEES WORKING IN THEIR HOME COUNTRY
A,B
%
Europe
North America
South America
Group total
Managers
2022
88.22
91.29
91.85
89.32
2021
87.26
91.52
91.46
88.35
Other employees
Total
2022
94.33
99.69
98.23
96.92
2021
95.87
99.74
98.22
97.59
2022
94.22
99.63
98.19
96.84
A. At year end.
B. Figures from US is not included due to confidentiality.
A,B,C
9.1 EMPLOYEES WITH DISABILITIES BY REGION
%
2022
1.98
0.67
2.80
1.99
Europe
North America
South America
Group total
A,B,C
9.2. EMPLOYEES WITH DISABILITIES
Number of employees
Spain
Rest of the Group
Group total
2022
564
3,550
4,114
2021
1.70
0.24
3.07
1.86
2021
408
3,295
3,703
A. At year end.
B. The increase in North America is mainly due to Mexico reporting for the first time and the US has increased hiring and identification of employees with disabilities in order to
meet the bank's commitments.
C. In Argentina and Mexico the data collection process is not yet robust enough and does not reach the total workforce. Excluding these geographies, the Group's total
percentage is 2.40%.
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A
10. HEADCOUNT COVERED BY COLLECTIVE AGREEMENT
Countries
Spain
Brazil
Chile
Poland
Argentina
Mexico
Portugal
UK
US
SCF
Other business units
Total Group
A. At year end.
11.1. NEW HIRES BY AGE BRACKET IN 2022
% of total
Europe
North America
South America
Group total
A
11.2. NEW HIRES BY AGE BRACKET IN 2021
% of total
Europe
North America
South America
Group total
A. UK categorises all new employee registrations as new hires.
12. NEW HIRES BY GENDER
A,B,C
2022
%
99.93
97.05
100.00
0.00
87.70
30.04
99.39
100.00
0.00
53.82
54.14
70.89
Employees
27,060
53,284
9,345
0
7,080
8,065
4,688
19,566
0
7,804
9,473
146,365
2021
%
99.92
98.66
100.00
0.00
73.78
30.94
99.42
100.00
0.00
51.73
59.60
70.79
Employees
26,228
51,345
9,950
0
6,290
8,031
4,790
19,153
0
7,382
7,832
141,001
aged <= 25
31.23
34.00
41.69
37.01
aged 26-35
39.98
40.65
38.02
39.20
aged 36-45
19.94
16.22
15.59
16.88
aged over 45
4.84
4.04
2.54
3.52
aged > 50
4.02
5.09
2.15
3.39
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
Europe
North America
South America
Group total
Men
15.10%
30.00%
28.97%
23.23%
2022
Women
13.55%
26.42%
31.02%
22.92%
Total
14.28%
28.05%
30.10%
23.06%
Men
8.00%
36.95%
22.63%
19.51%
2021
Women
7.12%
32.88%
17.04%
16.55%
Total
7.53%
34.72%
19.50%
17.90%
A. The increase in the number of new hires in Europe and South America is due to the bank's strong performance and the return to normal activity in 2022, after two years
marked by the impact of the pandemic on recruitment. In addition, the Contact Centre in Brazil, characterised by high turnover rates, reported for the first time its staff
turnover data.
B. The decrease in the percentage of hiring in North America was due to the fact that in 2021 around 5,000 positions of the Bank's external workforce in Santander Mexico,
mainly in operational positions, were internalised as a result of a labour reform in the country. This did not occur in 2022.
C. UK categorises all new hires as new hires.
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A,C
13. DISMISSALS
by gender
Senior managers
Other managers
Other employees
Total Group
by age
aged <=25
aged 26-35
aged 36-45
aged 46-50
aged >50
Total Group
Men
58
378
5,771
6,207
%B
3.55%
3.36%
7.00%
6.51%
2022
Women
B
%
Total
B
%
17
216
7,837
8,070
75
2.51%
594
3.27%
7.55%
13,608
7.26% 14,277
3.24%
3.32%
7.31%
6.92%
2021
Men
77
719
7,348
8,144
B
%
Women
B
%
Total
B
%
4.87%
6.54%
9.50%
9.05%
18
341
9,237
9,596
95
3.19%
1,060
5.29%
9.23%
16,585
8.96% 17,740
4.43%
6.08%
9.34%
9.00%
2022
Women
1,546
2,719
2,229
594
982
8,070
Men
1,002
2,025
1,539
558
1,083
6,207
Total
2,548
4,744
3,768
1,152
2,065
14,277
2021
Women
1,149
2,535
2,770
863
2,279
9,596
Men
737
1,961
1,828
743
2,875
8,144
Total
1,886
4,496
4,598
1,606
5,154
17,740
A. Dismissal: termination of permanent employment determined unilaterally by the company. It includes voluntary resignations in restructuring processes.
B. Ratio of dismissals to the total number of employees in each group.
C. The reduction in dismissal is due to the restructuring process the Bank undertook in 2021 in many of its geographies, a process that has not been repeated in 2022..
14. EXTERNAL TURNOVER RATE BY GENDER
% of total
A,B
Europe
North America
South America
Group total
Men
10.36
31.28
24.68
19.90
2022
Women
10.30
28.35
30.89
21.93
Total
10.33
29.68
28.09
20.99
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
A. Excludes temporary leaves of absence and transfers to other Group companies.
B. The decrease in turnover in Europe is due to the restructuring process the bank undertook in 2021 in several of its geographies, mainly in Europe, a process that has not been
carried out in 2022.
C. The increase in North and South America is due to the lower incidence of the 2021 restructuring processes in these geographies and the return to normal activity after two
years of pandemic incidence..In addition, contact centre in Brazil, characterised by high turnover rates, reported for the first time its employee turnover data.
A
15.1 EXTERNAL TURNOVER RATE BY AGE BRACKET
% of total
2022
Europe
North America
South America
Group total
aged <= 25
31.10
60.66
51.78
49.29
aged 26-35
16.62
30.29
27.80
25.21
aged 36-45
6.96
21.09
20.06
14.20
aged 46-50
4.27
20.04
16.65
9.77
aged over 50
8.29
23.38
22.76
14.00
A. Excludes temporary leaves of absence and transfers to other Group companies.
15.2. EXTERNAL TURNOVER RATE BY AGE BRACKET
% of total
A,B,C,
2021
Europe
North America
South America
Group total
aged <= 25
38.63
51.03
25.73
aged 26-35
18.70
26.06
20.87
aged 36-45
11.04
17.22
16.90
aged 46-50
8.62
16.03
13.51
aged over 50
29.27
18.02
21.36
34.87
21.67
14.18
11.00
25.45
Total
10.33
29.68
28.09
20.99
Total
17.46
24.97
19.86
19.97
A. Excludes temporary leaves of absence and transfers to other Group companies.
B. The decrease in turnover in Europe is due to the restructuring process the bank undertook in 2021 in several of its geographies, mainly in Europe, a process that has not been
carried out in 2022.
C. The increase in North and South America is due to the lower incidence of the 2021 restructuring processes in these geographies and the return to normal activity after two
years of pandemic incidence..In addition, contact centre in Brazil, characterised by high turnover rates, reported for the first time its employee turnover data.
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A
16. REMUNERATION BY ROLE, GENDER AND REGION
Senior managers B
Women
248,978
506,966
285,388
337,280
GPG ratio
(Median) D
17.9%
18.3%
34.1%
25.8%
GPG-SAB
ratio
E
(Median)
16.1%
8.3%
19.6%
20.1%
Men
323,602
855,521
457,220
522,728
Other managers C
Women
65,785
219,244
96,472
105,005
GPG ratio
(Median) D
26.5%
7.2%
7.2%
22.9%
GPG-SAB
ratio
E
(Median)
22.5%
4.2%
4.6%
18.2%
Men
92,891
257,213
118,126
150,181
469,180
384,971
21.9%
C
Other employees
Women
42,736
36,336
19,426
Ratio GPG
D
(Median)
18.5%
19.1%
18.6%
GPG-SAB
ratio
(Median)E
15.9%
17.6%
21.5%
132,943
118,633
12.1%
Total
Men Women
45,332
42,263
21,448
64,078
72,070
34,164
Ratio GPG
D
(Median)
20.0%
29.4%
21.0%
GPG-SAB
ratio
(Median)E
17.1%
22.5%
26.0%
Total
employees
53,588
55,490
27,131
33,044
25.
7%
26.
3%
60,793
37,606
30.
2%
29.
8%
48,232
38,276
34,352
11.4%
60,793
53,785
37,606
33,350
13.0 %
12.8
%
30.2%
32.3%
(6.4)%
29.8%
30.0%
(0.7)%
48,232
42,628
13.2 %
Men
55,884
49,052
26,434
44,776
aged <= 25
aged 26-35
aged 36-45
aged 46-50
aged over 50
14,060
11,819
%
19.0
27,551
23,394
%
17.8
48,002
42,250
%
13.6
65,336
59,824
%
9.2
74,744
66,958
%
11.6
Total
48,232
42,628
13.2 %
Europe
North America
South America
Group total
2022 average remuneration
2021 average remuneration
Variation 2022 vs 2021 (%)
Europe
North America
South America
Group total
2022 average remuneration
2021 average remuneration
Variation 2022 vs 2021 (%)
By age bracket
2022 average remuneration
2021 average remuneration
Variation 2022 vs 2021 (%)
Includes Group Sr. Executive VP. Executive VP and Vice President.
A. Data at end of October 2022. The average total remuneration of employees includes annual base salary, pensions and variable remuneration paid in the year.
B.
C. The variation includes the effect of internal reclassification between categories of employees carried out in different geographies.
D. GPG Ratio (median) includes annual base salary and variable remuneration paid in the year.
E. GPG Ratio - ABS (median) includes annual base salary paid in the year.
17.1 AVERAGE REMUNERATION OF SENIOR MANAGEMENT (with variable remuneration not
linked to long-term objectives)
Thousand euros
2022
Women
Total
Men
2021
Women
Executive directors
Non-executive directors
Senior executives
Men
9,086
285
4,365
11,001
304
1,574
10,044
292
3,767
9,160
363
4,137
11,435
293
1,411
17.2 AVERAGE VARIABLE REMUNERATION OF SENIOR MANAGEMENT LINKED TO LONG-
TERM OBJECTIVES (fair value)
Thousand euros
2022
Women
Total
Men
2021
Women
Executive directors
Senior executives A
Men
1,436
597
2,128
191
1,782
510
1,563
592
2,316
186
Total
10,298
334
3,592
Total
1,940
511
A. Additionally, in 2022, one senior executive received EUR 500 thousand of the Digital Transformation Award from PagoNxt
S.L. Likewise, in 2021, one senior executive received EUR 348 thousand of the US Special Regulatory Incentive Plan.
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17.3 SENIOR MANAGEMENT COMPOSITION
Number
Executive directors
Non-executive directors
Senior executives
Men
1
8
11
2022
Women
Total
Men
1
5
3
2
13
14
2021
Women
Total
1
7
12
1
5
3
2
12
15
18.1 RATIO OF THE BANK’S MINIMUM ANNUAL SALARY TO THE LEGAL
MINIMUM ANNUAL SALARY BY COUNTRY AND GENDER, 2022
% Legal minimum wage
Germany
Argentina
Brazil
Chile
US
Spain
Mexico
Poland
Portugal
UK
Men
191.13%
376.58%
241.06%
159.68%
234.48%
153.76%
145.36%
100.00%
170.21%
222.76%
Women
191.13%
376.58%
241.06%
139.58%
231.86%
150.00%
145.36%
100.00%
170.21%
222.76%
% legal
minimum wage
191.13%
376.58%
241.06%
149.63%
233.17%
151.88%
145.36%
100.00%
170.21%
222.76%
18.2 RATIO OF THE BANK’S MINIMUM ANNUAL SALARY TO THE LEGAL
MINIMUM ANNUAL SALARY BY COUNTRY AND GENDER, 2021
% Legal minimum wage
Men
205.45%
375.62%
185.62%
177.16%
259.78%
132.72%
165.01%
100.00%
181.95%
206.58%
Germany
Argentina
Brazil
Chile
US
Spain
Mexico
Poland
Portugal
UK
19. TRAINING
Total hours of training
% employees trainedA
Total attendees
Hours of training per employeeA
Total investment in trainingB
Investment per employee
Cost per hour
% women participants
% of e-learning training attendees
% of e-learning hours
Employee satisfaction (up to 10)
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%
2022
2021
6,884,251
100.00
5,748,422
33.34
71,630,151
346.94
10.40
55.18
94.71
70.98
9.81
6,030,787
98.01
5,578,255
30.28
75,138,476
377.24
12.46
53.39
91.42
76.22
8.46
A. Calculation based on year-end headcount.
B. The decrease in investment in training is due to Banco Santander's efforts to optimise the resources
invested by increasing e-learning training.
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20. HOURS OF TRAINING BY CATEGORY
2022
2021
Hours
Average
Hours
Average
Senior managers
Managers
Other employees
Group total
87,353
493,474
6,303,424
6,884,251
37.78
27.61
33.84
33.34
60,804
695,353
5,274,630
6,030,787
29.15
40.56
29.31
30.28
21. HOURS OF TRAINING BY GENDER
2022
Average
33.15
33.51
33.34
2021
Average
32.45
28.46
30.28
Men
Women
Group total
22. ABSENTEEISM BY GENDER AND REGION
A,B
Europe
North America
South America
Group total
2022
Women
5.36
2.05
3.14
3.73
Men
2.68
0.95
1.45
1.80
Total
4.11
1.55
2.34
2.83
2021
Women
5.12
1.75
2.92
3.63
Men
2.50
0.93
1.50
1.83
Total
3.90
1.38
2.27
2.80
A.Days missed due to occupational accidents. non-work related illness and non-work related accident for every 100 days worked.
B. Santander Brasil only considers accidents recognized as work-related and reported in a comunicação de acidente de trabalho (CAT, work-related accident notice) to Brazil's
Instituto Nacional do Seguro Social (INSS, National Social Security Institute) following an internal expert review in 2021. This indicator only considers absences of at least 15
days due to non-work-related accidents or common illness.
23. ACCIDENT RATE
%
A,B
Europe
North America
South America
Group total
2022
Women
0.12
0.04
0.03
0.06
Men
0.04
0.01
0.02
0.02
Total
0.08
0.02
0.02
0.05
2021
Women
0.10
0.02
0.02
0.05
Men
0.04
0.00
0.01
0.02
Total
0.07
0.01
0.02
0.04
A. Ratio of hours missed due to an occupational accident involving leave to total hours worked. Hours worked are theoretical and include commute-related accidents.
B. Santander Brasil only considers accidents recognized as work-related and reported in a comunicação de acidente de trabalho (CAT, work-related accident notice) to Brazil's
Instituto Nacional do Seguro Social (INSS, National Social Security Institute) following an internal expert review in 2021.
24. OCCUPATIONAL HEALTH AND SAFETY
A,B
Frequency rateC
D
Severity rate
No. of fatal occupational accidents
E
Work-related illness
Total number of accidents
F,G
2022
Women
2
0.09
0
0
477
Men
1
0.04
1
0
239
Total
1
0.06
1
0
716
2021
Women
1
0.08
0
0
388
Men
1
0.03
0
0
183
Total
1
0.06
0
0
571
A. Occupational injuries that can be documented are reported, without exception for serious injuries.
B. Santander Brasil only considers accidents recognized as work-related and reported in a comunicação de acidente de trabalho (CAT, work-related accident notice) to Brazil's
Instituto Nacional do Seguro Social (INSS, National Social Security Institute) following an internal expert review in 2021.
C. Number of occupational accidents with leave for every 1,000 hours worked. Hours worked are theoretical and include commute-related accidents.
D. Days not worked due to work accident with leave for every 1,000 hours worked. Hours worked are theoretical. Commute-related accidents are included.
E. No Group employee is exposed to work-related illnesses because the activity Santander professionals carry out and the industry in which they work is not recognized in
Spain's Royal Decree 1299/2006.
F. Refers to occupational accidents with sick leave and includes commute-related accidents.
G. The increase in the total number of accidents is largely due to a rise in the US compared to previous years due to an improvement in the reporting of the indicator.
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4.2 Customers
GRI FS6
25. GROUP CUSTOMERS
A
Europe
Spain
Portugal
United Kingdom
Poland
OthersB
South America
C
Brazil
Chile
Argentina
OthersD
North America
México
United StatesF
OthersF
Digital Consumer Bank
Santander Consumer Bank
Openbank
Total
G
2022
45.564.102
14.319.800
2.922.944
22.402.482
5.696.983
221,894
69.552.757
60.117.327
3.577.094
4.384.558
1.473.778
24.980.442
20.239.134
4.523.340
217,969
19.746.178
17.793.206
1.952.972
159.843.480
2021
45.979.129
13.571.008
3.060.473
23.569.326
5.427.715
350,607
62.876.211
53.445.938
4.113.853
4.155.239
1.161.181
24.649.205
19.664.670
4.731.155
253,380
19.438.186
17.857.599
1.580.587
152.942.732
var.
(1)%
6%
(4)%
(5)%
5%
(37)%
11%
12%
(13)%
6%
27%
1%
3%
(4)%
(14)%
2%
—%
24%
5%
A. Figures corresponding to total customers. 2021 data has been redefined to accommodate 2022
reporting segments
B. Rest of Europe: BP Rest, Other SCIB Europe and PagoNxT
C. Brazil: Private Banking: Decision groups; Santander Financiamiento: Financeira's exclusive customer
data.
D. Other South America: Uruguay, Peru, Colombia and PagoNxT
E. USA includes BPI Miami
F. Other North America: PagoNxT
G. SCF includes customers in all European countries, including the UK.
26. DIALOGUE BY CHANNEL
Branches
Number of branches
Digital banking
B
(millions)
Digital customers
A
2022
2021
Var .2022/2021 %.
9,019
9,229
51.47
47.44
(2.3)%
8.5 %
A. Santander Consumer Finance not included.
B. Counts once for customers of both Internet and mobile banking.
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27. GROUP NPS
Argentina
Brazil
Chile
Uruguay
Spain
Poland
Portugal
UK
Mexico
USA
2022
2021
2020
2019
1
3
1
2
2
3
2
6
3
9
2
1
1
2
2
3
3
3
4
8
3
2
1
3
2
4
1
6
4
9
4
2
2
2
3
4
3
2
4
9
NPS to measure customer satisfaction, audited by Stiga/Deloitte.
Santander position vs competitors (Official Peer Group by countries). 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.
28. GROUP NPS BY CHANNEL
A
Branch
Contact center
B
Internet
Mobile
2022
66
60
62
65
2021
64
43
58
69
2020
56
45
60
68
A.
B.
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.
Internet: Excluding the UK and Uruguay.
29. CUSTOMER SATISFACTION
A
2022
2021
2020
2019
Argentina
Brazil
Chile
Uruguay
Spain
Poland
Portugal
UK
Mexico
USA
B
Group
93
88
90
97
89
95
90
96
94
89
92
91
n/a
90
96
84
96
90
95
94
88
92
90
89
87
93
87
99
86
94
95
87
91
86
86
86
94
86
98
86
96
95
88
90
A. Net customer satisfaction: calculation of 100% of customers minus percentage of dissatisfied customers.
B. Linear average of net satisfaction across all geographies.
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30. TOTAL COMPLAINTS
A
SpainB
Portugal
United Kingdom
Poland
C
Brazil
Mexico
Chile
D
Argentina
US
SCF
2022
76,272
3,584
20,624
5,169
215,906
70,100
7,873
5,294
1,717
29,777
2021
120,953
3,570
20,069
5,179
195,340
82,033
8,009
5,013
3,205
35,215
2020
150,298
4,036
22,625
6,057
146,067
80,031
8,328
3,512
4,292
39,064
A. Compliance metrics based on group-wide criteria, which may not match the UK's Financial Conduct
Authority (FCA) or standards in Brazil, among others.
B. Decrease in Spain mainly due to mortgage set up fees´ complaints, which increased in 2021 following the communication from the Ministry of Consumer Affairs, and the
C.
D.
change in Santander One's commercial policy on commissions.
Increase in Brazil due to claims handled independently last year and the government’s enhancement of official channels.
Increase in Argentina mainly due to fraudulent online purchases amid growing e-commerce since the
outbreak of the pandemic.
4.3 Tax contribution
GRI 201-1
In 2022, our tax contribution totalled EUR 20,476 million, including EUR 9,734 million in taxes directly paid by the Group and the rest
in collected taxes originating from our business operations with third parties. 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 every EUR 100 in total income, EUR 39 are taxed, including EUR 19 in taxes paid directly by Santander and EUR 20 in taxes
collected from third parties.
The taxes Santander pays directly (see table below) are included in the cash flow statement and mainly stem from the corporate
income tax paid (EUR 5,498 million, which represents an effective rate of 36.1%). They also include non-recoverable value added tax
(VAT), employers' social security contributions, charges levied on banks and financial transactions in Spain, the UK, Poland, Portugal,
Brazil and Argentina, and other taxes. Total taxes paid directly by the Group amount to 64% 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. Therefore, the corporate income tax accrued during the accounting
period is EUR 4,486 million, which represents an effective rate of 29.4% (see note 27 of the consolidated annual accounts).
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31. Total taxes paid
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
2022
Other
taxes paid
1,240
482
187
247
94
292
2,542
517
381
75
494
94
11
1,572
118
4
4,236
Corporate
income taxA
1,652
553
135
182
167
454
3,143
1,295
331
(2)
34
38
38
1,734
610
11
5,498
Total
taxes paid by
B
the Group
2,892
1,035
322
429
261
746
5,685
1,812
712
73
528
132
49
3,306
728
15
9,734
Third-party
C
taxes
1,366
455
235
177
134
(65)
2,302
3,029
620
334
3,525
36
12
7,556
874
10
10,742
Total
contribution
4,258
1,490
557
606
395
681
7,987
4,841
1,332
407
4,053
168
61
10,862
1,602
25
20,476
A. The Group's income tax for the year 2021 amounted to EUR 4,012 million
B. Total own taxes paid for all these concepts amounted to EUR 9,734 mn, broken down as EUR 5,498 mn in corporate income tax, EUR 992 mn in non-recoverable VAT and
other sales taxes, EUR 1,647 mn in employer-paid payroll taxes, EUR 112 mn in property taxes, EUR 366 mn in bank levies and EUR 1,119 mn in other taxes.
C. Total third-party taxes amounted to EUR 10,742 mn, broken down as EUR 2,725 mn in salary withholdings and employees' social security contributions, EUR 509 mn in
recoverable VAT, EUR 1,889 mn in tax deducted at source on capital, EUR 324 mn in non-resident taxes, EUR 444 mn in property taxes, EUR 300 mn in stamp taxes, EUR 2,695
mn in taxes related to the financial activity and EUR 1,856 mn in other taxes
4.4 Green transition
GRI 301-1, 302-1, 302-2, 302-3, 303-5, 305-1, 305-2, 305-3, 305-4, 305-5, 306-3, 306-4, 306-5, FS8, FS10, FS11
32. Green finance
EUR bn
Raised and facilitated
Accumulated since 2019
2022
28.8
94.5
2021
31.9
65.7
2020
14.8
33.8
2019
19.0
19.0
33. Financing of renewables energies
MW financed
Greenfield
Wind energy
Solar energy
Others
A
Brownfield
Wind energy
Solar energy
Others
A. Activity recovered from COVID-induced lows in 2021
2022
15,614
21 %
77 %
2 %
14,843
45 %
33 %
22 %
2021
13,604
58 %
39 %
3 %
1,776
77 %
18 %
5 %
2020
13,765
26 %
64 %
10 %
8,106
46 %
33 %
21 %
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34. ENVIRONMENTAL FOOTPRINT 2021-2022
A
2022
2021
Var. 2022-2021 (%)
Consumption
B
3
Water (m
)
Water (m3
/employee)
C
Normal electricity (millions of kwh)
Green electricity (millions of kwh)
C
Total electricity (millions of kwh)
Total internal energy consumption (GJ)C
Total internal energy consumption (GJ/employee)C
Total paper (t)D
Recycled or certified paper (t)D
Total paper (t/employee)D
Waste
Paper and cardboard waste (kg)
Paper and cardboard waste (kg/employee)D
Greenhouse gas emissions
E
Direct emissions (CO2 teq)
Indirect electricity emissions (CO2 teq)-MARKET BASED
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
C,F,G
C,F
C,I
D
H,I
1,887,857
9.75
97.42
745.82
843.24
3,431,272
17.73
5,849
4,860
0.03
4,123,740
21.30
21,967
30,917
217,906
81,535
134,419
0.69
193,573
1,808,668
9.76
213.87
675.78
889.66
3,667,872
18.95
7,345
6,020
0.04
6,323,866
34.11
25,672
52,904
265,095
35,420
113,996
0.61
185,379
4.4
-0.1
-54.4
10.4
-5.2
-6.5
-6.5
-20.4
-19.3
-23.7
-34.8
-37.5
-14.4
-41.6
-17.8
130.2
17.9
12.9
4.4
A. Refers to Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the UK and the US (minus Puerto Rico and Miami).
B. Refers to water withdrawal from public sources.
C. Energy consumption and GHG emissions data for Argentina for the year 2021 have been recalculated as a result of new changes in the calculation methodology.
D. The reduction in paper consumption and waste is due to the Group's implementation of new technologies and practices in its buildings.
E. Emissions are from the direct consumption of energy (natural gas, diesel and, in Mexico, petrol and diesel for cars, and in Poland in 2020 petrol and diesel for cars). They are
deemed scope 1, as defined by the GHG Protocol standard. To calculate them, emission factors DEFRA 2022 for 2022 and DEFRA 2021 for 2021 were applied.
F. Emissions are from electricity consumption. They are considered scope 2, as defined by the GHG Protocol standard. In 2021 we used the International Energy Agency (IEA)
emission factors from 2017. For 2022, we used the 2021 IEA emission factors.
- Indirect electricity emissions (market-based): no emissions were considered for green electricity consumed in Germany, Spain, Mexico, Portugal and UK; also, in Argentina,
Brazil, Chile, Poland and the US, some consumed electricity was green energy. The IEA emission factor for each country applied to the remaining electrical energy
consumed.
- Indirect emissions of electricity (location-based): the IEA emission factor for each country applied to renewable and non-renewable electricity consumption.
G. Indirect electricity emissions fell, mainly because we purchased more green energy in 2022, and reduce electricity consumption by 5.2%.
H. Emissions from employees travelling from central services to the workplace by personal car, mass transport and rail; and from employees' business travel by air and car. The
distribution of employees by type of travel is based on surveys or other estimates. Conversion factors DEFRA 2022 for 2022 and DEFRA 2021 for 2021 were used to calculate
emissions from employee travel. The number of employees travelling to work in personal vehicles was estimated only with the number of parking spaces at central service
buildings and with diesel/petrol consumption by the vehicle fleet. Personal vehicle use by employees in Argentina, Poland and the UK is not reported, as such information is
unavailable. Mass transport use by employees was calculated with the average distance travelled by vehicles Grupo Santander rents to transport its employees in Germany,
Brazil, the US, Spain, Mexico, Poland and Portugal and at SCF, and at the Santander Group City in Spain. Business trips by car from Santander Consumer USA are not reported,
as the information is unavailable. Emissions from courier services, the transport of funds, any purchase of products or services or indirectly from financial services are not
reported.
I. Group's total emissions increased in 2022 by 17.9%, due to the employee travel emissions. In the last two years the Covid-19 pandemic caused these emissions to plummet,
and in 2022 the employee travel was almost recuperated to pre-Covid levels. Comparing these emissions with 2019 data, prior to this exceptional situation, employee travel
emissions have been reduced by 33%, and total emissions have been reduced by 58%.
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4.5 Equator principles
35. Equator Principles
Number of projects
Category
TOTAL
Sector
Mining
Infrastructure
Oil & Gas
Power
Others
Region
Americas
Europe, Middle East & Africa
Asia pacific
Type
Designated countriesA
Non-designated countries
Independent review
Yes
No
A
5
0
0
1
3
1
2
1
2
5
0
5
0
Project Finance
B
24
0
3
0
21
0
4
20
0
22
2
24
0
C
7
0
1
0
6
0
2
5
0
6
1
4
3
Project Related Corporate Loans
B
3
A
3
C
1
Project-Related Refinance and
Project-Related Acquisition for
Project Finance
B
2
A
0
C
0
0
3
0
0
0
0
3
0
0
3
3
0
0
1
0
1
1
0
2
1
0
3
3
0
0
0
0
0
1
0
1
0
1
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
0
0
2
0
0
1
1
2
0
0
0
0
0
0
0
0
0
0
0
0
0
A. In accordance with the definition of designated countries included in the Equator Principles, with solid environmental and sociaI governance, legislation and institutions to
protect their inhabitants and the environment.
Category A – Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented;
Category B – Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily
addressed through mitigation measures2; and
Category C – Projects with minimal or no adverse environmental and social risks and/or impacts.
4.6 Financial inclusion
GRI 203-1, 203-2, 413-1
36. Financially empowered people
million people
Access
Finance
A
Financial education
Total
B
Accumulated since 2019
2022
1.0
1.8
2.7
5.5
11.8
2021
0.9
1.1
1.3
3.3
7.5
2020
0.8
2.0
0.7
3.6
4.9
2019
0.6
0.8
0.6
2.0
2.0
A. The increase in the number of people empowered by financial education programmes is due, among other reasons, to the implementation of programmes and
partnerships in support of refugees from the war in Ukraine.
B. Unique empowered people. Each year only new empowered people are added.
A
37. Microfinance
million euros / people
Total credit disbursed
Total micro-entrepreneurs supported
2022
950
1.6
2021
571
1.0
2020
469.3
1.1
2019
532.4
N/A
A. The increase in credit and microentrepreneurs supported is mainly due to the bank's commitment to expand its microfinance programmes in Latin America.
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4.7 Community investment
GRI 203-1, 203-2, 413-1
38. Community investment
At Banco Santander, we measure our investment in community outreach according to the Business for Societal Impact (B4SI)1
methodology, which is an international benchmark for the Global Reporting Initiative (GRI), S&P Dow Jones Sustainability Index and
other standards and indices.
million euros
Support for higher education
Other local initiatives
Total
2022
100
63
163
2021
106
46
152
2020
110
94
204
39. Outputs and outcomes
We have developed internal methodologies to measure beneficiaries and people helped of our Santander Universities programme
and our local community support initiatives, respectively.
39.1 Beneficiaries from Santander Universities programmes
beneficiaries
Higher education
2022
49,490
195,798
20,739
266,027
2021
40,632
98,480
23,120
162,232
2020
48,804
75,237
32,707
156,748
A
Employability
Entrepreneurship
A
Total
A. Seeking to maximise the reach of the programmes, in 2022 the number of beneficiaries has increased, especially in programmes aimed at improving employability, with
the greatest increase in Brazil and Mexico.
39.2 People helped from local initiatives
million people
Support for childhood education
Support for social welfare
Support for the arts and science
A
Others
Total
A. The increase is due to support for Ukrainian refugees.
2022
0.4
0.9
0.0
1.0
2.3
2021
0.8
1.3
0.0
0.0
2.1
2020
0.5
1.8
0.2
0.1
2.5
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5. Further information
5.1 Stakeholder engagement
GRI 2-29, 3-3, FS5
5.1.1 Listening to our stakeholders and
creating value
We run surveys and speak-up channels for employees and
customers. We assess externalities to identify risks and
opportunities and to appraise our impact on the community. We
respond to demands from analysts, investors and ratings and
NGOs; 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’).
Key dialogue channels for stakeholders
People
89%
aggregated participation
in Your voice Survey
3,935
complaints received
through ethical channels
For more details, see 'Economic, Regulatory and
Competitive Context' in the 'Economic and
Financial Review'.
Customers
Shareholders
+5 million
customer satisfaction
surveys
+40,000
banked individuals
surveyed in the corporate
A
Brand Tracker
436,316
complaints received
12,656
shareholders surveyed
about Santander being
Simple, Personal and Fair
276,198
responses from
shareholders and
investors through studies
and qualitative surveys
163,761
queries answered by
digital channels and
telephone.
201
events with shareholders
and 862 engagements
with institutional
investors (73 on ESG)
Communities
1,306
partner universities and
B
institutions
+2,200
partnerships with social
institutions and entities
+300
social media profiles
+26 million followers
A. Study that measures the perception of Santander's image and its peers in the 10 markets in which we operate as a retail bank.
B. This figure includes universities that have an agreement with Santander Universities, Universia and Fundación Universia´s in 25 countries. Taking Santander Universities
alone, the figure is 835 universities and academic institutions in 11 countries.
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5.1.2 Helping society tackle global challenges:
2030 agenda
Our activity contribute to several United Nations' Sustainable
Development Goals and to the Paris Agreement.
We analysed our agenda’s contribution to the SDGs and
determined the most relevant goals to Banco Santander’s
business, 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
We guarantee the best
employee experience and
an inclusive workplace.
Our financial inclusion
and community support
programmes help
entrepreneurs create
businesses and jobs; and
strength local
economies.
We tackle climate change
with the ambition to be
net zero by 2050, helping
our customers transition
to a sustainable economy
and reducing our own
carbon footprint and
environmental impact.
We promote transparency, the
fight against corruption and
robust governance across our
organization. Our policies and
codes of conduct regulate our
business 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 wealth and
well-being in the countries where we operate. Our
financial inclusion products and services and our
community investment programmes empower
millions each year.
Our pioneering Santander Universities programme
promotes education, entrepreneurship and
employment so universities and students can
prosper. 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, promoting the use of renewable
energies and 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 2022, see the `SDGs contribution content index`at
the end of this chapter
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5.1.3 Partnerships to promote our agenda
GRI 2-23
We drive our responsible banking agenda through a number of
local and international initiatives and working groups, including:
à UNEP Finance initiative
We are an active member of UNEP FI and a founding
signatory to the United Nations Principles for
Responsible Banking.
à World Business Council for Sustainable Development
(WBCSD)
We are an active member of WBCSD. In 2022,
we continued participating in the Banking for Impact on
Climate in Agriculture (B4ICA) initiative.
à United Nations Global Compact
à Banking Environment Initiative (BEI)
We've been part of the Global Compact network since
2002 and a 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.
à 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
Managers 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.
à 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
→ Equator Principles
→ The Valuable 500
→ Partnership for Carbon Accounting Financials (PCAF)
→ UN Principles for Responsible Investment
→ International Wildlife Trade Financial Taskforce
→ CDP (Carbon Disclosure Project)
→ Round Table on Responsible Soy
→ UN Global Investors for Sustainable Development (GISD)
→ Working group on Sustainable Livestock
Alliance
→ Green Recovery Alliance of the European Union
→ Climate Leadership Council
→ The Wolfsberg Group
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5.2 Materiality assessment: identifying
the issues that matter
GRI 2-29, 3-1, 3-2
The matrix is a refresh of last year´s Materiality assessment,
incorporating reinforced trends from latest months, mainly:
geopolitical tensions; inequality; the rising cost of living; stricter
regulation; and other aspects that impact on our markets. It also
takes inputs from subsidiaries related to the items that are
relevant in their markets: digitalization; innovation; human
rights; regulation.
As reflected in section 2.1 Materiality Matrix, there have not
been relevant changes to the items or positioning in the matrix,
but little adjustments in namings and definitions, to better
reflect the current context (see next page).
Following the proposed Corporate Sustainability Reporting
Directive (CSRD) and leading ESG reporting standards, our
matrix follows 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 methodology
Last year we perform and in-depth materiality assessment
which included direct stakeholder input (internal and external
interviews and surveys on the bank’s ESG priorities), in line with
best practice.
→ Phase 1
Based on the external landscape, key trends and our own
operations, we drew up a preliminary list of 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 weighting to rank them by 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 indices' expectations
→ Banking sector reporting trends (peer banks)
Stakeholder
opinion
Customers
9,000 surveys in 9 countries
Employees
500 surveys in each country and at HQ
(more than 1,800 responses)
Senior management
Specific discussions on materiality at our annual
senior 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
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Our ESG priorities
Our materiality assessment identified 15 ESG topics we should focus on.
Crucial topics
—
Customer experience
and satisfaction
Be the bank of choice for
our customers with
products, process and
services that meet their
needs and treat them in
a simple, personal and
fair way. Innovation &
usage of digital
technologies to
maximise access to
products and services
and enhance customer
experience.
Major topics
—
Privacy, data protection
and cybersecurity
Managing the risks from
collecting, storing and using
personal information.
—
Financial health
Financially support our
stakeholders to help
with any potential
challenges (e.g., rising
cost of living) that
might emerge through
tailored products and
solutions, including
financial education
—
Green Finance and
Socially Responsible
Investment
Facilitate and advise
our customers with a
product offering that
integrates
environmental and
social factors, helping
them in their transition
to a sustainable
economy.
—
Environmental and
social risk
management
Ensure our risk
management
framework incorporates
environmental & social
aspects regarding
customers and
operations (Climate,
Human Rights,
Greenwashing, Social
washing) and is
implemented across
geographies.
—
Culture, conduct and
ethical behaviour
Ensure exemplary
conduct from employees
& the institution, incl.:
simple, personal & fair
environment at work,
corporate culture,
conduct and ethical
behaviour,
whistleblowing
channels, full
transparency towards
customers and rest of
stakeholders; best-in-
class policies & controls
(AML FC –inc. modern
slavery, illegal trade, tax,
human rights)
—
Net zero by 2050
Ensure that the emissions
from our customer
portfolio and operational
footprint are aligned with
the Paris Agreement and
targeted towards net zero
by 2050.
—
Diversity, Equity
and inclusion
Ensuring fairness and
respect among employees in
an inclusive environment,
with zero tolerance of
harassment and
discrimination in a
psychological safety
environment.
—
Business resilience (inc. digitalization
& innovation)
Adapting to a changing and uncertain
environment, maintaining the resilience of
the business and building on strategic
priorities (One Santander, Digital
Consumer Bank and PagoNxt) and adapt to
current trends (e.g., growing importance of
digitalization and innovation).
—
Talent management
and development
Have a talented and
motivated workforce,
offering development
opportunities; and ensuring
meritocracy.
—
Financial inclusion
Developing and providing
products and services
promoting access to basic
financial services,
including finance that
meet their needs.
—
Corporate Governance
Ensuring the corporate governance system remains well established &
effective, supporting shareholder value & efficient capital allocation, whilst
addressing interests of all our stakeholders. Incl. Rewards and incentives
and with special focus in meeting growing regulatory requirements and
responding to the disclosure demands with transparency and efficiency.
Relevant topics
—
Responsible
procurement
Assessing ESG in our
supply chain to manage
associated risks.
—
Education and support to communities
Santander Universities focus on providing education,
employability and entrepreneurship opportunities,
connecting startups and SMEs, clients, training and other
resources. We also support community well-being and
improve the lives of people at risk of exclusion through our
community programs.
—
Nature & Biodiversity
Identifying and managing the impact and
dependencies of Santander’s financial activity
on nature and biodiversity through those it
lends to, including, but not limited to
deforestation, natural resource extraction,
cultivation or project development.
— Environmental — Social — Government
After the materiality análisis, issues such as materials (GRI 301), water and effluents (GRI 303), waste (GRI 306), labor/management relations (GRI 402), occupational health
and safety (GRI 403), freedom of association and collective bargaining (GRI 407), child labor (GRI 408), forced or compulsory labor (GRI 409), security practices (GRI 410), food
waste, light and noise pollution have not been identified as material to the Group given its activity and geographies of operation. More details in Non-financial information Act
11/2018 content index and Global Reporting Initiative (GRI) content index.
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5.3 Risk and opportunities
GRI 2-25, 3-3
Methodology analysis
Aligned to our materiality assessment, we have identified the
risk and opportunities for Banco Santander and their impacts
(real or potential). A two-part methodology has been applied:
1. We identified areas of social concern that relate to our
most material issues, where we can have a major impact
Combining our internal analysis focused on the Group
materiality assessment, along with external studies related to
ESG matters in the market, such us The Global Risks Report
2022 by the World Economic Forum, we have identified four
areas of social concerns — one environmental, two social and
one economic/governance — where we can have a major impact
due to the risk and opportunities they bring.
2. We identified the risks and opportunities each area of social
concern bring, and the impacts (real or potential) associated.
We identified main risks and opportunities for each area of
social concern considering guidelines such as the OECD Due
Diligence Guidance for Responsible Business Conduct, or the
Sector Impact Mapping of the United Nations Environment
Programme Finance Initiative (UNEP FI).
This exercise has also informed our ESG agenda towards
avoiding or minimizing negative impacts; and generating or
maximizing positive impacts.
Below, the list of impacts associated and relevant KPIs.
Environmental
Social
Governance
Areas
Climate change
Financial health and
inclusion
Quality employment
Responsible management
and business
development
Materiality Net zero by 2050
issue
Green finance and SRI
Financial health
Financial inclusion
Nature & Biodiversity
Education & support to
communities
Diversity, equity and
inclusion
Customer experience and
satisfaction
Talent management and
development
Culture, conduct and
ethical behaviour
Privacy, data protection &
cyber
Business Resilience (incl.
digitalization & innovation)
Corporate governance
environmental, social and
climate change risk
management
Responsible procurement
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Key areas where Santander has or can have more impact
Environmental
→ The Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report
declares global warming an unquestionable reality given the unprecedented
changes witnessed since the 1950s.
Climate change
→ The climate emergency is one of the humankind’s biggest challenges.
Social
→ Despite progress, social inequality remains an area of concern.
→ According to the World Bank, some 1.4 billion people are unbanked, and most of
them live in low-income households in developing countries.
Social stability
→ According to latest UN Sustainable Development Goals Report, access to education
remains an issue.
→ According to Cambridge University’s Sustainable Development Report 2022, while
unemployment has fallen in developed countries since 2020, it has increased in
developing countries.
→ The war in Ukraine is expected to make joblessness worse, especially among
vulnerable groups, due to rising energy prices and supply chain disruption.
→ The Covid-19 crisis put a strain on the global economy, but the war in Ukraine has
made matters worse since it started in early 2022. Companies must adapt and take
measures to properly manage at the same time a humanitarian crisis unseen since
World War II, an energy crisis rooted in dependence on fossil fuels, major regulatory
reform and the need for rapid digitalization.
Quality
employment
Governance
Responsible
management and
business
development
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5.4 EU Taxonomy
Information about Article 8 of the EU Taxonomy Regulation
In 2020, the European Parliament adopted the Taxonomy
Regulation. It establishes the criteria for determining whether
an economic activity qualifies as environmentally sustainable
and incorporates an obligation that companies subject to the
Non-Financial Reporting Directive (NFRD), including financial
corporations, must disclose how operations align with the
Taxonomy.
Before publishing the GAR in 2024, companies in 2022 and
2023 must make their eligibility ratio public. 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
screening criteria that establishes under which conditions an
activity can be considered as environmentally sustainable.
The primary indicator of alignment is the green asset ratio
(GAR), which companies must publish from 2024. It shows the
extent to which activities in our balance sheet meet the
Taxonomy’s technical 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).
How did we calculate our proportion of eligible activities?
The European Commission has two approaches to calculate the
eligibility ratio: mandatory reporting based on information that
counterparties publicly disclose; and voluntary reporting, which
is an estimate based on proxies when the information about
eligibility of the counterparties is not available.
This year we have been able to include the eligibility exposure
of our financial and non financial counterparties under the
mandatory approach, after capturing the data published by
these counterparties (both CapEx
eligibility) and provided by them on projects or activities aligned
with the SFCS
and turnover
-based
31
.
29
30
Santander's eligibility ratio is 35%, while our balance sheet’s potential eligibility ratio is 74%
32
.
29
30
31
32
CapEx: capital expenditure.
Turnover: ordinary revenue pursuant to IAS 1, paragraph 82(a).
SFCS: Sustainable Finance Classification System, which sets our internal criteria to consider an asset as green, social or sustainable based on the EU Taxonomy, among other
industry principles and guidelines. The activities from the SFCS not included in the EU Taxonomy were not included in the eligible exposures (e.g. agriculture or biodiversity).
For more information, please see section 5.5. Sustainable Finance Classification System (SFCS).
Potential eligibility of our portfolio for both mandatory and voluntary approaches. Santander is developing only the mandatory approach across this report.
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Numerator
The numerator includes:
→ exposures in the following household loan portfolio:
residential property loans, building renovation loans and
vehicle loans.
→ exposures to financial and non-financial corporations subject
to NFRD33
separated into:
– General purpose: based on the eligibility ratio publicly
disclosed by our counterparties
– Specific purpose: based on information provided by the
counterparties on projects or activities to which the
proceeds were applied by using the SFCS.
Denominator
We calculated the eligibility ratio for the 88% of the balance
sheet. The 12% not included comprises exposure to sovereign
debt, central banks and the trading book.
Eligibility ratios
Our mandatory ratio, as required under the Disclosures
Delegated Act, represents the eligible exposures to financial,
non-financial corporations and household exposures divided by
the denominator. The resulting mandatory eligibility ratio is
35% (both CapEx and turnover-based).
Our exposures reported under the Disclosures Delegated Act
Eligible activities under Article 10.3 (a) of the Disclosures Delegated Act
Lending
Mandatory approach (CapEx-
based)
Mandatory approach (turnover-
based)
Proportion of eligible economic activities
EUR bn
%
35 %
35 %
531.04
530.66
Proportion of non-eligible economic
activities
%
EUR bn
65 %
970.79
65 %
971.18
Coverage
%
88 %
Other exposures to report under Articles 10.3 (b) and (c) of
the Disclosures Delegated Act
Portfolios
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
8 %
5 %
129.8
75.2
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'.
14 %
5 %
1 %
214.2
89.1
13.4
For more details on how our financial strategy, product
design and relations with customers and counterparties
comply with the EU Taxonomy, please see section
'Supporting the green transition'.
33
This condition has been identified: For the general-purpose volumes, companies publishing their eligible CapEx and turnover. For specific-purpose volumes, a combination of
the booking criteria and exclusion of SMEs has been considered.
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5.5 Sustainable Finance
Classification System (SFCS)
GRI FS8
Sustainable finance is key to meeting our ambition to be net
zero by 2050. We developed our Sustainable finance
classification system (SFCS), which was published in February
2022 and has been recently updated. The SFCS is an internal
guide that outlines harmonized criteria to consider an asset
green, social or sustainable in all the Group’s units and
businesses. Reviewed by Sustainalytics, it 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 enables us to track our sustainable activity, 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.
We updated the SFCS based on lessons learned and market
trends. It now features:
An entity-based approach, which complements the
activity-based approach.
Additional details on manufacturing, real estate,
sustainable agriculture and other activities.
New activities, like solutions to reduce GHG emissions
or that relate to energy generation.
Nevertheless, we will keep updating the SFCS when new
sustainable market developments and Santander´s practice will
require. Beyond green activity, we are also working to identify
transition activities to support our customers and contribute to
our net zero objective.
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
→ 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 financing
→ 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)
Green, social and sustainability funding global framework published in 2022
Published in June 2022, our Green, Social and Sustainability
Funding Global Framework is the reference for all green, social
and sustainability labelled funding instruments traded in
sustainable capital markets and allow all Santander Group
entities to issue out of it. It replaces our previous Global
Sustainable Bond and Green bond frameworks.
Consistent with best market practices and the expectations of
investors, it covers use of proceeds, process for project
evaluation and selection, management of proceeds and
reporting, in line with the International Capital Market
Association’s (ICMA) and Loan Market Association’s (LMA)
guidelines. It is aligned with our Sustainable Finance
Classification System (SFCS).
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5.6 Country by country report
GRI 207-4
According GRI 207-4 TAX, a report of financial, economic and tax-related information is required for each country where Santander
operates. Profit/loss before tax, corporate income tax paid in cash, and the calculation of the number of employees are already
included in Appendix VI of the consolidated financial statements (Annual Banking Report):
EUR million
2022
E
D
Jurisdiction
Germany
Argentina
Austria
Bahamas
Belgium
Brazil
Canada
Chile
China
Colombia
United Arab Emirates
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
Consolidated group total
Revenue from
third-party sales
A Revenue from intra-group transactions
with other tax jurisdictions
A Tangible assets other than
cash and cash equivalents
B
1,710
1,831
204
11
58
12,500
68
2,408
14
68
1
6,192
7,776
177
31
925
2
156
1
110
-14
582
-11
380
4,572
271
91
155
2,776
1,362
0
6,906
20
172
155
457
52,117
11
-20
-6
-1
13
-187
-9
-16
5
1
6
1,515
-152
-3
73
-56
-1
-52
2
-128
62
-35
53
-5
-59
-26
-4
-4
-6
-5
0
-170
0
0
5
-3
798
2,767
634
13
1
2
1,755
1
531
0
2
0
11,582
14,518
0
40
77
0
0
0
940
0
39
0
48
1,625
50
61
4
238
514
0
1,949
0
0
63
55
37,509
Corporate income tax
C
accrued on profit/loss
202
195
21
0
6
894
4
204
1
5
0
171
433
26
10
24
-1
4
0
1
3
80
2
156
606
28
79
21
238
208
0
590
2
-8
7
60
4,272
A. Revenue from intra-group transactions with other tax jurisdictions includes interest income; interest expenses; commission income and expenses for transactions between
Santander companies whose residence is in different tax jurisdictions; and intra-group income, excluded from total income in the consolidated income statement because
counterparty expense is recorded under another item of the consolidated income statement not included in total income.
B. Tangible assets: Composed of tangible assets, non-current assets held for sale and inventories.
C. The accrued corporate income tax is a current-year expense and does not include deferred taxes.
D.
E.
Including the information about a branch in the Cayman Islands with EUR 124 million in accrued corporate income tax.
Includes Corporate Centre.
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Corporate income tax accrued on profit/loss and the tax due if the statutory tax rate is applied to profit/loss before tax are different
mainly because of tax calculation standards, which establish temporary or permanent restrictions on the deduction of expenses,
exemptions, deductions and other adjustments that cause the tax and accounting result to differ.
Other main adjustments to the taxable income in the Group’s relevant jurisdictions are:
• the monetary correction in Chile and Mexico;
• the hyperinflation adjustments in Argentina;
• the deduction of juros and taxes on margins in Brazil;
• and permanent adjustments in Poland and other jurisdictions due to non-deductible expenses (like Bank Levy) or recognized
provisions.
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6. ESG reporting standards
and references
6.1 Non-financial information Act 11/2018 content index
6.2 UN Global Compact content index
6.3 UNEP FI Principles for Responsible Banking reporting index
6.4 Global Reporting Initiative (GRI) content index
6.5 Sustainability Accounting Standards Board (SASB) content index
6.6 Stakeholder Capitalism Metrics content index
6.7 Task Force on Climate-related Financial Disclosure (TCFD) content
index
6.8 SDGs contribution content index
105
110
111
129
143
146
151
152
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6.1 Non-financial information
Act 11/2018 content index
Table of equivalences with reporting requirements under Spain's Act 11/2018
Non-financial information to be disclosed
Brief description of the Group’s business model (including
its business environment, organization and structure,
markets, objectives and strategies, plus the main factors and
trends that can affect its future performance).
Chapter/section of the annual report
Business model and strategy (p. 7); About
this chapter (p. 18); Materiality matrix (p.
23); Materiality assessment (p. 95).
0.
General
Information
A description of the Group's policies that includes due
diligence procedures for identifying, assessing, preventing
and mitigating risks and significant impacts, and for verifying
and controlling, 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.
Correspondence
with GRI
indicators/Other
regulations
GRI 2-1
GRI 2-2
GRI 2-3
GRI 2-4
GRI 2-5
GRI 2-6
GRI 2-7
GRI 2-22
GRI 3-3
Policies (p. 26); Conduct and ethical
behaviour (p. 32) (Environmental, social and
climate change risk management section).
A talented and motivated team (p. 37);
Acting responsibly towards customers (p.
47); Responsible procurement (p. 51);
Supporting the green transition (p. 52);
Socially responsible investment (p. 67).
Our progress in figures (p. 76).
Risk and opportunities (p. 24); Conduct and
ethical behaviour (p. 32) (Environmental,
social and climate change risk management
section); Supporting the green transition (p.
52); Acting responsibly towards customers
(p. 47); Risk management and compliance
chapter (p. 419).
GRI 2-24
GRI 3-3
GRI 2-12
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Non-financial information to be disclosed
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.
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:
Waste prevention measures, waste recycling measures,
waste reuse measures; other forms of waste recovery and
reuse; actions against food waste.
Sustainable use of resources:
Use and supply of water according to local limitations
1.
Environmental
Information
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:
Important elements of greenhouse gas emissions generated
as a business activity (including goods and services produced)
Measures taken to adapt to the consequences of climate
change
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
Correspondence
with GRI
indicators/Other
regulations
GRI 2-12
GRI 2-23
GRI 3-3
Chapter/section of the annual report
Supporting the green transition (p. 52);
Conduct and ethical behaviour (p. 32)
(Environmental, social and climate change
risk management).
At the end of the 2022 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.
Supporting the green transition (p. 52)
(Reducing our environmental footprint).
GRI 3-3
GRI 305-5
Supporting the green transition (p. 52)
(Reducing our environmental footprint).
Supporting the green transition (p. 52)
(Reducing our environmental footprint); Our
progress in figures (p. 76) (Environmental
footprint)
Supporting the green transition (p. 52)
(Reducing our environmental footprint); Our
progress in figures (p. 76) (Environmental
footprint)
Supporting the green transition (p. 52)
(Reducing our environmental footprint); Our
progress in figures (p. 76) (Environmental
footprint)
Supporting the green transition (p. 52)
(Reducing our environmental footprint); Our
progress in figures (p. 76) (Environmental
footprint)
Supporting the green transition (p. 52)
Supporting the green transition (p. 52)
GRI 3-3
GRI 301-1
GRI 306-2
GRI 303-5
GRI 3-3
GRI 301-1
GRI 3-3
GRI 302-1
GRI 302-3
GRI 302-4
GRI 3-3
GRI 305-1
GRI 305-2
GRI 305-3
GRI 305-4
GRI 3-3
GRI 201-2
GRI 2-23
GRI 3-3
Supporting the green transition (p. 52) (Our
approach to nature and biodiversity).
GRI 3-3
GRI 304-2
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Non-financial information to be disclosed
Employment:
Total number and distribution of employees by gender, age,
country and professional classification
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
Salary gap and remuneration of equal or average jobs in
society
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)
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)
Percentage of employees covered by collective bargaining
agreements by country
Balance of the collective bargaining agreements (particularly
in the field of health and safety in the workplace)
Mechanisms and procedures that employers have for
encouraging the involvement of workers in management of
the company, in terms of information, consultation and
participation
Training:
The policies implemented in the field of training
Chapter/section of the annual report
Our progress in figures (p. 76).
Our progress in figures (p. 76).
Our progress in figures (p. 76).
Our progress in figures (p. 76).
A talented and motivated team (p. 37)
(Diversity, equity and inclusion section).
Our progress in figures (p. 76).
A talented and motivated team (p. 37)
(Transforming the way we work section).
Our progress in figures (p. 76).
A talented and motivated team (p. 37)
(Transforming the way we work section).
Our progress in figures (p. 76).
A talented and motivated team (p. 37)
(Gender equality section).
A talented and motivated team (p. 37)
(Employees’ health and well-being section).
Our progress in figures (p. 76).
A talented and motivated team (p. 37)
(Social dialogue section). Acting responsibly
towards customers (p. 47); Stakeholders
engagement (p. 92).
Our progress in figures (p. 76).
A talented and motivated team (p. 37)
(Employees’ health and well-being section)
Conduct and ethical behaviours (p. 32)
(Ethical channels)
A talented and motivated team (p. 37)
(Ensuring we have the right talent and skills
section).
Total number of hours of training by professional categories. Our progress in figures (p. 76).
Correspondence
with GRI
indicators/Other
regulations
GRI 2-7
GRI 3-3
GRI 405-1
GRI 2-7
GRI 405-1
GRI 401-1
GRI 405-2
GRI 3-3
GRI 405-2
GRI 2-19
GRI 2-20
GRI 3-3
GRI 405-2
GRI 3-3
GRI 405-1
GRI 3-3
GRI 403-9
GRI 403-10
GRI 3-3
GRI 3-3
GRI 403-9
GRI 403-10
GRI 3-3
GRI 2-30
GRI 403-1
GRI 403-4
GRI 3-3
GRI 404-2
GRI 404-1
2.
Social
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Non-financial information to be disclosed
Accessibility:
Universal accessibility of people
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.
Elimination of discrimination in respect of employment and
occupation; elimination of forced or compulsory labour; and
the effective abolition of child labour.
Measures taken to prevent corruption and bribery
4.
Fight against
corruption
Measures to combat money laundering
Contributions to non-profit foundations and entities
Correspondence
with GRI
indicators/Other
regulations
GRI 3-3
Chapter/section of the annual report
A talented and motivated team (p. 37)
(Diversity, equity and inclusion section
section); Acting responsibly towards
customers (p. 47); Support to higher
education and other local initiatives (p. 72).
A talented and motivated team (p. 37)
(Diversity, equity and inclusion section);
Support to higher education and other local
initiatives (p. 72).
GRI 3-3
Policies (p. 26); Conduct and ethical
behaviour (p. 32) (Environmental, social and
climate change risk management and
Human rights protection section);
Responsible Procurement (p. 51).
Policies (p. 26); Conduct and ethical
behaviour (p. 32) (General code of conduct,
Environmental, social and climate change
risk management, and Human rights
protection sections); Responsible
Procurement (p. 51).
Conduct and ethical behaviour (p. 32)
(Ethical channels section).
A talented and motivated team (p. 37)
Conduct and ethical behaviour (p. 32)
(Environmental, social and climate change
risk management and Human rights
sections)
Policies (p. 26); Conduct and ethical
behaviour (p. 32) (Financial crime
compliance section).
Risk management and compliance chapter:
7.2 Compliance and conduct risk
management section (p. 477).
Policies (p. 26); Conduct and ethical
behaviour (p. 32) (Financial crime
compliance section).
Risk management and compliance chapter:
7.2 Compliance and conduct risk
management section (p. 477).
Support to higher education and other local
initiatives (p. 72).
GRI 2-25
GRI 3-3
GRI 2-23
GRI 2-24
GRI 2-25
GRI 2-26
GRI 406-1
GRI 3-3
GRI 2-23
GRI 3-3
GRI 406-1
GRI 2-23
GRI 2-26
GRI 3-3
GRI 205-1
GRI 205-2
GRI 2-23
GRI 2-26
GRI 3-3
GRI 205-1
GRI 205-2
GRI 413-1
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Non-financial information to be disclosed
Commitments of the company to sustainable development:
The impact of the company’s activity on employment and
local development
The impact of the company’s activity on local towns and
villages and in the country.
5.
Information on
the company
Relations maintained with the representatives of local
communities and the modalities of dialogue with them.
Association or sponsorship actions
Outsourcing and suppliers:
Inclusion of social, gender equality and environmental issues
in the procurement policy
Consideration in relations with suppliers and subcontractors
of their responsibility
Supervision and audit systems and resolution thereof
Consumers:
Measures for the health and safety of consumers
Systems for complaints received and resolution thereof
5.
Information on
the company
Tax information:
The profits obtained country by country
Taxes on benefits paid
Public grants received
EU Taxonomy
6.
Other relevant
information
Chapter/section of the annual report
Support to higher education and other local
initiatives (p. 72). Financial inclusion and
empowerment (p. 69). Conduct and ethical
behaviour (p. 32) (Environmental, social and
climate change risk management).
Support to higher education and other local
initiatives (p. 72). Financial inclusion and
empowerment (p. 69).
Stakeholder engagement (p. 92).
Santander participates in the sectoral
associations representing financial activity
in the countries in which it operates, such as
the AEB in the case of Spain.
Responsible procurement (p. 51).
Responsible procurement (p. 51).
Responsible procurement (p. 51).
Acting responsibly towards customers (p.
47). Risk management and compliance
chapter: 7.2 Compliance and conduct risk
management section (p. 477)
Acting responsibly towards customers. (p.
47); Risk management and compliance
chapter (7.2 Compliance and conduct risk
management section) (p. 477).
Auditor's report and 2022 annual
consolidate accounts (p. 501) (Annex VI
Annual banking report) and Auditor's Report
and 2021 annual consolidate accounts
(Annex VI Annual banking report).
Our progress in figures (p. 76) (4.3 Tax
contribution)
GRI content index (p. 129).
Information related to article 8 of EU
Taxonomy:
Socially responsible investment (p. 67); EU
Taxonomy (p. 99).
Correspondence
with GRI
indicators/Other
regulations
GRI 3-3
GRI 203-1
GRI 203-2
GRI 413-1
GRI 413-2
GRI 203-1
GRI 203-2
GRI 411-1
GRI 413-1
GRI 413-2
GRI 2-29
GRI 2-28
GRI 2-6
GRI 3-3
GRI 204-1
GRI 308-1
GRI 414-1
GRI 3-3
GRI 3-3
GRI 416-1
GRI 417-1
GRI 2-26
GRI 3-3
GRI 416-2
GRI 417-2
GRI 418-1
GRI 3-3
GRI 207-1
GRI 201-4
EU Regulation
2020/852 and
Commission
Delegated
Regulations
2021/2139 of 4
June and
2021/2178 of 6
July
In addition to the contents mentioned in the previous table, the consolidated non-financial information statement of Banco Santander
includes the following contents: 1, 2-8, 2-10, 2-11, 2-13, 2-14, 2-15, 2-16, 2-17, 2-18, 2-21, 2-27, 3-1, 3-2, 201-1, 201-3, 202-1,
202-2, 205-3, 206-1, 207-1, 207-2, 207-3, 207-4, 302-2, 302-5, 304-1, 304-3, 304-4, 305-6, 305-7, 306-1, 306-3, 306-4, 306-5,
308-2, 401-2, 401-3, 403-2, 403-3, 403-5, 403-6, 403-8, 404-3, 414-2, 415-1, 417-3.
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6.2 UN Global Compact
content index
Banco Santander has been a member of the United Nations Global Compact since 2002. Through the Responsible Banking chapter of
this 2022 Annual Report, the bank shows its support and progress in complying with the Ten Principles of the United Nations Global
Compact in the areas of human rights, labour, environment and anti-corruption.
Businesses should make sure they are not complicit in human A talented and motivated team (p. 37)
rights abuses.
(Our listening section); Conduct and
ethical behaviour (p. 32) (Ethical
channels section)
Principles
Human rights
Principle 1:
Businesses should support and respect the protection of
internationally proclaimed human rights.
Principle 2:
Labour
Principle 3:
Principle 4:
Businesses should uphold the freedom of association and the
effective recognition of the right to collective bargaining.
Businesses should uphold the elimination of all forms of
forced and compulsory labour.
Principle 5:
Businesses should uphold the effective abolition of child
labour.
Principle 6:
Businesses should uphold the elimination of discrimination in
respect to employment and occupation.
Environment
Principle 7:
Principle 8:
Businesses should support a precautionary approach to
environmental challenges.
Businesses should undertake initiatives to promote greater
environmental responsibility.
Reference in the
2022 Annual report
Correspondence
with GRI indicators
Policies (p. 26); Governance (p. 27);
Conduct and ethical behaviour (p. 32)
(General code of conduct,
Environmental, social and climate
change risk management, and Human
rights protection section); Responsible
Procurement (p. 51).
A talented and motivated team (p. 37)
(Social dialogue section).
Conduct and ethical behaviour (p. 32)
(Environmental and social risk analysis
and Human rights sections).
Conduct and ethical behaviour (p. 32)
(Environmental and social risk analysis
and Human rights sections).
A talented and motivated team (p. 37)
(Diversity, equity and inclusion section
section).
GRI 2-7, 2-22, 2-23,
2-30, 201-3, 205-2,
401-1, 401-2, 403-1,
403-6, 403-9, 406-1,
414-1
GRI 406-1, 414-1
GRI 2-30, 401-2
GRI 2-7, 401-1, 401-2,
403-9, 404-1, 404-2,
404-3, 405-1, 406-1
Supporting the green transition (p. 52).
GRI 308-1
Supporting the green transition (p. 52).
GRI 302-1, 302-4,
303-5, 305-1, 305-2,
305-3, 305-4, 305-5
GRI 302-4, 305-5
Principle 9:
Businesses should encourage the development and diffusion
of environmentally friendly technologies.
Supporting the green transition (p. 52)
(Reducing our environmental footprint).
Our progress in figures (p. 76).
Anti-Corruption
Principle 10:
Businesses should work against corruption in all its forms,
including extortion and bribery.
Policies (p. 26); Conduct and ethical
behaviour (p. 32) (Financial crime
compliance section); Risk management
and compliance chapter: 7.2 Compliance
and conduct risk management section
(p. 477).
GRI 2-23, 2-27, 205-1,
205-2
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6.3 UNEP FI Principles for Responsible Banking
reporting index
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.
Business model
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 across the main geographies in which your bank operates or
provides products and services. Please also quantify the information by disclosing e.g. the distribution of your bank’s
portfolio (%) in terms of geographies, segments (i.e. by balance sheet and/or off-balance sheet) or by disclosing the
number of customers and clients served.
Santander is a retail bank operating in 3 regions (Europe, North America and South
America) and in 10 main markets. Furthermore, we have two global businesses: like
Santander Corporate & Investment Banking; Wealth Management & Insurance
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.
-Total customers served: 160 million
-Gross loans and advances to customers by region: Europe (57%); North America
(16%); South America (15%); Digital Consumer bank (12%).
-Gross loans and advances to customers by segment: individuals (62%), SMEs and
corporates (24%) and SCIB (14%).
Links and references
Corporate website -
www.santander.com
• About us
• Our approach
2022 Digital Annual Review
2022 Annual Report
• Business model and strategy
chapter
• Economic and financial review
chapter
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Strategy alignment
Does your corporate strategy identify and reflect sustainability as strategic priority/ies for your bank?
☒ Yes
☐ No
Please describe how your bank has aligned and/or is planning to align its strategy to be consistent with the Sustainable
Development Goals (SDGs), the Paris Climate Agreement, and relevant national and regional frameworks.
Does your bank also reference any of the following frameworks or sustainability regulatory reporting requirements
in its strategic priorities or policies to implement these?
☒ UN Guiding Principles on Business and Human Rights
☒ International Labour Organization fundamental convention
☒ UN Global Compact
☒ UN Declaration on the Rights of Indigenous Peoples
☒ Any applicable regulatory reporting requirements on environmental risk assessments, e.g. on climate risk - please
specify which ones: NFRD (Spanish Act 11/2018), Pillar III
☒ Any applicable regulatory reporting requirements on social risk assessments, e.g. on modern slavery - please specify
Links and references
2022 Digital Annual Review
• About us
2022 Annual Report -
Responsible banking chapter
• 2.3 Our ESG agenda
• 5.1 Stakeholder engagement
• 6.8 SDGs contribution content
index
Other references
• Santander UK Modern Slavery
Statement -
www.santander.co.uk/about-
santander/investor-relations/
modern-slavery-statement
which ones: Modern Slavery Act 2015 UK
☐ None of the above
At Banco Santander we are committed to inclusive and sustainable growth. 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.
As a responsible bank, we focus on areas where our activity can have the greatest
impact and support an inclusive and sustainable growth.
We are a member of the United Nations Global Compact since 2002. Our policies
take into account the highest international standards.
Our activity and investments contribute to several United Nations' Sustainable
Development Goals and to the Paris Agreement. 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 and 17)
We support the Paris Agreement goals and in 2021 we set our ambition to be net
zero carbon emissions by 2050.
We also drive our responsible banking agenda through a number of local and
international initiatives and working groups, including: UN Principles for Responsible
Banking, TCFD, NZBA, Equator principles, CDP; UN Principles for Responsible
Investment, UN Women's Empowerment Principles, The Valuable 500, or CEO
partnership for Economic inclusion.
We comply with all regulatory requirements regarding ESG disclosure. Our
Responsible banking chapter of the Annual report 2022 is the consolidated non-
financial information statement of Banco Santander, S.A. and its subsidiaries. It
provides detailed information in accordance with Spanish Act 11/2018, which
transposes into Spanish law Directive 2014/95/EU. Our first Pillar 3 ESG risk
disclosure also covered the new market requirements.
Taking all this into consideration, our three main priorities as a responsible bank are:
• Support the transition to a low carbon economy;
• Promote inclusive growth;
• Strong governance and culture across the organization.
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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 (Key Step 1)
Show that your bank has performed an impact analysis of its portfolio/s to identify its most significant impact areas
and determine priority areas for target-setting. The impact analysis shall be updated regularly
requirements/elements (a-d)
a) Scope: What is the scope of your bank’s impact analysis? Please describe which parts of the bank’s core business
and fulfil the following
2
:
1
areas, products/services across the main geographies that the bank operates in (as described under 1.1) have been
considered in the impact analysis. Please also describe which areas have not yet been included, and why
Banco Santander performs a materiality assessment, (last deep dive in 2021 and
refresh in 2022) to identify the most relevant items in ESG following a double
materiality approach.
Also in 2022 we conducted a first exercise to identify impacts, risks and
opportunities for Banco Santander, aligned to our materiality assessment.
The scope of the exercise was Group while taking into account the Bank's main
business segments (mainly retail banking and corporate and investment banking).
The identified four relevant aspects (climate change,financial health and inclusion ,
quality employment and responsible management and business development) also
takes into account context and trends of the different geographies in which we
operate.
Links and references
Annual report 2022 -
Responsible banking chapter
• 2.1 Materiality matrix
• 2.2 Risk and opportunities
• 5.2 Materiality assessment
• 5.3 Risk and opportunities
analysis
b) Portfolio composition: Has your bank considered the composition of its portfolio (in %) in the analysis? Please
provide proportional composition of your portfolio globally and per geographical scope
3
i) by sectors & industries
breakdown in %), and/or
ii) by products & services and by types of customers for consumer and retail banking portfolios.
for business, corporate and investment banking portfolios (i.e. sector exposure or industry
If your bank has taken another approach to determine the bank’s scale of exposure, please elaborate, to show how you
have considered where the bank’s core business/major activities lie in terms of industries or sectors.
The identification of risk and opportunities takes into account key features of
Santander such as our geographical footprint and our customers’ profile (mostly
retail).
• Credit risk distribution by region (31 dec 2022): Europe (57%), South America
(16%), North America (15%) and Digital Consumer Bank (11%).
• Credit risk distribution by segment (31 dec 2022): Individuals (56%); Companies
(24%); SCIB (24%).
For climate issues we developed an in-depth materiality assessment (Climate risk
analysis and heat mapping of portfolios) with our exposure to different climate-
material sectors also including an assessment of transition and physical risk. This
materiality assessment identifies the climate most material portfolios. It covers
more than 80% of our balance sheet and include assessments of residual value,
strategic, market and liquidity risks.
Links and references
Annual report 2022 -
Responsible banking chapter
• 3.6 Supporting the green
transition
Annual report 2022 - Risk
management and compliance
chapter
• 3. Credit risk
1. That means that where the initial impact analysis has been carried out in a previous period, the information should be updated accordingly, the scope expanded as well as the
quality of the impact analysis improved over time.
2. Further guidance can be found in the Interactive Guidance on impact analysis and target setting (https://www.unepfi.org/wordpress/wp-content/uploads/2022/05/Impact-
and-Target-Process-V-1.1-09.05.2022.pdf).
3. ‘Key sectors’ relative to different impact areas, i.e. those sectors whose positive and negative impacts are particularly strong, are particularly relevant here.
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c) Context: What are the main challenges and priorities related to sustainable development in the main countries/
4
regions in which your bank and/or your clients operate?
what stakeholders you have engaged to help inform this element of the impact analysis.
Please describe how these have been considered, including
This step aims to put your bank’s portfolio impacts into the context of society’s needs.
Our materiality assessment reflects trends related to geopolitical tensions;
inequality; the rising cost of living; stricter regulation; and other aspects that impact
on our markets. It also takes inputs from subsidiaries on digitalization, innovation,
human rights; regulation; and other issues.
We analyzed internal and external sources , including: Group local materialities,
financial sector materiality, and main relevant reports published by sustainable
trend setters. We also reviewed latest regulations, reporting standards and ESG
ratings analysis.
This helped us to refresh previous materiality assessment, which also included an
in-depth consultation with our key stakeholders (we ran workshops, surveys and
one-to-one interviews and gathered feedback from customers, employees, senior
managers, investors and NGOs).
Links and references
Annual report 2022 -
Responsible banking chapter
• 2.1 Materiality matrix
• 2.2 Risk and opportunities
• 5.2 Materiality assessment
• 5.3 Risk and opportunities
analysis
Based on these first 3 elements of an impact analysis, what positive and negative impact areas has your bank
identified? Which (at least two) significant impact areas did you prioritize to pursue your target setting strategy (see
5
? Please disclose.
2.2)
We have identified four areas of social concerns — one environmental, two social
and one economic/governance (climate change, financial health and inclusion,
quality employment and responsible management and business development) —
where we can have a major impact due to the risk and opportunities they bring.
Of those, we have prioritised those two areas in which we believe we can contribute
the most (minimizing negative impacts or maximizing positive ones) and which are
aligned to our core business.
• Climate change
• Financial health & inclusion
Links and references
Annual report 2022 -
Responsible banking chapter
• 2.2 Risk and opportunities
• 2.3 Our ESG agenda
• 5.3 Risk and opportunities
analysis
d) For these (min. two prioritized impact areas): Performance measurement: Has your bank identified which sectors &
industries as well as types of customers financed or invested in are causing the strongest actual positive or negative
impacts? Please describe how you assessed the performance of these, using appropriate indicators related to
significant impact areas that apply to your bank’s context.
In determining priority areas for target-setting among its areas of most significant impact, you should consider the
bank’s current performance levels, i.e. qualitative and/or quantitative indicators and/or proxies of the social,
economic and environmental impacts resulting from the bank’s activities and provision of products and services. If
you have identified climate and/or financial health&inclusion as your most significant impact areas, please also refer
to the applicable indicators in the Annex.
If your bank has taken another approach to assess the intensity of impact resulting from the bank’s activities and
provision of products and services, please describe this.
The outcome of this step will then also provide the baseline (incl. indicators) you can use for setting targets in two
areas of most significant impact.
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Links and references
Annual report 2022 -
Responsible banking chapter
• 3.6 Supporting the green
transition
• 3.8 Financial inclusion and
empowerment
As mentioned above, for the area of climate change, we developed a Climate risk
analysis and heat mapping of portfolios. This analysis reflects our exposure to
different climate-material sectors with an assessment of transition and physical risk,
and hence, identifies the climate most material portfolios. The sectors with high and
very high transition risk are the high-emitters, where we have focused to set
decarbonisation targets. By year end, we have already set decarbonisation targets
for five of these sectors.
Climate poses not only risks but also opportunities. We have worked to identify
where are the largest opportunities to help the customers and the economies we
serve in the transition to a low carbon economy. Prioritized sectors in the
commercial banking portfolios are: Green buildings, Clean mobility, Sustainable
Agro, Renewables and Circular Economy.
For large corporates (SCIB) main focus is in renewables and sustainable tech.
In the second area, financial inclusion and financial health, we pursue different aims
depending on the context of the geographies we operate. 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.
Wherever we operate, we target unbanked and underserved individuals and SMEs
that have difficulty in accessing credit; limited financial knowledge; or are in
financial distress.
4. Global priorities might alternatively be considered for banks with highly diversified and international portfolios.
5. To prioritize the areas of most significant impact, a qualitative overlay to the quantitative analysis as described in a), b) and c) will be important, e.g. through stakeholder
engagement and further geographic contextualisation.
6
☐ No
☒ Yes
☒ Yes
☒ Yes
☐ Yes
☐ In progress
☐ In progress ☐
☐ In progress ☐ No
☒ In progress ☐ No
Self-assessment summary:
Which of the following components of impact analysis has your bank completed, in order to identify the areas in
which your bank has its most significant (potential) positive and negative impacts?
Scope:
Portfolio composition:
Context:
Performance measurement:
Which most significant impact areas have you identified for your bank, as a result of the impact analysis?
Climate change mitigation and financial health & inclusion
How recent is the data used for and disclosed in the impact analysis?
☒ Up to 6 months prior to publication
☐ Up to 12 months prior to publication
☐ Up to 18 months prior to publication
☐ Longer than 18 months prior to publication
Open text field to describe potential challenges, aspects not covered by the above etc.: (optional)
6. You can respond “Yes” to a question if you have completed one of the described steps, e.g. the initial impact analysis has been carried out, a pilot has been conducted.
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2.2 Target Setting (Key Step 2)
Show that your bank has set and published a minimum of two targets which address at least two different areas of
most significant impact that you identified in your impact analysis.
The targets
(SMART). Please disclose the following elements of target setting (a-d), for each target separately:
8
a) Alignment: which international, regional or national policy frameworks to align your bank’s portfolio with
have to be Specific, Measurable (qualitative or quantitative), Achievable, Relevant and Time-bound
7
have you
identified as relevant? Show that the selected indicators and 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.
You can build upon the context items under 2.1.
Regarding Climate change we set our ambition to be net zero in carbon emissions by
2050 in February 2021 (2020 Annual Report). We’re also a founding member of the
UNEP FI Net Zero Banking Alliance (NZBA) as a key initiative to help us drive
progress towards our net zero ambition.
We fulfilled the first round of target-setting as part of our UNEP FI Net Zero Banking
Alliance (NZBA) commitments. We addressed most of the material and high-
emitting sectors we financed, provided data and methodologies were available.
We base our work on NZBA guidelines and recommendations, the PCAF standard,
GFANZ publications, SBTi recommendations and other standards that enrich our
internal methodologies.
In financial inclusion we have developed and internal methodology to compute the
number of people we provide with Access, Finance or Financial Education
initiative.This methodology considers international best practice, has been ratified
by an independent third party, and includes the Group's common principles,
definitions and standards to count the number of people that our initiatives,
products and services have empowered financially.
Links and references
Annual report 2022 -
Responsible banking chapter
• 3.6 Supporting the green
transition
Climate finance report
• 5. Metrics and targets
b) Baseline: Have you determined a baseline for selected indicators and assessed the current level of alignment?
Please disclose the indicators used as well as the year of the baseline.
You can build upon the performance measurement undertaken in 2.1 to determine the baseline for your target.
A package of indicators has been developed for climate change mitigation and financial health & inclusion to guide
and support banks in their target setting and implementation journey. The overview of indicators can be found in the
Annex of this template.
If your bank has prioritized climate mitigation and/or financial health & inclusion as (one of) your most significant
impact areas, it is strongly recommended to report on the indicators in the Annex, using an overview table like
below including the impact area, all relevant indicators and the corresponding indicator codes:
Impact area
Climate change
mitigation
Impact area
Financial health &
inclusion
Indicator code
…
…
…
Indicator code
…
…
…
Response
See response below
Response
See response below
In case you have identified other and/or additional indicators as relevant to determine the baseline and assess the level
of alignment towards impact driven targets, please disclose these.
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We have established baselines for our decarbonization targets.
Choice of base year: Our customers’ emissions data takes longer to become
available than regular financial information. We’re using 2019 as the baseline for
calculating targets & financed emissions because 2020 proved a clear outlier in
many sectors due to the Covid-19 pandemic. This is consistent with industry
practice, as 2019 is more representative of normal production levels.
In financial inclusion, we performed a baseline assessment during 2019 prior to set
the target in this field. For this assessment, we considered the track record of
financial inclusion & empowerment initiatives in previous years, the gap to address,
and the context (i.e., unbanked population in LatAm). Based on this, we set the
target of empowering financially 10 million people between 2019 and 2025.
Links and references
Climate finance report
• 5. Metrics and targets
7. Operational targets (relating to for example water consumption in office buildings, gender equality on the bank’s management board or business-trip related greenhouse
gas emissions) are not in scope of the PRB.
8. Your bank should consider the main challenges and priorities in terms of sustainable development in your main country/ies of operation for the purpose of setting targets.
These can be found in National Development Plans and strategies, international goals such as the SDGs or the Paris Climate Agreement, and regional frameworks. Aligning
means there should be a clear link between the bank’s targets and these frameworks and priorities, therefore showing how the target supports and drives contributions to
the national and global goals.
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c) SMART targets (incl. key performance indicators (KPIs)
9
): Please disclose the targets for your first and your second
area of most significant impact, if already in place (as well as further impact areas, if in place). Which KPIs are you
using to monitor progress towards reaching the target? Please disclose.
Climate change. Our aim is to support the green transition and be Net zero in carbon
emissions by 2050.
Portfolio alignment to Paris agreement goal
• Target / KPI 1: Thermal coal-related power & mining phase out. From 7 bn (2021)
to 0 by 2030
Links and references
Annual report 2022 -
Responsible banking chapter
• 1.1 Highlights 2022
• 3.6 Supporting the green
• Target / KPI 2: Reduce emissions intensity of our power generation portfolio from
transition
0.21 tCO2e/MWh (2019) to 0.11 tCO2e/MWh by 2030
• 3.8 Financial inclusion and
• Target / KPI 3 [new 2022]: Reduce absolute emissions of energy portfolio from
empowerment
23.84 mtCO2e (2019) to 16.98 mtCO2e in 2030
• Target / KPI 4 [new 2022]: Reduce emissions intensity of aviation portfolio from
92.47 grCO2e / RPK (2019) to 61.71 grCO2e / RPK in 2030
• Target / KPI 5 [new 2022]: Reduce emissions intensity of steel portfolio from 1.58
tCO2e / tS (2019) to 1.07 tCO2e / tS in 2030
Help customers transition to a low-carbon economy
• Target / KPI 6: To raise EUR 120bn in green finance between 2019 and 2025 and
EUR 220bn by 2030
Help customers transition to a sustainable economy
• Target / KPI 7: 100 bn Socially Responsible Investment by 2025
Financial health & inclusion. Our aim is to help people access and use basic financial
services; provide tailored finance to individuals and SMEs with difficulty accessing
credit or that are in financial distress, and help people gain financial knowledge.
• Target 1: To financially empower 10 million people between 2019 and 2025.
◦ KPI 1: # people helped to access and use basic financial services through simple
payment platforms and cash-in/cash-out services in remote and small
communities.
◦ KPI 2: # micro entrepreneurs, customers in financial distress and low income /
people with difficulties accessing credit for housing or basic financial needs
supported.
◦ KPI 3: # people benefited from financial education programmes.
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d) Action plan: which actions including milestones have you defined to meet the set targets? Please describe.
Please also show that your bank has analysed and acknowledged significant (potential) indirect impacts of the set
targets within the impact area or on other impact areas and that it has set out relevant actions to avoid, mitigate, or
compensate potential negative impacts.
Links and references
Annual report 2022 -
Responsible banking chapter
• 1.1 Highlights 2022
• 3.6 Supporting the green
transition
• 3.8 Financial inclusion and
empowerment
Climate change.
We have set a climate strategy, an ambition, and we are working to (1) set and
operationalize decarbonization targets in the highest emitting sectors (1st round
July 2022; 2nd round March 2024), reporting progress and action plans yearly; (2)
supporting our customers in their transition (deploying solutions and increasing our
green activity) and engaging with them as part of our action plan; (3) embedding
climate in our Risk Management, revising the Risk appetite of portfolios with
decarbonization targets and (4) and active managing the environmental footprint of
our own operations, with multiyear plans agreed across units.
Financial health & inclusion.
Santander Finance for All is our initiative to support financial inclusion and
empowerment. We financially empower people in three ways:
• Access. We help people access and use basic financial services through simple
payment platforms and cash-in/cash-out services in remote and small
communities.
• Finance. We provide tailored finance to individuals and SMEs with difficulty
accessing credit or that are in financial distress.
• Resilience. We help people gain financial knowledge, making economic concepts
more understandable and enabling them to make better financial decisions.
Self-assessment summary
Which of the following components of target setting in line with the PRB requirements has your bank completed or is
currently in a process of assessing for your…
Alignment
Baseline
SMART targets
Action plan
… first area of most
significant impact: …
Climate change
☒ Yes
☐ In progress
☐ No
☒ Yes
☐ In progress
☐ No
☒ Yes
☐ In progress
☐ No
☒ Yes
☐ In progress
☐ No
… second area of most
significant impact: …
Financial health and
inclusion
☒ Yes
☐ In progress
☐ No
☒ Yes
☐ In progress
☐ No
☒ Yes
☐ In progress
☐ No
☒ Yes
☐ In progress
☐ No
(If you are setting targets in
more impact areas) …your
third (and subsequent)
area(s) of impact: … N/A
☐ Yes
☐ In progress
☐ No
☐ Yes
☐ In progress
☐ No
☐ Yes
☐ In progress
☐ No
☐ Yes
☐ In progress
☐ No
9. Key Performance Indicators are chosen indicators by the bank for the purpose of monitoring progress towards targets.
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2.3 Target Implementation and Monitoring (Key Step 2)
For each target separately:
Show that your bank has implemented the actions it had previously defined to meet the set target.
Report on your bank’s progress since the last report towards achieving each of the set targets and the impact your
progress resulted in, using the indicators and KPIs to monitor progress you have defined under 2.2.
Or, in case of changes to implementation plans (relevant for 2nd and subsequent reports only): describe the
potential changes (changes to priority impact areas, changes to indicators, acceleration/review of targets, introduction
of new milestones or revisions of action plans) and explain why those changes have become necessary.
Climate change
Portfolio alignment to Paris agreement goal
• Target / KPI 1: Thermal coal-related power & mining phase out. From 7bn in 2021
to 5.9bn in 2022
Links and references
Annual report 2022 -
Responsible banking chapter
• 1.1 Highlights 2022
• Target / KPI 2: Reduce emissions intensity of our power generation portfolio. From
0.21 tCO2e/MWh (2019) to 0.17 tCO2e/MWh in 2020.
• Targets / KPIs 3, 4 and 5 has been published in 2022. Progress will be reported in
next Climate Finance report.
Help customers transition to a low-carbon economy
• Target / KPI 6: To raise EUR 120bn in green finance between 2019 and 2025 and
EUR 220bn by 2030. 94.5bn by 2022
• Target / KPI 7: Socially Responsible Investment: 53.2 bn in 2022
Financial health & inclusion.
• Target 1: By 2022 we have reached 11.8 million of financially empowered people,
fulfilling our target (10 million) three years ahead of schedule.
◦ KPI 1: 3.1 million people helped to access and use basic financial services
through simple payment platforms and cash-in/cash-out services in remote and
small communities.
◦ KPI 2: 3.6 million people that have received tailored finance for collectives with
difficulties in accessing credit or in financial distress.
◦ KPI 3: 5.1 million people helped to gain financial knowledge, making economic
concepts more understandable and enabling them to make better financial
decisions.
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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.
10
in place to encourage sustainable
3.1 Client engagement
Does your bank have a policy or engagement process with clients and customers
practices?
☒ Yes ☐ In progress ☐ No
Does your bank have a policy for sectors in which you have identified the highest (potential) negative impacts?
☒ Yes ☐ In progress ☐ No
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
actions planned/implemented to support clients’ transition, selected indicators on client engagement and, where
possible, the impacts achieved.
This should be based on and in line with the impact analysis, target-setting and action plans put in place by the bank
(see P2).
). It should include information on relevant policies,
11
Our Responsible Banking and Sustainability Policy sets out the general principles,
commitments, objectives and strategy that should guide Group’s responsible
banking and sustainability progress. The objective is promoting value creation in a
sustainable manner for our stakeholders, setting how we should do things.
We also have other policies that support our responsible banking strategy, such as:
Conduct Risk with Customers Management Model; Code of conduct in the securities
markets; Cybersecurity policy; Third party approval policy; Tax policy; Conflicts of
interest policy; Political party financing policy; Policy on contributions to social
purpose; Global Health and Wellbeing policy; and Global mobility policy.
In addition, our socio-environmental and climate change risk management policy,
establishes the identification, assessment, monitoring and management of
environmental and social risks and other activities related to climate change.
Together with the Princicipios de Ecuador, operations are analysed in relation to
investment in entities, the provision of financial products or services in the oil and
gas, electricity generation and mining and metallurgy sectors, as well as those
derived from 'soft commodities' businesses.
Also, our Sensitive sectors policy provides guidelines for our involvement in
industries that pose a reputational risk.
Links and references
Annual report 2022 -
Responsible banking chapter
• 2.4 Policies
Corporate website -
www.santander.com
• Our approach/Policies -
https://www.santander.com/
en/our-approach/policies
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3.2 Business opportunities
Describe what strategic business opportunities in relation to the increase of positive and the reduction of negative
impacts your bank has identified and/or how you have worked on these in the reporting period. Provide information on
existing products and services , information on sustainable products developed in terms of value (USD or local
currency) and/or as a % of your portfolio, and which SDGs or impact areas you are striving to make a positive impact on
(e.g. green mortgages – climate, social bonds – financial inclusion, etc.).
As main growth opportunities Banco Santander identifies.:
• Green finance: All initiatives aiming to support our customers in their transition to
a low carbon economy. For large corps focus is mainly on renewables and
sustainable tech solutions. In retail banking we have identified 5 areas of priority:
green buildings, Clean mobility, renewables, sustainable agro and circular
economy.
• Financial inclusion/ microfinance: our microfinance operations aim to support
microentrepreneurs to set up and grow their businesses. We have operations in
several markets across LatAm, mainly Brazil, Mexico, Uruguay, Colombia and Perú.
• Financial inclusion/ Access: we have the opportunity to provide access through
bank accounts and digital solutions/ wallets for the base of the pyramid.
Links and references
Annual report 2022 -
Responsible banking chapter
• 2.2 Risk and opportunities
• 3.6 Supporting the green
transition
10. A client engagement process is a process of supporting clients towards transitioning their business models in line with sustainability goals by strategically accompanying
them through a variety of customer relationship channels.
11. Sustainable economic activities promote the transition to a low-carbon, more resource-efficient and sustainable economy.
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Principle 4: Stakeholders
We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve
society’s goals.
12
) you have identified as relevant in relation to the impact analysis and target setting process?
4.1 Stakeholder identification and consultation
Does your bank have a process to identify and regularly consult, engage, collaborate and partner with stakeholders (or
stakeholder groups
☒ Yes
Please describe which stakeholders (or groups/types of stakeholders) you have identified, consulted, engaged,
collaborated or partnered with for the purpose of implementing the Principles and improving your bank’s impacts. This
should include a high-level overview of how your bank has identified relevant stakeholders, what issues were
addressed/results achieved and how they fed into the action planning process.
☐ In progress
☐ No
Links and references
Annual report 2022 -
Responsible banking chapter
• 5.2 Materiality assessment
Our materiality assessment includes inputs from customers, employees, senior
managers, investors and NGOs. We also consider external context, key trends,
regulatory requirements, sustainability frameworks and standards, ESG ratings and
peer banks.
We follow an approach of double materiality, prioritizing the issues both in terms of
financial materiality and environmental and social materiality. The matrix ranks
topics by relevance to Banco Santander, after applying weightings and scores to
different sources and stakeholders interviewed.
We have identified fifteen material topics, under the Environmental, Social and
Governance dimension.
Beyond the annual materiality assessment, we develop a continuous active listening
and engagement along the year. We run surveys and speak-up channels for
employees and customers. We assess externalities to identify risks and
opportunities and to appraise our impact on the community. We respond to
demands from analysts, investors and ratings and NGOs; keep pace with new
regulation and best practices worldwide; and take part in consultations with
authorities, trade bodies and other organizations on sustainability. We’re also
involved in major local and international initiatives to support inclusive and
sustainable growth.
12. Such as regulators, investors, governments, suppliers, customers and clients, academia, civil society institutions, communities, representatives of indigenous population
and non-profit organizations
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Principle 5: Governance & Culture
We will implement our commitment to these Principles through effective governance and a culture of
responsible banking
☐ In progress
5.1 Governance Structure for Implementation of the Principles
Does your bank have a governance system in place that incorporates the PRB?
☒ Yes
Please 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 the effective implementation of
the Principles. This includes information about
• which committee has responsibility over the sustainability strategy as well as targets approval and monitoring
☐ No
(including information about the highest level of governance the PRB is subjected to),
• details about the chair of the committee and the process and frequency for the board having oversight of PRB
implementation (including remedial action in the event of targets or milestones not being achieved or unexpected
negative impacts being detected), as well as
• remuneration practices linked to sustainability targets.
ESG Governance at Santander
1) The Board of Directors approves and oversees the implementation of policies and
strategies related to corporate culture and values, responsible practices and
sustainability (which includes UNEP FI's Responsible Banking principles). It also
ensures that all the Group's employees are aware of the codes of conduct and act
ethically, and ensures compliance with the laws, customs and good practices of the
sectors and countries in which we operate.
2) Responsible Banking, Sustainability and Culture Committee (RBSCC) overseeing
the Group's responsible banking programme and strategy. This committee is made
up of a minimum of three and a maximum of nine directors, all external or non-
executive, with a majority representation of independent directors. It meets four
times a year.
3) Responsible Banking Forum, which meets six times a year, executes and drives
the responsible banking strategy throughout the Group, drives decision-making and
ensures the execution of any mandates from the CBRSC, other board committees
and the board of directors itself. It also ensures alignment on key issues, including
the review and submission of reports to the RBSCC.
4) Management meeting, chaired by the CEO, discusses quarterly our progress on
the responsible banking agenda, including climate change, with a focus on the
implementation of the TCFD recommendations and ESG business opportunities.
Remuneration linked to sustainability targets
Responsible Banking/ sustainability is part of the reward schemes, both short term
(variable remuneration) and long term incentives. In both cases, Santander has put
in place scorecards which leverage on ESG targets. In the case of the LTI scorecard
2022-2024, it comprises 5 metrics, including ratio of women in senior positions,
number of financially empowered people, green finance volumes, number of sectors
with decarbonization targets, and percentage reduction in power generation
emissions intensity.
Links and references
Annual report 2022 -
Responsible banking chapter
• 2.5 Governance
• 3.3 A talented and motivated
team (Performance review and
remuneration)
Annual report 2022 - Corporate
governance chapter
• 4. Board of directors
• 6. Remuneration
Corporate website -
www.santander.com
• Corporate governance -
www.santander.com/en/
shareholders-and-investors/
corporate-governance
◦ Rules and regulations of the
Board of directors
◦ Board of directors
◦ Board committees
5.2 Promoting a culture of responsible banking:
Describe the initiatives and measures of your bank to foster a culture of responsible banking among its employees
(e.g., capacity building, e-learning, sustainability trainings for client-facing roles, inclusion in remuneration structures
and performance management and leadership communication, amongst others).
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We have progressed on a 3 level training strategy:
• We launched the first global mandatory training in ESG for all employees,
'Sustainability for all'.
• We created ESG Talks, a series of online recordings, with internal experts from
Links and references
Annual report 2022 -
Responsible banking chapter
• 3.3 A talented and motivated
SCIB, Risk, Human Resources, Consumer Finance and Retail Banking for the areas
involved in our sustainability agenda.
team (Performance review and
remuneration)
• We provided the contents for employees to obtain Santander ESG Commitment
• 3.6 Supporting the green
Fundamentals, International Sustainable Finance Specialist-IASE level II and other
ESG expert certifications.
transition
Some subsidiaries and global businesses provided additional training on climate
change, sustainability, sustainable finance, sustainable investment, diversity and
inclusion.
In 2022, the board of directors also completed training programmes on climate
change, with modules on the Paris Agreement, net zero, portfolio alignment,
climate risk management, transition plans, regulation and reporting, and
biodiversity.
We also trained our employees on diversity and inclusion, health and safety,
customer and supplier relations, the environment and anti-corruption.
Regarding culture of sustainability, Santander runs local and global employee
awareness campaigns on the importance of reducing consumption and waste. Each
subsidiary posts news and feature articles on the environment and the Group’s ESG
initiatives on its internal portal. In 2022, for the thirteenth consecutive year, we have
observed Earth Hour, switching off the lights at the Group’s most emblematic
buildings.
We think it is key to lead by example: since 2021, our offices and buildings in our
core markets have been free of single-use plastics in fulfilment of our public
commitments on responsible banking. The Group aims to have ISO 1400111
certification for all the primary buildings it occupies. 30% of our employees already
work in ISO 14001 or ISO 50001-certified buildings. Under our 2022-2025 Energy
efficiency and sustainability plan, we aim to raise that by 6%.
Some buildings in Brazil, Germany, Poland and Spain are LEED Gold or Platinum-
certified, while the Santander Group City and Santander España’s central services
buildings have ‘Zero waste’ certification.
Also, sustainability is part of reward schemes both short and long term as
commented above.
5.3 Policies and due diligence processes
Does your bank have policies in place that address environmental and social risks within your portfolio?
describe.
Please describe what due diligence processes your bank has installed to identify and manage environmental and social
risks associated with your portfolio. This can include aspects such as identification of significant/salient risks,
environmental and social risks mitigation and definition of action plans, monitoring and reporting on risks and any
existing grievance mechanism, as well as the governance structures you have in place to oversee these risks.
Please
13
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Our Environmental, social and climate change risk management policy sets out
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 and transmission, mining and metals, and soft commodities
industries (especially retail customers involved in farming and ranching in the
Amazon). 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, social and climate change 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
International Finance Corporation Performance Standards. Following our
environmental and social due diligence of projects, we ask our customers for
mitigation plans, based on their risk rating.
Links and references
Annual report 2022 -
Responsible banking chapter
• 3.2 Conduct and ethical
behaviour (Environmental and
social risk management)
Corporate website -
www.santander.com
• Our approach - Policies
www.santander.com/en/our-
approach/policies
13. Applicable examples of types of policies are: exclusion policies for certain sectors/activities; zero-deforestation policies; zero-tolerance policies; gender-related policies;
social due diligence policies; stakeholder engagement policies; whistle-blower policies etc., or any applicable national guidelines related to social risks.
Self-assessment summary
Does the CEO or other C-suite officers have regular oversight over the implementation of the Principles through the
bank’s governance system?
☒ Yes
Does the governance system entail structures to oversee PRB implementation (e.g. incl. impact analysis and target
setting, actions to achieve these targets and processes of remedial action in the event targets/milestones are not
achieved or unexpected neg. impacts are detected)?
☒ Yes
Does your bank have measures in place to promote a culture of sustainability among employees (as described in 5.2)?
☒ Yes
☐ In progress
☐ No
☐ No
☐ No
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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 Assurance
Has this publicly disclosed information on your PRB commitments been assured by an independent assurer?
☒ Yes ☐ Partially ☐
If applicable, please include the link or description of the assurance statement.
This is our fourth reporting on the Principles for Responsible Banking, and has been
verified with limited assurance by PricewaterhouseCoopers Auditores, S.L. for
sections 2.1 Impact Analysis, 2.2 Target Setting, 2.3 Target Implementation and
Monitoring and 5.1 Governance Structure for Implementation of the Principles. . An
independent firm that also audited Banco Santander, S.A.’s consolidated Non-
financial and financial statements for 2022.
Links and references
Annual report 2022 -
Responsible banking chapter
• Independent verification report
6.2 Reporting on other frameworks
Does your bank disclose sustainability information in any of the listed below standards and frameworks?
☒ GRI
☒ SASB
☒ CDP
☐ IFRS Sustainability Disclosure Standards (to be published
☒ TCFD
☒ Other: WEF Stakeholder Capitalism Metrics
Our chapter meets the Spanish Act 11/2018, UE 2017/C215/01 Guidelines on non-
financial reporting, European Taxonomy regulation (Regulation (EU) 2020/852 and
Commission Delegated Regulations 2021/2139 and 2021/2178), GRI Standards, and
the GRI G4 guidelines on financial services disclosures. It also takes into account 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.
Links and references
Annual report 2022 -
Responsible banking chapter
• About this chapter
• ESG reporting standards and
references
6.3 Outlook
What are the next steps your bank will undertake in next 12 month-reporting period (particularly on impact analysis
target setting
and governance structure for implementing the PRB)? Please describe briefly.
15
14
,
We will continue progressing in the identification of material items, risk and
opportunities analysis.
Links and references
14. For example outlining plans for increasing the scope by including areas that have not yet been covered, or planned steps in terms of portfolio composition, context and
performance measurement
15. For example outlining plans for baseline measurement, developing targets for (more) impact areas, setting interim targets, developing action plans etc.
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6.4 Challenges
Here is a short section to find out about challenges your bank is possibly facing regarding the implementation of the
Principles for Responsible Banking. Your feedback will be helpful to contextualise the collective progress of PRB
signatory banks.
What challenges have you prioritized to address when implementing the Principles for Responsible Banking? Please
choose what you consider the top three challenges your bank has prioritized to address in the last 12 months
(optional question).
If desired, you can elaborate on challenges and how you are tackling these:
☐ Embedding PRB oversight into governance
☒ Customer engagement
☐ Gaining or maintaining momentum in the bank
☐ Stakeholder engagement
☐ Getting started: where to start and what to focus on in ☐ Data availability
the beginning
☒ Conducting an impact analysis
☒ Assessing negative environmental and social impacts
☒ Choosing the right performance measurement
methodology/ies
☒ Setting targets
☐ Other: …
☐ Data quality
☐ Access to resources
☐ Reporting
☐ Assurance
☐ Prioritizing actions internally
If desired, you can elaborate on challenges and how you are tackling these:
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6.4 Global Reporting Initiative
(GRI) content index
GRI 1
Statement of use
GRI 1 used
Sectoral standard of application
Grupo Santander has reported in accordance with the GRI Standards
for the period between 01 January 2022 and 31 December 2022
Foundation 2021
Financial Services (GRI G4)
GRI Standards: GENERAL DISCLOSURES
GRI Standard
Disclosure
GRI 2: GENERAL DISCLOSURES
Page
Omission
THE
ORGANIZATION
AND ITS
REPORTING
PRACTICES
2-1 Organizational details
2-2 Entities included in the organization's
sustainability reporting
Business model and strategy (p. 7); Note 1.a to the consolidated
financial statements (p. 530).
2022 consolidated directors’ report (Introduction)(p.4); About this
chapter (p.18); Notes 3 and 52 to the consolidated financial
statements; and Sections 3 and 4 of the Economic and financial
review.
2-3 Reporting period, frequency and contact 2022 consolidated directors’ report (Introduction)(p.4); About this
point
2-4 Restatements of information
chapter (p.18).
Our progress in figures (p. 76). Note 1.d to the consolidated
financial statements (p. 530).
The information on the number of employees and branches for the
year ended 31 December 2021 has been restated for comparative
purposes in accordance with the Group's homogenisation criteria.
2-5 External assurance
About this chapter (p.18); Independent verification report (p. 154).
2-6 Activities, value chain and other business Business model and strategy (p.7); Section 4 of the Economic and
relationships
financial review; Auditor´s report and annual consolidated accounts
(p. 529)(Appendix I. Subsidiaries of Banco Santander, S.A.).
ACTIVITIES AND
WORKERS
2-7 Employees
2-8 Workers who are not employees
Our progress in figures (p. 76). Note 1.d to the consolidated
financial statements (p. 530).
The information on the number of employees for the year ended
31 December 2021 has been restated for comparative purposes in
accordance with the Group's homogenisation criteria.
Information unavailable.
-
-
-
-
-
-
-
1
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GRI Standard
Disclosure
2-9 Governance structure and composition
Page
Governance (p. 27); Corporate Governance chapter of the annual
report. (p. 157) (4. Board of directors).
2-10 Nomination and selection of the highest Corporate Governance chapter of the annual report (p. 157)(4.2
governance body
2-11 Chair of the highest governance body
2-12 Role of the highest governance body
in overseeing the management of impacts
2-13 Delegation of responsibility for
managing impacts
2-14 Role of the highest governance body
in sustainability reporting
GOVERNANCE
2-15 Conflicts of interest
2-16 Communication of critical concerns
2-17 Collective knowledge of the highest
governance body
2-18 Evaluation of the performance of the
highest governance body
2-19 Remuneration policies
2.20 Process to determine remuneration
2-21 Annual total compensation ratio
2-22 Statement on sustainable development
strategy
2-23 Policy commitments
2-24 Embedding policy commitments
2-25 Processes to remediate negative
impacts
2-26 Mechanisms for seeking advice and
raising concerns
STRATEGY,
POLICIES AND
PRACTICES
Board composition).
Corporate Governance chapter of the annual report (p. 157)(4.3
Board functioning and effectiveness).
Governance (p. 27); Corporate Governance chapter of the annual
report (p. 157)(4.3 Board functioning and effectiveness; 4.9
Responsible banking, sustainability and culture committee).
Governance (p. 27); Corporate Governance chapter of the annual
report (p. 157)(4.3 Board functioning and effectiveness; 4.9
Responsible banking, sustainability and culture committee).
Governance (p. 27); Corporate Governance chapter of the annual
report (p. 157)(4.3 Board functioning and effectiveness; 4.9
Responsible banking, sustainability and culture committee).
Conduct and ethical behaviours (p.32); Corporate Governance
chapter of the annual report (p. 157)(4.12 Related-party
transactions and other conflicts of interest); Auditor's report and
consolidated annual accounts (p. 501).
Corporate Governance chapter of the annual report (p.
157)(sections 4.4 to 4.10); Auditor's report and consolidated
annual accounts (p. 501).
A talented and motivated team (p. 37) (3.3.2 Ensuring we have the
right talent and skills); Corporate Governance chapter of the annual
report (p. 157) (4.3 Board functioning and effectiveness).
Corporate Governance chapter of the annual report (p. 157) (4.3
Board functioning and effectiveness).
A talented and motivated team (p. 37)(Performance review and
remuneration subsection); Corporate Governance chapter of the
Annual Report (p. 157)(6. Remuneration).
Corporate Governance chapter of the Annual Report (p. 157)(4.7
Remuneration committee activities in 2022; 6. Remuneration).
Confidentiality constraints.
Business model and strategy (p. 7); Our ESG agenda (p. 25).
Highlights 2022 (p. 25)(Meeting our public targets); Our ESG
agenda (p. 25); Policies (p. 26); Conduct and ethical behaviours
(p.32).
Policies (p. 26); Governance (p. 27); Conduct and ethical behaviours
(p.32); A talented and motivated team (p. 37); Acting responsibly
towards customers (p. 47); Responsible procurement (p. 51);
Supporting the green transition (p. 52); Socially responsible
investment (p. 67). Corporate Governance chapter of the annual
report (p. 157) (4. Board composition); Risk management and
compliance chapter (p. 419)(7. Compliance and conduct risk).
Conduct and ethical behaviours (p.32); Acting responsible towards
customers (p.47); Supporting the green transition (p. 52) (Risk
management section). Risk management and compliance chapter
(p. 419).
A strong and inclusive culture: The Santander Way (p.31); Conduct
and ethical behaviour (p.32)(Ethical channels); Risk management
and compliance chapter (p. 419)(7.2 Compliance and conduct risk
management).
Omission
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
-
-
-
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GRI Standard
Disclosure
2-27 Compliance with laws and regulations
STRATEGY,
POLICIES AND
PRACTICES
2-28 Membership associations
STAKEHOLDER
ENGAGEMENT
2-29 Approach to stakeholder engagement
2-30 Collective bargaining agreements
GRI 3: MATERIAL TOPICS
3-1 Process to determine material topics
MATERIAL TOPICS
3-2 List of material topics
3-3 Management of material topics
Page
From 1 April 2020 to 31 January 2021, a legal payment
moratorium for creditors affected by Covid took place in Austria.
On 14 March 2022 Santander Consumer Bank, A.G. (SCB AG)
received a cease and desist letter of the Austrian Consumer
Protection Agency (Verein für Konsumenteninformation: “VKI”). VKI
claimed that SCB AG charged interest on the credit accounts
affected by the moratorium during the moratorium period and this
was not admissible as clarified by the Supreme Court ruling on 22
December 20221. On 4 of May 2022, the Management Board of
SCB AG approved to reach a settlement with VKI. The settlement
was closed in July 2022 and Santander Consumer Bank, A.G.
compensated 468 Accounts on request and 71 account with
proactive compensation of €661,658.
On 4 June 2021, the Massachusetts Attorney General issued a Civil
Investigative Demand to Santander Consumer seeking all notices
provided to Massachusetts residents from 30 March 2017 to the
present regarding repossession or auction of a repossessed vehicle.
The Attorney General alleged that the notices did not comply with
Massachusetts law. On 18 February 2022, the Massachusetts
Attorney General and SC entered into an Assurance of
Discontinuance resolving the matter for payment by SC of
approximately $5.6 million.
On 18 March 2021, a putative Pennsylvania-only class action filed
in state court against Santander Consumer USA, Inc. (SC) alleging
SC violated the Uniform Commercial Code and related
Pennsylvania state law, and that the repossessions were not
commercially reasonable and done in good faith and that SC failed
to inform the consumer of a redemption and/or personal property
fee that would have been required to have been paid in order to
retrieve their personal affects. The parties agreed to settle this
putative class action for US 14 million dollars. The court granted
preliminary settlement approval on 31 December 2022, and final
court approval of the settlement is currently scheduled for 17
October 2023.
On 24 January 2020, a putative class action filed against Santander
Bank, N.A. (SBNA) alleged that SBNA failed to pay 2% simple
interest on insurance and tax escrow accounts as required under
NY state law. The parties agreed to settle this putative class action
for US 2 million dollars. On 14 November 2022, the court granted
final approval of the settlement.
On 28 September 2021, a former employee included Reduction in
Force sued Santander Investment Securities Inc. (SIS) and her
manager, in New York federal court alleging discrimination, failure
to accommodate, and retaliation related to a current and previous
pregnancy. On 27 October 2022, the plaintiff accepted SIS’s offer
to settle for US 900,000 dollars.
A former branch manager terminated for failure to secure cash
shipment sued SBNA for national origin and race discrimination.
The Trial Court granted summary judgment in favor of SBNA.
Plaintiff appealed. Matter settled for 575,000 USD prior to
September 2022 trial.
See also GRI 206-1, 416-2, 417-2, 417-3, 418-1
Santander participates in industry associations representing
financial activity in the countries where it operates, as the AEB in
thecase of Spain
Stakeholder engagement (p. 92); Materiality matrix (p. 23);
Materiality assessment (p. 95).
A talented and motivated team (p. 37) (Social dialogue); Our
progress in figures (p. 76).
Materiality assessment: Identifying the issues that matter (p. 95);
Risk and opportunities analysis (p. 97); Risk and opportunities (p.
24)
Materiality matrix (p. 23). Materiality assessment: Identifying
the issues that matter (p. 95).
Responsible banking chapter (p. 17)
Omission
3
-
-
-
-
-
-
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GRI Standards: Topic-specific disclosures
See material and non-material issues in sections 2.1 'Materiality matrix' and 5.2 'Materiality assessment: identifying the issues that
matter'
GRI Standard
Disclosure
Page
Scope Omission
ECONOMIC STANDARDS
ECONOMIC PERFORMANCE
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
GRI 201:
ECONOMIC
PERFORMANCE generated and
201-1 Direct
economic value
distributed
Group
2022 Group
52,136
52,117
0
12
Business model and strategy (p. 7); Policies (p.
26); Stakeholder engagement (p. 92): Economic
and financial review chapter (p. 303)
€ 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
Other administrative expenses (except
taxes)
Personnel expenses
2
Income tax and other taxes
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
12,547
4,486
163
25,590
26,546
979
8,371
7
taxes recognised during the period. Our
progress in figures (p. 76) (4.3 Tax contribution)
provides additional information on the taxes
paid.
3. For comparative issues see Auditor's report and
-
-
-
-
2021 annual consolidate accounts.
Supporting the green transition (p. 52)
201-2 Financial
implications and other (Governance, and risk management) Risk
risks and
opportunities due to
climate change
201-3 Defined benefit
plan obligations and
other retirement plans
management and compliance chapter (p. 487)
(10. Climate and environmental risk).
Group
Group
The liability for provisions for pensions and similar
obligations at 2022 year-end amounted to EUR
2,392 million (p. 513). Endowments and
contributions to the pension funds in the 2022
financial year have amounted to EUR 361 million.
The detail may be consulted in Auditor´s report
and annual consolidated accounts (p. 529)(Note
46.a to annual consolidated accounts). For
comparative purposes see Audit report and
consolidated annual accounts 2021.
The Bank has not received significant subsidies or
public aids during 2021 and 2022. The detail may
be consulted in Annual banking report, section e)
Public subsidies (p. 804).
201-4 Financial
assistance received
from government
Group
-
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MARKET PRESENCE
GRI Standard
Disclosure
Page
Scope Omission
GRI 3 MATERIAL
TOPICS
GRI 202:
MARKET
PRESENCE
3-3 Management of
material topics
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
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
GRI 203:
INDIRECT
ECONOMIC
IMPACT
203-1 Infrastructure
investments and
services supported
203-2 Significant
indirect economic
impacts
INDIRECT ECONOMIC IMPACT
PROCUREMENT PRACTICES
GRI 3 MATERIAL 3-3 Management of
TOPICS
GRI 204:
PROCUREMENT spending on local
PRACTICES
material topics
204-1 Proportion of
suppliers
ANTI-CORRUPTION
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
GRI 205: ANTI-
CORRUPTION
A talented and motivated team (p. 37). corporate
governance chapter (p. 157).
Our progress in figures (p. 76).
Grupo
Group
Our progress in figures (p. 76). The Group
Corporate Human Resources Model aims to attract
and retain the best professionals in the countries
in which it operates.
Group
excluding
USA
Financial inclusion and empowerment (p. 69).
Support to higher education and other local
initiatives (p. 72); Stakeholder engagement (p.
92).
Financial inclusion and empowerment (p. 69);
Support to higher education and other local
initiatives (p. 72).
Financial inclusion and empowerment (p. 69);
Support to higher education and other local
initiatives (p. 72).
Responsible procurement (p. 51); Stakeholder
engagement (p. 92).
Responsible procurement (p. 51).
2022 overview (p. 20). A strong and inclusive
culture: The Santander Way (p. 31); Risk
management and compliance chapter (p. 419).
Risk management and compliance chapter (p.
419).
205-1 Operations
assessed for risks
related to corruption
205-2 Communication
and training about
anti-corruption
policies and
procedures
205-3 Confirmed
incidents of corruption channel). Risk management and compliance
and actions taken
Conduct and ethical behaviour (p. 32) (Finance
crime compliance). Risk management and
compliance chapter (p. 419).
Conduct and ethical behaviour (p. 32) (Ethical
chapter (p. 419).
-
-
-
-
-
-
-
-
-
-
-
Group
Group
Group
Group
Group
Group
Group
Group
Group
4
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ANTI-COMPETITIVE BEHAVIOR
GRI Standard
Disclosure
Page
Scope Omission
GRI 3 MATERIAL
TOPICS
3-3 Management of
material topics
GRI 206: ANTI-
COMPETITIVE
BEHAVIOUR
206-1 Legal actions
for anti-competitive
behaviour, anti-trust,
and monopoly
practices
GRI 3 MATERIAL
TOPICS
3-3 Management of
material topics
2022 overview (p. 20). A strong and inclusive
culture: The Santander Way (p. 31). Risk
management and compliance chapter (p. 419).
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 5,3 million. Banco
Santander Poland appealed the decision of the
UOKiK before the Court of Competition and
Consumer Protection, which resolved favorably
for the Bank. This decision is subject to appeal.
On 30 December 2021 the President of the UOKIK
(Office of Competition and Consumer Protection in
Poland) fined Santander Consumer Bank Poland
(SCB Poland) with 9.8 million euros for an alleged
breach of consumer regulations in respect of the
proceedings regarding individual offers and
insurance. SCB Poland has appealed UOKIK´S
decision before SOKiK (Polish Court of
Competition and Consumer Protection).
2022 overview (p. 20). A strong and inclusive
culture: The Santander Way (p. 31). Risk
management and compliance chapter (p. 419).
GRI 207: TAX
207-1 Approach to tax Conduct and ethical behaviour (p. 32) (Principles
of action in tax matters).
Conduct and ethical behaviour (p. 32) (Principles
of action in tax matters).
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
Conduct and ethical behaviour (p. 32) (Principles
of action in tax matters).
Further information (p. 92) (Country-by-country
report); Auditor's report and 2022 annual
consolidate accounts (p. 501) (Annex VI Annual
banking report); Audit report and consolidated
annual accounts 2021 (Annex VI Annual banking
report.
Group
Group
-
3
Group
Group
Group
Group
Group
-
-
-
-
-
ENVIRONMENTAL STANDARDS
MATERIALS
GRI 301:
MATERIALS
301-1 Materials used
by weight or volume
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76)(Environmental footprint).
Group
5
Although this is not a material issue for the
Bank, Banco Santander reports information on
the following indicators for greater
transparency.
134
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GRI Standard
Disclosure
Page
Scope Omission
ENERGY
GRI 3 MATERIAL
TOPICS
GRI 302:
ENERGY
3-3 Management of
material topics
302-1 Energy
consumption within
the organization
302-2 Energy
consumption outside
of the organization
302-3 Energy
intensity
302-4 Reduction of
energy consumption
302-5 Reductions in
energy requirements
of products and
services
Supporting the green transition (p. 52) (Reducing
our environmental footprint).
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76)(Environmental footprint).
Our progress in figures (p. 76)(Environmental
footprint).
Our progress in figures (p. 76)(Environmental
footprint).
Supporting the green transition (p. 52) (Reducing
our environmental footprint).
Not applicable.
Group
Group
Group
Group
Group
Group
-
5
5
5
-
6
WATER AND EFFLUENTS
GRI 303:
WATER AND
EFFLUENTS
303-5 Water
consumption
Although this is not a material issue for the
Bank, Banco Santander reports information on
the following indicators for greater
transparency.
BIODIVERSITY
GRI 3 MATERIAL
TOPICS
3-3 Management of
material topics
GRI 304:
BIODIVERSITY
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
Banco Santander manages its water consumption
and supply in accordance with local limitations. In
addition, the Bank collects its water from the
public water supply and discharges the used
water to the public network.Our progress in
figures (p. 76)(Environmental footprint).
Group
5
Conduct and ethical behaviour (Environmental,
social and climate change risk management) (p.
32). Supporting the transition to a green economy
(p. 52) (Our approach to nature and biodiversity).
Not applicable.
Group
Group
Supporting the green transition (p. 52) (Our
approach to nature and biodiversity)
Not applicable.
Not applicable.
Group
Group
Group
-
6
-
6
6
135
-
5
5
5
5
5
6
6
-
-
5
5
5
-
-
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
EMISSIONS
GRI Standard
Disclosure
Page
Scope Omission
GRI 3 MATERIAL
TOPICS
GRI 305:
EMISSIONS
3-3 Management of
material topics
305-1 Direct (Scope 1)
GHG emissions
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
Supporting the green transition (p. 52) (Reducing
our environmental footprint).
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76) (Environmental footprint).
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76) (Environmental footprint).
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76) (Environmental footprint).
Our progress in figures (p. 76) (Environmental
footprint)
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76) (Environmental footprint)
Not applicable.
305-6 Emissions of
ozone-depleting
substances (ODS)
305-7 Nitrogen oxides Not applicable.
(NOX), sulphur oxides
(SOX), and other
significant air
emissions
Group
Group
Group
Group
Group
Group
Group
Group
WASTE
GRI 306:
WASTE
Although this is not a material issue for the
Bank, Banco Santander reports information on
the following indicators for greater
transparency.
SUPPLIER ENVIRONMENTAL ASSESSMENT
GRI 3 MATERIAL
TOPICS
GRI 308:
SUPPLIER
ENVIRONMENT
AL
ASSESSMENT
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
3-3 Management of
material topics
308-1 New suppliers
that were screened
using environmental
criteria
308-2 Negative
environmental
impacts in the supply
chain and actions
taken
Supporting the green transition (p. 52)
Group
Supporting the green transition (p. 52)
Group
Supporting the green transition (p. 52) (Reducing
our environmental footprint). Our progress in
figures (p. 76) (Environmental footprint)
Our progress in figures (p. 76) (Environmental
footprint)
Our progress in figures (p. 76) (Environmental
footprint)
Responsible procurement (p. 51). Stakeholder
engagement (p. 92)
Responsible procurement (p. 51).
Group
Group
Group
-
Group
Responsible procurement (p. 51).
Group
7
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GRI Standard
Disclosure
Page
Scope Omission
SOCIAL STANDARDS
EMPLOYMENT
GRI 3 MATERIAL
TOPICS
GRI 401:
EMPLOYMENT
3-3 Management of
material topics
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
A talented and motivated team (p. 37) (Talent
attraction). Our ESG strategy (p. 25).
A talented and motivated team (p. 37) (Talent
attraction section). Our progress in figures (p. 76).
Benefits detailed in 'A talented and motivated
team'(p. 37) (section 'Corporate benefits') are
regarding only full-time employees. Corporate
Governance chapter (p. 157)
Group
Group
Group
-
-
-
Information unavailable.
Group
9
OCCUPATIONAL HEALTH AND SAFETY
GRI 403:
OCCUPATIONAL
HEALTH AND
SAFETY
403-1 Occupational
health and safety
management system
Although this is not a material issue for the
Bank, Banco Santander reports information on
the following indicators for greater
transparency.
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
403-6 Promotion of
worker health
403-8 Workers
covered by an
occupational health
and safety
management system
403-9 Work-related
injuries
403-10 Work-related
ill health
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. 37) (Employee
wellbeing section).
Group
Group
A talented and motivated team (p. 37) (Employee
wellbeing section).
At Banco Santander SA, the percentage of
Representation in the Security Committee is
100%.
Group
Banco
Santander
S.A. and
SCF
A talented and motivated team (p. 37) (Employee
wellbeing section).
Group
A talented and motivated team (p. 37) (Employee
wellbeing section).
100% of Banco Santander own employees are
covered by health and safety management
systems at work.
Group
Group
A talented and motivated team (p. 37) (Employee
wellbeing). Our progress in figures (p. 76).
Our progress in figures (p. 76).
Group
Group
-
-
-
-
-
-
-
-
-
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GRI Standard
Disclosure
Page
Scope Omission
TRAINING AND EDUCATION
GRI 3 MATERIAL
TOPICS
GRI 404:
TRAINING AND
EDUCATION
DIVERSITY AND EQUAL OPPORTUNITY
3-3 Management of
material topics
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.
A talented and motivated team (p. 37). (Ensuring
we have the right talent and skills).
A talented and motivated team (p. 37)) (Talent
attraction). Our progress in figures (p. 76)
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. 37) (Learning and development).
A talented and motivated team (p. 37)
(Performance review and remuneration section).
Regular performance and career development are
received by the 100% of the employees.
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
405-1 Diversity of
governance bodies
and employees
A talented and motivated team (p. 37) (Diversity
and Inclusion).
A talented and motivated team (p. 37) (Diversity
and Inclusion section). Our progress in figures (p.
76). Corporate governance chapter of the Annual
Report (p. 157).
405-2 Ratio of basic
salary and
remuneration of
women to men
A talented and motivated team (p. 37) (Diversity
and Inclusion). Our progress in figures (p. 76).
Group
GRI 405:
DIVERSITY AND
EQUAL
OPPORTUNITIE
S
NON-DISCRIMINATION
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
406-1 Incidents of
discrimination and
corrective actions
taken
GRI 406: NON-
DISCRMINATIO
N
RIGHTS OF INDIGENOUS PEOPLE
A talented and motivated team (p. 37) (Diversity
and Inclusion).
Conduct and ethical behaviour (p. 32). A talented
and motivated team (p. 37) (Active listening). Risk
management and compliance chapter (p. 419).
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
GRI 411:
RIGHTS OF
INIDGENOUS
PEOPLE
411-1 Incidents of
violations involving
rights of indigenous
people
Conduct and ethical behaviour (p. 32).
(Environmental, social and climate change risk
management).
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 2022, a total of 45
operations were evaluated in this respect.
LOCAL COMMUNITIES
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
413-1 Operations with
local community
engagement, impact
assessments, and
development
GRI 413: LOCAL programs
COMMUNITIES
Financial inclusion and empowerment (p. 69).
Support to higher education and other local
initiatives (p. 72)
Financial inclusion and empowerment (p. 69)
(Finance), Support to higher education and other
local initiatives (p. 72).
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.
413-2 Operations with
significant actual and Conduct and ethical behaviour (p. 32)
potential negative
impacts on local
communities
(Environmental, social and climate change risk
management).
Group
Group
Group
Group
Group
Group
Group
Group
Group
-
-
-
-
-
-
-
-
-
-
Group
8
Group
Group
Group
-
-
-
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SUPPLIER SOCIAL ASSESSMENT
GRI Standard
Disclosure
Page
Scope Omission
PUBLIC POLICY
CUSTOMER HEALTH SAFETY
GRI 3 MATERIAL
TOPICS
GRI 414:
SUPPLIER
SOCIAL
ASSESSMENT
3-3 Management of
material topics
414-1 New suppliers
that were screened
using social criteria
414-2 Negative social
impacts in the supply
chain and actions
taken
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
GRI 415: PUBLIC 415-1 Political
POLICY
contributions
Responsible procurement (p. 51).
Responsible procurement (p. 51).
Responsible procurement (p. 51).
2022 overview (p. 20). Governance (p. 26). A
strong and inclusive culture: The Santander Way
(p. 31). Conduct and ethical behaviour (p.
32)(Relations with political parties).
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.
In 2022 we made a contribution of $75,000 to the
US Political Action Committee.
Conduct and ethical behaviour (p. 32)(Relations
with political parties)
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
Acting responsibly towards our customers (p.
47)(Product governance and consumer
protection).
GRI 416:
CUSTOMER
HEALTH AND
SAFETY
416-1 Assessment of Acting responsibly towards our customers (p.47).
The Commercialization Committee evaluates
the health and safety
impacts of product
potential impact of all products and services,
and service categories 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
416-2 Incidents of
non-compliance
concerning the health other Group contingencies can be found in
and safety impacts of Auditor’s report and annual consolidated
products and services accounts.
Group
Group
Group
Group
Group
Group
Group
-
3
7
-
-
-
-
Group
3
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MARKETING AND LABELLING
GRI Standard
Disclosure
Page
Scope Omission
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
417-1 Requirements
for product and
service information
and labelling
GRI 417:
MARKETING
AND LABELLING
417-2 Incidents of
non-compliance
concerning product
and service
information and
labelling
417-3 Incidents of
non-compliance
concerning marketing
communications
Acting responsibly towards our customers (p.
47)(Product governance and consumer
protection).
Acting responsibly towards our customers (p.
47)(Product governance and consumer
protection).
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.
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.
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
Group
-
-
Group
3
Group
3
CUSTOMER PRIVACY
GRI 3 MATERIAL 3-3 Management of
TOPICS
material topics
Acting responsibly towards our customers (p. 47).
Group
-
GRI 418:
CUSTOMER
PRIVACY
418-1 Substantiated
complaints concerning
breaches of customer
privacy and losses of
customer data
On 3 November 2022, the “Instituto Nacional de
Acceso a la Información Pública y Protección de
Datos Personales (INAI)” fined Santander Mexico
with 163,000 and 279,000 euros for an alleged
breach of data protection regulations. Santander
Mexico has filed an appeal.
On 13 May 2022, Bank of Spain fined Santander
Consumer Finance, S.A. (as successor of
Santander Consumer E.F.C.) with 540,000 euros
for breach of the regulations on transparency and
customer protection in the commercialization of
consumer loans during the period 2014 to 2019
due to the lack of communication of settlements
of unpaid debts to approximately 25% of
customers. This non-compliance did not cause any
detriment to customers and did not result in any
benefit to the entity.
Group
-
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GRI Standards - Financial services sector disclosures
G4 Standard
FINANCIAL SERVICES SECTOR DISCLOSURES
PRODUCT PORTFOLIO
Disclosure
Page
Scope Omission
FS1
FS2
FS3
FS4
FS5
FS6
FS7
FS8
FS9
AUDIT
Policies with specific
environmental and social
components applied to
business lines
Governance (p. 26). Supporting the green
transition (p. 52) (Corporate governance).
Conduct and ethical behaviour (p. 32)
(Environmental, social and climate change
risk management).
Procedures for assessing Governance (p. 26). Supporting the green
and screening
transition (p. 52) (Corporate governance).
environmental and social Conduct and ethical behaviour (p. 32)
risks in business lines
(Environmental, social and climate change
risk management).
Processes for monitoring Governance (p. 26). Supporting the green
transition (p. 52). Conduct and ethical
clients´ implementation
of and compliance with
behaviour (p. 32) (Environmental, social
environmental and social and climate change risk management).
requirements included in
agreements of
transactions
Process(es) for improving A talented and motivated team (p. 37).
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
(Ensuring we have the right talent)
and skills
A strong and inclusive culture: The
Santander Way (p. 31). 2022 overview (p.
20). Stakeholder engagement (p. 92) (Joint
initiatives to promote our agenda).
Shareholder value (p. 28). Risk
management and compliance chapter (p.
419).
Acting responsibly towards customers (p.
47). Stakeholder engagement (p. 92)
(Helping society tackle global challenges:
2030 agenda section). Our progress in
figures (p. 76).
Financial inclusion and empowerment (p.
69).
Group
Group
Group
Group
Group
Group
Group
Supporting the green transition (p. 52).
Socially responsible investment (p. 67).
Group
-
-
-
-
-
-
-
-
Percentage of the
portfolio for business
lines by specific region,
size (e.g. micro/ SME/
large) and by sector
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
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
-
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ACTIVE OWNERSHIP
G4 Standard
Disclosure
Page
Scope Omission
FS10
FS11
FS12
FS13
FS14
FS15
FS16
Percentage and number
of companies held in the
institution´s portfolio with
which 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
Access points in low-
populated or
economically
disadvantaged areas by
type
Initiatives to improve
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
Conduct and ethical behaviour (p. 32)
(Environmental, social and climate change
risk management).
Group
8
Conduct and ethical behaviour (p. 32)
(Environmental, social and climate change
risk management); Socially responsible
investment (p. 67).
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.
Financial inclusion and empowerment (p.
69).
Group
8
Group
-
Group
Financial inclusion and empowerment (p.
69) (Access).
Group
Acting responsibly towards customers (p.
47) (Product governance and consumer
protection).
Financial inclusion and empowerment (p.
69 ) (Promoting financial education).
Group
Group
-
-
-
-
1.Given the size of the organisation and the rotation of outsourced services, Banco Santander does not currently have a register of non-employees. In the medium and long
term the Group will evaluate the possibility of reporting this indicator. 2. The indicator is not reported because it is confidential information. 3. The sanctions and
sentences reported correspond to those for an amount greater than 60,000 euros, excluding collective and/or mass sanctions. The evolution of already reported
sanctions or adverse sentences that have been appealed will not be informed, until they reach their firmness in law. 4. Information is provided on the total number of
complaints related to gifts and invitations/corruption and bribery . 5. The scope and limitations of this indicator are described on Our progress in figures. 6. Not
applicable due to the nature of the Group's financial business, geographies and sectors of operation. It should be noted that all of the Bank's activities are carried out in
urban areas. 7. Only top-500 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. Given the size of the organization and the turnover of outsourced services, Banco
Santander does not currently have a record of employees who have requested and taken parental leave during 2022. In the medium and long term the Group will
evaluate the possibility of reporting this indicator.
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6.5 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
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. 501).
FN-CB-230a.2
FN-CF-230a.3
Refer to ‘Risk Pro’ in section 'A strong and inclusive
culture' of this chapter (p. 31).; and to ‘Relevant
mitigation actions’ in section 6.2 of 'Risk management
and compliance chapter' (p. 419).
FN-CB-240a.1
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.
Topic
Data Security
Financial
Inclusion &
Capacity Building
Industry
Commercial
Banks
Consumer
Finance
Commercial
Banks
Consumer
Finance
Commercial
Banks
Commercial
Banks
Commercial
Banks
Commercial
Banks
(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.
FN-CB-240a.2
FN-CB-240a.3
FN-CB-240a.4
Refer to ‘Acting responsibly towards customers‘ section
of this chapter (p. 47).
For more detail see note 10. ‘Loans and advances to
customers´ in the Auditor's report and consolidated
financial statements (p. 501).
Additionally, all the information related to microfinance
programmes are available on the ‘Financial inclusion and
empowerment‘ section of this report (p. 69).
Refer to ‘Amounts past due‘ and ‘Impairment of financial
assets‘ in 3.3 'Key metrics' section of the Risk
management and compliance chapter. (p. 419).
Also refer to notes 2.g and 10.d of the consolidated
accounts in the Auditor's report and consolidated
financial statements (p. 501).
Refer to ‘Financial inclusion and empowerment‘ section
of this chapter (p. 69).
In 2022, Grupo Santander has financially empowered 5.5
million people.
For further information refer to ‘Financial inclusion and
empowerment‘ section of this chapter (p. 69).
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Topic
Incorporation of
Environmental,
Social, and
Governance
Factors in Credit
Analysis
Industry
Commercial
Banks
Commercial
Banks
Accounting Metric
Commercial and industrial
credit exposure, by industry.
Code
FN-CB-410a.1
Description of approach to
incorporation of
environmental, social,and
governance (ESG) factors in
credit analysis.
FN-CB-410a.2
FN-IB-410a.2
FN-IB-410a.3
(1) Number and (2) total
value of investments and
loans incorporating
integration of
environmental, social, and
governance (ESG) factors,
by industry.
Description of approach to
incorporation of
environmental, social, and
governance (ESG) factors in
investment banking and
brokerage activities.
FN-AC-510a.1
Total amount of monetary
losses as a result of legal
FN-CB-510a.1
proceedings associated with FN-IB-510a.1
fraud, insider trading, anti-
trust, anti-competitive
behavior,market
manipulation, malpractice,
or other related financial
industry laws or
regulations.
Description of
whistleblower policies and
procedures.
FN-AC-510a.2
FN-CB-510a.2
FN-IB-510a.2
Incorporation of
Environmental,
Social, and
Governance
Factors in
investment
Banking &
Brokerage
Activities
Investment
Banking &
Brokerage
Investment
Banking &
Brokerage
Business Ethics
Systemic Risk
Management
Asset
Management &
Custody
Activities
Commercial
Banks
Investment
Banking &
Brokerage
Asset
Management &
Custody
Activities
Commercial
Banks
Investment
Banking &
Brokerage
Commercial
Banks
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
FN-CB-550a.2.
FN-IB-550a.2.
Response
Refer to ‘Concentration risk‘ in section 3.5 'Other credit
risk details' of the Risk Management and compliance
chapter (p. 419).
Refer to the ‘Environmental and social risk analysis’
section on Conduct and ethical behaviour (p. 32), and the
‘Climate and environmental risk‘ (p. 487).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.
Refer to ‘Supporting the green transition’ section of this
chapter (p. 52).
Refer to ‘Supporting the green transition‘ section of this
chapter (p. 52).
For further information see our ‘General Sustainability
Policy‘, and our ‘Environmental, social & climate change
risk management policy‘, both available on our corporate
website.
Refer to GRI 206-1 discloses legal actions for
anticompetitive behaviour, anti-trust, and monopoly
practices.
For further information, refer to ’Litigation and other
matters’ section on the Auditor's report and consolidated
financial statements (p. 501).
Refer to ‘Ethical Channels’ in the section 'A talented and
motivated team' of this chapter (p. 37).
For further information, see our ‘General Code of
Conduct’, available on our website.
According to the G-SIB Scores Dashboard from the Basel
Committee on Banking Supervision (BCBS), Santander
Group´s scores are (end-2021 data):
• Score: 174
• Complexity: 75
• Cross-jurisdictional: 447
• Interconnectedness: 136
• Size: 170
• Substitutability: 44
Refer to ‘Capital planning and stress tests’ in the section
3.5 'Capital management and adequacy' (p. 340) of the
Economic and Financial chapter.
144
Global Systemically
Important Bank (G-SIB)
score, by category
FN-CB-550a.1.
FN-IB-550a.1.
According to the ‘2022 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).
2022 Annual report
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Topic
Employee
Diversity &
Inclusion
Industry
Commercial
Banks,
Investment
Banking &
Brokerage
Activity metrics
Commercial
Banks
Commercial
Banks
Accounting Metric
Percentage of gender and
racial/ethnic group
representation for (1)
executive management, (2)
non-executive
management, (3)
professionals, and (4) all
other employees
(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.
Code
FN-AC-330a.1 FN-
IB-330a.1
FN-CB-000.A
Response
Refer to 'Our progress in figures' section of this chapter
(p. 76).
For further information, refer to ‘Diversity & Inclusion’
section of ‘A talented and motivated team’ this chapter
(p. 37).
For further information about our diversity and inclusion
principles, see our ‘Corporate Culture Policy’, available on
our corporate website.
Refer to ‘Consolidated annual accounts‘ in Auditor's
report and consolidated financial statements (p. 501).
FN-CB-000.B
Refer to ‘Consolidated annual accounts‘ in Auditor's
report and consolidated financial statements (p. 501).
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6.6 Stakeholder Capitalism Metrics
content index
Stakeholder Capitalism Metrics
Theme
Metric
Response
Principles of governance
Governing Purpose
Quality of Governing
Body
Ethical Behavior
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.
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.
'Business model and strategy' (p. 7) chapter reflects how
we help people and businesses prosper whilst adopting
ESG practices.
Additionally, in 'Our ESG strategy' (p. 23) section in
'Responsible banking' chapter, we detail in deep how we
work to be a more sustainable bank.
Refer to the 'Board of directors' section in 'Corporate
governance' chapter (p. 157).
Refer to '2022 Overview' (p. 20) and 'Our ESG agenda' (p.
25) sections in 'Responsible banking' chapter.
1. Refer to ´Performance review and remuneration´ in
'A talented and engaged team' section (p. 37) in
'Responsible banking' chapter.
2. Refer to ´Remuneration´ section (p. 229) in 'Corporate
governance' chapter.
1. Refer to Financial Crime Compliance on 7.2
'Compliance and conduct risk management' section (p.
477) in 'Risk management and compliance' chapter. Refer
also to GCC in Conduct and 'Ethical behaviour' section in
'Responsible banking' 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. 641) of the consolidated accounts.
3. Refer to Financial Crime Compliance on 7.2
'Compliance and conduct risk management' section (p.
477) in 'Risk management and compliance' chapter.
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Theme
Risk and Opportunity
Oversight
Stakeholder
Engagement
Planet
Climate Change
Metric
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.
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.
Response
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. 477) in 'Risk and compliance
management' section on 'Risk management and
compliance' chapter. And ´Ethical channels´ on ´Conduct
and ethical behaviour´ section (p. 32) in 'Responsible
banking' chapter.
Refer to ‘Litigation and other matters‘ in the note 25.e (p.
641) of the consolidated accounts.
Refer to ´Principles of action in our relationship with
political parties´ in 'Conduct and ethical behaviour'
section in 'Responsible banking' chapter (p. 32)
The Financing of political parties policy is available on our
corporate website.
Refer to 'Risk and opportunities' section in 'Risk
management and compliance' chapter (p. 419).
In addition, we report our progress in implementing TCFD
recommendations (including Risk management) in
'Responsible banking' chapter (p. 52).
Our Environmental, social and climate change risk policy
is available at our corporate website.
Refer to 'Materiality matrix' (p. 23) and 'Materiality
assessment' (p. 95) section in 'Responsible banking'
chapter. Refer also to 'Our ESG agenda' (p. 25).
Refer to Environmental footprint 2021-2022 table in 'Our
progress in figures' section in 'Responsible banking'
chapter (p. 76).
• Total emissions (market based): 134,419 T CO2e
• Scope 1: 21,967 T CO2eT2e
• Scope 2 – market based: 30,917 T CO2e
• Scope 2 – location based: 217,906 T CO2e
• Scope 3: 81,535 T CO2e
Refer to 'Supporting the green transition' (p. 52) and
'TCFD content index' (p. 151) sections in 'Responsible
banking' chapter, 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 addition, refer to 'Climate and environmental risk'
section (p. 487) in 'Risk management and compliance'
chapter.
Refer to 'Supporting the green transition' section (p. 52)
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.
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Metric
Theme
Fresh water availability 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.
Nature Loss
Single-use plastics
Prosperity
Employment and
wealth generation
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.
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.
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:
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.
Response
Refer to Environmental footprint 2021-2022 table in 'Our
progress in figures' section (p. 76) in 'Responsible
banking' chapter.
In 2022, Santander consumed 1,887,857 m3 from the
public network, equalling a consumption of 9.75 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.
Refer to Our approach to nature and biodiversity on
'Supporting the green transition' section (p. 76) of the
'Responsible banking' chapter.
Refer to Reducing our environmental footprint on
'Supporting the green transition' section (p. 52)in
'Responsible banking' chapter.
In 2021 we have met our goal of eliminating unnecessary
single-use plastics from our buildings and branches. In
2022 we also continue not providing single-use plastics
in our buildings and offices.
Refer to 'Our progress in figures' section (p. 76) in
'Responsible banking' chapter.
1. See:
• Table 11.1. Distribution of new hires by age bracket
• Table 12. Distribution of new hires by gender
2. See:
• Table 14. External turnover rate by gender
• Table 15. External turnover rate by age bracket
1. Refer to Global Reporting Initiative (GRI) content index
in 'Responsible banking' chapter, and more specifically to
GRI 201.1 Direct economic value generated and
distributed (p. 129).
• Economic value generated in 2022: EUR 52,136 million
• Economic value distributed: EUR 26,546 million
• Economic value retained EUR 25,590 million
1.a Revenue: EUR 52,117 million
1.b Operating cost: EUR 23,903 million
1.c Employee wages and benefits: EUR 12,547 million
1.d Payments to providers of capital: N/A
1.e Payments to government: EUR 9,734 million (total
taxes)
1.f Community investment: EUR 163 million
Further detail for 1a-c refer to Group financial
performance section on Economic and financial review
chapter (p. 311).
Further detail for 1d refer to 3.3 Dividends in
Shareholders section on Corporate governance chapter
(p. 175).
Further detail for 1e refer to 'Total taxes paid' table on 4.
'Our progress in figures' in 'Responsible banking' chapter
(p. 76).
2. Grupo Santander did not receive public subsidies in
2022. Refer to 'Annual banking report', e) (p. 804).
1.Refer to note 16 Tangible assets (p. 613) – For own use
section in 'Auditor's report' in the consolidated financial
statements.
Additionally, refer to
- Operating expenses data (p. 303) in 'Economic and
financial review' chapter.
- Note 47. Other general administrative expenses (p. 697)
of consolidated annual accounts.
2. Refer to 'Shareholder value' section (p. 28) in
'Responsible banking' chapter. and 3. 'Shareholders.
Engagement and general meeting' section (p. 157) in
'Corporate governance' chapter.
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Theme
Community and social
vitality
Additional tax remitted
Total tax paid by
country for significant
locations
Innovation in better
products and services
Metric
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.
Total tax paid and, if reported, additional tax remitted, by
country for significant locations.
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.
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.
Response
Refer to 'Total taxes paid' table on 'Our progress in
figures' section in 'Responsible banking' chapter (p. 76).
Refer to 'Total taxes paid' table on 'Our progress in
figures' section in 'Responsible banking' chapter (p. 76).
Refer to 'Total taxes paid' table on 'Our progress in
figures' section in 'Responsible banking' chapter (p. 76).
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 (2022 EU Industrial R&D Investment Scoreboard,
based on 2021 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 in 'Economic and financial review' (p. 399).
Additional information refer to note 18 in 'Audit's report
and consolidated financial statements' (p. 619)
Refer to 'Our progress in figures' section (p. 76) of the
Responsible Banking chapter.
Additional information on how we promote DEI refer to
´Diversity, equity and inclusion´ in 'A talented and
motivated team' section (p. 37) in 'Responsible banking'
chapter.
Gender and equal pay gap figures match 2021 trends, on
the back of a firm commitment and ambitious action
plans assumed throughout the Group (1%).
Refer to ´Equal pay´ in 'A talented and motivated team'
section (p. 37) on 'Responsible banking' chapter.
1. Refer to 'Our progress in figures' section (p. 76) in
'Responsible banking' chapter.
Table 18 ´Ratio between the Bank’s minimum annual
salary and the legal minimum annual salary by country
and gender 2022´. We take as a reference the Bank’s
minimum annual salary in each country.
2. Refer to 6. 'Remuneration section' (p. 229) on
'Corporate governance' chapter.
Refer to ´Protecting human rights´ in 'Environmental,
social and climate change risk management' on 'Conduct
and ethical behaviour' section (p. 32) of the 'Responsible
banking' chapter.
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 Responsible banking and
sustainability policy, available at our corporate website.
Refer to ‘Litigation and other matters‘ in note 25.e of the
'Auditor's report and consolidated financial
statements' (p. 641).
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Theme
Health and well being
Skills for the future
Metric
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
1. Refer to 'Our progress in figures' section (p. 76) in
'Responsible banking' chapter.
- Table 10. Coverage of the workforce by collective
agreement
1. Refer to 'Our progress in figures' section (p. 76) on the
'Responsible banking' chapter.
• Table 23. Accident rate
• Table 24. Occupational health and safety
2. Refer to 'Our wellbeing' in 'A talented and motivated
team' section on 'Responsible banking' chapter (p. 37).
Refer to 'Our progress in figures' section (p. 76) in
'Responsible banking' chapter.
• Table 19. Training
• Table 20. Hours of training by category
• Table 21. Hours of training by gender
• 33.34 hours per employee
• EUR 346.94 of investment per employee.
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6.7 Task Force on Climate related Financial Disclosure
(TCFD) content index
Annual Report
55
Reference in Climate Finance Pages in this
Report 2021 - June 2022
3. Governance; 5. Metrics and
targets - Action plan - Power
generation sector alignment
3. Governance; 6. Financing
the green transition - ESG
governance in Santander
Asset Management
55, 56, 61
Governance
a
TCFD Recommendations
Describe the board’s oversight of climate-
related risks and opportunities.
Reference in this
Annual Report
3.6 Supporting the green
transition - Governance
Strategy
Risk
Management
Metrics and
Targets
b
a
b
c
a
b
c
a
b
c
Describe management’s role in assessing and
managing climate-related risks and
opportunities.
3.6 Supporting the green
transition - Governance; Risk
Management; Supporting our
customers in the transition
Describe the climate-related risks and
opportunities the organization has identified
over the short, medium, and long term.
Describe the impact of climate-related risks
and opportunities on the organization’s
businesses, strategy, and financial planning.
Describe the resilience of the organization’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario.
Describe the organization’s processes for
identifying and assessing climate-related
risks.
Describe the organization’s processes for
managing climate-related risks.
Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organization’s
overall risk management.
Disclose the metrics used by the organization
to assess climate-related risks and
opportunities in line with its strategy and risk
management process.
Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas (GHG)
emissions, and the related risks.
Describe the targets used by the organization
to manage climate-related risks and
opportunities and performance against
targets.
3.6 Supporting the green
transition - Our ambition and
strategy
2. Strategy - Climate risks and
opportunities; Resilience of
Santander’s strategy. Scenario
analysis
53
3.6 Supporting the green
transition - Risk management
4. Risk management - I.
Identification; II. Planning; III.
Assessment; IV. Monitoring; V.
Mitigation; VI. Reporting
56
3.6 Supporting the green
transition - Metrics and
targets
5. Metrics and targets -
Aligning our portfolio to the
Paris agreement
57
3.6 Supporting the green
transition - Reducing our
environmental footprint; 4.4.
Green Transition -
Environmental Footprint
2021-2022
3.6 Supporting the green
transition - Metrics and
targets
5. Metrics and targets -
Decarbonization targets -
Financed emissions; Our
environmental footprint
65, 89
5. Metrics and targets -
Decarbonization targets
57
References in this report are included in the Responsible banking chapter.
For more details TCFD recommendations, see our Climate Report 2021-June 2022 available on our corporate website. Progress has been made on some of these
recommendations since the publication of the Climate Finance Report in July 2022
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6.8 SDGs contribution
content index
We have identified eleven SDGs and associated targets
on which we have the greatest impact.
Summary of SDG target
Reference in the 2022 Annual report
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
SDG 7
7.1 Ensure universal access to affordable, reliable and modern
energy services
• Support for higher education and other local initiatives (p.72)
(Other community support programmes).
• Acting responsibly towards customers. Product Governance and
consumer protection (p. 47) (Transforming sales culture -
Vulnerable customers).
• Financial inclusion and empowerment (p. 69)
• Financial inclusion and empowerment (p. 69)
• Support for higher education and other local initiatives (p. 72)
(Support for higher education, employability and
entrepreneurship).
• Support for higher education and other local initiatives (p. 72)
(Support for higher education, employability and
entrepreneurship).
• Support for higher education and other local initiatives (p. 72)
(Support for higher education, employability and entrepreneurship
section; Other community support programmes sections).
• Support for higher education and other local initiatives (p. 72)
(Support for higher education, employability and entrepreneurship
section; Other community support programmes sections).
• Financial inclusion and empowerment (p. 69)
• A talented and engaged team (p. 37) (Diversity, equity and
inclusion - Gender equality section)
• A talented and engaged team (p. 37) (Diversity, equity and
inclusion - Gender equality section)
• Supporting the green transition (p. 52) (Supporting our customers
in the transition: Corporate and Investment Banking; Retail and
commercial banking).
7.b Expand infrastructure and improve technology to provide
modern and sustainable energy services
• Supporting the green transition (p. 52) (Supporting our customers
in the transition: Corporate and Investment Banking).
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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
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. 69)
• Support for higher education and other local initiatives (p. 72)
(Support for higher education - Entrepreneurship).
• Supporting the green transition (p. 52) (Reducing our
environmental footprint).
• A talented and engaged team (p. 37) (Diversity, equity and
inclusion: Gender equality; People with disabilities).
• Support for higher education and other local initiatives (p. 72)
(Support for higher education - Fundación universia).
• Support for higher education and other local initiatives (p. 72)
(Support for higher education).
• Conduct and ethical behaviour. Ethical channel (p. 32)
• A talented and motivated team. A diverse and inclusive workplace.
Employees' health and well-being (p. 37)
• A talented and motivated team. Transforming the way we work.
Social dialogue (p. 37)
• Financial inclusion and empowerment (p. 69)
• Financial inclusion and empowerment (p. 69)
• Support for higher education and other local initiatives. Other
community support programmes (p. 72)
• Financial inclusion and empowerment (p. 69)
• Conduct and ethical behaviour (p. 32) (Environmental, social and
climate change risk management)
• Support for higher education and other local initiatives (p. 72)
(Other community support programmes).
• Supporting the green transition (p. 52) (Reducing our
environmental footprint)
• Supporting the green transition (p. 52) (Reducing our
environmental footprint)
• Supporting the green transition (p. 52) (Reducing our
environmental footprint)
• See Responsible Banking chapter (p. 17)
• Supporting the green transition (p. 52) (Our approach; Risk
management)
• Conduct and ethical behaviour (p. 32) (General code of conduct;
Financial Crime Compliance)
• About this report (p. 18)
• Shareholder value (p. 28) (Communication with shareholder,
investors and analysts; ESG ratings)
• Stakeholders engagement (p. 92)
• Stakeholders engagement (p. 92)
• Stakeholders engagement (p. 92) (Partnerships to promote our
agenda)
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7. Independent verification report
GRI 2-5
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Corporate
governance
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1. 2022 Overview
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5. Management team
Statement from Bruce Carnegie-Brown, lead
independent director
1.1 Board skills and diversity
1.2 Board effectiveness
1.3 Strengthening of a remuneration policy
aligned with the strategy, investors' interests
and long-term sustainability
1.4 Engagement with our shareholders
1.5 Achievement of our 2022 goals
1.6 Priorities for 2023
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 2022 AGM
3.5 Our next AGM in 2023
4. Board of directors
4.1 Our directors
4.2 Board composition
4.3 Board functioning and effectiveness
4.4 Executive committee activities in 2022
4.5 Audit committee activities in 2022
4.6 Nomination committee activities in 2022
4.7 Remuneration committee activities in 2022
4.8 Risk supervision, regulation and compliance
committee activities in 2022
4.9 Responsible banking, sustainability and
culture committee activities in 2022
4.10 Innovation and technology committee
activities in 2022
4.11 International advisory board
4.12 Related-party transactions and other
conflicts of interest
160
161
161
162
162
163
166
166
166
167
168
168
170
172
172
174
175
176
178
179
180
188
194
201
202
207
211
215
219
222
225
225
6. Remuneration
6.1 Principles of the remuneration policy
6.2 Remuneration of directors for supervisory
and collective decision-making duties: policy
applied in 2022
6.3 Remuneration of directors for executive
duties
6.4 Directors' remuneration policy for 2023,
2024 and 2025 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
227
229
229
229
232
244
253
253
254
256
256
256
259
259
260
261
262
263
263
266
266
269
291
293
294
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Structure of our corporate governance report
Since 2018, Banco Santander's annual reports on corporate governance and
remuneration have followed an open format, as permitted by the Spanish stock market
authority (CNMV), and are included in this chapter. It includes:
→ Content legally required for the annual corporate governance report.
→ Reports on board committees' operations. 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 2023 annual general meeting. See section 6.
'Remuneration'.
→ Directors’ remuneration policy. See section 6.4 'Directors’ remuneration policy for
2023, 2024 and 2025 submitted to a binding shareholder vote'.
→ Cross references for each section of the corporate governance and remuneration
reports in the CNMV's required format in this and other chapters. 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 for each response to all recommendations in the CNMV'S Good
Governance Code for Listed Companies (Spanish Corporate Governance Code) in this
corporate governance report and other chapters of this annual report. See section 9.3
'Table on compliance with and explanations of recommendations on corporate
governance'.
Banco Santander has the highest score in
the Spanish Association for
Standardisation and Certification's
(AENOR) Good Corporate Governance
Index, which verifies aspects such as
board structure and dynamics,
shareholders' general meeting operation
and participation, transparency, and ESG
governance.
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1. 2022 Overview
'The 2022 geopolitical environment has been even more challenging than 2021, primarily
driven by the continuing impact of the covid pandemic and the war in Ukraine which have
significantly disrupted supply chains, increased energy and food costs and generated global
inflation. In these challenging times, strong and effective governance overseen by the
board is essential and in 2022 we made a number of improvements to ensure that this
remained the case.
During the year, we strengthened our board composition with the addition of both Germán
de la Fuente and Glenn Hutchins who both bring highly relevant skills and experience. We
also continued to focus on succession planning and developing the quality of our internal
pipeline of talent. Of particular note was the process we ran to appoint a new Group CEO
which resulted in the appointment of Héctor Grisi to the role from 1 January 2023. I am
delighted that José Antonio Álvarez will stay on the board as a non-executive director,
retaining his Vice Chair position. We have significantly benefited from José Antonio´s
exceptional dedication and professionalism whilst in an executive role and will continue to
do so in a non-executive capacity. In turn, and following their departure from the board of
directors, I would like to thank R. Martín Chávez and Sergio Rial for their contribution and
commitment to the Group.
We also remained focused on delivering against the agreed actions arising from the
governance review we conducted in 2021, which delivered a number of governance
enhancements, notably introducing a direct reporting line for the CEO to the board of
directors. Most recently, we completed our internal board effectiveness review in 2022, the
details of which can be found in 'Board effectiveness review in 2022', in section 4.3.
The board has also continued to embrace its commitment to a green economy and to
supporting our customers in their own transition to a Net Zero situation. To ensure
maximum progress in this regard, we have factored responsible banking and ESG criteria
into both our long and short-term incentives schemes for executive directors and top
management; details can be found in section 6. 'Remuneration'.
For 2023, the rapidly evolving macro-economic environment will continue to be volatile and
unpredictable. This will crystalise challenges that the board will need to navigate. I am
confident that our ongoing commitment to best-in-class governance will ensure that we
continue to be well placed to deal with such challenges.'
Bruce Carnegie-Brown, Lead independent director
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1.1 Board skills and diversity
Appointments in 2022
Throughout 2022, we continued to renew and strengthen the
board, reflecting our strong commitment to ensuring balance of
expertise and skills and diversity. 40% of board members are
women (in line with our representation target of 40-60% of
both genders); and two thirds are independent directors.
The changes have reinforced the board's banking, financial,
technological and digital prowess, and to make it more diverse
in terms of regional origin; and, overall, giving it the right
composition to lead the Group in pursuit of its strategy now and
in the future.
The main board changes in 2022 were as follows:
• Héctor Grisi was co-opted on 20 December 2022 as executive
director and Group CEO with effect from 1 January 2023,
succeeding Jose Antonio Álvarez who remains on the board of
directors as non-executive Vice Chair. Mr Grisi filled the
vacancy left by Sergio Rial, who stepped down with effect 1
January 2023. He brings a relentless focus on the customer,
proven leadership in driving transformation and greater
connectivity across the Group, and a strong track record of
delivering growth and business profitability. See section 4.1
'Our directors' for further details.
• Glenn Hutchins was co-opted as independent director on 20
December 2022 to fill the vacancy left by R. Martín Chávez,
who stepped down with effect from 1 July 2022. Glenn
Hutchins has a solid background in the financial sector,
including experience in the private sector and supervisory
activities, tech savviness and business transformation. See
section 4.1 'Our directors' for further details.
The board of directors has submitted the referred nominations
to our annual general meeting called for 30 or 31 March 2023 at
first or second call, respectively, (2023 AGM) for ratification. See
section 3.5 'Our next AGM in 2023' for further details.
Board committees
The board made the following changes to the composition of its
committees to ensure that they remained well equipped to
discharge their responsibilities:
• Executive committee: Héctor Grisi joined the committee with
effect from 1 January 2023.
• Audit committee: Germán de la Fuente became member on 21
April 2022.
• Nomination committee: Glenn Hutchins joined the committee
on 20 December 2022 and R. Martín Chávez stepped down on
1 July 2022.
• Remuneration committee: Glenn Hutchins joined the
committee on 20 December 2022 and R. Martín Chávez
stepped down on 19 April 2022.
• Risk supervision, regulation and compliance committee:
Germán de la Fuente became member on 1 January 2023 and
R. Martín Chávez stepped down on 7 April 2022.
• Responsible banking, sustainability and culture committee:
Álvaro Cardoso stepped down on 1 April 2022 and Gina Díez
Barroso was appointed to the committee on 31 January 2023.
• Innovation and technology committee: Ana Botín was
appointed chair on 18 April 2022 replacing R. Martín Chávez
who stepped down on the same date. Glenn Hutchins also
joined the committee on 20 December 2022 and Héctor Grisi
joined with effect from 1 January 2023.
1.2 Board effectiveness
Group and subsidiary board relations
Strengthening the ties between the Group's and its subsidiaries'
boards of directors is key to effective oversight of policies,
controls and corporate culture. In the last years, the global
pandemic together with the rapidly evolving macro-economic
environment heightened the need for effective cross-border
cooperation, which our proven Group Subsidiary Governance
Model (GSGM) facilitates.
Governance is strengthened by the presence of a number of
Group non-executive directors on our subsidiary boards: José
Antonio Álvarez at Banco Santander (Brasil) S.A. and PagoNxt,
S.L.; Homaira Akbari at Santander Consumer USA Holdings Inc.
and PagoNxt, S.L.; Henrique de Castro at PagoNxt, S.L.; Gina
Díez Barroso at Universia México, S.A. de C.V.; Pamela Walkden
at Santander UK PLC and Santander UK Group Holdings PLC; and
Luis Isasi at Santander España. See section 7. 'Group structure
and internal governance'.
Group audit and risk supervision, regulation and compliance
committees’ chairs attended specific subsidiary committee
meetings during 2022. In turn, they invited local audit and risk
supervision, regulation and compliance committees' chairs to
join Group audit and risk supervision, regulation and compliance
committee meetings throughout the year. This helped to
enhance communication and information cross-sharing.
In 2022, we continued to hold the convention with the chairs of
the audit committees, which was held at our headquarters in
Boadilla del Monte. The aim was to foster further collaboration
between subsidiaries, raise awareness about global initiatives
and expectations, collectively discuss topical issues and
encourage networking. The event was both successful and very
productive, with universal positive feedback received from
participants. Further meetings of chairs of this and other
committees are planned in 2023 and beyond.
The Group’s training, induction and development methodology
and content has been shared with subsidiaries in 2022 in order
to promote best practices and drive consistency of approach on
a Group-wide basis. See 'Director training and induction
programmes' in section 4.3 for further details.
As in previous years, at least one board session is held in one of
the Group´s key geographies. As part of these visits, directors
meet local management in order to better understand local
practices and challenges. In 2022, the board of directors met in
Dallas, US with a specific focus on the transformation agenda of
our business in this country.
Furthermore, subsidiary boards are encouraged to hold their
board meetings at Santander's headquarters in Boadilla del
Monte on occasion to foster further collaboration with the
corporate teams and drive further engagement on Group
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matters. The above mentioned practices will continue in 2023
and beyond.
Board effectiveness review and actions to
continuously improve its operation
Corporate governance is a priority for Santander. Our
governance model has consistently received strong support
from shareholders, as evidenced by their high participation in
general meetings and strong approval rates for corporate
management and the re-election of directors. Governance
needs to adapt to business and strategic needs, so we
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. We enlist the help of external advisors when
necessary. We also review individual and collective skills, both
thematic and horizontal, to ensure the board’s competence and
diversity are sufficient for it to function effectively and hold
management to account through constructive challenge.
Following on from the holistic external governance review
conducted in 2021, the nomination committee, chaired by our
Lead Independent Director, monitored execution of the
resultant action plan during 2022 under the coordination of the
General Secretary. The action plan aimed to continue ensuring
clarity of the roles and responsibilities of the most senior
executives, ensuring that checks and balances remained
appropriate and effective; and that control functions remained
fully independent.
Furthermore, in 2022, the nomination committee monitored the
action plan resulting from specific areas for improvement
identified by the non-executive directors under the leadership of
the Lead Independent Director in 2021.
The comprehensive action plan was successfully completed and
implemented, ensuring continuous improvement in the overall
functioning and effectiveness of our board, its dynamics and
internal culture.
In 2022, the board conducted its annual self-assessment
internally, covering its structure, organization and functioning,
dynamics and internal culture, committees’ performance, as
well as each director’s performance and contribution. See
'Board effectiveness review in 2022' in section 4.3.
1.3 Strengthening of a remuneration policy
aligned with the strategy, investors' interests
and long-term sustainability
To make remuneration policy for the Group's executive directors
and key executives consistent with the new strategic plan
disclosed at Investor Day on 28 February 2023 in London, the
short-term corporate bonus scheme was updated as follows:
• New metrics relating to the Group’s transformation, based on
active and total customer growth and customer transaction
cost; and quantitative metrics on generation of capital, which
will bear more heavily on variable remuneration for all
Material Risk Taker population;
• A simpler qualitative assessment, with four components (risk,
compliance, NPS and ESG) instead of seven, to more
efficiently satisfy regulatory requirements and our
stakeholders’ needs regarding risk, compliance, network
collaboration and ESG topics;
• In addition, as a new feature this year, a relative market
performance multiplier to maximize shareholder value is
introduced; it can raise or lower qualitative metrics, depending
on leading entities' progress with significant transformation
matters; and
• In terms of long-term remuneration, the metrics associated
with:
• Return on tangible equity (RoTE) to keep long-term
profitability and value creation at the top of our list of
priorities.
• Total shareholder return (TSR).
• Four ESG metrics on sustainability as part of our responsible
banking agenda.
1.4 Engagement with our shareholders
In 2022 we were able to bring back in-person activities once
suspended for the covid health crisis. Following its last edition
in April 2019, we have convened our Investor Day on 28
February 2023 in London, the first event with shareholders and
investors attended by Hector Grisi as our new CEO.
Notwithstanding the above, we continue to focus on
digitalisation in the relationship with our shareholders and
investors. Through both traditional and virtual communication
channels, we managed to engage our almost four million
shareholders in our corporate governance, adapt to their needs
and serve their interests.
We continued to inform of our sustainability strategy in a
challenging economic and geopolitical environment. We are
aware that our investors increasingly praise our efforts in ESG
and the positive impact our activity can have on society and the
environment. Therefore, we kept an open and constructive
dialogue with analysts who advise investors on sustainability.
We also proactively reported them on the progress of our
responsible banking agenda. By doing things responsibly and
developing long-term environmental and social solutions to
support inclusive and sustainable growth, we are able to create
value not just for our shareholders but for broader society. We
also enhanced the strength of our governance to drive our
strategy and ensure sound risk control.
For our 2022 AGM, we again gave shareholders the option of
attending the meeting in person or remotely. This flexibility
allows our shareholders, spread around the world, to participate
in the general meeting without having to travel, encouraging
their involvement in our corporate governance. As
demonstrated during the covid pandemic, shareholders can
participate in our entirely virtual general meetings the same
way they would in person. Through our remote attendance app,
they can fully exercise their rights to attend and participate in
real time, being able to watch a live feed of the entire meeting,
cast votes, make remarks, propose resolutions and send
messages to the AGM notary.
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1.5 Achievement of our 2022 goals
The 2021 annual report disclosed our corporate governance goals and priorities for 2022. The following chart describes how we
delivered on each priority.
2022 goals
How we delivered
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:
• Regarding the transformation of our operating and business model, we have
initiated its transformation with individuals, a segment where we have a
significant opportunity and that accounts for 80% of our customers (127 million).
During 2022, we have developed specific plans and appointed transformation
leaders to help us accelerate our transformation ambitions.
The board has overseen the three mentioned strategic initiatives and the main
achievements can be summarized as follows:
• 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: An autonomous global
payment platform to integrate all
Santander customers into the open
market. It 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: A combination of
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.
• PagoNxt: It closed 2022 with EUR 953 million in incomes, well above expectations
and managing more than 5% of the Group's payments. In 2022, the team was
strengthened, and PagoNxt accelerated the deployment of common solutions in
both merchant and trade, while ensuring that its overall structure remains simple
and efficient.
• Digital Consumer Bank: Despite the slowdown of the auto business, DCB has
delivered on its budget and market commitments, achieving a 14% RoTE, 2%
return (net of tax) on risk weighted assets for a particular business (RoRWA) and
47% C/I ratio. DCB made relevant progress in the transformation of its businesses,
both auto and non-auto, with the development of a common leasing solution,
innovating on insurance offerings around its lending products. It also expanded
new business models such as Wabi, an integrated car solution with monthly
subscription and Zinia, our 'buy now, pay later' service, where we have added 4.2
million customers by year end and which is now available in the Netherlands and
Germany.
In our digital banking business, Openbank closed 2022 with more than 1.9 million
customers, a 12% growth. Additionally, in 2022 we have streamlined the
governance of DCB subsidiaries (Openbank, Santander Consumer Finance and
Open Digital Services) to optimise efficiency and coordination.
We continued to progress on our ESG commitments. In particular:
• We announced three main new decarbonization targets for 2030 (measured in
emissions reductions against 2019) in the following sectors: energy (-29%
absolute emissions), aviation and steel (-33% and -32%, respectively, emissions
intensity), both in emissions as part of our commitment to reach net zero
emissions by 2050.
• We raised EUR 28.8bn this year in green finance (EUR 94.5bn since 2019 towards
our EUR 120bn target by 2022).
• We reached EUR 53.2bn (EUR 100bn 2025 target by 2025) in assets under
management (AUM) in socially responsible investments.
• Our Santander Finance For All programme has financially empowered 11.8mn
people since 2019, achieving our 2025 10mn target three years early. Euromoney
named us the Best Bank for Sustainable Finance in Latin America and the Banker
named us the Best Bank for Financial Inclusion.
• 29.3% of our senior managers are women (30% target by 2025). We continued to
prioritize diversity and inclusion awareness and equal opportunity for everyone
regardless of gender, culture, sexual orientation or disability.
For additional information, see the 'Responsible Banking' chapter.
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2022 goals
How we delivered
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.
In 2022, we successfully managed the succession planning discipline throughout
Santander, most notably conducting a rigorous and effective process that lead to the
appointment of Héctor Grisi as new Group CEO, following our comprehensive and
disciplined methodology. The strength and depth of our overall succession planning
discipline is a solid evidence of the strong internal cadre of talent the Group has to
face the challenges ahead, acknowledging that this will remain an ongoing area of
focus for the board.
We have continued to work on an appropriately refreshed board of directors
ensuring diversity in its broadest sense (gender, backgrounds, new skills and
experience) to ensure that we are well placed to address the challenges faced in our
business and taking into account feedback on previous board effectiveness reviews.
We have maintained our positive progress on governance following completion of
the external governance review commissioned in 2021 with the resultant actions
executed in 2022. These actions also impacted the split of roles and responsibilities
between the Executive Chair and the Group CEO, with the CEO now reporting
exclusively to the board.
Our continuous improvement approach has helped accelerate our progress with
strategically important initiatives such as Digital Consumer Bank and Investment
Platforms governance arrangements. With regard to Special Situations
Management, we have completed a detailed review and executed various
enhancements applicable on a Group-wide basis.
Ongoing improvements in oversight and control of our subsidiaries has continued as
a priority, leveraging new initiatives such as induction and training sessions for
subsidiary directors facilitated by Group (with high attendance levels) and proactive
guidance provided by Group on board effectiveness methodology, board governance
disciplines and associated best practices. We have also continued our relentless
focus on simplification of internal governance and related internal regulations,
ensuring that they are more user friendly and capable of application in practice.
Digital tools have played a significant part of this achievement.
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.
In 2022, the board has continuously monitored an even more disciplined approach of
capital allocation applied by the Group. This has resulted in a reduction of the
portfolios whose returns are below the cost of equity, going from 30% in 2021 to
20%, a commitment made to the market. Such discipline and transparency have
allowed us to take actions on the portfolio profitability and together with
securitizations, they have enabled us to close each quarter with a CET1 above 12%.
Our shareholder remuneration policy aims
to payout 40% of the underlying profit for
2022, split almost equally between a cash
dividend and a share buyback.
Once we complete the necessary actions under our shareholders' remuneration
policy for 2022 (see section 3.3 ‘Dividends and shareholder remuneration’), the
dividend per share will have risen 18% and earnings per share (EPS) 23%, owing to a
lower amount of shares in circulation after cancelling the repurchased shares in the
share buyback programmes and to increased profits. In addition, TNAV in 2022 has
increased 6% year on year, including cash dividends paid out in 2022.
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1.6 Priorities for 2023
The board set the following priorities for 2023:
• Ensure a smooth transition of the new Chief Executive
Officer and new Chief Risk Officer
In 2023, we welcomed Héctor Grisi as new CEO with effect
from 1 January 2023 and Mahesh Aditya will assume the
Group CRO position in March 2023, subject to regulatory
approval. The board will oversee the orderly transition into
these roles, providing ongoing support and constructive
challenge.
• Progressing in our ESG commitments
We will oversee the fulfilment of our ESG commitments to
reach net zero emissions by 2050, accelerating the green
finance with new and wider value propositions for our
customers, and at the same time taking care of the
sustainability and responsible banking agenda.
• Governance effectiveness
We will continue to enhance the overall effectiveness of the
board, with an appropriate composition and ensuring that its
role is discharged in the most tangible and effective manner.
We will also consolidate the enhancements delivered as part
of our action plan executed in 2022, following the review of
our governance arrangements.
• Balance sheet strength
In 2023, due to the current economic environment, the
solvency of the balance sheet and in particular, the quality of
the credit risk portfolio will be a priority for the board, while
we maintain our focus on capital management and capital
allocation to businesses with high returns on risk-weighted
assets (RoRWA).
• Long-term shareholder value
The board will promote the generation of long-term and
sustainable shareholder value creation through consistent
and reliable returns growth while continuing to build capital
strength organically. This will ensure strong shareholder
remuneration and the resources required to deliver our
strategic transformation.
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2. Ownership structure
→ Broad and balanced shareholder base
→ A single share class
→ Authorized capital in line with best practices to provide the necessary flexibility
2.1 Share capital
Our share capital is made up of ordinary shares, each with a par
value of EUR 0.50. All shares belong to the same class and carry
the same voting, dividend and other rights.
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'.
As of 31 December 2022, Banco Santander's share capital was
EUR 8,397,200,792 and comprised 16,794,401,584 shares.
It changed two times in 2022, related to two share capital
reductions by the respective amounts of EUR 129,965,136.50
(1.5% of share capital) and EUR 143,154,722.50 (1.7%),
cancelling the repurchased shares through the buyback
programmes carried out within the 2021 shareholder
remuneration policy.
On 1 February 2023, the board resolved to reduce, subject to
the required regulatory authorization from the ECB, the share
capital in the amount of EUR 170,203,286, by cancelling the
340,406,572 repurchased shares, representing 2.03% of the
share capital, through the first buyback programme carried out
within the 2022 shareholder remuneration policy (First 2022
Buyback Programme). Once the required regulatory
authorization is obtained, the share capital will be EUR
8,226,997,506 represented by 16,453,995,012 shares.
Such three share capital reductions were made under the capital
reduction resolutions approved at April 2022 AGM.
At the 2023 AGM, the board of directors submitted two capital
reduction resolutions to cancel the shares that will be acquired
through the second share buyback programme charged against
2022 results (Second 2022 Buyback Programme); as well as
those that will be acquired as part of any new buyback
programmes that the board may implement or by other legally
permitted means. See sections 3.3 'Dividends and shareholder
remuneration' and 3.5 'Our next AGM in 2023'.
We have a diversified and balanced shareholder structure. As of
30 December 2022, Banco Santander had 3,915,388
shareholders, broken down by type, geographical provenance
and number of shares as follows:
Type of investor
A
Board
Institutional
Retail
Total
% of share capital
1.10%
56.66%
42.24%
100%
A. Shares owned or represented by directors. For more details on the 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 CNMV'.
Geographic region
Europe
The Americas
Other
Total
Number of shares
1-3,000
3,001-30,000
30,001-400,000
Over 400,000
Total
% of share capital
74.71%
24.19%
1.10%
100%
% of share capital
8.74%
17.76%
12.58%
60.92%
100%
2.2 Authority to increase capital
Under Spanish law, shareholders at the general meeting have
the authority to increase share capital and may delegate power
to the board of directors to increase share capital by no more
than 50%. Our Bylaws are consistent with Spanish law and do
not set out special conditions for share capital increases.
As of 31 December 2022, our board of directors had received
authorization from shareholders to approve or carry out these
capital increases:
• Authorized capital to 2025: At our April 2022 AGM, the board
was granted authorization for three years (until 1 April 2025)
to increase share capital on one or more occasions by up to
EUR 4,335,160,25.50 (50% the of capital at the time of that
AGM ).The board was granted this authorization for three
years (until 1 April 2025).
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
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bonds or securities issued under its authority granted at the
April 2019 AGM. The board put to a vote at the 2023 AGM the
renovation of the authorization for the issuing of convertible
bonds or securities. See section 3.5 'Our next AGM in 2023'.
Shares without pre-emptive rights under this authorization
can be issued up to EUR 867,032,065 (10% of the capital at
the time of the April 2022 AGM). However, under the Spanish
Companies Act that limit 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). This authorization has not been used in 2022.
• Capital increases approved for contingent conversion of
CCPS: 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
Issues of contingent convertible preferred securities
ratio fell below a predetermined threshold. Each issue was
backed by a capital increase approved under the authorization
granted to the board by shareholders. The chart below shows
the outstanding CCPS at the time of this report, with details
about the capital increase resolutions that back them. Those
capital increases are, therefore, contingent and have been
delegated to the board of directors. The board is authorised to
issue additional CCPS and other convertible securities and
instruments in accordance with a resolution passed at the
AGM held on 12 April 2019 that allows convertible
instruments and securities to be issued for up to EUR 10
billion or an equivalent amount in another currency (no issues
were executed in 2022 under this authorization). Any capital
increase that results from shares converted from CCPS and
other convertible instruments will occur according to the
capital increase authorization made at the time those
instruments were issued.
Date of
issuance
29/09/2017
19/03/2018
08/02/2019
14/01/2020
06/05/2021
06/05/2021
21/09/2021
Nominal amount
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
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 predetermined
threshold
If, at any time, the CET1 ratio of
Banco Santander or the Group is
less than 5.125%
Maximum number
of shares in case
of conversion A
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
As of 31 December 2022, Norges Bank was registered with the
CNMV with a direct significant shareholding of 3.006% of voting
shares of Banco Santander (3% is the lower threshold generally
provided under Spanish law to disclose a significant holding in a
listed company), as it had announced on 5 May 2022.
On 16 June 2022, fund manager Dodge & Cox reported to the
CNMV a significant shareholding of 3.038% of voting shares of
Banco Santander, which it specified belonged to funds and
portfolios that it managed, with none holding more than 3%
individually. In addition, on 24 October 2019 asset manager
BlackRock Inc. reported a significant shareholding of 5.426% of
voting shares of Banco Santander, which it specified belonged
to several funds and investment firms, with none holding more
than 3% individually. These participations appear in the CNMV
records as of 31 December 2022.
These are other significant shareholder changes reported to the
CNMV in 2022:
• Amundi, S.A. reported on 21 February a significant
shareholding of 3.007%. On 11 May, it reported that its
shareholding had decreased to 2.997%. On 17 May, it
reported that its shareholding had risen to 3.004%. On 5
September, it reported that its shareholding had decreased to
2.881% (under the mandatory threshold). However, it
specified each time that shares belonged to investment funds
managed by entities that it controlled with none holding more
than 3% individually.
• On 12 December, the Goldman Sachs Group also reported to
the CNMV a significant shareholding, with voting shares and
financial instruments, of 7.465%; on 22 December, it reported
that its shareholding had decreased to 0.608%.
Likewise, though as of 31 December 2022 certain custodians
appeared in our shareholder registry as holding more than 3%
of our share capital, we understand that those shares were held
on behalf of other investors, none of whom exceeded that
threshold individually. These custodians were State Street Bank
(14.23%), Chase Nominees Limited (6.88%),The Bank of New
York Mellon Corporation (4.82%), Citibank New York (3.90%),
BNP Paribas (3.28%) and EC Nominees Limited (3.04%).
There may be some overlap in the holdings declared by the
above mentioned custodians and asset managers.
As of 31 December 2022, neither our 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 mandatory disclose
threshold applicable to such investors under Spanish law).
Our Bylaws and the Rules and regulations of the board of
directors set out an appropriate regime system for analysing
and approving related-party transactions with significant
shareholders. See section 4.12 'Related-party transactions and
other conflicts of interest'.
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2.4 Shareholders’ agreements
In February 2006, several persons linked to the Botín-Sanz de
Sautuola y O’Shea family entered into a shareholders’
agreement to set up a syndicate for their shares in Banco
Santander. The 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. 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), except when the transferee is also a
party to the agreement or member of the Fundación Botín.
These 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 pool
the voting rights attached to all their shares so that syndicate
members may exercise them and engage Banco Santander in
a concerted manner, in accordance with the instructions and
the voting criteria and orientation the syndicate establishes.
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 of usufruct, pledge or any other
contractual title, for as long as they hold those shares or are
assigned those rights. Representation of the syndicated shares
is attributed to the syndicate chair, who will be the chair of
Fundación Botín (currently Javier Botín, one of our directors
and our Group executive chair's brother).
Though the agreement initially terminates on 1 January 2056, it
will extend automatically 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.
As of 31 December 2022, the parties to this agreement held
102,279,441 shares in Banco Santander (0.61% of its capital at
such time), which were therefore subject to the voting
syndicate. They include 80,355,819 shares (0.48% of its capital
at such time) that are also subject to the transfer restrictions.
Subsection A.7 of section 9.2 'Statistical information on
corporate governance required by CNMV' contains a 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 these provisions:
• Treasury shares held at any time cannot exceed 10% of Banco
Santander's share capital, which is the legal limit set under
the Spanish Companies Act.
• The purchase price cannot be lower than the nominal value of
the shares nor exceed 3% of the last price on the Spanish
market for any trades in which Banco Santander does not act
on its own behalf.
• The board may establish its purposes and the procedures in
which it may apply.
The board put to a vote at the 2023 AGM the renewal of the
authorization for the acquisition of treasury shares. See section
3.5 'Our next AGM in 2023'.
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 due 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. In this regard, Banco
Santander has made during the year the donations to
Fundación Banco Santander indicated below in the context of
its Responsible Banking Policy.
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 rules on how treasury share trades must be carried out,
unless in exceptional circumstances as per the policy or
carried out through mechanisms, such as buyback
programmes, with a regulation of their own. These rules
include:
• Responsibility for execution of these trades, which falls on
the Investments and Holdings department, which is 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. Volume limits must generally 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 and the highest buy order price 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 sell order price in the
order book.
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• 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
irrespective of whether they are carried out in regulated
markets, in multilateral trading facilities, outside the orders
market, either through blocks or through special transactions, or
under buyback programmes. Furthermore, buyback
programmes shall comply with all the applicable specific
regulations, such as regulation on market abuse and their
relevant implementing rules. The policy does not apply to
transactions on Banco Santander's shares carried out to hedge
market risks or provide brokerage or hedging for customers.
The full treasury shares policy is available on Banco Santander's
corporate website.
Execution of the buyback programmes charged
against 2021 results
According to the 2021 shareholder remuneration policy, the
2022 AGM agreed to reduce Banco Santander’s share capital by
cancelling the repurchased shares in the first buyback
programme of 2021 under the authorization of the general
shareholders meeting held in April 2020, for an amount of EUR
129,965,136.50. On 25 April 2022, the capital reduction was
registered with the Commercial Registry.
In the second buyback programme of 2021 (executed from 15
March to 6 May 2022, once the required European Central Bank
(ECB) regulatory authorization was obtained), we acquired
286,309,445 treasury shares —1.676% of Banco Santander’s
share capital at such time— at a weighted average price per
share of EUR 3.0212. On 1 July 2022 the public deed of capital
reduction through the cancellation of repurchased shares, in the
terms agreed by the 2022 AGM and for an amount of EUR
143,154,722.50, was registered with the Commercial Registry.
See section 3.4 '2022 AGM'
First 2022 Buyback Programme
Under the authorization of the general shareholders meeting
held in April 2020, and according to the 2022 shareholder
remuneration policy, on 27 September 2022 the board resolved
that it would execute a new share buyback programme worth
EUR 979 million (approximately 20% of the Group’s underlying
attributable profit in first semester 2022) as shareholder
remuneration charged against 2022 results once it had obtained
the required regulatory authorization.
In the First 2022 Buyback Programme (executed from 22
November 2022 to 31 January 2023, once the required
regulatory authorization was obtained), we acquired
340,406,572 treasury shares, which was 2.03% of Banco
Santander’s share capital at such time, at a weighted average
price per share of EUR 2.8754.
The purpose of the First 2022 Buyback Programme 2022 was to
reduce Banco Santander’s share capital by cancelling the
repurchased shares in the terms agreed by the 2022 AGM. On 1
February 2023, the board resolved to reduce, subject to the
required regulatory authorization from the ECB, the share
capital in the amount of EUR 170,203,286, by cancelling the
340,406,572 repurchased shares.
Second 2022 Buyback Programme
Under the same AGM approval, on 27 February 2023 the board
resolved that it would execute a new share buyback programme
worth EUR 921 million as shareholder remuneration charged
against 2022 results for which the appropriate regulatory
authorization has already been obtained. The execution of the
Second 2022 Buyback Programme will start on 1 March 2023.
The purpose of the Second 2022 Buyback Programme is to
reduce Banco Santander’s share capital by cancelling purchased
shares , for which the board submitted a resolution for a vote at
the 2023 AGM. See section 3.5 'Our next AGM in 2023'.
Activity in 2022
As of 31 December 2022, Banco Santander and its subsidiaries
held 243,689,025 shares, which accounted for 1.45% of the
share capital (compared to 277,591,940, 1.601% of the share
capital, at 31 December 2021).
The chart below summarizes the monthly average proportion of treasury shares to share capital throughout 2022 and 2021.
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
2022
1.64%
1.55%
1.92%
1.27%
1.74%
0.02%
0.03%
0.11%
0.13%
0.03%
0.48%
1.45%
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%
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In 2022, the Group's treasury share trades amounted to these values:
Acquisitions and transfers of treasury shares in 2022
EUR (except
number of
shares)
Discretionary
trading
Client induced
C
trading
Buyback
programmes
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
74,833,528
37,416,764.00
202,659,000
2.71
69,748,976
A
34,874,488.50
A
194,864,000
A
B
2.72
6,653,000
B
131,274,007
65,637,003.50
368,573,000
2.81
131,274,007
65,637,003.50
368,573,000
2.81
507,252,251
713,359,786
253,626,125.50 1,478,840,000
356,679,893.00 2,050,072,000
2.92
2.87
N/A
A
201,022,983
N/A
A
100,511,491.50
N/A
A
563,437,000
N/A
B
2.85
N/A
B
6,653,000
A.Include two donations that Banco Santander had made to Fundación Banco Santander during the year totalling 36,700,000 treasury shares. For more details, see 'Other
programs to support communities' in section 3.9 'Support to higher education and other local initiatives' of the ‘Responsible banking’ chapter.
B. Excluding the donations mentioned in footnote A above.
C. Transactions on Banco Santander's shares 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.
A
Significant changes in treasury shares in 2022
Reported on
03/01/2022 B
08/04/2022 C
10/05/2022 D
6/07/2022
5/12/2022
27/12/2022 E
acquired since last notice
1.016
1.008
0.981
0.618
1.029
1.061
% of voting rights represented by shares
transferred since last notice
0.576
0.518
1.584
2.123
0.502
0.221
held at reference date of notice
1.593
2.084
1.512
0.032
0.559
1.399
A. Percentages calculated with share capital at the date of disclosure.
B. Data shown as corrected by notice dated 11 January 2022.
C. Data shown as corrected by notice dated 10 May 2022.
D. Data shown as corrected by notice dated 11 May 2022.
E. Data shown as corrected by notice dated 13 January 2023.
Transactions with financial instruments
We carried out these transactions of our own for a purpose
similar to discretionary treasury share management and with
Banco Santander shares as the underlying asset in 2022:
• In Q1, we reduced the investment position by a delta (i.e. net
exposure to share price changes) equalling 2,000,000 shares.
• In Q2 and Q3, we took two investment positions by a delta
equalling 1,500,000 shares each. The final position at year
end was a Delta equalling 9,000,000 shares worth a total EUR
24,300,000.
• The instruments used were total return equity swaps, to be
settled exclusively in cash.
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 the 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
2022 was marred by the war in Ukraine, strong inflationary
pressure, central banks’ tightening of monetary policy to halt
rising prices, slow growth in China, by covid outbreaks and
lockdowns, and fears of an upcoming global recession.
Central banks raised interest rates in 2022 as it had done in
2021, albeit more moderately. The European Central Bank set
its official interest rate at 2%, suggesting that it may surpass
3%. The Bank of England left its official interest rate at 3.5%;
but it is expected to peak at 4%. The Federal Reserve raised its
fed funds rate to 4.25%-4.50% and expects to take it to
5-5.25% or even higher.
In this context, main indices closed the year in the red, despite a
strong rebound in Q4. European banking indices closed the year
positively, having benefited from interest rate hikes. Banco
Santander’s share ended Q4 with a positive total return of
19.5%, slightly above the 18.5% of Europe’s main banking
index, the DJ Stoxx Banks.
Our share price ended the year with a return of -0.8%, slightly
below the eurozone’s main banking index, the EuroStoxx Banks
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(up 1.8%) and the DJ Stoxx Banks (up 2.5%). Meanwhile, the
MSCI World Banks fell 9.4%, the Ibex 35 2.0% and the DJ Stoxx
50 1.1%.
Market capitalization and trading
By 30 December 2022, Banco Santander’s market capitalization
of EUR 47,066 million was the second largest in the eurozone
and 36th largest in the world among financial institutions.
14,217 million Banco Santander shares traded in the year for an
effective value of EUR 40,262 million and a liquidity ratio of
84%.
The Banco Santander share
Shares (million)
Price (EUR)
Closing price
Change in the price
Maximum for the period
Date of maximum for the period
Minimum for the period
Date of minimum for the period
Average for the period
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)
2022
2021
16,794.4
17,340.6
2.803
(5%)
3.482
10/02/2022
2.324
15/07/2022
2.795
47,066
2.941
16%
3.509
03/06/2021
2.375
28/1/2021
3.055
50,990
14,217
55.3
13,484
52.7
40,262
41,195
156.7
160.9
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3. Shareholders. Engagement
and general meeting
→ One share, one vote, one dividend
→ No takeover defences in our Bylaws
→ High shareholders' participation and engagement at 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 Banco Santander’s policy on communication
and engagement with shareholders and investors are:
• Protection of rights and lawful interests of all shareholders.
We enable them to exercise their rights, provide them with
information and give them opportunities to have a say in our
corporate governance.
• Equal treatment and non-discrimination. We treat all
investors equally.
• Fair disclosure. We make sure that the information we
disclose to investors is transparent, truthful and consistent.
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 investors' needs and expectations.
We make sure to give investors clear, concise, reliable and
tailored information.
• Compliance with our Bylaws and corporate governance
rules, as well as the principles of cooperation and
transparency with 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.
The policy also 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 is available on our corporate
website.
Banco Santander has board-approved frameworks on branding
and communications, and accounting and financial information
and management. They set out the general principles, roles and
key processes on the communication of financial, non-financial
and corporate information, helping ensure that all our
shareholders and other stakeholders are properly informed
about our strategy, targets and results, and culture and values,
thus maximizing the disclosure and quality of the information
available to the market.
Engagement with shareholders in 2022
In keeping with our policy, we engaged with our shareholders
as follows:
• The annual general meeting. Our most important annual
event for our shareholders. We strive to encourage all our
shareholders to, in an informed way, attend and participate.
See 'Shareholder participation at general meetings' and 'Right
to 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 this corporate governance report. She also
addresses any questions raised by shareholders about the
agenda items and the relevant information disclosed to the
market since the last general meeting.
The CEO presents on the Group's strategy execution and
performance (overall and by region, country and business)
and the main priorities for the following year.
The chairs of the audit, nomination, remuneration and, since
the 2022 AGM, the responsible banking, sustainability and
culture committees also report to the annual general meeting
on their operations and elaborate the information provided in
this chapter on the committees they chair.
Shareholders may attend the annual general meeting both in
person and remotely. The meeting is broadcasted in real time
on our corporate website, where its recordings are also
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published in full thereafter. This allows shareholders who are
not present and all stakeholders to be fully informed of the
deliberations and approved resolutions.
Our 2022 AGM was hybrid, allowing shareholders to attend
both in person and remotely. Our general meeting attendance
app enables shareholders to exercise their rights to attend and
participate in real time and remotely. They can watch the
entire meeting through a live feed, vote, make remarks,
propose resolutions and contact the notary public. The high
shareholder meeting participation in the last meetings proved
the effectiveness of our electronic means of attendance,
delegation and remote voting prior to the meeting.
In addition, the excellent quorum and voting results at our
2022 AGM speak to the importance we place on shareholder
engagement at annual general meetings. See section 3.4
'2022 AGM'.
Banco Santander's management system for the 2022 AGM
received once again AENOR certification for sustainable events
in compliance with UNE-ISO 20121:2013, as well as AENOR’s
declaration of protocol verification against covid at events.
• Quarterly results presentations. Every quarter we present
our results on the same day we make them public. Our
presentation can be followed live, via conference call or
webcast in our corporate website. We release the related
quarterly financial report and presentation material before the
market opens. During the presentation, questions can be
asked or emailed to: investor@gruposantander.com.
In 2022, we gave our first, second and third quarter results
presentations on 26 April, 28 July and 26 October,
respectively. Our fourth quarter results presentation was on 2
February 2023.
• Investor and strategy days. We organize investor and
strategy days where senior managers explain our strategy to
investors and stakeholders in a broader context than in results
presentations. Investors can interact directly with senior
managers and some directors, which is increasingly important
and speaks to our strong governance. As recommended by the
CNMV, we publish announcements about meetings with
analysts and investors, as well as related documents, in
advance. On 28 February 2023 we hold our Investor Day in
London, which we last held in April 2019. It is the first
shareholder and investor event attended by Héctor Grisi as our
new CEO. The information made available at those events is
not included in this annual report nor considered part of it.
• Meetings and conferences. Our Shareholder and Investor
Relations team discusses financial and other issues at
meetings with investors and conferences organized by third
parties throughout the year.
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 these
engagements to meet the needs and expectations of our
institutional investors, 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, keeps
regular contact with investors in Europe and North America,
particularly in the months prior to the annual general
meeting. He gathers their insights and gauges their concerns,
especially regarding our corporate governance, which are duly
considered by nomination committee. In 2022 and early 2023,
he met with 28 investors, who accounted for approximately
30% of our 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 is informed about the
feedback received from investors, as the board's committee
specialized in corporate governance.
• Investor roadshows. Our Investor Relations team keeps in
constant contact with institutional investors and analysts to
promote constructive dialogue on shareholder value, better
governance and remuneration schemes, and sustainability.
In 2022, Shareholder and Investor Relations engaged 862
times (both in person and virtually) with 527 institutional
investors from 155 locations. 73 of those meetings focused on
environmental, social and governance topics. It engaged with
40% of the share capital, which is over 56% of the capital held
by institutional investors.
We issued over 650 communications to increase dialogue and
transparency with shareholders and investors about our
performance, results and Banco Santander's shares.
• Interaction with retail shareholders. We offer special means
of communication for retail shareholders, regardless of their
stake. In 2022, the Shareholder and Investor Relations
organized 201 events with retail shareholders (63 virtually;
137 in-person; and one in hybrid format). 7,589 people,
accounting for 412,457,915 shares (5.20% of our retail
shareholders’ capital in Spain), attended. Shareholders
engaged with the Chief Financial Officer (CFO) at several of
these events.
The team also responded to 163,761 queries received via our
shareholder and investor helplines, mailboxes, WhatsApp and
bilateral meetings on the Virtual Attention Channel.
Satisfaction surveys revealed 91% would recommend our
customer service.
Lastly, we received 276,198 shareholder and investor opinions
through quality surveys and studies.
Communication with proxy advisors and other
analysts
We have always recognized 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 investors.
In 2022, through our continuous engagement with the main
proxy advisers, we duly reported on and explained proposed
resolutions submitted to the 2022 AGM so they could make
voting recommendations.
Corporate website
Our corporate website enables us to communicate effectively
with all our shareholders and stakeholders worldwide. Its
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design means we can be transparent and helps users get quality
information about Santander.
As required by law, it has information on corporate governance.
In particular, (i) Banco Santander's key internal regulations
(Bylaws, Rules and regulations of the board, Rules and
regulations of the general meeting, etc.), (ii) the board of
directors and its committees, as well as directors’ skills and
professional biographies, and (iii) all the information related to
general meetings.
Our information on corporate governance can be found at
https://www.santander.com/en/shareholders-and- investors/
corporate-governance (address included for reference purposes
only). The content of our corporate website is not included in
this annual report nor considered part of it.
Other channels
We have an app (Santander Accionistas e Inversores) for
Android and iOS with vast insight into the Group so all
shareholders and investors can stay well informed.
We also post information about Banco Santander regularly on
our official Twitter and LinkedIn accounts.
3.2 Shareholder rights
Our Bylaws provide for one share class only (ordinary shares,
which grant all shareholders the same rights). Each Banco
Santander share entitles holders to one vote.
Banco Santander’s Bylaws do not dictate a voting cap 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 and free shares
transfers in our Bylaws
The law and our Bylaws only place restrictions on voting rights
when shareholders violate regulations.
There are no non-voting or multiple-voting shares; shares that
give preferential treatment in dividend payouts; shares limiting
the number of votes a single shareholder can cast; or quorum
requirements or qualified majorities other than those the law
dictates.
Neither our Bylaws nor any laws or regulations restrict the
transferability of shares. Our Bylaws also do not restrict voting
rights (unless acquired in violation the law or regulations).
Furthermore, our Bylaws do not include any neutralization
provisions as defined in the 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
Banco Santander is subject to legal and regulatory provisions
because banking is a regulated sector. Thus, the acquisition of
significant holdings or influence is subject to regulatory
approval or non-objection. As Banco Santander is a listed
company, cases aimed at acquiring control over it and/or any
other lawful scenarios must come through a tender offer or
takeover bid for its shares.
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.
• Act 10/2014 (articles 16 to 23) and its implementing
regulation, Spanish Royal Decree 84/2015, of 13 February
(articles 23 to 28).
The acquisition of a significant stake in Banco Santander may
also require approval by 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 other authorities
pursuant to foreign investment regulations (including those
imposed due to covid) in Spain or other countries where we
operate.
Shareholder participation at general meetings
All 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, available on the corporate
website at the time of the meeting, allows shareholders to add
to the agenda items included in the notice of call, requests for
support for their proposals, initiatives to reach the percentage
required to exercise minority shareholder rights legally, and
offers or requests to act as a voluntary proxy.
Supplement to the annual general meeting notice
Shareholders representing at least 3% of the share capital are
able to request the publication of a supplement to the annual
general meeting notice, adding one or more items to the
agenda, with an explanation or substantiated proposal and any
other relevant documents.
Shareholders representing at least 3% of the share capital may
also propose reasoned resolutions on 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, irrespective of its percentage of participation
in the share capital, can also request that the meeting addresses
the removal of directors or bringing corporate liability action
against any of them, despite not being included in the agenda.
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Right to information
From the time the general meeting notice is posted until the
fifth day before the general meeting 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. Within the same period, they can submit
written requests for clarification about price-sensitive
information Banco Santander has sent to the CNMV since the
last general meeting or about auditor’s reports. Banco
Santander posts any information or answers it provides on the
corporate website.
Shareholders may also exercise the right to information at the
meeting. If it cannot be provided in the course of the meeting, or
requests are made by shareholders attending remotely, it will
be issued 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 accounting for at least 25% of the
subscribed share capital with voting rights must be in
attendance (except for certain matters mentioned below) for
the valid constitution of the general shareholders' meeting. If
sufficient quorum is not reached, general meetings will be held
on second call, which does not require a quorum.
In accordance with our Rules and regulations for general
meetings, shareholders voting by remote means, cast by post or
direct delivery or by electronic means, 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, approve 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 a general meeting, 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 decisions about acquiring core assets, selling them
off or transferring them to another company, or similar
corporate transactions, unless the law dictates otherwise.
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, as applicable, the shareholders who have drafted
a proposed amendment to the Bylaws, must write it out in full
and prepare a report justifying it; and provide them to
shareholders at the time the meeting to debate the 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 proposed amendments and the related report at
Banco Santander’s registered office or to have them delivered
free of charge.
If shareholders are convened to debate amendments to the
Bylaws, the quorum on first call will be reached if 50% of the
subscribed share capital with voting rights is present. If a
sufficient quorum cannot be reached, the general meeting will
be held on second call, where 25% of the subscribed share
capital with voting rights must be present.
When less than 50% of the subscribed share capital with voting
rights is 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 the subscribed share capital with voting
rights is present, resolutions may pass by way of 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 authorize us to
amend our Bylaws. However, amendments that are exempt
from authorization but must still be reported to the SSM include
changing the registered office within Spain, raising share
capital, adding imperative or prohibitive laws or regulations to
the Bylaws, changing 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 2022 results
For 2022, the board continued the policy of allocating
approximately 40% of the Group's underlying profit to
shareholder remuneration, split in approximately equal parts
between cash dividends and share buybacks.
• Interim remuneration. On 27 September 2022 the board
agreed to:
• Pay an interim cash dividend of 5.83 euro cents per share
entitled to receive dividends (equivalent to approximately
20% of the Group's underlying profit in H1'22), charged
against 2022 results; it was paid on 2 November 2022.
• Implement the First 2022 Buyback Programme worth
approximately EUR 979 million (approximately 20% of the
Group's underlying profit in H1'22). It was approved by the
ECB on 17 November 2022 and ran from 22 November 2022
to 31 January 2023. Banco Santander bought back
340,406,572 shares, which was 2.03% of its share capital at
that time (see 'First 2022 Buyback Programme' in section
2.5). The First 2022 Buyback Programme aimed to reduce
share capital by cancelling the shares that were acquired.
Under the share capital reduction agreement approved at
the 2022 AGM, on 1 February 2023 the board agreed to
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reduce the share capital by EUR 170,203,286 (cancelling the
340,406, 572 shares acquired).
• Final remuneration. On 27 February 2023, pursuant to the
2022 shareholder remuneration policy, the board of directors
decided to:
• Submit a resolution at the 2023 AGM to approve a final cash
dividend in the gross amount of 5.95 euro cents per share
entitled to receive dividends. If approved at the 2023 AGM,
the dividend would be payable from 2 May 2023.
• Implement a Second 2022 Buyback Programme worth EUR
921 million, for which the appropriate regulatory
authorization has already been obtained and that will be
executed from 1 March 2023. For more details, see 'Second
2022 Buyback Programme' in section 2.5.
Once the above mentioned actions are completed, the
shareholder remuneration for 2022 will have been EUR 3,842
million (approximately 40% of the underlying profit in 2022)
split in approximately equal parts in cash dividends (EUR 1,942
million) and share buybacks (EUR 1,900 million). These
amounts have been estimated assuming that, after the
execution of the Second 2022 Buyback Programme, the number
of outstanding shares entitled to receive the final dividend will
be 16,190,866,119. Therefore, the total dividend will be higher
if fewer shares than planned are acquired in the buyback
programme and will be lower in the opposite scenario.
Shareholder remuneration policy for 2023 results
The shareholder remuneration policy the board has approved
for the 2023 results is to pay out a shareholder remuneration of
approximately 50% of the Group reported profit (excluding non-
cash, non-capital ratios impact items), distributed in
approximately 50% in cash dividend and 50% in share
buybacks.
The execution of the shareholder remuneration policy is subject
to future corporate and regulatory approvals.
3.4 2022 AGM
We held our annual general meeting on 1 April 2022, on second
call, both in person and by electronic means.
Quorum and attendance
The quorum (among shareholders present and represented) was
68.776%, which was a historical high quorum, surpassing the
record-breaking attendance quorum achieved at the general
meeting in 2019.
Quorum breakdown
Present
In person and virtual attendance
Remote voting
Cast by post or direct delivery
By electronic means
Represented
Cast by post or direct delivery
By electronic means
Total
3.368 %
0.712 %
0.574 %
2.082 %
65.408 %
7.505 %
57.903 %
68.776 %
Voting results and resolutions
All items on the agenda were approved. Votes in favour of the
board’s proposals averaged 98.40%. 99.71% of votes approved
the corporate management for 2021 and 93.93% of the votes
approved the directors' remuneration policy for years 2022,
2023 and 2024. None of the agenda items listed in the notice
convening the meeting received less than 88.00% of votes in
favour.
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The following chart summarizes the resolutions approved and
voting results:
1. Annual accounts and corporate management
1A. Annual accounts and directors’ reports for 2021
1B. Consolidated statement of non-financial statements for 2021
1C. Corporate management 2022
2. Application of results
3. Appointment, re-election or ratification of directors
3A. Setting of the number of directors
3B. Appointment of Mr Germán de la Fuente
3C. Re-election of Mr Henrique de Castro
3D. Re-election of Mr José Antonio Álvarez
3E. Re-election of Ms Belén Romana
3F. Re-election of Mr Luis Isasi
3G. Re-election of Mr Sergio Rial
4. Re-election of the external auditor for financial year 2022
5. Amendment of the Bylaws
5A. Relating to the form and the transfer of the shares
5B. Relating to the capital reduction
5C. Relating to the issuance of other securities
5D. Relating to right to attend the meeting
5E. Relating to the secretary of the board and the presiding committee of the general
shareholders' meeting
5F. Relating to the executive chair
5G. Relating to the audit committee
5H. Relating to remuneration matters
5I. Delegation to the prior authorisation for the payment of dividends other than in cash or
own funds instruments
6. Amendment of the Rules and regulations of the general meeting
6A. Relating to the information available as of the date of the call to meeting
6B. Relating to the presiding committee of the general shareholders’ meeting
6C. Relating to remote attendance at the meeting by electronic means
6D. Relating to presentations
7. Share capital
7A. Authorisation to the board of directors to increase the share capital on one or more
occasions and at any time, within a period of 3 years, by means of cash contributions and by a
maximum nominal amount of € 4,335,160,325.50
7B. Reduction in share capital in the amount of € 129,965,136.50, through the cancellation of
259,930,273 own shares
7C. Reduction in share capital in the maximum amount of € 865,000,000, through the
cancellation of a maximum of 1,730,000,000 own shares
7D. Reduction in share capital in the maximum amount of € 867,032,065, equivalent to 10% of
the share capital, through the cancellation of a maximum of 1,734,064,130 own shares
8. Remuneration
8A. Directors' remuneration policy
8B. Maximum total annual remuneration of directors in their capacity as directors
8C. Maximum ratio of fixed and variable components in executive directors' total remuneration
8D. Deferred multiyear objectives variable remuneration plan
8E. Application of the Group’s buy-out regulations.
8F. Annual directors' remuneration report (consultative vote).
9. Authorization to implement the resolutions approved
E
10. Corporate action to demand director liability
F
11 to 25. Dismissal and removal of directors
VOTES A
B
Blank
C
Against
0.27
0.29
0.29
0.34
0.37
0.40
0.49
0.42
0.48
2.91
1.68
0.33
0.37
0.36
0.39
3.39
0.34
0.36
0.31
0.48
0.06
0.06
0.07
0.06
0.08
0.08
0.08
0.07
0.07
0.07
0.07
0.06
0.06
0.06
0.07
0.07
0.07
0.07
0.07
0.07
B
For
99.73
99.71
99.71
99.66
99.63
99.60
99.51
99.58
99.52
97.09
98.32
99.67
99.63
99.64
99.61
96.61
99.66
99.64
99.69
99.52
Abstention
C
Quorum
D
2.77
2.75
2.97
2.76
2.78
2.81
2.80
2.82
2.80
2.82
2.81
2.81
2.80
2.76
2.83
2.79
2.82
2.81
2.80
2.81
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
99.63
0.37
0.06
2.76
68.78
99.71
99.70
90.35
98.58
0.29
0.30
9.65
1.42
0.06
0.07
0.06
0.08
95.62
4.38
0.05
99.63
0.37
0.05
99.54
0.46
0.05
99.59
0.41
0.05
93.83
98.17
98.74
97.14
98.65
88.01
99.68
0.00
0.00
6.17
1.83
1.26
2.86
1.35
11.99
0.32
100.00
100.00
0.06
0.06
0.06
0.06
0.08
0.06
0.06
0.00
0.00
2.80
2.81
2.78
2.81
2.78
2.74
2.72
2.72
2.83
2.78
2.79
3.84
2.89
2.82
2.76
0.04
0.04
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
68.78
66.12
66.12
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 2022 AGM.
D. Percentage of Banco Santander's share capital on the date of the 2022 AGM.
E. Item not included on the agenda.
F. Items 11 to 25 (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 2022 AGM.
The full texts of the resolutions passed at the 2022 AGM can be found on our corporate website and on the CNMV’s website, as they
were filed as other relevant information on 1 April 2022.
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• Remuneration policy. To approve the director remuneration
policy for 2023, 2024 and 2025. For more details, see section
6.4 'Directors’ remuneration policy for 2023, 2024 and 2025
submitted to a binding shareholder vote'.
• Director remuneration. To approve directors' fixed annual
remuneration. See section 6.4 'Directors’ remuneration policy
for 2023, 2024 and 2025 submitted to a binding shareholder
vote'.
• Variable remuneration. To approve 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 2023, 2024 and
2025 submitted to a binding shareholder vote'.
• Remuneration plans for executive directors. To approve
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 2023, 2024 and 2025 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 2023 AGM live,
as it was done for the 2022 AGM.
Since attendance at 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.
3.5 Our next AGM in 2023
The board of directors agreed to call the 2023 AGM on 30 March
on first call or on 31 March on second call, proposing these
resolutions:
• Annual accounts and corporate management. To approve:
• The annual accounts and the directors’ reports of Banco
Santander and its consolidated Group for the financial year
ended on 31 December 2022. For more details, see
'Consolidated financial statements'.
• The consolidated non-financial statement for the financial
year ended on 31 December 2022 that is part of this
consolidated directors' report. See the 'Responsible banking'
chapter.
• The corporate management for the financial year 2022.
• The application of results obtained during financial year
2022. See section 3.3 'Dividends and shareholder
remuneration'.
• Appointment of directors.
• Setting the number of directors at 15, within the maximum
and minimum limits stated in the Bylaws.
• Ratification and reelection of Héctor Grisi as executive board
member and of Glenn Hutchins as an independent director
(see section 1.1 'Board skills and diversity') and re-electing
Pamela Walkden, Ana Botín, Sol Daurella, Gina Díez Barroso
and Homaira Akbari for a three-year period. See section 4.1
'Our directors'.
• External auditor. Re-electing the firm
PricewaterhouseCoopers Auditores, S.L. as auditor for financial
year 2023. See 'External auditor' in section 4.5.
• Authority to acquire treasury shares. To authorize the board
of directors to acquire treasury shares, expressly including the
possibility of executing share buyback programmes. See
section 2.5 'Treasury shares' and section 3.3 'Dividends and
shareholder remuneration'.
• Authority to issue convertible securities. To delegate the
board of directors the authority to issue fixed-income
securities, preferred interests or debt instruments of a similar
nature (including warrants) that are convertible into shares.
See section 2.1 'Share capital'.
• Share capital reduction for these purposes:
• Cancelling a maximum of 1,514,451,957 treasury shares
purchased under the Second 2022 Buyback Programme.
• Cancelling a maximum of 1,645,399,501 treasury shares
acquired through one or more share buyback programmes or
by other legally permitted means, 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'.
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4. Board of directors
A balanced and diverse board
→ 15 directors: 13 non-executive and 2 executive
→ Majority independent directors (66.67%)
→ Balanced presence of women and men (40%-60%)
Effective governance
→ Specialized committees advising the board
→ The responsible banking, sustainability and culture
committee evidences the board's commitment to this matter
→ Complementary functions and effective controls: Executive
Chair, CEO and Lead Independent Director
1 Sol Daurella
Member
Non-executive
director
(independent)
¢¢Ÿ
2 Homaira
Akbari
Member
Non-executive
director
(independent)
òpŸ
3 José Antonio
Álvarez
Vice chair
Non-executive
director
òp
4 Héctor Grisi
CEO
Executive
director
òp
5 Ana Botín
Executive Chair
Executive
director
òPpP
6 Bruce
7 Belén Romana 8 Jaime Pérez
Member
Non-executive
director
(independent)
òòpPpŸ
Renovales
General
secretary and
secretary of the
board
Carnegie-
Brown
Vice Chair and
Lead
Independent
Director
Non-executive
director
(independent)
ò¢P¢Pp
9 Javier Botín
Member
Non-executive
director
10 Ramiro Mato
Member
Non-executive
director
(independent)
òòpŸP
11 Henrique
de Castro
Member
Non-executive
director
(independent)
ò¢p
12 Gina Díez
Barroso
Member
Non-executive
director
(independent)
¢Ÿ
13 Luis Isasi
Member
Non-executive
director
ò¢p
14 Pamela
Walkden
Member
Non-executive
director
(independent)
òPp
15 Germán
de la Fuente
Member
Non-executive
director
(independent)
òp
16 Glenn
Hutchins
Member
Non-executive
director
(independent)
¢¢p
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
Héctor
Grisi Checa
CHIEF EXECUTIVE OFFICER
Executive director
Ms Botín joined the board in 1989.
Mr Grisi joined the board in 2023.
Nationality: Spanish. Born in 1960 in Santander, Spain.
Nationality: Mexican. Born in 1966 in Mexico City, Mexico.
Education: Degree in Economics from Bryn Mawr College of
Pennsylvania.
Education: Degree in finance from the Universidad
Iberoamericana of Mexico City.
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 Banesto. Between
2010 and 2014, she was Chief Executive Officer of Santander UK
PLC and was a non-executive director until April 2021. In 2014
she was appointed Executive Chair of Santander. She was also a
non-executive director of Santander UK Group Holdings PLC
(2014-2021) and Chair of the European Banking Federation
from 2021 to February 2023.
Other positions of note: Ms Botín is a member of the board of
directors of The Coca-Cola Company and Chair of the Institute of
International Finance (IIF). She is also founder and Chair of the
CyD Foundation (which supports higher education) and the
Empieza por Educar Foundation (the Spanish subsidiary of
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 (Chair).
Skills and competencies: She has extensive international
experience in top executive roles in banking. She has also led
Grupo Santander´s strategic and cultural transformation, and
her philanthropy underscores her ongoing commitment to
sustainable and inclusive growth.
Experience: Mr Grisi joined the Group in 2015 as Executive Chair
and Chief Executive Officer of Santander México and Grupo
Financiero Santander México, and in 2019, he was additionally
named Regional Head for North America, whose primary
markets are Mexico and the US. Before joining Santander, he
had spent 18 years at Crédit Suisse in several leadership roles,
including head of investment banking for Mexico, Central
America and the Caribbean, as well as Executive Chair and Chief
Executive Officer of Crédit Suisse México. He also managed
corporate and investment banking at Grupo Financiero
Inverméxico and at Casa de Bolsa Inverlat. From 2011 to 2014,
Mr Grisi was Vice Chair of Asociación de Bancos de México.
Other positions of note: Mr Grisi is a non-executive Chair of
Cogrimex, S.A. de C.V.
Positions in other Group companies: Mr Grisi is a non-executive
director of Grupo Financiero Santander México, S.A. de C.V. and
PagoNxt, S.L.
Membership of board committees: Executive committee and
innovation and technology committee.
Skills and competencies: Mr Grisi has gained vast experience
and unique strategic vision from his many years of executive
service at several banking and financial institutions. He is well-
versed in Grupo Santander’s businesses and global strategy,
especially in relation to Mexico and the US, two key markets. He
brings to the board diversity and a strong, international track
record of management, leadership, business transformation
and connectivity between the Group’s markets.
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Bruce
Carnegie-Brown
VICE CHAIR & LEAD INDEPENDENT DIRECTOR
Non-executive director (independent)
José Antonio
Álvarez Álvarez
VICE CHAIR
Non-executive director (*)
Joined the board in 2015.
Mr Álvarez joined the board in 2015.
Nationality: British. Born in 1959 in Freetown, Sierra Leone.
Nationality: Spanish. Born in 1960 in León, Spain.
Education: Master of Arts in English Language and Literature
from the University of Oxford.
Education: Degree in Economics and Business Administration.
MBA from the University of Chicago.
Experience: Mr Álvarez joined Santander in 2002, was
appointed senior executive vice president of the Financial
Management and Investor Relations division in 2004 (Group
Chief Financial Officer) and was CEO of Group from 2015 to
2022. 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 Bank AG, Santander Consumer Holding
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 a 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: Mr Carnegie-Brown was non-executive Chair of
Moneysupermarket.com Group PLC (2014-2019), a non-
executive director of Jardine Lloyd Thompson Group PLC
(2016-2017), Santander UK plc and 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 Chair
and CEO 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, a
member of the investment committee of Gresham House PLC,
Chair of Marylebone Cricket Club (MCC) and of TheCityUK
leadership council.
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.
(*) Until 31 December 2022 executive director. See 'Other external directors' in section 4.2.
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Homaira
Akbari
Non-executive director (independent)
Javier
Botín-Sanz de Sautuola y O’Shea
Non-executive director
Ms Akbari joined the board in 2016.
Mr Botín joined the board in 2004.
Nationality: American and French. Born in 1961 in Tehran, Iran.
Nationality: Spanish. Born in 1973 in Santander, Spain.
Education: Degree in Law from the Complutense University of
Madrid.
Experience: Mr 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: PhD in Experimental Particle Physics from Tufts
University of Massachusetts and MBA from Carnegie Mellon
University.
Experience: Ms Akbari was a non-executive director of Gemalto
NV and Veolia Environment, S.A. She was Chair and CEO of
SkyBitz, Inc., managing director of TruePosition Inc. and a non-
executive director of Covisint Corporation and US Pack Logistics
LLC. She has also held various posts at Microsoft Corporation
and Thales Group and was non-executive Chair of WorkFusion,
Inc.
Other positions of note: Ms Akbari is CEO of AKnowledge
Partners, LLC and an independent director of Landstar System,
Inc. and Temenos, AG. She is also a trustee of the French
Institute Alliance Française.
Positions in other Group companies: Ms Akbari is a 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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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: Ms Daurella Comadrán served on the board of the
Círculo de Economía of Barcelona and was an independent non-
executive director at Banco Sabadell, S.A., Ebro Foods, S.A. and
Acciona, S.A. She was also Consul General of Iceland in
Barcelona (1992-2021).
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 Chair 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, she
provides responsible business and sustainability insight to the
board.
Education: Degree in Business Administration from the Lisbon
School of Economics & Management and MBA from the
University of Lausanne .
Experience: Mr de Castro was 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. He has also been an independent director at First
Data Corporation.
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 at the
world’s top technology companies, he brings to the board
valuable international experience in technological and digital
strategy.
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Germán
de la Fuente Escamilla
Non-executive director (independent)
Gina
Díez Barroso Azcárraga
Non-executive director (independent)
Mr de la Fuente joined the board in 2022.
Ms Díez joined the board in 2020.
Nationality: Spanish. Born in 1964 in Madrid, Spain.
Nationality: Mexican. Born in 1955 in Mexico City, Mexico.
Education: Degree in Economics and Business Administration
with a diploma in auditing from the Complutense University of
Madrid.
Experience: Mr de la Fuente has developed his professional
career at Deloitte, where he has been managing partner of Audit
& Assurance in Spain since 2007 and Chair and CEO of Deloitte,
S.L. from 2017 until March 2022. He was also a member of the
global board of directors of the firm from 2012 to 2016 and of
the global audit and risk services committee until June 2021. He
has been involved in auditing major Spanish companies and in
multiple consulting and advisory projects.
Membership of board committees: Audit committee and risk
supervision, regulation and compliance committee.
Skills and competencies: Mr de la Fuente brings extensive
experience in the auditing industry and sound knowledge in
auditing, accounting and internal and risk control, as well as in
the banking sector .
Education: Degree in Design from Centro de Diseño of Mexico
City.
Experience: Ms Díez Barroso 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 was also a founder and a trustee of the Pro-
Educación Centro and Diarq foundations.
Other positions of note: Ms Díez Barroso is the founder and
non-executive Chair of Grupo Diarq, S.A. de C.V. and Centro de
Diseño y Comunicación, S.C. (Universidad Centro). In addition,
she is a non-executive director of Bolsa Mexicana de Valores
(BMV) and 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.
Positions in other Group companies: Ms Díez Barroso is a non-
executive director of Universia México, S.A. de C.V.
Membership of board committees: Nomination committee and
responsible banking, sustainability and culture committee.
Skills and competencies: Ms Díez Barroso brings to the board
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 that focus on education, gender diversity and social
support.
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Glenn Hogan
Hutchins
Non-executive director (independent)
Luis
Isasi Fernández de Bobadilla
Non-executive director (*)
Mr Hutchins joined the board in 2022.
Mr Isasi joined the board in 2020.
Nationality: American. Born in 1955 in Virginia, US.
Nationality: Spanish. Born in 1956 in Jerez de la Frontera, Spain.
Education: Graduated with a AB, MBA and JD from Harvard
University.
Education: Degree in Economics and Business Administration
and MBA from Columbia Business School.
Experience: 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, was 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.
Experience: Mr Hutchins co-founded US technology and
investment firm, Silver Lake, where he was CEO until 2011.
Prior, Mr Hutchins had been a senior managing director at The
Blackstone Group (1994-1999) and Thomas H. Lee Co.
(1985-1994), and a consultant at Boston Consulting Group. He
has also served on the boards of SunGard Data Systems (Chair,
2005-2015), NASDAQ (2005-2017) and Virtu Financial
(2017-2021). He served as a director and Chair of the audit and
risk committee of the Federal Reserve Bank of New York from
2011 to 2021. Additionally, he served on the board of the
Harvard Management Company, which manages Harvard
University’s endowment. Furthermore, Mr Hutchins worked
with President Clinton in the transition of power and the White
House as special advisor on economic and healthcare policy.
Other positions of note: Mr Hutchins is non-executive Chair of
investment firm North Island Ventures and an independent
director of AT&T. He is a member of the international advisory
board and investment board of Singapore’s Government
Investment Corporation (GIC), co-Chair of the Brookings
Institution, Chair of CARE, and Vice Chair of the Obama
Foundation. He also serves on the executive committee of the
Boston Celtics Basketball Team.
Membership of board committees: Nomination committee,
remuneration committee, and innovation and technology
committee.
Skills and competencies: Mr Hutchins, as a long-time investor
in technology and fintech companies, has expertise in financial
markets and is well-known among investors and stakeholders.
He brings to the board his acumen in technology,
telecommunications, innovation, finance and investment as
well as extensive knowledge of financial regulation as a result
of his leadership roles in government, especially with financial
regulators and supervisors. He works closely with not-for-profit
entities committed to fighting poverty, designing effective
public policy and promoting social justice.
(*) 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)
Belén
Romana García
Non-executive director (independent)
Mr Mato joined the board in 2017.
Belén Romana joined the board in 2015.
Nationality: Spanish. Born in 1952 in Madrid, Spain.
Nationality: Spanish. Born in 1965 in Madrid, Spain.
Education: Degree in Economics from the Complutense
University of Madrid and graduate of Harvard University´s
Management Development Programme.
Experience: Mr 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. He has also
been 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.,
senior advisor of ACON Southern Europe Advisory, S.L. 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
professional career in banking and capital market sectors. 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 foundations to
promote education.
Education: Degree in Economics and Business Administration
from Universidad Autónoma de Madrid and State Economist.
Experience: Ms Romana was formerly senior executive vice-
president of Economic Policy and 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
Ministry of Economy. She served as a non-executive director at
Banesto and as Executive Chair of Sociedad de Gestión de
Activos Procedentes de la Reestructuración Bancaria, S.A.
(SAREB). She has also been non-executive director of Aviva PLC
and Aviva Italia Holding S.p.A. She has also been co-Chair of the
board of trustees of the Digital Future Society and advisory
board member at Inetum and TribalData.
Other positions of note: Ms Romana is an independent director
of SIX Group AG and its subsidiary Bolsas y Mercados Españoles,
Sociedad Holding de Mercados y Sistemas Financieros, S.A.U.
She is also the non-executive Chair of its other subsidiaries, SIX
Digital Exchange AG and SDX Trading AG. Furthermore, she is an
independent director of Werfen, S.A.; an advisory board
member at Rafael del Pino Foundation; senior adviser to Artá
Capital; and academic director of the IE Leadership & Foresight
Hub Programme.
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.
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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: Master's Degree in Economics from Cambridge
University.
Education: Degree in Law and Business Administration from
Universidad Pontificia 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 Banesto and deputy
director of legal services at the CNMV. He is the Banco
Santander representative on the board of trustees of the
Princess of Asturias Foundation and is a member of the jury for
its award for Social Sciences. He is Chair of the ICADE Business
Club and member of the board of trustees of the Fundación
Universitaria Comillas-I.C.A.I.
Jaime Pérez Renovales is the secretary of all board committees.
Experience: Mrs Walkden 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
and as member of the European Banking Authority Stakeholder
Group and was 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: Mrs Walkden 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: Mrs Walkden is qualifies as a financial
expert, based on her broad, international experience in banking
and auditing.
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Term of independent directors
4.2 Board composition
Size
As of 1 January 2023, the board of directors comprises the 15
members whose profile and background are described in
section 4.1 'Our directors'. The Bylaws dictate it can have
between 12 and 17 members.
Composition by director type
The board of directors has a balanced composition 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
A
• Héctor Grisi, Chief Executive Officer
Section 4.3 provides a detailed description of their respective
roles and duties under 'Group Executive Chair and Chief
Executive Officer'.
Independent directors
• Homaira Akbari
• Bruce Carnegie-Brown (Lead Independent Director)
Other external directors
• José Antonio Álvarez
• Javier Botín
• Luis Isasi
These directors cannot be classified as independent directors:
• Mr Álvarez, because he has been the former CEO of Banco
Santander until 31 December 2022.
• Mr Botín, because he has been director for over 12 years.
• Mr Isasi, because it is considered preferable to classify him as
an external director under prudent criteria, although the
nomination committee and the board believe 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.
Our board composition
• Sol Daurella
• Henrique de Castro
• Germán de la Fuente
• Gina Díez Barroso
• Glenn Hutchins
• 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 considers potentially
significant business relations that could affect their
independence and other pertinent circumstances. This analysis
is described further in section 4.6 'Nomination committee
activities in 2022' 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 to 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 2022, the average term of independent non-
executive directors was 4.43 years. See 'Board skills and
diversity matrix' in this section 4.2. Likewise, see 'Tenure and
equity ownership' chart also in section 4.2.
A. José Antonio Álvarez held the Chief Executive Officer position until 31 December
2022.
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3.03.43.013.563.423.024.054.4320152016201720182019202020212022Independent directors66.67%Executive directors13.33%Other external directors20.00%
2022 Annual report
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
A
Tenure and equity ownership
Board of directors
Executive Chair
Chief Executive
Officer
Vice Chair and Lead
Independent Director
Vice Chair
Members
Ana Botín
Héctor Grisi
Bruce
Carnegie-Brown
José Antonio Álvarez
Homaira Akbari
Javier Botín
Sol Daurella
Henrique de Castro
Germán de la Fuente
Gina Díez
Glenn Hutchins
Luis Isasi
Ramiro Mato
Belén Romana
Pamela Walkden
Total
General secretary
and secretary of the
board
Jaime Pérez
Renovales
Tenure
Banco Santander shareholding
D
Date of first
B
appointment
04/02/1989
Date of last
appointment
03/04/2020
C
End date
03/04/2023
Direct
Indirect
1,150,433 30,849,567
Shares
represented
20/12/2022
20/12/2022
20/12/2025
551,064
25/11/2014
26/03/2021
26/03/2024
59,940
Total
32,000,000
% of
share
capital
0.191%
551,064
0.003%
59,940
0.000%
25/11/2014
27/09/2016
25/07/2004
25/11/2014
12/04/2019
01/04/2022
22/12/2020
20/12/2022
03/04/2020
28/11/2017
22/12/2015
29/10/2019
12/04/2019
26/03/2021
26/03/2021
03/04/2020
12/04/2019
01/04/2022
22/12/2020
20/12/2022
03/04/2020
26/03/2021
12/04/2019
03/04/2020
12/04/2022
26/03/2024
26/03/2024
03/04/2023
12/04/2022
01/04/2025
03/04/2023
20/12/2025
03/04/2023
26/03/2024
12/04/2022
03/04/2023
2,288,410
168,739
2,288,410
67,826
100,913
E
5,502,083 19,471,101 155,904,169
476,837
149,483
2,982
10,000
0.014%
0.001%
180,877,353 1.077%
0.004%
0.000%
0.000%
0.000%
0.000%
0.000%
0.003%
0.000%
0.000%
10,291,897 50,898,422 155,904,169 185,094,488 1.102%
0
506,860
212
2,608
506,860
208
2,608
626,320
2,982
10,000
0
4
0
A. Figures from 1 January 2023.
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’s 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, 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 then, any shares they receive as remuneration are subject to a mandatory three-year holding period from their date of
delivery, unless they already hold the mentioned investment equivalent (in addition to the regulatory obligation not to sell them for one year from delivery, which applies in
all cases).
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. See section 2.4 'Shareholders’ agreements'. 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.
For more details, see section 9.2 'Statistical information on corporate governance required by the CNMV'.
Diversity
Diversity is essential to making the board of directors effective.
Mixed skills and experiences create an environment with varied
points of view that improves the quality of decision-making.
Thus, we seek to achieve a sound balance of technical expertise.
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 follows
the European Banking Authority (EBA) and the European
Securities and Markets Authority's (ESMA) joint guidelines on
suitability assessments of board members and key functions
holders.
In 2019, we added a gender equality target in the board of
40%-60% representation of either gender. The policy was later
amended amid a general review of the succession process for
directors and other executive positions, and after the last
amendment of the CNMV's Corporate Governance Code to
include age diversity as other additional diversity criteria in the
qualitative composition of the board.
Our selection policy aims to diversify the board of directors in
these terms:
• 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 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 to maintain a balanced presence of
women and men on the board.
On 2019, the board established the target of achieving a
balanced gender composition in the board with a representation
of both genders between 40% to 60%, which was met at year-
end of the same year representing women a 40% of the board.
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Lastly, the 'Committees' skills and diversity matrix' also shows
the balanced diversity of skills on each board committee. This
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 number of women board members is above the average
for large listed companies in Spain and Europe. According to
figures published by the CNMV in September 2022, based on
annual corporate governance reports for 2021, IBEX 35
companies in Spain had an average 31.3% women directors.
Furthermore, according to data published by Eurostat (the
European Commission's statistical office), in February 2022,
the percentage of female directors in large listed companies
was, on average, 30.6% for all European Union countries.
• Age: The policy on the selection, suitability assessment and
succession of directors also considers that selection process
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 to understand our Group’s businesses, structure and
markets 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.
Our goal is to contribute the maximum feasible information for
our investors and other stakeholders, giving visibility to the
skills on our board. Furthermore, it follows the
recommendations from the EBA and ESMA guidelines on the
suitability assessment of board members and key functions
holders, as well as the ECB Guide to fit and proper assessments.
The matrix (below) follows the following structure:
• We separate thematic and horizontal skills.
• We include a separate diversity section that details gender,
country of origin and/or international education, and age.
• Finally, we also show board tenure.
The skills matrix discloses each board member's skills and
competence as a sign of our commitment to transparency.
Section 4.1 'Our directors' provides a section on the skills and
competencies of each counselor to more clearly identify the
support of this matrix.
The board diversity and skills matrix which is shown below
shows that there are no substantial gaps with regard to the
qualitative composition of the board and ensures robust board
skills diversity. However, the ongoing need for coverage of
Banco Santander's strategic markets as well as knowledge and
expertise in technology, digital strategy, banking, finance,
regulation, data management and sustainability remain
important, as evidenced by our most recent board
appointments. The appropriateness of board skills and diversity
will continue to be monitored.
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Board skills and diversity matrix
Ana
Botín
Executive
Chair
Héctor
Grisi
CEO
Bruce
Carnegie-
Brown
Vice Chair
Lead
Independent
Director
José
Antonio
Álvarez
Non-
executive
Vice Chair
Homaira
Akbari
Independent
Javier
Botín
Non-
executive
Henrique
de Castro
Independent
Sol
Daurella
Independent
Gina Díez
Barroso
Independent
Germán de
la Fuente
Independent
Glenn
Hutchins
Independent
Ramiro
Mato
Independent
Belén
Romana
Independent
Pamela
Walkden
Independent
Luis Isasi
Non-
executive
SKILLS AND EXPERIENCE
THEMATIC SKILLS
Banking (93.3%)
Other financial services (86.7%)
Accounting, auditing and financial literacy (100%)
Retail (80%)
Digital & information technology (60%)
Risk management (86.7%)
Business strategy (100%)
Responsible business & sustainability (73.3%)
Human resources, culture, talent & remuneration (93.3%)
Legal and regulatory (13.3%)
Governance and control (86.7%)
International experience
Continental Europe (73.3%)
US/UK (93.3%)
Latam (66.7%)
Others (40%)
HORIZONTAL SKILLS
Top management (100%)
Government, regulatory and public policy (13.3%)
Academia and education (40%)
Significant directorship tenure (86.7%)
DIVERSITY
Female (40%)
Continental Europe (60%)
US/UK (66.7%)
Latam (13.3%)
Others (6.7%)
Less than 55 (6.7%)
From 55 to 65 (66.7%)
More than 65 (26.7%)
Country of origin/
international education
Age
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
BOARD TENURE
0 to 3 years
4 to 11 years
12 years or more
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%
85.7%
100%
100%
85.7%
100%
14.3%
100%
85.7%
100%
71.4%
28.6%
100%
14.3%
42.9%
100%
28.6%
71.4%
85.7%
14.3%
–
–
71.4%
28.6%
28.6%
57.1%
14.3%
83.3%
83.3%
100%
83.3%
66.7%
83.3%
100%
50%
100%
16.7%
83.3%
83.3%
100%
66.7%
66.7%
100%
16.7%
33.3%
66.7%
50%
66.7%
66.7%
–
16.7%
–
83.3%
16.7%
50%
50%
–
100%
75%
100%
50%
50%
75%
100%
100%
100%
25%
75%
50%
75%
25%
50%
100%
25%
75%
100%
50%
25%
75%
25%
–
–
50%
50%
50%
50%
–
80%
80%
100%
80%
60%
80%
100%
60%
100%
20%
80%
80%
100%
40%
60%
100%
20%
40%
100%
20%
60%
60%
–
–
–
60%
40%
60%
40%
–
100%
80%
100%
80%
40%
100%
100%
40%
100%
20%
100%
80%
100%
60%
60%
100%
20%
20%
60%
40%
80%
80%
–
–
–
60%
40%
60%
40%
–
87.5%
100%
100%
87.5%
100%
87.5%
100%
87.5%
100%
25%
87.5%
75%
100%
62.5%
25%
100%
25%
37.5%
100%
37.5%
50%
75%
12.5%
12.5%
–
87.5%
12.5%
37.5%
50%
12.5%
100%
80%
100%
80%
60%
80%
100%
100%
100%
20%
80%
80%
80%
60%
40%
100%
20%
80%
100%
80%
60%
80%
20%
20%
–
60%
40%
20%
80%
–
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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. Outgoing directors may be re-elected. Each
appointment, re-election and ratification is submitted to a
separate vote at the general meeting.
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. Furthermore, if directors step down during their term
of office, the board of directors may provisionally designate
another director by co-option until the general meeting
confirms the appointment at the earliest subsequent meeting.
Proposals for appointment, re-election and ratification of
directors, regardless of their category, which the board of
directors submits to the shareholders, as well as appointments
of the board in cases of co-option, should be preceded by the
corresponding reasoned proposal of the nomination committee.
Proposals to be submit to the general shareholders' meeting
must include a duly substantiated report by the board,
containing an assessment of the qualifications, experience and
merits of the proposed candidate. Re-election and ratification
proposals will also 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 information 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 their term (i.e.
by general meeting resolution or by resignation), they shall
explain the reasons for 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 unless he/she reports them at a meeting of the
board and this is recorded in the minutes. When appropriate,
the resignation shall be publicly reported, including a reference
to the reasons or circumstances provided by the director. When
appropriate, it 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 the
nomination committee's recommendation, deems it appropriate
in cases that may adversely affect the board's functioning or
Banco Santander’s credit 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, and on the
honourability requirements for directors and the consequences
for directors who subsequently fail to meet them.
Directors must notify the board as soon as possible of any
circumstances affecting them (whether related to their
performance in Banco Santander or not) that might damage
Santander's credit or reputation, especially when under criminal
investigation; and of the developments of any criminal
proceedings. When the board is informed or becomes otherwise
aware of any such situations, it will examine them as soon as
possible and decide, based on the particulars and on 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 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 renewal 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 which contribute to an
adequate diversity and balance of skills in the board.
Banco 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,
including suitability and diversity standards and targets and
the policy for the suitability assessment.
• 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.
• Process of identification of potential board member
candidates.
• The board member and related roles selection, suitability and
nomination procedure.
The policy has specific core performance indicators, reviewed
each year, for such aspects as succession effectiveness
(vacancies filled by identified candidates); the number of
internal and external candidates immediately available to
succeed executive directors; training and development plans for
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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 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 succession
planning, with sound and appropriate plans in place that are
regularly revisited to make sure they meet regulatory
requirements and align with industry best practice.
4.3 Board functioning and effectiveness
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 day-to-day operations and implement the
strategy. It focuses on general supervision and other function it
cannot delegate by law, the Bylaws or the Rules and regulations
of the board, including:
• General policies and strategies (including capital and liquidity,
new products, operations and services; corporate culture and
values, including policies on responsible business and
sustainability and, in particular, on environmental and social
matters; control and risk management; 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.
• The selection, succession and remuneration of directors,
senior management and other key positions.
• Effectiveness of Grupo Santander’s corporate and internal
governance system, including the GSGM, corporate
frameworks and internal regulations.
• Significant corporate transactions and investments.
• Calling the general shareholders’ meeting.
• Related-party transactions.
Board's regulation
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
on 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 and good governance recommendations.
They set out the principles governing its actions and the duties
of its members.
As stated in the report for the 2021 financial year, on 24
February 2022 the board adapted the Rules and regulations of
the board, subject to the effectiveness of the corresponding
amendments to the articles of Bylaws approved by the 2022
AGM, to introduce fundamentally technical amendments and:
• Acknowledge that the board may establish that executives
other than the chair to report directly to the board or its
committees.
• Bolster coordination mechanisms between the audit
committee and the responsible banking, sustainability and
culture committee.
• Harmonize it with the articles of Bylaws for whose
amendment were approved at the 2022 AGM. See section
3.4 '2022 AGM'.
The Rules and regulations of the board adhere to all legal
provisions as well as the principles and recommendations set
out in the Spanish Corporate Governance Code; Corporate
Governance Principles for Banks of the Basel Committee on
Banking Supervision; and the EBA's in Guidelines on internal
governance.
Our rules on the audit committee also adhere to the good
operating practices set out in CNMV's Technical Guide 3/2017
on Audit Committees of Public Interest Entities; as well as
with the applicable regulations because our shares are listed
as ADS on the NYSE and, in particular, with Rule 10A-3 under
the Securities Exchange Act (SEA) on standards relating to
audit committees.
Our rules on the nomination and the remuneration
committees also adhere to the good operating practices set
out in the CNMV’s Technical Guide 1/2019 on Nomination and
Remuneration Committees.
Structure of the board
The board’s corporate governance structure ensures that it
discharges its duties effectively. This structure can be split into
these four dimensions:
• 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. Both report exclusively to the board of
directors.
• 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.
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• A board committee structure, which supports the board in:
• In supervising and making important decisions in the audit
• Managing the Group by exercising decision-making powers
in the executive committee.
• Formulating strategy for core areas in the responsible
banking, sustainability and culture committee, and in the
innovation and technology committee.
committee, nomination committee, remuneration
committee and risk supervision, regulation and compliance
committee.
• A board secretary, who supports the board, its committees
and our chair, and is also General Secretary of the Group.
Group Executive Chair and Chief Executive Officer
Our Executive Chair is Ana Botín and our Chief Executive Officer is Héctor Grisi as of 1 January 2023. Their respective roles and
responsibilities were updated in February 2022 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 and 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, Talent, Financial Accounting
& Control, Strategy and Corporate Development, General
Secretariat and Communications & Corporate Marketing.
• The Chair also leads the appointment and succession
planning of Grupo Santander senior management, to be
submitted to the nomination committee and board for
approval.
Chief Executive Officer
• The Chief Executive Officer is entrusted with the day-to-day
management of the business with the highest executive
functions and reports exclusively to the board in this regard.
• Accordingly, the Chief Executive Officer’s direct reports are
the senior managers in charge of the business units: 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 and control functions.
• As responsible for day-to-day management, the CFO and
head of Investment Platforms & Corporate Investments also
report to the CEO.
• Additionally, the Chief Executive Officer is responsible for
Regulatory & Supervisory Relations and for embedding the
Group's sustainability policy in the day-to-day management
of Group businesses and the support and control functions.
The duties of the Executive Chair, the Chief Executive Officer,
the board, and its committees are clearly separated. Various
checks and balances give Santander’s corporate governance
structure the appropriate equilibrium. In particular:
• The board and its committees supervise both the 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 Executive Chair may not simultaneously act as Banco
Santander’s Chief Executive Officer.
• The corporate Risk, Compliance and Conduct, 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.
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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 Lead Independent Director's functions and activities in 2022. He provided a detailed report
summarizing his activities and the discharge of his duties more generally, to the nomination committee and board of directors.
Duties of the Lead Independent Director and activities during 2022
Duties
Facilitate discussion and open dialogue among independent
directors, coordinating private meetings of non-executive
directors without the executive present and proactively
engaging with them to consider their views and opinions.
Direct the periodic evaluation of the Chair of the board of
directors and coordinate her succession plan.
Engage with shareholders and other investors to learn about
their concerns, in particular with regard to Banco Santander's
corporate governance.
Replace the Chair in her absence, with such key rights as the
ability to call board meetings under the terms of the Rules and
regulations of the board.
Request a board meeting or that new items be added to the
agenda thereof.
Activities in 2022
Held five meetings with non-executive directors without
executive directors present, where they were able to voice their
views and opinions. The meetings were also a valuable
opportunity to discuss such other matters board training topics,
strategy execution, executive director and key management
performance, succession planning and reflections on areas for
continuous improvement with regard to the effectiveness and
culture of the board and its committees.
Led the Chair's annual evaluation 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.
Though the Lead Independent Director did not have to replace
the Chair of the board at any board meeting, he remained fully
committed to ensure 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, made
suggestions regarding the same and encouraged constructive
challenge.
Structure of board's committees
The board currently has seven committees and one international advisory board with the following characteristics:
(required by Law, t
he Bylaws or the Rules and regulations of the board)
Mandatory 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
Voluntary committees
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 secretary of the board is also the General Secretary of
Banco Santander. He acts as the Secretary of all board
committees and facilitates a fluid and effective relationship
between the committees and the Group's units that must
collaborate with them. The secretary does not necessarily need
to be a director.
The appointment of the secretary of the board is a matter for
the board to approve, taking into account the prior opinion of
the nomination committee.
The board has three vice secretaries, 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).
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.
Board operation
The board of directors held 14 meetings (12 ordinary and two
extraordinary) in 2022. 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 a calendar set annually and a
provisional agenda of items to discuss, new items can be added
and additional meetings can be called. 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 keeps a formal list of matters that only it can address.
It prepares a plan to distribute them among the ordinary
meetings scheduled in the annual calendar it has approved.
To help directors prepare effectively for each meeting, they are
given relevant documents sufficiently in advance and in a
secure electronic format. In the board’s opinion, these
documents are thoroughly detailed and received in good time.
The Rules and regulations of the board of directors also
expressly recognize directors’ rights 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.
Additionally, the board meets at the Chair’s discretion or at the
request of at least three directors. The Lead Independent
Director is also authorized to request a board meeting or that
new items be added to the agenda for a meeting that has
already been called.
Directors must attend meetings in person and endeavour to
limit their absence to situations of absolute necessity. The
nomination committee checks that directors attend at least 75%
of board and committee meetings and that any absence has a
valid excuse without raising doubt about the director´s
commitment to good governance. For more details, see 'Board
and committee preparation and attendance' in this section 4.3.
If directors are unable to physically attend a meeting, they can
designate (in writing and on a special basis for each session)
another director to act on their behalf. Proxies are granted with
instructions. Non-executive directors may only be represented
by other non-executive directors. A director can hold more than
one proxy.
The board may meet in various rooms at the same time,
provided that members can interact in real time ensuring the
interactivity and intercommunication via audio-visual means or
telephone.
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 the qualified majorities according to Law.
The secretary of the board keeps the board’s documents on file
and 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.
Though 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.
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A
Comparison of number of meetings held
Average
Spain
11.1
9.8
8.8
Santander
14
32
12
US
average
8.3
—
8.2
UK
average
9.7
—
5.4
Board
Executive committee
Audit committee
Nomination
committee
Remuneration
committee
Risk supervision,
regulation and
compliance
committee
12
13
6.5
6.5
4.7
6.0
4.2
5.4
17
NA
NA
NA
A. Source: Spencer Stuart Board Index 2022 (Spain, United States and United
Kingdom).
NA: Not available.
The following chart shows the board’s approximate time
allocation to each function in 2022.
Approximate allocation of the board’s time in 2022
Committee operation
Board committees follow a 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 every year. Each committee meets as often as is
required to fulfil its duties.
A committee meeting is quorate if it is attended by more than
half the committee's members in person or through an
appointed proxy. A committee resolution passes with a simple
majority of votes. In the event of a tie, the committee chair has
the casting vote. Committee members may appoint a proxy to
vote for them and, is in board meetings, non-executive directors
can only appoint a non-executive director proxy.
Committee members are given relevant meeting materials
sufficiently in advance of each meeting to facilitate solid
meeting preparation therefore promoting overall committee
effectiveness.
Committees have the authority to summon executives, who will
appear at meetings at the invitation of, 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 committee meeting minutes and all documents
provided for meetings.
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Board and committee preparation and attendance
The table following shows the attendance rate of board and committee meetings in 2022.
Committees
Directors
Average attendance
Individual attendance
A
Ana Botín
B
Héctor Grisi
Bruce Carnegie-Brown
José Antonio Álvarez
Homaira Akbari
Javier Botín
Sol Daurella
Henrique de Castro
C
Germán de la Fuente
Gina Díez Barroso
Glenn Hutchins
Luis Isasi
Ramiro Mato
Belén Romana
Pamela Walkden
D
Board
98%
Executive
90%
Audit
99%
Nomination Remuneration
92%
92%
Risk
supervision,
regulation
and
compliance
97%
Innovation
and
technology
89%
Responsible
banking,
sustainability
and culture
95%
14/14
0/0
14/14
14/14
14/14
13/14
13/14
14/14
10/10
13/14
1/1
14/14
14/14
14/14
13/14
30/32
0/0
18/32
32/32
_
_
_
_
_
_
_
31/32
32/32
29/32
_
_
_
_
_
12/12
_
_
11/12
8/8
_
_
_
12/12
12/12
12/12
_
_
12/12
_
_
_
9/12
_
_
12/12
1/1
_
_
_
_
_
_
13/13
_
_
_
11/13
11/13
_
_
0/0
13/13
_
_
_
_
_
_
_
_
_
_
_
0/0
_
_
16/17
17/17
17/17
16/17
3/3
0/0
2/3
2/3
3/3
_
_
3/3
_
_
0/0
_
_
3/3
_
_
_
_
_
5/5
_
4/5
_
_
_
_
_
5/5
5/5
_
Note: This table shows each director's in-person attendance at ordinary and extraordinary board or committee meetings except when they attended by proxy. The nomination
committee was informed of directors’ excused absences and verified that they raised no doubt about their capability of good governance. Some directors did not attend
extraordinary meetings that were not scheduled in the annual meeting calendar.
A. Appointed chair of the innovation and technology committee on 19 April 2022.
B. Member of the board and member of the executive and innovation and technology committees since 1 January 2023.
C. Member of the board and member of the audit committee since 21 April 2022. Member of the risk supervision, regulation and compliance committee since 1 January 2023.
D. Member of the board and of the nomination, remuneration and innovation and technology committees since 20 December 2022.
The table following shows the average preparation of directors
in the exercise of their functions in the board and committees in
2022:
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
Average of
hours per
A
member
Average of
hours per
A
chair
B
144
160
120
48
52
B
288
320
240
96
104
Meetings
14
C
32
12
12
13
17
170
340
5
3
25
12
50
24
A. Includes hours of meeting preparation and attendance.
B. Of the 12 ordinary meetings of the board held in 2022.
C. It has met every two weeks since September 2022.
Directors’ average time commitment is calculated by taking the
number of members on the board and on each committee, the
number of times each body meets during the year, average
meeting length, and an estimate of the time each director needs
to prepare for every meeting. We estimate that the Group
Executive Chair and the committee chairs have a greater time
commitment than the other directors because of the added
functions their roles require. We consider the average time that
directors not living in Spain must take to travel to board and
committee meetings, but it is not factored into their average
time commitment.
On average, directors dedicate approximately 55 eight-hour
days a year to preparing and attending board and committee
meetings.
Directors must report to the nomination committee any
professional activity or role that they are going to do outside the
Group so that the committee can check that they can dedicate
enough time to the Group and the professional activity or role
does not pose conflicts of interest.
The annual suitability reassessment our nomination committee
conducts (see section 4.6 'Nomination committee activities in
2022') enables updates information on the estimated time
directors dedicate to roles or professional activities outside the
Group and demonstrates their ability to exercise good
governance.
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This makes sure the number of board roles that our directors
have at once is within the legal limit (i.e. no more than 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 has an annual training and development programme
to help directors continue to develop skills and increase their
understanding of the Group and industry, taking into account
existing skills, competencies and knowledge of directors. The
board chooses contents based on feedback, effectiveness
reviews, supervisory and regulatory requirements as well as on
cyber, risk management, climate change and other topics.
In 2022, programme workshops were discharged on a collective
basis and covered, in at least one session per year, the following
items:
• Climate change and Net Zero momentum, with a focus on
portfolio alignment and climate risk management, which was
covered in two sessions throughout 2022.
• Risk appetite statement review and associated methodology,
with a focus on the decarbonization target and power
generation metrics, as well as an overview of new metrics for
2023.
• Financial crime compliance, bribery and corruption risks,
sanctions and anti-money laundering regulation.
• New ways of working and Flexiworking, with a focus on
talent attraction and retention.
• Duties and requirements for directors under Spanish law
(refresher course).
• Credit risk and key factors in credit losses, with detailed
insights on accounting and prudential classification of loans.
• Reputational risk, with a focus on forward looking trends and
the management model.
• Cyber, with a focus on trends and risk development.
Directors can also request one to one and ad-hoc training on
specific topics, if deemed helpful. The objective of such sessions
would be to enable directors to deep dive into specific areas in
order to ensure that their knowledge is optimal.
The Group shares its training, induction and development
methodology with subsidiaries to promote best practices and
drive consistency of approach on a group-wide basis. Top
executives ran special sessions for subsidiary directors
throughout the year to keep them up to speed with relevant
Group matters.
In addition, the board has sound induction programmes so new
directors can better understand industry and Santander’s
business model and structure, risk profile and governance
arrangements, taking into account their existing skills,
competencies and knowledge. They normally are completed
within six months after taking up their position as new directors.
Induction and development needs are facilitated through
different methods, including document reviews, tailored
meetings, site visits, training sessions with senior managers of
the Group and other methods decided from time to time.
In 2022, Germán de la Fuente (July) and Héctor Grisi
(November) completed their induction programmes which were
tailored to their experience and particular needs.
“The induction program was very effective as part of my
onboarding and in preparing me as a member of the board
and audit committee. The materials prepared were focused
and dealt with the most relevant issues providing me with
an integral vision of the Group. I have also had the
opportunity to meet a number of business senior
management around the world, which provided me with
important insights into the Group’s values, culture, strategy,
and overall group-wide commitment to help people and
businesses prosper, to attend to the social mandate that
being a member of the board entails.”
Germán de la Fuente
Board effectiveness review in 2022
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 consultant, whose independence is
assessed by the nomination committee. In 2022, the
assessment was conducted internally.
The scope of the internal assessment included the structure of
the board, its organisation and functioning, dynamics and
internal culture and the functioning and effectiveness of its
committees. In addition, the assessment covered the individual
performance of the Executive Chair, Chief Executive Officer,
Lead Independent Director and General Secretary. The
assessment also facilitated the opportunity for performance
feedback on the remaining individual directors.
The Executive Chair and Vice Chair Lead Independent Director
led the assessment, which followed the methodology and
structure of previous internal reviews, based on a confidential
questionnaire that was fully completed by all board members.
The results of the 2022 assessment process, the findings and
specific actions to address those findings were discussed by the
nomination committee and the board of directors in January
2023, with a consensus view that the results were positive and
that the board and its committees operate effectively. In
particular, the results revealed the following:
• The board remains appropriately composed, with a depth and
variety of board skills and high degree of diversity.
• The board engages in open and transparent discussions which
facilitates rigorous decision-making processes, leveraging the
skills and diversity of the board.
• The committee structure, composition and overall functioning
is considered to be both effective and efficient and in
particular, the support provided to the board is appreciated
and rated positively.
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• The Executive Chair, Chief Executive Officer, Lead Independent
Director and General Secretary performed positively,
effectively and with the competence expected.
• The remaining directors performed positively with an overall
effective contribution.
• Directors consider that the management of the meetings, as
well as the information provided is effective, helping them to
focus on key strategic and business issues and constructively
challenge management.
As a result of the review, the board of directors discussed
potential areas for improvement and approved an associated
action plan in January 2023. Each committee will be engaged on
specific actions applicable to their remit to ensure effective and
efficient operation.
The key action plan highlights can be summarised as follows:
• Structure of the board: as part of any future board
refreshment, a continued focus will be placed on maintaining
an appropriate balance of finance and technological profiles
and international and gender diversity.
• Corporate governance: consolidate the enhancements
delivered as part of the action plan executed in 2022 following
the review of our governance arrangements, with a special
focus on the interaction with the Chief Executive Officer, given
his recent appointment.
• Organization and functioning of the board: continue to drive
a better balance between strategic, technological, business
and customer orientated topics versus regulatory and
operational content. This will ensure a deep focus on long-
term strategy and talent requirements. This will also ensure
that board time is used in an optimal manner.
• Board dynamics and internal culture: combine in person
meetings with virtual / hybrid meetings in an efficient
manner, being aware of the implications of each format.
Furthermore, remain focused on culture and its implications
on future business dynamics.
• Committees: keep committee composition under review,
ensuring optimal performance and effectiveness. Specifically,
review the composition of the responsible banking,
sustainability and culture committee with a view of
complementing the existing membership; this specific action
was completed in January 2023 following the appointment of
Gina Díez Barroso to the committee.
The resulting actions and associated outcomes of the review
have supported our continued priority focus on effective
governance. See 'Board assessment and actions to continuously
improve its operation' in section 1.2.
4.4 Executive committee activities in 2022
Composition
Position
Chair
Members
Secretary
Ana Botín
Héctor Grisi
Bruce Carnegie-Brown
José Antonio Álvarez
Luis Isasi
Ramiro Mato
Belén Romana
Jaime Pérez Renovales
Category
Executive
Executive
Independent
Other external
Other external
Independent
Independent
Appointed on
A
11/12/1989
01/01/2023
12/02/2015
03/01/2015
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. Its
meeting frequency and its business as usual nature of its
decisions allows the board to focus on general oversight. It also
reports regularly to the board on its core matters and provides
all directors with the minutes and documents from its meetings.
Committee performance
The board, supported by its nomination committee, determines
the committee's size and composition, to ensure its
effectiveness based on board composition guidelines. As well as
the board, the committee has an external director majority,
including three independent directors, ensuring a balance of
opinions and compliance with Recommendation 37 of the
Spanish Corporate Governance Code. Its secretary is the
secretary of the board.
As part of the organizational changes announced on 24
February 2022, the operating rhythm and content of the
committee was revisited to continue ensuring ongoing
effectiveness and proper coordination with other committees
and the board. The review identified specific opportunities for
improvement, with no loss of appropriate governance.
Therefore, with effect from September 2022, the executive
committee generally meets every two weeks. However, it can
meet as many times as required by the Chair in order to ensure
the discharge of its duties.
The change in committee frequency was driven by a review of
the business being conducted, the materiality and delegation
thresholds being applied in order to optimise the volume of
matters being presented and improve its effectiveness. In
addition, leveraging the already established work of other board
committees has enabled the committee to meet less frequently
than prior years.
Main activities in 2022
In 2022, 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 that were subsequently submitted to the board of
directors. It covered:
• Results: It regularly reviewed the Group's results and
investors and analysts reaction to them.
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• Business performance: The committee regularly received
management reports on the performance of the Group’s
business areas and other related matters.
2023 priorities
The committee set the following priorities for 2023:
• Information reported by the Chair: The board´s Chair, who
also chairs the executive committee, regularly reported on the
Group´s management, strategy and institutional issues.
• Information reported by the CEO: The CEO reported on the
Group´s performance, budget and execution of units and
global businesses' plans reporting to him.
• Corporate transactions: The committee analysed and
approved (where appropriate) corporate transactions on
investments and divestments, joint ventures and capital
transactions.
• Risks: The committee received regular holistic risk and
compliance reports. Within the framework of the risk
governance model, the committee authorized or declined
transactions that it had to approve due to their materiality
taking into account the above-mentioned streamlining of
reporting. It also examined the credit impact relating to the
war in Ukraine, economic sanctions and other significant
macroeconomic matters.
• Subsidiaries: The committee received updates on subsidiary
performance against agreed plans, as well as relevant unit
updates. This helped the committee support the board with
the oversight and control of its subsidiary operations.
• Capital and liquidity: The committee received regular reports
on capital ratio and the optimization measures; pricing
(originations) and portfolio profitability. By virtue of the
board's delegation and within capital and funding plans, the
committee agreed non-convertible debt issuances and
securitizations.
• Supervisors and regulatory matters: The committee reviewed
regulatory developments, the yearly supervisory agenda and
projects to ensure compliance with supervisory
recommendations and regulatory reforms.
• Governance matters: The committee approved specific
internal regulation under its remit and ensured the
effectiveness of the executive first level committee structure.
In 2022, the executive committee held 32 meetings as a result
of the above-mentioned change in committee frequency. See
'Board and committee preparation and attendance' in section
4.3 for members’ meeting attendance and the estimated
average time each one spent on meeting preparation and
attendance.
• Monitor the performance of the Group's global businesses
and subsidiaries, including progress in the execution of their
strategic plans.
• Continue to assess proposed corporate transactions relating
to investment and divestments, joint ventures and capital
transactions
• Oversee the execution and achievement of specific agreed
public commitments assumed with stakeholders, and in
particular, those disclosed at the Investor Day.
• Continue to facilitate timely and efficient decision making,
supporting the board and enabling it to focus on general
oversight and strategy matters.
• Continue to ensure committee’s effectiveness and efficient
coordination with the board, its committees and the executive
first level committees.
4.5 Audit committee activities in 2022
'The increasingly volatile global environment has created
increased risks and a more difficult economic environment.
Many individuals and businesses are concerned about the
rising costs of living and energy and, at the same time, there
are increased risks associated with supply chain disruption,
financial crime compliance and cyber crime. We will do
every possible to anticipate future risks and adapt our plans
to ensure our internal controls remain appropriate.
We have also continued to supervise enhancements to our
reporting of ESG information to ensure its consistency and
our preparedness for the greater independent assurance
required.
The committee continued to benefit from a great mix of
experience and skills, and I was delighted to welcome
Germán de la Fuente, who joined us in April 2022. Germán
brings, among other things, very valuable accounting and
audit experience to the committee.
As we have done in previous years, we shared concerns and
views with our subsidiary audit committees, which enabled
us to harness their vast collective expertise. We also
commissioned an external review of the most relevant
elements of our Internal Audit function, which rated them
“best in class” in all the areas under scope. This is a great
outcome which is a credit to the team'.
Pamela Walkden
Chair of the audit committee
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• The external auditor’s remuneration for audit and other
services;
• All non-audit services rendered by the external auditor,
verifying that they met independence requirements under
European and Spanish law, the SEC rules and the rules of the
Public Company Accounting Oversight Board (PCAOB); and
• The personal circumstances, as the financial dealings, that the
auditor or persons performing the audit may have with the
Group, analysing threats and taking appropriate safeguarding
measures.
Likewise, the committee received written confirmation from the
external auditor on its independence from Banco Santander in
accordance with applicable European and Spanish law, the SEC
and the PCAOB.
In view of the above, the audit committee concluded that, by its
judgement, it had no objective reason to question the external
auditor's independence.
Proposed re-election of the external auditor
for 2023
As indicated in section 3.5 'Our next AGM in 2023', the board of
directors will submit a resolution to re-elect PwC as external
auditor for 2023 at our 2023 AGM, following the proposal the
audit committee had issued in November 2022. Mr González
will continue as lead audit partner.
Time allocation
In 2022, the audit committee held 12 meetings, including two
joint sessions with the risk supervision, regulation and
compliance committee. See 'Board and committee preparation
and attendance' in section 4.3 for members' attendance and the
estimated average time each one spent on meeting preparation
and attendance.
The chart below shows the committee's approximate time
allocation in 2022:
This section is the report the audit committee prepared on 17
February 2023 regarding its activities. The board of directors
approved it on 27 February 2023.
Composition
Position
Chair
Pamela Walkden
Homaira Akbari
Henrique de Castro
Members Germán de la Fuente
Ramiro Mato
Belén Romana
Jaime Pérez Renovales
Secretary
A. Committee Chair since 26 April 2020.
Appointed on
A
Category
Independent 29/10/2019
Independent 26/06/2017
Independent 21/10/2019
Independent 21/04/2022
Independent 28/11/2017
Independent 22/12/2015
The board of directors appointed the committee’s members
based on their expertise, skills and experience in the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board 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,
past leadership positions at entities where accounting expertise
and risk management were essential, and international
experience (primarily in the UK and Asia).
Germán de la Fuente was appointed to the committee on 21
April 2022.
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 audit partner Julián González, PwC's banking sector audit
leader, has experience as a global group 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 17 February 2023 before the 2022 auditor’s
report on the financial statements was issued in line with
section 4.f) of Article 529 quaterdecies of the Spanish
Companies Act, and with Article 17.4.c) (iii) of the Rules and
regulations of the board. It had considered the information
included in the corresponding subsection 'Duties and activities
in 2022' in this section on:
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Duties and activities in 2022
This section summarizes the audit committee's activities in 2022.
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 directors' report for 2022 and
submitted them to the board of directors for approval. Monitored compliance with legal requirements
and accounting principles, and ensured that the external auditor issued a report on the effectiveness of
the Group’s system of internal control over financial reporting (ICFR).
• Reviewed quarterly financial information (dated 31 December 2021, 31 March, 30 June and 30
September 2022, respectively), before it was approved by the board and subsequently released to the
market and supervisory bodies.
• Reviewed such other financial information included in the annual report; share registration document
filed with the CNMV; Form 20-F filed with the SEC; and the half-yearly financial information filed with
the CNMV and with the SEC as Form 6-K.
• Oversaw and assessed the preparation and reporting processes, as well as the integrity of non-
financial reporting according to applicable regulation and international standards, in coordination with
the responsible banking, sustainability and culture committee; and informed the board accordingly.
• Reviewed the annual 'Green Bond' report on investments for each green bond issuance before board
approval, assessing the integrity of such disclosure and the external auditor opinion on it.
• Reported to the board on tax policies based on the Code of Good Tax Practices and on the filing of the
2021 Tax transparency report with the Spanish tax agency (Agencia Estatal de Administración
Tributaria).
• Received information on emerging tax developments and regulation, and its potential impacts.
• Reviewed and endorsed the tax strategy and policy on control and management of risk, including tax
risk and recommended it to the board for approval.
Report to the board about
applied tax policies
Relations with the external auditor
Receive information on the
external audit plan
• Received updates on the planning, progress and execution of the audit plan.
• Discussed improvements to financial reporting in light of new accounting standards and best practice.
• Obtained the external auditor's confirmation of its full access to all information to conduct the audit.
• Analysed the audits for the annual financial statements before the external auditor submitted them to
Interaction with the
external auditor
Assessment of the
external auditor’s
performance
the board of directors.
• Received reports on ESG information reporting process, evolution of reporting requirements, their
impact on timelines and assurance scope of the independent external verification of such information.
• Met twice with the lead audit partner without executives present to ensure fluent communication and
the independent performance of its function.
• The lead audit partner, who met periodically with the committee Chair, attended all committee
meetings, which facilitated communication between the external auditor and the board.
• Performed the final assessment of the external auditor's and how it has contributed to financial
reporting integrity considering its work and the opinions of the controllers of main local units or
relevant subgroups and the main entities' audit committee chairs.
• Received the PwC 2022 Transparency report from the lead audit partner who informed the committee
on other relevant investigations and confirmed that no inspections from the ICAC on PwC were
expected in 2022 as part of the former's regular quality control processes.
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Actions taken
Duties
External auditor's independence. Possible threats and protective measures
PwC’s remuneration for
audit and non-audit
services
to the Group:
EUR million
• Monitored PwC’s remuneration, including the following fees for audit and non-audit services provided
Audit
Audit-related services
Tax advisory services
Other services
Total
2022
113.4
6.4
0.5
4.8
125.1
2021
104.6
6.0
0.7
2.4
113.7
2020
99.4
6.0
0.8
1.2
107.4
The 'Audit' heading mainly includes audit fees for the individual and consolidated financial statements
of Banco Santander and its subsidiaries, of which PwC or another firm in its network is the statutory
auditor; for interim consolidated financial statements of Banco Santander; for integrated audits
prepared in order to file Form 20-F for the annual report with the SEC in the US regarding required
entities; the internal control audit (SOx) for required Group's entities; the limited review of the
financial statements; and the regulatory auditor’s reports on Grupo Santander’s geographies.
The main fees under 'Audit-related services' include, comfort letters, verifying financial and non-
financial information (as required by regulators), and other reviews of documents that, due to their
nature, the external auditor provides to be submitted to domestic or foreign authorities.
The fees included under the heading 'Tax services' mainly related to tax compliance and advisory
services provided to Group companies outside Spain, which are permitted in accordance with
independence regulations; none were for tax planning advice.
The 'Audit' heading includes the fees for the year's audit, regardless of the date the audit was
completed. Any subsequent adjustments, which are not significant, and for purposes of comparison,
are shown in note 47.b) in the 'Notes to the consolidated financial statements' for each year. The fees
corresponding to the rest of the services are shown by when the audit committee approved them.
• Verified that the ratio of PwC's total fees paid for all services for the Group to its annual revenue in
Spain and worldwide in 2022 did not exceed 15% for three consecutive years. The ratio stood at 0.3%
of PwC's total revenues in worldwide. Banco Santander has been complying with the requirement
that, over three or more consecutive years.
• Verified every quarter, according to Regulation (EU) No 537/2014 of the European Parliament and of
the Council, that the fees approved in 2022 for non-audit services provided by
PricewaterhouseCoopers Auditores, S.L. (PwC) (including for ‘Other services’ and ‘Audit-related
services’, and not including services that the external auditor is required to perform under domestic or
EU laws) were significantly less than 70% of the average fees paid specifically to PwC in the past three
consecutive years for the ‘Audit’ of Banco Santander and its subsidiaries in Spain (not including fees for
reviews with more limited assurance than required for accounts auditing, which are included as non-
audit services). At 2022, non-audit service fees were 32.12% of the average fees paid to PwC; they
would be 20.43% if they included services approved for PwC and other firms in its network by Grupo
Santander in and outside Spain.
See subsection C.1.32 of section 9.1. 'Reconciliation with the CNMV’s corporate governance report
model' for the reconciled amounts of the abovementioned fees listed, with the numerator and
denominator values of each ratio found in section C.1.32 of section 9.2 'Statistical information on
corporate governance required by the CNMV'.
• In 2022, Grupo Santander contracted for services by audit firms other than PwC in amount of EUR
185.5 million (EUR 263.8 and 172.4 million in 2021 and 2020, respectively).
Non-audit services
• Verified that all non-audit services rendered by the Group's external auditor met independence
requirements under applicable regulation.
Personal and financial
relations
External auditor
independence report
• Received written confirmation from PwC that the designated audit team, PwC as external auditor,
everyone else that forms part of PwC or firms in its network, and all applicable extended relations to
them complied with regulation on external auditor independence.
• The committee was also informed about an internal review of potential financial ties with PwC and its
related companies, which had found none that compromised the independence of PwC as external
auditor.
• After considering the information above, the committee issued its 'Report on the independence of the
external auditor' at the beginning of this section.
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Actions taken
Duties
Re-election of the external auditor
Re-election of the external
auditor
• Recommended to the board, for subsequent submission to the 2023 AGM, the re-election of PwC as
the external auditor of Banco Santander and its consolidated Group for 2023.
Internal audit
Oversight of the Internal
Audit function
• Supervised the Internal Audit function and ensured its independence and effectiveness in 2022.
• Commissioned and reviewed the external assessment of the Internal audit function according to
Internal Audit Standards 1312 to further ensure the effectiveness of the function and its alignment
with best practice and monitored implementation of the associated action plan.
• Held meetings with the Group Chief Audit Executive (CAE) and internal audit officers, including one
private meeting with the CAE without other executives or the external auditor present.
• Proposed a 2022 Internal Audit function budget, ensuring the resources the function needed to its
duties effectively.
• Was kept apprised of audit hub projects and internal audit digital initiatives.
• Assessed the preparedness and effectiveness of the Internal Audit function to fulfil its duties.
• Reviewed and reported to the board on the CAE's 2022 objectives.
• Reviewed the CAE's performance in 2022 and reported to the remuneration committee and to the
board to set his variable remuneration.
• Was engaged in the appointment of new subsidiary CAEs, ensuring their proper oversight and control,
in coordination with the nomination committee.
Monitoring of internal
audit activities
• Reported on the internal audit plan, internal audit recommendations and ratings of units and corporate
functions. Each unit CAE reported to the committee at least once in 2022.
• Reviewed the strategic audit plan for 2022-2025 and recommended it to the board for approval,
ensuring that it covered the Group's relevant risks.
• Received regular information on the internal audit activities carried out in 2022, highlighting an overall
improvement in audit ratings, as a result of the continued focus on a stronger control environment;
and conducted an additional review of issued audit reports, requiring that relevant business areas
present action plans.
• Continued promoting the first-line’s further involvement in internal audit recommendations and
ensured that senior management and the board understood the conclusions of internal audit reports.
• Received holistic reviews of internal audit coverage of financial crime, model risk, ESG and vendor
management and other topics, to ensure proper oversight, with second line of defence representatives
invited to provide additional feedback.
• Received information on the Group's internal control system and monitored related action plans,
together with the internal control strategic plan.
• Received reports and certification on the Group’s 2021 internal control system (ICS) and assessed its
effectiveness in compliance with CNMV Internal Control over Financial Reporting regulation (SCIIF) and
the SEC Sarbanes-Oxley Act (SOx).
• Received information in a joint meeting with the risk supervision, regulation and compliance
committee on Canal Abierto, the Group's whistleblowing channel with a special focus on matters
within the committee's area of authority to ensure the Group's culture empowers employees and
other persons related to Banco Santander can talk straight and report irregular practices without fear
of reprisal.
• Held two joint meetings with the risk supervision, regulation and compliance committee to discuss the
Group's risk control environment assessment, risk model, financial crime compliance, risk culture,
whistleblowing, third-party supplier risk management and other topics of mutual interest.
• Received biannual reports on legal risk, in coordination with the risk supervision, regulation and
compliance committee.
• Invited the CRO to all 2022 committee meetings.
• The chairs of the audit committee and the risk supervision, regulation and compliance committees met
regularly.
Internal control systems
Monitoring the
assessment of internal
control systems
Whistleblowing channel
(Canal Abierto)
Coordination with Risk and
Compliance and Conduct
Other activities
• Endorsed the Pillar III disclosures report, which was submitted to the board for approval.
• Received reports from Santander España audit committee on the main items covered at its meeting to
remain sighted on its activities.
Related-party and corporate transactions
Creation or acquisition of
special-purpose vehicles
and entities based in
countries considered non-
cooperative jurisdictions
the proposals presented.
• Was informed of the activities of the Group’s offshore entities by the Head of Tax, in accordance with
Spanish regulations. See note 3.c) in the 'Notes to the consolidated financial statements'.
• Received a report on the creation of special purpose entities and reported favourably to the board on
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Duties
Authorization and
oversight of related-party
transactions
Actions taken
• Reviewed the details and balances of the related-party transactions that appear in the annual and half-
yearly financial statements. Checked that those transactions were carried out under market
conditions.
• Conducted bi-annual reviews to check that related-party transactions complied with the law, the Rules
and regulations of the board and the conditions set by board resolution, and met the requirements to
be considered fair, reasonable and transparent. Reported its findings to the board.
• Reviewed and recommended to the board changes and a wider scope for the rules for authorizing
related-party transactions, in particular in relation to non-typically banking transactions and those
whose approval has not been delegated by the board of directors.
• Issued the Related-party transactions report, which can be found in section 4.12 'Related-party
transactions and other conflicts of interest'.
• Reviewed the corporate transactions that the Group planned in 2022 prior to their submission to the
board of directors, analysing their economic conditions, accounting and internal audit impact.
Transactions involving
structural or corporate
changes
Information for general meetings and corporate documents
Shareholder information
• Was represented by Pamela Walkden in reporting at the 2022 AGM on the committee's activities
in 2022.
Corporate documents for
2022
• Prepared this activities report which includes a performance review of the committee's functions and
key priorities identified for 2023.
Annual assessment of the committee
The 2022 internal board effectiveness review covered the
committee's effectiveness. The committee considered the
findings and suggested areas for improvement resulting from
the review and related to its remit. For more details, see 'Board
effectiveness review in 2022' in section 4.3.
Achievement of 2022 objectives
The committee took these actions planned for 2022:
• Welcomed Germán de la Fuente as a new member. He
complements the skills and background of committee
members with additional accounting and audit experience and
strong knowledge of banking and financial services.
• Increased the overall committee effectiveness, ensuring
proper mechanisms remained in place to coordinate and share
information with the risk supervision, regulation and
compliance committee and others.
• Proactively reviewed its forward-looking planning to ensure
committee time was used optimally and aligned with member
expectations, and its responsibilities were discharged in line
with its assigned functions.
• Enabled the Group and subsidiary chairs to participate in each
other’s committee meetings, and held a meeting of audit
committee Chairs of Grupo Santander to discuss global
initiatives and topical matters of mutual interest.
• Oversaw the internal audit plan and the Group's
environmental strategic initiatives, the Internal Audit function,
the internal control systems as well as the measurement of
emerging risks identified by management.
• Oversaw key judgements made in preparing the Group's
financial statements, including the oversight of the integrity of
financial reporting and controls.
2023 priorities
The committee set the following priorities for 2023:
• Continue to monitor the impact of the current volatile
environment on key aspects within the committee's remit.
These include the macroeconomic scenarios which flow
through to the key management judgements and estimates,
such as provisioning, that are made in preparing the Group's
financial statements, as well as the heightened risks around,
for example, supply chain and cyber.
• Continue to supervise the Group's units and global businesses,
with a special focus on those more relevant to the digital
transformation, such as PagoNxt and Digital Consumer Bank,
to ensure that appropriate controls are in place.
• Continue to focus on the oversight of the internal audit plan
execution, ensuring appropriate amendments to address
future risks and appropriateness of the internal controls to
manage these risks.
• Review our enhanced ESG disclosures to ensure consistency
and coherence in a complex legislative framework and
monitor the greater independent assurance required in the
coming years, by both the SEC Climate disclosure and
Corporate Sustainability Reporting Directive.
• Remain focused on the independence and effectiveness of
both the Internal Audit team and the committee itself
ensuring that their roles are discharged effectively, and
maintain a strong working relationship with the other
committees, as well as the subsidiary audit committees.
4.6 Nomination committee activities in 2022
'Board composition and succession were high on our agenda
last year. In particular, significant time was devoted to our
CEO succession process around a number of other senior
roles impacted by Héctor's move to the CEO role. For all key
board and senior appointments, the committee continues to
oversee a robust succession process which has an
appropriate focus on the diversity of candidates under
consideration.
The skills and training of Group directors, the executive,
senior management and workforce talent strategy, and
gender and broader diversity criteria remained top priorities
in the committee's succession planning discussions.
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The effectiveness of the board, its committees and our
overall governance remained a key priority in the year. We
focused on the delivery of actions that arose from the 2021
external advisors’ governance review and ensured that this
was completed to our satisfaction. In this regard, the
committee is committed to continuously improving board
and committee governance and designed the 2022 board
effectiveness review, which was conducted internally.
Lastly, R. Martín Chávez left the board and Glenn Hutchins
joined the board and this committee, among others, on 20
December 2022. On behalf of the committee, I would like
to thank R. Martín Chávez for his hard work and
commitment and extend a warm welcome to Glenn
Hutchins'.
Bruce Carnegie-Brown
Chair of the nomination committee
The board of directors appointed the committee’s members
based on their expertise, skills and experience in the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board and
committees skills and diversity matrix' in section 4.2.
R. Martín Chávez stepped down as member of the committee on
1 July 2022 and Glenn Hutchins was appointed to the
committee on 20 December 2022.
Time allocation
In 2022, the nomination committee held 12 meetings, including
one joint session with the remuneration committee. See 'Board
and committee preparation and attendance' in section 4.3 for
members' attendance and the estimated average time each one
spent on meeting preparation and attendance.
The chart below shows the committee’s approximate time
allocation in 2022:
This section is the report the nomination committee prepared
on 20 February 2023 regarding its activities. The board of
directors approved it on 27 February 2023.
Composition
Position
Chair
Bruce Carnegie-Brown
Sol Daurella
Members Gina Díez Barroso
Glenn Hutchins
Secretary Jaime Pérez Renovales
Category
Independent
Independent
Independent
Independent
Appointed on
A
12/02/2015
23/02/2015
22/12/2021
20/12/2022
A. Committee Chair since 12 February 2015.
Duties and activities in 2022
This section summarizes the nomination committee's activities in 2022.
Actions taken
Duties
Board and committees composition and succession planning
Selection succession and
renewal of the board and
its committees
• Ensured board member selection procedures guaranteed directors’ individual and collective suitability;
fostered diversity in its broadest sense (gender, geographical provenance, age, experience and skills);
and analysed 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 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, either thematic or
horizontal, including the need to cover Grupo Santander’s strategic markets and such areas as
technology, digital strategy, banking, finance, regulation, data management and sustainability; and
verified that the overall composition of the board of directors and its committees remain appropriate.
• Ensured an up-to-date candidate pool identification for any proposal of appointment, considered
diversity in its broadest sense.
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Duties
Appointment, re-election
and confirmation of
directors and committee
members
Annual verification of the
status of directors
Directors' potential
conflicts of interest and
other professional activities
Director induction, training
and development
programmes
Actions taken
• Considered areas of expertise and experience required to complement the board of directors by
reference to the board skills and diversity matrix as well as the board effectiveness review in order to
commission the relevant recruitment.
• Oversaw a rigorous and comprehensive process to facilitate the orderly succession of the Chief
Executive Officer position, taking into account and constructively challenging all relevant factors. As a
result, confirmed the suitability of Héctor Grisi for the position of director and CEO and proposed his
nomination to the board of directors.
• Recommended that José Antonio Álvarez should remain as Vice Chair once he steps down from his
executive duties on 1 January 2023.
• Was apprised of the resignations from R Martín Chávez (effective on 1 July 2022) and from Sergio Rial
(effective on 1 January 2023) as directors of the board, which they had tendered in order to pursue
other professional interests.
• Recommended the nomination of Glenn Hutchins as independent director, effective from 20
December 2022, in light of his expertise in different areas, such as financial supervision, banking and
technology.
• Proposed composition changes for certain committees to further enhance their performance and
support to the board in their areas of authority.
• Verified each director category (i.e. executive, independent and other external) and submitted a
proposal to the board of directors for it to be confirmed in the annual corporate governance report and
at the 2023 AGM. See section 4.2 'Board composition'.
• Assessed directors’ independence, verifying there were no significant business ties between the Group
and companies in which they are or have been significant shareholders, directors or senior managers,
in particular regarding financing extended by the Group to such companies. In all cases, the committee
concluded that existing ties were not significant because (i) financing (a) did not constitute economic
dependency for such companies because other sources of funding were available, 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. New York Stock
Exchange (NYSE), Nasdaq and Canada’s Bank Act), among other reasons.
• Examined the information provided by directors about their intention to carry out other professional
activities or positions outside the Group held in order to assess related time commitment and the
compliance with the maximum number of boards to which they may belong according to the
applicable legislation. Concluded that those commitments did not interfere with their obligations as
Banco Santander directors nor entail any conflict of interest.
• Assessed the effectiveness of the Group’s director induction, training and development programmes
based on the Rules and regulations of the board, ESMA and EBA’s joint guidelines and the Spanish
Governance Code guaranteeing that such programmes are designed according to each director’s
circumstances and needs and identified areas for improvement and additional training topics for the
2023 training programme.
Senior management, succession planning and effectiveness monitoring, talent and related activities
Succession planning for
executive directors and
senior management
• Oversaw the discipline applied to senior executive succession planning (which included key positions
in subsidiaries) and made sure plans were being implemented for the orderly succession of senior
managers through a rigorous, transparent, merit-based and objective process that promotes diversity
in its broadest sense.
• Oversaw appointments of key positions and the regular strategic review of leadership succession
Appointment of key officers • Recommended the following nominees, later appointed by the board:
plans.
• Felipe García Ascencio as CEO of Santander México and Country Head.
• Román Blanco as CEO of Santander Chile and Country Head.
• Ángel Rivera as CEO of Santander España and Country Head.
• Cristina Ruiz as Head of Transformation of Santander España.
• Matías Sánchez as Global Head of Cards & Digital Solutions.
• Mahesh Aditya as Group CRO, subject to customary approvals.
• Issued favourable opinions on director and senior manager appointments in the Group’s core
subsidiaries.
Talent and culture matters
• Discussed Human Resources' activities and progress with the 2021 diversity, equity and inclusion
strategy, new proposals for 2022; and reviewed the Group’s STEM (science, technology, engineering
and mathematics) talent strategy.
• Assessed and challenged proposals on top-leadership goals, career development plans & mobility.
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Duties
Governance
Board effectiveness review
Actions taken
• Reviewed the execution of the action plan to address the areas for improvement revealed in the 2021
board effectiveness annual review.
• Oversaw the 2022 board effectiveness review, which was performed internally and the resulting
action plan. See 'Board effectiveness review in 2022' in section 4.3.
Internal governance
• Assessed the suitability of certain key position nominees for the subsidiaries, subject to the Group’s
appointments and suitability procedure.
• Oversaw subsidiary board composition to ensure consistent suitability in line with expectations across
the Group.
• Coordinated the appointments of specific subsidiary CAEs, CROs and CCOs with audit and risk
supervision, regulation and compliance committees, ensuring their proper oversight and control.
• Remained apprised on new governance regulation, trends, best practices and implications for the
Group. In this regard received proposed amendments to the GSGM and other applicable internal
regulation, which were endorsed and recommended to the board for approval.
• Verified that subsidiaries followed the GSGM on board and committee structure and their functions
pursuant best practices. In addition, the committee tracked subsidiary actions and progress in
implementing internal regulation dictated by the Group.
• Endorsed Group director nominations for subsidiary boards to ensure board members representing the
significant shareholder were suitable and correctly perform their duties.
• Reviewed the subsidiary board and board Chairs annual effectiveness reviews.
• Endorsed the proposal to streamline the number of board meetings during the year whilst maintaining
robust governance discipline and all times.
Corporate governance
• Oversaw the implementation of the action plan resulting from the external holistic review of our
governance model commissioned in 2021.
• Reviewed the highlights and results from the 2022 AGM.
• Reviewed the work of the Lead Independent Director, ensuring the discharge of his duties, as
evidenced through a summary of his activities in the year, which was also submitted to the board.
• Reviewed the work and presentations of the Shareholder and investor relations team, as well as the
Lead Independent Director's engagement with investors' and shareholders and proxy advisors, and the
feedback received from them on the Group's corporate governance arrangements.
• Reviewed the independence of the external advisers hired by the nomination and remuneration
committees in 2022 in line with the CNMV Technical Guide 1/2019 on nomination and remuneration
committees, analysing the services the advisers provided, the amounts they received and other items.
• Reviewed the annual corporate governance report to verify that information contained therein
conforms to the Law and that the corporate governance system promotes corporate interests and
considers the legitimate interests of all stakeholders.
Key roles suitability assessment
Annual suitability re-
assessment of directors
and key function holders
• Assessed the suitability of directors, senior management, head of internal control function heads and
Group's key position holders, confirming their continued business and professional good reputes and
appropriate knowledge and experience to perform their duties.
• Concluded that board members are capable of good governance of Banco Santander. To this effect, it
has supervised that the attendance of the directors at the meetings of the board and the committees
was not less than 75% and, in the specific cases of lower attendance, that the absences were duly
justified and do not undermine their capacity to devote sufficient time to discharge their functions.
Likewise, it has verified an average board attendance of 98.47%. See 'Board and committee
preparation and attendance' in section 4.3.
• Based on the information it had received from the directors, confirmed the absence of circumstances
that could harm the Group's credit and reputation.
Information for general meetings and corporate documents
Shareholder information
• Was represented by Bruce Carnegie-Brown in reporting at the 2022 AGM on the committee's activities
in 2021.
Corporate documents for
2022
• Prepared this activities report, which includes a performance review of the committee's functions and
key priorities identified for 2023.
Annual assessment of the committee
The 2022 internal board effectiveness review covered the
committee's effectiveness. The committee considered the
findings and suggested areas for improvement resulting from
the review and related to its remit. For more details, see 'Board
effectiveness review in 2022' in section 4.3.
Achievement of 2022 objectives
The committee took these actions planned for 2022:
• Reviewed board and senior executive succession planning
(including CEO and other key positions at Group and
subsidiary level) regularly; ensured plans were in place for the
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orderly succession of senior management positions and that
the succession procedure was rigorous, transparent and based
on meritocracy and objective criteria, as well as promoting
diversity in its broadest sense.
• Monitored the skills, competencies and training needs of the
directors and reviewed their induction, development and
training programmes designed to continuously improve the
knowledge of the most important topics of the organization
and industry, and meet to regulatory requirements.
• Received information on talent strategy, focused on leading
the workforce transformation of Santander to ensure its
readiness for emerging challenges, with a focus on STEM
talent attraction.
• Ensured delivery of actions that arose from the 2021 external
advisor's governance review and ensured that those were
completed, ensuring the continuous improvement of our
governance arrangements.
• Oversaw engagement with shareholders and investors about
governance.
2023 priorities
The committee set the following priorities for 2023:
• Continue to review the senior executive and board member
succession plans based on Group’s strategic needs, including
potential challenges the business may face. This will include
ensuring the continued development of internal succession
pipeline.
• Continue to promote gender and broader diversity in our
succession policy and talent strategy, acknowledging that
building a more diverse and inclusive workforce is critical to
business sustainability and success.
• Continue to monitor board members’ expertise and training
needs, as well as the board’s development.
• Review the process for the appointment of a successor to the
Lead Independent Director.
• Keep corporate governance arrangements under constant
review ensuring that the expectations of all stakeholders with
strategic relevance for the Group are considered; closely
monitoring shareholder engagement and, together with the
lead independent director, considering their feedback and
insights.
• Continue to ensure the ongoing application of the GSGM and
related internal regulation across Santander, and as a
consequence, robust oversight and control of the Group´s
subsidiaries.
• Remain focused on the overall effectiveness of the committee
ensuring that its role is discharged with appropriate rigour.
4.7 Remuneration committee activities in 2022
'We continued to oversee the drafting and implementation
of remuneration policies and schemes, ensuring they
promote effective risk management, strong performance,
meritocracy, our culture and our T.E.A.M.S. corporate
behaviours. We commissioned an external review of our
remuneration arrangements, which concluded that the
Group's policies, procedures and practices fully comply with
applicable legislation.
The committee holds the belief that a diverse workforce and
an inclusive workplace are key to fulfilling the Group’s
strategic ambitions, and for such purposes, it continued to
oversee that the remuneration policy addressed those
principles.
We benefited from our members’ mix of experience and
skills, leveraging their collective insights to ensure best
possible outcomes. They each provided appropriate advice
and challenge to management on the matters presented.
Fluid and effective communication with executives and non-
executives enabled us to continue monitoring our incentive
structures and measures, maintain alignment with our
targets, culture and behaviours, and support the delivery of
our strategic transformation agenda'.
Bruce Carnegie-Brown
Chair of the remuneration committee
This section is the report the remuneration committee prepared
on 20 February 2023 regarding its activities. The board of
directors approved it on 27 February 2023.
Composition
Position
Chair
Members
Bruce Carnegie-Brown
Sol Daurella
Henrique de Castro
Glenn Hutchins
Secretary
Luis Isasi
Jaime Pérez Renovales
A. Committee Chair since 12 February 2015.
Category
Appointed on
A
Independent 12/02/2015
Independent 23/02/2015
Independent 29/10/2019
Independent 20/12/2022
Other
external
19/05/2020
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The chart below shows the committee's approximate time
allocation in 2022:
The board of directors appointed the committee’s members
based on their expertise, skills and experience in the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board and
committees skills and diversity matrix' in section 4.2.
R. Martín Chávez stepped down as a member of the committee
on 19 April 2022 and Glenn Hutchins was appointed to the
committee on 20 December 2022.
Time allocation
In 2022, the remuneration committee held 13 meetings,
including two joint sessions, one with the nomination
committee and one with the risk supervision, regulation and
compliance committee. See 'Board and committee preparation
and attendance' in section 4.3 for members’ attendance and the
estimated average time each one spent on meeting preparation
and attendance.
Duties and activities in 2022
This section summarizes the remuneration committee's activities in 2022.
Actions taken
Duties
Remuneration schemes and policies
Remuneration policy for
executive directors, senior
management and other key
executives
• Remained focused on simplifying executive directors and top management remuneration, shaping
remuneration schemes consistent with Banco Santander's Simple, Personal and Fair values, with long
term ESG-related metrics in coordination with the responsible banking, sustainability and culture
committee.
• Proposed to the board global annual variable remuneration for 2021 (payable immediately) and
deferred executive remuneration, based on achievement of previously set quantitative and qualitative
targets. Recommended individual remuneration of members of senior management, based on annual
performance targets and their weightings as set by the board.
• Reviewed the calibration of executives’ performance reviews for the Executive Chair, the CEO and the
CFO in coordination with non-executive directors; for the CRO and CCO with the risk supervision,
regulation and compliance committee; and the CAE with the audit committee.
• Made sure remuneration for senior management remained fair and competitive, recommending
adjustments where appropriate to the board, based on a benchmark analysis.
• Established the annual performance indicators to calculate variable remuneration for 2023 in order to
maintain the simplification of the bonus pool scorecard approved for the previous year, with a
continued focus on customer centric, risk, capital and sustainable profitability.
• Set the achievement scales for the annual and multi-year performance targets and weightings for
submission to the board.
• Checked that remuneration schemes were appropriate to the Group’s results, corporate culture and
risk appetite and created no incentive to breach risk appetite.
• Reported to the board on Group remuneration practices and assessed their effectiveness receiving
confirmation on the alignment of Group-wide remuneration practices with the Group remuneration
policy.
• Reported to the board that an external advisor assessment based on Act 10/2014 and EBA guidelines,
found that the Group's policies, procedures and practices complies with the regulatory requirements
for credit institutions.
• Endorsed proposed changes to the remuneration policy based on updates of EBA guidelines on the
data collection exercise for high earners and remuneration benchmarking .
• Reviewed and proposed to the board of directors for approval a retention plan proposal to ensure
timely decisions in connection with staff retention measures in a resolution scenario.
• Reviewed the adoption of ex post risk adjustments, including the application of malus and clawback
arrangements within the Group.
Assist the board of
directors in supervising
compliance with
remuneration policies
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Duties
Diversity, equity and
inclusion
Actions taken
• Reviewed policies on diversity, gender pay gap reduction and equal pay with a view to promoting
greater diversity in its broadest sense, acknowledging progress made in the number of women in
senior positions.
• Reviewed internal “equal pay for equal work” data against the previous year and targets and focused
on measures to enhance them in each country.
• Received information on inclusion indicators and initiatives launched to continue promoting a culture
of inclusion in the Group and ensured the avoidance of pay gaps in this regard.
Remuneration of senior management and other key executives
Fixed remuneration for
executive directors
market rates which resulted in no adjustments.
• Checked that executive directors' fixed remuneration remained appropriate to their duties based on
Variable remuneration for
executive directors and
senior management
• Reviewed and proposed to the board the compensation for the newly appointed CEO.
• Proposed to the board immediately payable and deferred amounts of variable remuneration for the
preceding year.
• Reviewed and submitted a proposal to the board for approval, on annual performance indicators and
targets to calculate 2023 variable remuneration.
Share plans
• Submitted a proposal to the board and to vote at the 2022 AGM regarding the approval of
remuneration plans that involve the delivery to executive directors and senior management of shares
or share options (deferred multiyear target variable remuneration plan; deferred and conditional
variable remuneration plan; application of the Group buy-out policy).
• Reviewed the 2022 Digital Transformation Award, which was designed to attract and retain key talent
to drive long-term share value creation based on the achievement of key digital milestones. As part of
the 2022 Digital Transformation Award, the committee reviewed and submitted to the board incentive
proposals for senior executives to foster collaboration between the Group and PagoNxt.
• Analysed and submitted to the board tailored incentive schemes for strategic businesses to drive
talent retention and alignment with the Group’s strategic priorities.
Remuneration of directors
Individual remuneration of
directors in their capacity
as such
• Analysed and proposed adjustments to the directors’ remuneration in their capacity as such, based on
the positions they held on the collective decision-making body, their membership and attendance at
committee meetings, benchmark information and other objective circumstances.
Remuneration of Identified Staff
Remuneration of other
executives who are
Identified Staff but not
senior management
• Reviewed the volume of the Identified Staff population, trends versus previous years and checked that
fixed and variable remuneration ratios for control functions remained consistent with regulation and
targets.
• Set key remuneration components for Identified Staff (Material Risk Takers) in coordination with the
risk 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 2022 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 and senior management.
• Checked that remuneration schemes supported attraction and retention of key talent to help drive
digitalization, the application of incentives implemented in the Group, and the achievement of long-
term deferred remuneration metrics.
• Received information on local market practices, remuneration trends and challenges in different local
markets.
• Held a joint session with the risk supervision, regulation and compliance committee to review the
subsidiary action plans on internal sales force pay and conduct risk for the external sales force and
verified that remuneration schemes factor in 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.
• Reviewed the remuneration practices for subsidiary directors.
• Assisted the board of directors in overseeing compliance with the director remuneration policy.
• Reviewed the lead independent director’s report on engagement with key shareholders and proxy
advisors regarding executive director remuneration.
• Reviewed and proposed to the board the annual directors' remuneration report for an advisory vote at
the 2022 AGM.
Governance
Coordination with
subsidiaries
Annual directors'
remuneration report
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Duties
Information for general meetings and corporate documents
Shareholders information
Actions taken
• Was represented by Bruce Carnegie-Brown in reporting at the 2022 AGM on the committee's activities
Corporate documents for
2022
• Prepared this report, which includes a performance review of the committee's functions and key
priorities identified for 2023.
in 2021.
Annual assessment of the committee
The 2022 internal board effectiveness review covered the
committee's effectiveness. The committee considered the
findings and suggested areas for improvement resulting from
the review and related to its remit. For more details, see 'Board
effectiveness review in 2022' in section 4.3.
Achievement of 2022 objectives
The committee took these actions planned for 2022:
• Checked regularly that incentives remained consistent with
corporate strategy, culture and T.E.A.M.S. behaviours and that
remuneration schemes remained simple, effective and fair
and met regulation.
• Reviewed proposals to continue to enhance our employee
value proposition to attract and retain key talent. In particular,
placed a further focus on the challenges encountered relating
to the attraction and retention of STEM talent.
• Enhanced coordination and information exchange with the
subsidiaries based on presentations from subsidiary Human
Resources functions on local market practices and challenges.
• Continued prioritizing gender pay measurement and trends in
the Group to set targets; and checked that the methodology to
calculate gender equality metrics was accurate and action
plans effectively narrowed the gender pay gap in the Group
and its 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 2032, 2024 and 2025 that will be submitted by the board of
directors at the 2023 AGM as a separate item on the agenda and
is an integral part of this report. See sections 6.4 Directors'
remuneration policy for 2023, 2024 and 2025 submitted to a
binding shareholder vote' and 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, proxy advisors and ESG analysts throughout
the year (the policy for 2023, 2024 and 2025 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 2023, 2024 and 2025 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. Several
new features have been introduced, among them, share options
as variable remuneration instruments (along with shares) to
align executive pay with shareholders’ interests. It now 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.
2023 priorities
The committee set the following priorities for 2023:
• Keep incentive measures under continuous review to ensure
that they continue to align with our strategic aims. This will
include a continued focus on customers and sustainable
profitability and drive our corporate culture and behaviours,
balancing the needs of our different stakeholders, with strong
shareholder support and appreciation from investors and
proxy advisors.
• Continue to monitor external developments in executive
remuneration best practices in the financial industry and
broader market within regulation to enhance our employee
value proposition. This will ensure that our remuneration
schemes remain effective for attracting and retaining key
talent for the Group’s strategic ambitions. Make sure
remuneration promotes meritocracy and effective risk
management.
• Continue focusing on accelerating pay equality in the Group to
support Santander’s commitment to diversity, equity and
inclusion.
• Remain focused on the overall effectiveness of the committee
ensuring that its role is discharged with appropriate rigour.
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Composition
Position
Chair
Members
Belén Romana
Germán de la Fuente
Luis Isasi
Ramiro Mato
Pamela Walkden
Category
Independent
Independent
Other external
Independent
Independent
Appointed on
A
28/10/2016
01/01/2023
19/05/2020
28/11/2017
01/05/2021
Secretary Jaime Pérez Renovales
A. Committee Chair since 1 April 2021.
The board of directors appointed the committee's members
based on their expertise, skills and experience in the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board and
committees skills and diversity matrix' in section 4.2.
R. Martín Chávez stepped down as a member of the committee
and Germán de la Fuente was appointed to the committee on 1
January 2023.
Time allocation
In 2022, the committee held 17 meetings, including two
strategy sessions in February and June, two joint sessions with
the audit committee and one joint session with the
remuneration committee. See 'Board and committee
preparation and attendance' in section 4.3 for members’
attendance and the estimated average time each one spent on
meeting preparation and attendance.
The chart below shows the committee’s approximate time
allocation in 2022:
4.8 Risk supervision, regulation and
compliance committee activities in 2022
'2022 was another challenging year. The war in Ukraine
added to an already tough macro environment, with rising
inflation and interest rates, the energy crisis and price
volatility across the globe causing significant market
dislocation. The committee closely oversaw the actions to
manage and face those circumstances.
We monitored everyday and more strategic, non-traditional
emerging risks closely in all subsidiaries and in full
coordination with the board and other committees. We
focused on long-term strategic risks that could ultimately
compromise Grupo Santander's business and risk profile.
The committee held two strategy meetings in 2022, where
it reviewed key emerging risks and the implications that the
war in Ukraine would have, even before it started; the
impact of inflation and stagflation on key economies and
the financial system; the green energy transition; fiat
money versus digital currencies; and the risks and
challenges that China poses to the global economy.
Members’ skills and experience, boosted by the
appointment of Germán de la Fuente as a member, helped
the committee operate effectively and offer constructive
challenge and support to management. We will remain
vigilant of the current uncertainty and future risks to ensure
they are managed properly in our daily operations.
Finally, I welcome our newly appointed CRO, Mahesh
Aditya, who will join us from Santander Consumer USA in
March 2023. In turn, I would like to thank Keiran Foad for
his relentless work on strengthening Santander risk culture
over the last five years'.
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 16 February 2023 regarding
its activities. The board of directors approved it on 27 February
2023.
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Duties and activities in 2022
This section summarizes the risk supervision, regulation and compliance committee's activities in 2022.
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
Actions taken
• Reviewed and proposed to the board for approval the annual risk appetite statement proposal,
including the analysis of proposed new metrics and limits.
• Reviewed quarterly monitoring of risk appetite metrics, compliance with the limits and any breaches in
the year.
• Reviewed social and environmental policies (in coordination with the responsible banking,
sustainability and culture committee), which set out financing standards and prohibited activities in
such industries as energy, mining and soft commodities.
• Reviewed 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,
the recovery and resolution plans before the board of directors approved them. 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.
Risk management and
control
• Reviewed the Group's main risks, conducted specific analyses by unit and risk type; assessed
proposals, issues and projects relating to risk management and control.
• Received risk updates from core subsidiaries and businesses. .
• Checked that the Group's risk control management, most notably the risk profile assessment (RPA)
and the risk control self-assessment (RCSA) remained robust.
• Supervised the risks associated with the main corporate transformation programmes and their
mitigation measures, with specific focus on new global businesses and strategic initiatives.
• Received regular updates on the identification of risk exercises to facilitate focus and discussion on top
risks under management and the appropriateness of risk mitigating controls.
• Analysed the potential impact and opportunities associated with emerging risks and how they would
affect different geographies, our subsidiaries and businesses.
• 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 loan and non-performing asset performance during 2022, in
particular considering the evolution of the portfolios under the current macroeconomic environment,
considering the energy crisis and inflationary trend, as well as their potential effect on credit
provisions, liquidity and capital.
• Reviewed periodic reports on market, structural and counterparty risk.
• Reviewed reports on non-financial risks including operational risk, legal risk, reputational risk,
environmental and social risks (including climate) and vendor risk management, which remained
areas of focus. Reviewed biannual reports on legal risk, in coordination with the audit committee.
• 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, including presentations on business continuity and contingency plans.
• Reviewed, supervised and challenged the risks of strategic projects before their submission to the
board of directors.
• Supervised with the responsible banking, sustainability and culture committee the (i) the alignment of
risk appetite and limits with corporate culture and values; (ii) non-financial risks; and (iii) new metrics
related to climate that were proposed under the Risk Appetite Statement annual proposal.
• Reviewed the Risk function’s activities, strategy, strengths and potential areas for improvement.
• Ensured the ongoing independence and effectiveness of the Risk function, including the assessment of
its staffing levels and overall appropriateness of its resourcing.
• Reviewed and reported to the board on the CRO's 2022 objectives.
• Reviewed the CRO’s performance in 2022 against agreed risk appetite and strategy, at a joint session
with the remuneration committee, and reported to the board to set his variable remuneration.
• Was engaged in the appointment of the new Group CRO and subsidiary CROs, ensuring their proper
oversight and control, in coordination with the nomination committee.
Supervise the Risk function
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Duties
Collaboration to establish
rational remuneration
policies and practices
Regulatory and supervisory
relations
Compliance and conduct
Supervise the Compliance
and Conduct function
Actions taken
• Held a joint session with the remuneration committee to review the subsidiary action plans on internal
sales force pay and conduct risk for the external sales force and verified that remuneration schemes
factor in 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.
• Reviewed the ex-ante risk adjustment of total variable remuneration assigned to the units, based on
actual risk outcomes and their management, in conjunction with the remuneration committee.
• Reviewed the 2022 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 (Identified staff or
Material Risk Takers).
• Reviewed relevant developments regarding regulatory and supervisory relations and maintained focus
on the most relevant developments related to the SSM, the SRB, the supervisors of all the Group’s
subsidiaries and the SREP and specific on-site inspections related to risk and compliance matters, as
appropriate.
• Reviewed the Compliance and Conduct function area’s activities, strategy, development of the 2022
compliance programme, strengths and potential areas for improvement.
• Ensured the ongoing independence and effectiveness of the Compliance and Conduct function,
including the assessment of its staffing levels and overall appropriateness of its resourcing.
• Reviewed monthly reports on 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 and other matters.
• Received updates on compliance and conduct risks from the Group's main subsidiaries and global
businesses, with a special focus on the status of the implementation of the One FCC programme.
• Met with the CCO (twice in private, in addition to other informal meetings) to discuss strategic
compliance topics as well as to report independently and directly to the committee on any potential
material issue relating to the Compliance and Conduct function, if needed.
• Reviewed and reported to the board on the CCO's 2022 objectives.
• Reviewed the CCO's performance in 2022 against the agreed compliance plan and compliance and
conduct strategy at a joint session with the remuneration committee, in order to assist their work in
determining her variable remuneration.
• Was engaged in the appointment of new subsidiary CCOs, ensuring their proper oversight and control,
in coordination with the nomination committee.
Regulatory compliance
• Reviewed the Dodd Frank Title VII update, the Volcker Rule compliance programme, the status of data
Supervise the whistle-
blowing channel (Canal
Abierto)
Financial crime compliance
(FCC)
protection under the GDPR and the Corporate Defense Model.
• Reviewed and submitted to the board for approval amendments to the General Code of Conduct
consistent with the corporate culture and new T.E.A.M.S. corporate behaviours.
• Reviewed, in a joint meeting with the audit committee, the annual report on Canal Abierto, the ethical
channel that effectively promotes the Group's culture (Speak up) and a work environment where
employees and other persons related to Banco Santander can talk straight and report irregular
practices without fear of reprisal.
• Oversaw the Group's observance of FCC regulations as well as the activities carried out by the function
to ensure the ongoing delivery of the Group's One FCC programme. In particular:
• Was provided with quarterly updates on progress on the One FCC implementation strategy and
progress in the Group, providing support to the board in the oversight of financial crime risks.
• Reviewed the sanctions screening activity as part of the quarterly updates on One FCC, with a special
focus on the sanctions imposed to Russia due the war in Ukraine.
• Received recommendations and observations stemming from the annual independent expert report on
Banco Santander in accordance with Act 10/2010 and Royal Decree 304/2014 (on anti-money
laundering and terrorism financing).
Product governance and
consumer protection
• Checked on customer complaints and action plans to address identified deficiencies.
• Reviewed subsidiary action plans for internal sales force pay and conduct risk from the external sales
force at a joint meeting with the remuneration committee.
• Reviewed risk management and the main risks identified, as well as on concerns, priorities and actions
taken by the Product Governance and Consumer Protection area regarding the management and
mitigation of conduct risk with retail and vulnerable customers.
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Duties
Capital and liquidity
Assist the board in
reviewing and approving
capital and liquidity
strategies and supervising
their implementation
Governance
Corporate governance and
internal governance
Actions taken
• Reviewed and reported to the board on the annual ICAAP run by the Finance division and challenged by
the Risk function in accordance with industry best practices and supervisory guidelines.
• Reviewed a capital plan according to the scenarios envisaged over a three-year period.
• Reviewed and reported to the board on the ILAAP, which was challenged by the Risk function and
developed in line with the Group´s business model and its liquidity needs.
• Reviewed liquidity risk and liquidity levels of the Group and its subsidiaries.
• Continuously monitored capital levels, capital management and associated tools, the 2022
securitizations plan and the analysis of the portfolio profitability versus the risk undertaken.
• 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 executive committee.
• Maintained close interaction and communication with the audit committee and reviewed in a joint
session, internal auditing of the Risk and Compliance and Conduct areas, the Group’s risk control
environment assessment, and reports on risk model, FCC, risk culture, whistleblowing and third-party
supplier risk management.
• Received reports from Santander España risk committee on the main items covered at its meetings to
remained sighted on its activities.
Information for general meetings and corporate documents
Shareholder information
Corporate documents for
2022
key priorities identified for 2023.
• Was represented by Belén Romana in reporting at the 2022 AGM committee's activities in 2021.
• Prepared this activities report which includes a performance review of the committee's functions and
Annual assessment of the committee
The 2022 internal board effectiveness review covered the
committee's effectiveness. The committee considered the
findings and suggested areas for improvement resulting from
the review and related to its remit. For more details, see 'Board
effectiveness review in 2022' in section 4.3.
Achievement of 2022 objectives
The committee took these actions planned for 2022:
• Oversaw the risks generated by the war in Ukraine, inflation,
price volatility in energy and commodities, interest rates
hikes, among other market dislocations, and in particular, the
market risk and liquidity risk on the Group's and subsidiaries'
credit portfolios.
• Oversaw the risks associated with certain strategic projects,
especially those relating to model risk, financial crime and
anti-money laundering prevention, cyber security and climate
change.
• Supervised the main risks of the core business units,
geographies and new businesses, with an additional focus on
emerging businesses that are relevant to the Group's strategy.
• Prioritized oversight of the Group's top risks, impacts and
mitigation actions to ensure risks were appropriately
managed and would remain within the board-approved risk
appetite limits.
• Examined emerging and non-traditional risks to anticipate
changes in business strategy (as discussed at its strategy
meetings held in February and June 2022).
• Maintained close coordination with the board and its
committees to ensure that risks were closely controlled and
mitigated. Continued work on the committee's effectiveness
to make sure it is discharging its duties with the utmost
efficacy. In particular, the committee heightened its
coordination with other committees to examine matters that
concerned them holistically and promoted greater presence of
the first line of defence.
2023 Priorities
The committee set the following priorities for 2023:
• Continue to monitor the macroeconomic conditions, especially
the energy crisis, inflation, interest rates hikes and potential
recession in certain countries, and the potential impact on the
Group.
• Continue to oversee the risks associated with certain strategic
projects, PagoNxt and DCB, especially those relating to
financial crime and money laundering prevention, IT
obsolescence, climate change and model risk.
• Continue to monitor the Group’s top risks, early warning
indicators and mitigation actions to effective management of
risks and Group's risk profile within risk appetite.
• Continue 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
strategic meetings, which follows up on its strategic meetings
held since 2020.
• Continue to enhance coordination and information exchange
with core units and divisions, with Group and subsidiary-level
committee chairs taking part in each other’s risk supervision,
regulation and compliance committee meetings. In addition,
hold a convention of all chairs of the risk supervision,
regulation and compliance committees of Grupo Santander to
discuss global initiatives, expectations and relevant issues.
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This section is the report the responsible banking, sustainability
and culture committee prepared regarding its activities on 20
February 2023. The board of directors approved it on 27
February 2023.
Composition
Position
Chair
Members
Secretary
Ramiro Mato
Homaira Akbari
Sol Daurella
Gina Díez Barroso
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
01/07/2018
31/01/2023
01/07/2018
The board of directors appointed the committee's members
based on their expertise, skills and experience in the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board and
committees skills and diversity matrix' in section 4.2.
Álvaro Cardoso stepped down as member of the committee on
1 April 2022 and Gina Díez Barroso was appointed to the
committee on 31 January 2023.
Time allocation
In 2022, the responsible banking, sustainability and culture
committee held five meetings. See 'Board and committee
preparation and attendance' in section 4.3 for members’
attendance and the estimated average time each one spent on
meeting preparation and attendance.
The chart below shows the committee’s approximate time
allocation in 2022:
• Monitor and oversee the transition of new CRO and ensure
that his onboarding is robust and effective, enabling him to be
truly effective in role.
• Remain focused on the overall effectiveness of the committee
ensuring that its role is discharged in the most tangible and
effective manner.
4.9 Responsible banking, sustainability and
culture committee activities in 2022
'The committee continued to drive the responsible banking
agenda, including sustainability strategy, by helping the
board strive towards being a more responsible bank which
will in turn strengthen our customer loyalty. This included
ensuring that environmental, social and governance factors
were truly embedded within the Group´s strategy and
culture.
We reviewed actions proposed to align with the Task force
on Climate-related Financial Disclosure (TCFD)
recommendations, including targets to reduce emissions in
emission intensive sectors, decarbonization strategy and
commitments. Sustainable finance and green finance
remained key areas of focus. The committee monitored the
unit’s progress and the key initiatives to swiftly integrate
green finance within risk management, climate stress
testing, and the new risk appetite in our three-year strategic
plan.
We oversaw core initiatives, targets and metrics that
underpin Santander’s focus on culture, ethics, equality,
diversity, wellbeing and financial inclusion. We maintained
focus on vulnerable customers, support for education and
our communities, and sustainability data quality and ESG
reporting (in coordination with the audit committee).
We benefited from our members’ mix of expertise and
skills. Each provided appropriate advice, challenge to
management and support to the board. I would like to thank
them for their invaluable contributions during the year'.
Ramiro Mato
Chair of the responsible banking, sustainability
and culture committee
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Duties and activities in 2022
This section summarizes the responsible banking, sustainability and culture committee’s activities in 2022.
Duties
Environmental (E)
Portfolio alignment with
Net Zero by 2050
Actions taken
• Reviewed and provided input into the Group's climate change strategy, providing challenge to it to
ensure that it remained a key enabler to achieve our ambition of net zero emissions by 2050.
• Reviewed three new decarbonization targets for 2030 in the energy, aviation and steel sectors.
• Monitored and assessed the Group's progress on its public commitments to ensure that its KPIs
ESG in risk management
Green Finance
remained relevant and aligned with committee expectations.
• Reviewed climate projects and participation in the Net Zero Banking Alliance.
• Endorsed the priorities for 2022, such as aiding our customers’ green transition and promoting a green
culture.
• Reviewed actions proposed to align with the TCFD recommendations.
• Reviewed the ECB’s 2022 climate stress test and the feedback received from the supervisor. Analysed
lessons learned and next steps in climate and environmental management.
• Reviewed ESG factors introduced in credit approval processes, action plans and accomplishments.
• Reviewed the risk appetite statement proposed to decarbonize the power generation credit portfolio.
• Reviewed and discussed the status and key progress done, ambition and next steps of the Green
Finance unit as well as its strategy, commitments, challenges and opportunities in retail and
commercial bank and Santander Corporate & Investment Banking (SCIB).
• Checked on the status of the Green finance unit’s initiatives on infrastructure, data, business projects,
the market and considered the ambition to integrate green finance faster.
• Reviewed green bond issuances, annual disclosure requirements on the use of proceeds, and
achievements from assigned projects.
Biodiversity
• Reviewed and endorsed Santander Group Green, Social & Sustainability Funding Global Framework.
• Reviewed the biomass project to invest in a project to restore and conserve four million hectares of
native forest in Brazil over the next 20 years.
Environmental Footprint
• Reviewed the 2022 plan to offset emissions from its own activity and remain carbon neutral
Regulatory landscape
Social (S)
Diversity, Equity and
Inclusion
Customer financial
wellbeing
Financial inclusion and
empowerment
Education and other
support to communities
organization.
• Monitored the carbon footprint offsetting projects across the Group to fulfil public commitments.
• Reviewed relevant regulatory initiatives related to ESG sustainable finance in Europe which has
evolved in recent years to maximize investment in transition to a low carbon economy by 2050 and
increase transparency on business models and operations.
• Reviewed diversity and inclusion strategy, initiatives and 2025 targets, and discussed the associated
action plan for relevant dimensions of diversity, providing feedback and challenge on the same, as
well as the Group's relative position in global rankings.
• Reviewed the talent management programme and employee wellbeing.
• Reviewed the vulnerable customers model and the guidelines for a common approach towards such
customers, with awareness campaigns, fraud and over-indebtedness prevention, enhanced debt
collection and mandatory training for our sales force.
• Reviewed a summary of initiatives developed in response to issues highlighted by elderly people in
Spain, through campaigns like ¨Soy mayor, no soy idiota¨ ("I’m old, not stupid”).
• Reviewed Santander's financial inclusion and empowerment approach to which each region and
PagoNxt contributes. Discussed action plan to continue promoting financial inclusion and
empowerment.
• Reviewed Santander Finance For All, our initiative to support financial inclusion and empowerment,
and discussed its progress, targets and achievements through the access, finance and financial
education lines of action.
• Considered opportunities to expand sustainable finance activities and financial inclusion activities.
• Reviewed strategy, targets and KPIs on support for education, employability and entrepreneurship at
universities.
• Analysed the donation and contributions for social purposes, and in particular, reviewed the process to
expedite the approval process of donations to help Ukrainians.
• Reviewed and endorsed responsible banking communications and the four key responsible banking
communication pillars of diversity and inclusion, financial empowerment, climate change and
Santander Universities.
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Duties
Governance (G)
Corporate governance
Culture, conduct and ethical
behaviour
Policies and frameworks
Actions taken
• Worked with the remuneration and risk supervision, regulation and compliance committees to review
corporate culture and values, responsible banking practices and sustainability.
• Reviewed, in coordination with the remuneration committee, a proposal for a responsible banking
scorecard within the bonus pool qualitative assessment based and in the development of the long
term incentives, key variable remuneration tools based on responsible banking targets, metrics and
commitments.
• Endorsed the guiding principles of responsible banking governance for effective controls on
sustainability and best practice in place to mitigate risks, including greenwashing, and harness
opportunities.
• Reviewed the responsible banking progresses in the regions, units, global businesses and corporate
areas on a regular basis to ensure good communication and best practices globally.
• Identified relevant ESG topics based on the outcomes of the ESG Materiality assessment, which the
Responsible banking team conducts every year with other teams and an external consultant.
• Ensured that the proposed responsible banking agenda for 2022-2025 and commitments for 2025
remain aligned to Santander´s strategy.
• Reviewed Banco Santander´s global sustainability ratings, as well as its strengths, areas for
improvement and focus points with ESG rating providers. Reviewed any resultant action plans after
engaging with investors and NGOs on ESG matters.
• Checked with the remuneration committee that ESG-related metrics for senior management
remuneration schemes conformed to market practice, shareholders’ growing interests and corporate
culture and Simple, Personal and Fair values.
• Assisted the board in ensuring that responsible banking objectives, metrics and commitments were
embedded in the Group's remuneration schemes.
• Reviewed our Canal Abierto ethical channel, an anonymous way for employees and other persons
related to Banco Santander to talk straight and report irregular practices without fear of reprisal in all
Group units, in order to aid the Group’s cultural transformation.
• Reviewed the findings of the new engagement survey (“Your Voice”) and employee listening strategy.
• Reviewed the new T.E.A.M.S. corporate behaviours within our global culture, The Santander Way.
• Reviewed the policies on environmental, social and climate change risk management, general
sustainability, the defence sector and other responsible banking topics, ensuring that they remain up
to date and effective.
• Reviewed the rationale for adding instruments to Santander global sustainable bonds framework
based on best practices of the ESG funding market.
• Ensured that the new General Code of Conduct promotes the values, principles and commitments of
Grupo Santander toward its employees, customers, vendors and society.
• Ensured that the corporate responsible banking framework, approved in 2021, was effectively
embedded throughout the Group.
ESG reporting
• Supported the audit committee on the supervision and assessment of the preparation and
presentation of non-financial information according to the applicable regulations and international
standards.
• Reviewed the 2022 Group statement on non-financial information and, the independent expert's
report. See the 'Responsible banking' chapter.
• Reviewed the progress on responsible banking through specific KPIs to drive execution of the
responsible banking agenda.
• Reviewed Santander’s ESG requirements and plans to enhance Group reporting of our public
commitments, with data collection in areas’ BAU and systems, better controls and regular reporting
and audit processes.
• Gave feedback on the key topics disclosed in Climate finance report, new targets for energy, metal and
aviation sectors and an action plan for the power generation sector.
• Endorsed Banco Santander's 2021 Green Bond Report.
Information for general meetings and corporate documents
Shareholder information
Corporate documents for
2022
• Was represented by Ramiro Mato in reporting at the 2022 AGM committee's activities in 2021.
• Prepared this activities report, which includes a performance review of the committee's functions and
key priorities identified for 2023.
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Annual assessment of the committee
The 2022 internal board effectiveness review covered the
committee's effectiveness. The committee considered the
findings and suggested areas for improvement resulting from
the review and related to its remit. For more details, see 'Board
effectiveness review in 2022' in section 4.3.
Achievement of 2022 objectives
The committee took these actions planned for 2022:
• Assisted the board in monitoring climate change strategy and
net zero carbon ambition for 2050, and continued to review
risks and opportunities to develop sustainable finance
proposals for a low-carbon economy. As part of that, the
committee oversaw progress in relation to the
implementation of the TCFD recommendations, including the
introduction of targets to reduce emissions in certain climate-
intensive sectors and the decarbonization strategy and
commitments.
• Assisted the board in monitoring the development of green
and sustainable finance propositions across the Group by
monitoring unit's progress and their key initiatives.
• Assisted 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
responsible banking commitments and KPIs. Ensured that
initiatives, targets and metrics were consistent with our
commitments on diversity, equity and inclusion, financial
inclusion and empowerment, vulnerability, talent
management and ethical behaviour.
• Ensured that diversity and inclusion, The Santander Way, SPF
values and T.E.A.M.S. corporate behaviours were being
promoted throughout the Group; oversaw implementation of
the associated strategic plans and monitored improvements in
conduct, ethical behaviour, customer experience and
satisfaction.
• Focused on ensuring the corporate responsible banking
framework, approved in 2021, was effectively embedded
throughout the Group.
• Oversaw the work undertaken with regulators on the stress
test exercises, especially on climate risk.
• Monitored communications on the Group's achievements that
built up a reputation as one of the world's most sustainable
banks.
2023 Priorities
The committee set the following priorities for 2023:
• Continue to advise the board on the climate change strategy
and our ambition to be net zero by 2050, monitoring the
development of our green and sustainable finance proposition
and customers’ transition to a low-carbon economy.
• Oversee that actions and targets for climate material
exposure and decarbonization strategy are consistent with the
TCFD recommendations.
• Continue to assist the board in monitoring financial health and
financial inclusion to foster the financial empowerment of the
unbanked, underbanked and vulnerable customers.
• Review performance according on ESG analysts, addressing
identified areas for improvement and specially focus on
controversies and complaints received at Santander from
customers or other stakeholders, to ensure root cause
analysis and plan of actions are in place to remediate those.
• Provide support to the board in analysing and providing
feedback on the ESG information for reporting, disclosure, and
management purposes, in coordination with the audit
committee.
• Remain focused on the overall effectiveness of the committee
ensuring that its role is discharged in the most tangible and
effective manner.
4.10 Innovation and technology committee
activities in 2022
'The committee continued overseeing the overall role of
technology in our business strategy with the aim of being
the best open financial services platform. While monitoring
execution of T&O vision, the committee has remained
focused on ensuring that the strategy enables business
initiatives by partnering with global businesses and
supporting functions, reducing risks and improving cost
efficiency.
Cybersecurity and data strategy remained top priorities . We
continued our work on moving towards a data-driven
organization that embraces the use of data and advanced
analytics in decision making while generating business
value in a responsible way. The committee has covered
cyber progress and our position, evolution of the key
strategic cyber-security pillars and initiatives, key trends
and overall cyber threat landscape, including the challenges
posed by the war in Ukraine.
An appropriate mix of members’ skills, boosted by the
appointment of Glenn Hutchins and Héctor Grisi, ensured
that the committee remained well positioned to fulfil its
responsibilities and operate effectively. I would like to take
this opportunity welcome both Glenn and Héctor, and to
thank R. Martín Chávez, who left the committee upon his
resignation from the board, for his hard work, contributions
and commitment.'
Ana Botín
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
27 February 2023.
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Composition
Position
Chair
Members
Secretary
Ana Botín
José Antonio Álvarez
Homaira Akbari
Bruce Carnegie-Brown
Henrique de Castro
Héctor Grisi
Glenn Hutchins
Belén Romana
Jaime Pérez Renovales
A. Committee Chair since 19 April 2022
Category
Appointed on
A
Executive
23/04/2007
Other external 23/02/2015
27/09/2016
Independent
23/02/2015
Independent
23/07/2019
Independent
01/01/2023
Executive
20/12/2022
Independent
19/12/2017
Independent
Time allocation
In 2022, the innovation and technology committee held three
meetings. See 'Board and committee preparation and
attendance' in section 4.3 for members’ attendance and the
estimated average time each one spent on meeting preparation
and attendance.
The chart below shows the committee’s approximate time
allocation in 2022:
The board of directors appointed the committee’s members
based on their expertise, skills and experience in the matters it
handles.
For more details, see section 4.1 'Our directors' and 'Board and
committees skills and diversity matrix' in section 4.2.
Ana Botín was appointed chair on 18 April 2022 replacing R.
Martín Chávez who stepped down on the same date. Glenn
Hutchins also joined the committee on 20 December 2022 and
Héctor Grisi joined with effect from 1 January 2023.
Duties and activities in 2022
This section summarizes the innovation and technology committee’s activities in 2022.
Duties
Digital & innovation
Digital
Innovation framework
Actions taken
• Boosted collaboration between subsidiaries, business units and the Technology and Operations (T&O)
function on the different digital initiatives, overseeing their execution.
• Monitored metrics in connection with the digital evolution and associated transformation, such 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 new businesses growth.
• Reviewed the implementation of the Group's innovation agenda leveraging on our digital and data
management capabilities.
• Identified the Group's challenges and capabilities to increase end-to-end business agile
transformation.
• Identified new opportunities for accelerated innovation across the Group and increased the likelihood
of success in new business models, technologies, systems and platforms.
Technology and operations
Technology and operations
• Reviewed the global technology strategy plan, reported to the board on T&O planning and activities
and ensured that T&O strategy was properly focused on the Group's relevant priorities.
• Endorsed the Group's core strategic technology priorities to integrate key digital capabilities,
leveraging five pillars: agile, cloud, core systems evolution, artificial intelligence and deep technology
related skills and data.
• Reviewed the strategy supported by a new operating model based on global products and a common
architecture.
• Assisted the board in supervising technological risks.
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Duties
Cybersecurity
Cybersecurity
Data management
Data management
Actions taken
• Supervised defences against increasing threats and reviewed security controls and automated security
processes.
• Analysed high-profile cyber incidents in Banco Santander and specific incidents outside the Group
according to their relevance and impact, as appropriate.
• Monitored closely global cybersecurity and its associated impacts due to the Ukraine war that
dominated the cyber threat landscape.
• Received regular updates on cybersecurity risks, with a special focus on exercises of crisis simulation,
internal data leakage protection and such external threats as ransomware, in coordination with the
risk supervision, regulation and compliance committee. Assisted the board in the supervision of
cybersecurity risks.
• Reviewed the progress of Santander’s cyber vision for 2025, the cyber strategy defined in 2021,
focusing on the analysis of trends, protection techniques and responses and cyber solutions for our
customers and stakeholders.
• Reviewed employee training, internal and external cyber awareness campaigns and other initiatives.
• Reviewed the annual external cyber security assessment, including the three lines of defense,
performed by an external independent company on cyber threats, cybersecurity status and associated
plans.
• Reviewed the Models & Data unit's priorities for the year to stay fully appraised on the models and
data value chain to ensure their contribution to the improvement of business growth and customer
experience, risk control improvement, data model development and ethical necessary principles for
the proper use of the artificial intelligence within the information management.
• Assessed the adequacy of the resources of the Data function, validating their appropriateness and
effectiveness for the Group and its subsidiaries.
Information for general meetings and corporate documents
Corporate documents for
2022
key priorities identified for 2023.
• Prepared this activities report, which includes a performance review of the committee's functions and
2023 Priorities
The committee set the following priorities for 2023:
• Support the board on the Group innovation strategy, facing
the trends resulting from new business models, technologies
and products.
• Continue to review the effectiveness of data management and
analytics as enablers for the Group to fulfil strategic priorities.
• Continue strengthening the Group’s cybersecurity and fraud
ecosystems while creating additional commercial value and
service for clients.
• Continue to assess and provide suggestions on initiatives,
targets, commitments, KPIs and proposed metrics on cross-
cutting projects that conformed the Group's digital strategy.
• Remain focused on the overall effectiveness of the committee
ensuring that its role is discharged in the most tangible and
effective manner.
Annual assessment of the committee
The 2022 internal board effectiveness review covered the
committee's effectiveness. The committee will consider the
findings and suggested areas for improvement resulting from
the review and related to its remit. For more details, see 'Board
effectiveness review in 2022' in section 4.3.
Achievement of 2022 objectives
The committee took these actions planned for 2022:
• Continuously reviewed the Group’s innovation strategy,
especially in regard to a business-oriented T&O
transformation model, maintaining its focus on trends arising
from new business models, technology and products.
• Reviewed and discussed data management trends and
regulations and analytical capabilities in the Group's
businesses, based amongst others on the international
advisory board's feedback, to ensure appropriate
effectiveness and capabilities to support the Group's strategic
priorities.
• Continued to strengthen the response and innovation
strategies to react to an environment of ever-changing
threats, including the challenges posed in terms of cyber by
the war in Ukraine.
• Prioritized digital strategy through the implementation of
multidisciplinary projects for the Group, assessing initiatives,
targets, commitments, KPIs and proposed metrics on cross-
projects evidencing such strategy.
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4.11 International advisory board
Composition
Position
Chair
Larry Summers
Sheila C. Bair
Mike Rhodin
Background
Former Secretary of the US Treasury
and President Emeritus and Charles
W. Eliot University Professor 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 Managing Partner and co-founder at
Recognize
Members
George Kurtz
James Whitehurst Senior Advisor at IBM and former
Chief Executive Officer of Red Hat
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
Andreas Dombret Former board member of Deutsche
Nadia Schadlow
Bundesbank, Supervisory Board of the
ECB former vice chair of Bank of
America in Europe and former
director of Bank for International
Settlements
Secretary
Jaime Pérez Renovales
Functions
Since 2016, Banco Santander’s international advisory board has
provided the Group with expert insight into innovation, digital
transformation, cybersecurity, new technologies, capital
markets, corporate governance, branding, reputation,
regulation and compliance.
Its members are external and not members of the board. They
are prominent and respected leaders who have extensive
experience in the most relevant areas for the strategy of the
Group, 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
2022, it met in May and October. It addressed such topics as
simplifying the value proposition for consumers/ individuals
with a new customer relationship model and an open efficient
operating platform; data management strategy and intra-group
data sharing; value-added cybersecurity and anti-fraud services
for individuals and SMEs; and crypto strategy, web3 trends and
applicable digital wallets.
4.12 Related-party transactions and other
conflicts of interest
Related-party transactions
This section contains the related-party transactions report
referred to in the recommendation six of the Spanish Corporate
Governance Code, that the audit committee prepared on 17
February 2023.
Directors, senior managers and shareholders
Pursuant to the Rules and regulations of the board, a
transaction that Banco Santander or its subsidiaries make with
directors, shareholders who hold at least 10% of voting rights or
sit on the board, and parties considered "related parties" under
the International Financial Reporting Standards must be
authorized:
• In the general meeting if it is worth 10% or more of assets on
the last consolidated balance sheet; or
• By the board of directors in all other cases. Nonetheless,
according to relevant rules and on the audit committee’s
recommendation, the board delegated authority to executive
bodies, committees and competent proxies to approve
related-party transactions if they:
• are carried out under agreements with standard terms that
would generally apply to customers who contract for the
same product or service;
• are made at prices or rates set by the supplier of such
products or service or, where such products or service have
no existing prices or rates, under regular market conditions
as in business relations with similar customers; and
• do not exceed 0.5% of the net annual income as stated in
the last consolidated financial statements to have been
approved at the general meeting.
The board approved an internal reporting and monitoring
procedure in which the audit committee confirms twice a year
that transactions authorized with delegated board powers are
fair and transparent and meet the above-mentioned
requirements.
The board also has an internal approval mechanism for non-
banking and other transactions that do not meet the delegation
requirements. It sets out minimum transaction terms and
conditions in order to protect corporate and shareholder
interests.
The board and audit committee check that transactions with
related parties are fair and reasonable to Banco Santander and
to the other shareholders.
If a related-party transaction must be approved at the general
meeting or by the board, the law says that audit committee
must issue a preliminary report about it. However, the law does
not require the report for related-party transactions if they are
approved under the board's delegated authority and meet the
audit committee’s requirements.
Board members must recuse themselves from all deliberations
and votes on resolutions about a related-party transaction if
they have a conflict of interest with it.
In 2022, the audit committee found that no director or related
party, in the terms of International Financial Reporting
Standards, carried out transactions deemed “significant” or
material to Santander and the related party, or under non-
market conditions.
The audit committee confirmed that all related-party
transactions in 2022 had been performed correctly after
conducting a bi-annual review on their conformity to the law,
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the Rules and regulations of the board and the conditions set by
board resolution, and met the requirements to be considered
fair, reasonable and under market conditions (see the audit
committee activities report under section 4.5 'Audit committee
activities in 2022').
Banco Santander has a policy for the admission, authorisation
and monitoring of financing transactions to directors and senior
managers as well as to their spouse (or similar partner), a child
who is a minor or legal adult and their financial dependent, or a
company controlled by a director or a senior manager whose
business is to hold assets for the sole purpose of managing their
personal or family wealth. The policy also sets out general
maximum borrowing rules, interest rates and other conditions
that apply to related-party transactions, that are the same for
all other employees. It dictates that the board must authorize
loans, credit facilities and guarantees extended to Banco
Santander's directors and senior managers, and, except the
cases listed below, subsequently by the ECB:
• transactions guaranteed in a collective agreement signed by
Banco Santander, with similar terms and conditions to
transactions with any employee; or
• transactions made under agreements with standard
conditions that generally apply to a large number of
customers, if the amount granted to the beneficiary or their
related parties does not exceed EUR 200,000.
Note 5.f) 'Loans' to the consolidated financial statements
describes the direct risk Grupo Santander maintained with board
members as of 31 December 2022. Those transactions are
consistent with market conditions, have the same terms and
conditions as transactions with employees, and allocate
payments in kind where appropriate.
No Banco Santander shareholder holds 10% or more of voting
rights or has a sit on the board.
Intra-group transactions
The law does not consider direct or indirect transactions with a
wholly-owned subsidiary or investee to be "related-party" if no
party related to Banco Santander holds an interest in it. To this
end, Santander monitors subsidiaries or investees’ observance
of these rules if they can be affected by related-party
transactions. Intragroup transactions have the same rules,
approval competent bodies and procedures as transactions with
customers, with mechanisms to ensure that they are effected
under market conditions.
Note 52 'Related parties' to the consolidated financial
statements and note 47 'Related parties' to the individual
financial statements state the balance of transactions with
subsidiaries, affiliates, jointly-owned entities, directors, senior
managers and related parties.
Other conflicts of interest
Banco Santander has rules and procedures for preventing and
managing conflicts of interest that can arise from operations or
with directors and senior managers. We also have an internal
policy for Group employees, directors and entities on preventing
and managing conflicts of interest.
Directors and senior managers
Our directors must adopt necessary measures to avoid
situations in which their direct or indirect interests may enter
into conflict with corporate interests or their duty towards
Banco Santander.
Directors must refrain from using Banco Santander’s name or
their position to exert undue influence on private transactions;
using corporate assets for private purposes; using business
opportunities for personal gain; obtaining favours or
remuneration from others for being directors; and engaging in
activities for themselves or others that will put them and Banco
Santander in competition or permanent conflict.
Directors must report to the board conflicts of interest that they
or their related parties may have with Banco Santander, which
are to be disclosed in the financial statements. The nomination
committee verifies compliance with the rules set from time to
time to avoid conflicts of interest in other roles held by
directors.
In 2022, no director reported a conflict of interest with
Santander. Nonetheless, there were 28 abstentions in votes on
matters deliberated at board and committee meetings,
including 10 instances where directors did not vote on
resolutions on nominations, re-elections or board committee
assignments; five instances concerning remuneration; four
instances relating to a transaction between Banco Santander
and a director or a company related to a director; and nine
instances where directors removed themselves during the
review of their status and suitability.
The Code of conduct in security markets (CCSM), which directors
and senior managers follow, provides mechanisms to recognize
and resolve conflicts of interest. It also dictates that directors
and senior managers must provide the Compliance & Conduct
area with a statement on their relations, and they must keep it
up to date.
They must also disclose any matter that could put them in a
conflict of interest because of their ties or otherwise, and the
chief officer of their area will resolve it. Conflicts that involve
several areas must be resolved by their common senior officer.
In other cases, the Compliance & Conduct area should be
consulted.
The CCSM also dictates that directors, senior managers and
related parties should not trade Grupo Santander’s securities
within 30 days either from the time they are bought or sold or
before the quarterly, half-year or annual results are announced
and published.
The CCSM can be found on our corporate website.
Group companies
Banco Santander is the Group’s only company listed in Spain,
where it’s not required to have mechanisms in place to resolve
conflicts of interest with a listed subsidiary.
In a conflict of interest with a listed subsidiary, Banco
Santander, as the parent company, must consider the interests
of all its subsidiaries and how they suit the long-term interests
of the Group. Subsidiaries should also consider the interests of
Grupo Santander and assess the effect of their actions on the
Group.
The Group structures governance on a system of rules that
guarantees regulation on governance as well as proper
oversight over subsidiaries (see section 7. 'Group structure and
internal governance').
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5. Management team
The table below shows the profiles of Banco Santander’s Senior Executive Vice President.It does not include executive directors,
whose profiles are described in section 4.1 'Our directors')
Alexandra Brandão
GLOBAL HEAD OF HUMAN
RESOURCES
Juan Manuel Cendoya
GROUP HEAD OF
COMMUNICATIONS,
CORPORATE MARKETING
AND RESEARCH
José Doncel
GROUP CHIEF ACCOUNTING
OFFICER
Mahesh Aditya (*)
GROUP CHIEF RISK OFFICER
José Antonio García
Cantera
GROUP CHIEF FINANCIAL
OFFICER
Juan Guitard
GROUP CHIEF AUDIT
EXECUTIVE
José María Linares
GLOBAL HEAD OF
CORPORATE & INVESTMENT
BANKING
(*) Pending regulatory authorization. Replaces Keiran Foad.
Born in 1978, Alexandra Brandão joined Grupo Santander in 2003 as head
of Products and Services for Individuals at Santander Totta. She was
global head of Knowledge and Development at the Grupo Santander
Corporate Centre from 2012 to 2016; head of Human Resources from
2016 to 2018; and head of Commercial Management and Segments at
Santander Portugal from 2019 to 2020. In 2021, she was appointed
global head of Human Resources.
Born in 1967, Juan Manuel Cendoya joined Grupo Santander in 2001 as
Group Senior Executive Vice President and head of the Communications,
Corporate Marketing and Research division. In 2016, he was appointed
Vice Chair of the board of directors and head of Institutional and Media
Relations of Santander España. Previously, he had been head of the Legal
and Tax department of Bankinter, S.A. He is also a state attorney.
Born in 1961, José Doncel joined Grupo Santander in 1989 as head of
Accounting. He had also served as head of Accounting and Financial
Management at Banesto (1994-2013). He was appointed Senior
Executive Vice President and head of the Internal Audit division in 2013
and Group Chief Accounting Officer in 2014.
Born in 1962, Mahesh Aditya joined Grupo Santander in 2017 as Chief
Operating Officer of Santander Holdings USA. He became Chief Risk
Officer in 2018 and Chief Executive Officer of Santander Consumer USA in
2019. Previously, he had been Chief Risk Officer at Visa and Chief Risk
Officer of Retail & Mortgage Banking at JP Morgan, Capital One and
Citibank.
Born in 1966, José Antonio García joined Grupo Santander in 2003 as
Senior Executive Vice President of Global Wholesale Banking of Banesto
and in 2006, he was appointed Chief Executive Officer. Previously, he had
served on the executive committee of Citigroup EMEA, as well as on 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 before becoming Group Chief
Financial Officer in 2015.
Born in 1960, Juan Guitard joined Grupo Santander in 1997 as head of
Human Resources at Santander Investment, S.A. and he had been general
counsel and secretary of the board of Santander Investment, S.A. and
Banco Santander de Negocios, S.A. In 2002, he was appointed vice
secretary general of Banco Santander. In 2013, he was head of Banco
Santander’s Risk division. In 2014, he was appointed Group Chief Audit
Executive. He is also a state attorney.
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. (1993-1994). He worked as Senior Vice President and
senior equity analyst at Oppenheimer & Co. (1994-1997), as well as
director and senior equity analyst at Société Générale (1997-1999). He
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).
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Mónica López-Monís
Dirk Marzluf
GROUP HEAD OF SUPERVISORY Born in 1969, Mónica López-Monís joined Grupo Santander in 2009 as
AND REGULATORY RELATIONS
general counsel and secretary of the board of Banesto. Previously, she
had been general counsel at Aldeasa, S.A. She also was general counsel
at Bankinter, S.A., as well as independent director at Abertis
Infraestructuras, S.A. In 2015, she was appointed Senior Executive Vice
President of Banco Santander and Group Chief Compliance Officer until
her appointment in 2019 as group head of Supervisory and Regulatory
Relations. She is also a state attorney.
GROUP HEAD OF TECHNOLOGY Born in 1970, Dirk Marzluf joined Grupo Santander in 2018 as Senior
AND OPERATIONS
Víctor Matarranz
GLOBAL HEAD OF WEALTH
MANAGEMENT & INSURANCE
José Luis de Mora
GROUP HEAD OF STRATEGY &
CORPORATE DEVELOPMENT,
FINANCIAL PLANNING AND
SANTANDER CONSUMER
FINANCE
Jaime Pérez Renovales
António Simões
GROUP HEAD OF GENERAL
SECRETARIAT
REGIONAL HEAD OF EUROPE
Marjolein van
Hellemondt-Gerdingh
GROUP CHIEF COMPLIANCE
OFFICER
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. He also held global senior management roles at
Accenture, Daimler Chrysler and Winterthur Group.
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, he held several
management roles at McKinsey & Company, where he had become
partner.
Born in 1966, José Luis de Mora joined Grupo Santander in 2003 to head
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 has been head of
Strategy since 2019 and head and CEO of Santander Consumer Finance
since 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 was country head of Santander España from 2021 to
2022. 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 Grupo
Santander 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.
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.
In addition, sections 6.4 and 6.5 sets out the directors'
remuneration policy for 2023, 2024 and 2025, 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 2023, 2024 and 2025 were approved by
our board of directors on 27 February 2023. All directors were
present at the time of vote casting and voted in favour.
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 2022 and section 6.4 about the remuneration policy for 2023
and subsequent years.
The remuneration policy for directors in force as of the date of
this report is available on our corporate website.
Lastly, the remuneration committee and the board enlisted the
assistance of Willis Towers Watson to:
6.1 Principles of the remuneration policy
Directors' 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.
• 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.
6.2 Remuneration of directors for supervisory
and collective decision-making duties: policy
applied in 2022
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 2022 was set
at EUR 6 million, which included (a) annual allotment and (b)
attendance fees.
3. Variable remuneration must reward individuals for their role
in achieving set goals within the framework of prudent risk
management.
Santander has taken out a civil liability insurance policy for
directors subject to usual terms proportionate to its
circumstances.
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.
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.
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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 2021 and 2022.
In accordance with the remuneration policy approved at the general shareholders' meeting on 1 April 2022, the amounts for serving
and holding roles on the board and committees was the same amount as initially approved for 2021, with the exception of the yearly
amount for serving on the board of directors, which was modified from 90,000 euros to 95,000 euros. 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 nomination 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
Chair of the audit committee
Chair of the nomination committee
Chair of the remuneration committee
Chair of the risk supervision, regulation and compliance committee
Chair of the responsible banking, sustainability and culture committee
Chair of the innovation and technology committee
A
Lead independent director
Non-executive Vice Chair
2022
95,000
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
2021
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
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.
C. Attendance fees
Pursuant to resolutions approved by the board on the remuneration committee’s recommendations, attendance fees for board and
committees meetings (with the exception of the executive committee, for which no fees are set) totalled the amounts included in the
chart below for the last two years.
For 2022, the board voted to keep the same amounts set out in the 2021 policy.
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)
2022
2,600
1,700
1,500
2021
2,600
1,700
1,500
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D. Breakdown of Bylaw-stipulated emoluments
Total director Bylaw-stipulated emoluments and attendance fees received in 2022 amounted to EUR 4.7 million (EUR 4.8 million
in 2021). This is 22% less than the amount approved at the general meeting. Each director earned the following amounts for
these items:
Amount in euros
2022
Annual allotment
NC
—
RC
—
RSRCC
—
RBSCC
ITC
— 74,000
Total
339,000
Total By-law
stipulated
emoluments
and
attendance
fees
379,900
Board and
committee
attendance
fees
40,900
2021
330,000
Non-
Execu execu
tive
tive
—
BoardF
95,000
EC
170,000
—
95,000
170,000
AC
—
—
279,600
170,000
— 75,000 75,000
—
—
—
—
— 25,000
290,000
39,400
329,400
330,000
— 25,000
624,600
75,400
700,000
700,000
95,000
95,000
24,010
47,500
95,000
95,000
95,000
—
—
—
—
—
—
—
40,000
—
—
—
—
—
—
—
—
— 15,000 25,000
175,000
68,800
243,800
247,800
—
—
—
3,791
—
—
95,000
33,800
128,800
129,000
27,801
10,800
38,601
182,100
— 12,500
7,569
10,778
— 28,500
106,847
39,600
146,447
374,400
— 25,000 25,000
— 15,000
—
160,000
69,800
229,800
239,000
40,000
— 25,000
— 25,000
—
—
—
95,000
170,000
—
— 25,000
40,000
95,000
170,000
40,000
95,000
—
—
95,000
170,000
40,000
95,000
— 110,000
65,972
—
31,111
—
—
—
—
—
3,123
—
—
822
822
— 25,000
185,000
76,100
261,100
266,800
—
—
—
—
—
—
120,000
51,800
171,800
129,685
330,000
81,600
411,600
406,000
410,000
89,800
499,800
498,900
95,000
36,400
131,400
129,000
—
—
40,000 65,000
—
—
— 110,000 15,000 25,000
455,000
94,300
549,300
532,400
—
40,000
—
—
—
—
—
—
—
245,000
78,000
323,000
303,067
—
97,083
39,600
136,683
822
5,589
4,100
9,689
—
—
I
I
N
I
I
I
I
I
N
I
N
I
I
I
I
Directors
Ana Botín
José
Antonio
Álvarez
Bruce
Carnegie-
Brown
B
Homaira
Akbari
A
Javier Botín
Álvaro
Cardoso
R. Martín
ChávezC
Sol Daurella
Henrique de
Castro
Gina Díez
Barroso
Luis Isasi
Ramiro
Mato
Sergio Rial
Belén
Romana
Pamela
Walkden
Germán de
la FuenteD
Glenn
HutchinsE
1,560,206 1,020,000 301,111 138,322 158,391 240,778 113,791 228,322 3,760,921
930,200
4,691,121 4,798,152
A. All amounts received were reimbursed to Fundación Botín.
B. Stepped down as director on 1 April 2022.
C. Stepped down as director on 1 July 2022.
D.Director since 1 April 2022.
E. Director since 20 December 2022.
F. 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 NC: nomination 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
2022 was approved by the board of directors and put to a
binding vote at the 2022 general shareholders' meeting, with
93.83% votes in favour. The table below summarizes the
remuneration policy of Ana Botín and José Antonio Álvarez.
Component
Gross annual
salary
Variable
remuneration
Type
Fixed
Variable
Policy
• Paid in cash on a monthly basis.
• Individual benchmark reference.
• Calculated against annual quantitative metrics and a
qualitative assessment on account of individual
performance.
• 50% of each payment is instruments, consisting of Banco
Santander, S.A shares, Banco Santander, S.A. share options
and restricted stock units (RSUs) of PagoNxt, S.A., split as:
◦ the amount of PagoNxt RSUs set for each year; and
◦ the rest, shares and share options in equal parts, unless
the director chooses to receive options only.
Effective in 2022
• 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.
• See section 6.3 B iv for details on long-term
metrics.
• See section 6.3 B iii for details on individual
variable pay.
Pension scheme
Other
remuneration
Fixed
Variable
Fixed
Shareholding
policy
N/A
• The number of instruments is set at the time of the award.
• 40% paid in 2023;
• 60% deferred in five years.
◦ 24% paid in equal parts in 2024 and 2025.
◦ 36% paid in equal parts in 2026, 2027 and 2028, provided
certain long-term objectives are met (2022-2024).
• Annual contribution of 22% of base salary.
• Annual contribution of 22% of 30% of the average of
variable remuneration in the last three years
• Includes life, accident and medical insurance, and other in-
kind compensation.
• Includes a fixed remuneration supplement in cash (not
considered salary or pensionable) since supplementary
death and disability benefits were eliminated.
• Payment for non-compete commitment
• 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. And share
options shall not be exercisable until one year after their
delivery.
• No change since 2018
• See section 6.3 C for details on annual
contributions and pension balance.
• No change for Ana Botín or José Antonio
Álvarez since 2018.
• No change.
• 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 2022 as in 2021.
It also maintained the fixed pension contribution of 22% of
gross annual salary it had agreed in 2021 for 2022.
Executive directors’ gross annual salary and fixed annual
contribution to pensions for 2022 and 2021 were as follows:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2022
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
2021
Fixed annual
pension
contribution
699
559
1,258
Total
3,875
3,100
6,975
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B. Variable remuneration
i) General policy for 2022
The board approved the executive directors’ variable
remuneration on the remuneration committee’s
recommendation, according to the policy approved at the
general shareholders' meeting:
1
• Variable components
(including the variable part of the
contributions to the benefit systems) of executive directors’
total remuneration in 2022 should amount to less than 200%
of fixed components, as established by resolution of the
general shareholders' meeting on 1 April 2022.
• At the beginning of 2023, on the remuneration committee’s
recommendation, the board approved the final amount of the
2022 incentive, based on the set bonus pool in accordance
with the directors' remuneration policy approved at the
general shareholders' meeting on 1 April 2022, 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
solvency position, as well as fostering the global initiatives
PagoNxt and Digital Consumer Bank, and accelerating the
transformation of the Bank into One Santander, with a
special focus on IT, people and the responsible banking
agenda); and (ii) how they achieve them in consideration of
how they manage employees and follow the corporate
values.
Individual
benchmark
variable
remuneration
Quantitative
metrics and
qualitative
A
assessment
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 instruments, the latter as follows:
• EUR 608,000 and EUR 410,000 in PagoNxt, S.L. RSUs for Ana
Botín and José Antonio Álvarez, respectively.
• The rest in equal parts of Banco Santander, S.A. shares and
share options with a 10-year vesting period, unless the
executive director chooses to receive options only. In 2022,
they both chose to receive half in shares and half in share
options.
• 40% is paid in 2023, 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 2024 and 2025, (24% of the
total) will be paid if none of the malus clauses described
below are triggered.
• The deferred amount payable in 2026, 2027 and 2028, (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 reduce these amounts and the
number of deferred instruments, or increase them up to a
maximum achievement ratio of 125%, so executives have
the incentive to exceed their targets.
• 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 year 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 the instruments 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.
And the share options may be exercised one year after the
time each share option is delivered and until their expiry,
which shall take place 10 years after the initial date.
1
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.
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The payment schedule of the incentive is illustrated below.
Immediately
following
performance year
Deferred (malus)
Long-term performance deferral
Cash
Instruments
Total
40%
24%
36%
2023
2024
2025
2026
2027
2028
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 2022
Executive directors’ variable remuneration for 2022 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 2022 on the
remuneration committee’s recommendation. This also takes
into account the input from the human resources committee,
which for this 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 recurrence, and
compliance and control. The quantitative and qualitative results
for the bonus pool (shown in the chart below) resulting from
the process above, which are considered by the board, upon
recommendation from the remuneration committee are
included in 2022 remuneration policy approved in the annual
general meeting. In 2022, the board of directors, following a
proposal made by the remuneration committee, did not make
any exceptional adjustment to the final result obtained by
quantitative metrics and the qualitative assessment.
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Quantitative metrics
Qualitative
Total
weighted
B
score
31.81%
Assessment
Weighted
A
assessment
Component
Assessment
86.4 %
8.64 %
Measurement
of additional
and qualitative
customer
satisfaction
metrics
+0% - Increase in score for our Mobile
customer service in markets where a
new version of our app is available
(enhanced functionality, more user-
friendly and greater availability), while
in other markets improvements are
being developed for roll out soon.
Category
and (weight)
Metrics
Net Promoter
C
(NPS)
Score
(10%)
Customers
(30%)
Number of total
customer (10%)
Number of loyal
customers (10%)
Total Customers
%
Achievement over
target
weighted by #
Average of local
1
results
Loyal Customers
(Individuals + SMEs)
per country as of
December 2021
2
Total and loyal
customers' scores are
based on absolute
numbers for all the
countries except the
UK, based on delta
variance, as mature
country
104.2 %
10.42 %
Conduct risk
performance
and customer
due diligence
105.3 %
10.53 %
29.59%
D
(Return on
RoTE
tangible equity):
(30%)
Target:13.3%
Achieved: 16%
120.1 %
CET1 - Efficient
capital
adequacy
management
36.03 % Appropriate
management
of
operational
risk, risk
appetite and
recorded
breaches
Shareholders
(70%)
D
RoRWA
(Return on risk
weighted
assets)
(40%)
Target: 1.79%
Achieved: 2.13%
149.2 %
59.68 %
Sustainable
and sound
results and
efficient cost
management
Suitability of
business
growth
compared to
the previous
year in view of
market
conditions and
competition
Progress on
Responsible
banking
targets, with
focus on green
finance
(including
climate),
financial
inclusion and
diversity
+2.22% - Achievement of targets to
improve numbers, with a focus on
increasing the first line of defence’s
involvement in conduct risk
management. General improvement
also in key customer indicators; and
positive progress in the implementation
of actions in relation to vulnerable
customers and the improvement of the
design of sales teams’ remuneration
schemes.
+2.22%
+2.74% - Positive Evolution of CET1
ratio with active management of
regulatory and markets (e.g. available
for sale portfolios) headwinds
throughout the year.
+1.75% - Significant improvement in
risk management and control on the
back of a better balance sheet, owing to
a reduction in risk exposure in Spain and
SCUSA; over 130 regulatory model
enhancements submitted to the ECB;
more use of machine learning, artificial
intelligence and other advanced
techniques; and progress with strategic
and transformation initiatives.
+2.61% - Santander posted record
results in 2022 and fulfilled all its public
commitments, despite a challenging
economic and geopolitical context.
Costs rose below inflation in all regions
and efficiency ratio improved.
+1.49% - In a difficult year, Santander
outperformed its peers in revenue and
provisions, and remains as one of the
world’s most efficient banks. This
enabled us to achieve above-average
profit and net margin net of provisions
growth (where Santander was the
second biggest bank in terms of size,
continuing to reduce the gap with the
first).
+2.81% - (i) Women in senior
leadership positions (from 26.3% in
2021 to 29.3% -and ahead of 2022
target of 27.9%-); (ii) over 10 million
people financially empowered (amount
achieved three years ahead of
schedule). For 2022 the target was 9.1
million; (iii) EUR 94 bn in green finance
since 2019 (more than EUR 28 bn added
in 2022 compared with the target of
EUR 17 bn). Likewise, EUR 53 bn in AuM
in socially responsible investments; (iv)
and setting decarbonization targets in
power generation, energy, aviation and
steel as established in business plan.
Total
Shareholders
TOTAL
95.71%
+11.40%
107.10%
138.91%
A. The weighted assessment is the result of multiplying each objective’s assessment by its weighting per category. The five qualitative components under the RoTE and RoRWA
category have 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, as well as on its performance against competitors.
D. For this purpose, these metrics have 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 (such as impairments, corporate transactions, share buybacks or restructuring procedures) 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. Furthermore, in RoRWA scale there is an accelerator in the final assessment to foster an efficient use of capital.
1. Argentina: 94.5%; Brazil: 91%; Chile: 115.5%; Uruguay: 115.8%; Spain: 119.5%; Poland: 100%; Portugal: 105.0%; UK: less than 75%; Mexico: 115%; SCF:100%.
2. Total customers: Argentina:103%; Brazil: 97%; Chile: does not score (less than 75%); Uruguay: 119%; Spain: 100%; Poland: 102%; Portugal: 100%; UK: 150%; Mexico: 104%;
USA: 88%; SCF: 91%; Openbank: 150%. Loyal customers: Argentina:101%; Brazil: 90%; Chile: 81%; Uruguay: 124%; Spain: 102%; Poland: 102%; Portugal: 107%; UK: 150%;
Mexico: 100%; USA: 103%; Openbank: 150%.
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The following section details the individual variable
remuneration approved by the board.
Breakdown of immediately payable and deferred
remuneration
iii) Determination of the individual variable remuneration for
executive directors set in 2022
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:
2
• The Group’s ONP
for 2022 was not more than 50% less than
for 2021. 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 2022 as in 2021.
Variable contributions to pensions were not modified in 2022,
so the amounts are the 22% of the 30% of the last three
assigned bonus' average.
In 2022, the very good business performance (which enabled
Banco Santander to reach a 13.37% underlying RoTE, 0.64 p.p.
above 2021), the excellent execution of our strategy (with the
highest attributable profit ever: EUR 9,605 million, 18% above
2021), and efficient capital management, have led to the
138.91% bonus pool detailed above. However, this bonus pool
is smaller than 2021's of 151.23%, which was the result of
different metrics and weightings (including a very high result in
the capital metric). As a result, there has been a reduction in Ana
Botín's and Jose Antonio Álvarez's bonus of 8% from 2021 to
2022, as detailed below, despite even better 2022 results.
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
2022
In cash
2,702
1,823
4,525
In shares
(A)
1,229
830
2,059
In share
options (A)
1,229
830
In RSUs
(A)
243
164
Total
5,403
3,647
2,059
407
9,050
2021
In shares
2,941
1,985
4,926
In cash
2,941
1,985
4,926
Total
5,883
3,970
9,853
A. The amounts in the foregoing table correspond to a total of 667 thousand shares in Banco Santander, 1,795 thousand share options and 8 thousand RSUs (1,587 thousand
shares in 2021).
The following chart states deferred variable remuneration at fair value, which will only be received in 2026, 2027 and 2028 if the
long-term multi-year targets are met (see section 6.3 B iv)) and beneficiaries continue to be employed at Grupo Santander, in
3
accordance with the terms approved in the general shareholders' meeting, and no circumstances triggering malus clauses occur
:
Deferred variable remuneration linked to long-term objectives (fair value)
EUR thousand
Ana Botín
José Antonio Álvarez
Total
In shares
(A)
404
273
677
2022
In share
options (A)
404
273
677
In RSUs
(A)
255
172
428
In cash
1,064
718
1,782
Total
2,128
1,436
3,564
In cash
1,158
782
1,940
2021
In shares
1,158
782
1,940
Total
2,316
1,563
3,880
A. The number of shares in the table total 219 thousand shares in Banco Santander, 590 thousand share options and 9 thousand RSUs of PagoNxt S.L. (625 thousand shares in
2021).
Fair value has been determined on the grant date based on the
valuation of an independent expert, Willis Towers Watson.
Based on the design of the plan for 2022 and success levels of
similar plans at peer entities, the fair value was considered to be
70% of total value linked to long-term objectives assigned.
2
3
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 amount of shares and share options to be
delivered under the plan (corresponding to EUR 3,268 thousand
in shares and EUR 3,268 thousand in share options) is within the
maximum amount of the award to be delivered in shares (EUR
5,750 thousand) and in share options (EUR 5,750 thousand)
approved by 2022 general shareholders’ meeting for executive
directors. This number of shares and option shares has been
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 31 January
2023 (the date on which the board approved the 2022 bonus for
executive directors), which was EUR 3.088 per share. With this
price set, the share options are worth EUR 1.147. According to
independent experts, the price per PagoNxt, S.L. RSU equals EUR
48.08.
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iv) Multi-year targets linked to the payment of deferred
amounts in 2026, 2027 and 2028
The multi-year targets linked to the payment of the deferred
amounts payable in 2026, 2027 and 2028 are:
Metrics
Weight
Target and compliance scales (metrics ratios)
A
B
Banco Santander’s
consolidated Return on
tangible equity (RoTE)
target in 2024
40%
Relative Total Shareholder
Return (TSR)A
2022-2024 within a peer
group
in
40%
C
Five ESG (environmental,
social and governance)
metrics with same
weighting
20%
If RoTE in 2024 is ≥ 15%, then metric ratio is 1.5
B
If RoTE in 2024 is ≥ 12% but <15%, then metric rato is 0 – 1.5
If RoTe in 2024 is < 12%, then metric is 0
D
D
D
D
If ranking Santander above or equal percentile 100, then metric ratio is 1.5
If ranking Santander between percentiles 75 and 100 (not inclusive), then metric ratio is
C
1 – 1.5
C
If ranking Santander between percentiles 40 and 75 (not inclusive), then metric ratio is 0.5 – 1
If ranking Santander below percentile 40, then metric ratio is 0
If % women in senior leadership positions in 2024 is ≥ 30.5%, then metric ratio is 1.25
If % women in senior leadership positions in 2024 is ≥ 30% but <30.5%, then metric ratio is
1 – 1.25
If % women in senior leadership positions in 2024 is ≥ 28% but <30%, then metric ratio is 0 – 1
If % women in senior leadership positions in 2024 is < 28%, then metric ratio is 0
If number of financially empowered people between 2019 and 2024 (in million) is ≥ 14, then
metric ratio is 1.25
If number of financially empowered people between 2019 and 2024 (in million) is ≥ 13 but
<14, then metric ratio is 1 – 1.25
If number of financially empowered people between 2019 and 2024 (in million) is ≥ 9 but <13,
then metric ratio is 0 – 1
If number of financially empowered people between 2019 and 2024 (in million) is < 9,then
metric ratio is 0
If green finance raised and facilitated target between 2019 and 2024 (in euro billions) is ≥ 170,
then metric ratio is 1.25
If green finance raised and facilitated target between 2019 and 2024 (in euro billions) is ≥ 160
but < 170, then metric ratio is 1 –1.25D
If green finance raised and facilitated target between 2019 and 2024 (in euro billions) is ≥ 120
but < 160, then metric ratio is 0 –1
If green finance raised and facilitated target between 2019 and 2024 (in euro billions) is < 120,
then metric ratio is 0
If number of sectors with decarbonisation targets in 2024 is ≥ 11, then metric ratio is 1.25
If number of sectors with decarbonisation targets in 2024 is = 10, then metric ratio is 1D
If number of sectors with decarbonisation targets in 2024 is ≥ 0 but < 10, then metric ratio is
0 – 1
If % of emission intensity reduction of our power generation portfolio in 2024 versus 2019 is
E
≥ 17%
If % of emission intensity reduction of our power generation portfolio in 2024 versus 2019 is
E
≥ 13.5%
If % of emission intensity reduction of our power generation portfolio in 2024 versus 2019 is
E
≥ 0% but < 13.5
, then metric ratio is 1 –1.25
%, then metric ratio is 0 –1
, then metric ratio is 1.25
E
but < 17%
D
D
D
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 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). The peer group consists of BBVA,
BNP Paribas, Citi, Crédit Agricole, HSBC, ING, Itaú, Scotia Bank and Unicredit.
B. Straight-line increase in the RoTE ratio based on the percentage of specific RoTE in 2024 within this bracket of the scale.
C. Proportional increase in the TSR ratio based on the number of positions moved up in the ranking.
D. Increase of the coefficient is proportional to its position on this line of the scale.
E. In the Climate Finance Report published in July 2022, we assessed the 2019 financed emissions of our power generation portfolio, including guarantees and other types of
off-balance exposure to our customers that do not entail current funding. According to the PCAF standard, such exposure should not be calculated if its attribution factor is
“outstanding”, we were over-attributed with our corporate customers’ emissions. Therefore, the 2019 baseline emissions intensity has been restated from 0.23 to 0.21. With
this change, we have updated the % of reduction from 15% to 13.5%, and from 18.75% to 17%. Although the % of reduction required is lower, the emissions intensity
brackets are below previous calculations and thus closer to the net zero decarbonization target for 2030. The 2030 target remains unchanged.
To determine the annual amount of the deferred portion linked
to objectives corresponding to each board member in 2026,
2027 and 2028, the following formula shall be applied to each
of these payments ('final annuity') without prejudice to any
adjustment deriving from the malus clauses:
Final annuity = Amt. x (2/5 x A + 2/5 x B + 1/5 x C)
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 2023).
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• '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 targets
for 2024 described 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.
v) Malus and clawback
Deferred amounts (whether or not contingent on multi-year
targets) will be earned if the beneficiary continues to work with
4
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.
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 2022 can be clawed back until the
beginning of 2029.
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
Risk
Capital
Regulation and
internal codes
Conduct
Factors
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.
And among the specific cases that could lead to the application
of these clauses, of note the restatement of the annual financial
statements that does not result from a regulatory change, but
from incorrect application of accounting regulations or criteria,
as appreciated by supervisors and as long as it results in a lower
variable remuneration to be settled than that initially accrued or
where no remuneration would have been paid in accordance
with the variable remuneration system of the Entity or a specific
unit.
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 2029. 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.
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.
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
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
4
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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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.
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 of EUR
3.088:
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 2022 for retirement pensions
amounted to EUR 1,892 thousand (EUR 1,825 thousand in
2021), as broken down below.
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2022
1,081
811
1,892
2021
1,041
783
1,825
The amounts corresponding to each executive director as of 31
December 2022 and 2021 in the pension scheme are:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2022
46,725
18,958
65,683
2021
48,075
18,821
66,896
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.
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.
Gross
annual
salary
(thousand)
3,176
2,541
2022
Number of shares
(thousand)
26,857
2,288
X
26.1
2.8
Ana Botín
José Antonio Álvarez
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 in 2020 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 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 2022 or
2021.
However, in their personal capacity, in 2022 Álvaro Cardoso was
paid BRL 150 thousand (EUR 28 thousand) as member of
sustainability committee of Banco Santander Brasil, S.A.,
Homaira Akbari was paid USD 169 thousand (EUR 161
thousand) as member of the board of Santander Consumer USA
Holdings, Inc. and EUR 200 thousand as member of the Board of
PagoNxt S.L., and Henrique de Castro and R.Martín Chávez were
each paid the same EUR 200 thousand as members of the board
of PagoNxt. Likewise, Pamela Walkden was paid GBP 125
thousand (EUR 147 thousand) as member of the Santander UK
plc and Santander UK Group Holdings boards. And Sergio Rial,
as non executive Chair of Ebury Partners Limited received a total
pay of GBP 244 thousand (EUR 286 thousand) and as Chair of
the board of directors of Banco Santander Brasil, S.A. was paid
BRL 10,981 thousand (EUR 2,000 thousand).
Likewise, Luis Isasi was paid EUR 1,000 thousand for his role as
non-Executive Chair of Santander España and for Santander
España 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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Additionally, Héctor Grisi has received at the end of 2022 a
payment of EUR 2,500 thousand as relocation expenses for
settling in Spain to carry out his CEO role effectively from 1
January 2023. Because the payment is based on his annual
allowance capitalized over five years, in accordance with
corporate practices and policies, if the CEO terminates his
contract before said period, he will reimburse the proportional
share of that amount.
Below is a breakdown of each director’s short-term salary
(payable immediately) and deferred remuneration not based on
long-term performance for 2022 and 2021. Statistical
information on remuneration required by the CNMV (9.5) and
Note 5 to the Group’s consolidated financial statements
contains disclosures on shares delivered in 2022 under the
deferred remuneration schemes of previous years where
conditions for their delivery were met in the related years.
G. Individual remuneration of directors for all items
in 2022
Bylaw-stipulated
emoluments
Salary and bonus of executive directors
EUR thousand
2022
Directors
Ana Botín
José Antonio Álvarez
Bruce Carnegie-Brown
Homaira Akbari
A
Javier Botín
B
Álvaro Cardoso
C
R.Martín Chávez
Sol Daurella
Henrique de Castro
Gina Díez Barroso
Luis Isasi
Ramiro Mato
Sergio Rial
Belén Romana
Pamela Walkden
D
Germán de la Fuente
E
Glenn Hutchins
Total 2022
Total 2021
Board and
board
committees
annual
allotment
339
290
625
175
95
28
107
160
185
120
330
410
95
455
245
97
6
3,762
3,764
Board and
committee
attendance
fees
41
39
75
69
34
11
40
70
76
52
82
90
36
94
78
40
4
931
1,036
Immediate
payment
bonus (50%
in
instruments)
3,377
2,279
Deferred
payment
bonus (50%
in
instruments)
2,026
1,368
Fixed
Salary
3,176
2,541
Total
8,579
6,188
Pension
Contribution
1,081
811
Other
F
remuneration
961
1,758
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,717
6,467
—
—
—
5,656
6,158
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,394 14,767
16,319
3,694
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,892
1,824
—
—
—
—
—
—
—
—
1,000
—
—
—
—
—
—
3,719
3,542
2021
Total
11,435
9,160
700
248
129
183
374
239
267
130
1,406
499
879
533
303
—
—
—
Total
11,001
9,086
700
244
129
39
147
230
261
172
1,412
500
131
549
323
137
10
25,071
—
26,485
A. All amounts received were reimbursed to Fundación Botín.
B. Stepped down as director on 1 April 2022.
C. Stepped down as director on 1 July 2022.
D.Director since 1 April 2022.
E. Director since 20 December 2022.
F. Other remuneration includes for Luis Isasi EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España board and committees
meetings.
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I. 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 included) 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 directors’ total 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 increased (limited to 125%), reduced, or
even be zero, if the related minimum thresholds are not
achieved):
Ana Botín
José Antonio Álvarez
Total
EUR thousand
A
2022
2,128
1,436
3,564
A
2021
2,316
1,563
3,880
A. Fair value of the maximum amount receivable over a total of 3 years (2026, 2027
and 2028), which was estimated when the plan was granted, based on several
scenarios relating to variables in the plan during the measurement periods.
H. Ratio of variable to fixed pay components in
2022
At the 2022 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 2022. This
ratio decreased from 2021 by 13 pp for Ana Botín and by 13 pp
for José Antonio Álvarez.
Executive directors
Ana Botín
José Antonio Álvarez
For these purposes:
Variable Components /
fixed components (%)
169 %
115 %
• 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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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:
(EUR thousand)
1
Directors' remuneration
• Executive Directors
Ana Botín
José Antonio Álvarez
2
• Non-Executive Directors
Bruce Carnegie-Brown
Sergio Rial
A
Javier Botín
Sol Daurella
Belén Romana
Homaira Akbari
Ramiro Mato
Álvaro Cardoso
Henrique de Castro
Pamela Walkden
Luis Isasi
C
R. Martín Chávez
Gina Díez Barroso
Germán de la Fuente
E
Glenn Hutchins
Company’s performance
Underlying profit attributable to the Group (EUR mn)
3
Consolidated results of the Group
Ordinary RoTE
4
Employees' average remuneration
(EUR mn)
(EUR)
D
B
2022
% var.
22/21
2021
% var.
21/20
2020
% var.
20/19
2019
% var.
19/18
2018
11,001
9,086
(4)%
(1)%
11,435
9,160
68%
52%
6,818
6,018
(32)%
(27)%
9,954
8,270
(5)%
(4)%
10,483
8,645
700
131
129
230
549
244
500
39
261
323
F
1,412
147
172
137
10
9,605
15,250
13.37%
56,262
—
—
—
(4)%
3%
(2)%
—
(79)%
(2)%
7%
—
(61)%
32%
—
—
11%
5%
5%
1%
700
879
129
239
533
248
499
183
267
303
1,406
374
130
—
—
18%
—
6%
12%
28%
23%
16%
(25)%
23%
42%
49%
911%
—
—
—
595
63
122
214
417
202
430
243
217
214
943
37
4
—
—
(15)%
—
(11)%
(11)%
(21)%
(11)%
(14)%
(12)%
152%
529%
—
—
—
—
—
700
—
137
240
525
226
500
276
86
34
—
—
—
—
—
(4)%
—
13%
12%
27%
14%
11%
86%
—
—
—
—
—
—
—
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. 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. Full time equivalent data considered.
A. All amounts received were reimbursed to Fundación Botín.
B. Stepped down as director on 1 April 2022.
C. Stepped down as director on 1 July 2022.
D. Director since 1 April 2022.
E. Director since 20 December 2022.
F. Includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España board and committees meetings.
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J. Summary of link between risk, performance and remuneration
Banco Santander's remuneration policy and its application in 2022 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 2022
were as follows:
Key words
Metrics balance
Financial thresholds
Long-term objectives
Individual performance
Variable remuneration cap
Control functions involvement
Malus and clawback
Payment in shares
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, return on tangible equity (RoTE) and
the five public targets linked to our Responsible banking agenda.
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.
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 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 instruments and subject to retention or prohibition from exercise of at least one
year from their delivery.
6.4 Directors' remuneration policy for 2023,
2024 and 2025 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 2023, 2024 and 2025, no changes
to the principles and composition of directors’ remuneration for
supervisory and collective decision-making duties are planned
with respect of those in 2022. 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.
While there are no planned changes to the principles on
executive directors’ remuneration for executive duties in 2023,
2024 and 2025 (sections 6.1 and 6.3), changes to the corporate
bonus scheme are being proposed as detailed below.
First, to further support the Group's transformation strategy,
short-term corporate bonus metrics will include the new
strategic priorities released at the 2023 Investor Day,
maintaining the focus on clients (with active customers as the
main metric), as well as RoTE (which continues to be part of the
scheme). The third pillar to be included as a metric is capital, to
outline the importance of capital generation throughout the
business.
With the purpose of further promoting value creation for
investors, a relative performance multiplier is included, which
may reduce or increase the result from the metrics above, based
on results versus top peers in each market on metrics
considered more relevant for each country/business (and for
Group, the weighted average of countries results): NIM, NPS, C/
I, CoR, NPLs and Net Margin after provisions. Thus assuring that
our teams not only push to exceed budget, but also to
outperform peers.
The qualitative assessment for the short-term bonus is
simplified by reducing the items included in it from 7 to 4 the
possible adjustments made, covering risk, compliance, network
collaboration and ESG aspects (Responsible Banking).
Second, variable remuneration in 2023 for executive directors
will be paid 50% in cash and 50% in instruments. The part to be
received in instruments split as follows:
◦ EUR 500,000 and EUR 420,000 in PagoNxt, S.L. RSUs for Ana
Botín and Héctor Grisi, respectively.
◦ The rest, all in instruments of Banco Santander, S.A. The
executive director must decide between receiving such
amount all in shares, or receiving in equal parts shares and
share options of Banco Santander, S.A (while for 2024 and
2025, the board agreed, upon proposal from remuneration
committee, that executive directors receive half in shares
and half in share options).
For the rest of identified staff, variable remuneration will be
paid as follows, according to each executive's choice:
◦ 50% in cash and 50% in Banco Santander, S.A. shares; or,
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◦ 50% in cash, 25% in shares and 25% in Banco Santander,
S.A. share options.
This decision would mean the effective introduction of options
as part of the yearly bonus for identified staff (excluding
executive directors who already received options for 2022), as
the board voted in 2022 to postpone introducing share options
for this group.
Third, it is proposed to maintain the long-term performance
metrics, prioritising in this way 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 these metrics will be:
• Relative performance of Banco Santander's total shareholder
return (TSR) compared to our peer group; with a threshold at
which executives begin to accrue remuneration of 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.
• Four ESG (environmental, social and governance) metrics
linked to the progress we make on our targets to implement
the Group's Responsible banking agenda. Their weight will be
20% of the total.
The maximum achievement ratio will remain at 125% so
executives have the incentive to exceed their targets; however,
the maximum achievement ratio for 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 continue to receive restricted stock units (RSUs) of
PagoNxt, S.L.
The RSUs 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 2023, Ana Botín would receive the
equivalent of EUR 500 thousand in RSUs, and Héctor Grisi would
receive the equivalent of EUR 420 thousand in RSUs, in
accordance with 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.
Finally, every year, Banco Santander conducts a comparative
analysis of total compensation for executive directors and other
senior executives. For 2023, 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 included 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 termism and promote long-
term sustainability. The remuneration scheme for the 1,029
identified staff also includes deferrals of up to 60% of variable
remuneration, payment 50% in Santander instruments
(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 goals. From 2022, with
the purpose of increasing focus on the Group's responsible
banking agenda and highlight sustainability as a core long-
term strategy, 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 (see 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 2023
A. Directors' remuneration in their capacity as such
In 2023, directors, in their capacity as such, will receive
remuneration for supervisory and collective decision-making
duties for a total of up to EUR 6 million as authorised by the
shareholders at the April 2022 AGM (which will again be put to
a vote at the 2023 AGM). It consists of:
• annual allocation, and
• attendance fees.
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After several years with practically no review of directors'
remuneration, the board has proposed, for 2023, an increase of
EUR 3,000 in the annual allotment for board and committee
membership (except for the executive committee) and without a
comprehensive review of the remuneration. All other board
related amounts for 2023, including board and board
committees fees are the same as for 2022 (see sections 6.2.B
and C above).
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 2023. 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
The board, on the remuneration committee’s recommendation
and with effect from 1 January 2023, resolved for Héctor Grisi to
have the same target pay as José Antonio Álvarez received until
he stepped down as CEO, based on the fact that he is a
professional with a proven expertise and performed a similar
role for Santander México and as head of the Group's North
America region, plus the cost savings derived from not hiring an
external candidate.
i) Fixed remuneration components
A) Gross annual salary
After five years with no review of gross annual salary, and
further to the remuneration committee’s recommendation, the
board resolved that Ana Botín’s gross annual salary would
increase a 3% in respect of 2022 (this would mean an effective
total rise in her total compensation of around 1% versus 2022,
taking into account the sum of fixed salary, pension contribution
and target bonus). In connection with this, it is worth noting that
an increase of 4.5% in the base salary subject to collective
agreement has been applied to the general Santander
workforce in Spain.
In turn, the new CEO Héctor Grisi will receive a gross annual
salary of EUR 3 million, which is the same fixed compensation
as the former CEO. The board agreed on this amount upon
proposal of the remuneration committee, based on his proven
expertise as a successful CEO with Santander Mexico and
Group’s North America regional head. Also, as Héctor Grisi’s
appointment is internal, it does not entail any additional buyout
or sign-on bonus expenses, as would normally be the case with
an external candidate.
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.
B) Other fixed remuneration components
• Benefit systems: defined contribution schemes as set out in
section 'Benefit schemes'5
.
• Supplement to fixed salary: Ana Botín will receive EUR
525,000 as a supplement to her fixed pay in 2023. This had
been approved in 2018 when the supplementary death and
disability pension schemes were eliminated. Héctor Grisi will
not receive a supplement.
• Social welfare benefits: executive directors will also receive
social welfare benefits such as life insurance premiums, travel
grants, 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 similar terms and conditions that would be applied to third
independent party under the supervision of the audit
committee. This information can also be found under the
'Benefit plans' section.
ii) Variable remuneration components
The board approved the policy on executive directors’ variable
remuneration for 2023 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 (2024) 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 2025 and 2026 on the condition that no
malus clauses described under section 6.3 B v) are triggered.
• The amount deferred over the next three years (36% of the
total) will be paid in 2027, 2028 and 2029, 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 v).
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 2023 cannot exceed the limit of 200% of fixed components
submitted for approval to the 2023 AGM. However, under EU
regulations on remuneration, certain variable components can
be excluded.
5
As indicated in the next section, executive directors contribution to the benefit systems includes both fixed and variable components
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A. Variable remuneration benchmark
Variable remuneration for executive directors in 2023 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,
pushing 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.
Transformation:
Weight: 45%
The proposed quantitative metrics and weightings are:
Category
Quantitative metrics
Hector Grisi's variable remuneration target will be EUR 4,200
thousand, which aligns with the former CEO's variable
remuneration target until his departure and following the same
rationale explained above for gross annual salary.
B. Setting of final variable remuneration based on yearly
results
Based on that standard benchmark, 2023 variable remuneration
for executive directors will be based on this new corporate
bonus scheme proposal:
• Three categories of quantitative metrics (business
transformation, sustainable profitability and capital) to
increase alignment with increasing shareholder value and
capital generation.
• A relative performance multiplier versus market which will
multiply by 0.7 to 1.3 the result of the quantitative metrics
above, based on performance versus top peers in each market
on metrics considered more relevant for each country/
business (and for Group, the weighted average of countries
results): with net interest margin (NIM), cost to income, CoR,
NPLs, net promoter score (NPS) and Net Margin after
provisions as references.
• A simpler qualitative assessment with four components (risk,
compliance, network collaboration and ESG) instead of seven,
to cover regulatory requirements and stakeholders’ concerns
more efficiently. The assessment cannot raise or lower the
above result by more than 25%.
• An exceptional adjustment that must be duly supported and
may involve changes owing to control and/or risk deficiencies,
negative assessments from supervisors or unexpected
material events.
These changes align the new scheme with the strategic
priorities we announced at our Investor Day on 28 February
2023. Capital generation will become an important part of key
employees’ remuneration (including executive directors) in
order to ensure an efficient use of capital, alongside RoTE,
which we are keeping in the scorecard to incentivize
sustainable, long-term growth. Customers continue to be part
of the quantitative metrics, with special focus on active
customers. Lastly, executives' focus on outperforming the
market in aspects directly related with shareholder value is
increased.
Total and active customers (growth)
(Weight: 20%)
Operative cost per active customer
(Weight: 15%)
Revenue per active customer
(Weight: 10%)
A
CET1 ratio
RoTEA
(Return on tangible equity)
Capital
Weight: 30%
Sustainable
Profitability
Weight: 25%
A.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.
A relative performance multiplier (from 0.7 to 1.3) based on
performance versus best-in-class peers is applied to the total
result of these metrics.
And finally, to the result obtained above, we add or subtract the
qualitative assessment according to this table:
Qualitative assessment
Risk
Compliance
Network collaboration
ESG targets
Weight
+/-5%
+/-5%
+/-10%
+/-5%
Lastly, as additional conditions for determining the incentive,
the following circumstances must be confirmed to set variable
pay:
• If the Group’s ONP for 2023 were 50% less than in 2022,
variable pay would in no case exceed 50% of the benchmark
incentive for 2023.
• 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 of executive directors will be paid 50% in
instruments, split as:
• the amount of PagoNxt RSUs set for each year (which cannot
exceed 10% of their variable pay); and
• the rest, all in instruments of Banco Santander, S.A. The
executive director must decide between receiving such
amount all in shares, or receiving in equal parts shares and
share options of Banco Santander, S.A.
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One portion will be paid in 2024 and the other will be deferred
for five years and contingent on long-term metrics:
a) 40% of variable remuneration is paid in 2024 net of tax, with
50% in cash and 50% in instruments.
b) 60% paid, if applicable, in five equal parts in 2025, 2026,
2027, 2028 and 2029 (net of tax), with 50% in cash, 50% in
instruments, 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. Share
options shall not be exercisable or sold until one year after their
delivery. The exact exercise period for the options shall be
determined by the board, upon the recommendation from
remuneration committee, in the terms approved by the general
shareholders' meeting.
Additionally, a proposal to increase the number of trading
sessions used to determine the share price used for executive
directors and identified staff bonus from 15 to 50, to soften the
impact on the share price of events (positive or negative) that
may occur within a short period will be put to vote at the 2023
AGM. Under the Remuneration policy for 2023 and beyond, the
maximum number of shares (and/or share options) will be
calculated based on the daily volume-weighted average of the
weighted average Santander share price in the 50 trading
sessions before the last Friday (not included) before the board
meeting at which executive directors’ bonus is agreed.
D) Deferred variable pay subject to long-term objectives
As indicated above, the amounts deferred in 2027, 2028 and
2029 will be paid on the condition that the group achieves its
long-term targets for 2023-2025, in addition to the terms
described in section E).
As advanced in section B) on the principles of the remuneration
policy, the long-term targets are:
a. Banco Santander’s consolidated Return on tangible equity
(RoTE) target in 2025. The RoTE ratio for this target is
obtained as follows:
RoTE in 2025 (%)
≥ 17%
≥ 14% but <17%
< 14%
‘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 2025 within this bracket of the scale.
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 2023-2025 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
A
percentiles 1 – 1.5
th
A
percentiles (not 0.5 - 1
0
A. Increase in the TSR ratio proportional to the number of positions moved up in the
ranking.
6
measures the return on shareholders’ investment. It is the
TSR
sum 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 will depend on the progress made on the Group's
Responsible Banking actions lines and associated targets
7
(described below)
:
1. Women in senior leadership positions by 2025:
B
(%)
Women in senior leadership positions
≥ 36%
≥ 35% but < 36%
≥ 29.3% but < 35%
< 29.3%
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. Financial inclusion between 2023 and 2025:
(millions)
B
Financial inclusion
≥ 6
≥ 5 but < 6
≥ 3 but < 5
< 3
Coefficient
1.25
1 – 1.25A
A
0 – 1
0
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,
A. Increase of the coefficient is proportional to its position on this line of the scale.
B. Banking proposals for unbanked and underbanked regarding access to basic
financial services (i.e.: cash-in/cash-out services in remote locations) or tailored
finance (i.e.: for micro-entrepreneurs to set up or grow a business or customers in
financial distress).
6
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 2023 (exclusive) is
considered (to calculate the initial value) and the fifteen trading sessions prior to 1 January 2026 (exclusive) (to calculate the final value).
There are thresholds that go beyond current public targets, which should not be considered a revision of them, but a way to further motivate our management team, in order
to progress beyond targets on ESG main strategic lines.
7
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3. Green finance and socially responsible investment. This third
ESG goal is split into two subcategories: cumulative green
finance raised and facilitated between 2019 and 2025 and
socially responsible investments AuMs in 2025, with a
weight of 70% and 30%, respectively.
(EUR Bn)
B
Green finance raised and facilitated
≥ 240
≥ 220 but < 240
≥ 160 but < 220
< 160
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. Grupo Santander's contribution to green business: SCIB, Retail & Commercial
banking and Digital Consumer Bank. It is measured with cumulative data since
2019.
(EUR Bn)
B
Socially responsible investments
≥ 102
≥ 100 but < 102
≥ 53 but < 100
< 53
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. Funds registered under article 8 and 9 (SFDR) in the EU, including third-party
funds and SAM´s Latin American funds that meet equivalent criteria.
4. Reduction of the exposure in thermal coal-related power and
mining portfolios:
(EUR bn)
B
Thermal coal-related power & mining
≤ 3.8
< 5.8 but > 3.8
= 5.8
> 5.8
Coefficient
1.25
1 – 1,25A
1
0
A. Increase of the coefficient is proportional to its position on this line of the scale.
B. Credit risk exposure with customers affected by the thermal coal 2030 phase-out
target: power generation customers with more than 10% of revenues coming from
thermal coal and thermal coal-mining customers.
Each of the four Responsible Banking action lines has the same
weighting and this formula to calculate them:
C = (1/4 x Coefficient 1 + 1/4 x Coefficient 2 + 1/4 x Coefficient
3 +1/4 x Coefficient 4)
The following formula will be used to set the annual amount of
performance-based deferred variable remuneration in 2027,
2028 and 2029 ('final annuity'), without prejudice to any
adjustment deriving from the application of the malus policy
(see section 6.3 B v):
• '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 2023-2025.
• ‘C’ is the coefficient resulting from the sum of weighted
coefficients for each of the four Responsible banking targets
for 2025 (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 instruments
to executive directors is EUR 11.5 million.
E) Other terms of the incentive
Payment of the deferred amounts (including those linked to
long-term targets) will occur only if they remain in the Group
and none of the circumstances triggering malus clauses arise
(as per the malus and clawback section in the Group’s
remuneration policy) under terms similar to those indicated for
2022 (detailed in section 6.3 B v)). 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 and 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.
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.
iii. 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 Santander
shares for an amount equivalent to twice his/her annual salary.
Final annuity = Amt. x (2/5 x A + 2/5 x B + 1/5 x C)
Directors’ remuneration for 2024 and 2025
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 2024).
• ‘A' is the RoTE coefficient according to the scale in the table
above, based on RoTE at year-end 2025.
A. Directors’ remuneration in their capacity as such
For 2024 and 2025, no changes to directors’ remuneration are
planned in respect of what is foreseen herein for 2023.
However, shareholders at the 2024 or 2025 annual general
meeting may approve an amount higher than the six million
euros currently in force, or the board may approve an
alternative allocation of that amount to directors in accordance
with the criteria in article 58.2 of Banco Santander’s Bylaws (i.e.
duties and responsibilities; positions held on the board;
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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 2023, 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 2024 and 2025 and going
forward, the proposal of the board, upon recommendation from
the remuneration committee, is to increase their annual gross
salary by and amount equivalent to 75% of the average salary
increase applied to the general workforce in the Group, provided
that it may not increase above 5% of their gross annual salary in
respect of the previous year.
The 5% increase mentioned above may be higher for one or
several directors provided that, when applying the rules or
requirements or supervisory recommendations, 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 2023.
ii) Variable remuneration components
The policy on executive directors’ variable remuneration for
2024 and 2025 will be based on the same principles as in 2023,
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 2024 and 2025
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 contrasted with the budget for
the financial year, as well as with growth from the previous
year.
• a relative performance multiplier in some key metrics (from
0.7 to 1.3) versus our best-in-class peers.
• a qualitative assessment that cannot raise or lower the result
of the quantitative metrics and the multiplier above by more
than 25%. It will be conducted for the same categories as the
quantitative metrics, including risk, compliance, network
collaboration and ESG targets.
• 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, relative performance accelerator, the
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, their compliance with corporate values and
risk culture.
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
The variable remuneration of executive directors for 2024 and
2025, will be paid as follows:
• 50% in cash;
• and 50% in instruments, split as follows:
◦ the amount of PagoNxt, S.L. RSUs set for each year (as
described below); and
◦ the rest, half in shares and half in share options of Banco
Santander, S.A.
It is also envisaged that for 2024 and 2025 Ana Botín would
receive the equivalent of EUR 500 thousand in RSUs, and Héctor
Grisi would receive the equivalent of EUR 420 thousand in RSUs,
in accordance with 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 in any event.
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,
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reduce or increase payment amounts and the number of
deferred instruments.
especially in terms of confidentiality, professional ethics and
conflicts of interest.
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.
D) Other terms of the incentive
No changes to the continuity, malus and clawback clauses of
the remuneration policy for 2023 described in section E are
expected. Furthermore, no changes are planned in respect of
the clauses on hedging instruments 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 2024
and 2025, 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 2023 apply for 2024 and 2025.
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 Héctor Grisi, the
compensation to be paid by Banco Santander for this duty of
non-competition is twice the amount of the fixed remuneration.
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. During this period, she would continue
to receive her gross annual salary.
D. Benefit plans
Executive directors participate in the defined contribution
pension scheme created in 2012. It covers 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. For Héctor Grisi, the average for the first three years
will be calculated according to these criteria:
• For 2023, his gross variable remuneration agreed in that
exercise.
• For 2024, the average of his gross variable remuneration
agreed for 2023 and 2024 exercises.
• For 2025, the average of his gross variable remuneration
agreed for 2023, 2024 and 2025 exercises.
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 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 2023, 2024
and 2025 in the same amount and continue to be paid until they
reach retirement age (even if they are still active).
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,
The Group has life and health insurance policies taken out for
directors. Insurance premiums for 2023 include standard life
insurance and the life insurance cover with the supplement to
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their fixed remuneration mentioned above. In 2024 and 2025,
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 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 similar terms
and conditions that would be applied to third independent party
under the supervision of the audit committee
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
José Antonio Álvarez signed a contract to become a strategic
adviser to Grupo Santander, effective on 1 January 2023. The
contract stipulates that Mr Álvarez will aid in the handover to
the new CEO and attend executive risk committee meetings and
engaging supervisors, international bodies, sector organizations
and others in institutional matters as necessary. Mr Álvarez will
receive fixed remuneration of EUR 1,750 thousand. For this
contract, he will retain some of the benefits he enjoyed under
his former contract, including health and life insurance, and the
supplement he had been receiving for having waived the death
and disability policy in the amount stated under section 6.3 (see
“Other remuneration” in table 6.3 G) of this Annual Report.
Moreover, the post-contractual non-compete commitment in
his previous contract will remain in force until this one expires.
He will not be entitled to any other payment in connection with
the termination of this contract.
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 thousand a year) and to serve as a member of
the board of Santander España (for which he receives EUR 75
thousand 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,
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
maximum number of shares 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.
Mr Grisi’s appointment as CEO (with effect from 1 January
2023) did not entail a buyout or sign-on bonus since he was
already part of Grupo Santander.
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.
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6.5 Preparatory work and decision-making for
the remuneration policy; remuneration
committee involvement
Section 4.7 'Remuneration committee activities for 2022', (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 2022, including joint
sessions with the risk, compliance and regulation supervision
committee.
• The date of the meeting in which the report was approved.
The 2021 annual report on directors’ remuneration was
approved by the board of directors and put to a binding vote at
the 2022 AGM, with 88.01% of the votes in favour. The tally of
the votes was:
Votes
Votes forB
B
Votes against
C
Blank
Abstentions
C
Number
11,589,809,297
Number
10,193,385,775
1,389,271,674
7,151,848
336,389,901
% of total
A
97.18 %
%
88.01 %
11.99 %
0.06 %
2.82 %
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 2023, 2024 and 2025 herein.
The board of directors then submits it to the 2023 AGM as a
separate item on the agenda and an integral part of this text.
See section 6.4 'Directors' remuneration policy for 2023, 2024
and 2025 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
independent 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 2022
annual remuneration report elaboration and its continued
supervision of the remuneration policy, the remuneration
committee believes the director remuneration policy for 2023,
2024 and 2025 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.
The policy aims, among other aspects, (i) to maintain a simple
executive remuneration scheme, with three categories of
quantitative metrics (business transformation, sustainable
profitability and capital) to further align with value creation and
capital generation; (ii) outperform peers in value creation
aspects; and, (iii) regarding metrics linked to multiyear
objectives, to prioritize long-term profitability for shareholders
and Santander and a sustainable balance sheet (total
shareholder return, RoTE and ESG-related metrics related to our
responsible banking targets) in order to follow best market
practice and meet our stakeholders’ needs.
In 2022, no deviations from, or temporary exceptions to, the
application of the remuneration policy occurred.
6.6 Remuneration of non-director members of
senior management
2022 variable remuneration was approved by the board of
directors on 31 January 2023 in view of the recommendation
from the 30 January 2023 remuneration committee. 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 contracts of members of senior management were
amended in 2018 in the same manner described under 6.3.D in
respect of Ana Botín, 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 2022 and 2021, excluding
those of executive directors. This amount has been reduced by
35% compared to that reported in 2014 (EUR 80,792 thousand):
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Short-term and deferred salary remuneration
EUR thousand
Immediately
receivable variable
remuneration
A
(50% in shares)
Deferred
variable
remuneration
B
(50% in shares)
15,466
16,804
6,797
7,296
Fixed
18,178
19,183
Year
2022
2021
Number of
people
14
15
Pension
contributions
5,339
5,542
Other
C
remuneration
6,956
5,055
Total
52,736
53,880
A. The amount immediately payable in shares in 2022 was 2,504 thousand Santander shares (2,707 thousand Santander shares in 2021).
B. The amount of deferred shares in 2022 was 1,101 thousand Santander shares (1,175 thousand Santander shares in 2021).
C. Includes life insurance premiums, health insurance and relocation packages, other remuneration items and RSUs of PagoNxt S.L., as members of board of directors of this
entity .
This table breaks down remuneration linked to multi-year
targets for senior management (excluding executive directors)
at 31 December 2022 and 2021, 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
See Note 46 to the 2022 Group's consolidated financial
statements for further information on the Digital
Transformation Incentive.
In 2022, the ratio of variable to fixed pay components was
120% of the total for senior managers, well within the
maximum limit of 200% set by shareholders.
Deferred variable remuneration
subject to long-term
B
(50% in shares)
metricsA
See note 5 of the Group’s 2022 consolidated financial
statements for further details.
Year
2022
2021
Number of
people
14
15
7,137
7,660
A. In 2022, this corresponds to the fair value of maximum annual payments for
2026, 2027 and 2028 in the seventh cycle of the plan for deferred variable
remuneration linked to multi-year targets. In 2021, this corresponds to the
estimated fair value of maximum annual payments for 2025, 2026 and 2027 in
the sixth 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 2022 and success levels of similar plans at peer entities, the fair value was
considered to be 70% of the value linked to long-term metrics.
B. The number of shares in Santander as deferred variable pay subject to long-term
metrics shown in the table above was 1,156 thousand in 2022 (1,234 thousand
shares in Santander in 2021).
The long-term goals are the same as those for executive
directors. They are described in section 6.3 B iv).
Additionally, senior executives who stepped down from their
roles in 2022 consolidated salary remuneration and other
remuneration for a total amount of EUR 3,691 thousand (EUR
5,294 thousand in 2021). They also have the right to receive, in
total, EUR 447 thousand in variable pay subject to long-term
objectives (this right has been generated in 2021 for a total
amount of EUR 55 thousand).
The board of directors approved the 2022 Digital
Transformation Incentive which is a variable remuneration
scheme split in two different blocks:
• the first one, with the same desing as in previous years, that
delivers Santander shares and share options if the Group hits
major milestones on its digital roadmap. This 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 2022.
• And the second one, which delivers PagoNxt, S.L. RSUs and
premium priced options (PPOs), and is aimed at up to 50
employees whose roles are considered key to PagoNxt’s
success, including 1 senior executive who will receive EUR 500
thousand under it.
8
The 2022 Pillar III disclosures report can be found on our corporate website.
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, where
applicable, updates identified staff in order to include
individuals within the organization who qualify as such. The
Remuneration Policies chapter in the 2022 Pillar III disclosures
of Banco Santander, S.A. explains the criteria and
report
regulations followed to identify such staff.
8
At the end of 2022, 1,029 Group executives (including executive
directors and non-director senior managers) were considered
identified staff (1,018 in 2021), which accounts for 0.50% of the
total final workforce (0.52% in 2021).
Identified staff have the same remuneration standards as
executive directors (see sections 6.1 and 6.3), except for:
• Category-based deferral percentages and terms.
• The possibility in 2022 of certain less senior manager
categories of only having deferred variable pay subject to
malus and clawback clauses (and not to long-term targets).
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• 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 2023, 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).
The aggregate amount of variable remuneration for identified
staff in 2022, the amounts deferred in cash and instruments,
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 2022.
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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:
• 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 are subject to local authority regulation and
supervision, although the ECB supervises the Group overall.
• 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 such
functions 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;
• sharing best practices in global connectivity, commercial
initiatives and digitalization; and
• ensuring the “know your structure” governance principle is
effectively applied with a Procedure for appointing key
positions and assessing suitability that applies to the entire
Group.
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 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 relationship between regional and country heads and the
Group CEO.
• 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, Wealth Management &
Insurance and Global Cards and Digital Solutions).
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 subsidiaries in the
three geographic areas where it operates: Europe, South
America and North America. They must undertake their key
responsibilities in compliance with European Union and
country-specific laws and regulations, and ensure that the
country heads' role and accountability (including regulatory
responsibilities) are not undermined.
Since 2020, the Europe region (Spain, Portugal, Poland and the
UK) has had 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 those
countries. Specific coordination elements and organizational
structures were defined to ensure the effective discharge of the
Europe regional head's responsibilities, fully respecting local
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governance. Business and functional roles were also created to
support and control those responsibilities.
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.
Grupo Santander has corporate frameworks for matters
considered to have a material impact on its risk profile. They
cover risk, capital, liquidity, compliance, financial crime,
technology, auditing, accounting, finance, strategy, human
resources, outsourcing, cybersecurity, special situations
management communications and brand and Responsible
banking. Our frameworks also specify:
• how the Group should supervise and exert control over
subsidiaries; and
• the Group’s involvement in subsidiaries’ decision-making (and
vice versa).
The Banco Santander board approves the GSGM and corporate
frameworks for the subsidiary governing bodies to formally
adhere to them. They consider subsidiaries' local requirements
and are revised every year as required by the Group board to
adapt 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 approach ensures consistency throughout
the Group. Every year, the functions conduct an assessment to
ensure that the Group's internal regulations are embedded
locally and carry out an annual certification process to ensure
the internal regulation under their scope is fit for purpose. The
internal governance office presents the findings to the board of
directors.
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 on the governance of non-GSGM
subsidiaries has enhanced the governance and control system
that has been applied to those companies thus far.
PagoNxt, a wholly-owned subsidiary of Banco Santander
structured as a dedicated holding company with a set of key
initiatives on digitalizing the Group's financial services and with
payments at its core, has had its own governance model since
2020. This model sets out an organizational and governance
framework for PagoNxt and its subsidiaries against the
backdrop of Group-wide arrangements. It 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 (WM&I) have
had specific governance models to ensure robust, Group-wide
oversight of those businesses as set out in the GSGM. In 2022, a
new global business has been created for Global Cards and
digital solutions with a similar governance model and approach
to those of SCIB and WM&I.
In 2022, the Group decided to review the Digital Consumer Bank
(DCB) governance model to streamline its governance
arrangements given the already high degree of board
membership overlap of Openbank and Santander Consumer
Finance, whilst fully respecting the distinct nature of the legal
entities that these banking subsidiaries need to discharge. This
facilitates a more efficient operation of the DCB governance and
helps ensure ongoing governance effectiveness.
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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
Subsidiaries
Board of directors
A
Group Executive Chair
B
Group CEO
C
Regional heads
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
functions
D
Control management and business
functions
D
Interaction between the Group's
and subsidiaries's control,
management and business
functions.
A. First executive.
B. Second executive, who reports to the board of directors.
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.
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.
Synergies and economies of scale
across the Group.
Planning 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. It includes:
• control environment.
• risk assessment in financial reporting.
• control activities.
• reporting and communication.
• system monitoring.
• the external auditor’s report.
8.1 Control environment
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
internal information and communication systems. The
abovementioned includes the operational and financial control
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 2022'.
The audit committee works with the external auditor to address
every aspect that impacts on 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
Lead functions
Grupo Santander, through its corporate organization function,
countries and businesses, draws up, implements and maintains
the units' organizational structures, catalogue of roles and size.
The corporate Costs & Organization function sets out and
documents the corporate model for managing structures and
workforces, which is used as a reference across the Group.
The organizational units are in charge of identifying and
drawing-up the main functions under the responsibility of each
structural unit, ensuring that the organization has a solid ICFRS
model.
Grupo Santander has implemented a responsibility scheme to
identify potential risks and their mitigating controls under a
three-pronged defence model (business, risks and internal
audit) that establishes lines of authority and accountability
including:
The head of the financial accounting and control function (Chief
Accounting Officer) of the countries and businesses, 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 a suitable
hierarchical-functional structure.
• Running critical procedures (control models) based on
corporate technology.
• Implementing the corporate accounting and management
information systems and adapting them to the specific needs
of each unit.
In order to preserve its independence, the subsidiaries' CAO
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 corporate Non-Financial Risk Control function is responsible
for:
• establishing and circulating the methodology for documenting
the Group's Internal Control System (ICS) and its evaluation
and certification, which covers the ICFRS and other regulatory
and legal requirements. Grupo Santander's ICS makes sure the
board of directors, senior managers and other Group staff can
provide reasonable assurance they will achieve their
objectives.
• encouraging document maintenance to align with
organizational and regulatory changes and, alongside the
Financial Accounting and Control division and representatives
of the divisions and/or companies involved (where applicable),
to present the ICS evaluation to the audit committee. Similar
functions in each unit report to the corporate Non-Financial
Risk control area.
General Code of Conduct (GCC)
The Group’s GCC sets out board approved guidelines
employees’ conduct, accounting standards and financial
reporting. The GCC can be viewed on our corporate website.
All the Group’s employees, including members of its governance
bodies, adhere to the Code of Conduct, even though some are
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also subject to the Code of Conduct in Securities Markets and
other codes of conduct specific to their area or business.
guarantee that employees duly complete them and learning
properly.
Santander employees have access to e-learning courses on the
GCC. The Compliance and Conduct function answer employees’
queries on ethics and rules in the GCC.
The Human Resources function is the one competent to take
disciplinary measures due to GCC's breaches and to recommend
corrective actions (including labour-related sanctions),
irrespective of any related administrative or criminal penalties.
In 2022, the board amended the GCC, with new sections on use
of social media and control of individual employee expenses in
connection with their professional activity for the Group. See the
'General Code of Conduct'section 3.2 'Conduct and ethical
behaviour' in the 'Responsible banking' chapter.
Canal Abierto
Banco Santander’s ethical 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. The Canal Abierto can be found
on our corporate website.
It can also be used to report accounting or auditing irregularities
under Sarbanes-Oxley (SOX) to the Compliance and Conduct
function, which will forward them to the audit committee for
appropriate measures to be taken. 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 such channel to the audit
committee in matters that fall under its remit (specifically
financial and accounting, including those audit related), while
the risk supervision, regulation and compliance committee
oversees reports of breaches of regulatory requirements,
corporate behaviours and internal governance.
For more details on the number of complaints filed on the
channel and their type, see the 'Ethical Channels' section in 3.2
'Conduct and ethical behaviour' in the 'Responsible banking'
chapter.
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.
The participating functions of the SCIIF promotes, designs and
oversees these programmes and courses. It has support from
the Human Resources function.
Training takes the form of both e-learning and on-site sessions
monitored and overseen by the Human Resources function to
Training programmes and refresher courses in 2022 have
focused on matters directly and indirectly relating to financial
reporting: (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) mathematical skills; and (vi) calculations and
statistics.
56,090 employees in the all the Group's markets completed
training programmes. Over 395,000 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 Banco Santander’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, which the
Financial Accounting and Control division and the General
Secretariat division oversee.
This process enables us to identify the entities that Grupo
Santander controls through voting rights that grant direct or
indirect ownership of their capital and through mutual funds,
securitization funds, structured entities and other means. We
analyse 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 under 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 measured using the equity method.
For entities with the greatest impact on the preparation of the
Group's financial information, we implement an ICS using a
homogeneous methodology to make sure the relevant controls
are included and all significant risks to financial reporting are
covered.
The Group's ICS complies with the strictest international
standards, particularly the guidelines of the Committee of
Sponsoring Organizations of the Treadway Commission (COSO)
set out in its last published Internal Control framework in 2013,
which covers control targets for effective and efficient
operations, reliable financial reporting and regulatory
compliance.
The risk identification process considers 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 be covered by the
ICS is based on management's knowledge and understanding of
the business and its operations in relation to the importance and
qualitative criteria associated with the type, complexity or
structure of the business.
Banco Santander ensures there are controls to cover risks of
errors and fraud in financial reporting, as well as risks that may
concern (i) the existence of assets, liabilities and transactions at
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the relevant date; (ii) whether the items are assets or rights or
liabilities and obligations of the Group; (iii) the timely and
correct recording and proper valuation of assets, liabilities and
transactions; and (iv) the correct application of accounting
principles and rules, as well as appropriate breakdowns.
The main features of the Group's ICS are:
• It is a corporate model that involves the entire organizational
structure through a direct set of individual responsibilities.
• Management of the ICS 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
assessments, 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 is under constant evolution 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 ICS 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.
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, and the compliance
with regulatory requirements, the scope of consolidation and
the correct application of accounting standards, ensuring that
such information is permanently updated on corporate 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 and
aspects related to judgements and estimates to correctly
record, evaluate, present and break down financial information.
The audit committee is responsible for reporting to the board on
the financial information that the Group must publish regularly,
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 contingent liabilities.
• The fair value of certain unquoted assets and liabilities.
• The recoverability of tax assets.
• The fair value of acquired identifiable assets and the liabilities
assumed in business combinations.
Grupo Santander 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.
The Non-financial Risk Control area checks potential changes in
the Group's control environment to make sure the ICS operates
correctly. Annual pyramid assessment and certification of the
ICS help the area review the criticality of risks and the
effectiveness of controls. The process begins with an
assessment of control activities by those responsible for them.
The assessment is then challenged and ratified by senior
officers, so that the CEO, CFO and CAO can confirm the ICS’s
effectiveness.
Grupo Santander also has an internal control forum chaired by
the heads of the Risk and Financial Accounting & Control
divisions. It continuously monitors the Group's control
environment and ICS strategy and performance.
Internal control policies and procedures for IT
systems
The Technology and Operations division draws up the Group’s
corporate policies on IT systems used directly or indirectly in
relation to the financial statements. These systems implement
special internal controls to prepare and post financial
information correctly.
The internal control on these matters are particularly important:
• 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.
• 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.
• 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.
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• 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 account for
transactions and asset valuations.
• IT support in terms of software development, infrastructure
maintenance, incident management, security and processing.
• The provision of other material support services not directly
related to financial reporting, such as supplier management,
property management and HR management, amongst others.
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.
• External suppliers undergoing 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.
Grupo Santander reviews estimates internally according to its
control model guidelines. It will hire a third party to help with
specific matters upon confirming their expertise and
independence and approving their methods and rationale of
assumptions though relevant procedures.
Furthermore, there are controls make sure information relating
to external suppliers of services that could affect the financial
statements is accurately and comprehensively detailed in
service level agreements.
Responsible function for accounting policies
The Financial Accounting and Control division has an area called
Regulation Accounting, which has the following responsibilities:
• To set out how the transactions that constitute Banco
Santander's activity are accounted for in accordance with their
economic nature and the regulations governing the financial
system.
• To draw up and keep up-to-date the Group's accounting
policies and resolve any queries or conflicts arising from their
interpretation.
• To enhance 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.
Grupo Santander'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 are reflected appropriately
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) for statements and financial information to be available to
management bodies, supervisors and other third parties,
providing accurate and reliable information for decision-making
in relation to the Group, and (ii) timely compliance with legal
obligations by all Group entities.
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 Regulation
Accounting area, as well as with the other areas of the Financial
Accounting and Control division.
8.4 Information and communication
The CAO meets with the audit committee at least every quarter
to submit the Group’s financial statements for validation. He
explains the criteria used to make important estimates,
assessments and conclusions.
The Non-financial Risk Control area prepares detailed reports on
the Group’s control environment and mitigation plan
developments at least every quarter and makes them available
to the internal control forum.
The Non-financial Risk Control area, the Finance & Management
Control division and, if necessary, representatives of concerned
divisions and companies, present the findings of the ICS
assessment to the audit committee at least every half-year after
first presenting them to the risk control committee.
The Non-financial Risk Control area also prepares a report on
the main conclusions on units’ ICS assessment and major
shortcomings uncovered during the year. It is additional
information for management and the audit committee that
details corrected shortcomings and plans in place to correct
others. It also includes all information that CEO, CFO and CAO
need to confirm the effectiveness of the SCI.
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8.5 Monitoring
2022 ICFR monitoring activities and results
The board of directors approved an internal audit framework
that details 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. It 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:
• The efficiency and effectiveness of the processes and systems
referred to above.
• Compliance with applicable regulations and supervisory
requirements.
• The reliability and integrity of financial and operational
information.
• Asset integrity.
Internal Audit is the third line of defence, independent of the
other 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, their activities,
businesses and processes carried out (either directly or through
outsourcing), their 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 such 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 2022'.
As at 2022 year-end, Internal Audit had 1,233 exclusively
dedicated employees, of which 273 were based at the
Corporate Centre and 960 in the local units in the main
geographies where the group is present.
Every year, it prepares an audit plan based on a risk self-
assessment and is solely responsible for executing the plan.
Reviews may lead to recommendations, which are prioritized in
accordance with their relative importance and monitored
continuously until full implementation.
At its meeting on 21 February 2022, the audit committee
reviewed the 2022 audit plan, which was reported to, and
approved by, the board at its meeting on 24 February 2022.
As regards the review of the ICFR, Internal Audit reports mainly
aim to:
• Verify compliance with the provisions contained in sections
302, 404, 406, 407 and 806 of the SOX Act.
• Check governance with regard to information on the internal
control system for financial reporting, including the risk
culture.
• Review the duties performed by the internal control
departments and by other departments, areas and divisions
that work to ensure compliance with the SOX Act.
• Make sure the supporting documents relating to the SOX Act
are up to date.
• 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 audit plan recommendations.
In 2022, the audit committee and the board of directors were
informed of the Internal Audit function's work (according to its
annual plan) and of other matters related to it. See section 4.5
'Audit committee activities in 2022'.
Detection and management of deficiencies
The audit committee oversees to supervise the financial
reporting process and the internal control systems. It is
responsible for discussing with the external auditor any
significant weaknesses detected in the audit.
The audit committee also assesses the results of the Internal
Audit function's work and may take the necessary measures to
correct any deficiencies identified in the financial information,
that could affect the reliability and accuracy of the annual
accounts. It may refer to other areas of the Group involved in
the process to obtain necessary information and seek
clarification. It also assesses the potential impact of any errors
detected in the financial information.
In 2022, the audit committee was informed of the ICS
evaluation and certification for the 2021 financial year. See
section 4.5 'Audit committee activities in 2022'.
8.6 External auditor report
The external auditor issued an independent reasonable
assurance report on the design and effectiveness of the ICFR
and on the ICFR description that is provided in this section 8.
The 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 2022 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
A.1
Yes
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'.
See 'Tenure and equity ownership' in section 4.2 and sections 6.3 'Remuneration of directors for
executive duties' and 9.2 'Statistical information on corporate governance as required by the CNMV'.
See section 2.3 'Significant shareholders'.
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 9.2 'Statistical information on corporate governance as required by the
CNMV'.
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
Section in the CNMV
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 2022, and section 9.2 'Statistical
information on corporate governance as required by the CNMV', in relation to the financial 2020, 2021
and 2022 year.
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 section 1.1 'Board skills and diversity', 4.1 'Our directors, '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 director type' in section
4.2, 'Duties and activities in 2022' 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 2022, 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 2022' in section 4.6.
See 'Diversity' in section 4.2 and 'Duties and activities in 2022' in section 4.6 and, regarding top
executive positions, see 1.1 'Highlights 2022' and 3.3 'A talented and motivated team' in 'Responsible
banking' chapter.
See 'Diversity' in section 4.2 and 'Duties and activities in 2022' in section 4.6.
Not applicable, since there are no proprietary directors. See 'Composition by director type' 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 to the consolidated financial statements.
See sections 5. 'Management team' and 9.2 'Statistical information on corporate governance as required
by the CNMV'.
See 'Board's regulation' in section 4.3.
See 'Election, renewal and succession of directors' in section 4.2.
See 'Board effectiveness review and actions to continuously improve its operation' in section 1.2, 'Board
effectiveness review in 2022' in section 4.3 and 'Annual assessment of the committee' in section 4.6.
Not applicable as it was not carried out with the help of an independent external advisor. See 'Board
effectiveness review in 2022' in section 4.3.
See 'Election, renewal and succession of directors' in section 4.2.
See 'Board operation' 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 operation' in section 4.3.
See 'Lead Independent Director' and 'Board and committee preparation and attendance' in section 4.3,
'Duties and activities in 2022' 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 committee preparation and attendance' in section 4.3, section 4.6 'Nomination
committee activities in 2022' 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 2022' 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
model
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', 'Report on the independence of the
external auditor' and 'Duties and activities in 2022' in section 4.5.
See 'External auditor' in section 4.5 and section 9.2 'Statistical information on corporate governance
required by CNMV'.
In accordance with the CNMV’s instructions, see 'External auditor's independence. Possible threats and
protective measures' in section 4.5 and sub-section C.1.32 of section 9.2 'Statistical information on
corporate governance required by the CNMV'. Per the CNMV’s instructions on preparing annual reports
on corporate governance, sub-section C.1.32 provides the fee ratios of non-audit services to total audit
services,with these differences in the ratio set out in Regulation (EU) No 537/2014 that is included in
section 4.5 'Audit committee activities in 2022': (a) the ratios in sub-section C.1.32 have two perimeters
to the one established by Regulation (EU) No 537/2014: fees for the approved services to be performed
by PricewaterhouseCoopers Auditores, S.L. (PwC) for Banco Santander and fees for the approved
services to be performed by PwC and other firms in its network for all other Grupo Santander entities, in
and outside Spain; and (b) the ratios' denominator is the fees amount for audit services in 2022 and not
the average fee value from the past three consecutive years that Regulation (EU) No 537/2014 dictates.
See 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 'Board operation' and 'Committee operation' in section 4.3.
See 'Election, renewal and succession of directors' in section 4.2.
Not applicable. See 'Duties and activities in 2022' in section 4.6.
Not applicable.
See sections 6.4 'Directors' remuneration policy for 2023, 2024 and 2025 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 'Structure of board's committees' and 'Committee operation' in section 4.3, 'Duties and activities in
2022' 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 'Board's regulation' and 'Structure of board's committees', 'Committee operation' in section 4.3 and
'Duties and activities in 2022' 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
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 'Other conflicts of interest' in section 4.12.
Not applicable. See section 2.3 'Significant shareholders' and 'Other conflicts of interest' in section 4.12.
E. CONTROL AND RISK MANAGEMENT SYSTEMS
No
E.1
E.2
E.3
E.4
E.5
E.6
No
No
No
No
No
See chapter 'Risk management and compliance', in particular section 2.'Risk management and control
model' and sections 3.1 'A strong and inclusive culture: The Santander Way' and 3.2.4 'Principles of
action in tax matters' in the 'Responsible banking' chapter.
See Note 53 to the consolidated financial statements, section 2.3 'Risk and compliance governance' in
the 'Risk management and compliance' chapter, and sections 3.1 'A strong and inclusive culture: The
Santander Way' and 3.2.4 'Principles of action in tax matters' in the 'Responsible banking' chapter.
See sections 2.2 'Key risk types', 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 3.1 'A strong and inclusive culture: The Santander Way' and 3.2.4 '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 the 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.
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Section in the CNMV
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F. ICFRS
F.1
F.2
F.3
F.4
F.5
F.6
F7
Included in
statistical report
Comments
No
No
No
No
No
No
No
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'.
G. DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS
G
Yes
'Degree of compliance with the corporate governance recommendations' in section 9.2 and section
See
9.3 'Table on compliance with or explanations of recommendations on corporate governance'.
H. OTHER INFORMATION OF INTEREST
H
No
See 'Board's regulation' in section 4.3. Banco Santander also complies with the Polish Code of Best
Practices, except in areas where regulation is different in Spain and Poland. In addition, see sections 3.2
'Conduct and ethical behaviour' and 2.4 'Polices', in particular, 5.1 'Stakeholder engagement', in the
Responsible banking chapter.
9.2 Statistical information on corporate governance required by the CNMV
Unless otherwise indicated all data as of 31 December 2022.
A. OWNERSHIP STRUCTURE
A.1 Complete the following table on share capital and the attributed voting rights, including those corresponding to shares with a
loyalty vote as of the closing date of the year, where appropriate:
Indicate whether company Bylaws contain the provision of double loyalty voting:
Yes o No þ
Date of last
modification
30/06/2022
Share capital
(euros)
8,397,200,792
Number of
shares
16,794,401,584
Number of voting rights
16,794,401,584
Indicate whether different types of shares exist with different associated rights:
Yes o No þ
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.
Dodge & Cox
Norges Bank
Details of the indirect shares:
% of voting rights
attributed to shares
Direct
0
0
3.01
Indirect
5.08
3.04
0
% of voting rights through
financial instruments
Indirect
Direct
0.346
0
0
0
0
0
Total % of voting rights
5.43
3.04
3.01
Name or corporate name of
the indirect shareholder
BlackRock Inc.
Dodge & Cox
Name or corporate name of
the direct shareholder
Subsidiaries of BlackRock Inc.
Funds and portfolios
managed by Dodge & Cox
% of voting rights
attributed to shares
5.08
% of voting rights through
financial instruments
0.346
Total % of voting rights
5.43
3.04
0
3.04
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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
Sol Daurella Comadrán
Germán de la Fuente
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
Details of the indirect holding:
% of voting rights
attributed to shares
(including loyalty
votes)
Direct
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
Indirect
0.18
0.00
0.00
0.00
0.12
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
% of voting rights
through financial
instruments
Direct
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
Indirect
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
Name or
corporate name
of director
_
Name or
corporate name
of direct owner
_
% of voting rights
attributed to shares
_
% of voting rights through
financial instruments
_
Total % of
voting rights
_
From the total % of voting
rights attributed to the
shares, indicate, where
appropriate, the % of the
additional votes attributed
corresponding to the
shares with a loyalty vote
Indirect
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
Direct
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
Total %
of voting
rights
0.19
0.01
0.00
0.00
0.15
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.35
0.74
From the total % of voting rights
attributed to the shares, indicate,
where appropriate, the % of the
additional votes attributed
corresponding to the shares with a
loyalty vote
_
A.7 Indicate whether the company has been notified of any shareholders’ agreements that may affect it, in accordance with the
provisions of Articles 530 and 531 of the Spanish Companies Act (LSC). If so, 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
0.61
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
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Indicate whether the company is aware of the existence of any concerted actions among its shareholders. If so, 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
0.61
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
220,942,806
Number of shares held indirectly (*)
22,746,219
% of total share capital
1.451
(*) 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
%
85.98
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 financial year to which this report relates
and in the two preceding financial years:
Attendance data
% remote voting
Date of General Meeting
03/04/2020
Of which free float:
% attending in
person
0.09
0.01
% by proxy
62.60
61.59
Electronic means
1.71
1.71
Attendance data
% remote voting
Date of General Meeting
27/10/2020
Of which free float:
% attending in
person
% by proxy
0.17
0.11
43.29
42.27
Electronic means
16.30
16.30
Date of General Meeting
26/03/2021
Of which free float:
% attending in
person
0.06
0.01
% by proxy Electronic means
2.04
2.04
65.02
64.03
Attendance data
% remote voting
Date of General Meeting
01/04/2022
Of which free float:
% attending in
person
0.71
0.09
% by proxy Electronic means
2.08
2.08
65.41
64.98
Attendance data
% remote voting
Other
0.60
0.60
Other
0.59
0.59
Other
0.55
0.55
Other
0.57
0.57
Total
65.00
63.91
Total
60.35
59.27
Total
67.67
66.63
Total
68.77
67.72
B.5 Indicate whether in the general shareholders’ meetings held during the financial year to which this report relates there has been
any matter submitted to them which 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 þ
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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 set by the General Meeting
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 N/A
Representative director
Category of
José Antonio Álvarez Álvarez
Bruce Carnegie-Brown
Homaira Akbari
Javier Botín-Sanz de Sautuola y
O’Shea
Sol Daurella Comadrán
Henrique de Castro
Germán de la Fuente
Gina Díez Barroso
Glenn Hutchins
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Executive
Executive
Position in
the board
Chair
Chief executive
officer
Independent
Lead independent
director
Independent
Director
Other external
Director
Independent
Director
Independent
Director
Independent
Director
Independent
Director
Independent
Director
Luis Isasi Fernández de Bobadilla
N/A
Other external
Director
Ramiro Mato García-Ansorena
N/A
Independent
Director
Sergio Rial
Belén Romana García
Pamela Walkden
N/A
N/A
N/A
Other external
Director
Independent
Director
Independent
Director
Total number of directors
15
17
12
15
Date of first Date of last
appointment appointment Election procedure
04/02/1989 03/04/2020 Vote in general
shareholders’
meeting
25/11/2014 12/04/2019 Vote in general
shareholders’
meeting
25/11/2014 26/03/2021 Vote in general
shareholders’
meeting
27/09/2016 26/03/2021 Vote in general
shareholders’
meeting
25/07/2004 26/03/2021 Vote in general
shareholders’
meeting
25/11/2014 03/04/2020 Vote in general
shareholders’
meeting
12/04/2019 12/04/2019 Vote in general
shareholders’
meeting
01/04/2022 01/04/2022 Vote in general
shareholders’
meeting
22/12/2020 22/12/2020 Vote in general
shareholders’
meeting
20/12/2022 20/12/2022 Cooption
03/04/2020 03/04/2020 Vote in general
shareholders'
meeting
28/11/2017 26/03/2021 Vote in general
shareholders´
meeting
03/04/2020 03/04/2020 Vote in general
shareholders'
meeting
22/12/2015 12/04/2019 Vote in general
shareholders’
meeting
29/10/2019 03/04/2020 Vote in general
shareholders’
meeting
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Indicate any directors who have left during the financial 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
Álvaro Cardoso de
Souza
R. Martín Chávez
Márquez
Category of director
at the time he/her
left
Independent
Date of last
appointment
26/03/2021
Date of leave
01/04/2022
Independent
27/10/2020
01/07/2022
Board committees he or she
was a member of
Responsible banking,
sustainability and culture
committee
Nomination committee
Indicate whether he or she
has left before the expiry
of his or her term
YES
YES
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
Ana Botín-Sanz de Sautuola y O’Shea
Executive chair
José Antonio Álvarez Álvarez
CEO
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.
Total number of executive directors
% of the Board
Proprietary non-executive directors
Name or corporate name of director
N/A
Name or corporate name of significant shareholder represented or having
proposed his or her appointment
N/A
Profile
N/A
Total number of proprietary non-executive directors
% of the Board
Independent 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.
2
13.33
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, as a director, or who maintain or have maintained during the financial year covered in this report a business
relationship with the company or any group company, whether 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 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
Business/Financing
Henrique de
Castro
Business
Gina Díez
Barroso
Business/Financing
Glenn Hutchins Financing
Belén Romana
Business/Financing
Reasoned statement
When conducting the annual verification of the independence of directors classified as independent, 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 2022 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 classified as independent, 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 and the funding Grupo Santander
granted to companies in which Sol Daurella was a principal shareholder or director in 2022 were not
significant because, among other reasons: (i) 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) were
aligned with Grupo Santander's share in the corresponding market, and (iii) 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 classified as independent, 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 2022 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 classified as independent, 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 and the funding granted by Grupo
Santander to the companies in which Gina Díez Barroso was a principal shareholder and director in 2022
were not significant because, among other reasons: (i) 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) were aligned with Grupo Santander's share in the corresponding market, and
(iii) 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 classified as independent, 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 the company in which Glenn
Hutchins was a director in 2022 was not significant because, among other reasons: (i) 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) was aligned with Grupo Santander's share in the corresponding
market, and (iii) 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 classified as independent, 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 and the funding Grupo Santander
granted to the companies in which Belén Romana was a director in 2022 were not significant because,
among other reasons: (i) 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) were aligned with Grupo
Santander's share in the corresponding market, and (iii) did not reach certain comparable materiality
thresholds used in other jurisdictions, e.g. NYSE, Nasdaq and the Canadian Bank Act.
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Other external directors
Identify all other external 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, pursuant to sub-section 4. i) of article 529
duodecies of the Spanish Companies Act.
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.
Total number of other external directors
% of the Board
Company, manager or
shareholder to which or
to whom the director is
related
Banco Santander, S.A.
Banco Santander, S.A.
Banco Santander, S.A.
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
2021 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
N/A
Date of change
N/A
Previous category
N/A
Current category
N/A
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
% of total directors of each category
Executive
Proprietary
Independent
Other external
Total:
FY 2022
1
—
5
—
6
FY 2021
1
—
5
—
6
FY 2020
1
—
5
—
6
FY 2019
1
—
5
—
6
FY 2022
50.00
0.00
50.00
0.00
40.00
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
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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
Bruce Carnegie-Brown
Javier Botín-Sanz de Sautuola y
O’Shea
Homaira Akbari
Sol Daurella Comadrán
Henrique de Castro
Gina Díez Barroso Azcárraga
Glenn Hogan Hutchins
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Sergio Rial
Belén Romana García
Company name of the listed or non-listed entity Position
Remunerated YES/NO
The Coca-Cola Company
Director
Lloyd's of London
Cuvva Limited
JB Capital Markets, Sociedad de Valores, S.A.U.
Inversiones Zulú, S.L.
Agropecuaria El Castaño, S.L.E
Inversiones Peña Cabarga, S.L.
Landstar System, Inc.
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.
Bolsa Mexicana de Valores, S.A.B. de C.V.
AT&T Inc.
North Island, LL
North Island Ventures, LLC
Compañía de Distribución Integral Logista
Holdings, S.A.
Balcón del Parque, S.L.
Santa Clara de C. Activos, S.L.
Ansorena, S.A.
Delta Airlines Inc
Vibra Energia S.A.
BRF S.A.
Werfen, S.A.
Six Group AG
Bolsas y Mercados Españoles, Sociedad Holding
de Mercados y Sistemas Financieros, S.A.
Chair
Chair
Chair
Chair-chief executive officer
Joint and several administrator
Sole administrator
Director
Chief executive officer
Director
Chair
Representative of director
Director
Joint and several administrator
Representative of director
Sole administrator
Director
Director
Chair
Director
Chair
Director
Director
Chair
Chair
Director
Sole administrator
Director
Chair
Director
Chair
Vice Chair
Director
Director
Director
YES
YES
YES
YES
NO
NO
NO
YES
YES
YES
YES
NO
YES
NO
NO
YES
YES
NO
NO
NO
NO
YES
YES
NO
NO
YES
NO
NO
NO
YES
YES
YES
YES
YES
YES
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
Glenn Hogan Hutchins
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Belén Romana García
Pamela Walkden
Other paid activities
Member of investment committee of Gresham House PLC
Member of the international advisory board Government of Singapore Inestment
Corporation
Member of the executive committee of Boston Celtics
Senior Advisor of Morgan Stanley
External advisor of ACON Southern Europe Advisory, S.L.
Senior advisor of Artá Capital, S.G.E.I.C., S.A
Member of the advisory board of JD Haspel Limited
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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)
25,071
65,683
0
47,950
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 financial 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
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)
Global 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 Technology and Operations
Global head of Wealth Management & Insurance
Group head of Strategy & Corporate Development, Financial Planning and Santander Consumer
Finance
Group head of General Secretariat
Regional head of Europe
Group Chief Compliance Officer
3
21.43
53,236
C.1.15 Indicate whether any changes have been made to the board's regulations during the financial 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's 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 financial year and how many times the board has met without the
Chair’s attendance. Attendance also includes proxies appointed with specific instructions:
Number of board meetings
Number of board meetings held without the Chair’s attendance
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
14
0
5
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Indicate the number of meetings of the various board committees held during the financial 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 financial 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 financial 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
financial year
12
5
3
12
13
17
32
14
98.04
12
98.53
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 financial 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
10,712
41.50
Group
companies
7,682
10.30
Total
18,394
18.30
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
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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
7
Company
17.07
7
Group
17.50
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 foresees 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 external directors
Audit committee
Name
Pamela Walkden
Homaira Akbari
Henrique de Castro
Germán de la Fuente
Ramiro Mato García-Ansorena
Belén Romana García
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
Position
Chair
Member
Member
Member
Member
Member
Position
Chair
Member
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
Independent director
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
Pamela Walkden
Belén Romana García
Homaira Akbari
Germán de la Fuente
Henrique de Castro
Ramiro Mato García-Ansorena
Date of appointment of the committee chair for that position
26 April 2020
Nomination committee
Name
Bruce Carnegie-Brown
Sol Daurella Comadrán
Gina Díez Barroso
Glenn Hutchins
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
Position
Chair
Member
Member
Member
Type
Independent director
Independent director
Independent director
Independent director
33.33
0.00
50.00
16.67
0
0
100
0
0
0
100
0
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Remuneration committee
Name
Bruce Carnegie-Brown
Sol Daurella Comadrán
Henrique de Castro
Glenn Hutchins
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
Luis Isasi Fernández de Bobadilla
Ramiro Mato García-Ansorena
Pamela Walkden
Position
Chair
Member
Member
Member
Type
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
Sol Daurella Comadrán
Belén Romana García
Position
Chair
Member
Member
Member
Type
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
Ana Botín-Sanz de Sautuola y O'Shea
José Antonio Álvarez Álvarez
Bruce Carnegie-Brown
Homaira Akbari
Henrique de Castro
Glenn Hutchins
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
Executive director
Executive director
Independent director
Independent director
Independent director
Independent director
Independent director
0
0
80.00
20.00
0
0
75.00
15.00
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
Number of female directors
FY 2022
FY 2021
FY 2020
FY 2019
Number
3
3
3
2
1
2
2
%
50.00
75.00
42.86
50.00
20.00
50.00
33.33
Number
3
3
3
2
1
2
2
%
60.00
60.00
—
50.00
20.00
40.00
33.33
Number
3
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
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.
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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
Brief description of the transaction and any other information necessary for its evaluation
Amount (EUR
thousand)
Banco Santander
(Brasil) S.A.
(Cayman Islands
Branch)
This chart shows the transactions and the results obtained by the Bank at 31 December 2022 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).
These results, and the balances indicated below, were eliminated in the consolidation process. See note
3 to the 2022 Consolidated financial statements for more information on offshore entities.
The amount shown on the right corresponds to negative results relating to contracting of derivatives
(includes branches in New York and London of Banco Santander, S.A.).
The referred derivatives had a net negative market value of EUR 328 million in the Bank and covered the
following transactions:
- 104 Non Delivery Forwards.
- 341 Swaps.
- 50 Cross Currency Swaps.
- 9 Options.
- 58 Forex.
The amount shown on the right corresponds to negative results relating to term deposits with the New
York branch of Banco Santander, S.A. (liability). These deposits had a nominal value of EUR 1,227 million
at 31 December 2022.
The amount shown on the right corresponds to positive results relating to deposits with the Hong Kong
branch of Banco Santander, S.A. (asset), all of them expired before 31 December 2022.
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 2,363 million as at 31 December 2022.
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 36 million at 31 December 2022.
The amount shown on the right corresponds to positive results relating to commissions received mainly
for operations with the London and Hong Kong branches of Banco Santander, S.A.
526,245
8,669
5
158,620
217
411
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
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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
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.
d) After the general meeting, disclose the breakdown of votes
on such supplementary items or alternative proposals.
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.
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.
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 Explain o
Complies þ Partially complies o 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
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.
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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.
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.
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:
a) In large cap companies where few or no equity stakes attain
the legal threshold for significant shareholdings.
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
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 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.
18. Companies should disclose the following director particulars
on their websites and keep them regularly updated:
Complies þ Partially complies o Explain o
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
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.
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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
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.
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
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.
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
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:
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.
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.
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.
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.
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.
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;
The process followed and areas evaluated should be detailed in
the annual corporate governance report.
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
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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,
shareholders, 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) 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 regulations 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.
d) In general, ensure that the internal control policies and
systems established are applied effectively in practice.
b) Participate actively in the preparation of risk strategies and in
key decisions about their management.
2. With regard to the external auditor:
a) Investigate the issues giving rise to the resignation of the
external auditor, should this come about.
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.
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.
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
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.
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
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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.
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
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.
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
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
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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
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
Information
See section 3.2 'Shareholder rights'.
See 'Other 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 2022', 4.6 'Nomination committee activities in 2022', 4.7
'Remuneration committee activities in 2022', 4.8 'Risk supervision, regulation and compliance committee
activities in 2022', 4.9 'Responsible banking, sustainability and culture committee activities in 2022', 4.10
'Innovation and technology committee activities in 2022' and 4.12 'Related-party transactions and conflicts
of interest'.
See 'Engagement with shareholders in 2022' in section 3.1, 'Shareholder participation at general meetings'
in section 3.2 and section 3.5 'Our next AGM in 2023'.
See 'Board's regulation' in section 4.3 and section 4.5 'Audit committee activities in 2022'.
See 'Shareholder participation at general meetings' in section 3.2.
See 'Supplement to the annual general meeting notice' in section 3.2.
See section 3.5 'Our next AGM in 2023'.
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, 'Board's regulation' in
section 4.3, 'Duties and activities in 2022' in section 4.6, section 5 'Management team' and 'Responsible
banking' chapter.
See section 4.2 'Board composition'.
See 'Composition by director type' in section 4.2.
See 'Composition by director type' and 'Election, renewal and succession of directors' in section 4.2.
See 'Corporate website' in section 3.1, section 4.1 'Our directors' and 'Tenure and equity ownership' in
section 4.2.
See 'Composition by director type' 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, 'Board's regulation' in section 4.3 and
'Duties and activities in 2022' 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, 'Board's regulation' in section 4.3 and
'Duties and activities in 2022' in section 4.6.
See 'Board and committee preparation and attendance' in section 4.3 and 'Duties and activities in 2022' in
section 4.6.
See 'Board operation' and 'Board and committee preparation and attendance' in section 4.3.
See 'Board operation' and 'Board and committee preparation and attendance' in section 4.3.
See 'Board operation' in section 4.3.
See 'Board operation' and 'Committee operation' in section 4.3.
See 'Director training and induction programmes' in section 4.3.
See 'Board operation' in section 4.3.
See section 3.1 'Shareholder communication and engagement' and 'Duties and activities in 2022' 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 effectiveness review in 2022' in section 4.3.
See 'Board's regulation' in section 4.3 and 'Composition' in section 4.4.
See 'Committee operation' in section 4.3 and section 4.4 'Executive committee activities in 2022'.
See 'Board's regulation' in section 4.3 and 'Composition' in section 4.5.
See 'Duties and activities in 2022' in section 4.5 and section 8.5 'Monitoring'.
See 'Board's regulation' in section 4.3 and 'Duties and activities in 2022' in section 4.5.
See 'Board's regulation' in section 4.3 and 'Duties and activities in 2022' in section 4.5.
See 'Committee operation' in section 4.3.
See 'Duties and activities in 2022' in section 4.5.
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Recommendation Comply / Explain
45
Comply
46
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
Comply
Information
See 'Board's regulation' in section 4.3, 'Duties and activities in 2022' in section 4.5, 'Duties and activities in
2022' in section 4.8 and the 'Risk management and compliance' chapter.
See 'Duties and activities in 2022' in section 4.5,'Duties and activities in 2022' 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's committees' in section 4.3.
See 'Duties and activities in 2022' in section 4.6.
See 'Duties and activities in 2022' in section 4.7.
See 'Duties and activities in 2022' in section 4.7.
See 'Board's regulation' and 'Committee operation' in section 4.3 and sections 4.8 'Risk supervision,
regulation and compliance committee activities in 2022' and 4.9 'Responsible banking, sustainability and
culture committee activities in 2022'.
See 'Board's regulation' in section 4.3, 'Duties and activities in 2022' in section 4.6, 'Duties and activities in
2022' in section 4.8 and 'Duties and activities in 2022' in section 4.9.
See 'Board's regulation' in section 4.3, 'Duties and activities in 2022' in section 4.6, 'Duties and activities in
2022' in section 4.8 and 'Duties and activities in 2022' in section 4.9.
See 'Duties and activities in 2022' 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 2022', 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration
policy for 2023, 2024 and 2025 submitted to a binding shareholder vote'.
See sections 6.2 'Remuneration of directors for supervisory and collective decision-making duties: policy
applied in 2022', 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration
policy for 2023, 2024 and 2025 submitted to a binding shareholder vote'.
See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for
2023, 2024 and 2025 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
2023, 2024 and 2025 submitted to a binding shareholder vote'.
See 'Duties and activities in 2022' in section 4.7, section 6.3 'Remuneration of directors for executive duties'
and 6.4 'Directors' remuneration policy for 2023, 2024 and 2025 submitted to a binding shareholder vote'.
See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for
2023, 2024 and 2025 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 2023, 2024 and 2025 submitted to a binding shareholder
vote'.
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9.4 Reconciliation to the CNMV’s remuneration report model
Included in
statistical
report
Section in
the CNMV
model
A. Remuneration policy for the present fiscal year
A.1
No
Further information elsewhere and comments
• 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.
• 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.
No
No
No
A.2
A.3
A.4
B. Overall summary of application of the remuneration policy over the last fiscal year
B.1
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)
Yes
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.
No remuneration for this component.
See section 9.5.
No remuneration for this component.
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
11,926,199,198
% of total
100.00 %
Votes in favour
Votes against
Blank
Abstentions
Number
10,193,385,775
1,389,271,674
7,151,848
336,389,901
% of votes cast
85.47 %
11.65 %
0.06 %
2.82 %
C. ITEMISED INDIVIDUAL REMUNERATION ACCRUED BY EACH DIRECTOR
Directors
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. 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
Germán de la Fuente
Glenn Hutchins
Type
Executive Chair
CEO
Lead independent
director
Independent
Other external
Independent
Independent
Independent
Independent
Independent
Other External
Independent
Other External
Independent
Independent
Independent
Independent
Period of accrual in year 2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 01/04/2022
From 01/01/2022 to 01/07/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/01/2022 to 31/12/2022
From 01/04/2022 to 31/12/2022
From 20/12/2022 to 31/12/2022
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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
remuneration
Per diem
allowances
Remuneration
for
membership
of Board's
committees
Short-term
variable
Salary remuneration
Long-term
variable
remuneration
1 Severance
pay
95
95
280
95
95
24
48
95
95
95
95
95
95
95
95
—
66
3
41
39
75
69
34
11
40
70
76
52
82
90
36
94
78
—
40
4
244
3,176
195
2,541
2,702
1,823
444
297
345
80
—
4
59
65
90
25
235
315
—
360
150
—
31
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
236
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
grounds
Total
year
2022
Total
year
2021
525 7,227 7,533
710 5,700 5,941
—
—
700
244
700
248
—
129
129
—
39
183
—
147
374
—
—
—
230
261
172
239
267
130
1,000 1,412 1,406
—
—
—
—
500
131
549
323
499
879
533
303
—
236
292
—
—
137
10
—
—
Name
Ana Botín-Sanz de
Sautuola y O’Shea
José Antonio
Álvarez Álvarez
Bruce Carnegie-
Brown
Homaira Akbari
Francisco Javier
Botín-Sanz de
Sautuola y O’Shea
Álvaro Cardoso de
Souza
R. Martín Chávez
Márquez
Sol Daurella
Comadrán
Henrique de Castro
Gina Díez Barroso
Luis Isasi
Fernández de
Bobadilla2
Ramiro Mato
García-Ansorena
Sergio Rial
Belén Romana
García
Pamela Walkden
Rodrigo Echenique
Gordillo
Germán de la
Fuente
Glenn Hutchins
Comments (Not included in the electronic submission to the CNMV)
1. Includes deferred amounts from the 2018 deferred and conditional variable remuneration plan subject to long term metrics for Ana Botín, José
Antonio Álvarez and Rodrigo Echenique.
2. The remuneration of Luis Isasi includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España
board and committees meetings.
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ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments
Financial instruments at start
of year 2022
Financial instruments
granted during 2022 year
Financial instruments consolidated during 2022
Instruments
matured but
not
exercised
4
Financial instruments at end
of year 2022
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares /
handed over
Name
Ana Botín
Sanz de
Sautuola y
O'Shea
Name of Plan
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)
7th cycle of deferred variable remuneration
plan linked to multi-year targets (2022) in shares
7th cycle (bis) of deferred variable remuneration
plan linked to multi-year targets (2022) in option
shares
2
.
7th cycle (bis) of deferred variable remuneration
2
plan linked to multi-year targets (2022) in RSU
PagoNxt S.L.
of
309,911
309,911
319,390
319,390
111,823
111,823
533,024
533,024
—
—
—
—
—
—
—
—
—
—
—
—
—
—
103,303
103,303
—
—
—
—
—
—
—
—
—
585,079
585,079
398,078
398,078
3.088
1,575,335
585,079
1,071,830
398,078
3.088
—
—
—
1,229
1,229
12,646
196,891
5,058
78,756
3.088
243
Net profit
from shares
handed over or
consolidated
financial
instruments
(EUR thousand)
No. of
instruments
No. of
instruments
No. of
equivalent
shares
289
206,608
—
—
Price of the
consolidated
shares
3
'2.80
—
—
—
—
—
—
319,390
319,390
111,823
111,823
533,024
533,024
187,002
187,002
503,505
187,002
7,587
118,135
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Financial instruments at start
of year 2022
Financial instruments
granted during 2022 year
Financial instruments consolidated during 2022
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)
Instruments
matured but
not
4
exercised
Financial instruments at end
of year 2022
No. of
instruments
No. of
instruments
No. of
equivalent
shares
69,032
69,032
3
'2.80
193
138,065
—
—
Name
José
Antonio
Álvarez
Álvarez
Name of Plan
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)
7th cycle of deferred variable remuneration
plan linked to multi-year targets (2022) in shares
7th cycle (bis) of deferred variable remuneration
plan linked to multi-year targets (2022) in option
shares
2
7th cycle (bis) of deferred variable remuneration
2
plan linked to multi-year targets (2022) in RSU
PagoNxt S.L.
of
207,097
207,097
213,449
213,449
60,739
60,739
359,733
359,733
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
394,916
394,916
268,679
268,679
3.088
1,063,316
394,916
723,421
268,679
3.088
8,527
132,772
3,411
53,109
3.088
—
—
—
830
830
164
—
—
—
—
—
—
213,449
213,449
60,739
60,739
359,733
359,733
126,237
126,237
339,895
126,237
5,116
79,663
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2022 Annual report
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Financial instruments at start
of year 2022
Financial instruments
granted during 2022 year
Financial instruments consolidated during 2022
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares
No. of
instruments
No. of
equivalent
shares /
handed
over
164,462
164,462
98,092
98,092
—
—
—
—
54,820
54,820
—
—
Net profit
from shares
handed over or
consolidated
financial
instruments
(EUR thousand)
153
—
Price of the
consolidated
shares
3
'2.80
—
Instruments
matured but
not
exercised
4
Financial instruments at end
of year 2022
No. of
instruments
No. of
instruments
No of
equivalent
shares
109,642
—
—
—
98,092
98,092
Name
Rodrigo
Echenique
Gordillo
Name of Plan
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)
1.After reviewing the results of the 3rd cycle of the deferred variable remuneration plan linked to multi-year targets (2018), the board of directors confirmed in 2022, upon recommendation from the remuneration
committee, a 33.3% achievement of the long-term metrics of the plan (as the following level of achievement was met during 2018-2020 period: CET1 at 100% at 2020 year-end (the target was 11.30%); underlying EPS
growth at 0% (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
2022, 2023 and 2024 in connection with this plan. This applies to all persons under this plan.
2.Santander share price: EUR 3.088; Santander share option price: EUR 1.147 (Santander share option price is 37.14% of Santander share price); and restricted stock unit (RSU) of PagoNxt S.L. price: EUR 48.08 (equivalent
just for this table calculation purposes, the conversion rate of Santander share/PagoNxt RSU is 0.064 times).
3. The share price as of 31 December 2022 closing (EUR 2.80) has been taken into account as a value for the calculation process of this plan. This value may be different to the share price in the moment or date of the
respective deliveries and the cost for the Bank, which will depend on the purchase price of the shares or the share hedging that may be exist.
4. These instruments were initially assigned and due to the level of achievement of the metrics of this plan will not be delivered and the beneficiaries will not receive them.
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iii) Long-term saving systems (thousand EUR)
Name
Ana Botín-Sanz de Sautuola y O’Shea
José Antonio Álvarez Álvarez
Remuneration from
consolidation of rights
to savings system
1,081
811
Contribution over the year from the company (EUR
thousand)
Savings systems with
consolidated
economic rights
Savings systems with
unconsolidated
economic rights
Amount of accumulated funds (EUR thousand)
2022
2021
Name
Ana Botín-Sanz de
Sautuola y O’Shea
José Antonio Álvarez
Álvarez
2022
1,081
2021
1,041
811
783
iv) Details of other items (thousands of EUR)
Name
Ana Botín-Sanz
de Sautuola y
O’Shea
Item
Life and accident insurance and
fixed remuneration supplement
Other remuneration
Name
José Antonio
Álvarez Álvarez
Item
Life and accident insurance and
fixed remuneration supplement
Other remuneration
Systems
with
Systems with
consolidated unconsolidate
d economic
rights
economic
rights
Systems
with
Systems with
consolidated unconsolidate
d economic
rights
economic
rights
2022
2021
—
—
—
—
46,725
18,958
—
—
48,075
18,821
—
—
Amount
remunerated
412
25
Amount
remunerated
1,040
7
b) Remuneration of the company directors for seats on the boards of other group companies:
i) Remuneration in cash (thousands of EUR)
Name
Homaira Akbari
Álvaro Cardoso de Souza
R. Martín Chávez Márquez
Henrique de Castro
Pamela Walkden
Sergio Rial
1
Fixed
Per diem
remuneration allowances
—
—
—
—
—
—
361
28
200
200
147
117
Remuneration
for membership
of Board's
Short-term
variable
committees Salary remuneration
—
—
—
—
—
167
—
—
—
—
—
2,000
—
—
—
—
—
—
Long-term
variable Severance
pay
—
—
—
—
—
—
remuneration
—
—
—
—
—
—
Other
grounds
—
—
—
—
—
1
Total
year
2022
361
28
200
200
147
2,286
Total
year
2021
213
334
52
52
36
4,001
Comments (Not included in the electronic submission to the CNMV)
1. Long-term variable remuneration only includes amounts since the appointment as director.
ii) Table of changes in share/based remunerations schemes and gross profit from consolidated shares of financial instruments
Not applicable
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iii) Long term saving systems (thousand EUR)
Name
Sergio Rial
Remuneration from
consolidation of rights
to savings system
162
Contribution over the year from the company (EUR
thousand)
Savings systems with
consolidated
economic rights
Savings systems with
unconsolidated
economic rights
Amount of accumulated funds (EUR thousand)
2022
2021
Systems
with
Systems
with
consolidated unconsolidat
economic ed economic
rights
—
rights
6,276
Name
Sergio Rial
2022
162
2021
1,153
2022
—
2021
—
Comments (Not included in the electronic submission to the CNMV)
Saving system from Banco Santander Brasil S.A.
iv) Detail of other items (thousands of EUR)
Not applicable
Systems
with
Systems
with
consolidated unconsolidat
economic ed economic
rights
—
rights
5,202
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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.
Remuneration accrued in the company
Remuneration accrued in group companies
Gross profit
on
consolidated Contributions
shares or
financial
1
instruments
to the long- Remuneration
for other
term savings
items
plan
Total cash
1
remuneration
Total
2022
Total
Total cash
2021 remuneration
Gross profit
on
consolidated Contributions
shares or
financial
instruments
to the long- Remuneration
for other
term savings
items
plan
Name
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. Martín Chávez
Márquez
Sol Daurella
Comadrán
Henrique de Castro
Gina Díez Barroso
2
Luis Isasi
Fernández de
Bobadilla
Ramiro Mato
García-Ansorena
Sergio Rial
Belén Romana
García
Pamela Walkden
Rodrigo Echenique
Gordillo
Germán de la
Fuente
Glenn Hutchins
Total
7,227
2,990
1,081
437 11,735 12,288
5,700
2,017
811
1,047
9,575
9,728
700
244
129
39
147
230
261
172
1,412
500
131
549
323
236
137
10
18,147
—
—
—
—
—
—
—
—
—
—
—
—
—
153
—
—
5,160
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,892
—
—
—
361
—
28
200
—
200
—
—
—
—
—
—
—
—
—
700
244
700
248
129
129
39
183
147
374
230
261
172
239
267
130
—
1,412
1,406
—
—
—
—
—
—
500
131
549
323
499
879
533
303
389
444
—
—
—
—
1,484 26,683 28,350
137
10
—
2,286
—
147
—
—
—
3,222
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
162
—
—
—
—
—
162
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
2022
Total
2021
—
—
—
361
—
28
200
—
200
—
—
—
—
213
—
334
52
—
52
—
—
—
—
2,448
—
7,170
—
147
—
—
36
—
—
—
3,384
—
—
7,857
Comments (Not included in the electronic submission to the CNMV)
1. Includes deferred amounts from the 2018 deferred and conditional variable remuneration plan subject to long term metrics for Ana Botín,
José Antonio Álvarez and Rodrigo Echenique.
2. The remuneration of Luis Isasi includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España
board and committees meetings.
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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.
1
Directors' remuneration (EUR thousand)
• Executive Directors
Ana Botín-Sanz de Sautuola y O’Shea
José Antonio Álvarez Álvarez
• External Directors
Bruce Carnegie-Brown
Javier Botín-Sanz de Sautuola y O’Shea
Sergio Rial
Sol Daurella Comadrán
Belén Romana García
Homaira Akbari
Ramiro Mato García Ansorena
Álvaro Cardoso de Souza
Henrique de Castro
Pamela Walkden
2
Luis Isasi Fernández de Bobadilla
R.Martín Chávez Márquez
Gina Díez Barroso
Germán de la Fuente
Glenn Hutchins
Company’s performance
Underlying profit attributable to the Group
(EUR mn)
Consolidated results of the Group
Ordinary RoTE
4
Employees' average remuneration
3
(EUR)
(EUR mn)
2022
% var.
22/21
2021
% var.
21/20
2020
% var.
20/19
2019
% var.
19/18
2018
11,735
9,575
(5)%
(2)%
12,288
9,728
52%
41%
8,090
6,877
(19)%
(17)%
9,954
8,270
(10)%
(8)%
11,011
9,001
700
129
2,579
230
549
605
500
67
461
470
1,412
347
172
137
10
9,605
15,250
13.37%
56,262
—
—
(68)%
(4)%
3%
31%
—
(87)%
45%
38%
—
(19)%
32%
—
—
11%
5%
5%
1%
700
129
8,049
239
533
461
499
517
319
339
1,406
426
130
—
—
18%
6%
22%
12%
28%
19%
16%
(11)%
36%
59%
49%
689%
622%
—
—
595
122
6,621
214
417
386
430
578
234
214
943
54
18
—
—
(15)%
(11)%
—
(11)%
(21)%
71%
(14)%
(14)%
172%
529%
—
—
—
—
—
700
137
—
240
525
226
500
673
86
34
—
—
—
—
—
(4)%
13%
—
12%
27%
14%
11%
355%
—
—
—
—
—
—
—
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.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.The remuneration of Luis Isasi includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España board and committees
meetings.
3. Group operating profit/(loss) before tax.
4.Employee average remuneration includes all concepts. 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 27 February 2023.
State if any directors have voted against or abstained from approving this report.
Yes o No þ
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Economic and
financial review
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1. Economy, regulation and competition
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 segment
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 2023
8. Alternative performance measures (APMs)
305
309
311
311
315
328
332
340
352
356
356
358
360
378
380
390
399
401
402
410
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1. Economy, regulation
and competition
Economy
In 2022, Santander operated in an environment marked by
global inflation picking up to levels not seen in decades. The war
in Ukraine fanned geopolitical tensions and global supply chain
bottlenecks and disruptions stemming from the covid-19
pandemic and geopolitical situation waned but, nonetheless,
persisted.
In response, the major central banks raised interest rates to try
to contain inflationary pressures; some countries are expected
to consolidate monetary policy in 2023, which may lead to a
gradual slowdown in global economic activity.
Our core regions' economies performed as follows:
• Eurozone (GDP: +3.5% in 2022). The end of pandemic
restrictions in Q2'22 boosted services sector activity, but the
war in Ukraine, which caused energy and basic food prices to
rise, hampered post-pandemic recovery and created a
recession risk. The labour market was resilient, as the
unemployment rate continued to fall to historical lows (6.6%).
Inflation rose steadily to above 10% after the summer,
although ended the year at 9.2%. The European Central Bank
(ECB) responded by beginning to raise interest rates in July,
increasing the official interest rate from -0.50% to 2% at year
end.
• Spain (GDP: +5.5% in 2022). Normalization of the service
sector and tourism activity following the pandemic boosted
growth in 2022. Despite economic deceleration, the labour
market remained robust and the number of part-time
contracts fell. Inflation peaked above 10% but declined to
5.8% in December, due to falls in energy prices. However,
core inflation continued to rise (7.5% in December).
• United Kingdom (GDP: +4.1% in 2022). Accelerated inflation
caused real income and domestic demand to fall as the year
went on, ending with a significant slowdown. The labour
market, with little idle capacity, was another factor pressuring
inflation. As a result, the Bank of England raised interest rates
to 3.5%.
• Portugal (GDP: +6.7% in 2022). Synchronized external and
internal demand due to rapid and intense post-pandemic
recovery helped keep Portugal at almost full employment
(average unemployment rate at 6%). Stronger demand when
supply was unable to respond and the effects of the war in
Ukraine accelerated inflation to double digits.
• Poland (GDP: +4.9% in 2022). The economy was resilient
despite headwinds: the war in Ukraine, the spike in energy
costs and tighter financial conditions. A strong increase in
wages put further pressure on already high inflation. In
response, the central bank raised the official interest rate to
6.75%.
• United States (GDP: +2.1% in 2022). Economic growth slowed
following the high growth rates in 2021. The labour market
remained solid, as the unemployment rate was close to
historical lows. Inflation shows signs of falling back from mid-
year highs but remains elevated (6.5% in December). The
Federal Reserve raised interest rates by 425 bps in 2022 up to
a range of 4.25%-4.5%.
• Mexico (GDP: preliminary +2.8% in 2022). Economic growth
was surprisingly robust, on the back of expansion of services,
manufacturing and agriculture plus an active export market.
Inflation continued to pick up though at a slower pace in
Q4'22 (7.8% in December). The central bank continued to
raise the official rate, reaching 10.5% (5.5% at the end of
2021).
• Brazil (GDP: estimated +3.0% in 2022). The economy grew
well but showed signs of a slowdown in the second half of the
year, particularly in terms of private consumption. Inflation
peaked in April but quickly fell back (5.8% in December). The
central bank raised the official rate by 450 bps to 13.75% in
August with no further rate increases in the rest of the year.
• Chile (GDP: 2.7% estimated in 2022). The economy adjusted
after growing intensely in 2021. GDP contracted in the second
half of the year, due to fiscal stimulus withdrawal and tighter
monetary policy. Chile's central bank raised interest rates by
725 bps to 11.25% to combat high inflation (12.8%).
• Argentina (GDP: estimated +5.5% in 2022). Economic
recovery continued despite high inflation (average monthly
inflation rates of 5.7%). The IMF reached an agreement with
the government to refinance debt maturities with the
organization, backed by a programme focused on addressing
macro imbalances.
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The exchange rates of our main currencies against the euro in
2022 and 2021 were:
monetary policy tightening withdrew excess liquidity and credit
institutions' wholesale funding costs increased.
Exchange rates: 1 euro/currency parity
Average
US dollar
Pound sterling
Brazilian real
Mexican peso
Chilean peso
Argentine peso
Polish zloty
2022
1.051
0.853
5.421
21.131
2021
1.182
0.859
6.372
23.980
916.688 897.123
134.786 112.383
4.564
4.683
Period-end
2022
1.068
0.887
5.650
20.805
2021
1.133
0.840
6.319
23.152
909.200 964.502
189.116 116.302
4.597
4.684
Geopolitical risk, lower growth forecasts amid considerable
uncertainty, inflationary pressures and tighter monetary policy
led to a tumultuous year in financial markets.
Government bond yields trended up as central banks raised
interest rates. Short-term rates rebounded more strongly than
long-term rates, inverting yield curves. In the UK, tensions
warned that fiscal policy should accompany monetary policy to
avoid undermining fiscal sustainability. Euro periphery spreads,
especially Italian bonds, widened against German debt, due to
initial doubts cast on the new Italian government and on the
ECB's monetary policy shift.
Stock markets experienced episodes of instability and a decline
due to rising interest rates, central banks' uncertainty about
terminal interest rates and lower visibility on earnings
estimates. In this lower risk appetite environment, the US dollar
appreciated against most currencies, and fell below parity
against a euro penalized by the ECB's slower reaction in raising
interest rates and by the possibility of a recession in Europe
caused by a potential energy crisis.
Latin American markets performed well in this volatile
environment, helped by high commodity prices, lower current
account imbalances, strong reserve buffers, lower currency
mismatches, and the swift action by central banks in the region,
which moved quickly to preserve their credibility.
Monetary policy tightening puts an end to the distortions
created by very low or negative interest rates, and will have a
positive impact on banks' margins. The speed and intensity of
the interest rate rises, the ensuing economic slowdown and the
effect of prices on private sector income, may impact on banks'
credit quality, especially in highly indebted segments that were
already vulnerable after the pandemic.
Loan delinquency was better than expected, due to the effective
income support measures offered during the pandemic as well
as economic recovery following it. Banks should monitor
portfolio credit quality performance.
Banks faced the economic environment from an initial position
of solid solvency, as demonstrated in the stress tests carried out
by the main central banks and multilateral organizations. This
indicates that banks were in a good position to face a potential
further economic deterioration. Moreover, banks had ample
initial liquidity, boosted by central bank covid-19-pandemic
support measures and by savings that households and
corporates had accumulated during lockdowns. However,
The medium-term challenges that banks face remain
unchanged. Digital transformation accelerated during the
pandemic, forcing entities to offer customers better digital
experience in the wake of a surge in new competitors. Climate
transition also requires a significant effort as institutions must
develop new portfolio classification models and risk scenarios
to assess the potential balance sheet impacts and understand
exposure to transitional and physical risks to companies and
households owing to climate change in the coming years.
Regulatory and competitive environment
The 2022 regulatory agenda was once again marked by
discussions around three main areas: prudential and resolution,
sustainability and digital. The outbreak of the war in Ukraine at
the beginning of the year influenced regulatory debates:
generally, on the need to ensure banks can continue to play a
key role in financing the economy (as they did during covid-19)
and specifically, on energy sources and sustainability.
Main regulatory actions in these three areas in 2022 were:
• Prudential and resolution: most discussions focused on the
European Commission's (EC) proposal to implement Basel III
in Europe, a reform aimed at reducing the variability of risk-
weighted assets and favouring comparability between
institutions. In view of the war in Ukraine, the Eurogroup
unsuccessfully pushed for an agreement to set up a Deposit
Guarantee Fund. International debate focused on the Basel
Committee's new consultation on the prudential treatment of
financial institutions' exposures to crypto-assets.
• Sustainability: Europe continued to lead the way in
sustainability talks. The final Pillar 3 disclosure framework
defined by the European Banking Authority (EBA) was
approved and will apply from 2023. Work continued this year
on the green taxonomy, the revision of the non-financial
disclosure reporting directive (NFRD), which will define new
transparency requirements for financial and non-financial
companies, and the development of sustainability reporting
standards. The EC published three new proposals: green
bonds, due diligence and deforestation. At the international
level, the Basel Committee established guidelines on the
management and supervision of climate-related financial
risks.
• Digitalization: the EC finalized key parts of the digital finance
plan announced in 2020. The new Markets in cryptoassets
(MiCA) regulation establishes a common European framework
for the issuance, custody and exchange of cryptoassets. The
new Digital Operational Resilience Act (DORA) establishes a
harmonized supervisory framework for technology providers
that offer services to financial institutions and imposes
common cybersecurity requirements. The Digital Markets Act
(DMA) was also passed. It establishes obligations and
prohibitions for digital platforms considered gatekeepers, in
order to ensure competition in the EU digital market. At the
same time, practically all central banks continued to explore
the issuance of digital currencies (CBDCs). The ECB in
particular stands out as one of the most advanced in its
research.
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Amid rising inflation and cost of living, some national
governments adopted mortgage payment regulations for
vulnerable groups and, in general, for others struggling to meet
their financial obligations. Entities adopted additional measures
individually and collectively.
For more details, see note 1.e to the consolidated financial
statements.
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Santander and public policy
Santander has always defended the need for robust, high-quality regulation that supports bank strength and solvency,
establishes strong consumer protection and market stability standards, and favours transparency regarding 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.
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 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:
•
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.
• The need for a stable and predictable framework to facilitate management by institutions and investors'
understanding of this agenda.
• 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
We believe that decarbonization is a first order social and environmental challenge in which banks have an important
role to play and we are fully committed to the objectives. We continue to advocate for regulation that:
• Ensures business competitiveness and avoids fragmentation to promote economic growth. Encourages
harmonization across jurisdictions by agreeing on a global, principle-based sustainability regulatory framework.
• Does not restrict banks' ability to support their customers' transitions. It is not only important to finance
companies that are already green, but to help those in carbon-intensive sectors develop more sustainable models.
• Supports governments with their responsibility to define transition paths for the different economic sectors, along
with implementation tools and policies, with banks as a major player in supporting individuals and companies in
their transitions.
1
2
The digital landscape
The banking sector is undergoing significant changes during its digital transformation with the aim of leveraging
technology and innovation opportunities and improving customer choice. We continue to advocate for:
3
• Simple, future-proof regulation and supervision that allows the banking sector to innovate and take advantage of
the potential benefits of technology and digitalization on an equal basis with other companies.
• A data economy that is fair (level-playing field), competitive (with incentives for innovation) and secure
(appropriate distribution of responsibility). Consumers and users must have real control over their data. In
addition, a sharing of data across sectors that will really make a difference in better provision of services and
products for those consumers and customers.
• 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 (%)
EPS (euro)
RoE
RoTE
RoA
RoRWA
Efficiency ratio C
(EUR million)
UNDERLYING INCOME STATEMENT C
Net interest income
Total income
Net operating income
Profit before tax
Attributable profit to the parent
(%)
UNDERLYING EPS AND PROFITABILITY C
Underlying EPS (euro)
Underlying RoE
Underlying RoTE
Underlying RoA
Underlying RoRWA
2022
1,734,659
1,036,004
1,025,401
1,255,660
97,585
2021 % 2022 vs. 2021
8.7
6.5
11.7
8.8
0.5
1,595,835
972,682
918,344
1,153,656
97,053
2020
1,508,250
916,199
849,310
1,056,127
91,322
2022
38,619
52,117
28,214
15,250
9,605
2022
0.539
10.67
13.37
0.63
1.77
45.8
2022
38,619
52,154
28,251
15,250
9,605
2022
0.539
10.67
13.37
0.63
1.77
2021 % 2022 vs. 2021
B
33,370
46,404
24,989
14,547
8,124
15.7
12.3
12.9
4.8
18.2
2021 % 2022 vs. 2021
0.438
23.1
9.66
11.96
0.62
1.69
46.2
2021 % 2022 vs. 2021
D
33,370
46,404
24,989
15,260
8,654
15.7
12.4
13.1
(0.1)
11.0
2021 % 2022 vs. 2021
0.468
15.0
10.29
12.73
0.65
1.78
2020
31,994
44,279
23,149
(2,076)
(8,771)
2020
(0.538)
(9.80)
1.95
(0.50)
(1.33)
47.0
2020
31,994
44,600
23,633
9,674
5,081
2020
0.262
5.68
7.44
0.40
1.06
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SOLVENCY (%)
Fully-loaded CET1
Fully-loaded total capital ratio
CREDIT QUALITY (%)
Cost of risk
NPL ratio
Total coverage ratio
2022
12.04
15.81
2022
0.99
3.08
68
2021
12.12
16.41
2021
0.77
3.16
71
2020
11.89
15.73
2020
1.28
3.21
76
THE SHARE AND MARKET CAPITALIZATION
Number of shareholders
Shares (millions)
Share price (euro)
Market capitalization (EUR million)
Tangible book value per share (euro)
Price / Tangible book value per share (X)
2022
3,915,388
16,794
2.803
47,066
4.26
0.66
2021
3,936,922
17,341
2.941
50,990
4.12
0.71
% 2022 vs. 2021
(0.5)
(3.2)
(4.7)
(7.7)
2020
4,018,817
17,341
2.538
44,011
3.79
0.67
CUSTOMERS (thousands)
Total customers
Loyal customers E
Loyal retail customers
Loyal SME & corporate customers
Digital customers F
Digital sales / Total sales (%)
2022
159,843
27,490
25,298
2,191
51,470
55.1
% 2022 vs. 2021
4.5
7.6
8.3
0.1
8.4
2021
152,943
25,548
23,359
2,189
47,489
54.4
2020
148,256
22,838
20,901
1,938
42,362
44.3
OPERATING DATA
Number of employees
Number of branches
2022
206,462
9,019
2021 % 2022 vs. 2021
3.7
(2.3)
199,177
9,229
2020
193,226
10,586
A. Includes customer deposits, mutual funds, pension funds and managed portfolios.
B. In constant euros: Net interest income: +9.0%; Total income: +5.8%; Net operating income: +4.9%; Profit before tax: -3.9%; Attributable profit: +8.5%.
C. In addition to IFRS measures, we present non-IFRS measures including some which we refer to as underlying measures. These non-IFRS measures exclude items outside
the ordinary course of business and reclassify certain items under some headings of the underlying income statement as described at the end of section 3.2 'Results' and in
section 8 'Alternative Performance Measures' of this chapter. In our view, this provides a better year-on-year comparison.
D. In constant euros: Net interest income: +9.0%; Total income: +5.9%; Net operating income: +5.0%; Profit before tax: -8.0%; Attributable profit: +2.3%.
E. 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.
F. 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), which generally inform
reporting of our financial situation in this consolidated directors’
report. However, 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 exclude items outside the
ordinary course of business and reclassify certain items under
some headings of the underlying income statement as
described at the end of section 3.2 ‘Results’ in this chapter and
in note 51.c of the consolidated financial statements. In our
view, this provides a better year-on-year comparison.
In section 4 'Financial information by segment', we present
results by business area only in underlying terms in
accordance with IFRS 8. We reconcile them in aggregate terms
with our IFRS consolidated results in note 51.c to the
consolidated financial statements; and
• local currency measures: we use certain non-IFRS financial
indicators in local currency to assess our ongoing operating
performance. They include the results from our subsidiary
banks outside the eurozone excluding the exchange rate
impact (i.e. in constant euros). Because changes in exchange
rates have a non-operating impact on results, we believe
assessing 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. Thus, the amounts given in
the totals columns and rows of tables in certain instances may
not match the sum of that column or row.
3.1 Situation of Santander
Santander is one of the largest banks in the eurozone. At year-
end 2022, we had EUR 1,734,659 million in assets and EUR
1,255,660 million in total customer funds. Santander was the
second largest bank by market capitalization (EUR 47,066
million as of 30 December 2022).
Our purpose to help people and businesses prosper by being
Simple, Personal and Fair remains the same. We do not merely
meet our legal and regulatory obligations but also aim to
exceed our stakeholders' expectations. We strive to aid our
customers' green transitions, while also promoting financial
inclusion.
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 (people, customers, shareholders
and communities).
2022 was another challenging year, as certain adverse social
and economic effects of the covid-19 pandemic continued to
impact the macroeconomic environment and Santander.
Moreover, the current context, in part as a result of the war in
Ukraine, is geopolitically and economically more complex,
volatile and uncertain. In 2022, we continued to play an active
role in economic recovery, supporting our 160 million
customers and broader society.
We had 206,462 employees at 31 December 2022. We
continue to work towards being an employer of choice, chosen
for our purpose and culture and for generating profit
responsibly. Our strategic priorities centred around talent and
culture help us ensure we have the right people, encourage and
empower them and develop their skills while providing an
excellent employee experience.
In 2022, we launched our new T.E.A.M.S. corporate behaviours
and 'Your Voice', our continuous listening tool through which
our employees can share their opinions, ideas and experiences.
In its first year, 'Your Voice' addressed such issues as
engagement, flexibility, co-worker relationships, inclusion,
well-being and culture. Santander’s global eNPS (employee Net
Promoter Score) stood well above the average of all companies
in the survey.
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We interact with our customers through several channels to
ensure their access to financial services. At the year end, we had
9,019 branches, which we have improved in recent years. These
include WorkCafés, SmartBank and Ágil ('Agile') branches, and
other specialist centres for businesses, private banking,
universities and other customer segments. We are also
promoting new, more digital collaborative spaces.
The number of digital and loyal customers as well as digital
activity continued to increase. We now have more than 27
million loyal customers (+8% year-on-year), mainly due to the
increase in individuals. Digital customers rose 8% to over 51
million. Digital sales accounted for 55% of total sales (54% in
2021, 44% in 2020 and 36% in 2019) and 80% of transactions
carried out were digital (+4 pp in 2022).
Additionally, our contact centres, which provide best-in-class
service quality, continue to serve our customers.
Amid faster digitalization, our aim, now more than ever, is to
continue to offer customers digital products and services that
will meet their needs and support them in their digital journey.
Santander continues to invest in ensuring access to financial
services for customers who prefer to bank in-person, do not
have a branch nearby or do not feel comfortable using mobile
banking or digital channels. Our priority is to ensure that no one
is left behind and everyone has the opportunity to access our
products and services.
Some examples of our commitment to financial inclusion are
our initiatives in rural Spain. Through our branches, ATMs and
network of financial agents in communities with under 10,000
inhabitants and Correos Cash, we provide access to financial
services to customers in these rural areas that might otherwise
have been left off the grid. In 2022, we also joined the
Asociación Española de Banca's (AEB) agreement to make
further headway in financial inclusion. In Mexico, around 80% of
our Tuiio (our microfinance programme) customers were able to
grow their business through our loans and 48% of them were
able to hire more employees.
As another example, Santander has been working on enhancing
services for our elderly customers and on preventing
digitalization from becoming an obstacle to accessing financial
services. Our cross-functional team has put in place measures
that include extending the hours of counter/teller services and
creating senior ambassadors to make sure senior citizens
receive the best possible service.
In addition to these improvements in the way we serve our
customers, we are simplifying our retail and commercial
banking products and automating processes, while working to
lower our cost to serve and increase our local competitiveness.
This is reflected in customer growth and enhanced customer
experience and satisfaction. In terms of NPS, we are one of the
top three banks in eight markets (including ranking first in Chile
and Argentina).
We promote financial inclusion as part of our ESG strategy, in a
society that is increasingly aware of its importance. Because we
have an opportunity and a responsibility to do things the right
way, we embed ESG factors in all our businesses.
We have a competitive advantage to aid our customers' green
transitions. In 2022, we performed these actions:
• in SCIB, we continued to deliver on our green finance target of
mobilizing EUR 120 billion by 2025, having so far achieved
approximately EUR 94.5 billion since 2019. We remained a
leader in renewables financing in Europe and Latin America
and ranked second globally (by number of deals and volume).
We continued to move forward in our Net zero ambition by
setting three new interim decarbonization targets for our
energy, steel and aviation portfolios;
• in Consumer, we provided over EUR 5 billion in green finance
loans, mainly for electric vehicles but also for bicycles, solar
panels, electric chargers, green heating systems and others;
and
• in WM&I, we achieved EUR 53 billion of the EUR 100 billion
we had pledged to hold in Socially Responsible Investment
(SRI) assets under management (AuMs) by 2025.
Our ability to attract a diverse and talented workforce, our
culture of teamwork and our financial inclusion initiatives drive
our success, which is recognized inside and outside the Group.
• Santander employees are highly engaged with a global eNPS
score of 54 that falls within the top 10% in the financial sector
and is 16 points above the average for all companies in the
external benchmark Workday Peakon Employee Voice.
• We addressed the importance of gender equality and pay gap
by implementing a diversity and inclusion strategy for
remuneration. We are working towards reducing the pay gap
to near 0% (already 1%).
• We have increased the number of women in top
management, progressing towards our 2025 target of 30%.
The greatest gain has been in the past two years from 24% to
around 29%.
These efforts are reflected in our ranking as the world’s
highest-scoring bank and the second highest scoring company
overall worldwide in the 2023 Bloomberg Gender-Equality
Index, which recognizes excellence and commitment to
equality. Our score of 92.87 was over 2 pp up on the previous
year.
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• In terms of financial inclusion, we have already exceeded our
target to financially empower 10 million people by 2025, and
were named The World’s Best Bank for Financial Inclusion by
Euromoney for our efforts.
• Finally, we continue to be a reference in the sector, as 40% of
the Group’s board members are women. We have long
ensured that the Group's visions and decisions are informed
by diverse views. We expect this diverse vision to also be a
reality in each of the countries in which we operate.
In 2022, we delivered solid financial results. We achieved
record attributable profit of EUR 9,605 million, supported by
strong net operating income, translated into higher profitability
and shareholder remuneration. Our credit quality, liquidity and
capital positions were strong.
We reached the targets we had set at the beginning of the year:
mid-single digit revenue growth in constant euros (+6%
achieved), cost of risk below 1% (0.99%), fully-loaded CET1
ratio over 12% (12.04%) and RoTE over 13% (13.4% achieved).
In a year with considerable inflationary pressure, we improved
the efficiency ratio and ended the year close to our efficiency
target of 45% (45.8%).
Looking ahead, we plan to continue helping companies,
businesses and countries prosper making the most of our
opportunities and commitments.
Our goal is to build a digital bank with branches for our
customers through global technology initiatives to further
transform our business and operating model.
In our view, we have built the foundations of a simple, fair and
innovative product offering that creates more value for our
shareholders, sustains our solid capital position and improves
profitability going forward. We will rely on our business model
that combines local scale and expertise with our global reach.
Our in-market scale in each of our core markets provides strong
support for increased profitability. At the same time, our global
reach, backed by our global divisions and leveraging our auto
and payments capabilities, generates additional business and
revenue opportunities, and supports growth with greater
efficiency and profitability.
Our regions' 2022 achievements and strategic priorities were:
• Europe: customers, loans and deposits grew in most of our
markets. Underlying attributable profit grew by double-digits,
supported by robust NII and cost control and contained cost of
risk. We improved our efficiency ratio by 5 pp on the back of
structural changes to our operating model.
Our countries are starting from a strong position, but these
changes and business transformation will help achieve our
objective of greater profitability and contribution to the Group's
capital.
• North America: we grew our customer base and enhanced
customer experience through tailored products and services.
Loan growth was driven by most segments in Mexico and by
CIB, Commercial Real Estate (CRE) and Auto in the US. North
America's profitability remained strong, driven by good results
in Mexico and high profit in the US.
Profitability, transforming our retail business and building on
synergies between countries to realize North America's
growth and efficiency potential will remain a top priority.
• South America: we continued to strengthen ties and share
best practices between units, capture new business
opportunities and add customers (+7 million). Profit was
boosted by revenue and by a lower tax burden, which more
than offset inflationary pressures and higher provisions. We
closed the year with high profitability (double-digit RoTEs in
all our markets).
Santander is among the most efficient banks in the region,
supported by regional and global collaboration opportunities.
Our priorities will continue to focus on leveraging the regions'
high structural growth and on increasing profitability.
• Digital Consumer Bank: we delivered significant market share
gains, as new lending rose 10% year-on-year in a shrinking
market. Revenue increased, backed by leasing and net fee
income, and absorbed negative sensitivity to interest rate
increases and new TLTRO conditions. In addition, costs grew
well below inflation and credit quality remained solid.
We are the leader in consumer finance in Europe in terms of
scale, profitability and digital capabilities. Going forward, we
will focus on profitable growth by reinforcing our leadership
and leveraging our global OEM and dealer relationships and
new business platforms (leasing, subscription, BNPL), which
will also enable us to support our businesses in North America
and South America in their expansion and revenue growth.
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Our global business' 2022 achievements and strategic
priorities were:
• Payments: we continued to expand our merchant, payments
and cards capabilities across our footprint.
• Santander Corporate & Investment Banking (SCIB): our
client-centric transformation from lenders to strategic
partners delivered strong results, with double-digit growth in
all core businesses.
We are leaders in Latin America and are strengthening our
value proposition in Europe and the US. We have further
diversified our business model in terms of clients, countries
and products and accelerated capital rotation. Going forward,
we will focus on capitalizing on our global coverage and
product factories to increase profits both for SCIB and
countries.
• Wealth Management & Insurance (WM&I): double-digit
increase in WM&I's contribution to the Group's profit, despite
a complex landscape. Private Banking was recognized as one
of the top 3 Best Global Private Banks by Euromoney and
achieved a record year in results and cross-border business.
Santander Asset Management showed resilience amid
market turmoil maintaining its contribution to profit and
Insurance sustained growth in gross written premiums
(+24%).
We strive to become the best wealth and insurance manager
(asset management, wealth management and insurance
businesses) in Europe and the Americas. Going forward, we
will focus on boosting network collaboration and capabilities
for higher global revenue and efficiency.
In PagoNxt's second year, we continued our strategy to
deliver innovative payments technology, better user
experiences and greater efficiency. PagoNxt's revenue rose
72% in constant euros year-on-year, achieving our 2022
target set earlier this year of 50% revenue growth.
PagoNxt aims to achieve a global leadership position in
payments as one-of-a-kind paytech business that provides
customers with a wide range of innovative payments and
integrated value-added services. We are laying the
groundwork for further growth in the coming years by
integrating our payments volumes into a global platform to
increase efficiency and boost our share in the open market.
In 2022, our cards business, Cards & Digital Solutions,
managed 97 million cards globally. Revenue rose 19% in
constant euros and we maintained high profitability with an
RoTE close to 30%.
Santander IT's global scale enables us to enhance our
transformation journey. We focus on increasing our Technology
and Operations (T&O) division's global reach to bolster
initiatives and benefit from economies of scale.
To conclude, looking ahead, we believe Grupo Santander is well
positioned to drive further growth on the back our customer
focus, scale, diversification, disciplined capital allocation and
consistent track record of increasing profitability.
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3.2 Results
Executive summary
Attributable profit
Strong profit growth underpinned by our geographic
and business diversification
Performance (2022 vs. 2021)
Profit supported by growth in revenue, improved efficiency
and controlled cost of risk
EUR 9,605 mn
+18% in euros
+8% in constant euros
Total income
+12.4%
+5.9%
Costs
+11.6%
+7.0%
Provisions
+41.3%
+31.2%
in euros
in constant euros
Efficiency
The Group's efficiency ratio strengthened driven by
Europe
Profitability
Strong improvement in our profitability
Group
45.8%
-0.4 pp
Changes 2022 vs. 2021.
Europe
47.3%
-4.9 pp
RoTE
13.4%
RoRWA
1.77%
+1.4 pp
+0.6 pp 1
+0.08 pp
-0.01 pp 2
1. vs. underlying RoTE.
2. vs. underlying RoRWA.
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)
Gains 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
2022
38,619
11,790
1,653
488
702
(1,135)
52,117
(23,903)
(20,918)
(12,547)
(8,371)
(2,985)
(1,881)
(10,863)
(239)
12
—
7
15,250
(4,486)
10,764
—
10,764
(1,159)
9,605
2021 Absolute
5,249
1,288
90
(25)
270
(1,159)
5,713
(2,488)
(2,259)
(1,331)
(928)
(229)
933
33,370
10,502
1,563
513
432
24
46,404
(21,415)
(18,659)
(11,216)
(7,443)
(2,756)
(2,814)
(7,407)
(231)
53
—
(43)
14,547
(4,894)
9,653
—
9,653
(1,529)
8,124
(3,456)
(8)
(41)
—
50
703
408
1,111
—
1,111
370
1,481
Change
%
15.7
12.3
5.8
(4.9)
62.5
—
12.3
11.6
12.1
11.9
12.5
8.3
(33.2)
46.7
3.5
(77.4)
—
—
4.8
(8.3)
11.5
—
11.5
(24.2)
18.2
% excl.
FX
9.0
6.7
2.6
(5.0)
55.8
—
5.8
7.0
7.4
7.5
7.1
4.7
(33.6)
36.1
0.6
(81.4)
—
—
(3.9)
(16.6)
2.6
—
2.6
(29.2)
8.5
2020
31,994
10,015
2,187
391
(96)
(212)
44,279
(21,130)
(18,320)
(10,783)
(7,537)
(2,810)
(2,378)
(12,382)
(10,416)
114
8
(171)
(2,076)
(5,632)
(7,708)
—
(7,708)
(1,063)
(8,771)
315
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Main income statement items
Total income
Total income amounted to EUR 52,117 million in 2022, up 12%
year-on-year. In constant euros, it increased 6%. Net interest
income and net fee income accounted for 97% of total income.
By line:
Net interest income
Net interest income amounted to EUR 38,619 million, 16%
higher than 2021.
The tables below show the average balances of each year
–calculated as the monthly average over the period, which we
believe should not differ materially from using daily balances–,
and the generated interest.
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
The tables also include average balances and interest rates in
2022 and 2021, based on the domicile of the entities at which
the relevant assets or liabilities are recorded. Domestic balances
relate to our entities domiciled in Spain. International balances
relate to entities domiciled outside of Spain (reflecting our
foreign activity), and are divided into mature markets (the US
and Europe, except Spain and Poland) and developing markets
(South America, Mexico and Poland).
2022
2021
Average
balance
Interest
Average
rate
Average
balance
Interest
Average
rate
2.34%
1.04%
1.42%
7.39%
4.71%
0.77%
1.17%
10.52%
5.25%
2.17%
3.59%
13.79%
2.36%
0.44%
2.78%
7.00%
5.69%
1.76%
1.83%
9.45%
265,417
112,621
109,672
43,124
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
304,935
111,697
139,105
54,133
39,572
19,072
4,713
15,787
1,031,226
272,826
552,674
205,726
43,505
9,509
33,068
928
183,013
45,932
43,877
93,204
7,139
1,166
1,971
4,002
1,862
146
55
1,661
54,110
5,929
19,821
28,360
1,026
42
919
65
10,416
809
803
8,804
(236)
16
480
(732)
1
(121)
40
82
1.01%
0.72%
0.49%
3.09%
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%
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
1,519,174
430,455
735,656
353,063
201,099
—
1,720,273
71,430
7,799
23,115
40,516
4.70% 1,377,322
409,593
1.81%
664,161
3.14%
303,568
11.48%
46,463
5,912
17,000
23,551
3.37%
1.44%
2.56%
7.76%
71,430
186,577
—
1,563,899
46,463
316
2022 Annual report
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
The average balance of interest-earning assets in 2022 was
10% higher than in 2021. Domestic assets grew 5%,
international mature markets increased 11% and international
developing markets were up 16%, driven by greater loans and
advances to customers (which increased in local currency in
almost all markets).
The average balance of interest-bearing liabilities in 2022 was
10% higher year-on-year, also spurred by growth in domestic
(+3%), mature international (+13%) and developing
international (+15%) markets, which were all boosted by
customer deposits and deposits from central banks and credit
institutions.
Higher interest rates in our markets led to a general increase in
asset yields and liability costs.
The average return on interest-earning assets increased from
3.37% in 2021 to 4.70% in 2022, with general rises across our
markets (domestic +37 bps, international mature +58 bps,
international developing +372 bps). Moreover, returns across all
balance sheet items grew: cash, demand deposits and loans and
advances to central banks and credit institutions +133 bps,
loans and advances to customers +115 bps, debt securities
+230 bps.
The average cost of interest-bearing liabilities rose 127 bps to
2.25%, with increases in all markets. Domestic liabilities
increased 35 bps, +61 bps in international mature markets and
+411 bps in international developing markets. By balance sheet
item, average costs increased 81 bps in central banks and credit
institution deposits, +112 bps in customer deposits and +125
bps in marketable debt securities.
We calculated the change in interest income/(expense) shown
in the tables below by:
• applying 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 volumes; and
• applying the difference between the rates from the current
and previous periods to the average balance from the previous
year to obtain the change in interest rate.
Both interest income and costs increased in 2022, mainly due to
higher interest rates and to a lesser extent greater volumes.
Net interest income increased 16%, as shown in the table below
that summarizes the performance of net interest income by
market. In constant euros, growth was 9%.
In constant euros, net interest income increased across Europe:
+9% in Spain, +13% in the UK, +99% in Poland and +3% in
Portugal. There were also increases in North America: +3% in
the US and +13% in Mexico.
The positive effect of higher interest rates is mainly reflected in
Poland, the UK and Mexico. However, the full benefit of interest
rate rises has not yet passed through to results in Spain,
Portugal or the US.
In South America, higher volumes and interest rates did not
translate to growth in some countries due to their initial
negative sensitivity to increases. Net interest income rose in
Argentina (+171%), while it fell in Brazil (-4%) and Chile (-9%).
In DCB, NII was slightly down due to higher funding costs (steep
rate rises) and TLTRO changes, partially mitigated by new
business repricing initiatives.
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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
214,879
92,373
78,230
44,276
34,298
17,321
2,743
14,234
979,840
299,046
464,054
216,740
57,646
2,327
37,380
17,939
255,721
111,682
107,374
36,665
17,907
12,377
4,280
1,250
6,595
3,131
1,649
1,815
1,457,035
506,232
651,307
299,496
164,617
8,635
89,986
—
1,720,273
2022
Interest
Average
rate
Average
balance
197,997
96,209
63,047
38,741
28,763
11,268
2,300
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
1.69%
0.61%
1.24%
4.75%
3.93%
1.07%
1.82%
7.82%
1.73%
0.23%
0.71%
6.01%
5.55%
1.03%
2.94%
11.57%
3.31%
2.03%
2.11%
10.75%
2.09%
1.79%
1.40%
7.44%
3.28%
2.97%
0.06%
6.72%
2.25% 1,329,869
492,482
0.84%
578,020
1.06%
259,367
7.22%
139,757
10,140
84,133
—
1,563,899
2021
Interest
Average
rate
0.88%
0.39%
0.36%
2.96%
2.44%
0.16%
0.35%
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%
0.98%
0.49%
0.45%
3.11%
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
3,636
560
972
2,104
1,349
186
50
1,113
16,994
698
3,279
13,017
3,199
24
1,099
2,076
8,464
2,262
2,262
3,940
375
222
60
93
216
93
1
122
2,055
218
207
1,630
1,446
435
186
825
32,811
4,266
6,907
21,638
32,811
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'.
318
2022 Annual report
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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
2022 vs. 2021
Increase (decrease) due to changes in
Volume
Rate
Net change
586
(7)
180
413
523
(6)
(1)
530
5,138
368
1,274
3,496
(11)
—
7
(18)
546
25
39
482
487
(4)
571
(80)
(130)
(92)
27
(65)
6,627
290
2,091
4,246
3,871
364
1,249
2,258
632
123
41
468
10,323
762
2,457
7,104
977
35
894
48
4,146
471
318
3,357
—
—
—
—
—
—
—
—
4,457
357
1,429
2,671
1,155
117
40
998
15,461
1,130
3,731
10,600
966
35
901
30
4,692
496
357
3,839
487
(4)
571
(80)
(130)
(92)
27
(65)
18,340
1,597
4,024
12,719
24,967
1,887
6,115
16,965
319
2022 Annual report
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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
2022 vs. 2021
Increase (decrease) due to changes in
Volume
234
(16)
67
183
Rate
1,652
200
678
774
Net change
1,886
184
745
957
(29)
14
2
(45)
797
12
103
682
175
—
11
164
819
110
86
623
14
—
(4)
18
(26)
(20)
(4)
(2)
2,423
371
354
1,698
241
129
77
35
4,488
586
683
3,219
675
154
40
481
10,745
404
2,470
7,871
2,504
24
1,082
1,398
2,807
614
506
1,687
226
200
5
21
26
43
(25)
8
—
—
—
—
—
—
—
—
15,230
1,261
3,629
10,340
646
168
42
436
11,542
416
2,573
8,553
2,679
24
1,093
1,562
3,626
724
592
2,310
240
200
1
39
0
23
(29)
6
2,423
371
354
1,698
241
129
77
35
19,718
1,847
4,312
13,559
320
2022 Annual report
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Responsible banking | 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
2022 vs. 2021
Increase (decrease) due to changes in
Volume
6,627
290
2,091
4,246
4,488
586
683
3,219
2,139
(296)
1,408
1,027
Rate
18,340
1,597
4,024
12,719
15,230
1,261
3,629
10,340
3,110
336
395
2,379
Net
change
24,967
1,887
6,115
16,965
19,718
1,847
4,312
13,559
5,249
40
1,803
3,406
+16% A
2022 vs. 2021
+12% A
2022 vs. 2021
A. In constant euros: +9%.
A. In constant euros: +7%.
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
2022
4,032
2,139
986
2,032
797
788
277
227
512
11,790
2021 Absolute
383
3,649
357
1,782
(49)
1,035
182
1,850
155
642
266
522
11
266
28
199
(45)
557
1,288
10,502
Change
%
10.5
20.0
(4.7)
9.8
24.1
51.0
4.1
14.1
(8.1)
12.3
%
excl. FX
6.9
12.9
(12.0)
11.8
31.5
44.3
1.9
2.0
(17.4)
6.7
2020
3,416
1,737
951
1,649
594
500
295
253
620
10,015
321
31,99433,37038,61920202021202210,01510,50211,790202020212022
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Net fee income
Net fee income increased 12% year-on-year to EUR 11,790
million. In constant euros, it was 7% higher, driven by higher
volumes and improved activity.
We had strong growth in high value-added products and
services, with card and point of sale turnover increasing 14%
and 21%, respectively. Transactional fees rose 8%.
In Wealth Management & Insurance (WM&I), and despite lower
volumes than 2021, total fee income generated (including fees
ceded to the commercial network) increased 3% year-on-year,
supported by the growth in insurance premiums (+24%). In
Santander Corporate & Investment Banking (SCIB), net fee
income increased 9%, with widespread growth across its core
businesses.
Together, the two businesses accounted for close to 50% of the
Group’s total fee income (SCIB: 17%; WM&I: 31%).
By region, net fee income in Europe was up 3%, supported by
growth in all markets except the UK due to the transfer of its
SCIB business to the London branch in Q4 2021. There was a 6%
increase in North America, though the US was affected by the
Bluestem portfolio disposal in 2021. Excluding the effect of the
Bluestem portfolio disposal, net fee income would have
increased 8% in the region. The 21% increase in Mexico was
driven by payments and insurance. South America was up 11%
boosted by greater transactionality, with growth in the main
markets. Finally, Digital Consumer Bank rose 3% driven by
greater new lending volumes.
Gains or losses on financial assets and liabilities and exchange
differences (net)
Gains on financial transactions and liabilities and exchange
differences (net) accounted only for 3% of total income. They
were EUR 1,653 million, 6% higher than the previous year (+3%
in constant euros) driven by growth in Brazil, Chile, Argentina
and Spain. This growth was partially offset by falls in Portugal
and Mexico and by the Corporate Centre due to negative results
from the FX hedge which offset the positive impact of the
exchange rates on the countries' results.
Gains and losses on financial assets and liabilities stem from
valuing the 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 488 million, 5% lower than in 2021
(both in euros and in constant euros).
Income from companies accounted for by the equity method
The income from companies accounted for by the equity
method climbed to EUR 702 million in 2022, increasing 63%
year-on-year (+56% in constant euros) owing to the higher
contribution from the Group's associated entities in Spain and
South America.
Other operating income/expenses
Other operating income/expenses recorded a loss of EUR 1,135
million compared to a gain of EUR 24 million in 2021 owing to
lower leasing income in the US, the creation of an Institutional
Protection Scheme in Poland in Q2'22, greater contributions to
the Single Resolution Fund (SRF) and to the Deposit Guarantee
Fund (DGF), and the impact of high inflation in Argentina.
For more details, see note 45 to the consolidated financial
statement.
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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
Operating expenses
Operating expenses increased 12% from 2021 to EUR 23,903
million. In constant euros, costs rose 7% due to the sharp rise in
inflation. However, in real terms (excluding the impact of
average inflation), costs fell 5% in constant euros.
Our disciplined cost management enabled us to maintain one of
the best efficiency ratios in the sector, which stood at 45.8%, a
0.4 pp improvement on 2021.
We continued to make headway with our transformation
towards a more integrated and digital operating model, with
better business dynamics and improved customer service and
satisfaction.
Efficiency ratio (cost to income)
%
-0.4 pp
2022 vs. 2021
The trends by region and market in constant euros were:
• In Europe, costs were up 2% in nominal terms on the back of
our transformation process and operational improvements. In
real terms, costs decreased 7%, with falls across the region:
-10% in Spain, -6% in the UK, -19% in Portugal and -7%
Poland. The region's efficiency ratio stood at 47.3% (-4.9 pp
compared to 2021), improving in all markets.
2022
12,547
8,371
2,473
410
559
708
96
559
3,566
20,918
2,985
23,903
2021 Absolute
1,331
928
291
9
49
9
6
1
563
2,259
229
2,488
11,216
7,443
2,182
401
510
699
90
558
3,003
18,659
2,756
21,415
Change
%
11.9
12.5
13.3
2.2
9.6
1.3
6.7
0.2
18.7
12.1
8.3
11.6
% excl.
FX
7.5
7.1
11.5
0.5
6.0
(1.7)
0.7
2.7
14.6
7.4
4.7
7.0
2020
10,783
7,537
2,075
473
517
725
100
534
2,980
18,320
2,810
21,130
• In North America, costs increased 5%. In real terms, costs
were down 3%. They remained stable in the US (-8% in real
terms) while Mexico recorded an increase due to higher
salaries, digitalization and technology spend and the increase
in supply costs affected by inflation at 8%. The efficiency ratio
stood at 47.7% (+1.9 pp on 2021).
• In South America, the rise in costs (+18%) was significantly
distorted by soaring average inflation in the region (19% due
to 71% inflation in Argentina) which was reflected in salary
increases in Brazil and Argentina. In real terms, costs fell 5%
in Chile and increased 1% in Brazil and 29% in Argentina. The
efficiency ratio was 37.0% (+2.0 pp on 2021).
• Digital Consumer Bank's costs were 2% higher affected by
inflation, strategic investments, transformational costs and
business growth. In real terms, costs fell 6%. The efficiency
ratio stood at 46.7% (-0.4 pp on 2021).
Provisions or reversal of provisions
Provisions (net of provisions reversals) amounted to EUR 1,881
million (EUR 2,814 million in 2021). This line includes the
charges for restructuring costs recorded in 2021 (EUR 530
million net of tax).
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
10,863 million (EUR 7,407 million in 2021), a 47% increase
year-on-year in euros and +36% in constant euros.
This comparison was affected by the releases recorded in the UK
and the US in 2021, macro provisions in 2022 (mainly in Spain,
the UK and the US) resulting from a potential economic
slowdown, the charges in Poland and DCB for CHF mortgages
and the new mortgage payment holiday regulations in Poland
(EUR 327 million). Lastly, there was a year-on-year rise in Brazil,
driven by individual loans and a single name in CIB in the fourth
quarter. However, there was a notable decline in Spain and
Mexico.
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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 239 million,
compared to -EUR 231 million in 2021.
Gains or losses on non-financial assets and investments (net)
Net gains on non-financial assets and investments were EUR 12
million (EUR 53 million in 2021).
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
2022
7
10,856
2021
19
7,388
2020
19
12,363
10,863
7,407
12,382
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)
2022
—
239
140
75
24
239
2021
—
231
150
71
10
231
2020
—
10,416
174
10,242
—
10,416
Negative goodwill recognized in results
No negative goodwill was recorded in 2021 or 2022.
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 7 million in 2022 (-EUR 43 million in 2021).
For more details, see note 49 to the consolidated financial
statements.
Profit or loss before tax from continuing operations
Profit before tax was EUR 15,250 million, +5% year-on-year. In
constant euros it fell 4%.
Tax expense or income from continuing operations
Total income tax was EUR 4,486 million (EUR 4,894 million in
2021).
Profit attributable to the parent
EUR million
A. In constant euros: +8%.
+18% A
2022 vs. 2021
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Profit attributable to non-controlling interests
Profit attributable to non-controlling interests decreased 24%
year-on-year (-29% in constant euros) to EUR 1,159 million, due
to the buyback of minority interests in Mexico and in the US of
Santander Consumer USA (SC USA).
For more details, see note 28 to the consolidated financial
statements.
Profit attributable to the parent
Profit attributable to the parent amounted to EUR 9,605 million
in 2022, compared to EUR 8,124 million in 2021. The
performance of the above-mentioned income statement items
is reflected in profit growth of 18% in euros and 8% in constant
euros.
Sustained earnings per share, which rose +23% year-on-year to
EUR 53.9 cents.
Earnings per share
EUR
+23%
2022 vs. 2021
RoTE stood at 13.37% (11.96% in 2021) and RoRWA at 1.77%
(1.69% in 2021).
RoTE
%
RoRWA
%
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Below is the condensed income statement adjusted to items beyond the ordinary course of business 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.
Underlying profit attributable to the parent
Profit attributable to the parent and underlying profit were the
same in 2022, as profit was not affected by results that fall
outside the ordinary course of our business, but there is a
reclassification in the presentation of certain items under some
headings of the underlying income statement. Attributable
profit and underlying profit in 2022 both amounted to EUR
9,605 million.
In 2021, attributable profit was affected by restructuring costs,
mainly in the UK and Portugal. Excluding these charges from the
line where they were recorded, and including them separately
in the net capital gains and provisions line, adjusted profit or
underlying profit attributable to the parent in 2021 stood at EUR
8,654 million.
Adjusted profit or underlying profit attributable to the parent in
2022 was 11% higher in euros (+2% in constant euros)
compared to 2021.
2022
2021 Absolute
%
Change
38,619
11,790
1,653
92
52,154
(23,903)
28,251
(10,509)
(2,492)
15,250
(4,486)
10,764
—
10,764
(1,159)
—
9,605
9,605
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)
(530)
8,124
8,654
5,249
1,288
90
(877)
5,750
(2,488)
3,262
(3,073)
(199)
(10)
590
580
—
580
371
530
1,481
951
15.7
12.3
5.8
(90.5)
12.4
11.6
13.1
41.3
8.7
(0.1)
(11.6)
5.7
—
5.7
(24.2)
(100.0)
18.2
11.0
% excl.
FX
9.0
6.7
2.6
(92.1)
5.9
7.0
5.0
31.2
8.1
(8.0)
(19.3)
(2.4)
—
(2.4)
(29.2)
(100.0)
8.5
2.3
2020
31,994
10,015
2,187
404
44,600
(20,967)
23,633
(12,173)
(1,786)
9,674
(3,516)
6,158
—
6,158
(1,077)
(13,852)
(8,771)
5,081
For more details, see note 51.c to the consolidated financial
statements.
The Group’s cost of risk was 0.99%, consistent with our 1%
forecast, and higher than in 2021 but a significant improvement
compared to 2020 and 2019 (1.28% and 1.00%, respectively).
Before recording loan-loss provisions, Santander's net operating
income1
(i.e. total income less operating expenses) was EUR
28,251 million, 13% higher year-on-year, +5% in constant
euros. The performance in constant euros is detailed below.
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.
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Net loan-loss provisions
EUR million
Cost of risk
%
+41% A
2022 vs. 2021
+0.22 pp
2022 vs. 2021
A. In constant euros: +31%.
A
Underlying profit attributable to the parent
EUR million
A
Underlying earnings per share
EUR
+11% B
2022 vs. 2021
+15%
2022 vs. 2021
A. Excluding net capital gains and provisions.
B. In constant euros: +2%.
A. Excluding net capital gains and provisions.
By line:
By region:
• Total income increased mainly due to net interest income
(+9%) improving consistently every quarter, and net fee
income (+7%), which recovered further due to greater
commercial activity.
• Costs were driven up by soaring inflation and investments in
technology associated with the transformation process.
• In Europe, net operating income increased 25% with better
performance in all markets.
• In North America, net operating income fell 3%. It dropped
12% in the US (mainly due to lower leasing income) and was
up 17% in Mexico.
• In South America, net operating income grew 2% despite a
3% decrease in Brazil and 1% decrease in Chile. It rose 136%
in Argentina.
• In Digital Consumer Bank, net operating income increased by
4%.
In 2022, the Santander’s underlying RoTE (same as statutory
RoTE) was 13.37% (12.73% in 2021), underlying RoRWA was
1.77% (1.78% in 2021) and underlying earnings per share was
EUR 0.539 (EUR 0.468 in 2021), with all three showing an
improvement compared to 2020 and 2019.
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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
Total assets
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
2022
223,073
156,118
5,713
8,989
85,239
2021
210,689
116,953
5,536
15,957
108,038
1,147,044 1,037,898
4,761
410
7,525
283
33,321
16,584
25,196
8,595
4,089
1,734,659 1,595,835
8,069
(3,749)
7,615
308
34,073
18,645
29,987
10,082
3,453
Change
Absolute
12,384
39,165
177
%
5.9
33.5
3.2
2020
153,839
114,945
4,486
48,717
120,953
958,378
8,325
1,980
7,622
261
32,735
15,908
24,586
11,070
4,445
8.7 1,508,250
(43.7)
(6,968)
(22,799)
(21.1)
10.5
109,146
3,308
69.5
(4,159) (1,014.4
1.2
8.8
2.3
12.4
19.0
17.3
(15.6)
90
25
752
2,061
4,791
1,487
(636)
138,824
9,228
115,185
55,947
(117)
747
8,149
9,468
14,609
—
79,469
32,733
1,423,858 1,349,169
5,463
248
770
9,583
8,649
12,698
—
1,637,074 1,498,782
119,649
(32,719)
10,123
97,053
1,734,659 1,595,835
124,732
(35,628)
8,481
97,585
35,716
23,214
74,689
3,765
(365)
(23)
(1,434)
819
1,911
—
138,292
5,083
(2,909)
(1,642)
532
138,824
68.9
(147.2)
44.9
70.9
81,167
48,038
5.5 1,248,188
6,869
286
910
(3.0)
10,852
(15.0)
8,282
9.5
12,336
15.0
—
—
9.2 1,416,928
114,620
4.2
(33,144)
8.9
9,846
(16.2)
91,322
0.5
8.7 1,508,250
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Executive summary A
Loans and advances to customers (minus reverse repos)
Positive trend in loans and advances to customers in 2022
Customer funds (deposits minus repos + mutual funds)
Strong increase in customer funds benefiting from the
higher customer deposits
EUR 1,019 billion
+5%
EUR 1,146 billion
+6%
è By segment:
è By product:
Growth backed by individuals and large corporates
Demand deposits accounted for 62% of customer funds.
Increase in time deposits due to higher interest rates and
mutual funds were impacted by market performance
Individuals
+7%
SMEs and
corporates
0%
A. 2022 vs. 2021 changes in constant euros.
CIB
+11%
Demand
-1%
Time
+48%
Mutual funds
-5%
Loans and advances to customers totalled EUR 1,036,004
million in December 2022, up 7% compared to December 2021.
For the purpose of analysing traditional commercial banking
loans, the Group uses gross loans and advances to customers
excluding reverse repurchase agreements which amounted to
EUR 1,019,188 million, 6% higher year-on-year. To facilitate the
analysis of the Santander's management, as usual the
comments below do not consider the exchange rate impact.
Gross loans and advances to customers, excluding reverse
repurchase agreements and in constant euros, increased 5%,
with broad-based growth across regions, as follows:
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 (minus repurchase agreements)
Repurchase agreements
Gross loans and advances to customers
Loan-loss allowances
Net loans and advances to customers
• Europe: growth was 3%. By market, lending in the UK rose 4%
due to mortgages; 2% in Spain, boosted by strong
performance in individuals and SCIB; and 1% in Poland driven
by corporates and CIB. In 'Other Europe', loans increased 13%
owing mainly to SCIB. In Portugal, they remained flat.
Change
2022
56,688
565,609
290,031
39,833
11,435
22,704
32,888
1,019,188
39,500
1,058,688
22,684
1,036,004
2021
49,603
542,404
269,526
38,503
10,304
20,397
31,645
962,382
33,264
995,646
22,964
972,682
Absolute
7,085
23,205
20,505
1,330
1,131
2,307
1,243
56,806
6,236
63,042
(280)
63,322
%
14.3
4.3
7.6
3.5
11.0
11.3
3.9
5.9
18.7
6.3
(1.2)
6.5
2020
37,459
503,014
269,143
36,251
7,903
19,507
30,815
904,092
35,702
939,794
23,595
916,199
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Gross loans and advances to customers
(minus reverse repos)
EUR billion
Gross loans and advances to customers
(minus reverse repos)
% of operating areas. December 2022
+6% A
2022 vs. 2021
A. In constant euros: +5%.
• In North America, growth was 9%. In the US, lending grew 9%
propelled by auto financing, CIB and CRE, while lending in
Mexico was up 8% with widespread rises across segments
(except SMEs).
By the end of 2022, 62% of loans and advances to customers
maturing in more than a year had a fixed interest rate, while the
other 38% had a floating interest rate:
• In Spain, 50% of loans and advances to customers were fixed
• Growth in South America was 10%. In Argentina, lending
rate and 50% were floating rate.
increased 72% driven by consumer, SMEs and corporates. In
Brazil, it climbed 8% owing to positive performance in
individuals (mainly in mortgages and payrolls) and corporates.
In Chile, loans increased 8% backed by mortgages, corporates,
institutions and SCIB. In Uruguay, they rose 14%.
• Digital Consumer Bank (DCB) rose 9%, receiving an uplift
from new lending, which rose 10% year-on-year, and
increased in most markets. Openbank loans grew 30%.
As of December 2022, gross loans and advances to customers
minus reverse repurchase agreements maintained a balanced
structure: individuals (62%), SMEs and corporates (24%) and
SCIB (14%).
• Outside Spain, 65% of loans and advances to customers were
fixed rate and 35% were floating 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 34,073 million in December
2022, up EUR 752 million compared to December 2021 due to
exchange rate movements.
Intangible assets stood at EUR 18,645 million, of which EUR
13,741 million corresponds to goodwill (which increased EUR
1,028 million) and EUR 4,904 million to other intangible assets,
mostly IT developments (up EUR 1,033 million).
Loans and advances to customers with maturities exceeding one year at 2022 year end
EUR million
Fixed
Floating
TOTAL
Domestic
International
TOTAL
Amount
Weight as % of
the total
81,874
81,178
163,052
50%
50%
100%
Amount
369,353
197,219
566,572
Weight as % of
the total
65%
35%
100%
Amount
451,227
278,397
729,624
Weight as % of
the total
62%
38%
100%
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2022 Annual report
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Total customer funds
EUR million
Demand deposits
Time deposits
Mutual funds A
Customer funds
Pension funds A
Managed portfolios A
Repurchase agreements
Total funds
2022
710,232
251,778
184,054
2021
717,728
164,259
188,096
1,146,064 1,070,083
16,078
31,138
36,357
1,255,660 1,153,656
14,021
32,184
63,391
Change
Absolute
(7,496)
87,519
(4,042)
75,981
(2,057)
1,046
27,034
102,004
2020
%
642,897
(1.0)
171,939
53.3
164,802
(2.1)
979,638
7.1
15,577
(12.8)
26,438
3.4
34,474
74.4
8.8 1,056,127
A. Including managed and marketed funds.
Customer deposits grew 12% year-on-year to EUR 1,025,401
million in December 2022.
Santander uses customer funds (customer deposits, minus
repurchase agreements, plus mutual funds) to analyse
traditional retail banking funds, which stood at EUR 1,146,064
million.
Customer funds increased 7%. In constant euros they rose 6%,
as follows:
• By product, customer deposits minus repurchase agreements
were up 9%. Time deposits grew 48% (higher interest rates)
in all markets except Portugal and Peru, to the detriment of
demand deposits, which fell 1% (declines in most countries).
Mutual funds declined 5%, affected by market trends mainly
in Europe.
• Customer funds increased 11% in North America (the US:
+16% and Mexico: +2%), 5% in South America (Argentina:
+98%; Uruguay: +8%; Brazil: +3%) and 5% in Europe
(increases of 10% in Spain and 2% in the UK and Poland that
more than offset the 3% drop in Portugal).
• Positive performance also in DCB, whose funds increased 7%.
Growth in Openbank was 5%.
The weight of demand deposits was 62% of total customer
funds, while time deposits accounted for 22% and mutual funds
16%.
In addition to capturing customer deposits, the Group, for
strategic reasons, has 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 each market's receptiveness.
For more details on debt issuances and maturities, see section
3.4 'Liquidity and funding management' in this chapter.
Customer funds (minus repos)
EUR billion
Customer funds (minus repos)
% of operating areas. December 2022
+7% A
-2%
+9%
• Total
• Mutual
fundsB
• Deposits
minus
repos
2022 vs. 2021
A. In constant euros: +6%.
B. Including managed and marketed funds.
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2022 Annual report
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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%)
Liquidity management
Our structural liquidity management aims to optimize
maturities and costs, and to avoid undesired liquidity risks in
funding Santander’s operations.
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.
• Wholesale funding sources diversified by instrument,
investor, market, currency and maturity.
• Limited use of 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.
To apply these principles effectively across the Group, we
developed a unique, three-pronged management framework:
• Organization and governance. Strict organization and
governance that involve subsidiaries’ senior managers in
decision-making and 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 part of our risk appetite
framework, which meets regulatory and market standards for
strong risk management and control systems.
• Balance sheet and liquidity risk. In-depth balance sheet
analysis and liquidity risk measurement that support decisions
and controls to ensure liquidity levels cover short- and long-
Debt issuances in 2022
We issued more than EUR 57 bn in debt in 2022,
diversified by product, currency, country and maturity
EUR 39.6 bn
Medium- and long-term debt
EUR 17.6 bn
Securitizations
Comfortable and stable funding structure
High contribution from customer deposits
101%
LTD ratio
term needs with stable funding sources, and manage funding
costs.
Each subsidiary has a conservative risk appetite framework
(based in their 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 markets;
– 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 the plan's components throughout the year.
Santander continues to carry out the Internal Liquidity Adequacy
Assessment Process (ILAAP) as part of 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 a board-approved ILAAP
assessment to supervisors 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 local liquidity
management models).
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.
We produce frequent, detailed liquidity monitoring reports for
management, control and reporting purposes. We also regularly
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send the most relevant information 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 form part of our
governance model, including 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 2022
Funding strategy and structure
In recent years, our funding strategy has focused on extending
our management model to all subsidiaries.
It is based on a model of autonomous subsidiaries that are
responsible for covering their own liquidity needs. This enables
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 business trends,
market conditions and new regulations. In 2022, we improved
specific aspects, without significant changes in liquidity
management or funding policies and practices. This will enable
us to start 2023 from a strong position and with no growth
restrictions.
Our subsidiaries continue to apply the same funding and
liquidity management strategies to:
• maintain sufficient and stable medium- and long-term
wholesale funding levels;
• ensure the right volume of assets that can be discounted in
central banks as part of the liquidity buffer; and
• generate liquidity from the retail business.
These developments have strengthened Santander's funding
structure:
• Customer deposits are our main funding source . They are
highly stable because they mainly arise from retail customer
activity. At the end of December 2022, they represented just
over two thirds of net liabilities (i.e. of the liquidity balance
sheet) and nearly 99% of loans and advances to customers.
Their weight (as a percentage of loans and advances to
customers) increased year-on-year. For more details, see the
Liquidity in 2022 section.
Group's liquidity balance sheet
%. December 2022
• Financial assets
• Fixed assets
& other
• Loans and
advances to
customers
• ST funding
• Equity and other
• M/LT debt issuance
• Securitizations
and others
• Customer
deposits
Note: Liquidity balance sheet for management purposes is the consolidated balance
sheet, net of trading derivatives and interbank balances. For more information on
the consolidated balance sheet, see the 'Consolidated financial statements' chapter.
• M/LT funding accounted for nearly 17% of net liabilities at the
end of 2022 (similar to 2021). 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 (to third parties) at
the end of 2022 was EUR 186,689 million. Our maturity profile
is comfortable and well balanced by instruments and markets
with a weighted average maturity of 4.3 years (slightly below
average maturity of 4.8 years at the end of 2021).
These tables show our funding by instrument over the past
three years and by maturity profile:
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Group. Stock of medium- and long-term debt issuances A
EUR million
Preferred
Subordinated
Senior debt
Covered bonds
Total
2022
8,693
17,573
116,350
44,073
186,689
2021
10,238
16,953
104,553
41,908
173,652
2020
8,925
13,831
95,208
49,388
167,351
A. Placed in markets. Does not include securitizations, agribusiness notes and real estate credit notes.
Group. Distribution by contractual maturity. December 2022
EUR million
Preferred
Subordinated
Senior debt
Covered bonds
Total
0-1
month
—
—
1,818
—
1,818
1-3
months
—
—
3,386
1,248
4,634
3-6
months
—
—
4,119
1,000
5,119
6-9
months
—
—
2,216
987
3,202
9-12
months
—
663
2,795
200
3,658
12-24
months
—
—
22,891
7,642
30,533
2-5 more than
5 years
8,693
9,373
27,543
12,618
58,226
years
—
7,538
51,581
20,378
79,497
Total
8,693
17,573
116,350
44,073
186,689
Note: There are no additional guarantees for any of the debt issued by the Group’s subsidiaries.
Covered bond issuance recovered sharply in 2022. Santander
was not very active in this market in previous years due to
Santander's focus on building the MREL and TLAC requirements.
In addition to M/LT wholesale debt issuances, we have
securitizations placed in the market and collateralized and other
specialist funding totalling EUR 54,890 million (including EUR
10,720 million in debt instruments placed with private banking
clients in Brazil). Average maturity was 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 2021.
Loans and advances to customers and M/LT wholesale
funding
%. December 2022
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 is comfortably covered by liquid
assets.
The outstanding short-term wholesale funding balance at the
end of 2022 was EUR 44,146 million. 61% was in European
Commercial Paper, US Commercial Paper and domestic
programmes issued by Banco Santander, S.A.; 12% in
certificates of deposit and commercial paper programmes in the
UK; 15% in Santander Consumer Finance (SCF) commercial
paper programmes; and 12% in issuance programmes in other
subsidiaries.
Liquidity in 2022
The key liquidity takeaways from 2022 were:
• basic liquidity ratios remained at comfortable levels;
• regulatory liquidity ratios were well above minimum
requirements; and
• our use of encumbered assets in funding operations was
moderate.
In order to tackle high inflation and return it to more normalized
levels, central banks continued to withdraw stimulus measures
that were introduced in 2021. This was done both by removing
liquidity from the system and by raising interest rates.
Santander repaid a significant part of the funding (with original
maturity in 2023) from the ECB's TLTRO-III programme early in
Q4 2022. We were able to replace these funds as we
strengthened balance sheets through a combination of growth
in customer deposits, an increase in short-term instruments and
greater activity in medium and long-term issuances, with the
objective of maintaining regulatory liquidity ratios and internal
metrics at prudent levels after repayment.
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Our liquidity position has always remained solid. Commercial
activity was not a significant drain on liquidity in 2022, given
that credit growth was coupled with deposit growth.
i. Basic liquidity ratios at comfortable levels
At the end of 2022, Santander recorded:
• a stable credit to net assets ratio (i.e. total assets minus
trading derivatives and inter-bank balances) of 72%, slightly
lower than previous years. 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 101%, a very comfortable
level (well below 120%) and lower than 2021 year-end.
Lending grew moderately in constant euros in almost all our
markets, including consumer businesses, and deposits
performed positively;
• a customer deposit plus M/LT funding to net loans and
advances ratio of 122% (117% in 2021);
The table below shows the principal liquidity ratios of our main
subsidiaries at the end of 2022:
Main subsidiaries' liquidity metrics
%. December 2022
Spain
United Kingdom
Portugal
Poland
United States
Mexico
Brazil
Chile
Argentina
Digital Consumer Bank
Group
Deposits + M/
LT funding /
Loans A
143%
107%
115%
135%
123%
117%
126%
89%
189%
69%
122%
LTD ratio
75%
109%
93%
75%
105%
93%
96%
149%
53%
209%
101%
• limited recourse to short-term wholesale funding (around 3%
A. Loans and advances to customers.
of total funding), in line with previous years; and
• an average structural surplus balance, defined as the excess
of structural funding sources (deposits, M/LT funding and
capital) against structural liquidity needs from fixed assets
and loans, of EUR 237,141 million in the year.
The consolidated structural surplus stood at EUR 274,492
million at year-end. Fixed-income assets (EUR 171,900
million), equities (EUR 12,745 million) and net interbank and
central bank deposits (EUR 133,993 million) were partly offset
by short-term wholesale funding (-EUR 44,146 million). This
totalled around 19% of our net liabilities (slightly up from the
end of 2021).
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
Loan 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.
2022
72%
101%
2021
75%
106%
2020
76%
108%
122%
117%
116%
3%
2%
2%
19%
16%
15%
In 2022, the key drivers of Santander's and its subsidiaries'
liquidity (in constant euros, i.e. excluding exchange rate impact)
were:
• lending growth in all our markets, including Digital Consumer
Bank (DCB). There was also general growth in customer
deposits. As a result, the retail funding gap increased only
slightly; and
• issuances continued at a similar rate to the previous year and,
overall, were in line with our funding plan for the year. North
America and DCB issued less than planned due to lower-than-
expected business growth, while we were more active in
capital markets in Europe.
In 2022, Santander issued EUR 57,247 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) increased by around 36% to EUR 39,602 million at
the end of the year. Greater activity in preferred and TLAC
eligible senior debt and covered bonds more than offset lower
hybrids issuances. Securitizations and structured finance
totalled EUR 17,645 million in 2022, down 23% year-on-year.
Spain and the UK issued the most M/LT fixed income debt (not
including securitizations), followed by the US and Brazil. The UK
and the US registered the highest absolute increases in the year.
The main year-on-year decrease occurred in Brazil.
SCF and SC USA were the main issuers of securitizations.
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The charts below show issuances by instrument and region:
Distribution by instrument and region
%. December 2022
Mortgage covered bonds represented 16% of the total
issuances in 2022, compared to just 1% in 2021. This increase
was due to the recovery of this product in its traditional markets
(Spain and the UK) for the reasons mentioned above. Senior
debt accounted for 53% of total issuances compared with 45%
in 2021. In 2022, the weight of TLAC-eligible senior debt versus
senior preferred debt was lower than in 2021. The issuance of
eligible hybrid instruments as AT1 or subordinated debt
depends on changes in risk-weighted assets. Since no additional
issuance was necessary in 2022 as the AT1 and T2 buffers (1.5%
and 2%, respectively) were covered, liquidity was replaced by
other, more cost-efficient instruments.
In 2022 at average exchange rates, the Group issued EUR
12,093 million in subordinated instruments, including EUR
11,970 million in senior non-preferred debt from Banco
Santander, S.A. and senior preferred from the holdings in the UK
and the US; EUR 123 million in subordinated debt issued from
Chile; and, as mentioned, no AT1 eligible hybrid instruments
were issued.
We retained comfortable access to all our markets having
issued and securitized debt in 14 currencies, involving 20 major
issuers from 12 countries and an average maturity of 4.1 years
(slightly lower than 4.5 years in 2021).
ii. Compliance with regulatory liquidity ratios
Within the liquidity management model, in recent years,
Santander has implemented, monitored and complied with the
liquidity requirements established under international financial
regulations early.
Liquidity Coverage Ratio (LCR)
As the regulatory LCR requirement has been at the maximum
level of 100% since 2018, we set a risk appetite of 110% at the
consolidated and subsidiary level.
Our strong short-term liquidity base and our core subsidiaries’
autonomous management helped us reach compliance levels
above 100% (both at the Group and subsidiary level) throughout
the year. Our LCR in December 2022 was 152%, well above the
regulatory requirement.
Moreover, this ratio considers the EUR 55 billion of TLTRO funds
amortized (the vast majority of which were repaid early). Of
these, EUR 50 billion were at the parent bank (82% of its total
outstanding at the beginning of 2022).
This table shows that all our subsidiaries substantially exceeded
the required minimum in 2022 and the comparison versus 2021.
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 2022 December 2021
151%
168%
138%
197%
150%
184%
141%
148%
258%
319%
163%
148%
157%
132%
178%
125%
197%
127%
189%
235%
241%
152%
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Senior debt: 53%Securitization and other: 31%Covered bonds: 16%Europe: 53%North America: 31%South America: 8%DCB: 8%
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NSFR (Net Stable Funding Ratio)
The Regulation (EU) 2019/876 of the European Parliament
dictated that 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. As RSF primarily
refers to any asset deemed illiquid over one year, it needs to be
matched with stable sources of funding.
We set a risk appetite limit for the NSFR of 101.5% 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 which all exceeded 100% in December 2022.
The following table provides details by entities as well as a
comparison with 2021. Santander UK’s figures only include
activities that the Financial Services and Markets Act 2000
leaves within the Ring-Fenced Bank. All figures were calculated
using European regulations.
Net Stable Funding Ratio
%
Parent bank
United Kingdom
Portugal
Poland
United States
Mexico
Brazil
Chile
Argentina
Santander Consumer Finance
Group
December 2022 December 2021
118%
138%
124%
156%
128%
134%
116%
124%
180%
115%
126%
118%
137%
116%
146%
109%
120%
112%
117%
195%
109%
121%
iii. Asset Encumbrance
Santander’s use of assets as collateral in structural balance
sheet funding sources is moderate.
Per 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 2022:
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Group. Disclosure on asset encumbrance as at December 2022
EUR billion
Assets
Loans and advances
Equity instruments
Debt instruments
Other assets
Carrying amount of
encumbered assets
308.9
197.3
8.3
71.7
31.6
Fair value of
encumbered assets
—
—
8.3
71.1
—
Carrying amount of
unencumbered assets
1,425.7
1,143.5
7.4
122.0
152.8
Fair value of
unencumbered assets
—
—
7.4
125.8
—
Group. Collateral received as at December 2022
EUR billion
Collateral received
Loans and advances
Equity instruments
Debt instruments
Other collateral received
Fair value of encumbered collateral Fair value of collateral received or own debt
received or own debt securities issued securities issued available for encumbrance
29.4
—
6.8
22.5
0.1
104.3
1.3
4.8
98.2
—
Own debt securities issued other than own covered
bonds or ABSs
—
0.5
Group. Encumbered assets/collateral received and associated liabilities as at December 2022
EUR billion
Total sources of encumbrance (carrying amount)
Matching liabilities,
contingent liabilities
or securities lent
313.2
Assets, collateral received and own
debt securities issued other than
covered bonds and ABSs encumbered
413.2
On-balance-sheet encumbered assets amounted to EUR 308.9
billion, of which 64% were loans and advances (e.g. mortgages
and corporate loans). Off-balance-sheet encumbrance stood at
EUR 104.3 billion and mainly related to debt securities received
as collateral in reverse repurchase agreements and
rehypothecated ('reused').
strength and diversification, Moody’s, DBRS and Standard &
Poor’s (S&P) still rate Banco Santander, S.A. above the Kingdom
of Spain's (where it is headquartered) sovereign rating while
Fitch rates them equally.
At the end of 2022, the ratings from the main agencies were:
In total encumbered assets amounted to EUR 413.2 billion,
giving rise to associated liabilities of EUR 313.2 billion.
At the end of 2022, total asset encumbrance in funding
operations was 22.1% of the Group's extended balance sheet
under EBA criteria (total assets plus guarantees received: EUR
1,868.4 billion). This is lower than the end-2021 figure (26.1%),
mainly due to the early repayment of collateralized funding
with central banks, in particular the European Central Bank
(TLTRO) and the Bank of England (TFSME).
Rating agencies
DBRS
Fitch Ratings
Moody's
Standard & Poor's
Scope
JCR Japan
Long term
A (High)
Short term
R-1 (Middle)
A-(SeniorA) F2 (Senior F1)
P-1
A-1
S-1+
—
AA-
A+
A2
A+
Outlook
Stable
Stable
Stable
Stable
Stable
Stable
Rating agencies
Rating agencies influence Santander’s access to wholesale
funding markets and the cost of its issuances.
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 again in 2022.
The agencies listed below regularly review our ratings. Debt
ratings depend on several internal factors (business model,
strategy, capital, income generation capacity, liquidity, ESG
related factors, etc.) but also on external factors related to
economic conditions, the industry and sovereign risk across our
footprint.
The agencies' methodologies limit ratings in some cases to the
sovereign's rating of the country where the bank is
headquartered. However, as a testament of our financial
In 2021, Fitch upgraded its outlook from negative to stable due
to the stabilization of the operating environment in Santander's
main markets. In March 2022, S&P Global ratings raised
Santander's outlook on the back of its upward revision to the
sovereign's outlook, placing them both at stable again and
keeping Santander one notch above the Kingdom of Spain.
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Funding outlook for 2023
Santander has begun 2023 with a strong liquidity position,
having already repaid a large part of the ECB financing
maturities corresponding to 2023. The funding outlook for the
year is positive, despite lingering uncertainties due to the
macroeconomic and geopolitical landscape.
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.
Maturities in the coming quarters are manageable, aided by
limited recourse to short-term funding and an expected
medium- and long-term issuance dynamic slightly up on last
year. We will manage each country and optimize liquidity to
maintain a solid balance sheet structure across our footprint.
Our funding plans consider 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). We design them to ensure
Santander and its subsidiaries satisfy regulatory requirements
and those stemming from our risk appetite framework.
Santander has been very active at the beginning of 2023. The
main issuers in the Group (Banco Santander, S.A., UK, Santander
Consumer Finance and Santander Holdings USA) had already
issued EUR 12.2 billion by the end of January 2023, which
represents nearly half of their total funding plan for the year.
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3.5 Capital management and adequacy. Solvency ratios
Executive summary
Fully-loaded capital ratio
The fully-loaded CET1 ratio remained above 12% in every
quarter in 2022
%
Fully-loaded CET1
Strong organic generation driven by profit and RWA
management
Organic generation*
+76 bps
TNAV per share
The TNAV per share was EUR 4.26, +6% year-on-year
including cash dividends
* Net of shareholder remuneration.
Capital management and adequacy at Santander aims to
guarantee solvency and maximize profitability, while complying
with internal capital targets and regulatory requirements.
• assessing capital adequacy to ensure the capital plan is also
consistent with our risk profile and risk appetite framework
and in stress scenarios;
Capital management is a key strategic tool for decision-making
at both the subsidiary and corporate levels.
• developing the annual capital budget as part of the Group's
budgeting process;
We have a common framework that covers capital management
actions, criteria, policies, functions, metrics and processes.
Our most notable capital management activities are:
• establishing capital adequacy and capital contribution targets
that align 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;
• monitoring and controlling budget execution at Group and
subsidiary level and drawing up action plans to correct any
deviations;
• integrating capital metrics into our business management to
ensure alignment with the Group's objectives;
• preparing internal capital reports, and reports for the
supervisory authorities and the market; and
• planning and managing other loss absorbing instruments
• drawing up a capital plan to meet our strategic plan
(MREL and TLAC).
objectives. Capital planning is an essential part of executing
the three-year strategic plan;
Santander's capital function is comprised of three levels:
Regulatory capital
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, securitizations, asset sales and issuances of equity instruments
(hybrid equity instruments and subordinated debt).
→ The first step in managing regulatory capital is to analyse the capital base, the capital adequacy ratios under the
→ Economic capital
→ Profitability and pricing
Creating value and maximizing profitability is one of Santander's main objectives. We carefully select the most
appropriate markets and portfolios based on profitability while considering risk. Thus, profitability and pricing are
integral to our key capital model processes.
The economic capital model aims to ensure we adequately allocate our capital to cover every risk we are exposed
to a result of our activity and risk appetite. It also aims to optimize economic value added at Group and business
unit level.
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Strengthening our active capital management culture
We continue to focus on disciplined capital allocation and
shareholder remuneration while maintaining our fully-loaded
CET1 target between 11%-12%.
Continuous improvement of our capital ratios reflects our
profitable growth strategy and a culture of active capital
management at all levels.
The Capital and Profitability Management team is in charge of
our capital analysis, adequacy and management, coordination
with subsidiaries on all matters related to capital and
monitoring and measuring returns.
Every subsidiary and business unit has drawn up individual
capital plans that focus on maximizing the return on equity.
Santander places a high value on its long-term sustainability
and the efficient use of capital in the incentives of the Group's
main executives. We considered certain aspects relating to
capital management and returns when setting senior managers'
2022 variable remuneration:
• Metrics included return on tangible equity (RoTE), return on
risk-weighted assets (RoRWA) and customer-related
measures.
• Qualitative adjustments considered included efficient
management of solvency metrics, operational risk
management, risk appetite, sustainability and strength of
results and effective cost management.
Action plans
We are working on a programme of continuous enhancement of
capital-related infrastructure, processes and methodologies, to
further bolster active capital management by responding
quicker to the numerous and increasing regulatory
requirements and efficiently carrying out all associated
activities.
The main measures we took in 2022 were:
Issuances of capital hybrid and other loss-absorbing
instruments
Banco Santander, S.A. did not issue any hybrid instruments
(subordinated debt and contingently convertible preferred
shares - CoCos) in 2022 but did issue EUR 5,536 million in senior
non-preferred debt.
Dividends and shareholder remuneration
For 2022, the board continued the policy of allocating
approximately 40% of the Group’s underlying profit to
shareholder remuneration, split in approximately equal parts in
cash dividends and share buybacks.
• Interim remuneration. On 27 September 2022, the board
agreed to:
• Pay an interim cash dividend of EUR 5.83 cents per share
entitled to receive dividends (equivalent to approximately
20% of the Group’s underlying profit in H1 2022), charged
to 2022 results. It was paid on 2 November 2022.
• Implement the First 2022 Buyback Programme worth
approximately EUR 979 million (approximately 20% of the
Group’s underlying profit in H1 2022). It was approved by
the ECB on 17 November 2022 and ran from 22 November
2022 to 31 January 2023. Banco Santander bought back
340,406,572 own shares, which was 2.03% its share capital
at that time (see ‘First 2022 Buyback Programme’ in the
'Corporate Governance' chapter).
• Final remuneration. On 27 February 2023, within the 2022
shareholder remuneration policy, the board of directors
decided to:
• Submit a resolution at the 2023 AGM to approve a final cash
dividend in the gross amount of EUR 5.95 cents per share
entitled to receive dividends. If approved at the AGM, the
dividend would be payable from 2 May 2023.
• Implement a Second 2022 Buyback Programme worth EUR
921 million, for which the appropriate regulatory
authorization has already been obtained and that will be
executed from 1 March 2023. For more details, see ‘Second
2022 Buyback Programme’ in the 'Corporate Governance'
chapter.
Once the above mentioned actions are completed, the
shareholder remuneration for 2022 will have been EUR 3,842
million (approximately 40%1
of the underlying profit in 2022)
split in approximately equal parts in cash dividends (EUR 1,942
million) and share buybacks (EUR 1,900 million). For more
details, see section 3.3 'Dividends and shareholder
remuneration' in the 'Corporate Governance' chapter.
1. Subject to approval of the final dividend at the 2023 AGM and completion of the Second 2022 Buyback Programme under the terms agreed by the board (see section 3.3
‘Dividends and shareholder remuneration’ in the ‘Corporate Governance’ chapter).
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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
2022
Phased-in A
2022
2021
73,390 70,208
82,221 79,939
96,373 95,078
2021
74,202 72,402
83,033 82,452
97,392 97,317
609,702 579,478 609,266 578,930
12.04% 12.12% 12.18% 12.51%
13.49% 13.79% 13.63% 14.24%
15.81% 16.41% 15.99% 16.81%
5.37%
4.74%
5.21%
4.70%
A
Regulatory phased-in CET1 ratio
%
12.34
12.51
12.18
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.
Fully-loaded capital ratios in 2022
The fully-loaded CET1 ratio was 12.04% if we do not apply the
transitory IFRS 9 provisions or the subsequent amendments
introduced by Regulation 2020/873 of the European Union.
Of note in the year was organic generation of 138 bps,
supported by profit and our management of risk-weighted
assets. We recorded an impact of 62 bps for shareholder
remuneration, which represents a net generation of 76 bps in
2022. This strong generation was partially offset by the
negative market impacts on available for sale (HTC&S)
portfolios and regulatory drivers.
The fully-loaded leverage ratio stood at 4.70%.
Fully-loaded CET1 ratio in 2022
%
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Regulatory capital ratios (phased-in)
The phased-in ratios are calculated by applying the CRR
transitory schedules.
On a consolidated basis, the minimum levels required by the
European Central Bank are 9.07% for the CET1 ratio, 10.87% for
the tier 1 ratio and 13.26% for the total capital ratio.
Our capital requirements increased in 2022, mainly due to the
reactivation of countercyclical buffers by the competent
authorities in the countries in which we operate (+0.16 pp) and
the ECB's review of the Pillar 2 requirement (P2R), which
increased 0.08 pp (0.05 pp in CET1 and the rest between AT1
and Tier 2).
At year-end, the phased-in CET1 ratio was 12.18%, resulting in
a CET1 management buffer of 311 bps. This shows our ability to
generate capital organically, our solid position to be able to pay
dividends and our strong capital management.
The total phased-in capital ratio was 15.99%. Taking into
account the shortfall in AT1 and Tier 2 (T2), Santander exceeded
the 2022 minimum regulatory requirements (i.e. distance to the
maximum distributable amount - MDA) by 272 bps.
Regulatory capital (phased-in). Flow statement
EUR million
Capital Core Tier 1 (CET 1)
Starting amount (31/12/2021)
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 (31/12/2022)
Additional Capital Tier 1 (AT1)
Starting amount (31/12/2021)
AT1 eligible instruments
AT1 excesses - subsidiaries
Residual value of intangible assets
Deductions
Ending amount (31/12/2022)
Capital Tier 2 (T2)
Starting amount (31/12/2021)
T2 eligible instruments
Generic funds and surplus loan-loss provisions-IRB
T2 excesses - subsidiaries
Deductions
Ending amount (31/12/2022)
Deductions from total capital
Total capital ending amount (31/12/2022)
2022
72,402
(1,979)
906
(2,305)
7,684
(2,654)
680
(1,118)
587
74,202
10,050
(1,758)
539
—
—
8,831
14,865
(653)
(75)
223
—
14,359
—
97,392
A. Countercyclical buffer.
B. Global systemically important banks (G-SIB) buffer.
C. Capital conservation buffer.
The phased-in leverage ratio stood at 4.74%.
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These 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 (phased-in CRR, phased-in IFRS 9)
EUR million
Credit risk (excluding CCR)
Of which: standardized approach (SA)
Of which: the foundation IRB (FIRB) approach
A
Of which: slotting approach
Of which: equities under the simple risk-weighted approach
Of which: the advanced IRB (AIRB) approach
Counterparty credit risk (CCR)
B
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
B
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 B C
It includes equities under the PD/LGD approach.
A.
B. For more detail see Pillar 3 report.
C. Total does not include amounts below the thresholds for deduction.
RWAs
2022
507,775
274,922
11,759
14,509
2,828
188,442
13,096
9,493
—
278
1,097
2,229
4
9,898
4,471
2,156
3,270
—
15,791
7,521
8,270
—
62,702
—
62,702
—
25,868
609,266
2021
477,977
262,869
9,483
14,672
2,219
173,956
15,674
13,639
—
268
1,767
—
1
9,268
5,226
1,366
2,676
—
17,224
6,844
10,380
—
58,786
—
58,786
—
21,032
578,930
Minimum
capital
requirements
2022
40,622
21,994
941
1,161
226
15,075
1,048
759
—
22
88
178
0
792
358
173
262
—
1,263
602
662
—
5,016
—
5,016
—
2,069
48,741
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RWAs by geographical distribution (phased-in CRR, phased-in IFRS 9)
EUR million
TOTAL
EUROPE
o/w:
Spain
o/w:
United
Kingdom
NORTH
AMERICA o/w: US
SOUTH
AMERICA
o/w:
Brazil
Rest of
the world
Credit risk (excluding CRR)
507,775 299,188
124,858
70,519
90,572
67,004
112,099
79,007
Of which: internal rating-based (IRB) approach A
222,978 175,935
77,292
52,204
17,622
8,773
25,297
21,327
Central governments and central banks
—
—
—
—
—
Institutions
Corporates – SME
11,422
6,713
1,114
1,373
2,298
123,261
81,227
42,034
16,387
15,192
Of which: Corporates - Specialized Lending
15,471
11,254
3,134
4,902
Of which: Corporates – Other
Retail - Secured by real estate SME
18,904
17,790
14,971
4,719
4,703
4,576
616
20
Retail - Secured by real estate non-SME
48,059
47,846
14,987
29,467
Retail - Qualifying revolving
Retail - Other SME
Retail - Other non-SME
Other non-credit-obligation assets
4,547
8,574
4,541
8,557
20,818
20,771
1,577
1,577
1,089
5,850
6,064
1,577
2,649
4
2,304
—
2,919
802
5
92
1
12
21
—
—
1,368
7,312
1,605
10
4
75
1
11
2
—
5,915
4,125
—
811
—
1,601
—
644
23,612
20,663
3,229
758
309
2
55
3
3
21
—
—
288
1
4
1
1
14
—
540
3
8
66
2
2
6
—
Of which: standardized approach (SA)
274,922 111,876
35,861
18,503
73,253
58,265
88,001
58,647
1,792
Central governments and central banks
26,579
11,537
10,217
12,285
11,163
215
330
369
—
—
104
53
—
—
4,610
1,506
47,920
22,911
98,556
35,151
35,103
10,804
12,251
3,305
1,414
257
157
158
135
101
257
100
158
59
33
—
—
—
585
3,115
3,012
2,152
1,345
19
—
14
116
—
5
—
—
—
—
318
6,288
6,114
726
341
38
246
4
—
—
2,543
15
198
—
—
—
15
198
—
—
211
116
—
—
183
—
—
—
1,639
9,970
1,548
9,022
1,422
14,650
1,171
8,252
31,717
25,853
30,594
24,085
1,093
10,972
4,296
7,860
3,542
1
—
50
—
—
1
—
50
—
—
13,319
4,642
1,312
3,895
3,042
315
—
—
—
76
—
—
—
—
47,082
25,830
15,253
4,423
11,851
10,176
9,375
6,541
18,120
18,120
18,120
5,388
2,828
9,903
13,096
9,493
—
278
1,097
2,229
4
9,898
5,388
2,828
9,903
7,385
6,679
—
156
551
—
4
6,968
15,791
10,477
7,521
4,570
8,270
62,702
5,907
25,781
—
—
5,388
2,828
9,903
6,007
5,540
—
4
463
—
4
1,820
9,998
4,091
5,907
12,694
—
—
—
—
—
600
440
—
113
47
—
—
2,760
245
245
—
6,790
—
—
—
—
—
911
766
—
59
85
—
—
2,502
1,568
1,568
—
9,072
—
—
—
—
—
632
547
—
57
28
—
—
2,481
1,568
1,568
—
5,168
—
—
—
—
—
—
—
—
—
2,570
2,047
1,795
1,386
—
62
460
—
—
353
3,757
1,394
2,363
16,365
—
—
8
401
—
—
328
1,326
1,326
—
9,193
—
—
2
—
—
43
388
7
9
—
—
6
—
—
27
—
—
—
—
2,230
1
—
—
—
2,229
—
75
—
—
—
11,484
—
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
Other items
Of which: Equity IRB
Under the PD/LGD method
Under simple method
Equity exposures under risk weighted approach
Counterparty credit risk
Of which: standardized approach
Of which: internal model method (IMM)
Of which: exposures to a CCP
Of which: CVA
Of which: other CCR
Settlement risk
Securitization exposures in banking book (after cap) B
Market risk
Of which: standardized approach (SA)
Of which: internal model method (IMA)
Operational risk
Of which: basic indicator approach
Of which: standardized approach
Amounts below the thresholds for deduction and other
non-deducted investments (subject to 250% risk weight)
Total C
Of which: advanced measurement approach
—
—
—
62,702
25,781
12,694
6,790
9,072
5,168
16,365
9,193
11,484
25,868
13,903
12,728
—
3
—
2,112
—
—
—
—
9,820
9,181
—
35
609,266 349,803
155,381
80,915
104,626
76,854
135,144
91,649
19,705
Note: Breakdown according to debtor’s residency, except operational risk (management criteria) and some residual standardized approach exposures (legal basis).
A. Including IRB counterparty credit risk.
B. Does not include 1,250% deductions.
C. Total does not include amounts below the thresholds for deductions (subject to 250% risk weight).
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In contrast to regulatory criteria, we consider such intangible
assets as DTAs and 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 internal management tool that
helps us develop our strategy, assess solvency and manage
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 several 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 subsidiary
level.
Required economic capital in December 2022 amounted to EUR
70,951 million. Compared to the available economic capital
base of EUR 91,716 million, this implies a capital surplus of EUR
20,765 million.
This table presents the main changes to capital requirements
by credit risk:
Credit risk capital movements A
EUR million
Starting amount (31/12/2021)
Asset size
Model updates
Regulatory
Acquisitions and disposals
Foreign exchange movements
Other
Ending amount (31/12/2022)
RWAs
500,884
1,449
16,663
—
1,857
8,549
—
529,401
Capital
requirements
40,071
116
1,333
—
149
684
—
42,352
A. Includes capital requirements from equity, securitizations and counterparty risk
(excluding CVA and CCP).
Credit risk RWAs increased EUR 28,221 million in 2022, with a
notable impact from models, mainly in Spain. The effect from
exchange rate movements was +EUR 8,549 million, mainly due
to the BRL's and USD's appreciation, partially offset by the
GBP's depreciation. The acquisition of Pierpont Capital Holdings
LLC resulted in an increase in credit risk of EUR 1,857 million. In
terms of asset size, of note was business growth in South
America and Digital Consumer Bank, offset by the impact from
securitizations the Group carried out in the year (-EUR 13,205
million).
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 using an
internal model. To calculate the required capital, we determine
our solvency level based on our long-term rating target of 'A' (in
line with the Kingdom of Spain); 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 and their impact differ by country, which was
evident during the covid-19 pandemic. Groups with a global
presence tend to have more stable results and are more
resistant to market or portfolio crises, which translates into
lower risk.
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Reconciliation of economic and regulatory capital
EUR million
The charts below show the Group’s economic capital needs at
31 December 2022, by region and risk type.
Net capital and issuance premiums
Reserves and retained profits
Valuation adjustments
Minority interests
Prudential filters
Other A
Base economic capital available
Deductions
Goodwill
Other intangible assets
DTAs
Other
Base regulatory (FL CET1) capital
available
2022
54,610
67,978
(35,068)
7,426
(708)
(2,522)
91,716
(18,603)
(14,484)
(2,698)
(1,421)
237
2021
55,683
61,436
(34,395)
6,736
(637)
(1,184)
87,639
(16,922)
(13,911)
(2,153)
(859)
(509)
73,350
70,208
Base economic capital available
Economic capital required B
Capital surplus
91,716
70,951
20,765
87,639
64,308
23,332
A. Includes: deficit of provisions over economic expected loss, pension assets and
other adjustments.
B. 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 2022 methodology.
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 2022
Our distribution of economic capital among core business areas
is an indication of our business and risk diversification. Europe
accounted for 44% of capital needs; North America, 20%; South
America, 24%; and Digital Consumer Bank (DCB) 12%.
Outside our operating areas, the Corporate Centre mainly takes
on goodwill risk and structural exchange rate risk (from
maintaining stakes in foreign subsidiaries denominated in
currencies other than the euro).
The benefit from diversification included in the economic capital
model, including intra-risks (largely similar to geographic
diversification) and inter-risk diversification was approximately
25-30%.
Distribution of Group economic capital needs by region and risk type
EUR million. December 2022
Grupo Santander. Total requirements: 70,951
Corporate Centre
17,978
Europe
23,503
North America
South America
10,760
12,665
DCB
6,045
All risks:
Goodwill
Market
DTAs
Others
All risks:
61% Credit
24% ALM
13% Market
1% Others
All risks:
46% Credit
16% ALM
10% Fixed Assets
28% Others
All risks:
55% Credit
11% DTAs
10% Business
24% Others
All risks:
51% Credit
14% Operational
11% ALM
24% Others
64%
9%
7%
20%
347
Credit: 38%Goodwill: 16%Market: 11%DTAs: 10%Business: 6%ALM: 6%Operational: 5%Other: 8%
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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 units' management 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 obtain each subsidiary’s underlying
result for the year.
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
2022 was 11.2% (compared to 10.1% in 2021).
On top of reviewing the cost of capital every year, we also
estimate 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
2022. The 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
2022
2021
RoRAC
16.1%
24.4%
24.1%
26.2%
14.5%
EVA
1,493
1,582
1,299
1,043
2,446
RoRAC
12.7%
34.6%
25.4%
28.1%
14.2%
EVA
631
2,542
1,323
1,053
2,969
Note: The 2021 economic capital requirements in this table have been recalculated
based on the 2022 methodology to facilitate their comparison.
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 assess risks and
solvency thoroughly to determine capital requirements if a bank
fails to meet its regulatory and internal capital objectives.
Santander has an internal capital stress and planning process to
respond to various regulatory exercises and is a key tool
integrated within management and strategy. They aim 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
• Central and recession
• Idiosyncratic: based on specific risks the entity faces
• 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
Capital requirements
forecasts
• Consistent with projected balance sheet
• Regulatory and economic risk parameters (PD, LGD and EAD)
Solvency analysis
• 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 component that:
measure capital adequacy and ensure we meet all internal
capital and regulatory requirements.
• ensures current and future solvency, even in adverse
economic scenarios;
• facilitates communication with the market and supervisors;
• ensures comprehensive capital management, analyses
specific effects and integrates them into strategic planning;
• enables a more efficient use of capital; and
• helps formulate capital management strategy.
Senior managers are fully involved in and closely oversee
capital planning under a framework that ensures proper
governance and is subject to the robust challenge, review and
analysis.
In capital planning and stress analysis exercises, calculating the
required provisions under stress scenarios is key, especially to
cover losses on credit portfolios and is particularly important for
income statement forecasts under adverse scenarios.
To calculate loan-loss provisions of the credit portfolio, we use a
methodology that ensures provisions cover loan losses
projected by internal expected loss models, based on exposure
at default (EAD), probability of default (PD) and loss given
default (LGD parameters), at all times.
In 2018, we adapted this methodology to incorporate changes
brought in by the new IFRS 9 regulations, with models to
calculate balances by stages (S1, S2, S3) as well as the
movements between them and the loan-loss provisions in
accordance with the new standards.
Our capital planning and stress analysis culminate in an analysis
of solvency under various scenarios over a set period to
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 subsidiaries use it as an internal management
tool, particularly to respond to local regulatory requirements.
We have undergone eight external stress tests since the
beginning of the economic crisis in 2008. 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.
The ECB determines and sets Pillar 2 Guidance (P2G) according
to the results of the adverse scenario in these supervisory stress
tests, including the EU-level stress tests carried out by the EBA.
When determining the P2G, the ECB considers the maximum
impact expected on the CET1 ratio, which, for this purpose, is
the difference between the lowest CET1 ratio in the adverse
scenario over the projection horizon and the real CET1 ratio at
the starting point.
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 globally and
locally. We carry out these capital planning processes using
tools shared throughout the Group.
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Due to the special situation resulting from the covid-19
pandemic, capital planning capacities and stress tests enabled
us to analyse various pandemic scenarios and ensure capital
adequacy in each of them.
We incorporate an analysis of the potential impact of climate
risks (transition risk and physical risk) into internal stress
exercises in addition to expressly considering them in the
macroeconomic scenarios definitions, in line with industry best
practices and supervisory expectations.
In 2022, Santander participated in the ECB's first climate risk
stress test comprising three parts: first, the supervisor assessed
entities’ internal capacities; second, the entities provided
information on their main customers' emissions and revenue
shares by activity sector to the supervisor; and third, the ECB
made projections under various transition risk, heat wave risk
and flood risk scenarios. The ECB published aggregate results
for the industry as a whole.
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Total Loss-Absorbing Capacity (TLAC) and Minimum
Requirement for own funds and 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 that is the greater of 18% of risk-
weighted assets or 6.75% of the Basel III Tier 1 leverage ratio
exposure from 1 January 2022.
Some jurisdictions have already transposed the TLAC term sheet
into law (as is the case in Europe, in the US and in Mexico as of 1
January 2023); 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 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 of 3.5%).
As of 31 December 2022, the TLAC of the resolution group
headed by Banco Santander, S.A. stood at 24.81% of risk-
weighted assets and 8.79% 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 May 2022, 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 the highest of 28.95% of the
1
Resolution Group’s RWAs
Group’s leverage ratio exposure, based on 31 December 2020
data.
and 13.20% of the Resolution
As of 31 December 2022, Banco Santander, S.A. met its MREL
requirements having issued eligible instruments during the
year, specifically 38.01% of RWAs and 16.32% of the leverage
ratio exposure.
Of the total MREL requirement, a minimum subordination level
was fixed as the highest 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
2022, the MREL subordinated figures of the Resolution Group
headed by Banco Santander, S.A. were 32.36% and 13.90%,
respectively.
TLAC 2022
%
MREL 2022
%
A. CBR: Combined Buffer Requirement, comprising a capital conservation buffer (2.5%), a G-SII buffer (1%) and a countercyclical capital buffer (0.18%).
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 the year
relating to: (i) preparing and strengthening mechanisms for a
potential crisis; (ii) recovery plans; and (iii) preparing and
executing initiatives to improve resolvability plans.
Corporate framework for special situations and resolution
The framework enables our units to aggregate and clearly
interpret the various mechanisms for monitoring, escalating and
managing both financial and non-financial events as well as
governance. It helps link the action plans (e.g. contingency
plans, business continuity plans, recovery plan) to be executed
in each phase.
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
instance, in the most severe stages of a hypothetical crisis, the
'Gold committee', composed of the Group’s top executives,
supported by the 'Silver forum' and other specialist 'Bronze
teams', would be the leading decision-making body.
The framework aims to encourage the sharing of best practices
across the Group and continuous collaboration between
subsidiaries and corporate teams (including coordination in the
recovery and resolution planning phases) to continue to develop
our management and control model in the most effective way.
Following the Banco Santander, S.A. board of directors'
ratification of the corporate special situations and resolution
framework in Q2 2021, in 2022:
• All country units adhered to the framework and transposed
the reference regulatory tree. Modifications were limited to
local laws and regulatory requirements. We carried out
several training exercises with corporate and subsidiary
governance bodies to promote the necessary dissemination of
the changes and collaborative discussions.
• We reinforced crisis prevention mechanisms by:
– setting up a working group, which meets regularly to
identify and react to threats early;
– carrying out a new simulation exercise (involving local
units) to be better prepared for stress situations; and
– strengthening the mechanisms for reporting to crisis
governance bodies, with a new dashboard and a tool for
monitoring static and forward-looking crisis management
indicators (Special Situation Tool).
• Regardless of the management of more local events, these
changes introduced to the new crisis management framework
proved effective in the wake of the impacts of the war in
Ukraine on energy supply, supply chains, refugees and
humanitarian aid:
– We encouraged coordination with subsidiaries through
crisis governance bodies (e.g. global Silver forum) or via
the recurring issuance of corporate guidelines.
– We improved our ability to respond quickly and
proactively to critical events by way of the Bronze-level
Event Response Group (ERG).
– We simplified our decision-making process (e.g. approval
of 2022 objectives and guidance) and escalation process
between crisis management and statutory government
bodies (e.g. board of directors and executive committee).
• During 2022, in crisis prevention and management, we
continued to implement the new regulatory tree and fulfilled
the agreed actions arising from the 'lessons learned from
covid-19' exercise. We also responded effectively to global
uncertainties (e.g. arising from the war in Ukraine) and local
events.
Recovery plans
Context. Santander drew up its thirteenth corporate recovery
plan in 2022. 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 the 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 that
could materialize in idiosyncratic, systemic and combined
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.
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Progress in 2022. In May, the ECB sent the CEO a letter
indicating the end of the operational relief offered for the last
two years in response to the covid-19 pandemic. The ECB asked
that we include four new scenarios considering the implications
of the war in Ukraine and that in the idiosyncratic scenario we
include a cyber incident as a source of severe financial
implications.
Like every year, the document fully covered all of the ECB’s
recommendations. Specifically:
• new indicators to meet the EBA's Guidelines on recovery plan
indicators under Article 9 of Directive 2014/59/EU, published
in November 2021;
• more extreme scenarios so that the systemic and combined
scenarios break the red threshold (9% CET1);
• four stress scenarios to meet regulatory requirements:
idiosyncratic, regional, global and combined (global crisis plus
idiosyncratic);
• impact estimation on a larger number of indicators, mainly
MREL and TLAC; and
• new recovery measures.
The key takeaways from our review of the 2022 corporate plan
were:
• no material interdependencies between main subsidiaries;
• ample recovery capacity in all scenarios through available
measures. Our geographic diversification model is a great
benefit from a recovery standpoint;
• sufficient capacity in each subsidiary to emerge from a
recovery situation on its own, which strengthens capital and
liquidity within our autonomous subsidiaries model;
• sufficiently robust governance to manage financial and non-
financial stresses that vary in nature and intensity; and
• amid a serious financial or solvency crisis, no 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)
would 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 2022; 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 subsidiaries (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 submitted to
and discussed by the Silver forum, Gold committee, risk control
committee and the risk supervision, regulation and compliance
committee beforehand. Local plans are approved by 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 and provides them with all information they
request1
upheld their decision on our Multiple Point of Entry (MPE)
strategy to be used in a hypothetical resolution.
. The members of the Crisis Management Group (CMG)
This strategy is consistent with our legal and business structure,
which is organized into twelve resolution groups that can be
resolved independently without involving other parts of the
organization, given the low level of interconnection.
Meetings with the Single Resolution Board (SRB) and its
working priorities letters confirmed that there are no
substantial impediments to Banco Santander, S.A.’s
resolvability. However, this will have to be confirmed in
December 2023 (when banks must have reached full
resolvability). In fact, the SRB highlighted the significant
progress the Group has made in recent years to improve its
resolvability.
In 2022, we prepared the multi-annual work plan to achieve
resolvability. Banco Santander, S.A.’s board of directors
approved it in January 2023, prior to its definitive submission to
the SRB and in which the following actions, among others, were
defined:
1. With the exception of Santander US whose resolution plans correspond to the individual entities.
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1) Ensure we establish processes and develop capabilities to
measure and report liquidity needs in resolution and complete
the data template to report on the liquidity situation during
resolution.
In 2021, we identified key liquidity entities (KLEs) that provide
liquidity to other entities in the Group, depend on the liquidity
received from other entities in the Group or perform liquidity
management functions for the resolution group.
This analysis consisted of a comprehensive individual
assessment of the business lines, activities, business model and
international footprint to outline the core bank's post-resolution
objectives. In addition, the analysis included an assessment of
each our recovery measures and others that complemented this
analysis.
In 2023, Santander is expected to further detail an optimal mix
of measures and quantify its total capacity through projections.
We also identified the key liquidity drivers in resolution, which
could trigger a substantial change or deterioration in the bank's
liquidity position in resolution.
We developed a methodology to identify, process and analyse
relevant data to estimate the liquidity position in resolution.
6) Ensure information systems can quickly provide the high-
quality information required in resolution.
We enhanced and automized our governance of information
provided to the resolution authority for drawing up resolution
plans, including these projects in 2022:
In 2022, we focused on identifying and mobilizing optimal
collateral to obtain liquidity in a recovery situation.
• automation of Santander Consumer Finance's liability data
report and additional liability report;
2) Demonstrate the separability of relevant subsidiaries in the
Banco Santander, S.A. resolution group.
This analysis must incorporate an assessment of potential risks
to operational and business continuity.
3) In 2022, G-SIBs were required to analyse the impact of
reducing the trading portfolio to its base minimum in a
resolution and during the post-resolution phase, to avoid
potential contagion effects in the financial system.
An operational manual or playbook detailing the governance
complemented this analysis. In 2023, we expect to incorporate
this analysis into our systems (Steady-State) and test its
robustness on an annual basis.
4) In 2022, we carried out a comprehensive analysis on the
loss transfer mechanism and simultaneous recapitalization
between relevant subsidiaries with internal MREL and Banco
Santander, S.A., as the entry point for the resolution group.
We complemented this analysis with a quantitative simulation
and then each subsidiary prepared an individual playbook
incorporating this process. In 2023, we aim to further develop
this playbook and test this mechanism during the planned dry
run.
5) In 2022, the resolution group drafted a preliminary version
of its restructuring plan in a post-resolution phase, to ensure
its viability after resolution.
• automation of Banco Santander, S.A.’s TLAC/MREL reports;
• automated production of the necessary data to carry out a
valuation exercise in resolution;
• automated production of the dataset for bail-in (simulation);
• a dry run generating the MIS information; and
• a self-assessment of our ability to generate asset information
on a selected number of portfolios for each of the Group's
material entities.
In 2023, we expect to focus on enhancing automation through
dry runs, testing and template development.
7) Guarantee operational continuity in resolution situations.
In 2022, we identified the 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.
We continued to work on making contingency plans for market
infrastructure services more operational and executive.
We addressed the development of retention and succession
plans.
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8) Foster a culture of resolvability.
Santander continued to involve more senior managers in
resolution planning. We escalated the three-year plan, which
includes the resolution work streams, to the board. We also
reported on progress to such high-level committees as the Gold
committee, Silver forum, and other bodies. In 2022, senior
management received training and completed the first
governance-level resolution simulation. The CEO was appointed
as the highest resolution officer.
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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
(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 or by 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.
With the aim of increasing transparency and improving capital
allocation to continue enhancing our profitability, on 4 April
2022, we announced that, starting and effective with the
financial information for the first quarter of 2022, inclusive, we
would make a change in the reportable segments.
a. Main changes in the composition of Santander's segments
made in April 2022
The main changes, which have been applied to management
information for all periods included in the consolidated financial
statements, are the following:
1. Reallocation of certain financial costs from the Corporate
Centre to the country units:
• Further clarity in the MREL/TLAC regulation makes it
possible to better allocate the cost of eligible debt issuances
to the country units.
• Other financial costs, primarily associated with the cost of
funding the excess capital held by the country units above
the Group's CET1 ratio, have been reassigned accordingly.
2. Downsizing of Other Europe:
• The Corporate & Investment Banking branches of Banco
Santander, S.A. in Europe and other business lines
previously reported under 'Other Europe' have been now
integrated into the Spain unit to reflect how the business
was managed and supervised, in line with other regions.
The Group recast the corresponding information of earlier
periods to 2022 considering the changes included in this section
to facilitate a like-for-like comparison.
In addition to these changes, we completed the usual 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.
The above-mentioned changes have no impact on the Group's
reported consolidated financial figures.
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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 (SC USA), the specialized business
unit Banco Santander International, Santander Investment
Securities (SIS), the New York branch and Amherst Pierpont
Securities (APS).
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 SCIB, 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: 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 four businesses: Merchant
Acquiring, International Trade, Payments 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.
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 segments, 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
2022
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
12,565
4,539
4,992
747
1,976
312
9,705
6,140
3,565
0
12,979
8,901
1,772
1,778
527
4,022
(652)
38,619
34,880
3,544
825
22
(652)
38,619
Net fee
income
4,493
2,818
390
484
528
273
1,958
771
1,140
47
4,515
3,296
468
542
210
843
(19)
11,790
7,650
1,988
1,291
881
(19)
11,790
Net operating
income
9,507
4,236
2,733
793
1,782
(38)
6,445
4,025
2,547
(126)
11,350
8,730
1,468
846
306
2,807
(1,858)
28,251
Profit before
tax
5,482
2,079
1,900
775
789
(61)
3,790
2,261
1,665
(137)
5,764
4,055
1,062
443
205
2,237
(2,022)
15,250
Underlying
profit
attributable to
the parent
3,810
1,560
1,395
534
364
(42)
2,878
1,784
1,213
(119)
3,658
2,544
677
324
112
1,308
(2,049)
9,605
24,116
4,497
1,566
(71)
(1,858)
28,251
11,772
4,115
1,526
(141)
(2,022)
15,250
7,946
2,805
1,118
(215)
(2,049)
9,605
Total
income
18,030
8,233
5,418
1,295
2,474
609
12,316
7,623
4,623
70
18,025
12,910
2,449
1,833
832
5,269
(1,487)
52,154
42,684
7,395
2,608
953
(1,487)
52,154
Underlying profit attributable to the parent distribution
Distribution 1
by primary segment. 2022
Underlying profit attributable to the parent. 2022
EUR million. % change YoY
1. As a % of operating areas. Excluding the Corporate Centre.
Europe
North
America
South
America
Digital
Consumer Bank
DCB
Global
businesses
2. Changes in constant euros.
Var. Var. 2
+149% +149%
-9%
-10%
+16% +16%
+159% +166%
-21%
-30%
+49% +31%
+10%
-7%
+6%
+9%
+20% +95%
+12% +12%
+33% +31%
+19% +15%
-15%
-10%
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2021
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
10,574
4,166
4,383
722
1,020
282
8,072
5,298
2,773
—
11,307
7,867
1,982
1,065
393
4,041
(624)
33,370
30,596
2,921
476
1
(624)
33,370
Net fee
income
4,344
2,789
434
441
518
163
1,644
782
828
34
3,721
2,728
394
420
179
821
(28)
10,502
7,045
1,744
1,247
493
(28)
10,502
Net operating
income
7,615
3,696
2,223
750
955
(9)
5,886
4,080
1,910
(104)
9,958
7,641
1,513
583
221
2,694
(1,165)
24,989
Profit before
tax
4,034
863
2,149
685
351
(15)
4,531
3,546
1,100
(114)
6,232
4,610
1,156
306
160
1,973
(1,510)
15,260
Underlying
profit
attributable to
the parent
2,750
627
1,537
462
140
(16)
2,960
2,252
816
(108)
3,317
2,320
636
270
91
1,164
(1,535)
8,654
21,766
3,240
1,326
(178)
(1,165)
24,989
12,632
3,071
1,294
(227)
(1,510)
15,260
7,389
2,113
941
(253)
(1,535)
8,654
Total
income
15,934
7,748
4,815
1,313
1,617
441
10,853
7,277
3,553
23
15,337
10,876
2,455
1,388
618
5,099
(819)
46,404
38,869
5,619
2,240
495
(819)
46,404
359
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
4.3 Primary segments
Europe
Underlying attributable profit
EUR 3,810 mn
"Europe continues to drive the fundamental
transformation of our business. Having laid its
foundations in 2021, we accelerated our
transformation towards a more common operating
model in 2022"
António Simões
Regional head of Europe
Strategy
1
Business performance
Results
1
We remain focused on
customer experience and
service quality, and on making
the structural changes needed
to develop a common operating
model for Europe
Loans and advances to
customers were 3% higher,
with strong growth in
individuals and CIB. Customer
funds grew 5% driven mainly
by customer deposits
Underlying attributable profit
rose 38% year-on-year
underpinned by NII growth,
significant efficiency gains
(despite inflation) and controlled
cost of risk
1. In constant euros.
Strategy
Our aim is to create a better bank in Europe, that our customers
and employees will feel a close connection with and to deliver
sustainable value to shareholders and society. We aim to:
• grow our business by serving our customers better, focusing
on capital efficient opportunities (including SCIB and WM&I),
simplifying our mass market value proposition, improving
customer experience and engaging with PagoNxt;
• make headway with our omnichannel strategy by redefining
customer interaction, accelerating our digital transformation
and maintaining close customer relationships through our
teams; and
• create a common operating model in Europe to serve our
businesses through shared technology platforms and services.
This should enable us to become a more agile organization
with one aligned team across Europe.
Our ongoing structural changes aim to deliver higher revenue,
greater efficiency and significantly better customer experience.
In 2022, we accelerated our transformation by simplifying
products, launching the common "Everyday Banking" value
proposition in our four core markets, enhancing our common
app (which we're currently rolling out in the UK) and digital
marketing capabilities, and implementing a series of shared
services across the region (e.g. 2LoD Cyber and Climate Risks,
Costs and FCC). We delivered:
• sustainable business growth, increasing customer loyalty and
revenue per customer. We built on our connectivity,
accelerated our E2E digital transformation and improved
customer and employee experience;
• strong cost discipline which led to a better efficiency ratio;
• solid risk management which allowed us to improve NPL and
coverage ratios; and
• greater shareholder value, with an underlying RoTE of 9.3%
(up from 6.8% in 2021).
360
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Strategy by country in 2022:
Spain
We aligned our strategy with our priorities for Europe focusing
on:
• sustained customer base improvement thanks to a simple, yet
comprehensive, value proposition. We took further steps to
unify our proposition in Europe (i.e. same account in all
markets, common model of green cards) and leveraged our
digital capabilities to develop new products (Home planner,
roboadvisor, Santander Activa) and services (Santander Key);
• progress with product simplification and process automation
(e.g. digital confirming, 100% digital onboarding) to enhance
experience on all channels and reduce the cost to serve at the
same time. Our app for individuals is the core of ONE APP,
which we have rolled out in Portugal and Poland and will soon
fully launch in the UK. In corporate digital banking, we
transformed our channels into a work tool, making it easier
for companies to carry out their daily business with value-
added services that help them make decisions to run efficient
operations; and
• proactive, forward-looking risk management that harnesses
predictive models and optimizes repayment and recovery
processes.
Our work during the year led to a marked improvement in NPS.
Global Banking & Finance Review named us the Best Digital
Bank in Spain in 2022 and we picked up the prize for the Most
Innovative Corporate Banking App in Spain in 2022. These
awards reflect our innovation model and the focus on
technological and digital solutions as part of our
transformation.
United Kingdom
We continued to focus on generating greater commercial
opportunities in our core business areas (Homes, Everyday
Banking and Corporate & Commercial Banking), while
bolstering digitalization, simplification, efficiency and
sustainable growth. In 2022:
• we leveraged the region's scale, capabilities and shared
resources to boost mortgage lending and use of digital
channels;
• we continued transforming the business to meet changing
customer needs. For example, we launched products to help
our customers manage their budgets; and
• we structurally improved efficiency through cost
management.
Portugal
We continued to follow our selective growth strategy that
focused on service quality and profitability. In 2022:
• we continued developing the commercial and digital
transformation of our business to attract more customers and
continue reducing the cost to serve;
• we maintained high and stable volumes of new mortgage
lending (23% market share) and growth in digital and loyal
customers; and
• we were named the Best Bank in Portugal by Global Finance
and World Finance, due to outstanding customer service and
innovation.
Loyal
Customers
Thousands
YoY
Digital
Customers
Thousands
YoY
Europe
10,964
+6%
Europe
17,450
+7%
Spain
3,083
+11%
Spain
5,899
+9%
UK
Portugal
4,566
3%
934
+9%
UK
Portugal
6,980
+5%
1,115
+11%
Poland
2,379
+6%
Poland
3,284
+10%
361
2022 Annual report
Contents
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Mutual funds decreased 13% in constant euros, impacted by
higher interest rates across the board, particularly affecting
business Poland, and by market volatility. However, we
observed a slight recovery during Q4 2022 in some countries.
Results
Underlying attributable profit was EUR 3,810 million (33% of
the Group's total operating areas). Year-on-year it was up 39%
in euros, +38% in constant euros, as follows:
• Total income grew 13% mainly driven by net interest income
which rose 19%, benefitting from higher volumes and interest
rates and active spread management. Net fee income
increased 3% spurred by greater activity and growth in WM&I
and CIB.
• Despite higher inflation, increased activity and investments in
IT, our costs rose just 2% (-7% in real terms). As a result, net
operating income rose 25%.
• Net loan-loss provisions increased due to the normalization of
provisioning in the UK, following releases in 2021, and CHF
mortgage charges in Poland but was partially offset by the
positive performance in Spain and Portugal which allowed us
to maintain the cost of risk stable at 0.39%.
• Other gains (losses) and provisions increased 27%, mainly due
to mortgage payment holidays in Poland, as well as the
settlement agreed with the FCA in the UK regarding AML
controls prior to 2017.
Poland
We focused on delivering the best customer and employee
experience, digital acceleration, product and service
simplification and profitable business growth. In 2022:
• we achieved our target to raise employee engagement and
satisfaction in every quarter;
• we were recognized in important rankings. For example,
Golden Bank considered us the Best Bank in Service Quality
and second in Best in Personal Accounts and Mortgage Loans.
We also ranked first for the second time in a row on the
Forbes list of the Best Banks for SMEs;
• we were one of just six companies and the only financial
institution to get the Equal Pay Certificate from the Business
Center Club, a local organization of business owners; and
• we won the Euromoney award for CEE Best Bank for
Corporate Responsibility, demonstrating that we are one of
the most committed banks to ESG.
Business performance
Loans and advances to customers were flat year-on-year. In
gross terms, minus reverse repurchase agreements and in
constant euros, they rose 3%. We saw growth in individuals in
all countries except Poland where interest rate spikes slowed
mortgage lending. Of note was the strong growth in mortgages
in Spain, Portugal and the UK.
Customer deposits increased 6% compared to 2021. Minus
repurchase agreements and in constant euros, they were up 9%,
with strong growth in CIB, SMEs and Individuals. In Individuals,
demand deposits grew in Spain and Portugal, and time deposits
were up in the UK and Poland as interest rate rises began to
feed through to deposit rates.
Europe. Business performance.
2022. EUR billion and YoY % change in constant euros
Europe. Underlying income statement
EUR million and % change
579 +3%
737 +5%
Gross loans and advances to
customers minus reverse repos
Customer deposits minus
repos + mutual funds
Revenue
Expenses
2022
2021
18,030
15,934
-8,523
-8,319
Net operating income
9,507
7,615
LLPs
PBT
-2,396
-2,293
5,482
4,034
Underlying attrib. profit
3,810
2,750
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+13
+2
+25
+4
+36
+39
+13
+2
+25
+5
+35
+38
362
+2%+4%0%+1%+10%+2%-3%+2%
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Spain
Underlying attributable profit
EUR 1,560 mn
United
Kingdom
Underlying attributable profit
EUR 1,395 mn
Business performance
Despite the challenging macroeconomic environment, we
increased our customer base more than 700 thousand in total
recording growth in every quarter in 2022.
Business performance
Our transformation programme continues to deliver efficiency
improvements through the simplification and digitalization of
key processes.
Loans and advances to customers rose 3% year-on-year. In
gross terms, minus reverse repurchase agreements, growth was
2%.
In Individuals, we saw record mortgage origination in Q3 and
sustained business dynamics in consumer finance and insurance
during the year. In wholesale banking, we continued to lead the
syndicated and leveraged finance market. In corporate lending,
short-term financing reached record highs while demand for
long-term loans fell.
Customer deposits increased 17% compared to 2021. Minus
repurchase agreements, growth was 15%. Mutual funds
decreased 10% due to financial market volatility. Customer
funds rose 10%.
Results
Underlying attributable profit was EUR 1,560 million (13% of
the Group’s total operating areas), 149% higher than 2021. By
line:
• Total income increased 6% propelled by growth in net interest
income, on the back of higher volumes and interest rates
starting to feed through in recent months. Net fee income
increased slightly, driven by CIB.
• Administrative expenses and amortizations fell 1% as our
operating model transformation more than offset both
inflationary pressures and investment in wholesale banking.
The efficiency ratio improved 3.7 percentage points to 48.6%.
• Net loan-loss provisions decreased strongly (-30%) and our
NPL ratio also improved, up 145 basis points to 3.27%.
• Other gains (losses) and provisions was broadly unchanged.
Loans and advances to customers were 4% lower year-on-year.
In gross terms, minus reverse repurchase agreements and in
constant euros they grew 4% underpinned by strong mortgage
growth. Net mortgage lending amounted to GBP 9.8 billion
(GBP 35.5 billion gross new lending) in a robust housing market.
Customer deposits fell 5%. Minus repurchase agreements and
in constant euros, both customer deposits and total customer
funds increased 2%. We saw higher balances in customers'
savings accounts supported by successful eSaver and ISA
campaigns.
Results
Underlying attributable profit was EUR 1,395 million in 2022
(12% of the Group’s total operating areas), 9% down on 2021
affected by the LLP normalization and the aforementioned
settlement agreed with the FCA (EUR 127 million). In constant
euros, underlying profit fell 10%. By line:
• Total income was up 12%, driven by strong net interest
income growth (+13%) on the back of higher mortgage
volumes and margin management in a rising interest rate
environment.
• Administrative expenses and amortizations rose 3% driven by
transformation spending and inflationary pressure. In real
terms, costs were down 6%. Efficiency improved to 49.6%
(-4.3 percentage points).
• Loan-loss provisions rose to EUR 316 million, leading to a cost
of risk of 12 basis points. In 2021, we released provisions
recorded in 2020.
• The negative impact from other gains (losses) and provisions
increased year-on-year, due to such legal contingencies as the
aforementioned settlement agreed with the FCA.
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
2022
2021
8,233
7,748
-3,998
-4,052
4,236
3,696
-1,618
-2,320
2,079
1,560
863
627
/ 2021
%
+6
-1
+15
-30
+141
+149
Revenue
Expenses
2022
2021
5,418
4,815
-2,685
-2,592
Net operating income
2,733
2,223
LLPs
PBT
-316
245
1,900
2,149
Underlying attrib. profit
1,395
1,537
Detailed financial information in section 4.6 'Appendix'.
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+13
+4
+23
—
-12
-9
+12
+3
+22
—
-12
-10
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2022 Annual report
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Portugal
Underlying attributable profit
EUR 534 mn
Poland
Underlying attributable profit
EUR 364 mn
Business performance
Our ongoing commercial and digital transformation supported
of our growth strategy. We improved our service quality,
increased the number of loyal and digital customers and gained
market share in Individuals, mainly due to high new mortgage
lending.
Business performance
2022 was a challenging year for our business in Poland, as we
focused on helping Ukrainian refugees from the war in Ukraine.
We developed our strategic growth initiatives to improve our
customer satisfaction through digitalization and simpler
processes.
Loans and advances to customers were flat year-on year (both
net and in gross terms, minus reverse repurchase agreements).
On the other hand, customer deposits (both, including and
minus repurchase agreements) fell 1%. Mutual funds decreased
17% driven by market conditions. As a result, customer funds
fell 3% from the previous year.
Results
Underlying attributable profit was EUR 534 million (5% of the
Group’s total operating areas), up 16% year-on-year.
• Total income decreased 1%, affected by ALCO portfolio sales
in 2021 but was boosted by a 10% increase in net fee income
(transactional fees and mortgage lending). Net interest
income rose 3%, driven, in recent months, by higher interest
rates.
• Transformation initiatives enabled us to reduce administrative
expenses and amortizations 11%. The efficiency ratio stood at
38.7%, among the best banks in Portugal.
• Conservative risk management in recent years, the change in
portfolio mix and positive credit quality performance enabled
us to maintain loan-loss provisions close to zero, improve NPL
ratio to 3.0% and increase NPL coverage to 79%.
• Other gains (losses) and provisions was practically zero in the
year compared to -EUR 26 million in 2021.
Loans and advances to customers were 1% down in the year. In
gross terms, minus reverse repurchase agreements and in
constant euros, however, they grew 1%. This was driven by
increased demand from corporates and CIB. Mortgage volumes
contracted 6% as rising interest rates reduced demand.
Customer deposits increased 4%, +6% minus repurchase
agreements and in constant euros. There was strong growth in
time deposits from Individuals and CIB. Mutual funds decreased
29% due to flows into time deposits and tough market
conditions.
Results
Underlying attributable profit was EUR 364 million (3% of the
Group’s total operating areas). Year-on-year, profit grew 159%.
In constant euros, it grew 166% as follows:
• Total revenue was 57% higher driven by NII which doubled on
the back of higher volumes and rates and well controlled
funding costs. Net fee income was up 5%, mainly boosted by
transactional products.
• Administrative expenses and amortizations increased 7%,
well below average inflation (14%).
• Loan-loss provisions grew sharply (+126%) by the recognition
of CHF mortgage provisions in this line (previously recorded in
other gains (losses) and provisions).
• Other gains (losses) and provisions recorded a EUR 553
million net loss due to mortgage payment holiday provisions
(-EUR 327 million) and the contribution to the Borrower
Support Fund.
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
2022
2021
1,295
-502
1,313
-563
793
-17
775
534
750
-38
685
462
/ 2021
%
-1
-11
+6
-55
+13
+16
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
364
2022
2021
2,474
1,617
-692
1,782
-440
789
-663
955
-200
351
140
Detailed financial information in section 4.6 'Appendix'.
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+53
+4
+87
+120
+125
+159
+57
+7
+92
+126
+131
+166
364
2022 Annual report
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North America
Underlying attributable profit
EUR 2,878 mn
"Our ongoing transformation leverages our
global and regional network benefits to enrich
digitalization, customer experience and
efficiency, while expanding the business
through initiatives to enhance profitability"
Héctor Grisi Checa
1
Regional head of North America
Strategy
2
Business performance
Results
We continue leveraging our
own local individual strengths
and capabilities in Mexico and
the US while simplifying our
regional business model to
generate efficiencies and
profitable growth
Loans and advances to
customers increased 9%
driven by growth in Mexico
and in CIB, CRE and Auto in the
US. Customer funds rose
11%, boosted by time
deposits
Underlying attributable profit
amounted to EUR 2,878
million, down 3% YoY (-14%
in constant euros), as
normalization in the US offset
the positive performance in
Mexico
1. From a January 2023, Grupo Santander CEO.
2. In constant euros.
Strategy
We continued to pursue joint US-Mexico initiatives to:
• create synergies and reduce overlapping in our business
• We formalized green financing for the acquisition of 50 zero-
emission buses for Mexico City's public transport service.
model, by leveraging our regional capabilities and sharing
best practices to optimize expenses and improve profitability;
In line with our strategy to allocate capital to the most
profitable businesses, in 2022:
• boost customer attraction and retention through loyalty
• SHUSA completed the acquisition of the common stock of
strategies, expand our tailored services and products for a
better and more straightforward customer experience. We are
building on successful businesses and improved interactions
to drive customer loyalty, NPS and customer experience; and
• strengthen a common and regional approach through strong
collaboration between both countries and the Group, bringing
together operations know-how, digitalization, hubs, front-
office, back-office and other IT functions in North America.
We have been focusing on taking and expanding sustainable
finance opportunities within our businesses, in line with our
global responsible banking agenda and public commitments.
Here are some of our achievements and operations in 2022:
• Euromoney Magazine named Santander Best Bank in the
World for Financial Inclusion for the second consecutive year
in recognition of our inclusion programmes (Tuiio and
Prospera).
• Santander US released its first Environmental, Social and
Governance (ESG) Report which highlighted our commitment
to a sustainable future.
• Santander US issued its first sustainable bond for USD 500
million.
Santander Consumer USA (SC USA);
• Santander US completed the acquisition of Amherst Pierpont
Securities, improving our strategic focus and competitiveness
with greater cost synergies;
• Santander US discontinued mortgage and home equity
originations to focus efforts on products, services and digital
capabilities that have greater growth potential;
• the Group announced plans to repurchase the outstanding
shares of Santander México that it does not already own
(3.76%) and delist them from the Mexican and the New York
Stock Exchanges. We expect to complete this transaction in
2023 once the relevant regulatory approvals have been
obtained; and
• Santander US distributed USD 4.75 billion in dividends and
reallocated capital from Home lending to more accretive
businesses aligned with strategic goals.
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2022 Annual report
Contents
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Strategy by country in 2022:
United States
We refocused our business model towards a simpler, more
integrated structure. It is based on four core segments
(Consumer, Commercial, CIB and Wealth Management)
prioritizing businesses that benefit from the Group’s
connectivity or have a distinct competitive scalable business
advantage.
Our strategy for Santander US is anchored on three key pillars:
• simplification: reducing complexity and rationalizing products
and services to make our operating model and governance
simpler;
• transformation: driving distinctive positioning through
digitalization;
Santander US announced a multi-year programme to
accelerate its new consumer banking digital transformation
strategy; and
• profitable growth: growing the customer base in our Auto
Consumer and Commercial Real Estate businesses and our
globally connected CIB and Wealth business lines.
In auto, origination channels continued to expand. We
extended the Stellantis agreement to 2025, announced a new
preferred finance partnership with Mitsubishi Motors North
America (MMNA) and transitioned over 13,000 dealers to our
newly released digital portal.
Our key accomplishments include:
• Consumer: we progressed towards our objective of becoming
a full spectrum auto lender while achieving significant
improvement in customer satisfaction and experience.
• Commercial: we focused on improving profitability and
disciplined capital allocation while supporting our well-
established CRE/Multifamily franchise.
• CIB: we completed the APS acquisition to create a competitive
structuring and distribution platform across multiple asset
classes.
• WM: we integrated Crédit Agricole Indosuez in Miami and
achieved a 35% return on investment one year after
completing the transaction.
Mexico
Multichannel innovation and digital channel promotion
enabled us to strengthen our value proposition with new
products and services. We made headway with our customer
attraction and loyalty strategy through commercial
agreements, customer referrals and more customers who get
their salary paid directly into a Santander account.
In cards, we continued to promote the LikeU credit card, with
822 thousand cards issued at year end. We continued to
improve authorization and security procedures for better
customer experience and fraud prevention. We also launched
Cash Back Baby, the first loyalty programme that gives money
back to customers for using their card at many retail outlets.
In mortgages, we launched products that fit our customers'
needs based on the nature of their income and financial
situation. In addition, our digital platform, Hipoteca Online,
processed 97% of the mortgages formalized, with a more
agile process.
In auto lending, we teamed up with Caranty to launch Caranty
Credit, a digital car-buying and selling platform which is the
only financing scheme in Mexico for private purchases of
second hand vehicles directly from another individual. We
also launched Mazda First, a new financial programme to help
young people buy their first car.
In SMEs, we attracted new customers through commercial
agreements in strategic sectors (restaurants and pharmacies).
We strengthened our merchant acquiring business by offering
state-of-the-art terminals (G-Mini, G-Advance, G-Smart and
G-Store) that enable face-to-face sales and remote payment
collection through payment links. Getnet has grown quickly.
In 2020, we had a 14% market share (by number of
transactions). By the end of 2022, our market share had
grown to around 20% and is currently second in terms of
payments volumes and transactions.
Finally, 65% of Tuiio customers noted an improvement in their
lives, both personally and financially.
Loyal
customers
Thousands
YoY
Digital
customers
Thousands
YoY
North America
United States
Mexico
4,693
+10%
365
-3%
4,328
+11%
North America
United States
Mexico
7,239
+7%
1,037
0%
6,029
+9%
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2022 Annual report
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Business performance
Loans and advances to customers grew 25% year-on-year,
partly favoured by the dollar appreciation. In gross terms, minus
reverse repurchase agreements and in constant euros, they rose
9% boosted by consumer lending, credit cards, mortgages and
auto loans in Mexico and auto lending, CIB and CRE in the US.
Customer deposits grew significantly compared to 2021
(+38%). Minus repurchase agreements and in constant euros,
they grew 14%. This was driven by flows into interest-bearing
deposits, as rates were higher across the region. Growth was
concentrated in corporates in the US, but mainly in Individuals in
Mexico as a result of our mix change strategy to control funding
costs.
Mutual funds were flat in constant euros, due to the impact of
higher rates and market volatility, partially offset by our efforts
to grow our asset management business, especially in Mexico.
Results
Underlying attributable profit in 2022 was EUR 2,878 million
(25% of the Group's total operating areas). Year-on-year,
underlying attributable profit decreased 3%. However, profit
fell 14% in constant euros, by line:
• Total income slightly increased (+1%), as net interest income
and net fee income growth was largely offset by lower leasing
revenue. NII rose 7% supported by higher interest rates and
strong loan growth. Net fee income increased 6% driven by
credit cards and insurance in Mexico. On the other hand, lease
income decreased significantly in the US as higher used car
prices increased the proportion of vehicles repurchased by
dealers at lease end.
• Administrative expenses and amortizations rose 5%, well
below inflation. Costs were higher in Mexico as we launched
Getnet, investments in digitalization and faced higher-than-
expected inflation. The US remained flat amid high inflation
(8%).
• Net loan-loss provisions rose 85% reflecting the
normalization of the cost of risk following US releases in
2021. Loan-loss provisions in Mexico decreased 12%,
improving its cost of risk by 48 bps. In both countries, the
loan-loss provision performance was better than expected at
the beginning of the year.
• Other gains (losses) and provisions were less negative in 2022
mainly due to the early amortization of buildings and
integration costs in the US in 2021.
North America. Business performance
EUR billion and YoY % change in constant euros. 2022
North America. Underlying income statement
EUR million and % change
/ 2021
157 +9%
164 +11%
2022
2021
% % excl. FX
Revenue
Expenses
12,316
10,853
-5,871
-4,967
Net operating income
6,445
5,886
+13
+18
+9
LLPs
PBT
-2,538
-1,210
+110
3,790
4,531
-16
Underlying attrib. profit
2,878
2,960
-3
Gross loans and advances to
customers minus reverse repos
Customer deposits minus
repos + mutual funds
Detailed financial information in section 4.6 'Appendix'.
+1
+5
-3
+85
-26
-14
367
+9%+8%+16%+2%
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
United States Underlying attributable profit
EUR 1,784 mn
Mexico
Underlying attributable profit
EUR 1,213 mn
Business performance
We focused on delivering strong and profitable growth while
diversifying our business mix across the US. We significantly
improved customer satisfaction and experience in consumer and
mobile banking, and improved the profitability of our
Commercial segment.
Loans and advances to customers increased 26% year-on-year.
In gross terms, minus reverse repurchase agreements and in
constant euros, they grew 9% year-on-year driven by Auto, CIB
and CRE.
Customer deposits soared 49% year-on-year. Minus repurchase
agreements and in constant euros, they grew 19%. Deposit
costs were stable for much of 2022 but started to increase in
Q4.
Mutual funds decreased 3% as higher rates drove funds to
interest-bearing deposits and the negative performance in
equity markets affected valuations.
Results
Underlying attributable profit remained high in the year at
EUR 1,784 million (15% of the Group's total operating areas),
though fell 21% year-on-year affected by releases in 2021. In
constant euros, underlying profit fell 30%:
• Total income decreased 7% driven by home lending exit and
by lower activity in capital markets, gains on lease disposition
and fees from new Safety Net initiative. On the other hand,
net interest income increased 3% due to the positive impact
from higher loan balances and interest rates, partially offset
by the increase in wholesale funding costs.
• Administrative expenses and amortizations were flat as
investments in CIB and Wealth Management were offset by
savings from transformation initiatives. In real terms, costs
decreased 8%.
• Net loan-loss provisions increased due to the already
mentioned normalization. Nonetheless, the cost of risk
(1.35%) remained well below pre-pandemic levels.
• Other gains (losses) and provisions dropped to nearly zero, as
there were no major items recorded.
Business performance
We strengthened our value-added products to increase
customer loyalty. We developed different mortgage products,
where we have high market share, maintained the momentum
of the LikeU credit card and signed new agreements in auto.
Loans and advances to customers increased 21% year-on-year.
In gross terms, minus reverse repurchase agreements and in
constant euros, they climbed 8%, driven by loans to individuals
(auto +43%, cards +21% and mortgages +10%). Lending to
corporates and institutions rose 6% but fell 8% in SMEs.
Customer deposits grew 14% year-on-year. Minus repurchase
agreements and in constant euros, they rose by 1%, driven by
deposits from individuals, reflecting customer acquisition
campaigns to control liability costs, and the success of our
customer loyalty strategy. Mutual funds were up 3% in constant
euros.
Results
Underlying attributable profit in 2022 was EUR 1,213 million
(10% of the Group’s total operating areas), 49% higher year-on-
year. In constant euros, it increased 31%. By line:
• Total income rose 15%, boosted by net fee income (+21%)
and net interest income (+13%, as a result of higher volumes
and interest rates).
• Administrative expenses and amortizations increased 11%,
affected by inflation at 8% and its effect on wages and
investments in digitalization and technology.
• Net loan-loss provisions were down 12%, owing to the solid
portfolio performance. The NPL ratio was 2.32% (-41 bps),
cost of risk stood at 1.95% (-48 bps) and total coverage ratio
was 107%.
• Other gains (losses) and provisions recorded a EUR 94 million
loss compared to -EUR 22 million in 2021, due to higher
provisions for legal and tax contingencies in 2022.
United States. Underlying income statement
EUR million and % change
Mexico. Underlying income statement
EUR million and % change
Revenue
Expenses
2022
2021
7,623
7,277
-3,599
-3,197
Net operating income
4,025
4,080
LLPs
PBT
-1,744
-419
+316
2,261
3,546
Underlying attrib. profit
1,784
2,252
/ 2021
% % excl. FX
+5
+13
-1
-36
-21
-7
0
-12
+270
-43
-30
Revenue
Expenses
2022
2021
4,623
3,553
-2,076
-1,643
Net operating income
2,547
1,910
LLPs
PBT
-788
-791
1,665
1,100
Underlying attrib. profit
1,213
816
Detailed financial information in section 4.6 'Appendix'.
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+30
+26
+33
—
+51
+49
+15
+11
+17
-12
+33
+31
368
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
South America
Underlying attributable profit
EUR 3,658 mn
"Our focus remains on boosting profitability through
greater connection between countries. By delivering
profitable growth, we reaffirm our commitment to society,
sustainability and shareholders"
Carlos Rey
Regional head of South America
Strategy
1
Business performance
Results
1
We continued with our strategy
to strengthen regional
connectivity, share best practices
among countries and capture
new business opportunities
while maintaining high
profitability
1. In constant euros.
Year-on-year growth in loans
and deposits, supported by
innovative products and services.
We continued to roll out ESG
initiatives in the region
Underlying attributable profit
rose 10% year-on-year (+1% in
constant euros) driven by higher
customer revenue and a lower
tax burden
Strategy
South America offers great growth potential, with opportunities
for increasing banking penetration and financial inclusion. We
continued to focus on widening our customer base and boosting
digitalization, with new and innovative technology and
solutions. Our strategy remained focused on generating
synergies across business units:
• In consumer finance, we export positive experiences between
our countries, such as a new and used vehicle management
platform in Brazil and the consolidation of Cockpit in several
countries. We expanded our digital strategy for consumer
credit and used auto financing in Peru and Argentina. We
remained well positioned in consumer credit in Uruguay. In
Brazil, new auto business averaged more than BRL 2.4 billion
per month and insurance sales were strong in Chile, through
such digital platforms as Autocompara and Klare.
• In payment methods, we made progress with in our e-
commerce strategies and in immediate domestic and
international transfers. We consolidated Getnet, our
successful acquiring model from Brazil, in other countries in
the region. In Chile, Getnet is already one of our most known
and popular brands and in Argentina, we are the second
largest payment processing company. In Uruguay, we
launched Getnet for SMEs, gaining a stronger foothold in the
payments market.
• We continued to make headway in joint initiatives between
CIB and corporates to deepen relations with multinational
clients helping boost loyalty and customer capture in every
country. In Peru, we offered more sophisticated products on
the back of global and regional expertise. In Colombia, we
remained part of the most important development-related
transactions in the country. In Chile and Argentina, we
continued to offer comprehensive solutions for our customers.
• We promoted inclusive and sustainable businesses through
our ESG agenda in different niches, such as our micro-credit
programme Prospera in Brazil (with 885,000 active
customers), Colombia (in 425 municipalities) and Uruguay
(more than 10,000 entrepreneurs). In Peru, we also promoted
micro-credits through Surgir, with almost 63,000 customers
(95% are women). In Uruguay, we continued to grant carbon-
neutral loans for vehicle purchase. In Argentina, we launched
lower interest rate loans for purchasing electric cars. In Brazil
and Chile, we made progress with our solar energy loan
proposition. In Chile, we remained leaders in Green Finance,
and, in Brazil, we partnered with other companies to create
Biomas, a company focused on the restoration, conservation
and preservation of Brazilian biomes.
Our customer service enhancement initiatives and our expanded
product and service proposition earned us a place in the top 3 in
NPS in four markets, plus substantial customer growth in the
region.
369
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Main initiatives by country in 2022:
Brazil
Our strategy to become the best consumer credit company in
Brazil rests on four pillars:
• customer focus: we strengthened our products and services to
improve customer experience and satisfaction;
• more integrated and accessible sales channels: for example,
in the physical channel, we continued to expand to strategic
businesses; we had 541 million monthly hits on digital
channels; and there were 10.3 million queries per month in
the remote channel;
• innovation and capital: we focused on exploring new markets
and innovative services through investment platforms,
insurance and services for SMEs and large corporates. We
continued to transform our investment platform, introducing a
new advisory model with 592 advisors; and
• In ESG, we continued to lead the way in Green Finance. During
the year we built six solar plants to increase the bank's
renewable energy use.
Argentina
We remained focused on improving our customers experience,
which enabled us to rank first in NPS for individual customer
satisfaction.
• We made progress in digitalization with our open financial
services platform. Our banking app remained the best rated
among banks on iOS and Android.
• We strengthened Getnet's value proposition and held on to
second place in payment processing in Argentina.
• We boosted consumer credit, ending the year with more than
1,000 member companies, 45,500 customers and 2,100
points of sale. We are leaders in auto lending with a 16%
market share.
• a horizontal culture that promotes empowerment, diversity
and meritocracy, and prioritizes sustainable businesses that
support the transition to a low-carbon economy.
• In ESG, we supported the municipality of Córdoba in the first
issuance of a green bond by a city and signed an agreement
with Coradir for the purchase of electric vehicles.
Chile
Uruguay
Our strategy remained based on digital banking and better
customer service. We increased loyal and digital customers,
driven by Santander Life and Superdigital.
• In payment methods, we continued to develop our e-
commerce and domestic and international transfer
businesses. Consumer credit now accounts for 12% of total
new business volumes.
• We continued to offer our corporate customers integrated
financing, cash management and treasury solutions, which
resulted in significantly higher revenue and profit in these
segments.
• We launched the WorkCafé Startup, a new initiative to
support startups with development and expansion.
We reaffirmed our leadership among privately-owned banks
in Uruguay. Our business model allowed us to keep growing
loyal customers. Consumer credit continued to expand, as we
maintained our market leading position with a 30% share in
new lending.
We made progress with digitalization, with the consolidation
of SOY Santander, a fully-digital loyalty proposition for
individuals, which already represents 40% of total card sales.
We also launched F1RST, a new solution focused on
innovation and security.
In addition, we were the best bank in Uruguay in the Great
Place to Work (GPTW) ranking.
Loyal
customers
Thousands
YoY
Digital
customers
Thousands
YoY
South
America
11,473
+8%
South
America
25,897
+9%
Brazil
8,743
+9%
Chile
855
+3%
Argentina
1,671
+5%
Brazil
Chile
Argentina
20,405
+11%
1,982
-2%
2,867
+5%
Other South
America
204
+21%
Other South
America
643
+2%
370
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Business performance
Loans and advances to customers climbed 17% year-on-year.
Minus reverse repurchase agreements and in constant euros,
gross loans were 10% higher, with increases in all countries.
Customer deposits rose 14% year-on-year. Minus repurchase
agreements and in constant euros, they rose 5%, backed by
time deposits (+13% year-on-year). Mutual funds were up 7%
(in constant euros).
Results
Underlying attributable profit was EUR 3,658 million (31% of
the Group’s total operating areas), 10% higher year-on-year. In
constant euros, it was up 1%, as follows:
• In total income, net interest income was 6% higher, net fee
income increased 11% and gains on financial transactions also
rose, with significant increases in all countries.
• Administrative expenses and amortizations increased 18%,
heavily impacted by inflation. In real terms, costs decreased
1% owing to management efforts.
• Net loan-loss provisions rose by 37%, increasing across the
region. The cost of risk was 3.32% (2.60% in December 2021).
• Greater loss in other income and provisions, mainly due to
Argentina, partly offset by improved performance in Brazil.
Peru
We focused on global companies and the corporate segment,
offering more sophisticated products. Our global and regional
experience enabled us to develop new businesses (such as
joint offers between SCIB and companies) and launch new
products.
We are among the top three investment banks and, we have
been leaders in mergers and acquisitions by volume of
transactions for the last three years. We help distribute
derivative instruments to reduce our customers' financial risk.
In addition, our specialized auto finance company achieved a
32% market share.
Our NeoAuto platform, a digital marketplace for new and used
auto financing, continued to expand. It had 1.7 million visits
and more than 720,000 different users. We continued to
digitalize our services and processes, with 90% of transactions
processed digitally by our office banking and Nexus platforms.
Colombia
We continued to offer sustainable and inclusive financial
solutions, and remained involved in the most important
development-related transactions in Colombia, aided by joint
CIB and corporate propositions.
In consumer finance, we strengthened our position in lending
for new and used vehicles, with a 67% increase year-on-year.
In ESG, we increased our presence with Prospera, a fully-
digital operation that processes payments in up to 24 hours.
We continued to promote lending to entrepreneurs, with a
significant percentage going to women, agricultural activities
and charities.
South America. Business performance
EUR billion and YoY % change in constant euros. 2022
South America. Underlying income statement
EUR million and % change
152 +10%
183 +5%
Revenue
Expenses
2022
2021
18,025
15,337
-6,675
-5,380
Net operating income
11,350
9,958
LLPs
PBT
-5,041
-3,251
5,764
6,232
+18
+24
+14
+55
-8
/ 2021
% % excl. FX
Gross loans and advances to
customers minus reverse repos
Customer deposits minus
repos + mutual funds
Underlying attrib. profit
3,658
3,317
+10
Detailed financial information in section 4.6 'Appendix'.
+8
+18
+2
+37
-17
+1
371
+8%+8%+72%+14%+3%-5%+98%+8%
2022 Annual report
Contents
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Brazil
Underlying attributable profit
EUR 2,544 mn
Chile
Underlying attributable profit
EUR 677 mn
Business performance
In Brazil, we remained focused on promoting a customer
orientated culture with integrated channels and constant
innovation.
In insurance, premiums amounted to BRL 10.8 billion
(increasing 28% in two years). We remained market leaders in
auto lending to individuals, with a 23% market share. 2022 was
our best year in corporate business to date and we achieved
record customer acquisition in SMEs. In wholesale, we
maintained our strong position in FX, infrastructure, agro and
Cash Management.
Loans and advances to customers increased 18% year-on-year.
In gross terms, minus reverse repurchase agreements and in
constant euros, they rose 8%, underscored by corporates
(+10%) and individuals (+8%).
Customer deposits increased 21% year-on-year. Minus
repurchase agreements and in constant euros, they grew 4%
driven by time deposits (+10%). As mutual funds remained
stable, customer funds rose 3% in constant euros.
Results
Underlying attributable profit was EUR 2,544 million (22% of
the Group's total operating areas), 10% higher year-on-year. In
constant euros, it was 7% lower. By line:
• Total income rose 1% boosted by gains on financial
transactions and net fee income. Net interest income
decreased 4% as higher volumes failed to offset negative
sensitivity to higher interest rates.
• Administrative expenses and amortizations increased 10%,
heavily affected by inflation (only +1% in real terms). The
efficiency ratio remained excellent at 32.4%.
• Net loan-loss provisions rose 38%, due to the retail portfolio
and a single name in CIB in the fourth quarter. This brought
the cost of risk to 4.79% and the NPL ratio to 7.57%. Coverage
stood at 80%.
• The negative impact of other gains (losses) and provisions
decreased due lower civil and labour provisions in 2022.
Business performance
In 2022, we continued to expand Santander Life (which greatly
surpassed one million customers) and Superdigital (with
397,000 customers). We maintained the best NPS in Chile.
We launched the Santander Life current account for SMEs and
micro-entrepreneurs, integrated with Getnet. It was also a good
year for our Corporate and CIB segments, owing to the
integrated financing, cash management and treasury solutions
we offered our customers.
We also received numerous awards, such as Best Bank in Chile
in 2022 by Euromoney and Latin Finance and the Sustainable
Finance Award from Global Finance.
Loans and advances to customers rose 14% year-on-year in
euros. Minus reverse repurchase agreements and in constant
euros, gross loans and advances to customers rose 8% boosted
by mortgages, corporates and institutions and CIB.
Customer deposits decreased 2% year-on-year. Minus
repurchase agreements and in constant euros they fell 8%, due
to a 21% fall in demand deposits. Time deposits increased 14%
and mutual funds rose 3% in constant euros. Total customer
funds fell 5% in constant euros.
Results
Underlying attributable profit was EUR 677 million (6% of the
Group’s total operating areas), up 6% year-on-year. In constant
euros it rose 9%. By line:
• Total income rose 2% driven by the double-digit rise in net fee
income (greater loyal customers and transactionality) and
gains on financial transactions. Net interest income fell 9%, as
the increase in volumes failed to offset the negative sensitivity
to higher interest rates.
• Administrative expenses and amortizations rose 6% (well
below inflation) and the efficiency ratio was 40.1%.
• Net loan-loss provisions increased 19%, while the cost of risk
was practically stable. NPL ratio stood at 4.99% and coverage
at 56%.
• Other gains (losses) and provisions totalled -EUR 8 million,
50% less loss year-on-year.
Brazil. Underlying income statement
EUR million and % change
Chile. Underlying income statement
EUR million and % change
Revenue
Expenses
2022
2021
12,910
10,876
-4,180
-3,236
Net operating income
8,730
7,641
LLPs
PBT
-4,417
-2,715
4,055
4,610
Underlying attrib. profit
2,544
2,320
/ 2021
% % excl. FX
+19
+29
+14
+63
-12
+10
+1
+10
-3
+38
-25
-7
Revenue
Expenses
2022
2021
2,449
2,455
-981
-942
Net operating income
1,468
1,513
LLPs
PBT
-399
-341
1,062
1,156
Underlying attrib. profit
677
636
Detailed financial information in section 4.6 'Appendix'.
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
0
+4
-3
+17
-8
+6
+2
+6
-1
+19
-6
+9
372
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Argentina
Underlying attributable profit
EUR 324 mn
Uruguay
Underlying attributable profit
EUR 138 mn
Business performance
Both volumes and the income statement were affected by very
steep inflation (around 70%).
We remained leaders in transactional business, with a 12%
market share in demand deposits and 16% in fees. We ranked
second among privately-owned bank in loans.
Loans and advances to customers rose 8%. Minus reverse
repurchase agreements and in constant euros, gross loans and
advances to customers were 72% higher driven by consumer
credit, SMEs and CIB.
Customer deposits increased 15% year-on-year. Minus
repurchase agreements and in constant euros, deposits grew
87%. Demand and time deposits increased 76% and 112%,
respectively, and mutual funds rose 136%. Customer funds rose
98% in constant euros.
Results
Underlying attributable profit was EUR 324 million (3% of the
Group’s total operating areas). Year-on-year, underlying
attributable profit was 20% higher. In constant euros, it rose
95%:
• Total income grew 115% underpinned by 171% net interest
income growth and 110% higher net fee income, driven by
transactional, mutual fund and insurance fees. Gains on
financial transactions were 141% higher. This good
performance of the main revenue lines more than offset the
greater negative effect from the hyperinflation adjustment.
• Administrative expenses and amortizations increased below
revenue. The efficiency ratio stood at 53.9% (-4.2 pp) and net
operating income rose 136%.
• Net loan-loss provisions rose 53% from extraordinarily low
levels in 2021 (following covid-19-related provisioning in
2020). Cost of risk was 2.91%, 10 bps lower than in December
2021.
• Other gains (losses) and provisions increased their loss due to
charges relating to downsizing.
Business performance
We reaffirmed our position as the country's leading financial
group, in terms of efficiency and profitability. We continued to
transform our distribution model and apply new ways of
working.
We strengthened our retail commercial proposition, with
successful such products as Soy Santander or auto financing.
We continued promoting Getnet as an integral solution for
SMEs and businesses.
Loans and advances to customers increased 37% year-on-year.
In gross terms, minus reverse repurchase agreements and in
constant euros, they rose 14%.
Customer deposits were 10% higher year-on-year. In constant
euros and minus repurchase agreements, they fell 8% driven by
demand deposits (-11%). Growth in mutual funds led to an 8%
increase in customer funds in constant euros.
Results
Underlying attributable profit was EUR 138 million (1% of the
Group's total operating areas). Year-on-year, it rose 25%. In
constant euros, it increased 5% as follows:
• Total income increased 11% boosted by net interest income
(+16%, driven by higher interest rates) and gains on financial
transactions, which more than offset lower net fee income.
• Administrative expenses and amortizations rose 1%,
compared with 9% average inflation. The efficiency ratio
stood at 42.9% (+4.5 pp year-on-year) and net operating
income rose 21%.
• Net loan-loss provisions increased, after the low levels
recorded in 2021. Cost of risk remained low (1.51%) and the
NPL ratio stood at 2.39%.
Argentina. Underlying income statement
EUR million and % change
Uruguay. Underlying income statement
EUR million and % change
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
324
2022
2021
1,833
1,388
-987
846
-132
443
-805
583
-140
306
270
/ 2021
% % excl. FX
+32
+23
+45
-6
+45
+20
+115
+99
+136
+53
+136
+95
2022
2021
/ 2021
% % excl. FX
Revenue
Expenses
Net operating income
LLPs
PBT
453
-194
259
-56
201
Underlying attrib. profit
138
342
-162
180
-32
145
110
+33
+20
+44
+73
+39
+25
Detailed financial information in section 4.6 'Appendix'.
Detailed financial information in section 4.6 'Appendix'.
+11
+1
+21
+45
+16
+5
373
2022 Annual report
Contents
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Peru
Underlying attributable profit
EUR 73 mn
Colombia
Underlying attributable profit
EUR 27 mn
Business performance
Loans and advances to customers rose 16% year-on-year (+5%
in gross terms, minus reverse repurchase agreements and in
constant euros).
Business performance
Loans and advances to customers rose 20% year-on-year. In
gross terms, minus reverse repurchase agreements and in
constant euros they rose 35%.
Customer deposits decreased 7% (-16% minus repurchase
agreements and in constant euros), with falls in both demand
and time deposits.
Customer deposits were up 17%, +30% minus repurchase
agreements and in constant euros, mainly driven by 54%
growth in time deposits.
Results
Underlying attributable profit of EUR 73 million in 2022 was
18% higher year-on-year. In constant euros, it rose 4%:
Results
Underlying attributable profit of EUR 27 million was 13% higher
year-on-year. In constant euros, it increased 14%. By line:
• Total income was up 20%, boosted by net interest income and
gains on financial transactions, which offset the drop in net
fee income.
• Administrative expenses and amortizations were 44% higher,
mainly driven by the launch of new businesses. The efficiency
ratio stood at 35.9% and net operating income increased
10%.
• Total income grew 35% driven by the good performance in
the main revenue lines and in CIB, corporates and Prospera
and Consumer businesses. The latter two accounted for 16%
of the country's total revenue.
• Administrative expenses and amortizations were 51% higher.
The efficiency ratio stood at 56.3% and net operating income
was 18% higher.
• Net loan-loss provisions increased, but cost of risk remained
• Net loan-loss provisions rose 25% and cost of risk remained
low at 0.68%.
low at 0.37%.
Other South America. Underlying income statement
EUR million and % change
Net operating income
Underlying attrib. profit
2022
2021
/ 2021
% % excl. FX
2022
2021
/ 2021
% % excl. FX
Peru
Colombia
131
49
104
42
+26
+18
+10
+18
73
27
62
24
+18
+13
+4
+14
374
2022 Annual report
Contents
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Digital Consumer Bank
Underlying attributable profit
EUR 1,308 mn
“DCB is the European consumer finance leader in
scale and profitability as it leverages SCF’s auto and
non-auto consumer finance footprint and
Openbank’s technology stack"
Sebastian J. Gunningham
Chair of Santander Consumer Finance and
VP of Openbank
Strategy
1
Business performance
Results
1
Our focus is on transformation for We continued to reinforce our
future growth and offsetting
market headwinds with a simpler
organizational structure, delivering
through digital platforms and
launching new channels, platforms
and products
auto leadership via strategic
alliances, leasing and subscription
and made significant market share
gains (new business +7% year-on-
year in a shrinking market). The
rest of the consumer portfolio also
showed a strong increase in new
consumer lending
Underlying attributable profit
stood at EUR 1,308 million (+12%
year-on-year), driven by total
income growth (+3% year-on-
year) and solid cost of risk and
efficiency performance
1. In constant euros.
Strategy
Digital Consumer Bank (DCB) is the leading consumer finance
bank in Europe, created through the combination of Santander
Consumer Finance's (SCF) scale and leadership in consumer
finance in Europe and Openbank’s retail banking and digital
capabilities.
SCF is Europe's consumer finance leader, present in 18
countries (16 in Europe, plus China and Canada). It works
through more than 130,000 associated points of sale (mainly
auto dealers and retail merchants). In addition, it is developing
pan-European initiatives to boost direct business across its
footprint.
Openbank is Europe's largest fully-digital bank. It offers current
accounts, cards, loans, mortgages, a state-of-the-art
roboadvisor service and open platform brokerage. It is currently
active in Spain, the Netherlands, Germany and Portugal, and is
working on expansion across Europe and the Americas.
DCB aims to generate synergies between both businesses:
• SCF is dedicated to helping its customers and partners (OEMs,
car dealers and retailers) enhance their sales capacity by
financing their products and developing advanced
technologies to give them a competitive edge. It is Europe's
top mobility financer and provider.
• Openbank continues to work on boosting customer loyalty
and engagement by applying its technological developments
and business philosophy, while maintaining its ability to
swiftly launch new initiatives.
Loans and advances to customers by geographic area
December 2022
Germany
Nordic countries
France
Spain
United Kingdom
Italy
Poland
Others
375
31%14%13%12%11%8%3%8%
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Jose Luis de Mora
Co-CEO of DCB
“We are focused on becoming the best-in-class mobility financer and
provider in Europe by leveraging our OEM relationships and new
digital capabilities, agreements and auto platforms"
In 2022, DCB continued to expand its reach, with new products,
services, platforms and by signing new agreements with retail
distributors and manufacturers. In the year, management's
main priorities were to:
f. We continued our pursuit of further market share gains in
used and new cars while also addressing new segments
(light delivery EV-Vans and leisure) and entering and
accelerating growth in high-potential markets.
• Secure leadership in global digital consumer lending focusing
on growth and transformation in these three areas:
1. Auto: continue our journey to transform the business and
build a world-class digital proposition in mobility and capture
today’s market growth opportunity in used cars to reinforce
our already strong franchise. Our transformational priorities
include these initiatives:
a. In leasing, our solutions and commercial focus increased
the number of new leasing contracts by >20% year-on-
year. We continued to develop a proprietary digital leasing
platform for Europe with the ambition of disrupting the
market. We launched a new platform in Italy and expect to
expand more into Europe in 2023-24.
b. In subscription, where we are already a leader, we
continue to expand Wabi, our end-consumer subscription
platform (live in Spain, Norway and Germany, with
launches planned in Italy and France for 2023). In June,
SCF launched Ulity, its new platform for vehicle
subscription-based solutions for companies.
c. We are creating one pan-European digital front that
connects all our partners: OEMs, digital dealers and 3
party marketplaces. We expect the digital dealers and auto
marketplaces we've been successfully attracting to
translate into nearly EUR 1 billion in new loans from digital
partners in 2023.
rd
d. We are also developing our own digital channel with
leading proprietary marketplaces and car advising value-
added services. Plus, we strengthened our business in
Spain (Coches.com) and are ramping up business in the UK
(YourredCar.co.uk), Germany (Autobörse.de) and Portugal
(Carmine.pt).
e. We further expanded transformational OEM relationships.
For example, in 2022 we renewed and extended our
Stellantis partnership, in a deal due to be completed in H1
2023 (following the required authorizations). We also
entered into a long-term global partnership with Piaggio
Group, Europe's leader in scooters. In November, we
acquired MCE Bank Germany establishing a partnership
with Emil Frey, Europe's largest auto importer, gaining its
captive finance for Mitsubishi, Isuzu, Great Wall and ORA
brands for the German market. We continue to develop
new agreements with OEMs entering the European market
with strong EV propositions (e.g. GWM, BYD) and other
sizeable on-going negotiations. DCB prioritized strategic
deals to capture pan-European importers.
g. We adapted our operating model to gain efficiency moving
from self-contained banks to European hubs to increase
competitiveness and enable scale benefits.
We had a loan book of EUR 98 billion as of 2022.
2. Consumer (Non-Auto): gain market share in consumer
lending and develop buy now, pay later (BNPL) 2.0 to
strengthen our top 3 position in Europe. Zinia, our BNPL
initiative, continued to achieve outstanding results with more
than 4.2 million contracts since its launch and around 44,000
retail merchants connected.
The TIMF in joint venture is a strategic alliance with the
leading Italian Telco, a new vertical for DCB. It has had more
than 1.5 million contracts since launch as well as more than
5,800 active points of sale.
Our loan book was EUR 21 billion as of 2022.
3. Retail: continue improving digital capabilities to increase
loyalty among our 3.9 million Openbank and SC Germany
Retail customers and boost digital banking activity.
• Increase profit by leveraging strategic operations (e.g.
Stellantis), leasing and subscription launch (in Auto) and BNPL
development (in Non-Auto);
• Drive tech transformation projects to seize on the fast-
growing transition to online, support digital customer base
expansion and provide our partners with digital tools to
achieve a single digital connection in Europe while
maintaining high profitability and one of the best efficiency
ratios in the sector.
We continue to promote ESG and the transition to a greener
economy by doing business sustainably. We supported our
customers’ green transitions by providing EUR 4.8 billion in
green finance in the year for electric vehicles (>150k electric
vehicles financed, gaining market share), electric chargers, solar
panels, green heating systems, bikes and others.
We were also recognized as a Top Employer or Great Place to
Work (GPTW) in eight countries.
376
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Ezequiel Szafir
Co-CEO of DCB
“Openbank's new tech stack and product building capabilities
deployed in Zinia's BNPL activity will allow us to deliver on our
merchant and customer targets to exceed our customers’
expectations”
Business performance
2022 was a difficult year as we faced consecutive crises that
drove supply chain disruptions (covid-19, chips shortage and the
war in Ukraine) among other geopolitical tensions. High
inflation in Europe and energy scarcity dented consumer
confidence, reducing disposable income and affecting
consumption decisions.
Still, we managed to increase new lending 10% year-on-year.
Our leadership position and strategic alliances enabled us to
increase market share in car financing in most of our countries.
Our new business volumes in new and used cars were up 7%
year-on-year while car transactions in 2022 in Europe fell high-
single digits in our footprint.
The stock of loans and advances to customers increased 8%
year on-year. In gross terms, minus reverse repurchase
agreements and in constant euros they rose 9% year-on-year to
EUR 125 billion. We will continue to closely monitor our
portfolios to prevent the impact of any deterioration in our
activity.
Customer deposits increased 6% and 7% minus repurchase
agreements and in constant euros. Mutual funds increased 23%
in constant euros. Our recourse to wholesale funding markets
remained strong and diversified. We are actively repricing our
new business to offset higher funding costs from rising interest
rates.
Results
Underlying attributable profit was EUR 1,308 million (11% of
the Group’s total operating areas).
Interest rate rises pressured margins in consumer finance
monoliners, at a time when Auto and Consumer Industries
are transforming towards more sustainable mobility and
consumption. At the end of the year, DCB faced negative
impacts from regulatory claims in Poland and the TLTRO
remuneration adjustment.
Compared to 2021, underlying profit increased 12%. In constant
euros, it also rose 12% as follows:
• Total income was up 3% supported by increased leasing
activity and net fee income (volumes growth). NII was slightly
down due to higher funding costs (steep rate rises) and TLTRO
changes, partially mitigated by new business repricing
initiatives.
• Administrative expenses and amortizations increased 2%,
affected by inflation, strategic and transformation
investments and business growth. In real terms costs fell 6%.
Net operating income rose 4% and the efficiency ratio
improved 0.4 percentage points to 46.7%.
• Credit quality performance remained strong. Net loan-loss
provisions increased just 3%, supported by portfolio sales.
Cost of risk was steady at 0.45%, very low for consumer
lending business, and the NPL ratio improved to 2.06%.
Coverage remained high, exceeding 90%.
• Other gains (losses) and provisions came in less negative
despite headwinds from regulatory charges in Poland
(mortgage payment holidays) and insurance regulation in
Germany.
• The largest contribution to underlying attributable profit came
from Germany (EUR 433 million), the Nordic countries (EUR
273 million), the UK (EUR 227 million), France (EUR 160
million) and Spain (EUR 131 million).
Digital Consumer Bank. Activity
EUR billion and % change in constant euros. 2022
Digital Consumer Bank. Underlying income statement
EUR million and % change
+9%
YoY
125
Revenue
Expenses
2022
2021
5,269
5,099
-2,462
-2,405
Net operating income
2,807
2,694
62
+7%
YoY
LLPs
PBT
-544
-527
2,237
1,973
Gross loans and advances
to customers minus
reverse repos
Customer deposits minus
repos + mutual funds
Underlying attrib. profit
1,308
1,164
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+3
+2
+4
+3
+13
+12
+3
+2
+4
+3
+13
+12
377
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
4.4 CORPORATE CENTRE
Corporate Centre
Underlying attributable profit
-EUR 2,049 mn
2022 HIGHLIGHTS
→ The Corporate Centre continued with its role supporting the Group.
→ The Corporate Centre's objective is to define and coordinate the Group's strategy and aid the operating units by
contributing value and carrying out the corporate oversight and control function. It also carries out functions related to
financial and capital management.
→ Underlying profit was impacted by lower gains on financial transactions due to the exchange rate differences from the
hedging of results of our core country units, partly offset by the improvement in provisions.
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,
that enable us to be one of the most efficient banks; and
• 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 relationships with regulators in the EU
and performs the following financial and capital management
functions:
• Financial management:
– Structural management of liquidity risks from funding the
Group's recurring activity and financial stakes.
– This activity is carried out by the diversification of funding
sources (issuances and other), always maintaining an
adequate profile in volumes, maturities and costs. The
price of these transactions with other Group units is the
market rate that includes all liquidity items (which the
Group supports by immobilizing funds during the term of
the transaction) and regulatory requirements (TLAC/
MREL).
– Interest rate risk is also actively managed in order to
dampen the impact of interest rate changes on net
interest income, conducted via high credit quality, very
liquid and low capital consumption derivatives.
– Strategic management of exposure to exchange rates in
equity and dynamic on the countervalue of the units’ next
twelve months results in euros. Net investments in equity
are currently hedged, EUR 19,778 million (mainly in Brazil,
Chile, Mexico, the UK and Poland) with different FX
instruments (spot or forwards).
• 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.
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Results
The underlying attributable loss of EUR 2,049 million was 33%
greater than in 2021 (-EUR 1,535 million):
• Net interest income decreased, impacted by the rising interest
rates.
• Gains on financial transactions were lower (EUR 583 million
less than in 2021) dampened by negative foreign currency
hedging results, which partially offset the favourable FX
impacts in the countries' results.
• Administrative expenses and amortizations increased 7%
year-on-year, due to the general upturn in inflation in 2022.
Excluding this impact, they decreased 1%.
• Net loan-loss provisions were considerably down.
• The net negative impact of other gains (losses) and provisions
(which include provisions, intangible asset impairments, cost
of the state guarantee on deferred tax assets, pensions,
litigation, one-off provisions, etc.) decreased from -EUR 190
million in 2021 to -EUR 173 million in 2022.
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
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
B
customers
Customer funds
Customer deposits C
Mutual funds
Operating means
Number of employees
A. Includes exchange differences.
B. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
2022
(652)
(19)
2021
(624)
%
5
(28)
(31)
(140)
(28)
(819)
417
231
81
(724)
(92)
(1,487)
(372)
(1,858)
9
(173)
(2,022)
(27)
(2,049)
(346)
(1,165)
(155)
(190)
(1,510)
(24)
(1,534)
—
(2,049)
0
—
(1,534)
(1)
7
60
—
(9)
34
12
34
—
34
(95)
(2,049)
(1,535)
33
5,785
6,787
(15)
123,230
8,588
273
88,918
1,555
2,203
124,343 116,007
262,217 215,470
1,042
53,061
74,302
431
7,113
178,650 135,950
79,520
895
71,226
98,733
308
7,489
83,567
39
452
(88)
7
22
(14)
34
33
(29)
5
31
5
5,779
895
895
—
6,813
1,042
1,042
—
(15)
(14)
(14)
—
1,899
1,724
10
379
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
4.5 Secondary segments
Retail Banking
Underlying attributable profit
EUR 7,946 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
1
Business performance
Results
We continued to strengthen
our commitment to
customers and society,
boosting digitalization and
offering new products and
services that meet their needs
Year-on-year growth in loans
and advances to customers
(driven by North America and
South America) and in
customer deposits, due to the
increase in time deposits
Underlying attributable profit
up 8% in euros (-1% in
constant euros) to EUR 7,946
million, due to strong
customer revenue
1. In constant euros.
Strategy
One of the main pillars of the Group's business model is a clear
focus on customers to strengthen the relationships we establish
with them and to contribute to our purpose of helping people
and businesses prosper.
We intensified our transformation strategy, focusing on
multichannel and digitalization of processes and businesses.
Our goal is to take advantage of digitalization while being
mindful of the importance of continuing to meet our customers'
needs through our physical channels.
We believe in a hybrid model that, while we prioritize service on
digital channels, it complements branch services, particularly
for more complex transactions or those requiring more
personalized attention from our professionals. We have 9,019
branches.
This personalized support adapted to our customers' needs, also
forms part of our aim to continuously enhance customer care
and service.
Our strategy helped us rank in the top 3 in NPS for customer
satisfaction in eight markets.
Loyal customers
Millions
Digital customers
Total customers
Millions
Millions
Digital sales
% of total sales
+8%
+8%
+5%
+1 pp
380
26272021202247512021202215316020212022545520212022
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Our digitalization efforts, together with continuous
improvement of our customer service and service quality, led us
to increase our customer base by 7 million to 160 million.
Likewise, loyal customers grew 8% year-on-year to 27 million
and digital customers reached 51 million having grown 8%
year-on-year. Digital sales accounted for 55% of total sales and
digital transactions 80% of total transactions.
Such a substantial increase in customers, loyalty and
digitalization is the result of numerous commercial initiatives,
with specialized products and services for each segment:
• Individuals: strong mortgage growth in our European markets
especially in the UK and Spain. In Portugal, we saw high new
mortgage lending growth. There was double-digit growth in
new mortgage lending, driven by process simplification and
commercial offers. In Mexico, we developed various mortgage
products and maintained the momentum of the LikeU credit
card.
• Auto finance: Digital Consumer Bank continued to strengthen
its market position, with various strategic agreements. In the
US, auto loans performed well during the year. In Mexico, we
increased our auto market share and already exceed 15%. In
South America, we consolidated the Cockpit platform in
several of our countries, which originated in Brazil. In Peru, we
continued to expand the NeoAuto platform, a digital
marketplace for financing new and used vehicles.
• SMEs and Corporates: we continued to provide new services
and products to our customers. In Poland, we continued our
strategic Agile programmes. In Chile, we launched the
Santander Life current account for SMEs and micro-
entrepreneurs. In Brazil, we had a record year in corporate and
SME customer acquisition.
Business performance
Loans and advances to customers increased 4% year-on-year.
Minus reverse repurchase agreements and in constant euros,
gross loans rose 5%, boosted by North and South America.
Customer deposits were 3% higher compared to 2021. Minus
repurchase agreements and in constant euros, they also
increased 3%, driven by growth in time deposits (+31%), as
demand deposits decreased 2%.
Results
Underlying attributable profit was EUR 7,946 million (68% of
the Group’s operating areas).
Compared to 2021, underlying attributable profit was up 8%.
In constant euros, it decreased 1%:
• Total income increased 3% on the back of net interest income
(+7%) and net fee income (+3%). On the other hand, gains on
financial transactions dropped 51% and other revenue also
decreased impacted by lower leasing revenue.
• Administrative expenses and amortizations increased (+4%,
well below inflation). Net operating income grew 3% and
efficiency stood at 43.5%.
• Loan-loss provisions rose 33% mainly due to the
normalization in North America and the provisions related to
loan portfolio growth in South America.
• The other gains (losses) and provisions line was slightly
more negative than in 2021 mainly due to regulatory charges
in 2022 (mortgage payment holiday provisions and the
aforementioned settlement agreed with the FCA in the UK).
Retail Banking. Underlying income statement
EUR million and % change
Revenue
Expenses
2022
2021
42,684
38,869
-18,568
-17,103
Net operating income
24,116
21,766
LLPs
PBT
Underlying attrib.
profit
-10,210
-7,081
11,772
12,632
7,946
7,389
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+10
+9
+11
+44
-7
+8
+3
+4
+3
+33
-15
-1
381
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Santander Corporate &
Investment Banking
Underlying attributable profit
EUR 2,805 mn
"The customer-centric business transformation we started
five years ago continues to pay off. In a year characterized
by economic and geopolitical challenges, more clients are
relying on SCIB as their strategic partner in the
transformation and financing of their businesses"
José M. Linares
Global head of Santander CIB
Strategy
Business performance
Results
Expanding our content and
products to become our
clients' strategic advisors,
while accelerating
digitalization
Business growth in 2022 in
SCIB's main economies,
despite a challenging
macroeconomic and
geopolitical environment
Underlying attributable profit
reached EUR 2,805 million,
driven by higher revenue.
Efficiency was among best-in-
class and RoRWA was 2.72%
Strategy
SCIB continued to make headway with its strategy to transform
its business and strengthen its position as our clients' strategic
advisor of choice, by boosting specialized high value-added
products and services. We remain focused on sustainable
development and digital transformation.
The goal of our transformation is to become a leading
investment bank by:
• continuing to accelerate business in the US, focusing on the
integration of the broker-dealer Amherst Pierpont Securities
(APS) as a first step towards achieving our growth aspirations;
• strengthening customer support in Europe, with a pan-
European platform; and
• we reached a strategic agreement with the EIT InnoEnergy
fund to accelerate energy transition by developing its start-up
portfolio; and
• we entered into a new partnership with SAP to accelerate the
digitalization of transactional banking services and offer
innovative, high-value-added solutions.
SCIB held leading positions in several rankings:
• In Project Finance and Export & Agency Finance: top 3
globally, in Europe and in Latin America (only in Project
Finance) by transaction volumes, promoting renewable
energies (top 3 in Green Global), a key part of our ESG
strategy.
• consolidating our regional leadership in most countries and
• In Debt Capital Markets (DCM): leader in Spain and top 3 by
products in Latin America.
Some of the key highlights in 2022 include:
• we continued to invest in talent, naming a new Global
Markets head and a new head of SCIB Brazil;
• we acquired 80% of WayCarbon Soluções Ambientais e
Projetos de Carbono (leading ESG consulting firm in Brazil),
expanding SCIB's product portfolio in voluntary carbon
markets and reforestation and conservation programmes;
volume of debt placed in Latin America (top 3 in Mexico, Chile
and Argentina).
• In Equity Capital Markets (ECM): top 3 in Europe and leader in
the Spanish and Mexican markets.
SCIB also received numerous awards in several categories,
including from Global Finance and Euromoney:
382
2022 Annual report
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Ranking 2022
Award/ranking
Best Investment Bank Spain
Market Leader Corporate Banking Spain, Portugal and Chile
Outstanding Leadership in Transition/Sustainability Linked Loans
Outstanding Leadership in Sustainable Infrastructure Finance
Best Bank for Sustainable Finance Chile
Best Bank for Sustainable Finance Poland
Best Debt Bank in Latin America
Issuer of the Year
Best Iberian Broker
Risk Solutions House of the Year
Structured Finance Deal of the Year – Metro de Panama's USD 2 billion ECA-covered
notes issuance facility
Private Equity Deal of the Year – KKR's acquisition of Telefónica fibre assets in Chile
and Colombia
Source
Euromoney
Euromoney
Global Finance
Global Finance
Global Finance
Global Finance
Global Finance
SCI
Institutional Investor
Risk Magazine
LatinFinance
LatinFinance
Bank of the Year Southern Cone 2022 Project & Infrastructure Finance Awards
LatinFinance
Best Trade Financier in Latin America
Best Supply Chain Finance Bank
Best ESG SCF Global Deal
BAFT
GTR
Supply Chain Finance Community Awards
Area
Global
Global
GDF
GDF
GDF
GDF
GDF
GDF
Markets
Markets
CF
CF
GDF
GTB
GTB
GTB
Business performance
In a challenging macroeconomic and geopolitical environment,
our priority has been to support our clients with innovative and
high-value-added solutions. In this context, revenue grew 32%
year-on-year to EUR 7,395 million. In constant euros, revenue
rose 27%, backed by growth across core businesses, notably
Global Transactional Banking, Global Debt Finance and Global
Markets:
• Global Markets: revenue was 25% higher year-on-year. The
business successfully overcame a period of volatility in a
difficult macroeconomic environment due to high levels of
inflation, central bank policy and the protracted war in
Ukraine.
In Europe and Asia, market disruption and diligent risk
management created opportunities, particularly in FX, equity
derivatives and equity finance. The team continued to
innovate and launched the first ESG-linked derivatives
framework during the year.
In Latin America, there was solid demand for interest rate and
currency hedging products in all countries and a significant
increase in sales volumes. In Argentina, Brazil and Chile, we
were in the top 3, while in Peru and Colombia, we climbed
into the top 5 in currency and rates.
We had excellent results in US markets, boosted by gains in
fixed income, currency and commodities, rates and security
finance, as well as significant growth in customer flows
(especially with financial sponsors).
• Global Debt Financing (GDF): significant revenue growth
(+9%). Inflation, interest rates, liquidity shortage and a
possible recession put pressure on primary issuances. Despite
a sharp global decline in debt issuance, DCM maintained (or
gained) market share in key markets, supported by EU debt
issuance, KNP and Duke Energy green bonds, and the Lloyds
AT1 bond.
In Structured Finance, Santander continued to lead global
rankings, especially regarding the renewable energy sector
(leaders globally, in Europe and in Latin America). GDF
participated in such major deals as Origis Energy Debt Raise,
Project Gauss (1,600 MW of wind farms in Spain and
Portugal), Great Pathfinder and Provence Grand Large, the
first floating wind farm in France.
Growth continued in our newer business lines, such as
securitizations (+37%) and Leveraged Finance (+49%).
• Global Transactional Banking (GTB): Total income was 50%
higher than in 2021. Cash Management transactionality and
liability income increased significantly during the year, driven
by greater economic activity across most of SCIB's footprint
and the higher interest rates in Europe, the US and Latin
America.
Trade & Working Capital Solutions (T&WC) focused on
providing our clients with means to mitigate the impact of
commodity price increases, optimize working capital and
inventories, strengthen supply chains, reduce trade
transaction risks and achieve ESG objectives. T&WCS more
than tripled its ESG operating income year-on-year with
significant transactions, especially in sustainable confirming.
It also continued to develop new capabilities and products
such as inventory finance.
In Export Finance, SCIB maintained market leadership. We
were number 1 in the global ECA finance ranking (according
to Dealogic). The ESG team's work, particularly in the
renewables sector, led to numerous transactions during the
year, including Iberdrola's Green Shopping Line for a value of
EUR 1 billion.
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Results
Underlying attributable profit increased 33% to EUR 2,805
million (24% of the Group's total operating areas). In constant
euros, growth was 31%. RoRWA was 2.72% (2.23% in 2021). By
line:
• Total income was 27% higher, driven by net interest income
(+18%), net fee income (+9%) and gains on financial
transactions (+139%).
• Administrative expenses and amortizations rose 17% year-on-
year, due to investment in products and franchises under
development, while our efficiency ratio (39%) was better than
in 2021 (-3.2 pp) and well below the sector.
• Loan-loss provisions increased 63% compared to 2021 due to
the normalization of provisioning and a single name in Brazil.
SCIB. Underlying income statement
EUR million and % change
Revenue
Expenses
2022
2021
7,395
5,619
-2,898
-2,379
Net operating income
4,497
3,240
LLPs
PBT
-251
-151
4,115
3,071
Underlying attrib. profit
2,805
2,113
Detailed financial information in sect
/ 2021
% % excl. FX
+32
+22
+39
+66
+34
+33
+27
+17
+35
+63
+30
+31
Total income breakdown
Constant EUR million
TOTAL
Other
Global Debt Financing
+27%
+1%
+9%
Global Transactional
Banking
+50%
Markets
+25%
• In Corporate Finance (CF), M&A growth has been undermined
by the slowdown in Equity Capital Markets activity of the
global markets. In this context, we participated in the Porsche
IPO.
In Infrastructure, Santander leads the League Tables in Europe
and Latin America. Santander advised Platinum Equity on the
sale of Socamex, a Spanish water company acquired by
Quaero Capital.
In the telecommunications, media and technology (TMT)
sector, there was significant activity in fibre and towers
during the year, with the M&As of MásMóvil, Ardian and
Onnet valued at more than EUR 2 billion.
In Energy, Santander established itself as a renewable energy
financing leader. We participated in such important deals as
the offshore wind farms of Hornsea One and Wikinger and
the solar photovoltaic project with Ardian.
In Consumer Retail Healthcare (CRH), Santander continued to
grow its franchise through the most significant transactions in
the sector, including the merger of Dufry with Autogrill for
EUR 5.3 billion, or Gelnx's sale to Darlin Ingredients for USD
1.2 billion.
Collaboration revenue and revenue from multinational clients
outside their home country increased 34% year-on-year and
stood at around EUR 5.1 billion, of which EUR 3.4 billion came
from SCIB (+33% year-on-year) and the rest was distributed
among the different commercial banking markets.
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2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Wealth Management &
Insurance
Underlying attributable profit
EUR 1,118 mn
"In 2022, despite a complex market we continued
to grow at double-digits and progressed with our
strategic plan, developing value-added products
focused on our clients' needs"
Víctor Matarranz
Global head of Wealth Management &
Insurance
Strategy
1
Business performance
Results
1
We aim to become the best
Wealth Manager in Europe
and the Americas, committed
to offering the best service
and products, acting
responsibly and developing
sustainable products
1. In constant euros.
Total assets under
management fell 3% to EUR
401 billion, less than falls in
the market during the year
Total contribution to profit in
2022 grew 18% (minus 2021
non-recurring results to EUR
2,728 million, as a result of
good activity levels in a
challenging market
Strategy
In 2022, we continued to work to become the best responsible
wealth manager in Europe and the Americas. We performed
very well, contributing to the Group's profit growth despite
difficult market conditions.
• In Private Banking, we continued to leverage our scale, to
benefit clients with our global platform, while fostering
collaboration across markets and segments. We managed
EUR 51 billion from customers in countries outside their local
markets. Santander is leading the large investment flow
between Latin America, Europe and the US.
We continued to update our value proposition, widening our
product range in line with market trends. We had a particular
focus on alternative products (more than EUR 2.9 billion),
collateralized lending, investment banking and socially
responsible products (ESG). We also further improved our
discretionary advisory service, which accounted for 9.5% of
total assets under management (AuMs).
We launched six funds during the year. Most recently in Q4,
we launched EB Capital Preferred Futures (first private market
fund marketed to our customers in Brazil) and the Laurion
Private Credit Fund.
Our real estate investment service is capturing a large part of
the flow between Latin America, Europe and the US. It reached
a total volume of EUR 321 million in transactions in the year.
Our socially responsible investment (SRI) products, classified
according to Article 8 or 9 under the SFDR or similar criteria
applicable in Latin America, reached EUR 25 billion.
This year we received these awards:
• In Santander Asset Management (SAM), market volatility
affected asset valuations and investment flows in general.
Nevertheless, we continued to enhance our local and global
product propositions.
The arrival of our new SAM CEO led to organizational changes
and a redesign of our strategy in order to put clients at the
centre of our activities and remain a leading provider of
investment solutions.
We achieved great results in Latin America, maintaining or
gaining market share (and reaching number 1 in Argentina)
and developing a strategic plan in Brazil, in collaboration with
Santander Brasil.
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2022 Annual report
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We showed resilience in Europe. After a very difficult start to
the year, we managed to regain market share in Spain in Q4
by launching Objetivo range (subscriptions of more than EUR
2.7 billion) and improved our aggregate performance to end
the year in the second quartile.
Business performance
Total assets under management amounted to EUR 401 billion,
3% lower year-on-year, dampened by market performance,
particularly in Europe, but managed to absorb much of the
market downturn.
We made further headway with our ESG strategy. We offer
72 ESG products globally and our assets under management
stood at EUR 37.5 billion. In November, we launched the
Santander Prosperity fund along with RED (an NGO founded
to fight AIDS with the help of the world's best brands). The
fund will contribute 15% of its management fee to this
purpose.
Our robust range of alternative products includes six
strategies and 15 vehicles already launched. With it, we
reached EUR 2.5 billion committed globally, including Direct
Lending, Funds of Funds, Real Estate, Infrastructure and
Renewable Energy, Trade Finance and VC Climate Tech
strategies.
• In Insurance, we maintained a healthy growth rate in
premiums, mainly in our Non-Related and Savings businesses.
The credit-related business was slightly affected by the lower
demand for credit in general but especially in Brazil.
Protection insurance sales were strong in Europe, as a result
of optimized client communications and new products (e.g.
credit policies for companies in Spain, auto comparison tool in
Poland). Our new savings value proposition in Spain was
particularly successful, enhancing the range of unit-linked,
guaranteed interest and annuities products. The new products
enable us to diversify our offering and provide our customers
with innovative alternative to traditional savings solutions.
In the Americas, diversification of the non-credit insurance
business continued strongly. New sales grew in the double
digits owing to our strategy to strengthen services with more
customer value and promote commercial dynamics for
sustained growth on all channels. We launched a new Life and
Accident Insurance offering in Brazil and a new unit-linked
product offering in Mexico for the Select segment, which build
on the growth potential of the savings business.
Motor vehicle insurance business grew 8% year-on-year. Our
Autocompara platform, in Argentina, Brazil, Chile, Mexico and
Uruguay, reached 1.4 million active policies.
Our digital strategy continued to drive growth in policy sales
through digital channels, now representing 20% of the total.
Business performance: SAM and Private Banking
EUR billion and % change in constant euros. December 2022
/ 2021
-3%
-6%
-6%
-7%
-4%
+10%
+5%
Note: Total assets marketed and/or managed in 2022 and 2021.
(*) Total adjusted private banking customer funds managed by SAM.
• Private Banking client assets and liabilities reached EUR 259
billion, 1% lower than in 2021, because of custody valuation.
Net new money amounted to EUR 11.7 billion (4.5% of total
volume). Net profit was EUR 690 million, up 40% year-on-
year, primarily backed by total income. Threshold Private
Banking clients increased 8% to 114,000 clients.
• SAM's total AuMs decreased 6% year-on-year to EUR 188
billion. Net sales recorded outflows of EUR 4.1 billion (2.2% of
total AuMs), but with different underlying dynamics: in Latin
America, total net sales were EUR 0.7 billion, and in Europe
net sales were -EUR 2.2 billion, more heavily affected by the
war in Ukraine. SAM’s contribution to the Group's profit
(including ceded fee income) was EUR 580 million, remaining
stable year-on-year.
• In Insurance, gross written premiums amounted to EUR 11.7
billion (up 24% year-on-year). Protection premiums grew 7%
despite declining demand in Latin America. Total fee income
rose 7% (+10% excluding the impact from insurance portfolio
buybacks in 2021), and net fee income from protection
insurance was 9% higher. Total contribution to profit stood at
EUR 1,458 million, +3% year-on-year (+18%, minus insurance
earn-out one-offs and insurance portfolio buybacks).
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2022 Annual report
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Results
Underlying attributable profit was EUR 1,118 million in 2022, up
19% year-on-year. In constant euros, it was 15% higher (+36%
excluding insurance one-offs in 2021):
• Total income increased 12% as a result of improved margins
and net fee income.
• Total fee income generated, including ceded to the
commercial network, amounted to EUR 3,689 million (31% of
the Group's total fee income), a 3% increase year-on-year,
despite the market impact on volumes.
• Administrative expenses and amortizations were 8% higher
year-on-year, due to the investment carried out and the higher
costs from increased commercial activity.
• As a result, net operating income increased 15% and the
efficiency ratio improved 0.9 pp.
Total contribution to profit
EUR million and % change in constant euros
2,728
〉
+10%
/ 2021
The total contribution to the Group (including net profit and
total fees generated net of tax) was EUR 2,728 million, 10%
higher than in 2021 in constant euros (+18%, minus insurance
one-offs in 2021).
WM&I. Underlying income statement
EUR million and % change
Revenue
Expenses
2022
2021
2,608
2,240
-1,041
-914
Net operating income
1,566
1,326
LLPs
PBT
-14
-38
1,526
1,294
Underlying attrib. profit
1,118
941
Detailed financial information in section 4.6 'Appendix'.
/ 2021
% % excl. FX
+16
+14
+18
-63
+18
+19
+12
+8
+15
-64
+15
+15
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2022 Annual report
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PagoNxt
Underlying attributable profit
-EUR 215 mn
"In our second year since inception, we continued with our strategy
to bring innovative payments technology, better user experience
and efficiency. I'm thrilled to see more and more customers trusting
in PagoNxt's solutions and expertise, while we make progress
laying the groundwork for further growth in the coming years"
1
Business performance
Results
Javier San Félix
CEO of PagoNxt
Strategy
Scale up our global platform of
innovative payments and integrated
value-added solutions serving the
payment needs for Grupo Santander
and for open market customers
worldwide
PagoNxt continued to expand,
achieving significant growth in
2022. Getnet's Total Payments
Volume globally was 27% higher
than 2021 and active merchants
grew to 1.32 million
Revenue exceeded our growth
target by reaching EUR 953
million in 2022, +93% (+72%
in constant euros) versus
2021, fuelled by an increase
in payments processed and
active customers
1. In constant euros.
Strategy
PagoNxt aims at global leadership in payments, through a
distinct, holistic and customer-centric value proposition. We are
a one-of-a-kind paytech business that provides customers with
a wide range of innovative payments and integrated value-
added services.
We focus on several strategic and high-growth business
segments:
Merchants: to provide global and integrated acquiring,
processing and value-added solutions for physical and e-
commerce merchants.
International Trade: to deliver specialized cross-border trading
solutions (payments, FX, cash management, trade finance) for
businesses, in a large and global market yet to be fully
digitalized.
Payments: to provide wholesale account-to-account payment
processing and instant connectivity to schemes in multiple
regions in a highly scalable model.
PagoNxt's technology platform and specialist teams serve
Grupo Santander's payments needs and cater to open market
opportunities beyond Santander's business with in-depth
solutions for millions of businesses and people.
PagoNxt runs an efficient global operating model, that covers
three core regions (Europe, South America and North America)
with bank-grade security and compliance embedded in our
customer products.
PagoNxt's strategy sets out to:
• scale up our global, cloud-native, secure and efficient
platform, which is interconnected, in real-time, flexible, highly
scalable, fully cloud and API-based to ensure access to our
features through a single integration. We process and
generate insights to help our customers and their businesses
harness the full power of data to make decisions;
• accelerate commercial growth by continuing to strengthen
our commerce and trade ecosystem, offerings and distribution
on Santander's commercial platforms, especially for SMEs;
and
• maximize the open market opportunity through direct
commercialization and distribution partnerships (with
integrated software vendors and others), increasing our
market penetration in Europe, South America and North
America and extending our footprint to additional strategic
countries.
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2022 Annual report
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Business performance
Getnet, our stronghold business, continued expanding its reach
across Latin America and Europe. Latin American countries with
full acquiring propositions include Brazil, Mexico, Argentina,
Chile and Uruguay, and our pan-European acquirer has active
largest Merchant
customers in 12 countries. Getnet was the 3
Acquirer in Latin America and the 19
largest Merchant Acquirer
Worldwide (per Nilson reports in September and October 2022
respectively, based on number of transactions).
rd
th
In 2022, Getnet's Total Payments Volume (TPV) reached EUR
165 billion, +27% year-on-year (in constant euros), and active
merchants grew to 1.32 million. Our merchant platform added
innovative value-added services, deployed new global e-
commerce capabilities and further developed specialized
vertical solutions which it shares across countries. Highlights by
market were:
• Getnet Brazil's TPV increased 16%, boosted by e-commerce.
Our strategy in Brazil is also focused on driving profitable
growth through our pre-payments products, value-added
services and greater SME penetration. We are pursuing
opportunities across all sales channels and enhancing open
market sales through direct sales and digital channels.
• Getnet Europe, our pan-European acquirer, grew significantly
in the year. TPV increased 39% and active merchants rose
33% year-on-year, mainly driven by the Spanish market and
by the transfer of the former Santander Portugal acquiring
business to Getnet Europe in November. We enhanced
platform capabilities, with new payment methods, a vertical
solution for airlines and a stronger value-added proposition
for SMEs. We continued to develop our open market strategy
and we are now operating in 12 countries.
• Getnet Mexico continued strongly, with increases of 35% in
TPV and 12% in active merchants year-on-year, driven by
higher average tickets in our merchant base and the strong
performance of our open market distribution channels, which
include several partnerships with financial institutions,
integrated software vendors (ISVs) and payment ecosystems.
We launched several innovative value-added services in
Mexico.
• We are ramping up Getnet commercial activity in other Latin
American countries. In 2022, we launched our acquiring
businesses in Argentina and Uruguay and accelerated
penetration in the Chilean market.
Ebury showed strong performance in its B2B offerings for the
open market, driven by FX services. Active customers increased
by 16% year-on-year.
Our One Trade platform made headway in its objective to
become the international services (payments, FX, trade finance)
platform for the Group, replacing the local systems with a
single, common and interconnected technology solution. In
2022, it expanded into nine of our countries, replacing some of
the previous services and deploying such new digital capabilities
as instant payments to Europe or Brazil. One Trade was granted
an Electronic Money Institution licence to operate in open
markets in the EU.
PagoNxt continued to accelerate its roadmap to be Santander's
wholesale payments processing provider, centralizing all types
of payments (except cards). In 2022, payments services
included Santander in Spain, Portugal and Santander Corporate
and Investment Banking. The Payments Hub platform increased
the number of currencies it processes to more than 30, with five
clearing schemes.
On the consumer side, Superdigital continued to expand its
consumer offering across Latin America. We rolled out our
global platform in Argentina, Colombia and Peru, and we are
gradually integrating our customer base in Brazil. We upgraded
it to provide simpler and faster customer onboarding and higher
efficiency with its global operating model.
Results
In 2022, underlying attributable loss decreased year-on-year to
-EUR 215 million, from -EUR 253 million.
Total income was EUR 953 million, a 93% increase year-on-year
(+72% in constant euros), backed by rising regional business
activity and volumes, especially in our Merchant and Trade
businesses (Getnet and Ebury).
PagoNxt outperformed its 50% revenue growth target for 2022.
PagoNxt. Revenue performance
Constant EUR million
953
554
+72%
2021
2022
In 2022, administrative expenses and amortizations reflected
the ongoing investment plans to develop and implement global
technology.
PagoNxt. Underlying income statement
EUR million and % change
Revenue
Expenses
Net operating income
LLPs
PBT
Underlying attrib. profit
2022
2021
953
-1,024
-71
-44
-141
-215
495
-673
-178
-10
-227
-253
/ 2021
% % excl. FX
+93
+52
-60
+72
+45
-54
+336
+273
-38
-15
-32
-10
Detailed financial information in section 4.6 'Appendix'.
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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
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
Europe
2021
10,574
4,344
756
261
15,934
(8,319)
7,615
(2,293)
(1,288)
4,034
(1,213)
2,820
—
2,820
(71)
% % excl. FX
18.5
3.3
8.1
(41.9)
12.9
2.1
24.8
4.8
27.0
35.3
22.6
40.8
—
40.8
160.6
18.8
3.4
8.6
(42.1)
13.2
2.5
24.8
4.5
26.4
35.9
23.0
41.5
—
41.5
154.0
2,750
38.6
37.8
2022
12,565
4,493
821
151
18,030
(8,523)
9,507
(2,396)
(1,629)
5,482
(1,492)
3,989
—
3,989
(179)
3,810
2.5
0.4
15.0
28.1
(10.0)
3.5
8.8
(27.3)
0.4
55.4
7.9
3.8
(2.3)
2.9
5.4
8.8
(13.2)
591,280
216,310
76,319
47,737
26,564
958,209
659,554
112,254
71,731
60,010
11,621
915,169
43,040
590,610
219,155
67,068
37,250
29,793
943,875
619,486
156,258
73,629
38,706
10,929
899,007
44,868
579,476
736,589
643,309
93,280
575,983
711,799
603,739
108,060
9.28
47.3
2.37
51.8
65,581
3,148
10,964
17,450
6.81
52.2
3.12
49.4
63,048
3,242
10,334
16,238
0.1
(1.3)
13.8
28.2
(10.8)
1.5
6.5
(28.2)
(2.6)
55.0
6.3
1.8
(4.1)
0.6
3.5
6.6
(13.7)
2.47
(4.9)
(0.74)
2.4
4.0
(2.9)
6.1
7.5
2022
4,539
2,818
612
265
8,233
(3,998)
4,236
(1,618)
(539)
2,079
(518)
1,560
—
1,560
—
1,560
256,397
129,113
42,008
43,555
17,995
489,067
341,701
43,110
23,674
52,876
7,314
468,674
20,394
249,821
406,965
334,570
72,395
7.89
48.6
3.27
51.0
26,839
1,913
3,083
5,899
Spain
2021
4,166
2,789
526
268
7,748
(4,052)
3,696
(2,320)
(514)
863
(236)
627
—
627
—
627
248,211
130,773
30,043
34,553
18,677
462,256
292,251
83,229
28,582
33,994
5,198
443,254
19,002
245,386
370,927
290,633
80,295
3.40
52.3
4.72
51.4
26,015
1,951
2,772
5,412
%
9.0
1.0
16.4
(1.3)
6.3
(1.3)
14.6
(30.3)
4.9
140.9
119.4
149.0
—
149.0
—
148.9
3.3
(1.3)
39.8
26.1
(3.7)
5.8
16.9
(48.2)
(17.2)
55.5
40.7
5.7
7.3
1.8
9.7
15.1
(9.8)
4.49
(3.7)
(1.45)
(0.4)
3.2
(1.9)
11.2
9.0
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2022 Annual report
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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
% % excl. FX
13.0
13.9
United Kingdom
2021
4,383
434
(8)
6
4,815
(2,592)
2,223
245
(319)
2,149
(612)
1,537
—
1,537
—
(10.1)
—
(2.0)
12.5
3.6
22.9
—
62.0
(11.6)
(17.5)
(9.2)
—
(9.2)
—
2022
4,992
390
31
6
5,418
(2,685)
2,733
(316)
(517)
1,900
(505)
1,395
—
1,395
—
(10.8)
—
(2.8)
11.6
2.8
21.9
—
60.7
(12.3)
(18.2)
(10.0)
—
(10.0)
—
Underlying profit attributable to the parent
1,395
1,537
(9.2)
(10.0)
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
1.7
(4.0)
(1.7)
63.4
(38.7)
(0.1)
0.4
(11.4)
14.1
46.4
(32.9)
0.6
(16.4)
4.3
1.7
2.4
(16.5)
251,892
65,962
7,294
601
3,292
329,042
230,829
37,022
44,088
3,549
1,553
317,041
12,001
261,414
72,499
7,832
389
5,667
347,801
242,739
44,119
40,796
2,558
2,442
332,654
15,147
244,840
228,993
221,884
7,109
247,775
237,780
228,790
8,991
10.70
49.6
1.21
33.8
21,185
449
4,566
6,980
11.47
53.8
1.43
25.8
20,259
450
4,455
6,635
(3.6)
(9.0)
(6.9)
54.8
(41.9)
(5.4)
(4.9)
(16.1)
8.1
38.7
(36.4)
(4.7)
(20.8)
(1.2)
(3.7)
(3.0)
(20.9)
(0.78)
(4.3)
(0.23)
8.0
4.6
(0.2)
2.5
5.2
Portugal
2021
722
441
142
8
1,313
(563)
750
(38)
(26)
685
(223)
463
—
463
(1)
462
2022
747
484
56
8
1,295
(502)
793
(17)
(1)
775
(240)
536
—
536
(2)
534
39,126
9,634
7,887
1,095
1,481
59,223
41,899
9,182
3,288
448
1,074
55,890
3,333
40,066
45,521
41,899
3,623
15.03
38.7
2.99
79.3
4,952
383
934
1,115
39,280
9,692
8,489
1,586
1,209
60,257
42,371
9,430
2,633
236
1,344
56,014
4,244
40,262
46,711
42,371
4,340
11.39
42.9
3.44
71.7
5,069
393
860
1,000
%
3.4
9.8
(60.6)
2.7
(1.3)
(10.9)
5.8
(55.0)
(97.0)
13.1
7.8
15.7
—
15.7
22.0
15.7
(0.4)
(0.6)
(7.1)
(30.9)
22.5
(1.7)
(1.1)
(2.6)
24.9
90.0
(20.1)
(0.2)
(21.4)
(0.5)
(2.5)
(1.1)
(16.5)
3.64
(4.1)
(0.45)
7.7
(2.3)
(2.5)
8.6
11.5
391
2022 Annual report
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
2022
1,976
528
93
(123)
2,474
(692)
1,782
(440)
(553)
789
(247)
542
—
542
(179)
364
29,659
8,898
11,865
628
1,616
52,665
39,299
4,969
681
1,179
1,378
47,506
5,159
30,524
42,370
39,299
3,071
11.93
28.0
3.80
74.0
10,532
395
2,379
3,284
Poland
2021
1,020
518
77
2
1,617
(663)
955
(200)
(404)
351
(141)
210
—
210
(69)
% % excl. FX
98.7
4.6
23.8
—
57.0
7.2
91.6
125.8
40.6
130.9
79.5
93.7
2.0
20.6
—
53.0
4.5
86.7
120.1
37.0
125.0
74.9
158.8
—
158.8
157.9
165.5
—
165.5
164.6
165.9
1.4
205.5
(19.8)
27.2
16.0
7.8
5.6
51.9
(57.1)
73.6
(8.1)
7.4
11.9
140
159.2
29,817
2,968
15,082
503
1,419
49,788
37,919
3,332
1,618
692
1,529
45,091
4,697
(0.5)
199.8
(21.3)
24.8
13.9
5.8
3.6
49.1
(57.9)
70.3
(9.8)
5.4
9.8
30,657
42,325
37,919
4,406
(0.4)
0.1
3.6
(30.3)
1.5
2.0
5.6
(29.0)
4.38
41.0
3.61
73.9
10,250
440
2,245
2,998
7.55
(13.0)
0.19
—
2.8
(10.2)
6.0
9.6
2022
312
273
29
(5)
609
(646)
(38)
(6)
(18)
(61)
18
(43)
—
(43)
1
(42)
14,206
2,703
7,265
1,857
2,180
28,211
5,827
17,971
—
1,958
302
26,058
2,153
14,226
12,740
5,658
7,082
Other Europe
2021
282
163
19
(23)
441
(450)
% % excl. FX
4.5
54.1
18.1
(80.3)
27.8
36.4
—
10.3
67.6
53.7
(79.4)
37.9
43.6
329.9
—
(27.7)
322.3
—
176.9
—
176.9
—
(9)
19
(25)
(15)
(1)
(16)
—
(16)
—
—
(32.7)
—
—
375.4
—
375.4
—
(16)
164.2
346.4
11,889
3,224
5,620
219
2,821
23,773
4,204
16,148
—
1,226
417
21,995
1,778
19.5
(16.2)
29.3
748.8
(22.7)
18.7
38.6
11.3
—
59.8
(27.6)
18.5
21.1
13.0
(20.4)
29.3
582.5
(24.4)
14.0
31.5
7.4
—
52.5
(27.9)
13.9
15.2
11,903
14,055
4,026
10,029
19.5
(9.4)
40.5
(29.4)
13.0
(10.8)
33.1
(29.4)
392
2022 Annual report
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
North America
2021
8,072
1,644
224
914
10,853
(4,967)
5,886
2022
9,705
1,958
204
449
12,316
(5,871)
6,445
20.2
19.1
(9.0)
% % excl. FX
6.6
5.7
(19.3)
(56.3)
(50.9)
13.5
18.2
9.5
109.8
(18.9)
(16.4)
(14.5)
(16.9)
—
(16.9)
(92.2)
0.6
5.1
(3.1)
85.5
(27.4)
(26.0)
(24.2)
(26.5)
—
(26.5)
(93.1)
(2.8)
(14.1)
(2,538)
(1,210)
(118)
3,790
(145)
4,531
(869)
(1,016)
2,921
—
2,921
(43)
2,878
3,515
—
3,515
(556)
2,960
171,519
35,607
44,060
14,668
22,741
288,595
168,748
25,294
41,063
20,883
6,943
262,931
25,664
137,428
34,857
38,500
12,555
21,394
244,734
121,989
35,152
38,061
14,652
6,194
216,048
28,686
24.8
2.2
14.4
16.8
6.3
17.9
38.3
(28.0)
7.9
42.5
12.1
21.7
(10.5)
156,521
164,414
135,955
28,459
134,090
137,206
111,004
26,202
16.7
19.8
22.5
8.6
16.3
(5.1)
4.9
6.7
(0.5)
9.5
28.4
(33.4)
0.9
29.8
4.0
12.9
(16.6)
8.7
11.2
13.8
0.1
11.06
47.7
3.03
93.3
44,518
1,854
4,693
7,239
12.73
45.8
2.42
134.9
43,595
1,859
4,273
6,774
(1.67)
1.9
0.61
(41.6)
2.1
(0.3)
9.8
6.9
2022
6,140
771
164
548
7,623
(3,599)
4,025
(1,744)
(20)
2,261
(478)
1,784
—
1,784
—
1,784
130,390
20,000
21,637
5,241
17,837
195,106
124,209
8,572
32,685
8,346
4,116
177,929
17,177
115,248
112,856
98,346
14,510
9.40
47.2
3.25
90.3
14,610
485
365
1,037
% % excl. FX
3.0
(12.3)
(3.7)
United States
2021
5,298
782
152
1,044
7,277
(3,197)
15.9
(1.4)
8.3
(47.5)
(53.3)
(6.8)
0.1
(12.3)
270.3
(84.9)
(43.3)
(46.9)
4.8
12.6
(1.4)
316.4
(83.0)
(36.2)
(40.3)
(35.0)
—
(35.0)
(100.0)
(42.2)
—
(42.2)
(100.0)
4,080
(419)
(116)
3,546
(800)
2,746
—
2,746
(494)
2,252
(20.8)
(29.6)
103,548
24,033
16,341
4,258
17,638
165,819
83,159
21,926
31,482
4,038
4,140
144,745
21,074
99,731
91,865
77,775
14,090
13.21
43.9
2.33
150.3
15,674
488
378
1,036
25.9
(16.8)
32.4
23.1
1.1
17.7
49.4
(60.9)
3.8
106.7
(0.6)
22.9
(18.5)
15.6
22.8
26.4
3.0
(3.81)
3.3
0.93
(60.0)
(6.8)
(0.6)
(3.4)
0.1
18.7
(21.5)
24.8
16.0
(4.7)
10.9
40.8
(63.1)
(2.1)
94.9
(6.3)
15.9
(23.2)
8.9
15.8
19.2
(2.9)
393
2022 Annual report
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
Mexico
2021
2,773
828
72
(120)
3,553
(1,643)
1,910
(791)
(19)
1,100
(223)
878
—
878
(61)
816
% % excl. FX
13.3
21.3
(52.0)
(10.6)
14.7
11.4
17.5
(12.2)
328.6
33.3
61.2
26.3
—
26.3
(36.2)
28.6
37.7
(45.6)
1.4
30.1
26.4
33.3
(0.3)
386.4
51.3
82.9
43.3
—
43.3
(27.6)
48.6
31.0
9.0
29.4
(9.1)
0.3
19.6
6.2
2.6
12.9
14.4
5.3
22.8
6.6
2.6
7.9
1.8
1.1
3.5
33,860
10,593
22,159
8,297
3,474
78,383
38,820
13,201
6,579
10,559
2,022
71,180
7,203
34,339
45,330
33,218
12,112
13.63
46.2
2.73
95.0
27,266
1,371
3,895
5,544
21.3
44.0
1.2
11.6
33.0
18.2
14.1
25.7
27.3
17.2
36.7
18.6
14.1
20.0
13.2
12.5
15.2
3.30
(1.3)
(0.41)
11.6
5.8
(0.1)
11.1
8.8
2022
3,565
1,140
39
(122)
4,623
(2,076)
2,547
(788)
(94)
1,665
(407)
1,257
—
1,257
(44)
1,213
41,080
15,254
22,423
9,257
4,622
92,636
44,309
16,592
8,378
12,374
2,764
84,416
8,220
41,218
51,328
37,379
13,949
16.92
44.9
2.32
106.6
28,834
1,369
4,328
6,029
Other North America
2021
—
34
—
(11)
23
(127)
(104)
—
(10)
(114)
7
(108)
—
(108)
—
(43.5)
40.5
—
—
201.4
54.4
21.6
—
(55.7)
19.6
153.1
11.5
—
11.5
—
% % excl. FX
(43.5)
40.5
—
—
201.4
54.4
21.6
—
(55.7)
19.6
153.1
11.5
—
11.5
—
2022
—
47
—
22
70
(196)
(126)
(6)
(5)
(137)
17
(120)
—
(120)
1
(119)
(108)
10.1
10.1
48
354
—
170
282
853
230
130
—
163
64
587
266
55
230
230
—
20
231
—
—
282
533
11
25
—
54
32
123
410
142.5
53.1
—
—
(0.1)
60.1
—
413.7
—
199.2
96.8
377.3
(35.1)
142.5
53.1
—
—
(0.1)
60.1
—
413.7
—
199.2
96.8
377.3
(35.1)
20
11
11
—
174.6
—
—
—
174.6
—
—
—
394
2022 Annual report
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
2022
12,979
4,515
1,291
(761)
18,025
(6,675)
11,350
(5,041)
(544)
5,764
(1,549)
4,215
—
4,215
(557)
South America
2021
11,307
3,721
716
(407)
15,337
(5,380)
9,958
(3,251)
14.8
21.4
80.4
87.0
17.5
24.1
14.0
55.1
14.8
(7.5)
% % excl. FX
5.6
11.5
76.9
130.7
7.6
18.0
2.3
37.2
14.0
(16.9)
(42.8)
(34.3)
(474)
6,232
(2,359)
3,873
—
3,873
(556)
8.8
—
8.8
0.1
Underlying profit attributable to the parent
3,658
3,317
10.3
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
144,812
52,358
57,106
19,854
18,795
292,925
137,661
42,921
35,063
41,445
11,327
268,417
24,508
123,920
43,134
51,451
23,809
15,491
257,805
120,500
44,314
23,461
40,490
8,610
237,375
20,430
16.9
21.4
11.0
(16.6)
21.3
13.6
14.2
(3.1)
49.5
2.4
31.6
13.1
20.0
152,435
182,541
123,307
59,234
128,916
162,212
110,875
51,337
18.2
12.5
11.2
15.4
18.77
37.0
6.20
76.0
78,271
3,653
11,473
25,897
20.22
35.1
4.50
98.3
74,970
3,819
10,630
23,727
(1.45)
2.0
1.70
(22.4)
4.4
(4.3)
7.9
9.1
(0.4)
—
(0.4)
(6.5)
0.6
8.4
15.9
1.5
(23.0)
13.2
5.6
7.0
(10.8)
36.9
(5.7)
22.3
5.0
12.3
9.7
5.2
4.6
6.6
Brazil
2021
7,867
2,728
376
(95)
10,876
(3,236)
7,641
(2,715)
(316)
4,610
(2,027)
2,583
—
2,583
(263)
2,320
2022
8,901
3,296
736
(23)
12,910
(4,180)
8,730
(4,417)
(259)
4,055
(1,232)
2,822
—
2,822
(278)
2,544
86,202
40,858
37,387
5,682
14,037
184,165
89,957
23,477
23,997
25,719
5,477
168,627
15,539
73,085
28,400
37,078
10,129
10,755
159,446
74,475
27,670
13,737
25,503
5,283
146,667
12,779
13.1
20.8
96.0
(75.8)
18.7
29.2
14.3
62.7
(18.1)
(12.0)
(39.2)
9.3
—
9.3
5.7
9.7
17.9
43.9
0.8
(43.9)
30.5
15.5
20.8
(15.2)
74.7
0.8
3.7
15.0
21.6
92,194
120,911
75,767
45,144
76,569
105,095
64,890
40,205
20.4
15.0
16.8
12.3
19.23
32.4
7.57
79.5
55,993
2,847
8,743
20,405
21.44
29.7
4.88
111.2
52,871
2,964
8,037
18,351
(2.22)
2.6
2.69
(31.7)
5.9
(3.9)
8.8
11.2
% % excl. FX
(3.7)
2.8
66.7
(79.4)
1.0
9.9
(2.8)
38.4
(30.4)
(25.2)
(48.3)
(7.0)
—
(7.0)
(10.1)
(6.7)
5.5
28.6
(9.8)
(49.8)
16.7
3.3
8.0
(24.1)
56.2
(9.8)
(7.3)
2.8
8.7
7.7
2.9
4.4
0.4
395
2022 Annual report
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. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
Chile
2021
1,982
394
131
(52)
2,455
(942)
1,513
(341)
(16)
1,156
(230)
927
—
927
(291)
% % excl. FX
(10.6)
18.8
84.9
(36.4)
(0.3)
4.1
(3.0)
16.9
(50.4)
(8.2)
(54.1)
3.2
—
3.2
(4.1)
(8.7)
21.3
88.9
(35.0)
1.9
6.4
(0.9)
19.5
(49.3)
(6.2)
(53.1)
5.4
—
5.4
(2.0)
636
6.5
8.8
7.9
(11.7)
3.1
(2.7)
(8.1)
2.7
(7.3)
8.3
6.0
(0.2)
79.1
2.1
11.8
8.0
(5.3)
(7.6)
2.9
37,849
6,773
10,955
13,469
2,942
71,987
29,525
12,109
9,264
13,841
2,543
67,283
4,704
38,930
37,847
29,484
8,363
19.25
38.4
4.43
63.3
10,574
326
832
2,017
14.5
(6.3)
9.3
3.2
(2.5)
8.9
(1.6)
14.8
12.4
5.8
90.0
8.3
18.6
14.5
0.4
(2.0)
9.1
0.22
1.7
0.55
(7.0)
(7.6)
(13.2)
2.8
(1.8)
2022
1,772
468
242
(33)
2,449
(981)
1,468
(399)
(8)
1,062
(105)
956
—
956
(279)
677
43,336
6,344
11,977
13,898
2,869
78,425
29,042
13,906
10,415
14,650
4,832
72,845
5,580
44,588
38,014
28,889
9,126
19.47
40.1
4.99
56.3
9,773
283
855
1,982
2022
1,778
542
218
(705)
1,833
(987)
846
(132)
(270)
443
(118)
325
—
325
(1)
324
5,586
3,021
5,317
74
1,017
15,015
10,547
1,080
153
811
514
13,105
1,910
5,781
14,499
10,547
3,952
26.23
53.9
2.08
180.4
8,251
375
1,671
2,867
Argentina
2021
1,065
420
147
(245)
1,388
(805)
583
(140)
(136)
306
(34)
272
—
272
(2)
270
5,173
5,243
1,358
92
966
12,832
9,170
649
204
1,013
443
11,479
1,353
5,454
11,891
9,170
2,721
27.15
58.0
3.61
153.8
8,620
411
1,593
2,730
% % excl. FX
171.5
109.6
141.3
368.7
114.8
99.4
136.1
53.0
223.0
135.6
465.4
94.4
—
94.4
(18.9)
67.0
28.9
48.4
188.2
32.1
22.6
45.2
(5.9)
98.7
44.9
247.7
19.5
—
19.5
(50.1)
20.0
95.1
8.0
(42.4)
291.7
(19.3)
5.2
17.0
15.0
66.5
(24.8)
(19.9)
16.0
14.2
41.1
75.6
(6.3)
536.9
31.2
71.1
90.3
87.0
170.7
22.3
30.2
88.6
85.6
129.5
6.0
21.9
15.0
45.2
72.4
98.3
87.0
136.2
(0.92)
(4.2)
(1.53)
26.6
(4.3)
(8.8)
4.9
5.0
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Other South America
2021
393
Digital Consumer Bank
2021
2022
4,041
4,022
(0.5)
% % excl. FX
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
2022
527
210
95
1
832
(527)
306
(94)
(7)
205
(94)
111
—
111
1
% % excl. FX
17.1
4.5
35.4
—
18.2
21.4
13.1
48.7
5.0
2.2
17.6
(8.0)
—
(8.0)
—
34.4
17.4
52.2
—
34.7
32.8
38.1
71.0
13.2
27.8
35.7
21.9
—
21.9
—
179
62
(15)
618
(397)
221
(55)
(7)
160
(69)
91
—
91
—
Underlying profit attributable to the parent
112
91
23.6
(6.8)
9,689
2,135
2,425
200
872
15,320
8,116
4,457
498
265
504
13,840
1,480
9,872
9,117
8,105
1,011
7,813
2,718
2,061
119
828
13,539
7,331
3,886
255
134
340
11,946
1,593
24.0
(21.4)
17.6
67.8
5.3
13.2
10.7
14.7
94.9
97.8
48.1
15.8
(7.1)
7,963
7,378
7,331
48
24.0
23.6
10.6
—
14.6
(29.3)
2.8
60.1
1.0
3.4
(3.1)
13.7
67.4
87.7
32.6
5.6
(13.6)
14.5
8.2
(3.2)
—
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 total customers (thousands)
A. Includes exchange differences.
B. Minus reverse repurchase agreements.
C. Minus repurchase agreements.
843
60
344
5,269
(2,462)
2,807
(544)
(27)
2,237
(549)
1,687
—
1,687
(379)
1,308
821
8
228
5,099
(2,405)
2,694
(527)
(194)
1,973
(464)
1,510
—
1,510
(346)
2.7
618.8
50.8
3.3
2.4
4.2
3.2
(86.1)
13.4
18.5
11.8
—
11.8
9.6
(0.5)
2.8
621.1
47.7
3.2
2.4
3.9
3.1
(86.0)
12.8
18.0
11.2
—
11.2
9.6
1,164
12.4
11.7
122,608
12,311
7,644
190
8,262
151,016
58,544
39,169
33,749
1,820
4,704
137,986
13,029
113,936
21,804
5,280
47
6,937
148,005
55,327
37,600
36,710
1,397
4,565
135,598
12,407
7.6
(43.5)
44.8
303.6
19.1
2.0
5.8
4.2
(8.1)
30.3
3.1
1.8
5.0
9.0
(43.0)
46.3
310.6
20.6
3.3
6.7
6.3
(7.4)
31.8
3.8
2.9
6.9
124,976
61,625
58,544
3,081
116,580
57,824
55,327
2,497
7.2
6.6
5.8
23.4
8.5
7.4
6.7
23.4
13.65
46.7
2.06
92.8
16,193
364
19,746
12.41
47.2
2.13
107.8
15,840
309
19,438
1.25
(0.4)
(0.07)
(15.0)
2.2
17.8
1.6
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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
2022
34,880
7,650
435
(280)
42,684
(18,568)
24,116
(10,210)
(2,135)
11,772
(2,931)
8,841
—
8,841
(895)
Retail Banking
2021
30,596
7,045
840
390
38,869
(17,103)
21,766
(7,081)
(2,052)
12,632
(3,898)
8,734
—
8,734
(1,345)
14.0
8.6
(48.2)
—
9.8
8.6
10.8
44.2
4.0
(6.8)
(24.8)
1.2
—
1.2
(33.5)
% % excl. FX
7.2
3.3
(50.8)
—
3.2
4.0
2.5
33.4
3.2
(14.7)
(32.0)
(6.9)
—
(6.9)
(37.9)
Corporate & Investment Banking
% % excl. FX
2021
17.6
2,921
9.4
1,744
139.3
766
(85.1)
188
27.4
5,619
17.3
(2,379)
35.0
3,240
63.0
(151)
855.4
(17)
30.1
3,071
27.8
(821)
31.0
2,250
—
—
31.0
2,250
30.6
(137)
2022
3,544
1,988
1,833
31
7,395
(2,898)
4,497
(251)
(131)
4,115
(1,119)
2,996
—
2,996
(192)
21.3
14.0
139.2
(83.7)
31.6
21.8
38.8
66.0
654.6
34.0
36.3
33.2
—
33.2
39.8
Underlying profit attributable to the parent
7,946
7,389
7.5
(1.3)
2,805
2,113
32.7
31.0
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
Wealth Management & Insurance
% % excl. FX
2021
67.7
476
(0.8)
1,247
19.3
100
(14.2)
416
12.1
2,240
(914)
8.2
14.8
1,326
(63.8)
(38)
6
—
14.6
1,294
(309)
9.9
16.0
985
—
—
16.0
985
32.0
(44)
2022
825
1,291
123
369
2,608
(1,041)
1,566
(14)
(26)
1,526
(347)
1,179
—
1,179
(60)
73.2
3.5
22.6
(11.3)
16.4
13.9
18.1
(62.9)
—
17.9
12.4
19.7
—
19.7
36.7
2022
22
881
(14)
64
953
(1,024)
(71)
(44)
(26)
(141)
(63)
(203)
—
(203)
(12)
PagoNxt
2021
1
493
(1)
2
495
(673)
(178)
(10)
(38)
(227)
(24)
(251)
—
(251)
(2)
% % excl. FX
0.0
59.7
836.3
—
72.0
44.5
(54.2)
272.8
(35.0)
(31.6)
95.0
(14.5)
—
(14.5)
540.5
0.0
78.6
887.4
—
92.7
52.2
(60.4)
336.5
(33.3)
(38.0)
158.3
(19.0)
—
(19.0)
570.2
Underlying profit attributable to the parent
1,118
941
18.8
15.3
(215)
(253)
(15.0)
(10.3)
A. Includes exchange differences.
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5. Research, development
and innovation (R&D&I)
Research, development and innovation activity
Innovation and technological development are crucial to
Santander's strategy. We focus on operational excellence and
customer experience to meet the challenges that stem from
digitalization.
Technology strategy
To aid the Group's strategy to become the best open digital
platform for financial services, our technology must boost
efficiency and minimize risk through optimization, growth and
value creation.
The information we gather on new technology platforms helps
us better understand the customer journey and design a more
accurate digital profile which boosts confidence and increases
customer loyalty.
In addition to competition from other banks, we must be
mindful of new entrants to the financial system that use new
technology to stand out from the crowd and gain 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 on all channels);
• enhanced processes for Santander’s professionals to ensure
greater reliability and productivity; and
• proper risk management that provides teams with the means
to spot and assess all business, 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 underlying technology, which require
considerable investments to guarantee compliance and legal
certainty.
As in previous years, the European Commission's 2022 EU
Industrial R&D Investment Scoreboard (based on 2021 data)
recognized our technological effort. We were the best Spanish
company and the second best bank globally in R&D investment.
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.
Our IT strategy ensures that our technology supports future
business growth and is based on simplification, reusable
components and composable architecture. It is consistent with
the Group's strategic initiatives and global business and
operating models.
To ensure our technology strategy is consistent in all Group
entities, the Santander Architecture Review Board (SARB) holds
monthly meetings that bring together units' chief technology
officers (CTOs) to actively make key architecture decisions. It
oversees the analysis of potential assets, migration to the cloud
and the review of data lake reference architectures.
Consequently, Santander Common Architecture is flexible for
the Group and enables the use of a global front- and back-end
technology stack. It guides technological development and
integration with such new digital capabilities as agile
methodologies, the public and private Cloud, core systems
development, and advanced technological skills (API -
application programming interface-, artificial intelligence,
robotics, blockchain, etc.) and data.
To implement our technology strategy, we use internal
regulation, the Group's commitment and experience in working
with our entities and a governance model that defines projects
and initiatives to shape the strategy across our footprint.
The development of our technology and operations (T&O)
model will help us cultivate new business, with a particular
focus on global products and digital services. Some 6,000
Santander Global Technology & Operations (SGTO)
professionals in Spain, the UK, Portugal, Poland, the US, Mexico,
Brazil and Chile are gradually incorporating the global product
portfolio agreed by the Group's entities, our global businesses
and the T&O division. They guarantee not only the quality of
digital services and products, but also their security.
SGTO has reaffirmed its commitment to R&D&I with technology
that enables us to transform and modernize complex systems,
such as core banking, to help businesses prosper by supporting
their digital transformations.
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In addition to regular testing and reviews, independent third
party certification authorities review and certify our critical
cybersecurity services. Certifications received include the
International Organization for Standardization (ISO) 27001 and
the Statement on Standards for Attestation Engagements
(SSAE) 18.
Investing in specialized cybersecurity companies to drive
technology and innovation is fundamental to our mission to
generate value and trust in society and help create a more
secure ecosystem. In 2022, Santander and Forgepoint Capital, a
leading venture capital firm specializing in cybersecurity,
announced a strategic alliance to drive investment and
innovation in cybersecurity in Europe and Latin America.
For more details on the cybersecurity initiatives we ran in 2022,
see the 'Acting responsibly towards customers' section of the
'Responsible banking' chapter. For details on the measurement,
monitoring and control of cybersecurity-related risks, and their
respective mitigation plans, see section 6.2 'Operational risk
management' of the 'Risk management and compliance'
chapter.
Digitalization and fintech ecosystem
We created PagoNxt in 2020 to make headway in our digital
transformation, in addition to the technological strategy,
infrastructure development and cybersecurity initiatives.
Building on Santander's large-scale distribution and proven
open-market capabilities, PagoNxt enables us to accelerate
business for merchants and enhance their ecosystem with a
Cloud-native, data-driven global payments platform that
connects customers and businesses. For more details on
PagoNxt see section 4 'Financial information by segment' in this
chapter.
Moreover, Santander combined Santander Consumer Finance's
scale and leadership 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
enhancements.
For more details on our digital and innovative products and
services for individuals and corporates, as well as references to
cybersecurity policies, see section 3.4 ‘Acting responsibly
towards customers’ in the 'Responsible banking' chapter.
Technological infrastructure
Santander has a network of high-quality data centres (CPDs)
interconnected by a redundant communications system. They
are spread across strategic markets to support and develop our
operations. They combine traditional IT systems with the
capabilities of a private, on-premise cloud, which, thanks to its
swift adoption, enables us to integrate management of the
business areas’ technology, accelerate digitalization and achieve
significant cost savings.
Santander has migrated more than 90% of its technology
infrastructure to the cloud and expects to complete migration in
2023. Our cloud strategy enables us to enhance processes,
innovate quickly and improve service quality. Our local Cloud
Centres of Excellence (CCoEs), coordinated by Global CCoE,
guarantee consistent and rigorous Cloud adoption across our
entities. This minimizes risk in accordance with our Public Cloud
policy. Migration will also contribute towards Santander's
responsible banking goals as we expect it to reduce the energy
our technology infrastructure consumes by 70%.
Cybersecurity
Cybersecurity is one of Santander’s main priorities. It is crucial to
support our purpose of helping people and businesses prosper,
and to offer customers excellent digital services.
The cybersecurity services and capabilities we created under our
three-year Security Transformation Plan (completed in 2020)
have become business as usual (BAU) operations in line with the
Group’s Cybersecurity Framework.
We must continuously adapt cyber defences against more
sophisticated threats and attack techniques. In 2021, we
established key strategic cyber security pillars and initiatives to
develop our cyber defences and avert new threats with cutting-
edge technology.
In 2022, Santander took preventive measures to strengthen
defence capabilities in a complex geopolitical backdrop. In
particular, we developed control frameworks for Ransomware
and Distribution Denial of Service (DDoS) threats, which
dominated the external cyber threat landscape. We also
adopted measures to make supply chains more secure, prevent
data exfiltration and build up internal controls.
Internal and external auditors periodically review our
information systems. The Group proactively identifies IT assets,
systems and information (even those of third parties) and
assesses their risk and protection levels to detect and remedy
any potential weaknesses by using vulnerability scanning,
penetration testing and red team simulations of real cyber-
attacks.
Santander takes part in coordinated cyber exercises with public
and private organizations. In September, Santander and FS-ISAC
organized a Capture the Flag (CTF) competition among 35
teams - including two from Santander - from 28 organizations
and financial institutions around the world.
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6. Significant events
since year end
On 28 December 2022 the Law establishing a new temporary
levy on credit institutions and financial credit institutions was
published in Spain (see note 27 to the consolidated financial
statements). On 1 January 2023, an estimated amount of EUR
225 million has been accounted for in accordance with IFRS
Interpretations Committee (IFRIC) 21 due to this new levy.
In accordance with the agreement reached by the April 2022
general shareholders’ meeting, on 1 February 2023 the board of
directors approved a capital reduction, subject to regulatory
authorization from the ECB, of EUR 170,203,286 through the
redemption of 340,406,572 shares, representing 2.03% of the
capital acquired in the First 2022 Share Buyback Programme.
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7. Trend information 2023
This directors' report contains 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 and compliance' chapter of this report
and in note 53 of the consolidated financial statements.
à Macroeconomic environment
Despite considerable factors of uncertainty in 2023 economic
outlooks (such as geopolitics, in particular its impact on the
supply of energy in Europe, and the restoration of global supply
chains), our base scenario assumes inflation will begin to
decelerate gradually in 2023 as a result of more restrictive
central bank monetary policies and the easing of geopolitical
tensions and global supply chain bottlenecks.
The expected economic cooling should slow down economic
growth. This could result in a mild recession in some countries.
We do not expect the slowdown to affect unemployment
significantly. Until inflation shows clear signs of slowing down,
we believe that central banks will continue to trend towards
tighter monetary policy, and that interest rates in 2023 will
remain around current levels. The only exception could be in
Latin America, where some countries could start to cut rates in
the second half of the year.
Our macroeconomic forecast for 2023 by country/region is as
follows:
Eurozone
A high inflationary environment that is eroding household
purchasing power, monetary policy that still needs tightening,
and the war in Ukraine (which seems unlikely to be resolved in
the near future) are shaping 2023. However, concerns regarding
the security of energy supply have subsided and global supply
chain functioning has improved. As a result, although we expect
slower economic growth in 2023 than in 2022, the outlook is
better than it was a few months ago. The euro area's GDP is
expected to grow modestly, around 1%. Inflation should fall but
is likely to remain far from the ECB's 2% target. We therefore
expect tighter monetary policy with higher official interest rates
and measures to reduce the ECB's balance sheet.
Fiscal policy could turn slightly expansive as governments are
extending some measures implemented in 2022 to offset the
impact of higher energy prices. Consistency between monetary
and fiscal policy will be a challenge. Eurozone tax reforms
(suspended due to the pandemic) are underway, but won't take
effect until 2024.
Geopolitics will be particularly important in the eurozone.
Economic growth might be affected by the war in Ukraine and
the EU's response to energy security and defence challenges.
Spain
We expect growth to slow down in 2023 due to lower
household consumption as real incomes are squeezed. Energy
price uncertainty and tighter financial conditions may delay
some investment. We expect inflation to decrease, though we
believe core inflation will take longer to do so. The
unemployment rate may increase due to economic slowdown at
the beginning of the year, but we expect it to be transitory.
UK
The economy is expected to be in recession in 2023. Though
household and business support measures should avoid a deep
recession, we expect consumption to fall as high inflation
reduces disposable income. We also believe investment will fall
considering outlooks of slumping demand. Inflation should fall
from Q1, but remain above the Bank of England's target. We
expect interest rates to remain around 4% during the year.
Portugal
The 2023 growth outlook depends on how much the more
restrictive monetary policy impacts activity. Higher interest
rates will affect domestic demand and reduce consumption; but
the impact of this will depend on the labour market (we expect
the unemployment rate to remain around its natural rate of
7%-8%) and the use of accumulated savings. Investment is
expected to moderate as a result of higher interest rates and
worse demand outlook. However, investment in energy
transition could mitigate some of this effect. Inflation should
begin to moderate, though wage pressures are expected to
keep inflation above 2%.
Poland
The expected recession in 2023 is likely to be less severe than
initially predicted, could reach its lowest point in Q1 2023. The
subsequent recovery should lead to slightly positive growth in
the year. Consumption is expected to be the most resilient
component of demand while investment may fall. However, net
exports is expected to contribute positively to GDP growth. We
expect inflation to peak during the first quarter and then fall
afterwards, although remaining above 10%. The Monetary
Policy Council agreed to delay the inflation target, and it seems
it will not raise rates above 6.75%.
US
US economic forecasts indicate 1% growth in 2023 affected by
lower disposable income and higher interest rates. However,
households and companies are in a solid position to stave off
further downturn. We expect the Federal Reserve (Fed) will
continue to raise interest rates in the next few months but then
keep them stable for the rest of the year. Lower demand should
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drive inflation down; but we expect inflation to end the year
above the Fed's target.
à Financial markets
Mexico
We expect an economic slowdown, driven by weaker external
demand (particularly from the US) and the impact of monetary
policy tightening in the last two years. We believe the central
bank's credibility and Mexico's strong macro basis will bring
overall and medium-term inflation back within target and lead
the central bank to stop raising interest rates. We expect a
marginal increase in early 2023 but for rates to then remain
stable until year end.
Brazil
We expect a slowdown driven by lower global economic growth
and tighter credit conditions in 2021 and 2022. We expect
uncertainty around Brazil's new government to clear up over
the year. Strong monetary policy, which we believe will not
raise rates further, should continue to lower inflation.
Chile
The economy is expected to continue the readjustment that
began in 2022. GDP growth forecasts are negative due to rising
interest rates in recent years and fiscal reform. We believe
inflation will fall and the central bank will begin to cut rates,
paving the way for a return to economic growth in 2024.
Argentina
Economic growth is expected to decline in 2023 amid weak
global conditions and soaring domestic inflation. Compliance
with the International Monetary Fund's economic stabilization
programme will be key to keep refinancing debt maturities.
Presidential elections could lead to some volatility.
The 2023 outlook suggests falling consumption and investment
(due to inflation), higher interest rates and lower confidence
will cause global economic activity to slowdown. Inflation
should fall back slightly which could lead to central banks
ending monetary policy tightening early in the year. We believe
this could gradually boost financial markets over the year; but
uncertainty still runs high.
There may be further upside risk to debt yields in early 2023;
but we expect them to begin to fall in the second half of the
year as the market prices in future rate cuts starting in 2024.
We expect quantitative tightening (QT) in peripheral Europe will
be gradual and the ECB will continue its Transmission Protection
Instrument (TPI), which should cover medium-term spreads.
With the interest rate ceiling, equities should recover some
value but not a great deal, as interest rates remain high and the
economy continues to cool down.
In foreign exchange, we believe the euro's depreciation against
the US dollar peaked in 2022. But we expect the euro to remain
weak in the short term and then moderately strengthen.
In developing markets, all eyes remain on China which has
moved away from zero-covid policies and is taking steps to
resolve the housing crisis. Elsewhere, especially in Latin
America, we expect cyclical slowdowns, high interest rates and
low global liquidity to sustain this challenging environment.
We believe a risk to our central scenario is inflation falling less
than forecasted. This could put pressure on central banks'
terminal interest rates. We remain cautious; if this risk
materializes, it could lead to financial market vulnerability in
2023.
We expect that the banking sector will be hit by the impact of
slower economic growth and tighter credit conditions on
customers' ability to pay in the private sector and on balance
sheet growth.
Higher interest rates will be accompanied by the withdrawal of
liquidity support measures. Consequently, entities will have to
adjust to higher wholesale funding costs and lower loan and
deposit growth, affected by economic slowdown.
Risks are skewed to the downside. They may come from non-
bank financial players and include potentially disorderly asset
price adjustments and market liquidity disruptions. However,
most entities still have enough capital to cope.
Aside from the economic environment, banks must digitalize
faster while recognizing and managing climate change risks.
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à Financial regulation
We expect the 2022 regulatory agenda to carry over into 2023,
especially regarding prudential, sustainability and digital pillars,
while retail issues will gain focus.
Prudential
The most notable debate will be about the Basel III reform being
adopted in Europe. The trade off between the effect it will have
on the banks and how much Europe will deviate from Basel will
be a central issue. The Basel Committee published its final
standards on financial institutions' treatment of crypto-asset
exposures, which the EU and other jurisdictions are expected to
begin to adopt.
Resolution
The European Banking Authority (EBA) is expected to begin its
third revision of the Banking Recovery and Resolution Directive
(BRRD). One of its aims is to improve the application of the
framework and make it more suited to medium- and small-
sized banks. The first Deposit Guarantee Schemes Directive
(DGSD) revision is expected and should drive negotiations on
the creation of a common European deposit guarantee fund.
Sustainability
The European Commission (EC) will work towards completing a
green taxonomy and setting the four remaining environmental
objectives relating to the transition to a circular economy, the
sustainable use and protection of water and marine resources,
pollution prevention and control, and the protection and
restoration of biodiversity and ecosystems. We expect progress
with defining reporting standards in the EU (through the
European Financial Reporting Advisory Group) and abroad
(through the new International Sustainability Standards Board).
In 2023, the debate on green bonds and due diligence proposals
will continue but an agreement could be reached. We expect
the EBA to present its conclusions on the integration of climate
and environmental risks into the prudential framework in 2023,
in addition to making progress with EIOPA and ESMA in
analysing greenwashing by European financial institutions.
Digital
EU negotiations on future regulation on the development,
marketing and use of artificial intelligence (AI) will continue
throughout 2023, with a focus on high-risk AI systems. The
rules on enforcing the Digital Markets Act and on notification by
potential gatekeepers will also continue to be developed.
We expect important discussions about data, which will play a
central role in digital transformation. The draft Data Act
addresses the sharing and re-use of internet of things (IoT)
product data, the possibility of receiving compensation for data
shared with third parties and the effective exchange of Cloud
data processing service providers. The European Commission
plans to publish its bill on Open Finance and data sharing in the
financial sector to supplement the Payment Services Directive
(PSD2).
Payments is an essential pillar in the digital world. The EC
published a draft instant payments bill at the end of 2022 and it
will be debated in 2023. It is also expected to publish its revision
of the PSD2 directive. The ECB's debate on the digital euro will
continue and, 2023 will be a key year, as it decides whether to
initiate a so-called "digital euro realization phase" as a pilot
programme to issue a digital euro in the future. In addition, the
EC will present a legislative proposal on the digital euro, to
establish a legal framework in preparation for its possible
launch.
Internationally, the Financial Stability Board will publish
proposed common rules on crypto-assets and specific rules for
stablecoins.
Retail banking
Initiatives are under way to improve consumer protection and
adapt standards to the digital environment. With regard to
legislative actions, we expect the approval of the proposal to
revise the consumer credit directive, the beginning of the
mortgage credit directive review and a strategy plan for retail
investor participation in markets. It aims to encourage
investment beyond savings.
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These are the main management priorities for 2023 in our core regions and segments:
Europe
Our strategy in Europe is to stay focused on customer experience, service quality and delivering a common operating
model. Our top priorities for 2023 are:
→ sustainable top-line growth by being customer-centric, achieving best-in-class customer satisfaction in all countries
through simpler, enhanced propositions and end-to-end delivery channel transformation, and building on our scale
(e.g. growing our global businesses and improving connectivity);
→ strong discipline to keep cost growth below inflation and improve efficiency, with a more common operating model
(e.g. shared services and platforms);
→ continued low cost of risk through risk management;
→ active capital management focused on capital deductions and reducing portfolios with low returns;
→ green finance leadership for retail and corporates; and
→ attract and retain the best talent and continue improving employee engagement to be a reference in the sector.
Our strategy remains customer-centric. To attract and
engage more customers, we will focus on:
• improving customer experience to be market leaders
in NPS with new products and a greater connectivity
with other countries;
In the UK, our foundations are solid and we are well
positioned to deliver strong financial results and RoTE.
We aim to achieve our targets through:
• growth through customer loyalty and outstanding
customer experience;
• building on our global and regional scale to grow our
• simplification and digitalization of the business for
high value-added businesses;
improved efficiency and returns;
• achieving operational excellence though simple and
• engagement, motivation and development of a
digital end-to-end processes which allow us to
structurally reduce our cost to serve;
• developing our customer relationship model to offer
a unique omnichannel experience and better
customer service more efficiently; and
• continuing active and forward looking cost of risk
management.
talented and diverse team; and
• being a responsible and sustainable business.
Our market position and progress allow us to focus on:
• continued commercial and digital transformation
and better customer experience;
• focused business growth in the segments with the
highest return on capital;
• continued leadership as the most efficient and
profitable bank; and
• risk policy execution to keep our credit quality high
and our capital position robust.
Our main objective is to deliver strong growth in a
country with high potential to grow and increase
profitability. We will focus on:
• better customer and employee experience;
• simpler processes, products and infrastructure to
create a self-service bank;
• digital transformation to allow customers to bank
remotely; and
• a new green financing offer to help our customers go
green.
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North America
In North America, we continue to build on our local individual strengths and capabilities in Mexico and the US while also
capitalizing on the Group’s scale and connectivity to:
→ transform into a digital bank with branches in Mexico. In the US, continue to deliver high customer satisfaction and
scale digital to our personal loans and deposits platforms;
→ simplify our regional business model to reduce overlapping, increase efficiency and create a joint value proposition for
better service and customer experience;
→ identify business- and customer-oriented initiatives with a continued focus on positioning ourselves as a market leader
with value-added products;
→ improve cross-border coordination and cooperation while managing local operations according to their specific market
strategies;
→ capitalize on ESG capabilities to support global clients achieve energy transition and wider green goals; and
→ continue consolidating regional IT under a single leadership, seeking a faster time to market by improving technology
and infrastructure, talent, quality and processes.
Our strategy stands on four pillars: simplification,
transformation, network collaboration and profitable
growth. We have several initiatives in each of our
business lines which focus on delivering quality
services to our customer and accretive profitability for
our shareholders.
• Simplification: rationalize businesses and products
with limited scale and profitability (e.g. Home
Loans), reducing the number of legacy depository
products and exiting non-core commercial
portfolios.
• Transformation: leverage Group digital and data
capabilities to modernize our depository platform to
drive scalability, lower cost to serve and support a
“digital-first” omnichannel platform with a national
deposit growth model.
• Network collaboration: leverage the Group’s
connectivity to drive top-line growth (Auto, CIB, and
Wealth) and achieve scale synergies (Technology &
Operations).
• Profitable growth: deploy capital to support core
growth businesses while maintaining focus on
capital efficiency.
Our aim is to become the best bank for our customers.
We will focus on:
• advancing our technological transformation to
improve our digital channels;
• continuously simplifying our products, processes
and operations to transform our service model,
building on technology and data to improve
customer experience;
• growing our customer base and increasing loyalty
through integrated digital products and offerings,
new service models and development of a mass-
market value proposition;
• remaining the market leader with value-added
products for corporates and by building on existing
relations to attract more customers, particularly
individuals; and
• maintaining profitable growth trends.
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South America
The Group's priorities in South America are:
→ strengthening connectivity between countries, capturing new business opportunities and sharing best practices
regionally;
→ maintaining profitable growth through higher loyalty and customer attraction;
→ expanding our joint Corporate and CIB offerings;
→ strengthening our payments businesses leveraging our global platforms; and
→ promoting inclusion and sustainability.
Santander Brasil will focus on:
Santander Chile will focus on:
• continuing to develop the best integrated
distribution platform in the market in order to
strengthen connectivity between businesses and
capture opportunities more swiftly;
• increasing and capitalizing on our customer base.
primarily through greater loyalty, to drive growth;
• simplifying products and processes and boosting
operational efficiency and customer experience;
• keeping credit quality under control by continually
anticipating trends and enhancing risk models; and
• focusing on profitability and adapting to new
demands through innovation.
In Argentina, our strategy is to:
• expand our customer base through our multi-
channel approach, especially digital channels;
• develop our financial platform and increase
collaboration between businesses;
• increase market share in personal lending, agro
loans and consumer credit;
• staying #1 in NPS by continually improving customer
service;
• continuing to consolidate our leadership position in
transactional services and loans for our corporate
customers;
• transforming our business to provide a platform to
help customers grow their businesses, for example
through Workcafé Startup and Community or
Getnet;
• continuing to strengthen our mass market position,
with Life and Superdigital; and
• driving our ESG strategy, increasing green finance
and financially empowering our customers.
In Uruguay, our priorities for 2023 are to:
• increase volumes growth, market share and
customer activity;
• improve efficiency and maintain high profitability;
• continue broadening our product offering with new
businesses and a transformed technology model;
and
• strive for operational excellence to provide a unique
customer experience; and
• accelerate our commercial transformation to a
simpler, more customer-centric digital model.
• position ourselves as a leading bank in sustainable
finance and financial inclusion.
• In Peru, we aim to expand our global, corporate and
retail customer bases through Consumer and Surgir
and to drive greater loyalty and satisfaction. We will
focus on expanding and increasing profitability our
vehicle finance businesses and strengthen our
microfinance business.
• In Colombia, we will focus on profitable products in
corporates and CIB, consolidating our consumer
finance entity with a new mix of new and used
vehicles and promoting our Prospera microcredit
business.
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Digital Consumer Bank
Our priorities for 2023 are to:
→ increase our leadership in global digital consumer lending by building on SCF's footprint as Europe's #1 consumer
finance company and on Openbank's technology and low cost of funding;
→ focus on profitable growth and transformation; and
→ enhance our ESG and green finance proposition in auto lending and consumer credit.
• To increase our leadership, we will:
• To enhance growth, we will focus on:
– Auto: continue progressing with strategic initiatives to
– developing our operational model to defend our best-
build a world-class digital offering in mobility; aid
OEMs' transformation journeys with online lending,
leasing, renting and subscription offerings; and
provide our partners with innovative finance and sale
solutions on dealer websites and in auto
marketplaces.
– Consumer (non-auto): gain market share through
specialization and with tech platforms that build on
our leadership in Europe in buy now, pay later (BNPL)
services, checkout lending, credit cards and direct
loans.
– Digital Bank: continue increasing loyalty among our
Openbank and SC Germany Retail customers and
boosting digital banking.
• In green finance, our focus is on financing the acquisition
of non-polluting vehicles, solar panels, bikes, heating
systems and energy efficient solutions.
in-class efficiency with:
a) a simpler legal and operational structure;
b) single IT platforms;
c) an operational back-office centre of excellence;
and
d) an optimized sales distribution network.
– reducing sensitivity to rising interest rates with
greater deposit acquisition and faster loan re-pricing;
and
– progressing in transformational projects: new
Stellantis partnership, acquisition of Mitsubishi Bank
Germany and capturing opportunities with OEMs and
digital players in auto. In consumer, full transition to
Zinia tech stack and branding, execute pan-European
agreements, leapfrog growth through integrators and
sign flagship deals with major global tech companies.
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SECONDARY SEGMENTS
Our ambition in 2023 is to continue transforming our
business and become strategic advisers to our customers
by:
• accelerating profitable growth, diversifying our
customer base, enhancing advisory offering and
content, broadening and improving our market product
capabilities and accelerating capital rotation;
• US: increasing our size with a strategy based on our
areas of expertise and knowledge to elevate our
business;
• Europe: turning CIB into a regional leader (top 5-10) in
all products; and
• Latin America: strengthening our leadership and moving
from a multi-country to a pan-regional focus to become
the main CIB player in most countries and products.
PagoNxt's plan for 2023 includes these objectives:
• continuing to increase our revenue, driven by greater
payment volumes processed, customer base across all
our businesses and usage of our value-added services;
• accelerating open market activity via partnerships and
direct marketing. Getnet will continue to enter into
distribution agreements with integrated software
vendors and local/regional banks beyond Santander,
and our Trade businesses will continue to pursue direct
marketing;
• consolidating our Getnet franchise, growing Santander's
merchant acquiring business through collaboration with
the Group in Europe, North America and South America
and with SCIB, with a focus on launching in all our
European markets;
As a multi-regional provider with an increasingly global
presence, we will continue to share innovation between
regions, expand our products and value-added services,
and tailor our solutions to merchants' local needs; and
• scaling our global platform: Getnet will accelerate
product development capabilities by converging
interoperable tech assets. The One Trade and Payments
Hub platforms will continue to expand across the Group
in a software-as-a-service (SaaS) model, following our
plan to migrate all payments (except cards), FX and
trade finance services to a global platform.
In 2023, key management aims and initiatives are:
In Private Banking:
• increasing our teams' connectivity to enhance our
leading platform in Europe, the US and Latin America;
• creating a more sophisticated value proposition to
enable a 360º client view and broaden our product
range;
• launching an initiative centred on Offshore Mass
Affluent customer segment to serve them from the
US; and
• implementing a global top talent management
initiative to enhance service to our clients.
In Santander Asset Management:
• partnering our retail network to become investment
Centre of Excellence in Private Banking, improving our
service model and offering tailored solutions;
• leveraging our expertise, reputation and global
distribution capabilities and creating an independent
company to accelerate growth and decision-making to
become a relevant player in Alternatives Products;
• boosting sales in the institutional segment by
increasing our market share of third-party AuMs and
maximizing collaboration opportunities across the
Group;
• enabling digital investment platforms in all countries;
and
• completing our ESG methodology implementation,
strengthening our product and service offerings,
incorporating ESG standards in investment processes,
increasing our engagement and voting activities, and
delivering on public commitments.
In Insurance:
• enhancing our distribution model and consolidating
our protection value proposition for individuals and
SMEs and our life-savings proposition for both
accumulation (e.g. unit-linked) and decumulation (e.g.
annuities) products;
• improving customer experience and portfolio lifetime
through innovative programmes;
• using data analytics to optimize digital journeys and
pay claims faster, where we already have examples of
same-day payments;
• boosting our motor platforms: Autocompara and
Santander Auto; and
• building on our joint venture partners' strengths to
guarantee the best product offering for our customers
across all countries.
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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 therefore 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 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 equity, to tangible equity, 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.
Ratio
Formula
Relevance of the metric
RoE
(Return on Equity)
Profit attributable to the parent
Average
sto
ckholders’
A
equity
(excl. minority
interests)
Underlying RoE
Underlying profit attributable to the parent
Average stockholders’ equity A
(excl. minority
interests)
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)
Average
Profit
attributable
stockholders’
interests) - intangible assets
B
to the parent
A
equity
(excl. minority
Underlying profit attributable to the parent
(excl. minority
Average
stockholders’
interests) - intangible assets
A
equity
Consolidated profit
Average total assets
Underlying consolidated profit
Average total assets
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
ratio measures the return that shareholders obtain on
This
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 used to evaluate the profitability of the company as a
percentage of its tangible equity. It is measured as the return
that shareholders receive as a percentage of the funds
invested in the bank less intangible assets.
This very common indicator measures the profitability of the
tangible equity of a company arising from underlying
activities, i.e. excluding results from operations outside the
ordinary course of business.
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 underlying profit over a given period.
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.
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.
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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Profitability and efficiency A B
RoE
(EUR million and %)
Profit attributable to the parent
Average stockholders' equity (excluding minority interests)
Underlying RoE
Profit attributable 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 C
Consolidated profit
(-) Net capital gains and provisions
Underlying consolidated profit
Average economic capital
Economic value added C
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 D
Underlying total income
Total income
Net capital gains and provisions impact in total income D
2022
10.67%
9,605
89,986
10.67%
9,605
—
9,605
89,986
13.37%
9,605
—
9,605
89,986
18,164
71,822
13.37%
9,605
—
9,605
71,822
0.63%
10,764
1,720,273
0.63%
10,764
—
10,764
1,720,273
1.77%
10,764
606,952
1.77%
10,764
—
10,764
606,952
14.50%
10,764
—
10,764
74,215
2,446
10,764
-8,317
74,215
—
45.8%
23,903
23,903
—
52,154
52,117
37
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
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
1.69%
9,653
572,136
1.78%
9,653
-530
10,183
572,136
14.22%
9,653
-530
10,183
71,602
2,969
10,183
-7,215
71,602
10.08 %
46.2%
21,415
21,415
—
46,404
46,404
—
-1.33%
-7,708
578,517
1.06%
-7,708
-13,866
6,158
578,517
8.68%
-7,708
-13,866
6,158
70,922
-2,353
6,158
-8,511
70,922
12.00 %
47.0%
20,967
21,130
-163
44,600
44,279
321
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. The 2021 and 2020 economic capital requirements have been recalculated based on the 2022 methodology to facilitate their comparison.
D. Following the adjustments in note 51.c to the consolidated financial statements.
412
2022 Annual report
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Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Efficiency ratio by business area (EUR million and %)
2022
2021
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
% Total income
18,030
8,233
5,418
1,295
2,474
12,316
7,623
4,623
18,025
12,910
2,449
1,833
5,269
47.3
48.6
49.6
38.7
28.0
47.7
47.2
44.9
37.0
32.4
40.1
53.9
46.7
Operating
expenses
8,523
3,998
2,685
502
692
5,871
3,599
2,076
6,675
4,180
981
987
2,462
% Total income
15,934
7,748
4,815
1,313
1,617
10,853
7,277
3,553
15,337
10,876
2,455
1,388
5,099
52.2
52.3
53.8
42.9
41.0
45.8
43.9
46.2
35.1
29.7
38.4
58.0
47.2
Operating
expenses
8,319
4,052
2,592
563
663
4,967
3,197
1,643
5,380
3,236
942
805
2,405
Underlying RoTE by business area (EUR million and %)
2022
2021
Underlying
profit
attributable to
the parent
3,810
1,560
1,395
534
364
2,878
1,784
1,213
3,658
2,544
677
324
1,308
%
9.28
7.89
10.70
15.03
11.93
11.06
9.40
16.92
18.77
19.23
19.47
26.23
13.65
Average
stockholders'
equity (excl.
minority
interests) -
intangible
assets
41,054
19,786
13,038
3,553
3,047
26,025
18,968
7,168
19,491
13,232
3,479
1,237
9,583
Underlying
profit
attributable to
the parent
2,750
627
1,537
462
140
2,960
2,252
816
3,317
2,320
636
270
1,164
%
6.81
3.40
11.47
11.39
4.38
12.73
13.21
13.63
20.22
21.44
19.25
27.15
12.41
Average
stockholders'
equity (excl.
minority
interests) -
intangible
assets
40,347
18,453
13,392
4,054
3,200
23,250
17,044
5,991
16,405
10,818
3,303
996
9,380
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
413
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
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
Total Risk A
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 customer
defaults both present and future.
Cost of risk
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
2022
3.08%
2021
3.16%
2020
3.21%
34,673
33,234
31,767
32,617
31,288
30,318
271
1,776
358
1,578
9
10
1,124,121
1,051,115
1,058,688
65,433
995,646
55,469
497
941
11
989,456
939,795
49,662
414
2022 Annual report
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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 amortized 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 risk
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
2022
68%
2021
71%
2020
76%
23,418
23,698
24,272
22,684
22,964
23,577
734
734
695
34,673
33,234
31,767
32,617
271
1,776
9
0.99%
10,509
10,836
-327
31,288
358
1,578
10
0.77%
7,436
7,436
—
30,318
497
941
11
1.28%
12,173
12,431
-258
Average loans and advances to customers over the last 12 months
1,059,872
968,931
952,358
NPL ratio by business area (EUR million and %)
2022
Credit impaired
loans and
advances to
customers,
customer
guarantees and
customer
commitments
granted
15,186
9,598
3,059
1,247
1,268
5,629
4,571
1,047
10,381
7,705
2,384
122
2,583
%
2.37
3.27
1.21
2.99
3.80
3.03
3.25
2.32
6.20
7.57
4.99
2.08
2.06
Total risk
639,996
293,197
253,455
41,755
33,350
185,614
140,452
45,107
167,348
101,801
47,811
5,844
125,339
2021
Credit impaired
loans and
advances to
customers,
customer
guarantees and
customer
commitments
granted
19,822
13,403
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
%
3.12
4.72
1.43
3.44
3.61
2.42
2.33
2.73
4.50
4.88
4.43
3.61
2.13
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Total risk
636,123
283,953
262,869
41,941
33,497
149,792
112,808
36,984
141,874
85,702
41,479
5,481
116,989
415
2022 Annual report
Contents
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Coverage ratio by business area (EUR million and %)
2022
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
7,871
4,890
1,033
990
938
5,250
4,127
1,116
7,886
6,128
1,343
220
2,397
15,186
9,598
3,059
1,247
1,268
5,629
4,571
1,047
10,381
7,705
2,384
122
2,583
%
51.8
51.0
33.8
79.3
74.0
93.3
90.3
106.6
76.0
79.5
56.3
180.4
92.8
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
6,887
971
1,033
895
4,901
3,943
958
6,279
4,651
1,164
305
2,684
19,822
13,403
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
%
49.4
51.4
25.8
71.7
73.9
134.9
150.3
95.0
98.3
111.2
63.3
153.8
107.8
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Cost of risk by business area (EUR million and %)
2022
2021
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
%
0.39
0.61
0.12
0.04
1.43
1.49
1.35
1.95
3.32
4.79
0.93
2.91
0.45
Underlying
allowances for
provisions over
the last 12
months
2,396
1,618
316
17
440
2,538
1,744
Average loans
loan-loss and advances to
customers over
the last 12
months
612,142
265,051
262,973
40,286
30,721
169,980
128,834
40,348
788
5,041
4,417
399
132
544
151,705
92,188
42,953
4,541
119,524
%
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
Underlying
allowances for
provisions over
the last 12
months
2,293
2,320
Average loans
loan-loss and advances to
customers over
the last 12
months
591,703
251,155
258,636
39,805
29,777
130,635
97,917
32,434
(245)
38
200
1,210
419
791
3,251
2,715
341
140
527
125,089
72,808
40,344
4,667
115,156
416
2022 Annual report
Contents
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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 to tangible book
value per share (X)
LTD
(Loan-to-deposit)
Loans and advances
(minus reverse repos)
Share price
TNAV per share
Net loans and advances to customers
Customer deposits
Gross loans and advances to customers minus reverse repos
Deposits (minus repos)
Customer deposits minus 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.
This 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 loans and advances to customers net of loan-loss
provisions as a percentage of customer deposits.
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 profit.
A. Tangible book value = Stockholders’ equity (excl. minority interests) - intangible assets.
Others (EUR million and %)
TNAV (tangible book value) per share
Tangible book value
Number of shares excl. treasury stock (million)
Price to tangible book value per share (X)
Share price (euros)
TNAV (tangible book value) per share
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
2022
4.26
70,459
16,551
0.66
2.803
4.26
101%
1,036,004
1,025,401
2,728
1,179
1,549
2021
4.12
70,346
17,063
0.71
2.941
4.12
106%
972,682
918,344
2,486
1,016
1,470
2020
3.79
65,568
17,312
0.67
2.538
3.79
108%
916,199
849,310
417
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
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 euros in the income
statement as well as the changes excluding the exchange rate
effect (i.e. in constant euros), as it considers the latter facilitates
analysis, since it enables business 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 2022 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 exchange rate movements on the
balance sheet
The Group presents, at both the Group level as well as the
business unit level, the real changes in euros in the balance
sheet as well as the changes excluding the exchange rate effect
for loans and advances to customers minus reverse repurchase
agreements and customer funds (which comprise deposits and
mutual funds) minus repurchase agreements. 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 minus reverse repurchase agreements and customer
funds minus repurchase agreements, into our presentation
currency, the euro, applying the closing exchange rate on the
last working day of 2022 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
Average
US dollar
Pound sterling
Brazilian real
Mexican peso
Chilean peso
Argentine peso
Polish zloty
2022
1.051
0.853
5.421
21.131
2021
1.182
0.859
6.372
23.980
916.688 897.123
134.786 112.383
4.564
4.683
Period-end
2022
1.068
0.887
5.650
20.805
2021
1.133
0.840
6.319
23.152
909.200 964.502
189.116 116.302
4.597
4.684
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 2022. 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, weighted 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.
Average inflation 2022
%
Europe
Spain
United Kingdom
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer Bank
Total Group
9.1%
8.4%
9.0%
7.8%
14.3%
8.0%
8.0%
7.9%
19.0%
9.3%
11.6%
70.7%
8.4%
11.6%
418
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Risk management
and compliance
419
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
1. Risk management and
compliance overview
1.1 Executive summary and 2022 highlights
1.2 2022 key achievements
1.3 Santander's top and emerging risks
2. Risk management and control model
2.1 Risk principles and culture
2.2 Key risk types
2.3 Risk and Compliance 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
421
421
425
426
429
429
429
430
431
435
436
436
436
437
443
449
455
455
456
459
464
465
466
467
467
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
8.3 Key metrics
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
10.3 Summary by risk type
468
468
468
469
470
470
470
476
477
477
477
484
484
484
485
486
486
486
487
487
489
495
420
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
1. Risk management
and compliance
Our risk management and compliance is key to ensuring that we remain a
strong, secure and sustainable bank that helps people and businesses
prosper
1.1 Executive summary and 2022 highlights
This section outlines Santander’s risk management and risk
profile in 2022 based on key risk indicators and their
performance. Additional information on each risk type can be
accessed using the links provided for each section.
Credit risk
> Section 3
Our proactive risk management and effective control of our
portfolios have allowed us to maintain a medium-low risk
profile in this uncertain environment.
1
Total credit risk with customers by region
Total credit risk with customers by segment
Despite the increase in the cost of risk mainly due to the
uncertainty generated by the macroeconomic environment, the
NPL
ratio maintained a positive performance in 2022.
2
Non-performing loans ratio
Loan growth coupled with positive portfolio performance and
portfolio sales drove the NPL ratio down.
3
Cost of risk
The ratio was slightly below 100 bp, due to the positive
performance of Spain, Portugal and Mexico in the year.
1
2
3
'Others' not included represent 1% (Corporate Centre).
Non-performing Loans
Cost of risk is the ratio of 12-month loan-loss provisions to average lending on the same period.
421
56%56%24%27%20%17%IndividualsCompaniesSCIB202220210.99%0.77%20222021Europe: 57%N. America: 16%S. America: 15%DCB: 11%EUR 1,124 Bn3.08%3.16%20222021
2022 Annual report
Contents
Responsible banking | Corporate governance | Economic and financial review | Risk management and compliance
Market, structural and liquidity risk
> Section 4
Risk levels in trading remained relatively low, in an
environment of greater volatility than in 2021.
2022 Avg. Value at Risk (VaR)
EUR million.
Max.
EUR 21.5mn
Min.
EUR 9.2mn
VaR remained stable averaging EUR 14 million in the year. It
peaked in July 2022 (EUR 21.5 million) due to supply chain
disruptions, the rise in interest rates and energy prices.
▼152% above the regulatory threshold.
The liquidity ratio (LCR) remained
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.
Grupo Santander issued EUR 35,000 million in senior debt and
mortgage covered bonds in order to obtain liquidity. This type
of issuances has been reactivated within the Eurozone as a
result of the current economic conjuncture.
Capital risk
> Section 5
4
by risk type
RWA
Credit, which is our core business, stands out among RWA.
RWA by region
Diversified and balanced distribution.
5
Fully loaded CET1
6
RoRAC
DCB: Digital Consumer Bank.
Others not included represent 2% in 2022 and 2021 (Corporate centre).
▲12.04%
▲8 bp in 2022
The CET1 ratio placed at the top of our 11-12% target due to
strong organic capital generation through underlying profit and
efficient RWA management.
The strength of our diversified retail banking business model is
demonstrated by the positive outcome in the eight regulatory
stress tests since 2008.
▼ 14.5%
▼ 50 bp in 2022 at
Group's RoRAC
RoRAC at Group level and by geography in 2022 are at levels
above the cost of capital and reflect an optimal level of return
on capital and value creation for our shareholders. The profit
achieved in the year, a solid risk management culture and a
balanced geographic and business diversification are the main
drivers behind this positive performance.
4
5
6
Risk weighted assets.
CET1 in 2021 Include acquisition of SC USA minority interest and Amherst Pierpont Securities completed at the beginning of 2022.
The Group’s total RoRAC includes the operative units and the Corporate Centre, reflecting the Group's economic capital and its return.
(*) Credit risk included counterparty credit risk, securitizations and amounts below the thresholds for deduction.
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13.813.514.614.7Q1Q2Q3Q4Operational: 10%Market: 3%Credit*: 87%12.04%11.96%2022202116%24%24%26%EuropeN. AmericaS. AmericaDCB43%44%19%19%22%21%14%14%EuropeNorth AmericaSouth AmericaDCB20222021
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Operational risk
Our operational risk profile remained stable in 2022. With the
goal of reinforcing controls, during this year our priorities
were:
> Section 6
In 2022, we improved our operational risk
model by enhancing the risk appetite
framework, the holistic risk assessment
programme, the assessment methodology of
the global cybersecurity transformation plan, as
well as the contingency, business continuity and
crisis management plans.
Several initiatives to mitigate the most relevant
operational risks in 2022 were launched, such as
IT, third party, fraud and cyber, and to adapt to
regulatory changes, focusing on Operational
Resilience, Basel principles related to
operational risk, ESG requirements and capital
models.
Operational losses by Basel category
Clients
62%
Damage to
physical
assets
0.6%
External
fraud
24%
Processes
& systems*
11%
Employees
1.6%
Internal
fraud
0.8%
(*) Processes & systems include the following categories: Execution, delivery and process management, and Business disruption and system failures.
Compliance and conduct risk
Main initiatives in 2022:
→ Transformation: Continued development of
compliance and conduct function strategic
transformation plan; exploring Big Data and
Machine Learning analysis techniques on voice
data from customers and public data from media,
support of the digital strategy through: digital
channels, Beyond Banking* and limited launch of
investment services related to crypto-assets;
transformational project to remodel Group's
Control Room.
→ More effective process overhaul: homogeneous
management methodologies and tools in
subsidiaries: Heracles, Capability Maturity Model
(CCM), Annual compliance program, product and
service approval, common reputational risk
reporting tools Group-wide, and strengthening
governance through a risk-based approach to
oversee our subsidiaries.
*Non-banking services program that we currently offer in the
United Kingdom, especially for individuals and SMEs.
> Section 7
→ Compliance & conduct risk management by the
first line of defence: We followed the
enforcement of international sanctions in
response to the war in Ukraine; enhanced
control environments for conduct with
customers; continuous improvement of
reputational risk management and control
processes; and participation in climate stress
testing and environmental and climate
Thematic review by the ECB.
→ Risk culture: Diversity and inclusion initiatives;
the General Code of Conduct simplification for
employees and other stakeholders; we
promoted employee training and awareness as
part of our growing commitment to ethics and
compliance in corporate culture.
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Model risk
> Section 8
→ We launched MRM Next, a new strategic plan to manage
model risk to strengthen our model risk culture.
→ We continued to enhance our regulatory models - Internal
Rating Based Approach (IRB) and Internal Model Approach
(IMA) - according to the Basel Committee requirements.
Strategic risk
> Section 9
→ Strategic management focused on monitoring the
→ We made progress with strategy planning, top risk
macroeconomic consequences of the war in Ukraine,
inflationary pressure, monetary and fiscal policies and our
transformation initiatives.
identification and monitoring, business model analysis, new
product validation, risk analysis for corporate development
transactions and strategic projects.
→ We also optimized reporting to senior management on
strategic risk.
Climate and environmental risk
> Section 10
→ We keep integrating climate and environmental risk into our
key risk management processes. A quantitative metric was
designed for the energy sector complementing our metric
for thermal coal, which will be included in our risk appetite
statement in 2023.
→ In 2022, we coped with strict supervisory demands as stress
testing and Thematic Review, involving several risk and
compliance factors. Overall, we have completed these
exercises satisfactorily, and action plans were implemented
to cover the improvement points detected.
→ We broadened the scope of credit risk materiality
assessments and made them more granular. We began
preliminary materiality assessments for climate-related
environmental risk to identify credit portfolios that may
have a potential impact in terms of biodiversity.
→ We enhanced credit approval procedures, with tighter risk
policy for sensitive sectors and activities. In particular, the
Risk function developed a target operating model called The
Climate Race, which aligns credit approval procedures
across the Group regarding climate and environmental risk.
Grupo Santander's risk profile could be affected by the
macroeconomic environment, regulation 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.
Additional information on Grupo Santander’s provisions, legal
proceedings, taxes and other risks, are available in the notes to
the consolidated financial statements.
For more details on segments, see section
'4.1 Description of segments' of the
'Economic and financial review' chapter.
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1.2 2022 key achievements
Our risk and compliance functions are forward-looking and
proactive. They follow a straightforward, robust strategy,
reinforced with lessons learned from the crisis that enable us to
be better prepared.
Management of risk from
the war in Ukraine
→ Special situations protocol
activated, with numerous
initiatives on policy,
customer support,
donations, risk appetite and
other matters
→ Tighter monitoring of risk
and enhanced reporting on
key indicators and most
affected sectors/customers
→ Sanctions management
strengthened to meet
regulatory requirements
and support decision-
making – 400% escalation
increase
→ Deep dive on Ukraine war
and related reputational
impacts for the Group.
Implementation of Group
wide mitigation actions
Operational excellence
Creating value
New ways of working
→ Model Risk reinforced with
a unique platform (Monet)
& all units with a single
way of working through a
unique policy
→ Greater flexibility, with an
average of 60% remote
working, plus permanent
hot-desking
→ Agile initiatives and new
visualization and
collaborative tools
→ Redefined behaviours and
positive risk culture
promoted across the Group
→ Customer-centric, with a
simpler onboarding value
proposition
→ Capital accuracy: Optimal
model enhancement and
other initiatives
→ Greater digitalization and
→ Successful management of
mounting regulatory
activity
→ Cost of risk kept below 1%,
even amid unprecedented
macroeconomic crisis of
rising inflation, interest
rates and commodity-
prices
1
→ Canal Abierto
further
embedded by regulatory
compliance Function, with
policy rollout across units
→ Boost advanced analytics
techniques in risk
management: conduct and
customer voice,
reputational and credit risk
→ Enhanced subsidiary
oversight in reputational
risk and best practices
sharing
automation of credit risk to
boost customer experience
('Time to yes'/'Time to
cash')
→ Progress on the
implementation of One FCC
across prioritised units
→ Risk and compliance data
strategy execution (data
lakes)
→ Leveraging hubs in regions
to improve risk
management effectiveness:
◦ Cybersecurity in Europe to
enhance monitoring and
alert management
◦ Control room
enhancement for further
implementation
◦ Model validation in North
America
→ ECB’s Climate stress test
and the SSM’s Thematic
review completed
→ Consolidation in de-risking
our balance sheet in key
countries
1. Grupo Santander's whistleblowing channel, through which employees can report financial and accounting wrongdoing as well as violations of the General Code of Conduct
and our corporate behaviours anonymously and confidentially.
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1.3 Santander's top and emerging risks
Through the top risks exercise, we evaluate the most relevant
and emerging risks, which could affect our strategic plan, under
different theoretical stress scenarios with low likelihood of
occurrence. In this way, we identify, evaluate and monitor those
risks that may have a significant impact on our profitability,
solvency or strategy. Proactive risk management is essential to
avoid possible negative impacts and deviations from the
established objectives, which, if they occur, would be mitigated
with previously defined action plans.
The identification of our top risk involves both the first and
second line of defence, in which both the subsidiaries and the
corporate centre participate. The risks identified are integrated
into the idiosyncratic scenarios of the Group's Internal Capital
Adequacy Assessment Process (ICAAP), the Internal Liquidity
Adequacy Assessment Process (ILAAP), and recovery and
resolution plans.
In 2022, most top risk stemmed acutely from inflation pressure,
the war in Ukraine, new government levies on banks, climate
change and environmental risk management. Here are some
core risks and associated action plans:
Macroeconomic and geopolitical environment
Some of the many macroeconomic and geopolitical factors
posing risk to our strategy include changes in monetary and
fiscal policy, geopolitical instability, the war in Ukraine, and
commodity prices. We analyse situations that we do not include
in our base scenario because of their low likelihood (per our top
risk and emerging risk methodology described above); however,
they can become global risk scenarios that may affect particular
areas where we operate in Europe and the Americas. For
example:
• Global monetary policies overreaction if inflationary pressures
do not recede, which could lead to lower-than-expected
growth.
• Industrial impact in Europe, in the event of power supply
distortions.
• Increased financial stress due to the decline in asset prices,
higher risk premiums and a recalculation of risk-free rates of
return, with higher cost of risk as a result of tight monetary
policy coupled with expansionary fiscal plans.
• Geopolitical uncertainty due to a possible escalation of the
war, growing Euroscepticism, among other geopolitical
developments in Europe.
Macroeconomic and geopolitical uncertainty can hinder our
growth, lower asset quality and slow down one or many of our
markets, potentially impacting our profitability. And because it
can also affect our customers’ income, losses could mount up if
we couldn’t recover loans.
Economic volatility can make our estimates seem inaccurate,
which in turn may affect the reliability of the process, and the
adequacy of our loan-loss provisions seem insufficient.
In response to this uncertainty, Grupo Santander has robust risk
policies and processes and a proactive risk management that
allow our risk profile to remain within the limits in alignment
with Group's risk appetite.
We remain resilient against macroeconomic risk because of our
geographical diversification and a wide range of products. The
mitigating measures we took in 2022 helped reduce risk
severity. They include:
• frequent monitoring meetings to review risk profile, business
trends, markets and macroeconomic conditions;
• playbooks designed and implemented to ensure a quick,
forward-looking and proactive response to changing
circumstances;
• ensuring the means to proactively detect credit impairment
and get customers the support they need through specific
solutions, identifying better vulnerable customers in new
context, with Collections and Recoveries support;
• helping our customers develop sustainable, energy-efficient
alternatives; and
• ALCO and Market committee meetings to monitor structural
and FX risk and the coverage of our capital ratios in all major
currencies.
Growing legislative and regulatory pressure
With a unique business model based on maintaining a
significant market share in our core geographies, Grupo
Santander is subject to varied regulation. Our status of global
systemically important bank (G-SIB) implies high capital
requirements that could intensify with subsequent reform or if
supervisors revise current requirements. New laws, like levies
on credit institutions, that impact on our business and relations
with customers could stymie profitability and return on equity,
increase funding costs, and undermine our resilience to
economic disruption and ability to extend credit.
Many legislative or regulatory action may result in new
requirements or more stringent standards, particularly with
respect to capital and liquidity. This could directly affect the
Group or our subsidiaries, negatively impacting our solvency
and/or liquidity levels.
The key mitigation measures for this risk are:
• Initiatives included in the capital plan, in line with the
continuous improvement of our regulatory models within the
IRB 2.1 project framework (project for the implementation of
the Group's EBA Repair Program), as well as to mitigate the
possible impacts of Basel guidelines.
• Multidisciplinary working groups to anticipate outcomes of
these measures, in collaboration with the banking
associations and through the dialogue with regulators and
other stakeholders.
Climate and environmental risk
Climate and environmental risk continues to raise concern for
several reasons: (i) the macroeconomic and geopolitical
situation (e.g. the war in Ukraine, economic slowdown, new
energy landscape, etc.) adds pressure to meet commitments
and targets in support of a transition to a low-carbon economy;
(ii) more climate-aware customers, shareholders and investors;
(iii) banks in the US and elsewhere are assessing legal and
reputational risk in belonging to platforms of climate-material
sectors; (iv) the threat of biodiversity loss to the economy; and
(v) new requirements in policies and institutional frameworks.
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The transition and physical risks associated with climate change
can have negative implications for the Group because of:
• greater market concentration in certain manufacturers,
distributors and other agents;
• higher credit exposure and companies with inconsistent
business models with low-carbon economic transition;
• operational risk, since severe weather can directly disrupt
business and operations both for our customers and for the
Group;
• challenges to meet several jurisdictions’ supervisory
expectations, which became more substantial, precise and
extensive in 2022, with stricter timescales, and could harm
our green product offering subject to different rules and
taxonomies under development;
• damaged reputation and relations with customers due to our
practices and decisions in relation to climate change and the
environment, or due to the practices or engagement of our
customers in sectors and initiatives linked to causing or
worsening climate change; and
• a lack of hard, quality data on climate change to be able to
give reliable, accurate reporting.
To tackle these challenges, the Group has mitigation plans. In
particular:
• Because climate risk is intertwined with other core risk types,
we continue to integrate climate risk into our strategy and
management through better processes, robust governance,
internal taxonomy (based on the EBA’s Pillar III guidelines),
risk appetite statement, stress testing, ESG policy, risk profile
assessments, etc.
• In alignment with other areas, risk and compliance advise on
efficient green product design and transition plans to help our
customers go green (or greener).
• Our climate stress testing and scenario analysis, such as those
developed in the ECB’s 2022 Climate Stress Test and Thematic
Review on Climate & Environmental Risk, heightened our
understanding of exposure to this risk and provided greater
insight to potentially improve risk management and decision-
making.
• Multidisciplinary working groups to anticipate outcomes, in
collaboration with banking associations and regulators and
other stakeholders.
The automotive industry
As the auto industry transforms in response to gradual changes
in legislation, technology, climate and consumption, it has
become a more significant source of risk to the Group in recent
years.
This transformation could affect our auto finance business (EUR
160 billion of exposure in 2022), which is mainly distributed in
SCIB, Digital Consumer Bank and SC USA), in view of:
• a transition from fuel to electric engines and environmental
aspects related to emissions and transition risk from political
and regulatory decisions (e.g. traffic restrictions in city centres
for highly polluting cars);
• growing customer preferences for car leasing, subscription,
car sharing and other services instead of vehicle ownership;
• more online sales channels; and
• self-driving vehicles.
The auto industry has also suffered with supply chain disruption
and shortages of batteries, semi-conductors and others in the
wake of the pandemic and the war in Ukraine.
In an adverse scenario, the auto lending business could be
impacted by a short supply of new vehicles affecting
guarantees, residual used car value and loan delinquency.
To manage such threats, the Group:
• continuously monitors auto loan portfolios and dealers, used
car prices (especially diesel vehicles), forward-looking
analyses of the auto market, check provisions adequacy,
commercial focus on leasing, alliances, fleet financing, and
innovative product development;
• implements specific plans to address particular concerns:
profitability in agreements with manufacturers and
campaigns to support distributors; loyalty programmes to
boost renewals; rentals and leases, car subscription; digital
solutions; plans to lower inventory; used car sales; 'buy now,
pay later' (BNPL) and market penetration by insurers; and
• aids the green transition, decarbonization of car fleets and
installation of electric vehicle charging stations in the auto
industry.
A transforming auto industry could create many opportunities
for the Group to:
• help develop the supply of new electric and low or zero-
emissions vehicles, which would be positive for the
environment, lower emissions and transition risk stemming
from public policies and regulation (e.g. aid for charging
stations, better legislation to develop electric vehicle
infrastructure and traffic restrictions for highly polluting
vehicles).
• create new business models with ecological, smart and
autonomous vehicles; support competitiveness and
investment in the industry, including new mobility companies,
with the support of the banking sector.
• capitalize on the growing demand for logistics services, fast
delivery and online shopping that suggests that commercial
and industrial vehicle sales will rise.
• public support measures for financing of new fleets with low
or zero emissions, for example through European funds.
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Central bank digital currencies (CBDCs), stablecoins
and disintermediation
Digital versions of fiduciary currencies issued by central banks
and stablecoins could have potential impacts on the financial
system, such as replacing or diminishing bank's current
accounts, which could affect the volume, structure, and cost of
funding for commercial banks.
Most central banks are exploring issuing digital currencies
(CBDCs), through pilot projects focusing in this field. The focus
is, above all, on retail CBDCs that offer citizens a digital, central
bank liability for payments. Most central banks are yet to make
a decision on CBDCs; but in Brazil, China and Sweden, they are
already running tests. The ECB is making significant headway
with the digital euro. According to the ECB's roadmap, the ECB
could be ready to take a decision on whether to issue a digital
euro by the end of 2026.
In addition, both CBDCs and stablecoins could be seen as a new
standard of payment and bank deposits, which could
inadvertently increase disintermediation across the financial
system. This could exacerbate financial instability in times of
economic stress if bank deposits are substituted with CBDCs,
which could be seen as more secure. It is not clear what services
and business models banks and other payment providers will be
able to provide based on these instruments.
The benefits of digital currencies, also unclear, will depend on
each country or region’s payments system, economic
development, financial inclusion and consumer habits. CBDCs
could open up the opportunity to develop innovative digital
asset and payment services.
To mitigate CBDCs risk, the Group:
• participates in the debate on CBDCs with domestic and foreign
authorities in order to explain their risk to banks and to
financial stability (as well as the importance of mitigating it),
and make sure they will enable banks to continue creating
value for customers;
• monitors central banks’ projects, stablecoin markets and
consumer behaviour; and
• participates in multidisciplinary working groups with banking
associations and regulators to anticipate outcomes.
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2. Risk management
and control model
Our risk management and control model is underpinned by common
principles, a solid risk culture, robust governance and advanced
management processes on risk factors
2.2 Key risk types
Grupo Santander's risk classification is based on our corporate
risk framework and includes (for further information, each risk
type definition can be accessed using the links provided):
Credit risk
Operational risk
Market risk
Financial crime risk
Liquidity risk
Model risk
Structural risk
Reputational risk
Strategic risk
Environmental and climate related drivers
-
Environmental and climate-related risk drivers are considered
as factors that could impact the existing risks in the medium-to-
long-term.
2.1 Risk principles and culture
The principles on which Grupo Santander's risk management
and control are based are detailed below. They take into
account regulatory requirements, best market practices and are
mandatory:
1. All employees are risk managers who must understand the
risks associated with their functions and not assume risks
that will exceed the Group’s risk appetite or have an
unknown impact.
2. Senior managers must make sure we keep our risk profile
within risk appetite limits, with consistent risk conduct,
action, communications, and oversight of our risk culture.
3. Independent risk management and control functions,
according to our three lines of defence model (See section
2.3 'risk and compliance governance').
4. We take a forward-looking, comprehensive approach
towards all businesses and risk types.
5. We keep thorough and timely reporting to properly
pinpoint, assess, manage and disclose risks.
Risk culture - Risk Pro
The Group's risk culture, which is called Risk Pro (or 'I AM RISK'
in the UK and the US), is a core element of both our corporate
culture, The Santander Way, and our purpose of helping people
and businesses prosper.
What Risk Pro comes down to is each employee’s accountability
for the risks inherent in their activities and our contribution to
the adequately identify, assess and manage all risks.
For more details, see the section 'A strong
and inclusive culture. The Santander Way'
of the 'Responsible Banking' chapter.
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2.3 Risk and compliance governance
Our risk and compliance governance structure allows us to
conduct effective oversight of all risks in line with our risk
appetite. It stands on a model of three lines of defence, a
structure of committees and strong Group-subsidiary relations
strengthened by our risk culture, Risk Pro.
Lines of defence
Our model of three lines of defence effectively manages and
controls risks:
st
1
Formed by business and support areas, which are
primarily accountable for managing the risk
exposure they originate, recognizes, measures,
monitors and reports on risks according to risk
management policies, models and procedures. Risk
origination must be consistent with the approved
risk appetite and related limits.
2
nd Comprised by risk and compliance & conduct
functions, independently oversees and challenges
risk management at the first line of defence to
make sure we keep risks within the risk appetite
limits approved by senior management and
promote a robust risk culture in the Group.
rd
3
Internal audit function, which is fully independent
to give the board and senior managers assurance
of high-quality and efficient internal controls,
governance and risk management to preserve our
value, solvency and reputation.
Risk, compliance & conduct, and internal audit are sufficiently
separate and autonomous functions, with direct access to the
board and its committees.
Risk and compliance committees' structure
The board of directors has final oversight of risk and compliance
management and control promoting a sound risk culture and
reviewing and approving risk appetite and frameworks, with
support from its risk, regulation and compliance committee and
its executive committee.
The Group's risk and compliance governance keeps risk control
and risk-taking areas separated.
For more details, see section 4.8 ‘Risk
supervision, regulation and compliance
committee activities in 2022’ on 'Corporate
governance' chapter.
The Group chief risk officer (Group CRO), who leads the
application and execution of our risk strategy and promotes proper
risk culture, is in charge of overseeing all risks, as well as
challenging and advising business lines on risk management.
The Group chief compliance officer (Group CCO), who handles
compliance risk and leads the application and execution of the
compliance and conduct risk strategy and provides the Group
CRO with a complete overview on the situation of risks being
monitored.
The Group CRO and the Group CCO report directly to both the
risk supervision, regulation and compliance committee and the
board of directors.
Board level:
Board of directors
Risk management
Risk control
Executive committee
Risk supervision, regulation and compliance committee
Executive
level:
Executive risk committee
(ERC)
Risk control committee
(RCC)
Compliance and conduct
committee
Chair:
CEO
Frequency:
Weekly
Group CRO
Monthly
Group CCO
Monthly
Fora:
• Model approval forum
• Market, structural, liquidity and
• Corporate product governance
• Risk proposal forum
capital risk control forum
forum
• Credit risk control forum
• Financial crime compliance forum
• Provisions forum
• Reputational risk forum
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The executive risk, risk control and compliance and conduct
committees (described below) are executive committees with
powers delegated from the board.
Executive risk committee (ERC)
The ERC manages risk with board-given authority to accept,
amend or escalate actions and transactions that may pose
significant risk to the Group. It makes the highest-level risk
decisions, mindful of risk appetite. It is formed by executive
directors and other senior managers from the risk, finance and
compliance & conduct functions. The Group CRO can veto the
committee’s resolutions.
Risk control committee (RCC)
The RCC, which provides a holistic overview of risk, makes sure
business units are managing risk within risk appetite. It also
identifies, monitors and assesses the impact of current and
emerging risks on the Group's risk profile. It is formed by senior
officers from the risk, compliance & conduct, finance and
accounting & management control functions, among others.
Subsidiary-level CROs participate on a regular basis to report to
the committee on risk profile.
Compliance and conduct committee
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. It is formed by senior managers representing the
compliance & conduct, risk and accounting and management
control functions, among others. The chair holds the casting
vote over the committee’s resolutions.
Executive-level committees delegate some duties to
management and control fora and meetings (see table above)
that:
• inform the Group CRO, the Group CCO, the risk control
committee, and the compliance and conduct committee if
risks are being managed within risk appetite;
• regularly monitor each key risk type; and
• oversee measures to meet supervisors and auditors’
expectations;
The risk and compliance & conduct functions' internal
regulation effectively creates the right environment to manage
and control all risk types.
Grupo Santander can also implement extra governance
measures for special situations, as it did with Brexit and the
covid-19 crisis. Since the beginning of the war in Ukraine, we
strengthened the monitoring of all risks, with special attention
to the situation in Poland, monitoring of macroeconomic
performance, vulnerable sectors/customers, cybersecurity,
among other. In addition, the compliance team have
continuously reviewed the application of the sanctions.
Santander has no presence in, or hardly any direct exposure to,
Russia and Ukraine. Our special situations governance enabled
the Group to remain resilient against the consequences of the
war in Ukraine.
The Group’s relationship with its subsidiaries
Grupo Santander's subsidiaries have a model for managing risk,
compliance and conduct that 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 to higher
standards according to local law and regulation. Furthermore,
the Group's aggregate oversight area advises subsidiaries on
internal regulation and operations. This reinforces a common
risk management model across Santander.
In 2022, we continued to build on our Group-subsidiaries’ model
through a regional approach, benefiting from the Group's global
scale to find synergies under a common operating and platform
model; to streamline processes; and tighten control
mechanisms to grow our business.
The Group CRO, the Group CCO and regional heads of risk are
involved in appointing, setting objectives for, reviewing and
compensating their country-unit counterparts to evaluating that
risks are adequately controlled. Each subsidiary's CRO/CCO
interacts regularly with the regional head of risk, the Group CRO
and the Group CCO in regional or country control meetings.
Local and global risk and compliance areas also meet to address
special matters. Country and regional units work closely to
effectively strengthen group-subsidiary relations through these
common initiatives:
• restructuring based on subsidiary benchmarks, strategic
vision, and advanced risk management infrastructures and
practices.
• exchange of best practices that will strengthen processes,
drive innovation and result in a quantitative impact.
• search for talent in risk and compliance teams with internal
mobility through the global risk talent programme and strong
succession plans.
For more details on our relationship with our
subsidiaries, see section 7. ‘Group structure and
internal governance’ of the 'Corporate
Governance' chapter.
2.4 Risk management processes and tools
Grupo Santander has these processes and tools to carry out
effective risk management:
Risk appetite and structure of limits
Risk appetite is the aggregate level and types of risk we deem
prudent for our business strategy, even in unforeseen
circumstances. In Grupo Santander, these principles influence
risk appetite:
• Risk appetite is part of the board's duties. It prepares the risk
appetite statement (RAS) for the whole Group every year. In a
cascading down process, each subsidiary's board also sets its
own risk appetite.
• Comprehensiveness and forward-looking approach. Our
appetite includes of all material risks that we are exposed to
and defines our target risk profile for the current and medium
term with a forward-looking view considering stress
scenarios.
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To promote that all material risks are adequately represented,
we use corporate methodologies to identify and assess the
risk to which we are exposed to and are inherent to our
activities (top risks and risk control self-assessment- RCSA-
among others).
For more details on these exercises see sections
‘Management and control model’
6.2 Operational risk management and
1.3 Santander's top and emerging risks.
Additionally, specific workshops are held with the specialized
first and second lines for each risk type, to review and
enhance the risk appetite metrics.
• Common standards embedded in the day-to-day risk
management. The Group shares the same risk appetite
model, which sets common requirements for processes,
metrics, governance bodies, controls and standards. It also
ensures an effective and traceable embedding of our appetite
into more granular management policies and limits across our
subsidiaries.
RAS
(Risk appetite statement
and limits)
Group's RAS
RAS
Unit 1
RAS
Unit 2
RAS
Unit n
RAS
embedding
(Management
limits)
Global
limits &
policies
Risk
limits
& policies
Unit 1
Risk
limits
& policies
Unit 2
Risk
limits
& policies
Unit n
• Continuous adaptation to market best practices, regulatory
requirements and supervisors’ expectations.
• Aligning with business plans and strategy. The risk appetite
is a key point of reference for strategic and business planning.
We verify that the three-year strategic plans, the annual
budget, and capital and liquidity planning are within the limits
set in the RAS before we approve them.
We promote that strategic and business plans are aligned with
our risk appetite by:
• considering the risk appetite, long-term strategic view and the
risk culture when drafting strategic and business plans.
• challenging business and strategic plans against the risk
appetite. Misalignments trigger a review of either the three-
year strategic plan (to make sure we stay within RAS limits) or
risk appetite limits, with independent governance.
• monitoring regularly that we comply with the risk appetite
limits. We follow a three lines of defence model for constant
oversight, with specialized control functions that report on
risk profile and compliance with limits to the board and its
committees every month.
Our risk appetite and business model rests on:
• a medium-low, predictable target risk profile, centred on
retail and commercial banking, internationally diversified
operations and a strong market share;
• stable, recurrent earnings and shareholder remuneration,
sustained by a sound base of capital, liquidity and sources of
funding;
• autonomous subsidiaries that are self-sufficient in terms of
capital and liquidity to ensure their risk profiles will not
compromise the Group’s solvency;
• an independent risk function and a senior management
actively engaged in supporting a robust control environment
and risk culture; and
• a conduct model that protects our customers and our Simple,
Personal and Fair culture.
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The risk appetite is expressed through qualitative statements
and quantitative limits and metrics that measure bank’s risk
profile at present and under stress. Those metrics cover all
material risks that we have exposure to, and take into account
key risk typologies, according to our corporate risk framework.
We articulate them in five axes that provide us with a holistic
view of all risks we incur in the development of our business
model:
Key risks
Risk Appetite
axes
Credit
risk
Market
risk
Liquidity
risk
Structural Operat.
risk
risk
Financial
Crime
Risk
Model
risk
Reputat.
risk
Strategic
risk
P&L volatility
Control of P&L volatility of business plan under baseline and stressed conditions (aligned with ICAAP
stress test)
Solvency
Control of capital ratios under baseline and stressed scenarios (aligned with ICAAP)
Liquidity
Control of liquidity ratios under base and stress scenarios (aligned with ILAAP)
Concentration
Control of credit concentration on top clients, portfolios and industries
Non financial
risks
Control on non financial risks aimed to minimize events which could lead to financial loss, operative,
technological, legal and regulatory breaches, conduct issues or reputational damage
Key initiatives in 2022
This year we included new metrics for data management risk
and public cloud information in our risk appetite. We enhanced
controls and metrics to closely follow our environmental
commitments.
Risk profile assessment (RPA)
The identification and evaluation of risks is the cornerstone for
its proper management, control and reporting. It encompasses
all those processes that raise risks and vulnerabilities, both
internal and external, to which the Group is exposed, as well as
the quantitative and/or qualitative determination of its
relevance. The risk framework defines the key types, which are
reviewed annually in the light of the outcome of the Group's
main identification and assessment exercises.
We systematically assess the risk profile of the Group and its
subsidiaries using a single methodology, RPA, which is based on
the fundamental principles of the risk identification and
assessment model: accountability, efficiency, comprehensive
risk coverage, materiality and decision oriented. The calculation
of the risk profile under RPA methodology generates results
through a scoring system that classifies the profile into four
categories of materiality: 'low', 'medium-low', 'medium-high'
and 'high', to make sure the board-approved Group risk appetite
remains within medium-low and predictable risk profile.
The risk profile is represented at different levels:
• By risk type, where we measure exposure under base and
stressed conditions, mainly through a set of metrics and
indicators calibrated with international standards.
• By Group/Unit, which gives an aggregated view of risks that
Group and their subsidiaries are exposed, also considering
emerging risks that could impact business planning and
strategic objectives.
During 2022, we added new credit and strategic risk metrics to
capture ESG criteria in the risk profile to align with our ESG and
green finance commitments. We also included early warning
indicators and intraday liquidity buffers to make risk profile
more forward-looking in an ever-changing environment.
By the end of 2022, the Group’s risk profile remains at medium-
low, despite pressures from high inflation, rising interest rates
and the effects of the war in Ukraine which have impacted most
risk types. Nonetheless, our cautious and proactive risk
management led to strong profitability and good credit
indicators while liquidity risk profile remains strong. The control
environment also remained satisfactory.
Scenario analysis
Scenario analyses are an important risk management tool at all
levels, since it allows us to periodically assess the resilience of
our balance sheet and our capital adequacy under stressful
conditions. We use findings to review risk appetite and draw up
actions to mitigate expected losses or, if needed, to reduce
capital and liquidity.
Scenario analyses also enable senior management to identify
and understand the nature and scope of the vulnerabilities to
which the Group is exposed to in the development of its
business plan.
Our Research department plays a key role in determining
scenarios, macroeconomic variables and others that can affect
our risk profile in our markets.
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To make stress testing more consistent and robust:
• Recurrent risk management also uses scenario analyses for:
• Our three lines of defence and senior management are
involved in oversight and governance of scenario analyses.
• The models we develop estimate future metric values (e.g.
credit losses).
• Our backtesting and reverse stress challenges model
outcomes regularly.
• Our teams contribute with expert opinions and a vast
understanding of portfolios.
• And we thoroughly monitor models, scenarios, assumptions,
results and mitigating management measures.
In the context marked by the war in Ukraine, scenario analyses
have been key for the identification and management of
potential impacts, such as, rising inflation, energy crisis and
interest rate hikes. During 2022 we improved the ability of
foresight to pinpoint lines of action, adapt our strategy and
remain solvent. To this end, focus was made on sectoral
analysis, for which we developed a methodology and tool for
the projection of financial statements of companies allowing us
to analyse their behaviour under different macroeconomic
scenarios, quantify the impacts of the energy crisis and thus
being able to carry out anticipated portfolio management.
We have repeatedly obtained excellent quantitative and
qualitative scores in the European Banking Authority’s (EBA)
stress tests.
How we use scenario analysis
We conduct a systematic review of our risk exposure under
base, adverse and favourable scenarios that predict an impact
on solvency and liquidity. These exercises are fundamental to
our processes:
• Regulatory exercises based on instructions from EU and
domestic supervisors.
• Business planning to help set the Group’s risk strategy and
profile, with:
◦ internal capital and liquidity adequacy assessment
processes (ICAAP and ILAAP) that measure capital and
liquidity in various scenarios;
◦ budget and strategy planning to apply a new risk approval
policy, based on the Group’s risk profile, specific portfolios
and business lines;
◦ our annual recovery plan, which specifies which tools
Santander could use to survive a severe financial crisis. The
plan’s financial and macroeconomic stress scenarios have
various levels of severity, plus idiosyncratic and systemic
events; and
◦ risk appetite, with stressed metrics to determine how much
risk we can assume.
◦ provisions estimates: Since 1 January 2018, scenario
analysis, models and methodologies have covered
International Financial Reporting Standards (IFRS 9)
requirements;
◦ regular credit and market risk stress testing that simulate
changes in expected losses to estimate required capital and
absorb unexpected losses; and
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' to the consolidated financial statement.
◦ climate change scenario analyses, with the scenarios
defined by Network for Greening the Financial System
(NGFS) and others that we’ve created to calculate climate
change impacts.
In 2022, we participated in the stress tests led by the ECB,
classified as a learning exercise within the industry, and will be
integrated into the Supervisory Review & Evaluation Process
(SREP) exercise. Santander UK has also participated in a similar
exercise following the requirements of the Prudential
Regulation Authority (PRA). On the other hand, improvements
related to environmental and climate-related risks have been
carried out in the ICAAP 2022 exercise, where the climate
scenario has been integrated into the internal projection
methodology.
For more details, see 'Monitoring' in section
10.2 'Climate and environmental risk
management' in this chapter
Risk reporting structure
To remain fully abreast of our risk profile, top management gets
regular reporting from the Enterprise-wide risk management
team on current and future risks so it can make the right
decisions in a timely manner.
Reporting covers all risks in our corporate risk framework, with
all necessary considerations for their proper review. We issue
weekly and monthly reports for senior managers, as well as
monthly subsidiary risk reports and detailed overviews of each
risk type.
Our risk reporting structure balances data collection, analysis
and feedback on forward-looking measures, risk appetite and
limits, and emerging risk to give an overview of all risks and
make sure information and metrics are high-quality and
consistent with the corporate data framework.
We continue to enhance our reporting with simpler, automated
processes and tighter controls that adapt to new needs. In 2022,
we reported on the macro-economic impact of the war in
Ukraine and commodity prices, our measures to support
vulnerable customers and continuous monitoring of conflict-
related sanctions policies. We included information on strategic
initiatives to strengthen new business units and environmental
risk management, with a special focus on climate change and
other risks.
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2.5 Models & Data Unit
In 2022, Santander continued to use data and advanced
analytics to develop our business strategy. Strong leadership
and connection with business units helped us focus on
commercial priorities.
We embed data and models in four ways:
1. Business models. Business heads worked with models teams
to pinpoint use cases that could enhance customer
experience and stimulate growth. In addition, we have a vast
matrix of use cases in all our markets and businesses. We
have close to 1,000 cases to attract customers, increase their
loyalty and enhance their experience, including the Next Best
Offer model in all our regions.
2. Risk models. We developed early warning models that delve
deeper into the behaviour of our portfolios to manage them
better and boost business units' response. We also continued
to work on the IRB 2.1 programme. We submitted EBA Repair
Programme models to the ECB and met all regulatory and
supervisory expectations.
3. In data, we prioritized managing business units' most
valuable data. We enhanced data exchange within and
between subsidiaries.
4. In data architecture, we’re building a Group-wide 360º view
of our customers to boost customer knowledge and offer the
products and services they need more effectively.
We use cutting-edge technology, unconventional data and
model automation to be more efficient, enhance quality, and
tackle our customers' and employees' challenges.
We maintain our commitment to promoting transformation in
banking through the responsible use of advanced analytics
(machine learning and AI). We took part in a Banco de España
study published in June 2022 on explainable machine learning
7
models
.
7
Accuracy of Explanations of Machine Learning Models for Credit Decisions – Banco de España
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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 includes
counterparty risk, country risk and sovereign risk. It is our most
significant risk in terms of exposure and capital consumption.
3.2 Credit risk management
We take a holistic view of the credit risk cycle, including the
transaction, the customer and the portfolio, in order to identify,
analyse, control and decide on credit risk.
Credit risk identification facilitates active and effective portfolio
management. We classify external and internal risk in each
business to adopt any corrective or mitigating measures
through:
Planning
Our planning helps us set business targets
and draw up action plans within our risk
appetite statement.
Business and risk areas prepare holistic
strategic commercial plans (SCP) that
describe commercial strategies, risk
policies, resources and infrastructure for
managing credit portfolios.
Risk assessment and credit rating
Risk approval generally depends on the applicant’s ability
to repay the debt, regardless of any collateral or personal
guarantees we require. We review their regular sources
of income, including funds and net cash flows from any
businesses.
Our credit quality assessment models are based on credit
rating engines, different in each of our segments, which
we monitor to calibrate and adjust the decisions and
ratings they assign.
Collections and recoveries
Collections & Recoveries develops a global
management strategy based on local
economic conditions, business models and
other recovery-related particulars, with a
full approach and general action lines for
our subsidiaries.
For effective and efficient recoveries
management, the area segments
customers based on certain aspects, using
new digital channels that help create value.
Scenario analysis
Scenario analysis reveals potential risk in
credit portfolios under various
macroeconomic conditions so we can
develop strategies to prevent future
deviations from set targets.
Mitigation techniques
We generally approve risk according to a
borrower’s ability to make due payment,
regardless of any additional collateral or
personal guarantees we may require to
modulate exposure.
We always consider guarantees or collateral
as a reinforcement measure in a credit
transaction to mitigate a loss if the borrower
defaults on their payment obligation.
Monitoring
Our holistic, regular monitoring allows us to
track credit quality, spot risk trends early and
check credit performance against original
targets based on performance forecasts,
ratings and other particulars for each
customer. In our subsidiaries, local teams use
new transaction and CRM databases and
advanced early-alarm analytics that help
determine an appropriate course of action for
each customer according to their assigned
rating and segment.
For more details see section 'Credit risk
management', in Note 53 to the consolidated
financial statement
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ATOMiC: Credit risk target operating model
Advanced Target Operating Model in Collaboration (ATOMiC), as
part of our new credit risk strategy, has transformed credit risk
management, while we continue to work every day. It
strengthens our control environment and our ability to
anticipate and handle uncertainty caused by complex,
unforeseen events (like the Covid-19 crisis or the war in
Ukraine) and to adapt to new regulation.
During 2022, ATOMiC focused on keeping advancing in
digitalization and innovation (including advanced modelling
techniques), on addressing new challenges derived from the
political, social and economic instability, technological
disruption, regulatory agenda and the transformation towards
more sustainable habits, as well as continue to support the
Group's five major strategic lines:
1. Customer First: Digital processes and useful solutions to
boost customer experience and loyalty and grow our
customer base. As part of our New to Bank strategy,
Customer First explores new horizons, using new
information sources (non-traditional data), digital payment
solutions and fraud checks that make it easier for new
customers to affiliate with us with less required information.
2. Sustainable profits: Efficient control of costs and exceptions
and strong governance to increase volume and expected
(risk-adjusted) returns.
3. Responsible banking: Environmental, social and climate
change risk embedded in decision-making.
4. Forward-thinking: Stronger planning, forecasting and credit
risk data models to anticipate unforeseen events and
enhance risk sensitivity analysis, so we can better align
decision-making with customer behaviour based on
complete information.
5. Effective exploration of opportunities for shared services and
fintech.
ATOMiC’s a 'living' strategy that we revise annually. In 2022 the
Group planned transformation initiatives in subsidiaries with
ATOMiC Pro to tackle new challenges based on four key levers:
Advanced Target Operating Models (updated TOMs), Business
Success Case Studies that help us understand best practices
implemented in the Group, KPIs (metrics that help measure the
contribution and impacts of ATOMiC on the credit portfolios)
and local transformational initiatives that more rapidly promote
the implementation of the strategic lines of credit risk in the
Group.
Each country unit decides which initiative it undertakes, creating
its own plan and targets to achieve the Group's objectives. Local
credit risk strategies are defined based on the starting situation
of each country, its budgetary needs and readjusting the global
objectives to its own reality and particularities. Their strategies
combine to define the Group’s ambition and strategy regarding
credit. ATOMiC positions us better to handle unexpected events,
as we constantly strengthen our control framework in terms of:
• risk appetite limits and risk profile;
• forward-looking metrics and concentration limits per
customer and sector;
• measures that help determine in advance the risk policies and
actions to be implemented with clusters of customer, taking
into account the environment (playbooks).
• specific measures for each segment, from individuals to
Corporate Investment Banking (CIB), such as sectoral
exercises with new macroeconomic scenarios, and review of
admission cut-off scores.
• enhanced forecasting, proactive monitoring and recovery
management by the Collections & Recoveries area.
3.3 Key metrics
2022 general performance
2022 was a year marred by the worst inflation in decades in
Europe and North America, with great uncertainty caused by the
war in Ukraine. Our performance was largely affected by
monetary policy in our markets. We had to make credit risk
control more forward-looking to be ready for future shifts.
The first quarter of 2022 saw the start of war Ukraine. Despite
not having a presence or hardly any direct exposure in Russia or
Ukraine, the Group tightened monitoring of all risks, with
particular attention to Poland, due to its geopolitical situation,
and with the customers of every unit whose operations could be
affected by the conflict. While the war cast uncertainty and
slowed economic activity, our credit portfolio continued to
grow, led by our units in Europe and in a South America propped
up by a stronger Brazilian real. Credit quality indicators
remained stable; delinquency increased in light of the
regulatory 'new definition of default' (NDD).
In the second quarter of 2022, we continued to follow
geopolitics closely, monitoring key indicators and the most
affected customers by the rising prices of energy, oil and
commodities. Credit volumes stayed high even though interest
rate hikes to curb inflation slowed down the economy, along
with global supply chain disruptions, new covid-19 outbreaks
and the war’s effect on prices. Retail banking activity was
moderate, but wholesale banking activity increased. Positive
performance in Europe, helped by portfolio sales in Spain and
Portugal, set NPLs back on a downward trend.
In the third quarter, the war in Ukraine continued to make
waves in the global economy, and the higher energy and
commodity prices and interest rates prompted us to run impact
analyses to identify the most affected customers. Credit
portfolio growth was boosted by corporates and large
corporates. Our NPL ratio rose slightly due to loan performance
in the Americas, which was partially offset by positive results in
Europe and at Digital Consumer Bank (DCB).
In the last quarter, the economy continued to present an
inflationary scenario, although economic activity is proving
more resilient than expected. The Group continued to closely
monitor economic effects from the war in Ukraine in order to
take preventive action. Exposure remained stable from previous
quarter, slightly declining in Europe due to higher interest rates
and offsetting by growth in North America, South America and
DCB. The NPL ratio remained stable, driven by good
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performance of our portfolios in Europe and DCB together with
new non-performing portfolio sales, mainly in Spain.
In December 2022, credit risk with customers rose 7%, like-for-
like, from 2021, in part because the currencies in our core
markets increased in value and the consolidation of Amherst
Pierpont Securities (APS) since April 2022. Still, all core
subsidiaries grew in local currency.
Our credit risk remained diversified, with a strong balance
8
between mature and emerging markets: Europe
America (16%), North America (15%) and Digital Consumer
Bank (11%).
(57%), South
Loan book growth offset the rise of credit impaired loans to EUR
34,673 million (+4.3% vs 2021) and lowered our NPL ratio to
3.08% (-8 bp vs 2021).
The Group recognized loan-loss provisions of EUR 10,509
million in compliance with IFRS 9, which were 41.3% higher
from the year ended in December 2021. The pressure from the
macroeconomic environment led to build additional provisions,
mainly in Spain, the UK and the US, and higher provisions in
Brazil (driven by unsecured individual portfolio performance and
a single name in SCIB in the fourth quarter) and in Poland (due
to CHF mortgages), which have been netted by the still good
behaviour in the North American and the DCB portfolios.
Santander's loan-loss allowances totalled EUR 23,418 million.
This brought our NPL coverage ratio to 67.5%, down from
71.3% in December 2021. At the end of 2022, approximately
35.4% of net loans to customers were mortgages to individuals,
which by and large are found in Spain and the UK and consist of
low-risk home mortgages, with low NPL ratios . A low-risk
profile means fewer losses.
All support measures (moratoria) that the Group took in
response to the covid-19 pandemic have expired, with positive
behaviour thanks to economic recovery in in 2021, and
improved sanitary-health conditions in our main geographies.
Government liquidity programmes also remained in force in
2022, of which 77% of total credit granted was in Spain (77%
was ICO-secured), and 12% of total credit was in the UK, with
98% government-secured.
In order to relief the mortgage payment burden for vulnerable
customers after interest rates increase, the Group is following
the government measures launched by Spain, Portugal and
Poland. These measures propose, among others, extending the
term of mortgages to align customers' instalments with their
payment capacity.
8
'Others' not included make up the remaining 1% (Corporate Centre)
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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)
2021
636,123
283,953
262,869
41,941
33,497
149,792
112,808
36,984
141,874
85,702
41,479
5,481
116,989
6,337
1,051,115
2022
639,996
293,197
253,455
41,755
33,350
185,614
140,452
45,107
167,348
101,801
47,811
5,844
125,339
5,824
1,124,121
2020
606,997
272,154
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
NPL coverage ratio
(%)
2022
51.8
51.0
33.8
79.3
74.0
93.3
90.3
106.6
76.0
79.5
56.3
180.4
92.8
1.5
67.5
2021
49.4
51.4
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
47.5
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
Credit impaired loans
(EUR million)
2021
19,822
13,403
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
903
33,234
2022
15,186
9,598
3,059
1,247
1,268
5,629
4,571
1,047
10,381
7,705
2,384
122
2,583
894
34,673
2020
20,272
14,053
3,138
1,584
1,496
2,938
2,025
913
5,688
3,429
2,051
93
2,525
344
31,767
Loan-loss provisions C
(EUR million)
2021
2,293
2,320
(245)
38
200
1,210
419
791
3,251
2,715
341
140
527
155
7,436
2022
2,396
1,618
316
17
440
2,538
1,744
788
5,041
4,417
399
132
544
(10)
10,509
2020
3,344
2,123
677
193
330
3,917
2,937
979
3,923
3,018
594
226
957
31
12,173
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 1,460 million).
D. Cost of risk is the ratio of 12-month loan-loss provisions to average lending of the same period.
Santander Spain 2021 and 2020 have been recalculated taking into consideration new perimeter (European branches).
NPL ratio
(%)
2021
2020
2022
2.37
3.27
1.21
2.99
3.80
3.03
3.25
2.32
6.20
7.57
4.99
2.08
2.06
15.35
3.08
2022
0.39
0.61
0.12
0.04
1.43
1.49
1.35
1.95
3.32
4.79
0.93
2.91
0.45
(0.14)
0.99
3.12
4.72
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
Cost of risk
D
(%/risk)
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
3.34
5.16
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
2020
0.58
0.86
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
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Reconciliation of key figures
As illustrated in the table below, Santander’s 2022 consolidated
financial statements disclose loans and advances to customers
before and after provision allowances. Credit risk also includes
off-balance sheet risk.
1,124,121
A
Gross credit risk with customers
1,058,688
Gross loans and advances to customers & others
1,034,263
Gross financial assets measured at
B
amortised cost
9,550
Financial assets
B
held for trading
14,875
Gross financial assets
B
at fair value
22,666
Loan-loss
allowances
1,011,597
Net financial assets
measured at amortised
cost
14,857
Net financial assets at fair
value
18
Loan-loss
allowances
1,036,004
Net loans and advances to customers
Credit risk section
Balance sheet item from consolidated financial statement
A. Includes gross loans and advances to customers, guarantees and documentary credits.
B. Before loan-loss allowances.
65,433
Contingent
liabilities
The graph below breaks down credit risk (including gross loans
and advances to customers, guarantees and letters of credit):
Credit risk distribution
Distribution by region and segment
Santander segments credit risk into three customer groups in
each market:
• Individuals: All natural persons that are not self-employed
individuals, subdivided by income level to manage risk
properly by customer type.
• SME, commercial banking and institutions: Companies and
self-employed individuals, state-owned entities and private
not-for-profit entities.
• Santander Corporate and Investment Banking (SCIB):
Corporate customers, financial institutions and sovereigns on
a closed list that is revised annually through analysis of
business type, geographic diversification, product types,
revenue volume for Santander, and other factors.
440
Individuals56%Companies24%SCIB20%
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Below is a breakdown of performing and impaired loans by region:
Total
Total
Eur Mn
1,124,121
Segments
Individuals
Eur Mn 630,310
SME, Commercial Banking
and Institutions
Eur Mn 273,516
SCIB
Eur Mn 220,295
'Others' include Corporate Centre.
Performing and non-performing was resegmented for 2021 and 2020.
• Europe: the NPL ratio fell 75 bp to 2.37% from 2021 because
impaired loans decreased significantly in the UK, and in Spain
and Portugal due to the portfolio sales.
• North America: NPLs increased by 61 bps to 3.03% year on
year, mainly due to the new definition of default and because
NPLs had grown at SC USA and the loan book had stabilized
once customer relief programmes created in the public health
crisis and government stimulus packages had expired.
• South America: The NPL ratio rose 170 bp from 2021 to
6.20%, due to increases in Brazil (by unsecured individual
portfolio performance and a single name in SCIB, in the fourth
quarter) and Chile, offset by the decrease in Argentina.
• Digital Consumer Bank: The NPL ratio decreased 7 bp to
2.06%, despite the decrease in automobile financing.
For more details, see section
3.4. 'Details of main geographies'.
441
Europe57%South America15%North America16%DCB 11%Others 1%1,089,4481,017,881957,69034,67333,23431,767PerformingCredit impaired202220212020Europe54%South America13%North America13%DCB20%611,816577,107529,48018,49415,13814,139PerformingCredit impaired202220212020Europe63%SouthAmerica19%North America16%Others 2%259,546263,334270,72213,97015,56816,104PerformingCredit impaired202220212020Europe58%South America15%North America27%218,086177,439157,4882,2092,5281,524PerformingCredit impaired202220212020
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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), according to the level of credit
risk of each instrument:
Observed credit risk deterioration since the initial recognition of the financial
instrument
Risk category
Stage 1
Stage 2
Stage 3
Classification
criteria
Financial instruments with no
significant increase in risk
since initial recognition.
Financial instruments with a
significant credit risk increase since
initial recognition but with no
materialized impairment event.
Financial instruments with true signs of
impairment as a result of one or more events
resulting in a loss.
Provisions
recognised
The impairment provision
reflects expected credit losses
from defaults over twelve
months from the reporting
date.
The impairment provision reflects
expected losses from defaults over the
financial instrument’s residual life.
The impairment provision reflects expected
losses for credit risk over the instrument’s
expected residual life.
In this stage, the calculation takes into account
that loss events have already occurred and
therefore the single scenario is the certainty that
they will materialize in losses.
Impairment provisions include expected credit risk losses over
the expected residual life of purchased or originated impaired
(POCI) financial instruments.
The table below shows Grupo Santander's credit risk exposure
by stage and geography:
A
Exposure by stage and by geography
EUR million
Europe
Spain
UK
Portugal
Poland
North America
US
Mexico
South America
Brazil
Chile
Argentina
Digital Consumer
Bank
Corporate Centre
Total Group
Stage 1
560,636
254,994
221,566
35,490
30,362
148,497
107,738
40,714
145,517
85,636
43,033
5,494
Stage 2
39,451
12,351
20,445
5,018
1,636
11,355
8,914
2,442
11,061
8,125
2,350
229
Stage 3
15,186
9,598
3,059
1,247
1,268
5,629
4,571
1,047
10,381
7,705
2,384
122
Total
615,274
276,943
245,070
41,755
33,266
165,481
121,223
44,203
166,958
101,466
47,766
5,844
118,019
4,718
2,583
125,320
1,907
974,575
2,561
69,147
894
34,673
5,362
1,078,396
A. Does not include EUR 29,543 million from reverse repos and EUR 16,183 million
from balances not subject to impairment accounting.
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11,665
8,824
13,263
3.4 Details of main geographies
Stage 3 financial instruments (showing impairment) performed
as follows:
2020 - 2022 Impaired credit assets
EUR million
Impaired credit (start of period)
Net entries
Perimeter
FX and others
Write-off
Impaired credit (end of period)
2022
33,234
13,257
—
417
(12,235)
34,673
2021
31,767
10,027
—
529
(9,089)
33,234
2020
33,799
10,277
(44)
(3,336)
(8,930)
31,767
2020 - 2022 Allowances
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
2022
23,698
9,983
13,714
2021
24,271
10,491
13,780
2020
22,965
8,872
14,093
305
(14)
(12,235)
23,418
9,272
14,146
(6)
(302)
(9,089)
23,698
9,983
13,715
139
(3,166)
(8,930)
24,271
10,491
13,780
To quantify expected losses from credit events, we use up to
five unbiased and weighted 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.
10
11
, LGD
9
We calculate impairment losses using parameters (mainly EAD
,
and discount rate) based on internal models and
PD
regulatory and management expertise. As they are far from
being a simple adaptation, we define and validate them
according to IFRS 9 guidelines.
For more information regarding Financial asset
impairment, see 'Credit risk management' in section
'2. Main aggregates and variations' on Note 53 to the
consolidated financial statement.
Forbearance
Grupo Santander's internal forbearance policy is a standard for
our subsidiaries locally and follows regulations and supervisory
expectations such as the EBA Guidelines on the management of
credit impaired and forborne exposures.
Its rigorous criteria for assessing and monitoring forbearances
ensure the strictest possible care and diligence in recoveries.
Forbearance must aim at recovering outstanding debt, with
payment obligations adapted to customers' circumstances.
Forborne debt should remain classified as 'doubtful' or put on a
9
10
11
Exposure at Default
Probability of Default
Loss Given Default
watch-list for sufficient time in order to determine both
associated risk and reasonable certainty about recovery of
ability to pay. We never use forbearance to delay recognition of
loss or misstate risk of default.
For years, the sound economic conditions in our core markets
sent forborne assets on a downward trend. But 2021 was a
turning point, as forbearance grew 24% due to customers'
financial struggles during the pandemic. In 2022, forbearance
reduced slightly to EUR 34,173 million. 44% of forborne assets
qualify as 'non-performing', with an average coverage of 44%.
Key forbearance figures
EUR million
Performing
Impaired credit
Total forborne
% Total coverage
A
2022
18,988
15,185
34,173
24%
2021
20,504
15,538
36,042
23%
2020
14,164
14,995
29,159
28%
A. Total forbearance portfolio loan-loss allowances/total forborne portfolio.
United Kingdom
General overview
Credit risk with customers in the UK (excluding Santander
Consumer UK and Santander London Branch) declined year-on-
year by 3.6% (+1.8% in local currency) to EUR 253,455 million.
22.5% of Santander’s credit risk with customers is in the UK.
At 1.21%, the NPL ratio fell 22 bp from December 2021, due to
a significant drop in the corporates segment following covid
relief measures and the positive performance of the real estate
market. The profile of the different segments remains stable.
443
1.04%1.24%1.43%1.21%33%45%26%34%0.09%0.27%-0.09%0.12%Non-pefoming loans ratio Non-performing coverage ratioCost of risk2019202020212022
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The Santander UK portfolio is divided into:
The chart below breaks down the portfolio by borrower type:
Portfolio segments
Dec. 22 data
A
Mortgage portfolio loan type
A. Excluding SCF UK and London Branch
Mortgage portfolio performance
We closely monitor the mortgage portfolio due to its size for
both Santander UK and the Group.
As of December 2022, the mortgage portfolio of Santander UK
grew by 5.5% in local currency to EUR 209,872 million. 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.
The high loan origination rate from 2021 carried on into 2022,
with very low credit risk. The economy slowdown and the
interest rate hikes have moderated the increasing pace of house
price increases from the second half of the year.
In the second quarter of 2022, interest rate hikes increased
customers’ monthly instalments on mortgages with a variable
rate (nearly 12% of the loan book) or a mixed rate after the
fixed-rate period (normally between two and five years)
expired. Higher instalments are being mitigated, in part, by our
conservative assessments of customers’ ability to pay in order
to approve them for a mortgage. Also, we are already taking
measures to aid customers.
Under 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.
We have credit exposure predominantly in south east UK and
the London metropolitan area.
Mortgage exposure by region
Dec. 22 data
Home mover: customers who change home, with or without
changing the bank that granted the mortgage.
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 to be rented.
In addition to traditional mortgages, Santander UK's wide range
of products include:
• Interest-only loans (22%): customers make a monthly
interest payment and repay the loan principal at maturity.
These mortgages require borrowers to have an appropriate
repayment vehicle, such as a pension plan or an investment
fund. This mortgage is common in the UK. To mitigate
inherent risk, Santander UK has restrictive approval policies,
such as a maximum loan-to-value (LTV) ratio of 50% and an
assessment of the ability to pay both interest and capital.
• Flexible loans (4%): loan agreements allow borrowers to
modify monthly payments or draw down additional funds up
to a set limit under various conditions.
• Buy-to-let (9%): a small portion of the total portfolio, 'buy-
to-let' mortgages are subject to strict risk approval policies.
By late December 2022, NPL ratio of the mortgage portfolio had
remained stable at 0.98% (-2 bp YoY), reflecting its strength.
With our prudent approval policies, simple average LTV stood at
39%. 1% of mortgages have an LTV of between 90% and 100%.
Our policies also helped prevent risk quality deterioration in
new mortgages.
444
Mortgages83%Other Individuals3%SME & Commercial banking 14%25%14%13%2%4%32%10%LondonMidlands and East AngliaNorthNorthern IrelandScotlandSouth East excluding LondonSouth West, Wales and other42%36%29%31%20%24%9%9%StockNew production
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The chart below shows the LTV structure of residential
mortgages as of December 2022:
Loan to value
Dec.22 data
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 'high risk' loans (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 293,197 million
(26% of the Group’s total). It is appropriately diversified in terms
of products and customer segments.
Spain's macroeconomic outlooks are of high uncertainty, with
high inflation, higher rates and lower purchasing power of
households as some negative factors. Positive factors include
boosted tourism when the end of the pandemic has been
declared together with a better than expected macro economic
performance.
Lending trends were disparate across segments. Consumer
credit and mortgage lending both grew considerably. But with
corporates, lending remained stable, and with SMEs, it declined
because customers still holding credit lines backed by Spain's
Official Credit Institute (ICO) needed less new credit.
Total credit risk grew by 3.3% since December 2021. A large
number of companies still hold the ICO loans that were granted
during the pandemic, which amounted to EUR 25,428 million.
The extension of the ICO loans in 2022 and the new support
programmes were less relevant compared to 2020.
3.27% of the credit portfolio was non-performing —145 bp
lower than in December 2021 — due to, overall, the portfolio
positive performance, helped by extensions of borrower relief
programmes, special loan management and portfolio sales.
Year-on-year, the coverage ratio remained at 51% and cost of
risk fell 31 bp to 0.61%.
Figures for 2019, 2020 and 2021 have been recalculated to include data from
European branches.
Santander España's portfolio is divided into these segments:
Portfolio segmentation
Dec.22 data
(*) SCIB includes the European branches.
Residential mortgages performance
Santander España’s residential mortgages portfolio amounted
to EUR 62,472 million, 21% of total credit risk. 99.5% are
secured by the property as collateral.
A
Residential mortgages
EUR million
Gross Amount
Without mortgage guarantee
With mortgage guarantee
of which credit impaired loans
Without mortgage guarantee
With mortgage guarantee
2022
62,472
288
62,184
1,033
24
1,009
2021
60,948
419
60,529
1,798
115
1,683
2020
58,079
387
57,692
1,784
75
1,709
A. Excluding SC España's mortgage portfolio (EUR 1,216 million in December 2022
with EUR 55 million in doubtful loans, and EUR 1,376 million with EUR 62 million
in doubtful loans in 2021)
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47%38%14%1%<50%50-70%70-90%90-100%>100%5.78%5.16%4.72%3.27%41%48%51%51%0.39%0.86%0.92%0.61%Non-pefoming loans ratioNon-performing coverage ratioCost of risk2019202020212022Residencial mortgages21%Other Individuals5%Companies39%SCIB*35%
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1.62% of mortgages to households to purchase a home were
non-performing, down 116 bp from last year, mainly explained
by the NPL portfolio sales.
Debt to income*
Dec.22 data
Loan to value**
Dec.22 data
NPL ratio, mortgages to households
%
In 2022, new mortgage origination had climbed 9% year on
year, due to higher consumer demand. The risk of the portfolio
remains medium-low:
• principal repayment begins on the start date of all mortgages;
• early repayment is common, and average transaction life is
shorter than the term in the loan agreement;
• the portfolio has high-quality collateral, which is almost
entirely from first-time home buyers;
• its average debt-to-income ratio is still near 26%;
• 93% of mortgages have an LTV (the ratio of total risk to the
latest available appraisal) below 80%;
• 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.
By midyear, the instalments of customers with a variable
interest rate (75% of the portfolio) began to rise because of the
higher Euribor, the ECB’s benchmark rate. This has been
partially offset by our conservative pre-approval assessment of
the ability to pay, and we are already taking measures to aid
customers aligned with the Código de Buenas Prácticas for
vulnerable customers and middle class.
Average 27%
(*) Debt to income: ratio of annual instalments to the customer’s net income.
(**) Loan to value: ratio of the total risk to latest available home appraisal.
Corporate and SME financing
Credit risk with SME and corporates in commercial banking,
declined 2.3% from December 2021 to EUR 112,255 million,
mainly due to a 4.3% drop in SME lending. Corporates and SME
are Santander España's largest segment, at 39% of its total
credit risk, at the same level as the SCIB portfolio, which in 2022
has come to include the branches of Europe.
Most corporates and SMEs are assigned a credit analyst to
monitor loan payment throughout the risk cycle. Our corporate
and SME portfolio is highly diversified and not concentrated in
any industry.
In 2022, portfolio indicators were stable following the
considerable growth in 2020 supported by ICO-secured loans,
which are now being repaid steadily following the liquidity
support scheme’s grace period and extensions.
By late 2022, 5.79% of corporate and SME loans were non-
performing, down 171 bp from 2021, because of the proactive
management of NPL supported by portfolio sales, mainly in
SMEs.
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4.26%2.96%2.78%1.62%201920202021202257%22%21%DI < 30%30% < DI < 40%DI > 40%28%33%32%5%2%LTV < 40%40% - 60%60% - 80%80% - 100%> 100%
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United States
General overview
In December 2022, Santander US's credit risk stood at EUR
140,452 million, 12.5% of the Group's total credit risk.
Santander US includes these business units:
Business units segmentation
Dec.22 data
Retail and commercial banking is Santander Bank N.A.’s core
business (81% of lending), split between individuals (54%) and
corporates (46%).
Santander Bank N.A.’s core strategic objectives include
continuing to improve customer experience, growing its
customer and deposit base with digital initiatives to transform
business and branches, and using its deposit base to build up its
Commercial Real Estate business. To maximize returns and
growth, retail and commercial banking mainly consists of
consumer credit, auto-lending and auto-leasing, but not
mortgages or any kind of loans or lines of credit secured by
collateral.
In December 2022, NPL rate stood at 1.08%, a 23 bp year-on-
year increase. Cost of risk rose 0.36%, once provisions
normalized after the additional provisions released in 2021,
driven by the relief and fiscal stimulus programmes then in
place.
SBNA: Santander Bank N.A.
SC USA: Santander Consumer USA
NYB - SIS: Santander Investment Securities
BSI: Banco Santander International
Other US
The recovery of the US continues, albeit slowly after the Federal
Reserve (Fed) withdrew economic stimulus. Growing concerns
over rising inflation, driven by demand and low unemployment,
prompted the Fed to raise its benchmark rate.
In December 2022, Santander US’s lending grew 24.6% year on
year, due overall to the integration of the Amherst Pierpont
Securities (APS) portfolio, which began in April. CIB lending
grew at the New York Branch, in SC USA and in SBNA due to, in
part, a stronger US dollar. Excluding the exchange rate impact,
Santander US's total growth was 17.4%.
With stimulus withdrawn and interest rates hikes, 3.25% of
total credit was non-performing, a 92 bp increase, due to more
NPLs in SC USA. Cost of risk also rose 92 bp year-on-year to
1.35%.
Santander US is focused on supporting customers and making
inroads with its strategy to enhance customer experience and
capital allocation to businesses. Integrating Amherst Pierpont
will boost our wholesale product offering and value proposition
and our positioning in structured products, fixed-income
issuances and securitizations in the US.
Leases carried out exclusively under the Stellantis Group
agreement (primarily with highly creditworthy customers)
dropped 1.8% to EUR 13,400 million, providing stable and
recurring earnings. Proactive risk management and residual
value mitigation measures remain a priority.
Key business units performance
Santander Bank N.A.
SBNA lending amounted to EUR 64,718 million (6% of the
Group's credit risk) and grew 12.8% across all segments, helped
by a stronger US dollar. In constant euros, loan book growth
was 6.3%.
Santander Consumer USA
Santander Consumer USA's (SC USA) risk indicators are higher
than other Santander US units due to the nature of its core auto-
lending and leasing business.
SC USA lending amounted to EUR 31,961 million (3% of the
Group's total) and increased 7.8% in 2022. In constant euros,
portfolio grew 1.6%.
It remains focused on improving return-to-risk with pricing
suited to the credit quality of the customer/transaction. It has
also been enhancing dealer experience. In 2022, auto loan
originations did not change year on year due to more expensive
used vehicles and a limited supply of new vehicles.
In December 2022, risk indicators stabilized when covid relief
programmes for customers and government stimulus ended,
and due to new definition of default . NPL ratio rose to 12.11%,
a 584 bp year-on-year increase, and cost of risk was 4.68%, up
314 bp from 2020. The coverage ratio fell 89 pp year-on-year to
87%, according to the estimated portfolio losses.
447
46%23%21%4%6%0.69%0.81%0.85%1.08%141%174%129%103%0.35%0.85%-0.06%0.36%Non-pefoming loans ratio Non-performing coverage ratioCost of risk2019202020212022
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they increased by 38%. As a result, cost of risk increased from
3.73% at the end of 2021 to 4.79%.
Brazil
General overview
2022 in Brazil was marked by economic instability and high
inflation rates, although it has been declining in the second half
of the year, standing at 5.8% in December (the lowest rate since
February 2021).
Santander Brasil's credit risk amounted to EUR 101,801 million,
up 19% from 2021; in constant euros, it grew 6.2%. As of
December 2022, Santander Brasil accounted for 9% of
Santander's loan book.
Santander Auto set a market penetration record, with 28% of
new auto loan agreements. With an individuals market share of
23%, it is a now a leading auto lender.
SME lending grew steadily, as practically all subsegments grew
in originations, especially among low-risk borrowers. As of
August, the relaunch of Government Guarantee Programmes for
all subsegments has contributed to the aforementioned
increase in production, in order to combat the effects of
generalized macroeconomic volatility.
Lending to corporates saw robust growth. New originations had
sound risk profiles, which helped keep credit quality indicators
within targets and reinforced the portfolio's profitability.
Our digital business continued to grow. 90% of all sales were
done online. 'Gente', our virtual assistance channel with
artificial intelligence, has over 18 million hits per month.
Santander Brasil’s leadership in wholesale banking makes it one
of Brazil's top corporate banks, owing to its global experience in
infrastructure, agribusiness and equities. It has led the national
banking sector in FX derivatives for the last eight years; it is also
Brazil's largest trader of commodities.
Because of inflation, benchmark rate (“Selic”) hikes and other
macroeconomic variables, together with the performance of
retail unsecured portfolio and a single name in SCIB in the
fourth quarter, at December, loan-loss provisions amounted to
EUR 4,417 million, 63% higher than in 2021; in constant euros,
Santander Brasil's loan book is distributed as follows:
Portfolio segmentation
Dec.22 data
It is diversified, with a distinct retail profile. 80% of total credit
is retail lending, consumer financing and corporate lending.
Portfolio performance
Cost of risk rose among individuals without collateral, but the
portfolio mix was robust. The NPL ratio rose from 4.88% in
December 2021 to 7.57% in December 2022, and the coverage
ratio decreased to 111% from 80%.
The individuals portfolio grew year on year, despite the
restrictive measures in place amid the macroeconomic
downturn in the second half of 2021.
448
6.16%5.26%6.27%12.11%175%230%176%87%9.42%8.09%1.54%4.68%Non-pefoming loans ratio Non-performing coverage ratioCost of risk20192020202120225.32%4.59%4.88%7.57%100%113%111%80%3.93%4.35%3.73%4.79%Non-pefoming loans ratio Non-performing coverage ratioCost of risk2019202020212022Individuals39%Consumer Finance10%Companies31%SCIB20%
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For SMEs, Santander Brasil took measures for loan approvals
and reviewed strategy to ensure sufficient credit quality and
prevent impairment of aggregate risk metrics.
Credit volume in the corporates portfolio showed sustainable
and steady growth, in line with forecasts. Its credit profile
improved and helped increase profitability.
One of the core credit risks indicator Santander Brasil uses to
measure credit quality and prevent the impairment of the
12
portfolio is the 'Over 90 ratio
December 2022 (+40 bp year on year), Santander Brasil’s Over
90 ratio has remained below the average of its competitors.
'. Standing at 3.1% as of
Over 90 total (%)
Dec. 22 data
3.5 Other credit risk details
Credit risk from financial markets activities
This section covers the credit risk generated by treasury activity
with customers (especially credit institutions), with money
market funding and counterparty risk products to meet the
needs of customers and the Group's own needs in their
management.
Counterparty credit risk is the risk that a customer will default
before the final settlement of a transaction’s cash flows. It
creates a bilateral credit risk because it can affect both parties to
a transaction. It is also uncertain because it depends on market
factors, which can be volatile.
We manage counterparties with several credit risk models
based on their characteristics and needs. Model segmentation is
organized by business and risk treatment and based on
counterparty disclosures as well as the credit risk cycle. The
exposure that the counterparty credit risk model covers includes
derivatives contracts, repurchase agreements, securities and
commodities lending, long settlements and margin lending.
An infrastructure that can quickly and dynamically measure
current and potential exposure with various degrees of
aggregation and granularity to generate detailed reports is
important for decision-making.
To measure exposure, we use two methods: 'Mark-to-
market' (MtM) (replacement cost of derivatives), plus potential
future exposure ('add-on'); and the Monte Carlo simulation for
certain countries and products. We also calculate capital at risk
and unexpected loss (e.g. economic capital, net of collateral and
recoveries, after deducting expected loss).
At market close, we recalculate exposure by adjusting
transactions to a new time horizon, adapting potential future
exposure, and applying netting, collateral and other mitigants.
That way, we can check exposure daily against the limits
approved by senior management within risk appetite. For risk
control, we use a real-time integrated system that shows the
exposure limit with a counterparty, for any product and term, in
all subsidiaries.
Counterparty credit risk can also give rise to 'wrong-way' risk if
exposure to a portfolio or a counterparty increases but credit
quality declines. 'Wrong-way' risk arises in the event that the
exposure to a portfolio or to a counterparty increases when its
credit quality deteriorates. In other words, there is a wrong-way
risk when there is an increase in the risk of default and,
therefore, the exposure to the counterparty increases.
Regarding settlement risk, this occurs when the settlement of a
transaction involves a bilateral exchange of flows or assets
between two counterparties. For example, when a counterparty
buys dollars in exchange for euros, the settlement of the
transaction implies that one party gives euros and receives an
equivalent amount of dollars from the other. Settlement risk is
the risk that one of the parties will default on their settlement
commitments.
Counterparty risk exposures: over-the-counter (OTC)
transactions and organized markets (OM)
By December 2022, with netting and collateral agreements, the
positive market value of total counterparty risk exposure (under
management criteria) was EUR 13,249 million (net exposure of
EUR 45,157 million).
In trading, the market value of derivatives has been rising since
December 2021 due to interest rate hikes, higher exchange
rates for major currencies (EUR, USD and GBP) and changes in
other factors that have the greatest impact on the Group’s
counterparty credit risk.
Counterparty risk: exposure in terms of market value and
A
credit risk equivalent, including the mitigation effect
EUR million
Market value with netting effect
B
and collateral
C
Net CRE
2022
2021
2020
13,249
45,157
5,491
31,444
5,235
30,139
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. Includes the mitigation of netting agreements and deducting the collateral
received.
C. CRE (credit risk equivalent): net value of replacement plus the maximum potential
value, less collateral received.
12
Assets with more than 90 days arrears / credit portfolio. Excluding commitments and guarantees and pulling effect.
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The chart below shows counterparty risk products (especially
interest rate and FX hedging instruments) by nominal risk:
A
Counterparty risk by nominal
EUR million
B
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Total OTC derivatives
Derivatives organised
markets
C
Repos
Securities lending
Total counterparty risk
D
2022
2021
2020
Nominal
14,765
26,177
13,320
1,069,870
5,538,173
13,496
6,479,325
196,476
259,946
52,270
6,988,017
Nominal
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
Nominal
14,530
53,821
11,370
863,001
4,917,944
3,732
5,695,339
169,059
146,984
46,418
6,057,800
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, and repurchase agreements
and securities lending in up to one year.
A
Counterparty risk: Distribution of nominal risk by maturity
EUR million. Dec.22 data
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
23%
60%
98%
51%
35%
85%
37%
62%
95%
100%
41%
Up to 5 years
44%
39%
2%
31%
39%
12%
39%
28%
5%
—%
36%
Up to 10 years
30%
1%
—%
12%
16%
2%
15%
More than 10 years
3%
—%
—%
6%
10%
1%
9%
8%
—%
—%
14%
2%
—%
—%
9%
TOTAL
14,765
26,177
13,320
1,069,870
5,538,173
13,496
6,479,325
196,476
259,946
52,270
6,988,017
A. Figures under internal risk management criteria.
B. Credit derivatives acquired, including coverage 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.
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Even if the credit quality of some counterparties declines, most
counterparty credit risk is with customers with high credit
quality (86% rated A or higher), especially financial institutions
(26%) and clearing houses (68%).
A
Counterparty risk: Notional values by customer rating
Dec.22 data
Rating
AAA
AA
A
BBB
BB
B
Other
%
0.85%
0.51%
84.96%
12.53%
1.09%
0.04%
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, with which we
also seek to cover all other transactions. In general, the
collateral agreements Santander signs are bilateral; still, we do
sign some unilateral agreements in the customer’s favour,
mainly with multilateral organizations and securitization funds.
Counterparty risk: Notional values by customer segment
Dec.22 data
We use collateral to reduce counterparty risk. It consists of
highly liquid instruments with economic value. They are
deposited or transferred from one counterparty to another to
guarantee or reduce counterparty credit risk from portfolios of
cross-risk derivatives.
We measure trades subject to collateral agreements daily, with
parameters to determine the amount of collateral to be paid or
received from the counterparty (in cash or securities).
With high volatility (especially during the pandemic), the
processes we have in place to manage collateral properly and
more often have proved effective.
Most of the collateral received under Credit Support Annex
(CSA), Overseas Securities Lending Agreement (OSLA),
International Securities Market Association (ISMA), Global
Master Repurchase Agreement (GMRA) and other agreements
signed by the Group has been effective (41%); the rest is subject
to strict quality policies in regard to the issuer and their rating,
debt seniority and haircuts.
Because of the credit risk we assume with each counterparty,
we apply credit valuation adjustments (CVA) to over-the-
counter (OTC) derivatives when calculating the results of
trading portfolios.
A CVA is a change to the market value of OTC derivatives that
accounts for counterparty credit risk throughout the contract
life. A counterparty’s CVA adds up to the CVA on all maturity
dates. It discounts the value of a derivative offered by a buyer
based on the chance that the counterparty will default. We
calculate it with exposure at default, probability of default, loss
given default, the discount curve and other inputs.
We also apply debt valuation adjustments (DVA), which are
similar to CVA but result from credit risk assumed by OTC
counterparties trading with Grupo Santander. Both CVA and DVA
are done within the potential period of exposure.
By late December 2022, CVA increased 39.4% year on year to
EUR 329.7 million, and DVA rose 90.7% year on year to EUR
308.6 million. This was mainly due to credit market
movements, with much wider spreads since 2021 year end.
Counterparty risk, organized markets and clearing houses
Santander’s policies promote early action according to
regulation on OTC derivatives, repurchase agreements and
securities lending (whether settled through clearing houses or
bilaterally). In recent years, we have been standardizing OTC
transactions to settle and clear new contracts through clearing
houses according to current regulation, in addition to promoting
electronic execution systems internally.
Also, we actively manage contracts not settled by clearing
houses to optimize volume, in accordance with regulation on
margins and capital.
While our counterparty risk management does not contemplate
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.
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The table below shows the weight of contracts settled by CCP
versus total counterparty risk as of December 2022:
A
Counterparty risk: Notional values by settlement channel and product
Nominal in EUR million
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Repos
Securities lending
Total
Bilateral
B
CCP
Nominal
9,917
19,067
13,305
1,003,017
847,313
1,218
150,698
52,270
2,096,804
%
67.2%
72.8%
99.9%
93.8%
15.3%
9.0%
58.0%
100.0%
Nominal
4,848
758
15
24,349
4,555,519
—
109,248
—
4,694,737
%
32.8%
2.9%
0.1%
2.3%
82.3%
—%
42.0%
—%
Organised marketsC
Nominal
—
6,352
—
42,504
135,341
12,278
—
—
196,476
%
—%
24.3%
—%
4.0%
2.4%
91.0%
—%
—%
Total
14,765
26,177
13,320
1,069,870
5,538,173
13,496
259,946
52,270
6,988,017
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.
A
Risk settled by CCP and product
Nominal in EUR million
Credit derivatives
Equity derivatives
Fixed income derivatives
Exchange rate derivatives
Interest rate derivatives
Commodity derivatives
Repos
Securities lending
Total
2021
6,714
—
—
38,755
2022
4,848
758
15
24,349
2020
6,245
62
—
31,043
4,555,519 4,054,711 4,020,927
—
39,397
—
4,694,737 4,135,464 4,097,674
—
109,248
—
—
35,284
—
A. Figures under internal risk management criteria.
Credit derivatives
We use credit derivatives to hedge transactions, customer
business in financial markets and trading. The credit derivatives
Santander has negotiated have a low notional value: 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 element in our management
processes. 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.
Based on those limits, the executive risk committee develops
risk policies and monitors to ensure that exposure remains
appropriate to manage credit risk concentration consistently
with the CRR provisions on large risks.
Because Santander is bound to the CRR regarding 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 bank
may assume any exposure with a single customer or group of
associated customers if it exceeds 25% of their eligible capital
once the credit risk reduction effect that the regulation
mentions has been factored in.
With our risk mitigation techniques, no groups had triggered
those thresholds by the end of December. Regulatory credit
exposure with the 20 biggest groups within the scope of large
risks made up 5.6% of credit risk (lending to customers and off-
balance sheet risks) as of December 2022.
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.
As indicated in the key metrics section, credit risk is diversified
among our core markets: the UK 22.5%, Spain 26%, the US
12.5%, Brazil 9%, etc. 56% is with individuals, who are
inherently highly diverse. It is also well distributed, with no
significant concentrations in a particular industry.
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Country risk
In credit risk, country risk is defined as the risk incurred for
transactions in which the debtor resides in a country other than
the lender entity, due to circumstances other than the usual
commercial risk. It includes sovereign risk and transfer risk, as
well as war, natural disaster, balance of payments crisis and
other things that can disrupt international finance. In
accordance with regulation, our models and provisioning
processes contemplate country risk.
We assume country risk very selectively in transactions that
enhance our global relations with customers. And we follow
highly cautious standards to manage it.
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.
Our standard for sovereign risk differs somewhat from the
EBA's standard for regular stress testing. In particular, the EBA
does not consider deposits with central banks, exposures with
insurance companies or indirect exposures from guarantees and
other financial instruments. However, its standard does
generally include entities run by regional, local and central
governments.
We continue to track and manage transactions with sovereign
risk based on available information, such as reports by rating
agencies and international organizations. We monitor each
country where we have cross-border
analyse events that could affect the country’s political or
institutional stability and assign its government or central bank
a credit rating. This helps us set limits for transactions with
sovereign risk.
and sovereign risk. We
1319
Our exposure to local sovereign risk not in the issuer country’s
currency at the end of December was minor (EUR 6,039 million
or 1.4% of total sovereign risk), based on our management
criteria. Exposure to non-local sovereign issuers with cross-
border risk was also minor
sovereign risk). The sovereign debt we hold in Latin America,
which is recorded in local ledgers, is predominantly in local
currency and short-term.
(EUR 8,867 million or 2.1% of total
14
The chart below shows the distribution as of December 2022:
A
Diversification by economic sector
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.
Vulnerable sectors identification
Grupo Santander carries out quarterly monitoring of exposure to
customers operating in sectors that could be affected by
macroeconomic conditions. The monitoring involves the use of
internal tools to forecast customer behaviour and trends in each
sector under several macro scenarios, as well as this
information:
• 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
Following the effects of the pandemic, in the second quarter of
2022, we adapted our definition of 'affected sectors' to the
current backdrop of rising energy and commodity prices and
others macroeconomic variables.
13
14
Risks with domestic public or private borrowers in foreign currency and originated outside the country.
Countries that are not considered low risk by Banco de España.
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In recent years, total sovereign risk exposure has remained
within regulatory requirements. Because exposure spans
several countries, each with its distinct macroeconomic outlook
and growth scenario, it varies due to our liquidity management
strategy and our interest and FX rate coverage, which apply
limits based on each country’s credit rating. The table below
shows exposure ratios by rating
15
:
AAA
AA
A
BBB
Lower than BBB
2022
27%
19%
34%
11%
9%
2021
15%
32%
26%
11%
16%
2020
18%
25%
25%
14%
18%
Sovereign exposure at the end of December 2022 is shown in
the table below (data in million euros):
Financial assets held
for trading and
Financial assets
designated as FV with
changes in results
2,666
(299)
(1,055)
—
—
205
53
4
(7)
3,503
8,017
2,627
175
123
1
16,013
2022
Portfolio
Financial assets
at fair value
through other
comprehensive
income
240
2,005
301
—
—
789
315
7,754
14
8,938
9,969
11,303
818
1,211
2,012
45,669
Financial
assets at
amortised cost
26,189
3,750
8,169
—
—
4,657
1,738
957
125
10,857
5,742
3,376
5,492
630
1,529
73,211
Non-trading
financial assets
mandatory at fair
value through
profit or loss
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total net
direct
exposure
29,095
5,456
7,415
—
—
5,651
2,106
8,715
132
23,298
23,728
17,306
6,485
1,964
3,542
134,893
2021
Total net
direct
exposure
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
119,020
Spain
Portugal
Italy
Greece
Ireland
Rest Eurozone
UK
Poland
Rest of Europe
US
Brazil
Mexico
Chile
Rest of America
Rest of the World
Total
15
Internal ratings are applied.
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4. Market, structural
and liquidity risk
4.1 Introduction
This section describes our management and control of market
risk in 2022, including trading risk, liquidity risk and structural
risk. It provides a 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, such as:
• Interest rate risk
• Inflation rate risk
• Exchange rate risk
• Equity risk
• Credit spread risk
• Commodity price risk
• Volatility risk
Options, futures, forwards, swaps and other derivatives can
mitigate some or all of the risks above.
Market risk factors that require more complex hedging are
correlation, market liquidity, pre-payment or cancellation and
underwriting risk.
For further detail on market factors see
section 'Activities subject to market risk
and types of market risk', in Note 53 to the
consolidated financial statement.
On-balance sheet liquidity risk, also relevant, which is where
the bank would have insufficient liquid assets or pay a high price
for liquid assets in order to meet due obligations. Losses may
result from a forced asset disposal and a cash flow imbalance.
Pension and actuarial risk also depends on market variables
(see the end of this section for more details.)
In 2022, we continued increasing our attention to climate and
environmental risk, which arises from the possibility that
climate change could adversely affect the value of a financial
instrument, or a portfolio, or the Bank's liquidity, for which we
use market and liquidity risk stress scenarios to measure their
potential exposure.
We check our compliance with the Basel Committee’s
Fundamental Review of the Trading Book (FRTB) and its
implementation according to EU’s Capital Requirements
Regulation (CRR II) and the EBA’s guidelines on market risks.
In 2022, we ran several projects to give managers and control
teams the best resources to manage market risk and capital
consumption. They include:
• a new capital calculation engine under the for the
fundamental review of the trading book (FRTB SA)
standardized approach;
• a better governance framework for models in use, with new
products and entities that were previously outside the
perimeter;
• documents on new qualitative requirements, based on the
trading-banking book boundary;
• a more robust technical and functional control environment
to keep consistent perimeters for risk management and
capital calculation; and
• better reporting on risk and capital metrics for internal
management and regulatory purposes.
IBOR reform
Since 2013, various organizations and authorities such as
International Organization of Securities Commissions (IOSCO)
and Financial Stability Board (FSB) have been promoting
initiatives aimed at improving interest rate indexes.
To execute the transition towards new interest rate indexes, the
central banks and regulators of various jurisdictions organized
different working groups to give their recommendations on new
indexes. Some of these new indexes are: SONIA, replacing the
Libor references in sterling, SOFR, replacing Libor in US dollars,
and €STR instead of Libor in euros.
As a result of the effort made in the working groups, the
transition process has been materializing in different milestones
between 2019 and 2022, remaining only, in 2023, the execution
of the plans to replace the Libor pound sterling and the Libor
dollar US.
At Grupo Santander we focused on making all the contractual,
commercial, operational and technological changes necessary
to undertake the transition of these reference indices. In 2023,
we will continue to address the following transition milestones
in all of our jurisdictions.
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For further detail see section 'IBOR Reform',
in Note 53 to the consolidated financial
statement,
4.2 Market risk management
Because factors inside and outside a unit can give rise to market
risk, management and control must cover all potential risk
sources with coordinated, uniform treatment by all subsidiaries.
The Group's senior management receives thorough, accurate
reporting on a regular basis to measure units’ risk profiles and
gain a holistic view of risk for global analysis and control.
Limits management and control system
Daily control by the market risk area promotes market risk
positions will remain within approved limits, and evaluates
significant changes in related metrics.
We set market risk limits in a dynamic process according to risk
appetite levels in the annual limits plan prepared by senior
management and extended to all subsidiaries.
To ensure limits cover all market risk factors based on risk
appetite, we take a prudent approach that includes:
• Value at Risk (VaR) and Stressed VaR (sVaR) limits.
• Equivalent and/or nominal positions limits.
• Interest rate sensitivity limits.
• Vega limits.
• Limits for risk of delivery of short sales (bonds and equities).
• Limits to reduce effective losses or protect profits during the
period (loss trigger and stop loss).
Market risk-related capital requirements
We use internal and standard models to determine market risk-
related capital requirements.
At Grupo Santander we use internal models to calculate
regulatory capital for the trading books of our subsidiaries in
Chile, Mexico and Spain, for which the latter has included the
Santander London Branch, diversifying its positions. We aim to
include the rest of our subsidiaries gradually and have been
working closely with the ECB, reviewing the new requirements
recently published by the Basel Committee to strengthen
financial institutions’ capital.
We launched the Market risk advanced platform (MRAP). MRAP
is a global initiative to strengthen market risk infrastructure
according to the new FRTB and to adapt internal market risk
models to the latest Targeted Review of Internal Models (TRIM)
and to supervisory demands. Its multi-disciplinary and multi-
regional approach includes all subsidiaries that generate market
risk; the market risk, T&O, front office, finance and regulatory
affairs areas; and other relevant stakeholders.
In 2022, we expanded MRAP’s perimeter to cover our overhaul
of processes to measure 'fair value'. It significantly enhanced
our functional and technological architecture and operating
models, with added synergy from initiatives and resources.
Our internal market risk model calculates the Group's
consolidated regulatory capital as subsidiaries’ total regulatory
capital that the ECB has approved. Because it does not consider
capital savings owing to geographical diversification, our model
is conservative.
It uses advanced methods with VaR, sVaR, Incremental Risk
Charge (IRC) and Risk Not in Model (RNIM) as fundamental
metrics to calculate ECB-approved regulatory capital in trading
consistently with the Basel requirements gathered in the CRR.
• Credit limits (limits for total exposure and jump-to-default by
Methodologies and key aspects
issuer).
• Origination limits.
Those general limits have sub-limits that make the structure
granular enough to control market risks from trading. We
monitor subsidiaries daily, checking changes in portfolios and at
trading desks as well as events that may necessitate immediate
mitigation.
We set global approval and control limits, global approval limits
with subsidiary-run control and subsidiary-level approval and
control limits. Each subsidiary’s business unit manager requests
limits based on business particulars and budgetary targets so
that they will match the risk/reward ratio. Risk bodies approve
limits according to established governance.
Subsidiaries must adhere to approved limits. When a limit
breach occurs, subsidiary business managers must provide a
written explanation with an action plan to correct it the same
day the breach occurs. Measures could be to reduce a position
within the limits or create a strategy to justify increasing them.
a) Value at Risk (VaR)
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 window is
one day. We also apply a two-year horizon or VaR over 520 days
and other statistical adjustments in order to quickly and
efficiently account for recent events that influence our risk
levels.
We report the highest of two VaR figures, which we calculate
every day. One figure includes an exponential decay factor with
a low weighting on the oldest observations; the other weights
all observations the same. We also use the same methodology
to calculate value at earnings (VaE), which gives maximum
potential earnings with a certain confidence level over specific
time horizon.
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. Still, it does
have its limitations, some of which are inherent to the VaR
metric, no matter the methodology used to calculate it. In
particular:
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• VaR is calibrated to a certain confidence level, above which it
does not reveal potential losses.
We regularly calculate and review stress test scenarios for all
the trading books of the Group and our subsidiaries, such as:
• The liquidity horizon of certain products in a portfolio is longer
than the VaR model’s.
• VaR is not a dynamic measure of risk even day to significant,
albeit unlikely, changes.
Historical scenarios
Historical scenarios consider trading portfolio performance
during a crisis or significant past market events to estimate
maximum losses if such events reoccur.
Historical simulation also has limitations, such as:
• high sensitivity to time window used;
• inability to show plausible high-impact events outside the
time window;
• 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.
We calculate ES as expected loss in case VaR is exceeded at a
given confidence level, 99% in our case. We also weight all
observations the same. 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,
97.5% ES is a risk level similar to 99% VaR.
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.
Scenario analysis is important in risk management so we can
recognize unexpected outcomes with a large variety of risk. It
gives us an estimate of how much capital could be needed to
absorb losses stemming from those outcomes. The scenarios
we use to predict future risk are important to overcome the
limitations of models and historic data, support liquidity and
capital plans, report on risk tolerance levels, and help us
execute risk reduction and contingency plans under stress.
• '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 a 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 yield hit record lows
and credit spreads widened significantly.
Hypothetical scenarios
We use extreme scenarios based on market risk shocks that do
not 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 interest rate curves, stock market
crashes, a stronger US dollar against other currencies, higher
volatility, wider credit spreads, commodity price decline,
lower dividend yields 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
based on 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 indicate loss-causing market
variables that may compromise the bank’s survival. They
supplement traditional stress test scenarios and point out
potentially vulnerable business areas, hidden risks and
correlations between risk factors.
They begin with a known stress outcome (e.g. missing certain
capital, liquidity or solvency ratios) to indicate extreme
scenarios in which market risk movements could cause events
that undermine business viability.
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Other stress scenarios
We also run different quarterly stress tests based on extreme
market movements to determine potential losses or major
impacts on capital:
• Incremental Risk Charge (IRC) scenarios: To stress capital
consumption according to IRC market risk, which relates to the
risk that debt issuers in our trading portfolio will either default
or suffer a change in credit rating.
• 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.
d) Calibration and backtesting
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. We review and contrast the VaR calculation
model on a regular basis to verify its accuracy.
We run internal backtesting, contrast VaR and review
assumptions about portfolios for subsidiaries that follow the
internal market risk model. For subsidiaries with an approved
internal model, we run regulatory backtesting to find exceptions
(where daily loss or profit 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. Our backtesting
compares daily VaR/VaE observed on D-1 to profit and loss
(P&L) observed on D:
• Economic P&L: P&L at end-of-day mark-to-market or mark-
to-model value. Backtesting indicates if the VaR/VaE
methodology to measure and aggregate risk is appropriate.
• Actual 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, under
the assumption that positions will not vary. Backtesting does
not consider the time effect, intraday trading or 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 excesses.
• Risk-Theoretical P&L: Calculated with the market risk
calculation engine, without intraday trading, changes in
portfolio positions or time ('Theta'). Backtesting of Risk-
Theoretical P&L enables us to check the quality of the internal
VaR model.
We run daily backtesting for our subsidiaries, as well as
internally (non-regulatory) 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 regulatory capital for market risk, we take
the regulatory K16
actual and hypothetical backtesting.
from the number of exceptions we find in
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
immediately correct whatever incidents we uncover.
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 market risk function’s daily P&L statement is an excellent
indicator of the impact of changes of financial variables on
portfolios.
f) Derivatives activities and credit management
Because of their atypical characteristics, we have special
measures to monitor derivatives and credit management daily.
On the one hand, we monitor the sensitivity of underlying
assets to price movements (delta and gamma), to volatility
(Vega17
)and over time (theta). On the other hand, we
systematically check measurements of their sensitivity to
spread risk, jump-to-default risk and position concentrations by
rating.
Based on 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 bond spots; forwards, options
and other bond derivatives; and 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
Monte Carlo method with one million simulations.
g) Credit valuation adjustment and debit valuation adjustment
The Group calculates trading book results with CVA and DVA.
For further detail on CVA and DVA see 'Credit
risk from financial markets activities' in
section 3.5 'Other credit risk aspect'
16
17
K: Parameter used for calculating the consumption of regulatory capital due to market risk.
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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4.3 Market risk key metrics
In 2022, trading risk levels stayed low amid the high volatility
caused by the war in Ukraine; mounting energy prices, inflation
and pressures on central banks; and new covid-19 outbreaks in
Asia.
Risks mainly originated from trading non-complex instruments
with customers. Most were hedges for interest rate and FX risk.
2022 saw generally low consumption of trading limits, which
are based on the Group's market risk appetite.
VaR 2020-2022
EUR million. VaR at 99% over a one day horizon
VaR analysis
As demonstrated by the VaR of SCIB’s trading book, Santander's
strategy focuses on trading with customers to minimize net
directional exposure and keep risk diversified by geography and
risk factor.
Because market volatility remained high throughout the year
(especially in terms of interest and FX rates), VaR stayed mostly
above its three-year average. It did rise in the second half of the
year owing to the up tick in volatility when central banks
hastened monetary policy to fight inflation. VaR ended
December at EUR 11.6 million.
In 2022, VaR fluctuated between EUR 21.5 and EUR 9.2 million.
Average VaR climbed to EUR 14 million from EUR 10.5 million in
2021 and EUR 12.5 million in 2020.
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Risk by 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 high and low VaR values in 2022 and 97.5% Expected
Shortfall at the end of December 2022:
A
VaR statistics and Expected Shortfall by risk factor
EUR million. VaR at 99% and ES at 97.5% with a one-day time horizon
2022
VaR (99%)
ES
(97.5%)
2021
VaR
Min
9.2
(7.8)
8.1
2.4
2.5
3.4
0.6
7.9
(5.1)
5.5
2.2
1.9
3.4
—
1.5
0.7
0.7
—
0.1
5.2
(1.3)
4.5
0.7
0.7
0.6
Average
14.1
(14.6)
12.6
4.2
4.8
5.4
1.7
12.2
(10.4)
10.2
3.6
3.4
5.4
—
2.3
(0.8)
2.2
0.1
0.8
8.0
(5.0)
7.0
1.6
2.7
1.7
Max
21.5
(30.5)
21.5
7.3
10.3
8.5
4.4
21.9
(16.8)
18.4
5.8
5.8
8.7
—
4.7
(4.0)
5.7
1.0
2.0
14.2
(19.8)
14.9
4.8
9.9
4.4
Latest
11.6
(15.5)
9.9
5.5
3.6
5.8
2.3
10.5
(14.2)
10.1
5.5
3.3
5.8
—
2.7
(1.1)
2.7
0.1
1.0
6.2
(4.2)
5.5
1.7
0.9
2.3
Latest
10.8
(15.6)
9.8
5.5
3.2
4.9
3.0
9.2
(12.0)
7.8
5.5
3.0
4.9
—
2.2
(1.3)
2.4
0.1
1.0
6.5
(4.4)
5.7
1.6
0.6
3.0
Average
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
—
2.5
(0.7)
2.5
0.1
0.6
5.9
(4.9)
5.5
1.2
2.8
1.3
Latest
12.3
(13.4)
9.1
5.1
5.7
5.1
0.7
9.9
(12.6)
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
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
A.In the Americas, credit spread VaR and North Americas's commodity VaR are negligible and, thus, not shown
At the end of 2022, VaR was slightly lower (EUR 0.7 million)
than at the end of 2021, consequence of an update in
calculation model and a lighter pressure in markets as inflation
started to moderate in some regions, as the Eurozone.
Although by risk factor, VaR has followed a generally stable
trend in recent years, in 2022 the average VaR rose by EUR 3.6
million compared to 2021. By risk factor, average VaR was
greater in all of them, specially in interest rate due to a higher
market volatility. The temporary increases in VaR are due more
to short-term price volatility than to significant changes in
positions.
By region, average VaR grew for all risk types in Europe and
South America, which have the highest market risk exposure.
2020
VaR
Average
12.5
(13.0)
9.2
4.4
5.9
5.5
0.5
Latest
8.3
(11.8)
5.4
3.1
6.0
4.5
1.1
10.5
(10.7)
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
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
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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 in 2022. Regarding to 99%
VaE, there was an exception the 15th of December as a
consequence of market volatility concurrent with the last
ECB's year meeting where a 50 bp interest rate hike was
confirmed.
• These results are consistent with assumptions in the VaR
calculation model.
Backtesting of trading portfolios: daily results vs. VaR for previous day
EUR million
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Derivatives risk management
Our operations with derivatives mainly involve 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. Over the last three years. On average,
it has increased some EUR 2.6 million. In general, high VaR
values stem from sudden spikes in 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.
Average risk (EUR 3.2 million) was slightly higher than in 2020
and 2021, considering the high volatility in interest rates
throughout 2022 (see table below):
Change in risk over time (VaR) of structure derivatives
EUR million. VaR Vega at a 99% over a one day horizon
Financial derivatives. Risk (VaR) by risk factor
EUR million. VaR at a 99% over a one day horizon
c
Total VaR Vega
Diversification effect
interest rate VaR
Equity VaR
FX VaR
Commodity VaR
Minimum
2.1
(0.5)
1.3
0.9
0.4
—
2022
Average Maximum
5.1
(2.0)
2.9
2.3
1.9
—
3.2
(1.1)
2.0
1.4
0.9
—
2021
2020
Latest
2.7
(1.0)
1.4
0.9
1.4
— —
Average
2.6
(0.9)
1.4
1.2
0.9
—
Latest
3.7
(0.1)
1.2
1.6
1.0
—
Average
1.9
(1.3)
1.0
1.3
0.9
—
Latest
2.3
(1.7)
1.8
1.4
0.8
—
Thanks to our risk culture and prudent risk management,
exposure to complex structured instruments or vehicles is
minor. At the end of December 2022, we had exposure to:
• hedge funds (as the counterparty in derivative contracts):
EUR 4 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 2022.
Our policy on approving new derivatives transactions has
always been extremely prudent and conservative. It is reviewed
by senior management.
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Scenario analysis
The table below shows Worst case (i.e. maximum volatility)
scenario results from late December 2022:
Stress scenario: maximum volatility (worst case)
EUR million. Dec. 2022
Total trading
Europe
North America
South America
Interest rate
(30.6)
(17.9)
(4.5)
(8.2)
Equities
(11.0)
(8.7)
(0.2)
(2.1)
Exchange rate
(12.0)
(3.6)
(4.0)
(4.4)
Credit spread
(5.2)
(5.1)
—
(0.1)
Commodities
—
—
—
—
Total
(58.8)
(35.3)
(8.7)
(14.8)
Our analysis found that Santander's trading books would lose
EUR 59 million in market value in the worst-case scenario of
market stress. Losses would mainly affect Europe, especially in
interest rates (if these should get higher) and in equities (if
markets were to crash).
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 others that are monitored with
different risk metrics.
Risk metric values on the consolidated balance sheet
EUR million. Dec. 2022
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
Balance sheet
amount
223,073
156,118
5,713
8,989
85,239
1,147,044
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
8,069
(3,749)
104,163
1,734,659
115,185
55,947
1,423,858
9,228
(117)
32,973
1,637,074
97,585
Main market
risk metrics
VaR
Main risk factors for
Other 'Other' balance
223,073 Interest rate
156,118
3,711
815
1,941
115,185
—
2,002 Interest rate, spread
8,174 Interest rate, spread
83,298 Interest rate, spread
1,147,044 Interest rate, spread
8,069 Interest rate, exchange
rate
(3,749) Interest rate
55,947 Interest rate, spread
1,423,858 Interest rate, spread
9,228 Interest rate, exchange
rate
(117) Interest rate
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4.4 Structural balance sheet risk management
Structural risk: Risk that market or balance sheet movements
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.
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 mechanism 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 reviews and challenges business proposals and helps senior
management and business units understand the interest rate
risk of Santander’s businesses and operations.
• It develops and revises models and policy. And it checks that
structural risk procedures are fit and proper.
Like market risk, structural risk also has an annual plan
framework to set structural balance sheet risk limits according
to risk appetite.
These are the main limits we use:
• Structural interest risk in the banking book:
◦ Net interest income (NII) sensitivity limit over a one-year
horizon.
◦ Economic value of equity (EVE) sensitivity limit.
◦ Market value limit on ALCO portfolios under stress scenarios
and with a potential influence on shareholders’ equity based
on their accounting entry (fair value through shareholders’
equity).
• Structural FX 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 provide 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 a key balance sheet risk.
Santander measures the potential impact of interest rate
movements on Economic value of equity (EVE) and Net interest
income (NII). Because of the effect of changing rates, we must
manage and control many subtypes of interest rate risk, such as
repricing risk, yield curve risk , basis risk and option risk (e.g.
behavioural or automatic).
Interest rate positions on the balance sheet and market
conditions and outlooks could necessitate certain financial
measures to achieve the risk profile target (such as changing
positions or setting interest rates on products we market).
Metrics for checking IRBBB include NII and EVE sensitivity to
interest rate movements.
• NII: Is the difference between interest we receive from assets
and the interest we owe for 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, it
can have as many values as considered scenarios. It enables
us to see short-term risks and supplement economic value of
equity (EVE) sensitivity.
• 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 obligations 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. The Group’s
model shows balances of all accounts without maturity using
stable and unstable volumes, settlement speed over time,
customer and market types, and other variables
• Prepayment treatment for certain assets. Prepayment risk
mainly affects fixed-rate mortgages at subsidiaries where
contractual rates are below market rates and customers have
the incentive to pay off all or part of their mortgage early.
Prepayment of variable-rate mortgages owes to factors like
the economic cycle, taxes or culture but has a lower IRRBB risk
impact because of variable revaluation. The Group models
prepayment risk and includes it in 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.
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4.5 Structural balance sheet risk key metrics
Market risk profile of the Group’s balance sheet remained
moderate in 2022 in terms of asset, shareholders’ equity and NII
volumes.
Each subsidiary’s finance division manages interest rate risk
from retail banking and is responsible for handling structural
risk from interest rate fluctuations.
To measure interest rate risk, we use statistical models based
on strategies to mitigate structural risk with interest-rate
instruments (such as bonds and derivatives) and keep risk
profile within risk appetite.
Exposure across all geographies and all countries was moderate
relative to annual budget and capital levels in 2022.
The NII and economic value of equity (EVE) sensitivities below
are based on scenarios of parallel interest rate movements
between ±100 bp.
Structural interest rate risk
Europe
At the end of December, the sensitivity of NII on our core
balance sheets and of Santander España’s EVE to interest rate
hikes was positive; but at Santander UK it was negative.
At the end of December, under the scenarios previously
described, significant risk of NII sensitivity to the euro amounted
to EUR 1,009 million; to the pound sterling, EUR 191 million; to
the US dollar, EUR 51 million; and to the Polish złoty, EUR 64
million, all with risk of rate cuts.
Net interest income (NII) sensitivity
% of total
64.2%
17.1% 5.4% 13.3%
* Other: Portugal and SCF.
Significant risk of EVE sensitivity to yield curves of the euro was
EUR 2,820 million; of the pound sterling, EUR 440 million; of the
US dollar, EUR 11 million; and of the Polish złoty, EUR 91
million, mostly with risk of rate cuts.
Economic value of equity (EVE) sensitivity
% of total
At the end of December, significant risk to NII was mainly in the
US and amounted to EUR 151 million.
Net interest income (NII) sensitivity
% of total
81.6%
18.4%
The most significant risk to EVE was in the US and amounted to
EUR 763 million.
Economic value of equity (EVE) sensitivity
% of total
88.2%
11.8%
South America
EVE and NII on our main South American balance sheets are
positioned for interest rate cuts.
At the end of December, most significant risk to NII was mainly
in Chile (EUR 72 million) and in Brazil (EUR 169 million).
Net interest income (NII) sensitivity
% of total
65.4%
27.9%
6.7%
* Other: Argentina, Peru and Uruguay.
Most significant risk to EVE was recorded in Chile (EUR 309
million) and in Brazil (EUR 386 million).
Economic value of equity sensitivity
% of total
52.1%
41.7%
6.2%
75.3%
16.3%
8.4%
* Other: Argentina, Peru and Uruguay.
* Other: Poland, Portugal and SCF.
North America
At the end of December, sensitivity of NII on our North America
balance sheet to interest rate hikes was positive while EVE
sensitivity was negative to interest rate hikes.
Structural foreign exchange rate risk/results
hedging
Our structural FX risk exposure mainly stems from the
performance of, and from hedges 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 2022, we hedged nearly all currencies that have an impact on
our core capital ratio.
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In December 2022, our permanent exposures (with potential
impact on shareholders’ equity) were, from largest to smallest,
in US dollars, Brazilian reais, British pounds sterling, Mexican
pesos, Chilean pesos and Polish złoty.
We use FX derivatives to hedge part of those permanent
positions. Our 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.
Equities in the banking book at the end of December 2022 were
diversified, with securities from 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 and proxies. At
the end of the year 2022, VaR at a 99% confidence level over a
one-day horizon was EUR 195 million (EUR 309 million in 2021
and EUR 319 million in 2020).
Structural VaR
Homogenous metrics like VaR make it possible to monitor all
market risk in the banking book (minus SCIB trading; see 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, as shown in the following table:
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.
Minimum
538.5
(323.5)
266.2
400.4
195.4
2022
Average Maximum
1,084.4
(489.5)
577.0
682.3
314.6
664.0
(417.1)
350.8
493.4
236.9
2021
2020
Latest
538.5
(422.4)
304.5
461.0
195.4
Average
993.7
(327.3)
400.7
600.6
319.7
Latest
1,011.9
(240.2)
287.8
655.2
309.1
Average
911.0
(349.8)
465.1
499.9
295.9
Latest
903.1
(263.4)
345.5
502.6
318.5
4.6 Liquidity risk management
The second line of defence ensures liquidity risk is understood,
controlled and reported to senior management and across the
Group according to established governance.
Methodologies and key other key details
To measure liquidity risk, we use tools and metrics for the right
risk factors such as:
• It defines liquidity risk and provides detailed measurements of
current and emerging liquidity risks.
• Liquidity buffer
• Liquidity coverage ratio (LCR)
• It sets liquidity risk metrics, and reviews and challenges
liquidity risk appetite and limits proposed by the first line of
defence.
• Wholesale liquidity metric
• Net stable funding ratio
• It oversees the first line of defence’s liquidity risk
• Asset encumbrance metrics
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
things 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.
• Other liquidity indicators
• Liquidity scenario analysis
• Early-warning indicators (EWI)
• Intraday liquidity metrics
For more details on the definition of liquidity
metrics, see section 'Liquidity risk
measurement', in Note 53 to the
consolidated financial statement,
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4.7 Liquidity risk key metrics
The Group’s sound liquidity and funding position stands on a
decentralized liquidity model. Each subsidiary manages its own
liquidity autonomously, keeping a large stock of highly liquid
assets.
In general, the LCR remained stable and well above the
regulatory threshold. In 2022, our minimum regulatory required
LCR was 100% and our risk appetite limit was 110%. We
calculate and monitor this metric on a daily basis.
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 net stable financing ratios (NSFR) of our core
subsidiaries and the Group remained above the regulatory
requirement of 100% and the internal risk appetite of 101.5%.
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
asset encumbrance decreased in 2022 on the back of fewer
appeals to central banks for covid-19 relief funds. Santander’s
asset encumbrance is comparable with the other European
banks’.
As demonstrated by stress scenarios run under uniform
corporate standards, the balance sheets of our subsidiaries are
robust. Under the worst scenario, every subsidiary would
survive and handle liquidity needs with nothing more than its
liquidity buffer for at least 45 days.
Santander manages intraday liquidity risk based on other
liquidity metrics, with 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
Grupo Santander operates a number of defined benefit pension
schemes which generate financial, market, credit and liquidity
risks from the assets and investments, as well as actuarial risks
from pension obligations.
We aim to identify, measure, control, mitigate and report on
pension risk and all its sources.
Grupo Santander measures and controls market and actuarial
components of pension risk using mainly Value at Risk (VaR)
techniques. VaR is also used to set risk appetite limits and to
calculate Economic Capital.
Additionally, we estimate combined losses each year on assets
and liabilities under a stress scenario that includes shifts in
interest rates, exchange rates, inflation, stock markets, property
values and credit spreads.
In 2022, the markets’ effect on pension risk was positive mainly
because of higher discount rates in our core markets, which
caused actuarial liabilities to decline significantly.
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
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 them 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.
◦ withdrawal/surrender 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 them 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, oversees first-line capital management and controls
that our capital adequacy and coverage are in line with our risk
profile. It also oversees transactions that could be significant
risk transfers (SRT).
Capital management falls under the Group’s capital framework
and model. It brings together capital planning, budget execution
and tracking, and the ongoing measurement, reporting and
disclosure of capital data.
5.2 Capital risk management
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 ratio and return on
capital targets.
• Capital adequacy: We measure capital levels against the type
and amount of risk assumed based on a risk profile
assessment (RPA), our strategy and risk appetite.
We review capital planning and adequacy exercises to make
sure capital is consistent with risk appetite and the risk profile
to:
◦ ensuring the monitoring of 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; and
◦ assessing the consistency of adequacy exercises (especially
ones that use baseline and stressed scenarios).
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.
• Origination: Assessment of our portfolios' capital efficiency to
identify capital optimization initiatives such as securitizations,
risk mitigation and asset sales.
We oversee securitizations that might be significant risk
transfers originated by Santander, in accordance with articles
243 and 245, articles about SRT, of Regulations (EU)
2017/2401 and 2017/2402.
This first step is an essential prerequisite for synthetic and
traditional securitizations, especially if they can reduce RWA
under regulatory standards.
The aim is to make sure that oversight includes analysis of the
conditions that could alter the 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 meets group-wide standards.
Key initiatives
The macroeconomic uncertainties have caused the expectations
of recovery coming from 2021, after the pandemic, to be
lowered.
Against this backdrop, our capital risk management focused on
protecting the Group’s solvency and making sure internal
objectives were met. We pinpointed and assessed the risks that
could affect solvency and continuously monitored key metrics.
In capital planning, the Capital Risk function regularly assesses
potential deviations in capital forecasts to set budget
uncertainty levels. We oversee progress with organic capital
and securitization plans, as well as the impact of Internal Rating
Based (IRB) model reviews.
• Capital risk management: The required actions to measure
capital metrics, based on a set methodology to obtain final
figures. It also supports the stages of capital management,
monitoring, oversight and control.
In 2022, we continuously monitored the achievement of capital
contribution targets to identify threats and opportunities
relating to our capital targets for the year. We also checked the
impact of market variables on capital levels. We continued to
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implement hedging policies to mitigate exchange rate volatility
on our CET1 ratio.
At the end of December, our fully-loaded CET1 was 12.10%,
above our 11-12% target.
The fully-loaded CET1 ratio rose 8 bp, owing to strong organic
generation of 76 bp (net of dividend accruals) based mainly on
the year's profit, growth in risk-weighted assets (RWA) and the
successful execution of the securitization plan.
Regulatory and model impacts caused a 28 bp drop, while other
items on the back of market developments triggered a 39 bp
fall.
Under IFRS 9 transitional arrangements, the CET1 phased-in
ratio was 12.18% and the total phased-in capital ratio was
15.99%, comfortably meeting the Basel Committee's 9.07%
and 13.26% minimum levels, respectively.
The fully-loaded leverage ratio was 4.70% and the phased-in
ratio was 4.74%, which also met the Basel Committee's 3%
minimum comfortably.
We kept capital ratios above solvency limits established in the
risk appetite, throughout the whole year.
For more details, see section 3.5 ‘Capital
management and adequacy. Solvency ratios'
in the 'Economic and financial review' chapter.
The capital risk function and first line of defence set the
solvency limits, which were consistent with the Group’s
medium-low risk appetite and resilient to stressful conditions.
We added new solvency risk appetite metrics for the Group and
its subsidiaries in order to make our risk appetite framework
more robust and more consistent with the Group’s risk profile,
as well as to boost coverage of the risks we’re exposed to.
We also added the analysis of Minimum Requirement for own
funds and Eligible Liabilities (MREL) and Total Loss-Absorbing
Capacity (TLAC) metric forecasts to our scenarios.
We focused on enhancing reporting and governance of
oversight of SRT securitizations during origination. Subsidiaries
became more involved in monitoring and in driving automation
through use of the corporate tool.
5.3 Key metrics
Banco Santander’s strong capital position is consistent with our
business model, balance sheet structure, risk profile and
regulatory requirements. Our robust balance sheet and
profitability enable us to finance growth and accumulate
capital.
Our model of subsidiaries with autonomy over liquidity and
capital allows us to mitigate risk. Our capital metrics are stable,
with ratios that remain comfortably above regulatory
requirements and that are consistent with senior management-
approved risk appetite
The distribution of risk-weighted assets by risk factor and by
region at the end of December reflects the Group's core
business in credit risk and geographic diversification:
RWA by risk type
Dec. 22 data
A
B
RWA by region
Dec. 22 data
A. Credit risk included counterparty credit risk, securitizations and amounts below
the thresholds for deduction.
B. Others, not included, represent 2% in 2022 (Corporate centre)
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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 risk types such as fraud, technological risk, cyberrisk,
legal risk
and conduct risk.
18
The main operational risk tools used by the Group throughout
the management cycle are the following:
Operational risk is inherent in all products, activities, processes,
and systems, and 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 management and control model is based
on a continuous process of identifying, evaluating and
mitigating sources of risk, regardless of whether they have
materialized or not, promoting that risk management priorities
are established appropriately, and internal controls are defined
and executed to manage and mitigate the risk across the
organization.
6.2 Operational risk management
Management and control model
Our operational risk model establishes the items needed to
manage and control operational risk properly according to
advanced regulatory standards and best management practices.
Its phases are:
• strategic planning;
• identification and assessment of risks and internal controls;
• ongoing monitoring of the operational risk profile;
• Internal event database: registry of operational risk events,
whose impact could be financial (e.g., losses, irrespective 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;
• implementation of actions to manage the risks, including
◦ facilitates regulatory reporting, and
mitigation measures, and
• disclosure, reporting, and escalation of relevant matters.
18
Legal proceedings stemming from operational risk.
◦ facilitates the development of the economic capital model
within the internal capital adequacy assessment process
(ICAAP).
• Operational risk 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 regulatory compliance, conduct and
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financial crime risk (for more details, see Section 7.2
'Compliance and conduct risk management').
• Control score: independent assessment of the control
environment performed by second line of defence in order to
oversee and challenge of the accuracy of each area´s control
assessments
• External events data: quantitative and qualitative information
about external operational risk events. This information
facilitates detailed and structured analysis of relevant events
in the industry; the comparison to Group and subsidiaries’ loss
profiles; as well as the preparation for RCSA exercises,
insurance and scenario analysis.
• Operational risk scenario analysis: identifies highly unlikely
events that could result in significant losses for us and
establishes appropriate mitigating measures based on the
assessment and opinion of experts from business lines and
risk managers. Scenario analysis results are also used as an
input to the economic capital models.
• Key risk indicators: indicators that provide quantitative
information about our risk exposure and control environment.
The most relevant indicators are those related to the bank´s
main risk exposures, and are part of operational risk appetite.
• Risk appetite, which has the following structure:
◦ a global non-financial risk appetite statement, which asserts
our commitment to controlling and limiting non-financial
risk events that can result in financial losses; fraud events;
operational and technological incidents; legal and
regulatory infractions; issues associated with conduct; or
reputational damage. This statement has associated loss
and control environment metrics.
◦ Statements regarding technology risk, cyberrisk, cloud,
fraud, financial crime compliance, product sales, regulatory
compliance, model risk, data management, and supplier risk
management, and their own forward-looking monitoring
metrics.
reporting simplification. Through Heracles, we ensure that
employees can have a timely, complete, and precise view of
their risks.
The main objective of the second line of defence is to challenge
and oversee the operational risk profile through the ongoing
monitoring of the previously described toolset.
Model implementation and enhancement initiatives
In 2022, we strengthen our operational risk model by:
• enhancing the risk appetite framework: establishing new
metrics at Group level (related to cloud and data
management); and improving definitions, thresholds and
measurements;
• reviewing the current operating model to achieve a risk-
intelligent model based on industry best practices and
regulations;
• improving and progressing with our holistic risk assessment
programme, in which each specialized 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;
• consolidating initiatives to assess climate related factors that
impact 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, assess, measure and
• Economic capital model: a loss distribution approach (LDA)
compare transformation risk among our subsidiaries.
model that captures our operational risk profile, with
information collected from the internal loss database,
external data, and scenarios. Its purpose is to determine
operational risk economic capital and estimate expected and
stressed losses for operational risk appetite.
• Other instruments are used to analyse and manage
operational risk, such as the assessment of new products and
services, and transformation initiatives; business continuity
plans (BCP); review of corporate insurance; review of the
management perimeter; recommendations from internal and
external auditors, and supervisors; and the quality assurance
process.
Heracles, which is our management and reporting system for
operational risk, 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 also facilitates
better operational risk management decisions by using a
common set of taxonomies and methodological standards to
allow information consolidation, duplication prevention, and
Operational resilience and the business
continuity plan
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 regulations that are
increasingly focused on the importance of Operational
Resilience, such as:
• the recently published Basel Principles for Operational
Resilience guidelines;
• the policy statement and final rules, Building the UK Financial
Sector’s Operational Resilience, by the Bank of England (BoE),
the Financial Conduct Authority (FCA) and the Prudential
Regulation Authority (PRA);
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• the EU's Digital Operational Resilience Act (DORA).
These regulations require banks to strengthen their ability to
recover from disruptive events that could have an impact on
their core business services and operations.
• strengthening the HQ contingency sites to ensure proper risk
coverage and a quick recovery of critical business activities in
the case of contingency scenarios impacting main offices, or
other situations such as ransomware attacks, power
shortages affecting the homes of staff; and
We are 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.
• enhancing the methodology to manage and monitor the
maturity level of subsidiary business continuity programmes.
In addition, the current BCM framework and systems are being
updated to ensure proper coverage of the new Operational
Resilience regulatory requirements.
Important mitigating measures
We continuously implement and monitor mitigation actions for
major sources of risk identified by internal operational risk
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.
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. It also defines the
proper protocols and governance 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.
In 2022, we continued to enhance and revise our BCMS with
particular emphasis on the following aspects:
• internal continuity strategies or workarounds to minimize the
impact on business activities derived from the potential
disruptions in the services provided by critical suppliers;
• mandatory risk assessments and cost-benefit analyses in
order to select the necessary continuity strategies for each
contingency scenario identified;
• several risk assessments to evaluate the Group’s
preparedness to address potential emerging risks such as
Solar Flares or Power shortages (due to the war in Ukraine);
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To reduce fraud, Grupo we apply special measures in some subsidiaries such as:
Card fraud
Online/mobile
banking fraud
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
(in some geographies).
→ New management and
authentication platforms.
→ Online banking transaction verification
with a second security factor of one-
time passwords. The evolution of
technology differs across countries,
e.g., the use of QR codes generated for
payments.
→ 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.
→ 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 safety features
such as dynamic CVVs (Card Verification
Value).
→ Use of a new biometric authentication system
in ATMs and branches. Customers can 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.
Cyberrisk
In 2022 the war in Ukraine and the increased
professionalization of cybercriminals have produced a
worsening threat landscape that has increased the frequency
and severity of cyberattacks that are impacting businesses, third
parties, critical infrastructure and even governments. This
situation has made cybersecurity a top risk concern for financial
institutions; thus we increased our activity in terms of
cybersecurity initiatives to mitigate emerging threats.
Our greater reliance on digital systems, also makes
cybersecurity one of the main non-financial risks of the
business. Our objective is to make Grupo Santander a
cyberresilient organization that can quickly resist, detect and
respond to cyberattacks, with constant evolution and
improvement of its defences.
In that sense, we continue to develop our risk management and
controls in line with the Group’s global cybersecurity framework
and international best practices. From the second line of
defence perspective, the cybersecurity risk team has developed
and implemented a framework for the measurement, and
monitoring of the cyberrisk profile and control environment. The
main areas of focus for this year have been:
• establishment of a European second line of defence Center of
Excellence for cyberrisk providing an opportunity to
strengthen control risk activities while achieving efficiencies,
simplification and harmonization;
• root cause analysis of recent external events;
• deep dives reviews of BAU processes; and
• KRI and risk scoring automatization.
For more details on cyber security, see
section 5 'Research, development and
innovation (R&D&I)' on 'Economic and
financial review' chapter.
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.
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 new regulatory requirements. It is
important to note that, even with the current digital
transformation, relevant IT incidents at Group level have
continued their downward trend in comparison with recent
years. For 2022 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
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made significant progress on reducing the level of
obsolescence in key IT assets in all subsidiaries.
• We continued the enhancement of an automated tool that
enables IT risk data correlation, analysis, and reporting. This
tool facilitates information gathering and consolidation to
enable the prioritization of risk management activities,
allowing for more efficient independent oversight of IT risk.
• Detailed deep dive analyses of relevant IT risks as identified in
our RCSA to gain an in-depth understanding of these risks,
controls and ensure appropriate mitigation plans.
• Oversight and challenge of the main IT transformation
initiatives.
• An IT risk management and oversight policy that establishes
common protocols and standards for the monitoring and
controlling of IT risks, in conjunction with functional and
governance aspects.
• Regular review of KRI and related thresholds to grant a
consistent oversight of our most relevant IT Risk.
Supplier risk 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 2022, in light of an increase in cyber and environmental
related risks as well as regulatory requirements, the Group has
strengthened the supplier risk management model and the
internal control framework. A new IT platform is being
developed to properly assess and manage the risks in
outsourcing and third-party agreements.
We revised our methodologies and tools to enhance the
monitoring of third-party risk in our subsidiaries. In addition, we
adopted a risk-based approach that focuses 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 supplier´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 are embedding our environmental, social and governance
approach in our strategy and culture to build a more responsible
bank. In this regard, as our suppliers can affect the environment
and broader society, we hold them to strict ethical, social and
environmental standards. A new certification process is being
defined to ensure that our suppliers follow the ESG
sustainability standards and criteria required by the Group.
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'.
Insurance in operational risk management
Santander considers insurance to be a key component in the
management of operational risk. The Corporate Insurance
function is responsible for the use of risk transfer formulas to
optimize and safeguard the bank´s financial results. The
Corporate 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
Corporate 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
Corporate Insurance, as well as other functions that
correspond to the various insurance typologies (e.g., facilities,
cyber security, 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 change, ESG, cyber risk, the digital
environment, and other elements. To respond to these and
other transversal risks, we have global insurance programmes
for property damage, general 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
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that adapt to the characteristics of each subsidiary and are
purchased according to the Corporate Insurance risk
management model implemented in each geography.
Analysis and oversight of controls in Santander
Corporate & Investment Banking (SCIB)
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 2022:
• Continued to strengthen 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
• The control framework was subject to continuous
improvements through regular review of controls and
enhancements of reports that facilitate the holistic
supervision and monitoring of Markets’ activity. The risk of
unauthorized trading kept being monitored via a specific risk
appetite metric that measures the periodic assessment of key
risk mitigation controls.
• Constant incident and risk surveillance to resolve them in a
quick manner and therefore have more effective operational
risk mitigation measures.
• Enhancement of the control model related to regulatory
requirements such as MiFID
21
IFRS 9, GDPR
and other regulations.
19
II (, the Dodd-Frank Act, EMIR
20
,
• Strengthened the oversight of third-party risk management to
comply with internal and regulatory requirements through
specific tasks such as watchlist and deep dives reviews,
enhancing the risk profile and the function itself.
• Due to the cybersecurity landscape, the maturity levels of the
cyber-controls deployed have been improved with focus on
vulnerability management and recovery processes, data leaks
and services deployed in the public cloud. In addition,
oversight and challenge exercises have been increased to
ensure the correct execution of the controls.
For more details on regulatory compliance in
markets, see section 'SCIB Compliance' in 7.2
'Compliance and conduct risk management'
19
20
21
Markets in Financial Instruments Directive.
European Market Infrastructure Regulation.
General Data Protection Regulation.
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6.3 Key metrics
Net losses (including incurred losses and net provisions) as per
Basel
risk categories in the last three years were:
22
A
Net losses by operational risk category
(% o/total)
A. Does not include employees litigations in Brazil
Losses due to practices with customers, products and business
were lower than in the previous year. However, those due to
execution, delivery and process management as well as
external fraud losses have increased.
The net losses by country were:
Net losses by country
(% o/total)
A
Santander considers employee litigation in Santander Brazil 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 2022, the most significant losses by category and geography
are related to litigation in Santander Brazil (with ongoing root
cause analyses of the main products), Spain (due to legacy
cases) and the UK (due to fraud and legacy cases). Additionally,
the amount of losses in the US remains stable compared to last
year.
A. Does not include labour proceedings in Brazil.
22
The Basel categories incorporate risks which are detailed in section 7 'Compliance and conduct risk'.
476
0.8%24.0%1.6%62.3%0.6%0.1%10.7%202020212022I - Internal fraudII - External fraudIII - Employees practices and workplace safetyIV - Practices with customer, products and businessV - Damage to physical assetsVI - Business disruption and system failuresVII - Execution, delivery and process managementBrazil22%UK26%Spain22%US5%Mexico5%Other20%
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7. Compliance and
conduct risk
7.1 Introduction
Under Santander’s 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
regularly to the board of directors through the Group Chief
Compliance Officer (GCCO). It facilitates critical, independent
debate, overseeing first-line management of risk in terms of
regulatory compliance, product governance, consumer
protection, financial crime and reputation. It also measures the
impact of compliance and conduct risk on risk appetite and risk
profile.
The compliance and conduct function reports to governance
bodies on risk when necessary and, especially, breaches of risk
appetite. It also promotes a common risk culture and gives
expert judgement and guidance on important compliance and
conduct risk matters.
Banco Santander and each subsidiary run compliance
programmes that suit their size and complexity. Programmes
are structured according to the four management risks
mentioned earlier, and set out the core initiatives to be
undertaken throughout the year. They are essential for
oversight of subsidiaries’ Compliance and conduct risk control
environment.
7.2 Compliance and conduct risk management
The compliance and conduct risk function upholds the General
code of conduct ('GCC'). It is supervised by the compliance and
the risk supervision, regulation and compliance committees.
The GCC sets out the ethical principles and conduct rules that
must govern our employees’ work. It is to be applied along with
all other internal regulation. It sets out:
• compliance functions and duties;
• the Group’s employee general ethical principles;
• the general rules of employee 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 oversees regulatory risk
from employees, data processing and securities trading
(together with SCIB’s compliance team). In 2022, it reinforced
the coverage of our Investment platform Unit
restructuring area with the appointment of an officer who
oversees all compliance risks of this activity.
and the
23
The main parts of the Regulatory Compliance function are:
A. Employees
The regulatory compliance function promotes a culture of ethics
and compliance among our employees, with standards for
preventing criminal risk, conflicts of interest and anti-
competitive practices according to the GCC. Together with
subsidiary-level compliance departments, it runs Canal Abierto,
Grupo Santander’s whistleblowing channel, through which
employees can report financial and accounting wrongdoing as
well as violations of the GCC and our corporate behaviours
anonymously and confidentially.
In 2022, it worked with other areas in the Group to simplify the
GCC, which the board approved in July 2022, to make it easier
for employees and other stakeholders to read, understand and
use, with plain and inclusive language; a more dynamic and
engaging look and feel; guidelines on dealing with colleagues,
customers, third parties and broader society that are based on
our corporate behaviours and Santander Way culture; and
internal browsing features.
It ran training and spread awareness about guidelines and
raised commitment towards a corporate culture of ethics and
compliance. In particular, it organized courses on the GCC,
competition law and other topics, taught by an external law firm
for compliance experts. It also promoted the 'Your conduct
matters' campaign, with content on the GCC and Canal Abierto
for all employees. The Group’s subsidiaries undertook
communications initiatives with core vendors to share
Santander’s conduct guidelines, ethical standards and culture.
For the second year running, the Group’s compliance and
conduct function ran initiatives to promote inclusion and
diversity of gender, age and culture and to spread awareness
with Fundación Universia about including professionals from
different backgrounds.
23
Investments in debt and or equity through a specialized fund manager. Characteristics of the businesses IPU participates are that Banco Santander invests in both the fund
and the asset manager.
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Employees’ compliance functions
Canal Abierto
Training and awareness
→ Provides a channel for employees to report
unethical conduct and breaches of internal
regulation.
→ Manages and investigate reported cases.
→ Promotes a culture of speaking up and truly
listening.
→ Develop employee training programmes and
awareness campaigns on corporate defence and
compliance.
→ Issue messages about ethics to the entire Group
and promote relationships built on trust.
Disciplinary proceedings
Policies and procedures
→ Investigate conduct that is inconsistent with our
→ Enforce the GCC with special policies and
ethics and compliance principles.
procedures.
→ Participate in the assessing of disciplinary
→ Report to governing bodies regularly.
measures.
Nominations
→ Assess the suitability of the Group’s nominees to
the board and senior management positions*.
Anti-trust
→ Manages the compliance programme on
competition law.
Queries about ethics
→ Manage queries from employees and members of
governing bodies about ethics and internal
regulation.
→ Provide advice on ethics amid controversy.
(*) This is a corporate procedure involving the Regulatory Compliance function, Legal and Internal Governance at HQ.
For more details on Canal Abierto, see
section Ethical channels in '3.2 Conduct
and ethical behaviour' 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 inside information, trading, unlawful disclosures and
market manipulation. A project was launched to remodel
Group’s control room. The project aims to create a global team
to help manage conflicts of interest in transactions by the
Group’s units and ensure robust governance of access to data
flows in compliance with regulation. It is a transformative
endeavour that involves reviewing policy and procedures and
enhancing reporting systems.
Also, during the second half of the year, a new specialist team
was built to continue monitoring benchmarks, and treasury
shares including buyback programmes of Bank´s shares.
C. Regulatory communications
The regulatory team communications core functions are:
• disclosure of Group’s relevant information to the markets. In
2022, the Group issued several releases of inside and other
relevant information, which can be found on both our website
and the Comisión Nacional del Mercado Valores’s (Spain’s
securities market commission or 'CNMV').
• reporting on transactions with treasury shares or significant
holdings of Banco Santander and on transactions and
remuneration schemes of board members and senior
managers (CNMV and other regulatory bodies where
Santander is a publicly traded company).
D. Data processing
In 2022, data processing focused on:
Data protection
A specialist area that enforces the fulfilment of our corporate
policy on data protection which sets out guidelines for all
subsidiaries, and its special governance model. It is headed by
each subsidiary’s designated data protection responsible. A
comprehensive compliance programme is also enforced to
effectively manage data protection risks. The programme is
supported by a robust control framework based on periodical
KPIs and the subsidiary’s annual self-assessment , reported to
the GCCO at year-end Data Protection meeting.
In our commitment to constant improvement, action plans were
developed throughout 2022 in more than 90 subsidiaries, based
on our oversight programme.
Our corporate privacy office is the team of data protection
experts advising our business lines.
• It produced some 400 analyses and opinions on subsidiaries’
new products and services, strategic proposals made in
internal forums, and suitability of vendors and services for
data processing.
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• It is part of the working teams formed to develop key projects
During 2022 we continued to:
• develop and reinforce SCIB specific and globally consistent
compliance and conduct frameworks and standards within the
wider corporate framework, including but not limited to
global management of firm and individual conduct risk
• focus on good culture and behaviours to underpin good
customer and conduct outcomes
• deliver a global mandatory training program on conduct and
regulatory requirements
• enhance globally consistent surveillance and monitoring
capabilities
• oversee control frameworks put in place to meet obligations
to our international regulators
in Grupo Santander’s digitalization strategy.
Foreign Account Tax Compliance Act (FATCA) and Common
Reporting Standards (CRS)
Corporate oversight of automatic tax disclosure in subsidiaries
(pursuant to FATCA and CRS) checked their regular reporting
obligations and execution of action plans.
E. SCIB Compliance
Build out of a dedicated SCIB Compliance function commenced
in 2020 and is progressively moving to full global coverage of
SCIB compliance risks in tandem with SCIB’s strategy of
becoming one of the top wholesale banks in Europe, while
strengthening its leadership position in Latin America and to up-
tier its franchise in the US to compete on a level playing field.
The function supports local CCOs and Compliance teams based
in headquarters and in each of the international branches by
providing centralised global compliance oversight and services.
Local Compliance teams continue to oversee local compliance
and regulatory risks.
Product governance and consumer protection
Our product governance and customer protection area
promotes that we base our actions on our customers’ interests,
regulation, our values and our principles
That means promoting a customer-centric culture with a
Simple, Personal and Fair approach, through the following
pillars:
1 Action and governance
principles:
→ Establish the internal guidelines
2 Oversight of key procedures
to make sure:
→ our products and services are
on customer service in the
conduct risk management
model updated in 2022, which
is developed in a robust
regulatory framework. These
guidelines promote a robust,
customer-centric culture
throughout the
commercialization process and
retail customer relations.
→ Run corporate product
governance forum to approve
new products and services, and
escalate customer conduct risk
issues. We carry this out
through the conduct and
customer voice follow-up
meetings, and especially to the
compliance, risk, responsible
banking and board committees.
designed with the right balance of
risk, cost and profitability meet
customers’ needs;
→ we sell to the right target markets
and provide transparent
information, with proper sales
force training and customer-
centric remuneration schemes;
and
→ our customer and post-sale
services strive to be Simple,
Personal and Fair, and we carry
out a follow-up and root-cause
analysis of our customers' voice
and product evolution to check for
product deterioration and process
shortcomings.
3 Risk management by:
→ reporting to senior managers to
enable correct decisions on customer
strategy, and drawing up and
tracking action plans;
→ oversight of the design and use of
controls for marketing and customer
relations, and reviews of the
management and control model in
the second line of defence;
→ risk detection and measurement with
methodologies that involve customer
survey analysis, management
indicators follow-up, thematic
assessments, first-line self-
assessments, regulatory trends,
industry practices, supervisor and
auditor opinions, learning from
internal and external events and
other sources.
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Product and service governance
We have a two-pronged approach to product approval
governance. Each subsidiary has its own approval body to
manage risk from marketing products and services and to
ensure they meet the needs of their target market, are sold
through appropriate channels and processes, and have clear and
fair terms and conditions. New products and services are first
escalated to the corporate product governance forum (CPGF,
which all the Group’s support and control areas attend) to be
approved.
In addition, the meetings of the fiduciary risk function control
that the investment products have an adequate definition of
their investment policies and their management is carried out in
a robust risk control environment, according to that defined in
the Group's fiduciary risk admission, monitoring and control
policy.
In 2022, products and services design included the following new features:
Promoting sustainable products and services:
Supporting our digital strategy:
→ Investment: Transforming products and designing new ones
based on ESG standards to meet our customers’
sustainability needs.
→ Sustainable development: Initiatives on innovation and
sustainable development, promoting responsible
consumption (for example, CO2 emissions offsetting and
investment in funds with a social purpose).
→ Digital channels: Enhancing coverage, quality and user
experience of online products and services.
→ Beyond banking: Taking logistics, supplier marketplaces and
other digital services a step further than traditional banking
through innovation.
→ Crypto: Limited launch of investment services related to
cryptoassets and implementing new procedures to mitigate
risk through new processes and controls.
Key conduct risk lines of action in 2022
Objectives
Lines of action
Principles and
internal rules on
customer
conduct
Keeping consumer protection
principles and the retail customer
conduct model up to date.
→ Approved a new corporate customer conduct risk model that
builds on the outdated commercialization and consumer
protection framework.
Awareness and
accountability of
the first line of
defence
Raising awareness of conduct risk
management and prevention and
management in business and
support areas.
→ Training for our first and second line defence local teams on
conduct risk, and revision of mandatory employee conduct
training for 2023 to all our employees throughout the
Group.
→ First-line teams’ remuneration linked to conduct and quality
with customers. We paid special attention to remote
customer service and sales teams given the growing
importance of digital channels.
→ Medium-term project to design and implement with a rating
scheme that will increase conduct risk management
integration in employees’ work.
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Sustainable
products and
services
Supporting projects relating to
the Group’s transition towards a
more sustainable economy in
cooperation with other risk and
compliance functions, and
Responsible Banking areas.
→ Transparent information on the investment products and
services we offer to retail customers.
→ ESG risks embedded in our management through
measurement tools and methodologies that enable us to
categorize products correctly, measure ESG risk and meet
our customers’ sustainability preferences.
Vulnerable
customers and
special cases
Treating vulnerable customers
fairly and appropriately, and
making sure we consider their
circumstances as part of our
services.
→ Global vulnerable customer strategy, with implementation
of action plans for units.
→ Monthly monitoring of collection and recovery indicators.
→ Special monitoring of practices related to customers with
disabilities, elderly customers and customers affected by
the rising cost of living.
Artificial
intelligence in
conduct
Researching big data and
machine learning analysis
techniques on customer voice
data and business indicators.
→ Developing a root-cause analysis methodology for customer
complaints.
→ Analysing consumer protection indicators, correlations and
impacts through customer surveys and business scorecards.
Enhancing
conduct risk
control
Reviewing the control
environment in the customer
conduct first and second line of
defence.
→ Self-assessments to raise awareness of the importance of
conduct risk.
→ Stronger supervision and control in the second line of
defence to promote a risk-based approach.
Financial Crime Compliance (FCC)
Financial crime risk is the risk arising from actions or the use of
the Group's means, products and services in criminal or illegal
activities. Such activity includes money laundering, terrorist
financing, violation of international sanctions, corruption,
bribery and tax evasion.
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. Compliance with financial crime regulation at
Santander goes beyond the Group’s legal and regulatory
obligations. Our commitment to partnering with law
enforcement and competent authorities to disrupt threat
finance networks is key to supporting the societies in which the
Group operates, including implementing international sanctions
programmes aimed at defending human rights and civil
liberties, and deterring corruption and armed conflict. We are
fully committed to the fight against financial crime, seek to
continuous improvement in our control framework, and do not
tolerate compliance failures with financial crime regulations
both internationally and in the countries in which we operate.
Over 2022, we have been a strong advocate for peace in Ukraine
and have embraced our role in enforcing sanctions compliance
related to the war across the Group’s global footprint. Our FCC
function continues to identify and develop new approaches,
both internally and via public-private partnership, on
responding to existing and emerging threats, including through
FCC Strategic Transformation Programme. In parallel, we
ensure that financial crime compliance is an enabler, not a
barrier, to the Group’s responsible banking strategies,
particularly on areas like financial inclusion.
Our business functions maintain the primary responsibility for
managing financial crime risk and to support and promote the
organisation'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 effectively the business within the
Group's established risk appetite.
Since the end of 2019, the FCC Strategic Transformation
Programme has been underway to strengthen the Group’s
control framework and operating model, embed a sustainable
and dynamic approach to customer due diligence, and
implement next generation technological platforms on
transaction monitoring and sanctions screening.
Key achievements over 2022 include:
• A return to in-person supervision and monitoring of local
Santander subsidiaries by the Group Oversight team within
the FCC function, with tangible progress on improving control
environment effectiveness;
• Reinforcing, via the Group’s operating model, the risk
ownership and accountability of the business in the activities
they undertake;
• Issuing a fully revised, Group-wide anti-bribery and corruption
policy (ABC) to embrace the expanded ABC programme
approved by the Board of Directors in 2021;
• Progressing on the FCC target operating model, including,
when permitted, responsible hubbing of FCC-related activities
in newly established operational centres of excellence;
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• Advancing significantly on the full implementation of the
strategic platform for transaction monitoring for Santander
entities providing correspondent banking services, and
piloting the platform on retail banking activity;
• Moving into production in various jurisdictions with the
Group’s strategic platform for sanctions screening, with
results indicating strong advancement on screening
effectiveness; and
• Kicking-off pilot activity in select Santander entities on a
digital, dynamic strategy for enhancing customer onboarding
and on-going due diligence.
Our Board of Directors and senior management continue to see
and reinforce the importance of the FCC Strategic
Transformation Programme, in response to the control
framework challenges that have occurred in the past while
preparing the bank’s functional and technical control framework
for the future.
In 2022, we continued to grow to build capacity and capability
across FCC staff. Monthly in-person, face-to-face all-hands and
smaller working group specialised training sessions were
implemented, bringing in external guests from law
enforcement, regional and international governmental
organisations, and key stakeholders from civil society to cover
topics ranging from complex terrorist finance investigations, tax
evasion and other tax crimes, fraud, corruption, internal
governance, regulatory change, and country perspectives on
specific financial crime typologies. We have also continued with
the mandatory annual training on FCC matters for all Group
employees in order to raise awareness in this topic.
While sanctions compliance has been a pillar of the Group’s FCC
programme for several years for deterring armed conflict, the
financial sector's role in supporting national and supra-national
diplomacy has been a clear focus of 2022 and a priority for
Santander. The financial sector’s role in supporting national and
supra-national diplomacy has been a clear focus of 2022 and a
priority for us. Sanctions programmes such as the Global
Magnitsky Sanctions, aimed at fighting human rights abuses
and corruption, are applied Group wide, and with the advent of
the war in Ukraine, additional resources were diverted to the
sanctions team to ensure the Group would be prepared to
navigate the evolving, multi-jurisdictional sanctions
programmes and fulfil our commitment, as a multinational
financial institution, in supporting a resolution to the crisis.
During the war in Ukraine, we maintained our objectives not
only to enforce sanctions compliance across the Group’s
international operations and respond rapidly to escalations from
Santander offices, but also ensure that global food and energy
supply chains continue to function, particularly given
Santander’s unique role in supporting European and Latin
American trade corridors.
Besides complying with sanctions in all of the Group's
international operations and providing the necessary support to
the subsidiaries, internal guidance was issued and enacted over
2022 in the European Santander offices and branches to ensure
that Ukrainian refugees would be able to access financial
products safely and swiftly. Contact between the FCC function
and relevant competent authorities was constant over the year
to ensure an aligned, coordinated strategy between the public
and private sectors.
We continued to place important emphasis on ensuring the
Group is prepared to respond to a rapidly evolving digital
landscape, particularly as it regards payment methods and
remote onboarding. Leadership within the FCC function plays an
important role in chairing industry forums and working groups,
including through the Wolfsberg Group (of which Santander is a
founding member), on reinforcing payment transparency – as it
is vital to safeguard the integrity of the payment industry and to
ensure effective financial crime detection – and on defining a
robust control framework for onboarding customers via digital,
non-face-to-face engagement.
We also led work on 'mule' accounts – closely associated with
fraud and cyber-dependent and enabled crime – within
Europol’s Financial Intelligence Public Private Partnership.
In 2022, we continued with our flagship FCC Summit, bringing
together all Santander FCC heads to hear from senior
management within the bank on the importance of financial
crime compliance, and to engage with internal and external
stakeholders on confronting the challenges faced in disrupting
threat finance networks.
The Summit included a series of sessions, including the
following:
• Session led by Sepblac, the Spanish Financial Intelligence Unit,
in providing feedback on the quality of suspicious activity
reporting
• Session led by the EBA on the importance of AML/CFT
governance
• Arrangements, interventions from Europol on environmental
crime
• United Nation’s FAST Initiative on finance against slavery and
trafficking and the importance of financial inclusion
• Wolfsberg Secretariat and Basel Institute on payment
transparency
• Regional subject matter experts on areas like drug trafficking
and on emerging threats, such as online child abuse.
The relationships formed at the Summit helped prepare the FCC
function to complete, by the end of 2022 a full, group-wide
threat assessment of the priority crimes that face the bank
globally.
Santander FCC leadership also continues to serve as chair of the
United Nations Office on Drugs and Crime’s Private Sector
Dialogue on the Financial Disruption of Forestry Crime,
highlighted at COP27 in Sharm al Sheikh by the Executive
Director of the UNODC for bringing together top financial
institutions with financial intelligence units and law
enforcement around the world to combat illegal deforestation.
The FCC function also continues to be an active member of the
United for Wildlife Financial Taskforce, aimed at disrupting
illegal wildlife trafficking networks.
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• Revised risks and mitigation plans in the corporation and in
subsidiaries as part of the global reputational risk assessment;
• Developed the reputational risk tool that measures
stakeholders’ perception of Santander and the financial
sector;
• Enhanced management consolidation and reporting based on
a forward-looking risk approach in the corporation and in
subsidiaries; and
• Strengthened subsidiary oversight in terms of governance,
challenge and updating oversight guidelines;
• Reformed a detailed reputational risk assessment of the war
in Ukraine and identified several mitigation actions that were
implemented Group wide (such as specific criteria for
donations, specific communications to employees and
customer engagement, etc.).
Highlights over 2022 in key activities include:
• The return of in-country subsidiary reviews (post-COVID),
conducted directly by the Group FCC Function, covering
countries across 3 continents
• 237,505 disclosures to authorities (+58% vs. 2021)
• 371,296 investigations conducted
• 165,185 employees trained
• 8 specialised training sessions for experienced FCC staff
Reputational risk
We define reputational risk as risk of a current or potential
negative economic impact due to damage to the perception of
the bank on the part of employees, customers, shareholders
and investors, and the wider community. Reputational risk may
arise from various sources, including other risks, business and
support operations, the social and political environment, and
events concerning our competitors.
Our reputational risk model takes a preventive management
and control approach, with effective processes for of early
warnings, identification, management and monitoring of risk
events. This requires regular revision of the Group’s risk appetite
and processes to promote forward-looking management and
prevention.
2022 highlights:
We continued to enhance management and control, updating
guidelines for certain areas. In particular, we:
• Revised reputational risk analysis procedures as well as policy
on financing, defence and other sensitive sectors
• Prepared new guidelines on measuring reputational risk with
transactions, customers and contributions to social causes;.
• Developed tools to manage risk events and transactions and
customers prone to reputational risk;
• Reviewed reputational impact and developed prevention and
mitigation measures and best practices on for branch and
workforce restructuring in Europe;
• Reviewed the methodology for identifying, assessing,
escalating and reporting reputational risks and events
• Engaged in the ECB's climate stress testing and thematic
review of climate and environmental risks;
• Helped prepare corporate guidelines on handling invitations
to sponsor sporting organizations and events;
• Developed special training and e-learning on reputational risk
policy, and reviewed the board's training; ran corporate
initiatives for all employees, such as Santander Business
Insights and others within Risk Pro training;
• Ran initiatives to share best practices with subsidiaries' risky-
level areas with a new collaborative tool and 'Best Practice'
workshops;
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8. Model risk
8.1 Introduction
A model is a system, approach or method that makes
quantitative estimates based on statistical, economic, financial
and mathematical theories, techniques and assumptions about
data.
Santander uses models for scoring and rating and for measuring
capital, behaviour trends, provisions, and market, operational,
compliance and liquidity risk.
Models that are poorly developed or misused in decision-
making can have bad consequences, including financial loss,
poor decision-making and strategy, and harm to the Group’s
operations.
Model risk stems from:
• incorrect or incomplete data in the model itself or the
modelling method used in systems;
• incorrect use or implementation of the model.
8.2 Model risk management
We have been measuring, managing and controlling model risk
for years. Our model risk function covers the corporation and
our core subsidiaries.
Our internal regulation sets out principles, obligations and
procedures for organizing, approving, managing and governing
models throughout their life cycle.
We manage model risk according to each model’s importance.
We synthesize the importance of non-regulatory models
through tiering. Regulatory models, which are particularly
important to Grupo Santander, are subjected to more intense
monitoring and management.
In 2022 we launched MRM Next, a multi-year strategic plan to
promote model risk culture and place Santander at the forefront
in the banking industry. MRM Next replaces the regulatory
Model Risk Management 2.0 (MRM 2.0) plan, which ended
successfully in 2021, ensuring compliance with the regulatory
standards (ECB's Guide to internal models, 2018).
The MRM Next strategy, coordinated and combined with the
global models & data unit, is based on advanced model risk
management, as well as extensive knowledge and forward-
looking of the behaviour of our portfolios, optimizing the efforts
with the support of digitalized processes and specializes staff.
More detail see section 2.5 'Models & Data
Unit' of this chapter.
We are fully committed to enhancing our regulatory models,
Internal Rating Based Approach (IRB) e Internal Model Approach
(IMA), to comply with Basel Committee's requirements. Our
main priority for the year ahead will be to focus on the
implementation of the EBA Repair Programme. We have
submitted several model changes to the ECB during 2021 and
2022 that will require formal approval, prior to implementation.
This approval will follow a thorough review process by the ECB
that will require full input from Model Risk function.
Model risk management and monitoring are structured into what's
known as the 'model life cycle'. They consist of these phases:
1. Identification
Model risk monitoring must include identified models. For
sound management, a complete inventory of models in use is
key.
Our centralized inventory system is a single platform with
uniform taxonomy and detailed descriptions of all the models
that business units use. It enables us to monitor them closely by
level of importance and tier.
2. Planning
An internal annual exercise approved by our subsidiaries’
governance bodies and ratified by the global team, which
formulates strategic measures for models managed by the
Model risk area and pinpoints needs for any models to be
created, revised or implemented during the year.
3. Development
This is the model development phase. The models & data unit,
both at corporate and local level, is responsible for the
development of the models according to the needs of each
subsidiary. Development by a specialized team guarantees a
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higher, more efficient and centralised execution, while taking
advantage of the synergies resulting from the combination of
models and data. In addition, we have common Group
methodological standards that promotes the quality of the
models.
8.3 Model key metrics
Group and subsidiary risk appetite uses thresholds based on
models’ average rating and the monitoring of changes in ratings
distribution.
4. Internal validation
Independent model validation is a regulatory requirement and
key feature of our model risk management and control.
Model risk appetite metrics focus on the quality of models
according to internal validation scores. Appetite varies based on
models’ importance. For instance, regulatory models are more
demanding.
We monitor metrics monthly and have action plans to keep to
set levels. We also monitor recommendations from the Internal
validation team and include impact on metrics in our planning to
keep model quality consistent with the appetite roadmap.
A specialist unit that is totally independent from developers and
users issues technical assessments of internal model suitability.
Each model is validated with 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
detailed analysis of model performance as well as controls,
reporting, uses, senior management involvement and other
components of risk management.
Our model risk management is robust and consistent across our
footprint. We have a single model inventory, a model risk team
in 13 markets with a common way of working and the same
internal policies, and a unique validation approach led by the
Single Validation Office, which supports the second line of
defence.
5. 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 its level of importance.
6. Deployment and use
In this phase, we add new models to our systems. Because this is
another source of model risk, technical teams and model managers
test proper model integration based on methodology and
expectations.
7. Monitoring and control
We regularly review models to ensure that they function correctly
or, otherwise, adapt and redesign them. Monitoring teams must
make sure models are managed according to the general model risk
framework and other internal rules.
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9. Strategic risk
9.1 Introduction
Strategic risk is the threat of loss due to poor strategic decisions
or deficient strategy implementation, which can affect our core
stakeholders’ medium-to-long-term interests; or due 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 produce
results that are consistent with the board's annual targets
(particularly for the next three years) and with the Group’s long-
term outlook.
Strategic risk has three components:
Business model risk, which includes the possibility
1 that the Group's model will become outdated or
irrelevant; or lose value to produce desired results.
Strategy design risk, which relates to the strategy
2 and assumptions set out in the Grupo’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-
3 year 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
Santander views strategic risk as cross-sectional. Subsidiaries
refer to our operating model that covers governance,
procedures and necessary tools for robust monitoring and
control within board-approved risk appetite.
We constantly monitor changes in competition, regulation,
market conditions and our organization to determine if we need
to revise strategy and verify mitigating factors and resolution
plans. The Strategic Risk area engages key first- and second-line
teams to make sure measures are primed to implement
immediately.
In 2022, our strategic risk management focused on the
macroeconomic uncertainty in view of the war in Ukraine,
inflationary pressure, monetary policy, and our strategic
objectives and transformation initiatives. While our long-term
strategy remains valid, success depends increasingly on our
customer focus (i.e. 'Customer first'). 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 other
specialized areas within the Risk division, the Strategic Risk
area challenges the three-year financial plan and long-term
strategic plan, including a specific chapter in both that
identifies potential threats and changes in the environment
that could undermine strategic objectives. In 2022, we closely
monitored One Transformation and other key initiatives that
underpin our strategic digitalization and common operating
model.
• Top risks: Under stressed scenarios, Santander proactively
identifies, measures, monitors and manages risks that could
have a significant impact on profitability, liquidity and
solvency. (For more details on top risks, see section 1.3
'Santander Top and emerging risks' of this chapter.)
• Business model analysing: To identify and measure major
threats to our business plan and strategic objectives in four
areas:
◦ Strategy execution: Measurement of the risk of deviation
from plans, targets, and strategic and transformation
initiatives.
◦ Viability and sustainability: Measurement of the risk that the
business model will fail to create shareholder value. We
also compare our position against competitors.
◦ Business plan volatility: Measurement of the risk that our
planning will be unstable and profits will not be recurrent in
the long term.
◦ Likelihood of meeting strategic objectives: Risk of failing to
achieve the strategic objectives in the three-year financial
plan, based on potential losses under stressed scenarios.
• The Strategic Risk and Strategy areas prepare the Strategic
risk report to review and challenge strategy and associated
risk. Presented regularly to senior management, it includes an
update on strategy execution, top risks, business model
performance, corporate development transactions, product
marketing and strategic projects.
• Commercialization of new products: Assessing and validating
new product and service proposals before Santander launches
them, ensuring they are consistent with the strategy.
• Corporate development transactions: Ensuring risk
assessments of these transactions' impact on our risk profile
and risk appetite.
• Monitoring strategic projects: The Strategic Risk area works
with area heads on drawing up and monitoring strategic
projects that fall within its domain. Twice a year, it reviews
performance, targets, indicators and potential risks, which is
key to assessing strategic risk. The 2LoD independently
challenges the area's status reviews and project performance.
This is included in the Strategic risk report.
Our subsidiaries made significant headway in developing
strategic risk control in 2022, and we strengthened our
monitoring of strategic projects and top risks, business model
performance reviews and other key components of strategic
risk. We also optimized reporting to senior management on
strategic risk.
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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.
Climate change and environmental factors could affect existing
risks in different time horizons. These factors include those
derived from the physical effects of climate change generated
by acute events or chronic changes in the environment, as well
as those stemming from the transition to a low-carbon
economy that includes changes in legislation, technology or
market trends. Grupo Santander assesses how both transition
and physical risks can affect the economy, our customers and
our business (the table below shows the potential impacts
arising from climate matters).
In this regard, Grupo Santander takes aiding customers’
transition to a low-carbon economy seriously, and offers
financial products and services for environmentally and socially
responsible businesses.
For more details, see the
'Responsible Banking' chapter.
In 2022, regulators and supervisors were keen for banks to
continue embedding ESG factors (especially Environmental) into
key risk management processes. As part of the regulatory
exercises, in 2022 Grupo Santander also took part in the ECB's
climate risk stress test, Pillar III ESG disclosure and Thematic
Review on climate and environmental risks.
Regarding the Thematic Review, Grupo Santander assessed its
alignment with the ECB's November 2020 Guide on climate-
related and environmental risks for banks and submitted its
action plans and implementation timelines according to the
regulatory and supervisory framework.
In addition, during 2022 Grupo Santander has temporarily
increased its overall exposure to the energy sector (oil and gas)
due to the liquidity needs arising from the volatility of energy
commodities prices; exchange rates; and the energy crisis.
However, our long-term climate ambition remains and a
significant part of our lending exposure has a short-term
maturity.
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Climate risk
type
Climate
drivers
Market and
customers
→ Growing consumer demand for more sustainable products
→ Potential loss of competitive advantage due to our green product proposition
→ Rising market volatility and costs, restrictions on sourcing carbon-heavy raw
materials
Policymaking
→ Stricter policy environment that affects our customer's business operations
→ Rising greenhouse gas (GHG) emissions pricing to foster transition to renewable
sources
Technology
and data
Transition
risk
Regulatory
pressure
Reputational
→ 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 and disclosure
→ New public disclosures that raise risk of misrepresentation; more regulatory
requirements that increase the risk of non-compliance; and more reliance on
external analysts, which increases the potential of a data privacy breach. This
could lead to fines, compensation for damages and voided contracts
→ Stricter banking regulation (disclosure, stress testing, taxonomies, etc.)
→ Inefficiencies as consequence of different climate regulations, especially for
international banks
→ Risk of disregard or a slow or inadequate response from banks, which could
tarnish their reputation; harmful extreme events that could cast doubt over
banks' ability to restore service quickly and provide care to customers in difficult
situations if planned responses fail
→ More scrutiny from supervisors, regulators, the media, NGO's, shareholders,
investors and other stakeholders towards commitments, performance, and
regulatory compliance of financial entities
→ Perception that banks are failing to meet, make progress with, or be transparent
reporting on climate-related commitments and transition
→ Liability as an intermediary in data, products, financial services and other value
chains
→ Reputational damage if certain portfolios do not reach emissions reduction
targets
Most affected
time horizon
Short/midterm
Short-mid-long
term
Midterm
Short/midterm
Short-mid-long
term
Acute
→ More frequent and severe climate events such as flooding, drought and other
climate phenomena that could depreciate financed assets and collateral
→ Alterations in weather and ecosystems affecting food production, living
Short-mid-long
term
Physical risk
environment and population health.
Chronic
→ Rising temperatures affecting working and living conditions and local
Long term
infrastructure
→ Rising sea levels affecting local ecosystems, increasing subsidence and flood risks
Climate-related time horizons have been aligned with our main strategic processes. Hence, we define short term as 1 year; medium term as 3 years; long term as 5 years; and
longer term as beyond 5 years.
It should be noted that above we depict the most affected time horizons, albeit this does not imply that others may be affected to a lesser extent.
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10.2 Climate-related and environmental risk
management
We continue to embed climate and environmental risk in our
risk management model according to regulation and growing
supervisory demands.
The risk and compliance & conduct function is working to
measure, manage and reduce the potential impact of climate
change on our loan book. In addition, it participates along with
other areas in the design of the decarbonization roadmap for
investment and financing portfolios, as well as in the
assessment of the risks arising from its implementation.
The chart below explains how our risk management cycle
accounts for climate change and environmental risk.
BUSINESS STRATEGY
RISK APPETITE
RISK MANAGEMENT CYCLE
1. Identification
à 2. Planning
à 3. Assessment
à 4. Monitoring
à 5. Mitigation
à 6. Reporting
Ensuring
effective
categorization
and control.
Setting targets
that consider
the landscape.
Determining the
likelihood,
impact and
materiality of
risk.
Managing risk
profile
according to the
limits set during
planning.
Keeping risk
within
acceptable
levels.
Submitting
accurate and
timely
management
reporting.
Climate and Environmental Risk
GOVERNANCE, FRAMEWORKS AND POLICIES
OTHER RISK MANAGEMENT PROCESSES: underwriting, rating, customer engagement, etc.
TRAINING AND RISK PRO CULTURE
Each stage of the risk management cycle is described in detail below.
1. Identification
The main risk identification process within Grupo Santander is
the top and emerging risk identification.
For more details, see section
1.3 'Santander's top risks &
emerging risks'
In identifying emerging and top risks, we measure internal and
external threats to profitability, capital adequacy and strategy.
Since 2018, our process has included a climate subcategory.
More recently, it includes biodiversity loss. Risk analysis covers
qualitative and quantitative factors and informs our internal
capital and liquidity adequacy assessment processes (ICAAP
and ILAAP).
Biodiversity
There has been a general rise in interest in environmental matters other than climate change in recent years. Some
examples are the new frameworks on Nature and Biodiversity, and initiatives such as the Taskforce on Nature-related
Financial Disclosures (TNFD) and the Kunming-Montreal Global Biodiversity Framework (GBF) passed at the UN Biodiversity
Conference (COP15) Supervisors and other stakeholders are working harder to understand and assess banks’ environmental
practices. In addition to the measures and initiatives explained in other sections of this report, the Group is assessing the
materiality of natural aspects in terms of impact and dependence for the most relevant portfolios. It’s a key step in our
assessment and management of environmental risk and opportunity.
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Moreover, a specific questionnaire related to climate risk was
implemented in 2021 as part of the risk profile assessment
process, which Grupo Santander regularly conducts to cover all
risk types and reveals any threat to its business plan.
During 2022, we evolved the questionnaire related to climate
risk taking into account the latest regulatory and management
developments, as well as industry best practices. We seek to
assess the progress made by the Corporate Center and
subsidiaries to integrate climate risk into management. It
helped us identify gaps and areas for improvement.
2. Planning
We have included our decarbonization targets in strategic
planning as part of our public sustainability commitments. We
run these exercises with separate time horizons:
Budget
Financial plan
Strategic plan
Ad hoc analysis
Short term (1 year)
Medium term (3 years)
Long term (5 years)
Long term (≥ 5 years)
These exercises enable the risk function to identify threats to
our targets and support the transition to a low-carbon economy
according to our policies and risk appetite.
3. Assessment
Santander runs a quarterly materiality assessment to determine
climate- and environmentally-material credit risk portfolios. It
proves fundamental for decision-making and defining our
strategic priorities on selected industries, customers and
regions. It covers climate and environmental risk in the Group’s
markets over different time horizons. Therefore, we can address
them in risk appetite, top risk identification, credit analysis,
stress testing and other management processes.
Our risk taxonomy, qualitative and quantitative heatmaps and
scenario analyses, determine how we categorize portfolios by
industry, region, time horizon regarding their exposure to
physical or transition 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) to
understand industry and regional trends.
Our taxonomy of industries and sub-industries is based on the
EU’s NACE codes (statistical classification of economic activities
in the European Community), we consistently compile exposure
data that serve as a starting point, along with a five-tier
heatmap for physical and transition-based risks, to measure
highly material climate change risks. The next table shows the 5
levels classified by colours, from low to very high risk.
Our 2022 materiality assessment covered climate risk c.a.80%
of our balance sheet items. We expanded its scope to cover
most portfolio segments and other business such as SCF Auto
(Santander Consumer Finance Auto).
The graph below shows the Group's last materiality assessment
at the end of Q3 2022.
Materiality assessment - Climate risk analysis and heat
mapping of portfolios
September 2022- Billion EUR
Power (conventional)
of which power generation clients
with > 10% of revenues coming
from coal
Power (renewables)
Oil & Gas
Mining y metals
of which clients with thermal coal
mining
Transport
Real Estate
Agriculture
Construction
Manufacturing
Water supply
Climate sectors
Other sectors
Total portfolio
TR PR
SCIB
27
Other
segments
2
4
11
25
15
3
30
8
3
18
50
3
190
55
245
0
0
1
8
0
105
398
8
14
29
1
566
224
790
Low
Moderately low
Medium
High
Very High
TR: transition risk; PR: physical risk.
SCIB: REC (on and off-balance sheet lending + guarantees + derivatives PFE:
Potential Future Exposure),
Other segments: drawn amount.
Other sectors: SCIB and Corporate NACE outside of risk taxonomy perimeter //
Individuals and SCF: cards and other consumer.
Other segments include Individuals, SCF, Corporates and Institutions and, since
2022, some SMEs.
0 exposure amounts to exposures below EUR 500 mn.
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We supported our qualitative risk appetite statement with a
quantitative metric the board had approved in November 2021.
The metric imposes limits on thermal coal counterparties
concerning our commitments, and sets a pathway that is
consistent with our objectives for 2030. We are in permanent
contact with affected customers to understand and support
their transition planning.
Santander continues to set alignment targets for key climate-
related industries to meet its commitments. In 2022, the Risk,
SCIB and Responsible Banking areas launched initiatives to
achieve the Group's decarbonization target for power
generation, which will be included in risk appetite. In this
regard, we announced our first decarbonization target for
power generation (0.11 tCO2e/MWh by 2030) as part of the
NZBA (Net-Zero Banking Alliance) in our Climate finance report.
We are gradually defining metrics and limits for agriculture,
aluminium, cement, commercial and residential real estate, iron
and steel, oil and gas, transport and other material sectors in
risk appetite, with a view to having them fully adopted in the
coming years. This chart shows the Group's progress as well as
targets for next years.
Throughout 2022, we updated our materiality assessment to
reflect the latest industry developments, along with regulatory
requirements. In this sense, we have made progress in updating
the risk taxonomy, extending the scope as well as in the
analysis of impact through more granular heatmaps,
incorporating scenario analysis techniques.
In addition, the scope of the assessment has been broadened,
incorporating other segments such as SMEs. For this reason, in
general, the volume of information is greater, particularly
impacting the increase in sectors of lesser concern, such as
Manufacturing, Transportation and Real Estate. The current
macroeconomic context of war in Ukraine and the energy crisis,
has affected, albeit to a lesser extent, the increase in the volume
of sectors such as Oil & Gas and Mining & Metal, with no
significant effect on the final distribution by sector of the
Group's portfolio.
To strengthen materiality assessment, we updated Klima, an in
house tool to spot, qualify, quantify and manage climate and
environmental risk. The common standards it applies help
manage physical and transition risks. It includes our risk
taxonomy and heatmaps to assess short-, mid- and long-term
exposure and draws on the same calculation methodology for
all business lines.
Its modules include 'Materiality Assessment', 'Scenarios', 'Risk
Management' and 'Sensitivities' in a multi-stage
implementation model. The exposure data it provides on each
business line is qualitative and quantitative, by sector and
geography, with advanced analysis models to project impacts in
different horizons and scenarios.
4. Monitoring
Santander uses risk appetite and scenario analyses to monitor
climate and environmental risk.
Risk appetite sets the volume and type of risks we deem
prudent for our business strategy. In 2019, the board approved
a qualitative risk appetite statement that links climate risk
management to our sector-based policies.
We announced our first decarbonization commitments for the
thermal coal sector in February 2021 in line with our ambition
to be net zero by 2050. Accordingly, by 2030 we will end
financial services to electricity generating customers if 10% of
their revenues rely on thermal coal, and we will eliminate our
exposure to thermal coal mining worldwide.
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Q4 2020
Risk appetite
update to align
with the Paris
Agreement
Q4 2021
Approved the first
quantitative risk
appetite metric
(thermal coal)
Q4 2022
Approved the second
quantitative risk appetite
metric (power
generation)
B
D
F
A
2019
Qualitative climate
risk appetite
statement
C
Q1 2021
Initial
decarbonization
targets (thermal
coal)
E
Q1 2022
New proposal of
decarbonization
targets (power
generation)
G
Next Years
Inclusion of oil and
gas, transport and
other key sectors
Scenario analyses are useful to monitor the Group’s climate and
environmental risk as well as regulatory and supervisory stress
tests. We use scenarios determined by the NGFS (Network for
Greening the Financial System), the ECB (as part of its stress
test) and others designed by our Research department to
analyse the impact on climate under adverse circumstances.
In the first half of 2022, Grupo Santander underwent the ECB’s
climate stress test for the banking sector. It comprised several
modules; a qualitative questionnaire, revenue and emissions
metrics, scenarios and time horizons. It was a big step to
integrate advanced risk management models that cover
portfolio forecasts under different scenarios and time horizons.
In 2022, the ECB tightened its supervision with a thematic
review, stress testing and on-site inspections. Overall, these
exercises have been completed satisfactorily, and action plans
were implemented to cover the improvement points detected.
We expect the regulatory and supervisory agenda to continue to
get increased.
Moreover, it served as a learning exercise for banks to introduce
climate risk into risk management as a qualitative part of the
Supervisory Review and Evaluation Process (SREP).
The following table breaks down each module:
1 QUALITATIVE
QUESTIONNAIRE
2 CLIMATE RISK METRICS
3 BOTTOM-UP STRESS TEST
PROJECTIONS
11 sections (78 questions):
Non-financial corporates
1. Existence and use of ST exercises
1
22 sectors (NACE
code level 2)
It covers credit, market, operational and
reputational risk.
2. Governance and inclusion in risk
appetite
2 metrics:
2
1) Income from GHG
intensive sectors
Transition risk:
EU/Non-EU
2 time horizons
3. Integration into strategy
4. Methodology used
5. Scenarios
6. Data and sources of information
7. Inclusion on the ICAAP
8. Future development plan
9. Role of Internal Audit
10. EU subsidiaries of non-EU institutions
11. Methodological assumptions and
choices
2) Financed GHG emissions (scopes 1, 2, 3)
Top 15 companies per sector
3y: static balance sheet (BS)
Additional documentation:
- Actions previously carried out by the bank
- Methodological approach
30y: dynamic BS (2030, 2040, 2050)
Physical risk:
EU, 1y time horizon
2 hazards: drought & heat + flood
Operational and Reputational Risks based on
qualitative assessment (no projections)
1. NACE: Statistical classification of economic activities in the European Community.
2. GHG: Green House Gas.
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Santander used internal models, the Planetrics platform and
vendors’ databases to quantify the financial impact of physical
and transition risk for each counterparty. The platform has
seven modules (see chart below), based on the United Nations
Environmental Programme Finance Initiative's (UNEP FI)
methodology and other sources of 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. We embedded scenario analysis methodology in our
credit risk management using Klima’s 'Sensitivities' and
'Materiality Assessment' modules to obtain a forward-looking
overview of the portfolios that include sector forecasts and
quantitative heatmaps.
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
PD: Probability of default. LGD: Loss given default.
5 Competition
module
Stage 2 profit
revenue, costs
6
Integration
module
Financial data of the
counterparty after
climate stress
Cost
Equity valuation
7
Credit risk modelling
Stressed PD & LGD
The ECB published its aggregated results in the second half of
2022. Coupled with our own analysis, it has helped us enhance
our internal climate risk stress testing. We also used it in our
2022 ICAAP.
In addition, Santander UK took part in the Bank of England’s
Climate Biennial Exploratory Scenario (CBES). In 2022, it began
the Climate Internal Scenario Analysis (CISA) programme to
create new climate risk scenarios and conduct quantitative
stress tests.
5. Mitigation
In mitigation, we updated our environmental, social and climate
change (ESCC) policy, which sets out our public commitments
and aims to support our strategy for sensitive, special-attention
and prohibited industries. The ESCC policy sets out Santander’s
standards for identifying, measuring, monitoring and managing
environmental and social risk, especially in oil and gas, power
generation, mining and metals and soft commodities. It is
consistent with our policies on responsible banking and
sustainability.
We follow special procedures to analyse environmental, social
and climate change risk as a required part of risk management,
control and governance. Sanctioning bodies make sure decisions
consider environmental, social and climate change risks and
policy.
Our internal taxonomy also qualifies as a mitigating instrument
since it helps us inform our customers of the need for credible
plans to ensure an orderly transition to a low-carbon economy.
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.
Furthermore, the first line of defence runs due diligence with
several special questionnaires to grant credit. If the process
reveals a reputational issue, it will be escalated to the
Reputational risk function for providing an opinion. SCIB's
project finance transactions must be checked against the
Equator Principles.
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This table summarizes SCIB’s risk analysis:
For more details on the Equator Principles, see
'3.2 Conduct and ethical behaviour' in the
Responsible Banking chapter.
In 2022, we continued to embed climate and environmental
factors in credit approval through credit committees to inquire
about ESCC factors along with customer ratings in SCIB
(spreading scope to Corporates).
The Credit risk area is launching a target operating model (TOM)
called 'The Climate Race', which includes environmental and
climate risk in all stages of the credit granting process. Thus,
encompass climate and environmental risk throughout the
entire credit granting process, so that both our strategic
priorities and regulatory requirements are homogeneously
embedded in the admission processes of the Group, based on
the materiality of portfolios, sectors, green business initiatives,
and related deadlines in 2023 and 2024.
Additionally, a corporate multidisciplinary working group
monitors the most significant claims and controversies,
especially regarding climate change management and
Santander’s reputation. This involves identification, assessment,
management, mitigation plans and escalations according to the
established governance.
In 2022, the Risk area bolstered employee training on climate
matters through certifications for teams directly involved in
climate risk management (internal Santander ESG Commitment
Fundamentals certification and external International
Sustainable Finance Specialist – IASE), as well as general
coursework for most employees. Our Risk pro culture will
remain an essential component of that. In 2023, we expect to
further our policy on climate risk-based incentives and
remuneration.
6. Reporting
Reports to senior managers and stakeholders on climate and
environmental risk are transparent and accurate and comply
with the law and supervisors’ expectations. Our Annual Report
and Climate Finance Report highlight our progress with climate
and environmental risk.
Santander is also working on the Pillar 3 ESG disclosure
regulation. In January 2022, the EBA published final Pillar 3 ESG
risk templates for disclosing meaningful, contrastable
information on how ESG risk (in particular, climate change) may
exacerbate other balance sheet risks. The Pillar 3 ESG disclosure
will enable the Group to compare its sustainability performance
with other banks’ and be transparent on its mitigation of risk
and support for customers' green transition.
The Group completed the first official Pillar 3 ESG disclosure.
Since the report covers the whole Group, we remained in
permanent contact with subsidiaries to guarantee that
requirements were fulfilled.
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10.3 Summary by risk type
Grupo Santander continues to boost its capacity to identify
climate and environmental risk drivers and integrate them into
risk management processes. This table summarizes the impact
of climate and environmental risk on the different typology of
existing risks, our response, and our plans for the coming years.
Risk type
Credit
Market &
Liquidity
Potential impact on climate risk
factors
→ Extreme weather can lead to higher
retail and corporate loan default and
lower collateral value.
→ Credit risk can also rise if borrowers'
business models do not consider the
transition to a low-carbon economy
(greater risk of revenue decline and
business interruption, which can
lead to higher default or a loss of
business value).
→ Growing consumer demand for
sustainable products and a short
supply of certain resources can
affect the value of shares, bonds
and other assets.
→ More frequent extreme weather can
have stifle the economic growth of
countries susceptible to climate
change, increase their sovereign
debt and reduce their access to
capital markets.
→ Cash outflows from companies
trying to boost their reputation in
the market or solve problems with
climate scenarios.
What we’re doing to manage climate risk
Next steps
→ Materiality assessment to spot physical and
transition risk in the Group’s credit portfolios.
→ Analysis on short-, mid- and long-term risk
concentration per sector and region. Heatmaps
that follow orderly, disorderly and HHW
scenarios up to 2050. Scenario analyses and
sensitivities to forecast changes in ratings, PD
and LGD in view of physical and transition risk.
→ ESCC factor measurement in customer and
transaction analysis, and ratings. Setting of risk
appetite limits and alerts to manage climate-
related sectors.
→ Launch of 'The climate race'
Environmental & Climate change
credit risk TOM.
→ Inclusion of climate factors in
internal physical and transition
risk models. Development of
tools to monitor physical risk in
all the Group’s markets.
→ Qualitative analysis of climate risk scenarios'
impact on market and liquidity risk (highly liquid
assets and impact of financing of exposed
companies).
→ Enhance analysis of material
climate impact on trading
portfolios to help with future
sector-based stress testing.
→ Materiality assessment to spot physical and
→ Enrich stress testing and review
transition risk in the Group’s trading portfolios,
under climate stress scenarios that cover
liquidity.
new scenarios to include.
→ Adapt stress testing to emerging
market practices.
→ Include new liquidity scenarios
to measure the materiality of
their impact.
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Risk type
Potential impact on climate risk
factors
What we’re doing to manage climate risk
Next steps
Operational → Serious climate events can affect
→ Climate risk was a mandatory addition to our
business continuity, infrastructure,
processes and headcount at
branches and offices.
→ If energy, water and insurance
prices soar, so will operational
costs.
scenario analyses.
→ We updated our operational risk database with
a new climate and environmental risk metric.
→ We’re updating our continuity plan with more
details on the threats of climate risk.
→ Embed climate risk in the annual
operational and control risk self-
assessment.
→ Enhance the operational risk that
considers climate risk data.
→ Study external data sources.
Reputational → Customers, investors and other
stakeholders who believe banks
aren't doing enough to meet low-
carbon targets or their own public
commitments can pose reputational
risk.
→ The Group's climate information is
considered insufficient or
misleading, or product
announcements appear to be
“greenwashing”.
Strategic
→ The Group's net-zero financing and
operations strategy fails to bring
about enough change and
undermines our strategy.
→ Updated climate and environmental risk policies → Methodology to quantify the
reputational impact of climate
and environmental risk.
and procedures.
→ Corporate credit committees address
reputational risk when assessing sensitive
transactions that involve climate and
environmental risk.
→ Strengthen climate and environmental risk
governance, which the Reputational risk forum
addresses. Formal meetings scheduled to
review reputational issues (including climate
matters), involving the legal, responsible
banking, investor relations, risk and other
teams.
→ Proactive measures that show Santander
supports companies’ green transition and
decarbonization.
→ Regular monitoring of the strategic 'Climate
change' project, including KPIs that relate to the
Group’s net zero objectives.
→ Increase granularity of stressed
event impacts as part of the top
risk identification.
→ Our top risk identification includes a climate
change risk event. We analyse the potential
impact of low-probability stress scenarios on
the Group’s strategic plans and draw up action
plans accordingly, o budget tracking for
inclusion in the strategic risk profile.
→ Monitoring of ESG initiatives presented at the
CPGF and investors’ forum.
→ Update key ESG metrics
according to the Group’s
strategy.
→ Include more ESG factors in our
business model performance
review.
→ Continue to include ESG factors
in comparisons with peers.
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Glossary
2022 AGM
2023 AGM
Act 10/2014
Active customer
ADR
ADS
AEOI
ALCO
ALM
AML
API
APM
APS
Banesto
bn
BNPL
bps
BRRD
Bylaws
CAE
CAO
CARF
CCO
CCPS
CCR
CCSM
CDI
CEO
CFO
CHF
CIO
CNBV
CNMV
COFINS
Constant euros
COSO
CRE
CRO
CRR
CSLL
Annual general shareholders’ meeting of Banco Santander held on 1 April 2022 at second call
Annual general shareholders’ meeting of Banco Santander called for 30 or 31 March 2023 at first or
second call, respectively
Act 10/2014, of 26 June, on the organization, supervision and solvency of credit institutions.
Those customers who comply with balance, income and/or transactionality demanded minimums
defined according to the business area
American Depositary Receipts
American Depositary Shares
Automatic Exchange of Information Standard
Asset-Liability Committee
Asset and Liability Management
Anti-Money Laundering
Application Programming Interface
Alternative Performance Measure
Amherst Pierpont Securities
Banco Español de Crédito, S.A.
Billion
Buy Now Pay Later. Short-term financing that allows consumers to make purchases and pay for
them at a future date.
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
Bylaws of Banco Santander, S.A.
Chief Audit Executive
Chief Accounting Officer
Conselho Administrativo de Recursos Fiscais (Administrative Council for Tax Appeals)
Chief Compliance Officer
Contingent Convertible Preferred Securities
Counterparty Credit Risk
Code of Conduct in Securities Markets
CREST Depositary Interests
Chief Executive Officer
Chief Financial Officer
Swiss franc
Chief Information Officer
Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission)
Comisión Nacional del Mercado de Valores (Spanish stock market authority)
Contribuiçao para Financiamiento da Seguridade Social (Contribution for Social Security Financing)
Excluding exchange rates’ impact
Committee of Sponsoring Organizations of the Treadway Commission
Credit Risk Equivalent
Chief Risk Officer
Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms, as
amended from time to time
Contribuçao Social sobre o Lucro Liquido (Social Contribution on Net Profit)
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CVA
DCB
Digital customer
DTA
DVA
EAD
EBA
ECB
eNPS
EOIR
EPC
EPS
ESG
ESMA
EU
EVA
EVP
FCA
FCC
First 2022 Buyback
Programme
FL CET1
FRTB
FX
GBP
GCC
GDP
GDPR
GHG
GSGM
G-SIB
GTB
ICAAP
ICAC
ICFR
ICO
ICS
Identified staff
IFRS
ILAAP
IMF
IRB
IRC
IRPJ
JPY
LCR
LGD
LLP
Credit Valuation Adjustments
Digital Consumer Bank
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
Deferred Tax Asset
Debt Valuation Adjustments
Exposure at default
European Banking Authority
European Central Bank
Employee Net Promoter Score
Exchange Of Information on Request standard
Energy Performance Certificate
Earnings Per Share
Environment, Social and Governance
European Securities and Markets Authority
European Union
Economic Value Added
Employee Value Proposition
Financial Conduct Authority
Financial Crime Compliance
First buyback programme carried out within the 2022 shareholder remuneration policy
Fully-Loaded Common Equity Tier 1
Fundamental Review of the Trading Book
Foreign Exchange
Pound Sterling
General Code of Conduct
Gross Domestic Product
General Data Protection Regulation
Greenhouse Gas
Group-Subsidiary governance model
Global Systemically Important Bank
Global Transactional Banking
Internal Capital Adequacy Assessment Process
Instituto de Contabilidad y Auditoría de Cuentas (Institute of accounting and auditing)
Internal Control over Financial Reporting
Instituto Oficial de Crédito (Spanish public credit institution)
Internal Control System
Other executives whose activities may have a significant impact on the Group's risk profile
International Financial Reporting Standards
Internal Liquidity Adequacy Assessment Process
International Monetary Fund
Internal Ratings-Based
Incremental Risk Charge
Imposto sobre a Renda das Pessoas Jurídicas
Japanese Yen
Liquidity Coverage Ratio
Loss given default
Loan-Loss Provisions
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Loyal customer
LTD
LTV
LTV
M/LT
Material Risk Taker
MREL
NACE
NFR
NGO
NII
NPL
NPS
NSFR
NYSE
NZAMi
NZBA
OECD
OEM
One FCC
OTC
P&L
PCAF
PCAOB
PD
PIS
pp
PwC
RCSA
RoA
RoE
RoRWA
RoTE
RWA
S&P 500
SAM
SC USA
SCF
SCIB
SEC
Second 2022 Buyback
Programme
SFCS
SHUSA
SMEs
SOX
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
Loan-To-Value ratio
Medium-and long-term
Other executives whose activities could have a significant impact on the Group's risk profile
Minimum Requirements for own funds and Eligible Liabilities which is required to be met under
the BRRD
Nomenclature of Economic Activities of the European Union
Non-financial risk
Non-governmental organization
Net Interest Income
Non-performing loan
Net Promoter Score
Net Stable Funding Ratio
New York Stock Exchange
Net Zero Asset Managers initiative
Net Zero Banking Alliance
Organization for Economic Cooperation and Development
Original Equipment Manufacturer
One Financial Crime Compliance
Over-The-Counter
Profit and Loss statement
Partnership for Carbon Accounting Financials
Public Company Accounting Oversight Board
Probability of Default
Programa de Integraçao Social
Percentage point
PricewaterhouseCoopers Auditores, S.L.
Risk Control Self-Assessment
Return on Assets
Return on Equity
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-Weighted Assets
The S&P 500 index maintained by S&P Dow Jones Indices LLC
Santander Asset Management
Santander Consumer US
Santander Consumer Finance
Santander Corporate & Investment Banking
Securities and Exchange Commission
Second share Buyback programme charged against 2022 results
Sustainable Finance Classification System
Santander Holding USA, Inc
Small and Medium Enterprises
Sarbanes-Oxley Act of 2002
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Spanish Corporate
Governance Code
Spanish Securities Markets
Act
SPF
SRB
SREP
SRI
SRT
SSM
STEM
T&O
TCFD
TLAC
TLTRO
TNFD
TPV
TSR
UK
UNEP FI
US
USD
VaR
VAT
WBCSD
WM&I
YoY
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 as amended from time to time
Simple, Personal and Fair
European Single Resolution Board
Supervisory Review and Evaluation Process
Socially Responsible Investment
Significant Risk Transfer
Single Supervisory Mechanism. The system of banking supervision in Europe. It is composed of the
ECB and the competent supervisory authorities of the participating EU countries
Science, Technology, Engineering, Mathematics
Technology & Operations
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
Taskforce on Nature-related Financial Disclosure
Total Payments Volume
Total Shareholder Return
United Kingdom
United Nations Environmental Programme Finance Initiative
United States of America
United States dollar
Value at Risk
Value Added Tax
World Business Council for Sustainable Development
Wealth Management and Insurance
Year-on-Year
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Auditor's report
and consolidated
financial statements
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Auditor’s report
Consolidated financial statements
Consolidated balance sheets as of 31 December
2022, 2021 and 2020
Consolidated income statements for the years
ended 31 December 2022, 2021 and 2020
Consolidated statements of recognised income and
expense for the years ended 31 December 2022,
2021 and 2020
Consolidated statements of changes in total equity
for the years ended 31 December 2022, 2021 and
2020
Consolidated statements of cash flows for the years
ended 31 December 2022, 2021 and 2020
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
503
514
514
518
520
521
527
529
530
535
580
583
585
599
600
602
603
603
609
609
609
611
612
613
616
619
620
621
621
622
628
630
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 2022
Appendix V. Other information on the Group’s banks
Appendix VI. Annual banking report
631
647
648
654
655
661
661
662
662
664
664
665
688
688
688
689
689
689
689
690
691
691
697
698
698
699
710
725
752
764
765
766
790
796
797
798
804
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Auditor's
report
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504
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505
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506
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507
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508
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509
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510
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511
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Consolidated
financial statements
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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 2022, 2021 AND 2020
EUR million
ASSETS
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND
FINANCIAL ASSETS HELD FOR TRADING
Derivatives
Equity instruments
Debt securities
Loans and advances
Central banks
Credit institutions
Customers
NON-TRADING FINANCIAL ASSETS MANDATORILY AT
FAIR VALUE THROUGH PROFIT OR LOSS
Equity instruments
Debt securities
Loans and advances
Central banks
Credit institutions
Customers
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
Debt securities
Loans and advances
Central banks
Credit institutions
Customers
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Equity instruments
Debt securities
Loans and advances
Central banks
Credit institutions
Customers
FINANCIAL ASSETS AT AMORTIZED COST
Debt securities
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
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
2022
223,073
156,118
67,002
10,066
41,403
37,647
11,595
16,502
9,550
5,713
3,711
1,134
868
—
—
868
8,989
2,542
6,447
—
673
5,774
85,239
1,941
75,083
8,215
—
—
8,215
1,147,044
73,554
1,073,490
15,375
46,518
1,011,597
8,069
A
2021
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
108,038
2,453
97,922
7,663
—
—
7,663
1,037,898
35,708
1,002,190
15,657
39,169
947,364
4,761
A
2020
153,839
114,945
67,137
9,615
37,894
299
—
3
296
4,486
3,234
700
552
—
—
552
48,717
2,979
45,738
9,481
12,136
24,121
120,953
2,783
108,903
9,267
—
—
9,267
958,378
26,078
932,300
12,499
37,838
881,963
8,325
(3,749)
410
1,980
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2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2022, 2021 AND 2020
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
2022
7,615
1,981
5,634
308
34,073
33,044
13,489
19,555
1,029
804
18,645
13,741
4,904
29,987
9,200
20,787
10,082
104
11
9,967
3,453
1,734,659
A
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
1,595,835
A
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
1,508,250
A. 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 2022.
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CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2022, 2021 AND 2020
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
2022
115,185
64,891
22,515
27,779
5,757
9,796
12,226
—
—
55,947
50,520
1,740
1,958
46,822
5,427
—
—
A
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
—
—
1,423,858
1,111,887
1,349,169
1,078,587
76,952
68,582
966,353
274,912
37,059
25,926
9,228
(117)
747
8,149
2,392
950
2,074
734
1,999
9,468
3,040
6,428
14,609
139,757
52,235
886,595
240,709
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
12,698
A
2020
81,167
64,469
16,698
—
—
—
—
—
—
48,038
43,598
2,490
6,765
34,343
4,440
—
—
1,248,188
990,391
112,804
62,620
814,967
230,829
26,968
21,880
6,869
286
910
10,852
3,976
1,751
2,200
700
2,225
8,282
2,349
5,933
12,336
—
1,637,074
—
1,498,782
—
1,416,928
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2022 Annual report
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CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2022, 2021 AND 2020
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
2022
124,732
8,397
8,397
—
46,273
688
—
688
175
66,702
—
(5,454)
1,553
(7,007)
(675)
9,605
(979)
A
2021
119,649
8,670
8,670
—
47,979
658
—
658
152
60,273
—
(4,477)
1,572
(6,049)
(894)
8,124
(836)
A
2020
114,620
8,670
8,670
—
52,013
627
—
627
163
65,583
—
(3,596)
1,504
(5,100)
(69)
(8,771)
—
(35,628)
(32,719)
(33,144)
(4,635)
(4,241)
(5,328)
(30,993)
(28,478)
(27,816)
8,481
(1,856)
10,337
97,585
10,123
(2,104)
12,227
97,053
9,846
(1,800)
11,646
91,322
1,734,659
1,595,835
1,508,250
274,075
12,856
92,672
262,737
10,758
75,733
241,230
12,377
64,538
A. 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 2022.
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CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2022, 2021 AND 2020
EUR million
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
Gain or losses on financial assets and liabilities held for trading, net
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
Note
38
39
40
13
41
42
43
43
43
43
43
44
45
45
45
45
A
(Debit) Credit
2022
71,430
5,479
59,214
6,737
(32,811)
38,619
488
702
15,867
(4,077)
2021
46,463
2,582
40,471
3,410
(13,093)
33,370
513
432
13,812
(3,310)
149
34
115
842
—
—
842
162
—
—
162
968
74
(542)
1,510
(2,803)
2,698
(2,540)
628
89
539
1,141
—
—
1,141
132
—
—
132
270
(46)
(562)
2,255
(2,442)
1,516
(1,305)
A
2020
45,741
2,840
40,365
2,536
(13,747)
31,994
391
(96)
13,024
(3,009)
1,107
(31)
1,138
3,211
—
—
3,211
82
—
—
82
(171)
51
(2,093)
1,920
(2,342)
1,452
(1,242)
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CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2022, 2021 AND 2020
EUR million
Total income
Administrative expenses
Staff costs
Other general administrative expenses
Depreciation and amortisation cost
Provisions or reversal of provisions, net
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
46
47
16 and 18
25
10
17 and 18
16
17 and 18
48
49
27
37
28
4
4
A
(Debit) Credit
2022
52,117
(20,918)
(12,547)
(8,371)
(2,985)
(1,881)
2021
46,404
(18,659)
(11,216)
(7,443)
(2,756)
(2,814)
(10,863)
(7)
(10,856)
(7,407)
(19)
(7,388)
—
(239)
(140)
(75)
(24)
12
—
7
15,250
(4,486)
10,764
—
10,764
1,159
9,605
—
(231)
(150)
(71)
(10)
53
—
(43)
14,547
(4,894)
9,653
—
9,653
1,529
8,124
0.539
0.537
0.438
0.436
A. 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 2022.
A
2020
44,279
(18,320)
(10,783)
(7,537)
(2,810)
(2,378)
(12,382)
(19)
(12,363)
—
(10,416)
(174)
(10,242)
—
114
8
(171)
(2,076)
(5,632)
(7,708)
—
(7,708)
1,063
(8,771)
(0.538)
(0.538)
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CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE YEARS ENDED 31 DECEMBER 2022, 2021 AND 2020
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
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
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
Note
29
36
29
36
36
36
29
2022
10,764
(2,660)
(399)
(56)
—
17
A
2021
9,653
(220)
754
1,567
—
(1)
A
2020
(7,708)
(9,794)
(1,018)
(25)
—
(4)
(497)
(171)
(917)
—
18
(18)
88
49
(2,261)
(2,467)
(2,467)
—
—
3,658
3,658
—
—
(3,016)
(1,762)
(1,254)
—
—
—
—
—
—
(2,086)
(2,591)
(99)
604
—
—
—
—
85
1,565
8,104
1,410
6,694
—
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)
A. 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
2022.
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CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2022, 2021 AND 2020
EUR million
A
A
Balance at 31 December 2021
Adjustments due to errors
Adjustments due to changes in accounting policies
Opening balance at 1 January 2022
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 2022
Equity
instruments
issued (not
capital)
658
—
—
658
—
30
—
—
—
—
—
—
—
—
—
—
—
—
—
—
30
688
Share
premium
47,979
—
—
47,979
—
(1,706)
—
—
—
—
—
(1,706)
—
—
—
—
—
—
—
—
—
46,273
Other equity
instruments
152
—
—
152
—
23
—
—
—
—
—
—
—
—
—
—
—
—
—
(49)
72
175
Accumulated
retained
earnings
60,273
—
—
60,273
—
6,429
—
—
—
—
—
—
(869)
—
—
—
—
7,298
—
—
—
66,702
Capital
8,670
—
—
8,670
—
(273)
—
—
—
—
—
(273)
—
—
—
—
—
—
—
—
—
8,397
A. 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 2022.
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Revaluation
reserves
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
(4,477)
—
—
(4,477)
—
(977)
—
—
—
—
—
273
—
—
7
—
—
(12)
—
—
(1,245)
(5,454)
Profit
attributable to
shareholders
of the parent
8,124
—
—
8,124
9,605
(8,124)
—
—
—
—
—
—
—
—
—
—
—
(8,124)
—
—
—
9,605
(-) Own
shares
(894)
—
—
(894)
—
219
—
—
—
—
—
1,706
—
(2,050)
563
—
—
—
—
—
—
(675)
(-) Interim
dividends
(836)
—
—
(836)
—
(143)
—
—
—
—
—
—
(979)
—
—
—
—
836
—
—
—
(979)
Other
comprehensive
income
(32,719)
—
—
(32,719)
(2,911)
2
—
—
—
—
—
—
—
—
—
—
—
2
—
—
—
(35,628)
Non-controlling interest
Other
comprehensive
income Other items
12,227
(2,104)
—
—
—
—
(2,104)
251
(3)
—
—
—
—
—
—
—
—
—
—
—
(3)
—
—
—
(1,856)
12,227
1,159
(3,049)
9
—
—
(756)
—
—
(500)
—
—
—
—
3
31
—
(1,836)
10,337
Total
97,053
—
—
97,053
8,104
(7,572)
9
—
—
(756)
—
—
(2,348)
(2,050)
570
—
—
—
31
(49)
(2,979)
97,585
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CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2022, 2021 AND 2020
EUR million
A
A
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*
Equity
instruments
issued (not
capital)
627
—
—
627
—
31
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31
658
Share
premium
52,013
—
—
52,013
—
(4,034)
—
—
—
—
—
—
(477)
—
—
—
—
(3,557)
—
—
—
47,979
Other equity
instruments
163
—
—
163
—
(11)
—
—
—
—
—
—
—
—
—
—
—
—
—
(62)
51
152
Accumulated
retained
earnings
65,583
—
—
65,583
—
(5,310)
—
—
—
—
—
—
—
—
—
—
—
(5,310)
—
—
—
60,273
Capital
8,670
—
—
8,670
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,670
A. 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 2022.
523
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Revaluation
reserves
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
(3,596)
—
—
(3,596)
—
(881)
—
—
—
—
—
—
—
—
23
—
—
(275)
—
—
(629)
(4,477)
Profit
attributable to
shareholders
of the parent
(8,771)
—
—
(8,771)
8,124
8,771
—
—
—
—
—
—
—
—
—
—
—
8,771
—
—
—
8,124
(-) Own
shares
(69)
—
—
(69)
—
(825)
—
—
—
—
—
—
—
(1,645)
820
—
—
—
—
—
—
(894)
(-) Interim
dividends
—
—
—
—
—
(836)
—
—
—
—
—
—
(836)
—
—
—
—
—
—
—
—
(836)
Other
comprehensive
income
(33,144)
—
—
(33,144)
54
371
—
—
—
—
—
—
—
—
—
—
—
371
—
—
—
(32,719)
Non-controlling interest
Other
comprehensive
income Other items
11,646
(1,800)
—
—
—
—
(1,800)
(274)
(30)
—
—
—
—
—
—
—
—
—
—
—
(30)
—
—
—
(2,104)
11,646
1,529
(948)
17
—
—
—
—
—
(648)
—
—
—
—
30
(5)
—
(342)
12,227
Total
91,322
—
—
91,322
9,433
(3,702)
17
—
—
—
—
—
(1,961)
(1,645)
843
—
—
—
(5)
(62)
(889)
97,053
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CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2022, 2021 AND 2020
EUR million
A
A
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*
Equity
instruments
issued (not
capital)
598
—
—
598
—
29
—
—
—
—
—
—
—
—
—
—
—
—
—
—
29
627
Share
premium
52,446
—
—
52,446
—
(433)
(72)
—
—
—
—
—
(361)
—
—
—
—
—
—
—
—
52,013
Other equity
instruments
146
—
—
146
—
17
—
—
—
—
—
—
—
—
—
—
—
—
—
(53)
70
163
Accumulated
retained
earnings
61,028
—
—
61,028
—
4,555
—
—
—
—
—
—
—
—
—
—
—
4,555
—
—
—
65,583
Capital
8,309
—
—
8,309
—
361
361
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,670
A. 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 2022.
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Non-controlling interest
Revaluation
reserves
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
(3,110)
—
—
(3,110)
—
(486)
70
—
—
—
—
—
—
—
1
—
—
298
—
—
(855)
(3,596)
Profit
attributable to
shareholders
of the parent
6,515
—
—
6,515
(8,771)
(6,515)
—
—
—
—
—
—
—
—
—
—
—
(6,515)
—
—
—
(8,771)
(-) Own
shares
(31)
—
—
(31)
—
(38)
—
—
—
—
—
—
—
(758)
720
—
—
—
—
—
—
(69)
(-) Interim
dividends
(1,662)
—
—
(1,662)
—
1,662
—
—
—
—
—
—
—
—
—
—
—
1,662
—
—
—
—
Other
comprehensive
income
(24,168)
—
—
(24,168)
(8,976)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(33,144)
Other
comprehensive
income Other items
11,570
—
—
(982)
—
—
(982)
(818)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,800)
11,570
1,063
(987)
5
—
—
—
—
—
(465)
—
—
—
—
—
(54)
—
(473)
11,646
Total
110,659
—
—
110,659
(17,502)
(1,835)
364
—
—
—
—
—
(826)
(758)
721
—
—
—
(54)
(53)
(1,229)
91,322
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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2022, 2021 AND 2020
EUR million
Note
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
16
18
13
16
18
13
12
4
23
23
2022
27,706
10,764
23,970
2,985
20,985
108,774
30,837
218
(7,083)
(22,358)
105,618
1,542
107,244
29,533
25,595
55,595
(3,479)
(5,498)
(3,898)
11,776
9,066
1,774
152
784
—
—
7,878
5,558
—
533
734
1,053
—
(9,964)
10,665
1,848
2,291
—
2,050
4,476
701
119
—
573
9
A
2021
56,691
9,653
21,363
2,756
18,607
27,258
2,064
969
(32,746)
(9,152)
73,181
(7,058)
56,945
(1,386)
(14,316)
79,114
(6,467)
(4,012)
(3,715)
11,669
10,015
1,388
126
140
—
—
7,954
6,382
—
672
6
894
—
(1,322)
7,741
1,313
2,684
—
1,645
2,099
6,419
5,340
—
854
225
A
2020
66,153
(7,708)
37,836
2,810
35,026
51,385
12,390
(275)
(10,314)
6,549
43,541
(506)
90,356
7,880
(10,907)
96,561
(3,178)
(2,946)
(7,220)
11,976
7,386
1,134
525
2,931
—
—
4,756
2,014
—
182
1,775
785
—
(1,909)
6,978
—
3,780
—
758
2,440
5,069
4,095
—
721
253
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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2022, 2021 AND 2020
EUR million
Note
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
2022
(1,460)
12,384
210,689
223,073
8,929
200,830
13,314
—
223,073
—
A
2021
5,196
56,850
153,839
210,689
8,142
193,102
9,445
—
210,689
—
A
2020
(4,252)
52,772
101,067
153,839
7,817
137,047
8,975
—
153,839
—
A. 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 2022.
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Notes to the consolidated
financial statements
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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 2022
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 2022, Grupo Santander consisted of 743
subsidiaries of Banco Santander, S.A. In addition, other 170
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 2020
were approved by the shareholders at the group´s annual
general meeting on 26 March 2021. Grupo Santander
consolidated financial statements for 2021 were approved by
the shareholders at the group´s annual general meeting on 1
April 2022. The Group's 2022 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 2022
were authorised by the Bank's directors (at the board meeting
on 27 February 2023) 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 2022, 2021 and 2020 and the
consolidated results of its operations and the consolidated cash
flows in 2022, 2021 and 2020. These consolidated annual
accounts have been prepared on the basis of the accounting
records held by Banco Santander 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.
The figures of the consolidated annual accounts are presented
in millions of euros unless another alternative monetary unit is
indicated, rounded to the nearest million unit.
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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 2022:
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 2022:
• 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. Applicable 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. Applicable 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.
Applicable from 1 January 2022.
• Amendment to IFRS Cycle (2018-2020): introduces minor
amendments, applicable from 1 January 2022, 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.
The application of the aforementioned amendments to
accounting standards and interpretations did not have any
material effects on Grupo Santander consolidated financial
statements.
• IFRS 17 Insurance Contracts and amendments to IFRS 17: 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 contract result
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. In accordance with current regulations, it will be
applicable retrospectively from 1 January, 2023.
The Group has carried out a project to implement IFRS 17
with all the Group entities affected and has prepared an
accounting policy that establishes the accounting criteria for
insurance contracts.
Grupo Santander has concluded the analysis of the effects of
this new standard without having identified any material
impact on its consolidated financial statements due to its
application, except for a balance sheet reclassification,
recorded at 1 January 2023, amounting to EUR
16,025 million, from the heading 'Financial liabilities at
amortized cost' to 'Liabilities under insurance or reinsurance
contracts', related to the different treatment that this new
standard establishes for the components of an insurance
contract.
• 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.
• The amendments to IAS 12 Income Taxes require companies
to 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.
– Decommissioning, restoration and similar liabilities, and
the corresponding amounts recognised as part of the cost
of the related assets.
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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.
Finally, at the date of approval of these consolidated annual
accounts, the following standards which effectively come into
force after 31 December 2022 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.
Likewise, during 2022, an additional amendment to IAS 1 on
the classification of liabilities with covenants as current or
non-current has been included, specifying that covenants that
must be complied with after the reporting date do not affect
the classification of liabilities and require additionally their
respective breakdowns.
It 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
2024.
• Amendment to IFRS 16 Lease Liability in a Sale and Leaseback
requires a seller-lessee to subsequently measure lease
liabilities arising from a leaseback without recognising any
amount of the gain or loss that relates to the right of use
retained. This new requirement does not prevent a seller-
lessee from recognising in profit or loss any gain or loss
relating to the partial or full termination of a lease. It will be
applied retrospectively from 1 January 2024.
Grupo Santander is currently analyzing the possible effects of
these new standards and interpretations, and unless expressly
indicated otherwise, no significant impacts are expected from
their application.
All accounting policies and measurement bases with a material
effect on the consolidated financial statements for 2022 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 Banco Santander 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).
• The recoverability of deferred tax assets (see note 27).
• The fair value of the identifiable assets acquired and the
liabilities assumed in business combinations in accordance
with IFRS 3 (see note 17).
To update the previous estimates, the Group's management has
taken into account the current macroeconomic scenario
resulting from the Ukrainian war, as well as the growing level of
inflation and the difficulties in the supply chains, which is having
a certain impact on the economic evolution and is being closely
monitored, and which generates uncertainty in the Group's
estimates. For this reason, the Management of the Group has
carried out an evaluation of the current situation in accordance
with the best information available to date, developing in the
notes the main estimates made and the potential impacts of the
Ukrainian war and the macroeconomic situation on them during
the period ended December 31, 2022 (see notes 17 and 53).
Although these estimates have been made on the basis of the
best information available at the end of the year 2022, 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.
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d) Information relating to 2021 and 2020
The segment information corresponding to the year ended 31
December 2021 and 2020 were restated for comparative
purposes in accordance with the Group's new organizational
structure, as required by IFRS 8 (see note 51).
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.
Additionally, the information in notes 46 and 47.c for December
2021 and 2020 corresponding to the staff and branches,
respectively, has been restated in accordance with the Group's
standardization criteria (see notes 46 and 47.c).
In order to interpret the changes in the balances with respect to
31 December 2022, 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 2022, based on the exchange rates at the end of 2022:
Mexican peso (11.28%), US dollar (6.07%) , Brazilian real
(11.85%) , Argentine peso (-38.50%), Sterling pound (-5.26%),
Chilean peso (6.08%), and Polish zloty (-1.86%); as well as the
evolution of the comparable average rates: Mexican peso
(13.48%), US dollar (12.45%), Brazilian real (17.55%), Sterling
pound (0.82%), Chilean peso (-2.13%) and Polish zloty
(-2.54%).
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
(hereinafter CRR) and the Capital Requirements Directive
(hereinafter CRD). In June 2019, these regulations were
significantly amended.
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 2022, the
transposition of the CRD into Spanish law has been completed
with the publication of Bank of Spain Circular 3/2022, which
amends Circular 2/2016, on supervision and solvency; Circular
2/2014, on the exercise of various regulatory options of the CRR
and Circular 5/2012, addressed to credit institutions and
payment service providers, on transparency of banking services
and responsibility in the granting of loans.
The CRD introduced important modifications such as Pillar 2G
regulation ('P2 Guidance' supervisory recommendation on Pillar
2 requirements). On 27 October 2021, the European
Commission published the draft review of the European banking
legislation: CRR and CRD.
This review completes the implementation of the Basel III
reform, which was agreed at the end of 2017 and aims to
reduce the variability of risk-weighted assets and improve
comparability between banks.
Progress was made in 2022 on discussions about the new texts
and the final proposal is expected to be approved in 2023.
The first element is reflected in the Commission's proposal to
amend the text of the CRR. This proposal contains changes
concerning, among other things, key risk factors, standardised
credit risk, internal models, the output floor and operational
risk.
The second element, relating to the contribution to
sustainability and green transition, is reflected in the fact that
the legislative proposals continue to incorporate ESG
(environmental, social and governance) factors into the various
areas of prudential regulation: governance, supervision, risk
management, reporting obligations to competent authorities
and disclosure requirements, among other topics. In this regard,
it is important to note the Commission's mandate to the
European Banking Authority (EBA) to assess whether specific
prudential treatment is required for environmental and social
risks. In line with this mandate, in 2022, the EBA issued the first
consultation on the role of environmental risks within the
prudential framework. Based on the feedback received in said
consultation, and depending on the final wording of the
CRR/CRD, the EBA shall publish a report on the matter.
Finally, the third element, which refers to stronger supervision
and protection of financial stability, is expressed in a series of
provisions concerning: fit-and-proper requirements, the
extension of the scope by revising certain definitions that would
cover groups managed by fintechs, and the establishment of
third-country branches in the EU in order to achieve greater
harmonisation of rules and better supervision of this type of
entity.
The European Council's proposal on CRR and CRD was published
on 8 November 2022. During 2023, it is expected that the
Parliament makes its position text public, which will be
followed by the beginning of the trialogues process that will
eventually result in the final versions of the regulations.
The new CRR/CRD regulations are expected to enter into force
from 1 January 2025.
With regard to the resolution framework, 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 entities must therefore meet several minimum
loss-absorbing requirements, named Total Loss-Absorbing
Capacity (TLAC) and Minimum Requirement for own funds and
Eligible Liabilities (MREL), which are regulated by the CRR and
by the Bank Recovery and Resolution Directive (BRRD).
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This Regulation is applicable since 14 November 2022, except
for the provisions relating to Daisy Chains, which apply since 1
January 2024.
Finally, Deposit Guarantee Schemes (DGSs) are regulated by the
Deposit Guarantee Schemes Directive (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 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
Royal Decree 2606/1996, with its amendments set forth in
Royal Decree 1041/2021.
To ensure that depositors' funds are secured, the DGSs collect
funds available through contributions that must be made by
their members at least once a year; a target level of 0.8% of the
guaranteed deposits total must be met by 3 July 2024. These
annual collections are set depending on the guaranteed
deposits total and the degree of risk faced by the entities
involved in the DGS. The method for calculating contributions is
stated in the EBA Guidelines (EBA/GL/2015/10). A review and
evaluation process was opened for these Guidelines by the EBA
in 2022 (EBA/CP/2022/10).
Additionally, recent market developments have caused
substantial increases in energy prices, which have consequently
generated increases in the margins required by central
counterparty entities (CCPs) to cover exposures. In response to
this issue, Delegated Regulation (EU) 2022/2311 was published
in November this year, amending Delegated Regulation (EU)
153/2013, which sets forth regulatory technical standards on
the requirements that CCPs must meet. The new Regulation
broadens the catalogue of guarantees that CCPs can accept as
eligible collateral until November 2023.
At 31 December 2022 Grupo Santander met the minimum
capital requirements established by current legislation (see note
53.d).
In June 2019, the CRR introduced the minimum TLAC
requirement, which only applies to global systemically
important banks (G-SIBs). This requirement involves two
metrics, the first is a minimum requirement for own funds and
eligible liabilities in terms of a percentage of the total risk
exposure amount (TREA), set at 18% from 1 January 2022 once
the transition period ended. The second is a metric to set a
minimum requirement for own funds and eligible liabilities in
terms of a percentage of the average exposure to the Basel III
Tier I leverage ratio of 6.75% from 1 January 2022 once the
transition period ended.
For large banks (defined as banks with total assets of more than
EUR 100 billion) or banks deemed to be systemically important
by the resolution authority, the BRRD sets a minimum
subordination requirement that will be higher between a 13.5%
of risk-weighted assets and 5% of the leverage ratio. For the
remaining institutions, the subordination requirement is set by
the resolution authority on a case-by-case basis.
On 25 October 2022, the regulation on prudential treatment for
global systemically important banks was published. This
modifies both the CRR and the BRRD as regards prudential
treatment of global systemically important banks (G-SIBs) with
a multiple point of entry (MPE) resolution strategy, as well as
methodologies for the indirect subscription of instruments
(Daisy Chains) eligible for meeting the minimum requirement
for own funds and eligible liabilities.
This Regulation, known as the 'Quick Fix', covers the following
objectives:
• Inclusion in the BRRD and CRR of references to third countries
that allow adjustment of the deduction applied for the TLAC
holding instruments issued by subsidiaries in third countries
based on excess TLAC/MREL at the said subsidiaries, as well as
the adjustment where the sum of the requirements for own
funds and eligible liabilities of G-SIBs under an MPE strategy
exceed the theoretical requirements for the same group under
a single point of entry (SPE) strategy. In other words, the
latter adjustment is based on a comparison between the two
possible resolution strategies.
For subsidiaries in jurisdictions without a resolution regime in
place, the Regulation provides for a transitional period until 31
December 2024. During this transitional period the entities
may adjust the deductions based on excess above capital
requirements in subsidiaries in third countries, if they meet
certain requirements.
• Inclusion of a deduction scheme for MREL instrument holdings
through entities of the same resolution group other than the
resolution entity. This Regulation sets a deduction for the
intermediate entity (Daisy Chains) that buy instruments issued
by another entity as a result of this the deduction. The
intermediate entity is obligated to issue the same amount that
is repurchasing to the Resolution Entity, transferring internal
MREL needs to the Resolution Entity, which will finally cover
the required amount with external MREL.
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ii. Plan for the roll-out of advanced approaches and
authorisation from the supervisory authorities
Grupo Santander remains committed to adopting the Basel II
advanced internal ratings-based (AIRB) approach for its banks,
increasing the amount of exposure managed using internal
models. This approach will be applied progressively over the
coming years. The commitment to the supervisory authority
means adapting the advanced approaches in the Group's core
markets.
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 ECB.
Grupo Santander has supervisory approval to use advanced
approaches for calculating regulatory capital for credit risk for
the parent and its main subsidiaries in Spain, the United
Kingdom and Portugal, and for some portfolios in Germany,
Mexico, Brazil, Chile, Nordic countries (Sweden, Finland and
Norway), France and the United States.
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 (see note 53.a.).
g) Events after the reporting period
On 28 December 2022 the Law establishing a new temporary
levy on credit institutions and financial credit institutions was
published in Spain (see note 27 for additional information). On 1
January 2023 an estimated amount of EUR 225 million has been
accounted for in accordance with IFRIC 21 due to this new levy.
In accordance with the agreement reached by the April 2022
general shareholders’ meeting, on 1 February 2023 the board of
directors approved a capital reduction, subject to corresponding
regulatory authorization from the ECB, of EUR 170,203,286
through the redemption of 340,406,572 shares, representing
2.03% of the capital, acquired in the first share buyback
program.
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.
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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.
– 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'.
▪ Income and expenses, at the average exchange rates for
the year.
– All components of the financial statements of the
subsidiary are translated at the closing exchange rate.
▪ 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 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. 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 Censuses (Indec) from 1 December
2016 on. Inflation during 2022 was 94.8% for the year (50.9%
at 31 December 2021). The exchange rate at 31 December 2021
has been of 189.12 Argentine pesos per euro (116.30 Argentine
pesos per euro at 31 December 2021).
At 31 December 2022, 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.
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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 and loss account 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
2022
2021
2020
(146.0) (133.3) (123.6)
(20.4)
(11.4)
(14.8)
(94.7) (105.9) (107.9)
(21.7)
(23.1)
(27.7)
(75.0)
(80.8)
(100.1)
(26.7)
(27.5)
(19.8)
Effect on
consolidated profit
2021
2022
2020
(4.4)
(2.0)
(1.5)
(2.0)
(5.9)
(1.3)
(8.6)
(2.4)
(4.1)
(4.4)
(2.3)
(1.2)
(0.9)
(15.4)
(2.0)
(12.6)
(1.1)
(2.2)
(17.1)
(10.7)
(7.9)
(2.1)
(2.5)
(1.8)
Similarly, the estimated effect on the Group’s consolidated
equity and on consolidated profit and loss account 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
2020
2021
2022
148.9 136.0 126.1
20.8
11.6
15.1
96.7 108.0 110.1
22.1
23.6
28.2
76.5
82.4
102.1
27.2
28.0
20.2
Effect on
consolidated profit
2021
2022
8.8
4.5
2.4
2.1
2020
4.2
4.5
1.5
2.0
6.0
1.4
2.3
0.9
15.7
1.1
1.2
2.0
12.8
2.2
17.4
11.0
8.0
2.2
2.6
1.8
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.
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 2022,
2021 and 2020.
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.
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.
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 2022, apart from the structured consolidated
entities, Grupo Santander does not control any company in
which it maintains a percentage of direct participation in its
share capital of less than 50%.
The appendices contain significant information on the
subsidiaries.
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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 2022, 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.
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 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.
• 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, additional to investments in the equity of investment
funds (note 8), 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.
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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).
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.
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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 5%.
• 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'.
• 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.
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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.
• 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.
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.
– Customers: includes the remaining credit, including
money market transactions through central
counterparties.
• Debt securities: 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.
• 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.
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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.
During the 2019 financial year, the European Central Bank
announced a new program of longer-term financing
operations with a specific objective (TLTRO III), which included
special conditions, including a reduction in the interest rate
applicable between June 2020 and June 2022 subject to
compliance with a certain volume of eligible loans.
Grupo Santander chose to accrue interest in accordance with
the specific periods of adjustment to market rates, so that the
interest corresponding to said period (-1%) has been recorded
in the income statement from June 2020 to June 2022, having
met the computable loan threshold that gave rise to the extra
rate on that date.
Subsequently, and as a result of the modifications introduced
by the European Central Bank in the conditions of the
program, which include changes in its interest rates, the
Group has updated the effective interest rate at which interest
accrues on said financial liability, maintaining the criterion
adopted in previous years, and considering said modifications
a change in the variable interest rate (which affects the EIR)
and is applied prospectively.
• 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), 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.
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 2022, 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.
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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.
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.
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 recorded 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.
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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
2022
2021
2020
Published
price
Internal
quotations
Models
in active
(level 2
markets
Total
and 3)
(level 1)
45,014 111,104 156,118
Published
price
quotations
in active
markets
(level 1)
39,678
Internal
Models
(level 2
Total
and 3)
77,275 116,953
Published
price
quotations
in active
markets
(level 1)
46,379
Internal
Models
(level 2
Total
and 3)
68,566 114,945
1,800
3,913
5,713
2,398
3,138
5,536
1,756
2,730
4,486
1,976
7,013
8,989
2,113
13,844
15,957
2,509
46,208
48,717
64,216
—
16,237
21,023
8,069
85,239
8,069
98,948 115,185
77,749
—
10,379
30,289 108,038
4,761
79,469
4,761
69,090
91,771
—
9,863
29,182 120,953
8,325
81,167
8,325
71,304
212
—
55,735
9,228
55,947
9,228
3,620
—
29,113
5,463
32,733
5,463
2,118
—
45,920
6,869
48,038
6,869
—
747
747
—
770
770
—
910
910
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
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
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.
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).
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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.
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 2022 amounted to EUR 330 million
(resulting in an increase of 39.2% compared to 31 December
2021) and DVA amounted to EUR 309 million (resulting in an
increase of 90.7% compared to 31 December 2021). The
increase is mainly due to movements in the credit markets,
whose spread levels have increased substantially compared to
those at the end of 2021.
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• 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.
• 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.
The CVA at 31 December 2021 amounted to EUR 237 million
(decrease of 41.9% compared to 31 December 2020) and DVA
amounted EUR 162 million (decrease of 30.4% compared to 31
December 2020). These impacts were 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.
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 2022, 2021 and 2020.
Grupo Santander has not carried out significant reclassifications
of financial instruments between levels other than those
disclosed in level 3 movement table during 2022 continuing the
trend observed in 2021 and 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.
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.
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Set forth below are the financial instruments at fair value
whose measurement was based on internal models (levels 2
and 3) at 31 December 2022, 2021 and 2020:
EUR million
Fair values calculated
using internal models at
A
2022
Level 2
Level 3
Valuation techniques
Main assumptions
ASSETS
Financial assets held for trading
Central banksB
B
Credit institutions
B
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
142,832
110,721
11,595
16,502
9,550
6,537
66,537
54,367
916
2,681
113
354
8,106
8,069
6,687
2
1,380
8,290
383
Present value method
—
Present value method
—
—
Present value method
43 Present value method
340
139 Present value method, Gaussian
Copula
4 Black-Scholes Model
39 Black's Model, multifactorial
advanced models interest rate
— Present value method
48 Black's Model, multifactorial
advanced models interest rate
110 Present value method, Advanced
stochastic volatility models and
other
—
— Present value method
— Black's Model
— Present value method, Advanced
stochastic volatility models and
other
Non-trading financial assets mandatorily at
fair value through profit or loss
Equity instruments
Debt securities
Loans and receivables
Financial assets designated at fair value
through profit or loss
Credit institutions
C
Customers
Debt securities
Financial assets at fair value through other
comprehensive income
Equity instruments
Debt securities
Loans and receivables
2,080
1,833
643
809
628
1,269 Present value method
325 Present value method
239 Present value method, swap
asset model & CDS
6,586
427
673
5,769
144
15,376
— Present value method
5 Present value method
422 Present value method
5,647
9
700 Present value method
11,869
3,498
229 Present value method
4,718 Present value method
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
Market price, Interest rates curves,
Dividends and Others
Yield curves
Yield curves and Credit curves
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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EUR million
LIABILITIES
Financial liabilities held for trading
B
Central banks
B
Credit institutions
Customers
Derivatives
Swaps
Interest rate options
Exchange rate options
Index and securities options
Futures on interest rate and variable income
Other
Short positions
Hedging derivatives
Swaps
Other
Financial liabilities designated at fair value
through profit or lossD
Liabilities under insurance contracts
163,733
98,533
5,759
9,796
12,226
64,147
51,191
3,268
769
591
807
7,521
6,605
9,214
8,142
1,072
Fair values calculated
using internal models at
2022A
Level 2
Level 3
Valuation techniques
Main assumptions
925
415
— Present value method
— Present value method
— Present value method
FX market prices, Yield curves
FX market prices, Yield curves
FX market prices, Yield curves
415
235 Present value method, Gaussian
Copula
19 Black's Model, multifactorial
advanced models interest rate
— Black-Scholes Model
42 Black's Model, multifactorial
advanced models interest rate
— Present value method
119 Present value method, Advanced
stochastic volatility models
— Present value method
14
14 Present value method
— Present value method, Advanced
stochastic volatility models and
other
Yield curves, FX market prices,
Basis, Liquidity, HPI
Yield curves, Volatility surfaces,
FX market prices, Liquidity
Yield curves, Volatility surfaces,
FX market prices, Liquidity
Yield curves, Volatility surfaces,
FX & EQ market prices, Dividends,
Liquidity
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
55,239
496 Present value method
747
— Present Value Method with
actuarial techniques
Mortality tables and interest rate
curves
A. Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.
B.
C.
D. Includes, mainly, short-term deposits that are managed based on their fair value..
Includes mainly short-term loans/deposits and repurchase/reverse repurchase agreements with corporate customers (mainly brokerage and investment companies).
Includes, mainly, structured loans to corporate clients.
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EUR million
ASSETS
Financial assets held for trading
Central banksB
B
Credit institutions
B
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
C
Customers
Debt securities
Equity instruments
Financial assets at fair value through other
comprehensive income
Equity instruments
Debt securities
Loans and receivables
Fair values calculated
using internal models at
Fair values calculated
using internal models at
A
2021
A
2020
Level 2
121,640
76,738
3,608
10,397
6,829
2,312
53,592
43,700
539
2,112
409
439
6,393
4,761
4,204
9
548
1,273
415
589
269
13,426
—
3,152
10,270
4
—
25,442
74
21,585
3,783
Level 3
7,667
537
—
—
—
24
513
224
12
182
—
41
54
—
—
—
—
1,865
1,231
366
268
418
—
—
18
400
—
4,847
821
146
3,880
Level 2
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
Level 3 Valuation techniques
8,543
740
—
—
—
10
730
272
22
Present value method
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
241
—
94
101
—
— Present Value method
— Black’s Model
Present Value method, Advanced
stochastic volatility models and other
—
934
505 Present Value method
134 Present Value method
Present Value method, swap asset model
& CDS
295
649
— Present Value method
163 Present Value method
19 Present Value method
467 Present Value method
— Present Value method
6,220
1,223 Present Value method
206 Present Value method
4,791 Present Value method
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EUR million
LIABILITIES
Financial liabilities held for trading
Central banksB
Credit institutionsB
Customers
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
Fair values calculated
using internal models at
A
2021
A
2020
Level 2
103,807
68,930
1,038
6,488
6,141
53,234
42,438
2,720
658
446
184
6,788
2,029
5,463
4,149
—
1,314
Level 3
629
160
—
—
—
160
44
26
7
67
—
16
—
—
—
—
—
Level 2
124,098
71,009
0
0
0
63,920
51,584
4,226
724
456
1,054
5,876
7,089
6,869
5,821
13
1,035
Level 3 Valuation techniques
905
295
0 Present Value method
0 Present Value method
0 Present Value method
295
81 Present Value method, Gaussian Copula
Black's Model, advanced multifactor
interest rate models
1 Black-Scholes Model
49
97
Black's Model, advanced multifactor
interest rate models
2 Present Value method
Present Value method, Advanced
stochastic volatility models and other
65
— 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 lossD
Liabilities under insurance contracts
28,644
770
469
—
45,310
610 Present Value method
910
Present Value method with actuarial
techniques
—
A. 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/deposits and repurchase/reverse repurchase with corporate customers (mainly brokerage and investment companies).
B.
C.
Includes, mainly, structured loans to corporate clients.
D. Includes, mainly, short-term deposits that are managed based on their fair value.
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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 (Held 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 securities
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 securities, 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 2022 arising
from models whose significant inputs are unobservable market
data (level 3) amounted to EUR 90 million loss (EUR 73 million
and EUR 193 million profit in 2021 and 2020, respectively).
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The table below shows the effect, at 31 December 2022, 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:
2022
Portfolio/Instrument
(Level 3)
Valuation technique
Main unobservable inputs
Range
Weighted
average
Impacts (EUR million)
Favourable
scenario
Unfavourable
scenario
Financial assets held for
trading
Debt securities
Corporate debt
Corporate debt
Government debt
Derivatives
CCS
CCS
CDS
EQ Options
EQ Options
FRAs
Fx Swap
Inflation Derivatives
Inflation Derivatives
IR Options
IRS
IRS
IRS
IRS
IRS
IRS
Others
Property derivatives
Financial assets designated at
fair value through profit or loss
Loans and advances to
customers
Loans
Mortgage portfolio
Debt securities
Discounted Cash Flows
Price based
Discounted Cash Flows
Credit spread
Market price
Discount curve
0%-20%
85%-115%
0%-10%
10.07%
100.00%
4.92%
Discounted Cash Flows
Forward estimation
Discounted Cash flows
EQ option pricing model
Local volatility
Asset Swap model
Others
Asset Swap model
Volatility option model
IR option pricing model
Asset Swap model
Discounted Cash Flows
Discounted Cash Flows
Forward estimation
Others
Prepayment modelling
Forward estimation
Option pricing model
Interest rate
Interest rate
Credit Spread
Volatility
Volatility
Interest rate
Others
Inflation Swap Rate
Volatility
Volatility
Interest rate
Credit spread
Swap rate
Interest rate
Others
Prepayment rate
Price
Growth rate
(0.7)% - 0.7%
(4)bps - 4bps
14.9bps - 42.1bps
0% - 90%
10% - 90%
0% - 6%
n.a.
0% - 10%
0% - 40%
0% - 60%
0% - 15.00%
1.25% - 6.29%
8.6% - 9.1%
(6)bps - 6.1bps
5% - n.a.
2.5% - 6.2%
0% - 2%
(5)% - 5%
0.00%
0.42bps
21.99bps
61.30%
50.00%
2.71%
n.a
3.41%
17.37%
35.82%
9.20%
3.89%
8.84%
0.13bps
n.a
4.17%
0.62%
0.00%
(1.38)
—
(8.34)
—
(0.06)
(0.05)
(0.23)
(1.05)
(1.16)
(1.37)
(0.21)
(0.14)
(0.30)
(0.05)
(2.25)
(0.02)
(0.04)
(11.58)
(0.06)
(0.53)
(5.75)
1.40
—
8.07
—
0.07
0.02
0.48
1.05
0.95
1.37
0.11
0.11
0.44
0.08
2.47
0.03
0.04
—
0.05
0.24
5.75
Discounted Cash Flows
Black Scholes model
Credit spreads
Growth rate
0.1% - 2%
(5)%- 5%
1.05%
0.00%
(0.18)
(0.79)
0.18
0.79
Other debt securities
Others
Inflation Swap Rate
0% - 10%
4.74%
(4.25)
3.83
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2022
Portfolio/Instrument
(Level 3)
Valuation technique
Main unobservable inputs
Range
Weighted
average
Impacts (EUR million)
Favourable
scenario
Unfavourable
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
(5)% - 5%
0.01bps
0.00%
(0.33)
(0.68)
0.33
0.68
Price Based
Price
90% - 110%
100.00%
(126.87)
126.87
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.
0.8% - 1.0%
(1)bp - 1bp
2.56% - 3.4%
n.a
0.88%
0bp
2.56%
(24.1)
(0.08)
(17.51)
(0.49)
—
0.08
17.51
—
Discounted Cash Flows
Interest rate
(0.4)% - 1.6%
0.63%
(0.01)
0.01
Price Based
Price
90% - 110%
100.00%
(70.04)
70.04
Volatility option model
Volatility
10% - 90%
40.73%
(0.29)
0.18
Repos/Reverse repos
Others
Long-term repo spread
n.a.
n.a.
(0.13)
—
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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
Range
Weighted
average
Impacts (EUR million)
Favourable
scenario
Unfavourable
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
Price
Volatility
Volatility
Interest rate
Volatility
Inflation Swap Rate
Volatility
Interest rate
Volatility
Interest rate
Credit spread
Inflation Swap Rate
Swap Rate
Forward estimation
Forward estimation
Others
Prepayment modelling
Interest rate
Prepayment rate
Others
Prepayment rate
Option pricing model
IR option pricing model
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%
1.03% - 3.75%
(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)bps
0.61%
61.20%
40.00%
1.78%
32.14%
50.00%
13.29%
5.91%
36.28%
10.36%
2.02%
1.81%
(2.87%)
n.a.
n.a.
n.a.
0.44%
2.5%
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%
100.00 %
—
—
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
Non-trading financial assets
mandatorily at fair value
through profit or loss
Debt securities
Corporate debt
Property securities
Equity instruments
Equities
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)
(1.90)
(1.23)
(4.14)
(5.47)
0.26
1.90
1.20
20.69
4.92
Discounted Cash Flows
Probability weighting
Margin of a reference portfolio
Growth rate
(1)bp - 1bp
0% - 5%
1bp
2.50%
(0.56)
(1.19)
0.60
1.19
Price Based
Price
90% - 110%
10.00%
(123.10)
123.10
554
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
2021
Portfolio/Instrument
(Level 3)
Valuation technique
Main unobservable inputs
Range
Weighted
average
Impacts (EUR million)
Favourable
scenario
Unfavourable
scenario
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
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)bps - 1bps
0.77% - 2.42%
n.a.
0.12%
1bps
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%
(0.50)
0.43
Repos/Reverse repos
Asset Swap Repo Model
Long-term repo spread
n.a
n.a.
(0.36)
—
555
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
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
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
Valuation technique
Main unobservable inputs
Range
Weighted
average
Impacts (EUR million)
Favourable
scenario
Unfavourable
scenario
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
HPI Forward growth rate and HPI
Spot rate
Volatility
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%
0.79% - 2.02%
2.47%-6.22%
0%-5%
0%-50%
Asset Swap Repo Model
Black Scholes model
Present value method
Long-term repo spread
HPI Forward growth rate
Credit spreads
n/a
0% - 5%
0.07% - 1.55%
Discounted Cash Flows
Price based
Interest rate
Market Price
HPI Forward growth rate and HPI
Spot rate
0% - 10%
90% - 110%
0% - 5%
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 %
1.18 %
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)
(7.24)
0.23
2.23
0.35
3.91
0.15
7.24
Property derivatives
Swaptions
Option pricing model
IR option pricing model
Property securities
Probability weighting
Non-trading financial assets
mandatorily at fair value
through profit or loss
Equity instruments
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
Government debt
Equity instruments
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
Discounted Cash Flows
Interest rate
1.1% - 1.3%
0.10 %
—
—
Equities
Price Based
Price
90% - 110%
10 %
(122.14)
122.14
Financial liabilities held for
trading
Derivatives
Cap&Floor
Volatility option model
EQ Options
Option pricing model
Volatility
HPI Forward growth rate and HPI
Spot rate
10% - 90%
0% - 5%
34.61 %
2.50 %
(0.02)
(6.35)
0.01
6.35
556
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Lastly, the changes in the financial instruments classified as
Level 3 in 2022, 2021 and 2020 were as follows:
EUR million
Financial assets held for trading
Debt securities
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 securities
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 securities
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
Hedging derivatives (Liabilities)
Swaps
Financial liabilities designated at
fair value through profit or loss
TOTAL LIABILITIES
01/01/2022
Fair value
calculated
using
internal
models
(Level 3)
537
22
2
513
224
12
182
41
54
Changes
Changes in
fair value
recognised
in profit or
loss
(116)
15
—
(131)
(20)
2
(142)
29
—
Changes in
fair value
recognised
in equity
—
—
—
—
—
—
—
—
—
Level
reclassifications Other
(15)
3
—
(18)
(23)
(1)
—
5
1
(15)
2
(1)
(16)
4
—
(1)
(26)
7
31/12/2022
Fair value
calculated
using
internal
models
(level 3)
383
42
1
340
139
4
39
48
110
Purchases/
Issuances
91
2
—
89
1
—
—
27
61
Sales/
Settlements
(99)
(2)
—
(97)
(47)
(9)
—
(28)
(13)
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
—
—
—
—
521
276
51
194
8,564
8,471
91
2
9,176
328
328
32
6
56
23
—
211
—
—
—
328
(9)
—
(9)
—
(579)
(280)
(33)
(266)
(8,029)
(7,988)
(23)
(18)
(8,716)
(97)
(97)
(16)
(14)
(44)
(19)
—
(4)
—
—
(3)
(100)
(31)
—
(5)
(26)
98
(25)
(31)
154
—
—
—
—
(49)
35
35
189
1
(19)
(32)
—
(104)
14
14
(8)
41
—
—
—
—
—
—
—
—
(172)
1
—
(173)
(172)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(22)
—
(27)
5
417
349
—
68
380
(2)
(2)
9
—
—
(11)
—
—
—
—
—
(2)
49
—
1
48
(50)
—
(1)
(49)
20
5
15
—
4
(9)
(9)
(23)
—
—
14
—
—
—
—
38
29
427
—
5
422
1,833
239
325
1,269
5,647
4,718
229
700
8,290
415
415
235
—
19
42
—
119
14
14
496
925
557
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
01/01/2021
Fair value
calculated
using
internal
models
(level 3)
740
7
3
730
272
22
241
94
101
Purchases
Sales/
/Issuances Settlements
(124)
(2)
(1)
(121)
(33)
(27)
(39)
(12)
(10)
136
20
—
116
5
14
7
18
72
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
59
—
—
59
534
122
206
206
5,681
5,597
75
9
6,410
85
85
4
2
26
23
—
30
143
228
(120)
—
(2)
(118)
(251)
(149)
(28)
(74)
(6,588)
(6,298)
(25)
(265)
(7,083)
(42)
(42)
(10)
—
(19)
(5)
(2)
(6)
0
(42)
EUR million
Financial assets held for trading
Debt securities
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 securities
Non-trading financial assets
mandatorily at fair value through
profit or loss
Customers
Debt securities
Equity instruments
Financial assets at fair value
through other comprehensive
income
Loans and advances
Debt securities
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
Changes
Changes in
fair value Changes in
fair value
recognized
in profit or recognized
loss
(181)
(2)
—
(179)
(35)
3
(27)
(51)
(69)
Level
in equity reclassifications Other
(19)
(1)
—
(18)
(18)
—
—
—
—
(15)
—
—
(15)
33
—
—
(8)
(40)
—
—
—
—
—
—
—
—
—
(11)
—
—
(11)
127
—
28
99
—
—
—
—
(65)
(138)
(138)
(36)
4
(8)
(27)
—
(71)
0
(138)
—
—
—
—
—
—
—
—
(228)
(37)
(43)
(148)
(228)
—
—
—
—
—
—
—
—
—
—
(163)
(163)
—
—
485
(3)
17
471
(241)
(173)
(68)
—
66
(21)
(21)
3
—
—
(22)
—
(2)
4
—
1
3
36
3
9
24
3
—
1
2
24
(19)
(19)
2
—
(22)
1
—
—
(289)
(310)
5
(14)
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
558
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
EUR million
Financial assets held for trading
Debt securities
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 securities
Non-trading financial assets
mandatorily at fair value through
profit or loss
Loans and advances to customers
Debt securities
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
Changes
fair value Changes in
fair value
recognised
01/01/2020
Fair value
calculated
using
internal
models Purchases/
(level 3)
598
65
—
533
182
8
177
95
71
Sales/
Issuances Settlements
(98)
(27)
—
(71)
(8)
—
(12)
(43)
(8)
52
7
3
42
—
—
15
25
2
Changes in
recognised
in profit or
loss
330
1
—
329
116
15
61
85
52
Level
in equity reclassifications Other
(97)
(39)
—
(58)
(10)
(1)
—
(30)
(17)
(45)
—
—
(45)
(8)
—
—
(38)
1
—
—
—
—
—
—
—
—
—
31/12/2020
Fair value
calculated
using
internal
models
(level 3)
740
7
3
730
272
22
241
94
101
664
50
32
582
1,601
376
675
550
3,788
6,651
290
290
115
1
34
88
2
50
784
1,074
280
164
—
116
120
104
—
16
(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)
17
(1)
3
15
(36)
12
(63)
15
—
311
130
130
(7)
2
6
95
—
34
(12)
118
—
—
—
—
—
—
—
—
(91)
(50)
—
(41)
(119)
(30)
2
(91)
(176)
—
(1)
(175)
(340)
(31)
(336)
27
649
163
19
467
934
295
134
505
(390)
(390)
571
316
1,072
459
6,220
8,543
—
—
—
—
—
—
—
—
—
—
(96)
(96)
(26)
—
—
(70)
—
—
(55)
(55)
(9)
(2)
—
(29)
—
(15)
(32)
(128)
(131)
(186)
295
295
81
1
49
97
2
65
610
905
559
2022 Annual report
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.
• Unrealized capital gains on financial assets at fair value
through other comprehensive income classified as 'Non-
current assets held for sale' because they form part of a
disposal group or a discontinued operation that are recorded
in the equity balancing entry 'Other accumulated
comprehensive income - Items that can be reclassified in
income - Non-current assets as 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.
560
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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.
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.
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• 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.
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.
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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 2022, 2021 and 2020:
31 December 2022
EUR million
Gross amount
of
financial
assets
176,814
Gross amount
of financial
assets
offset in the
balance sheet
(101,743)
Net amount
of financial
assets
presented in
the balance
sheet
75,071
127,561
304,375
(48,949)
(150,692)
78,612
153,683
31 December 2021
EUR million
Gross amount
of
financial
assets
101,486
Gross amount
of financial
assets
offset in the
balance sheet
(42,432)
Net amount
of financial
assets
presented in
the balance
sheet
59,054
72,023
173,509
(13,916)
(56,348)
58,107
117,161
31 December 2020
EUR million
Gross amount
of
financial
assets
136,437
Gross amount
of financial
assets
offset in the
balance sheet
(60,975)
Net amount
of financial
assets
presented in
the balance
sheet
75,462
82,865
219,302
(16,078)
(77,053)
66,787
142,249
Assets
Derivatives
Reverse
repurchase
agreements
Total
Assets
Derivatives
Reverse
repurchase
agreements
Total
Assets
Derivatives
Reverse
repurchase
agreements
Total
31 December 2022
EUR million
Gross amount
of
financial
liabilities
175,862
Gross amount
of financial
liabilities
offset in the
balance sheet
(101,743)
Net amount
of financial
liabilities
presented in
the balance
sheet
74,119
148,715
324,577
(48,949)
(150,692)
99,766
173,885
31 December 2021
EUR million
Gross amount
of
financial
liabilities
101,462
Gross amount
of financial
liabilities
offset in the
balance sheet
(42,432)
Net amount
of financial
liabilities
presented in
the balance
sheet
59,029
73,424
174,886
(13,916)
(56,348)
59,508
118,537
31 December 2020
EUR million
Gross amount
of
financial
liabilities
132,313
Gross amount
of financial
liabilities
offset in the
balance sheet
(60,975)
Net amount
of financial
liabilities
presented in
the balance
sheet
71,338
77,925
210,238
(16,078)
(77,053)
61,847
133,185
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 2022, Grupo Santander has offset other items
amounting to EUR 1,024 million (EUR 1,188 million and EUR
1,194 million at 31 December 2021 and 2020, respectively).
At 31 December 2022 the balance sheet shows the amounts
EUR 141,529 million (EUR 106,430 million and EUR 130,653
million at 31 December 2021 and 2020) on derivatives and
repos as assets and EUR 157,572 million (EUR 104,130 million
and EUR 122,416 million at 31 December 2021 and 2020,
respectively) 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.
Quantitative Within the quantitative thresholds, two types are
criteria
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.
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 consecutive days on material
arrears for principal, interest or expenses contractually
agreed.
This category also includes all loan balances for a client
when the operations with more than 90 consecutive days
on material arrears are greater than 20% of the amounts
pending collection.
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 consecutive days on material
arrears 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 consecutive days
on material arrears.
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 of 90 consecutive days on material arrears.
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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 balances of 90
consecutive days on material arrears.
• 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:
- 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.).
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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 complexity of the estimation in this exercise has been
derived from the current macroeconomic scenario as a
consequence of the war in Ukraine, as well as the increasing
level of inflation and interest rates, and the difficulties in the
supply chains, which has generated some uncertainty in the
evolution of the economy.
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 consecutive days past due material
balances with respect to any significant credit obligation.
Grupo Santander has partially and voluntarily aligned during
2022 the accounting definition of Stage 3, as well as 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 has been done
taking into account the criteria of IFRS 9 as well as the
accounting principles of unbiased presentation of financial
information. Grupo Santander has registered an increase in the
default rate at around 19 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).
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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.
• 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
• The existence of limitations imposed by each local unit´s
units for certain types of assets.
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.
• 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:
On the basis of the foregoing, the following types of guarantees
are considered to be effective:
• 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.
• Estimated marketing or sales costs.
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.
• Mortgage guarantees on properties, which are first charge,
duly constituted and registered. Real estate includes:
– Buildings and finished building elements.
– Urban and developable land in order.
– Other real estate, including buildings under construction,
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.
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v. Impairment individual assessment scope
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.
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 2022 are as
follows: Gloval Valuation, S.A.U., Tinsa Tasaciones Inmobiliarias,
S.A.U., CBRE Valuation Advisory, S.A., Valoraciones
Mediterráneo, S.A. y Sociedad de tasación, 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 2022 the fair value less costs to sell of non-
current assets held for sale exceeded their carrying amount by
EUR 631 million (EUR 567 million at 31 December 2021);
however, in accordance with the accounting standards, this
unrealised gain could not be recognised.
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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
1
and (iii) land.
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.
In the case of real estate assets foreclosed in Spain, which
represent 90% 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 characteristics of the properties,
2
filtering by type
, surface area range 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.
1. The assets in a situation of 'stopped development' are included under 'land
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.
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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:
• 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.
• 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 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:
• 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.
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• 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.
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.
• 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
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 annual tangible asset depreciation charge is recognised in
the consolidated income statement and are essentially
equivalent to the following amortization percentages
(determined based on the years of estimated useful life, on
average, of the different elements):
Buildings for own use
Furniture
Fixtures
Office and IT equipment
Lease use rights
Average
annual rate
2.7%
8.4%
8.4%
23.6%
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.
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.
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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
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.
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.
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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:
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.
• 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 (CGU) (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.
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 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.
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▪ 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.
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.
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 liabilities (assets)
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.
▪ 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 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 2022 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.
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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.
▪ 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.
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 considered contracts that require the
issuer to make specific payments to reimburse the creditor for
the loss it incurs when a specific debtor defaults on its due date
payment obligation in accordance with the original or modified
conditions of debt instrument, regardless of its legal form,
which may be, among others, a deposit, financial guarantee,
insurance contract or credit derivative.
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.
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.
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.
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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 employees, or they are returned
to reimburse employee benefits already paid by Grupo
Santander.
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 publicly announced or objective facts concerning its
implementation have been disclosed.
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.
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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 374.6 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.
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.
aa) Residual maturity periods
In note 50, it is provided an analysis of the maturities of the
balances of certain items in the consolidated balance sheet.
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 instruments, equity-instrument-based
payments, transfers between equity items and any other
increases or decreases in consolidated equity.
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ad) Consolidated statement of cash flows
The following terms are used in the consolidated statements of
cash flows with the meanings specified:
• 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 2022 Grupo Santander received interest amounting to
EUR 69,282 million (EUR 48,081 and EUR 43,953 in 2021 and
2020, respectively) and paid interest amounting to EUR 23,390
million (EUR 12,738 and EUR 13,690 in 2021 and 2020,
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.
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. Tender offer for shares of Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander
México
On 21 October 2022, Banco Santander, S.A. ('Banco Santander')
announced that it intends to make concurrent cash tender offers
to acquire all of the shares of Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander
México ('Santander Mexico') in Mexico (Series B shares) and
United States (American Depositary Shares ('ADSs')) which are
not owned by Grupo Santander, which amount to approximately
3.76% of Santander Mexico’s share capital.
The offers were launched on 7 February 2023 and will be
settled on 13 March, 2023. The shareholders who tender their
shares in the offer will receive 24.52 Mexican pesos
(approximately 1.20 euro) in cash per Santander Mexico share
(and the US dollar equivalent of 122.6 Mexican pesos in cash
per ADS based on the US dollar/Mexican peso exchange rate on
the expiration date of 8 March, 2023), which corresponds to the
book value of each Santander Mexico Share in accordance with
Santander Mexico’s quarterly report for the fourth quarter of
2022 according to applicable law.
Following the tender offers, Banco Santander intends to (a)
cancel the registration of the Series B Shares in the National
Securities Registry of the Mexican National Banking and
Securities Commission ('CNBV') and delist such Series B Shares
from the Mexican Stock Exchange ('BMV'), and (b) remove the
ADSs from listing on the New York Stock Exchange and the
Series B Shares from registration with the US Securities and
Exchange Commission ('SEC') in the United States. Such
cancellation has been approved by Santander Mexico's share
capital at an extraordinary general shareholders' meeting held
on 30 November 2022, with the favourable vote of the holders
of the shares representing more than 95% of Santander
Mexico’s shares, as required by applicable law.
Consummation of the offers is subject to certain conditions,
including the absence of any material adverse change in the
financial condition, results of operations or prospects of
Santander Mexico.
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ii. Agreement to acquire a significant holding in Ebury
iv. Acquisition of Amherst Pierpont Securities LLC, a US fixed-
Partners Limited
income broker dealer
On 28 April 2020, the investment announced on 4 November
2019 in Ebury, a payments and foreign exchange platform for
SMEs, was completed. The transaction involved a total
disbursement of GBP 357 million (EUR 409 million) of which
GBP 70 million (approximately EUR 80 million) was for new
shares. By the end of 2019, 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,
which gave the Group 50.38% of the economic rights of the
company, without the conditions to obtain control being met,
this interest was recorded under 'Investments - Associated
entities' in the consolidated balance sheet.
In April 2022 Grupo Santander acquired a new package of
shares for GBP 113 million (EUR 135 million) and subscribed in
full to a new capital increase, paying an additional GBP
60 million (EUR 72 million). Following these transactions, the
Group holds 66.54% of the economic rights and control of the
company.
The total value of the net assets identified in the business
combination amounted to EUR 413 million, mainly intangible
assets (IT developments, customer lists and brand) and resulted
in the recognition of goodwill of EUR 316 million.
No gain or loss was recorded for the difference between the
book value and the fair value of the previous holding as this
difference was not significant.
The amount contributed by this business to the Group's net
attributable profit since the date of acquisition is immaterial.
Similarly, the result that this business would have contributed
to the Group if the transaction had been carried out on 1 January
2022 would also have been immaterial.
iii. 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, with a decrease of
reserves of EUR 487 million and a decrease of EUR 1,752 million
of minority interests.
On 15 July 2021, Santander Holdings USA, Inc. reached an
agreement to acquire Amherst Pierpont Securities LLC, 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 450 million (around EUR
405 million). The operation was closed on 11 April 2022 once
the pertinent regulatory approvals have been obtained.
Immediately after the acquisition, SHUSA has lent financing to
the company for an amount of USD 163 million (approximately
EUR 147 million), which the company will use to cancel debt
with third parties. Amherst Pierpont Securities LLC will become
part of Santander Corporate & Investment Banking (Santander
CIB) Global business line.
The business combination meant the recognition of a goodwill
of EUR 158 million and EUR 24 million of intangible assets
(mainly relationships with customers) identified in the purchase
price allocation, without other relevant value adjustments to
net assets of the business.
The amount contributed by this business to the group net
attributable profit since the date of acquisition is not material.
Similarly, the result that this business would have brought to
the group if the transaction had been carried out on January 1,
2022 is also immaterial.
v. 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 (8.3% of the share capital of
Santander México at that time). 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,
Grupo Santander holds approximately 96.2% of Santander
México share capital.
The shareholders who tendered their shares in the offer
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 meant a disbursement of approximately EUR 335 million.
This transaction entailed a decrease of reserves of EUR
41 million and a decrease of EUR 294 million of minority
interests.
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vi. 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.
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.
c) Offshore entities
Spanish regulation
According to current Spanish regulation (Law 11/2021, of 9 July,
Royal Decree 1080/1991, of 5 July and Order HFP/115/2023, of
9 February), 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 two
other subsidiaries incorporated in non-cooperative jurisdictions
that are tax resident in the UK and subject to British tax law.
i. Offshore subsidiaries
At the reporting date, Grupo Santander has only one subsidiary
resident in Jersey, Abbey National International Limited, with
activity of services. In 2022, this subsidiary has contributed to
Santander’s consolidated profit with immaterial losses and has
no employees.
ii. Offshore branches
Grupo Santander also has three offshore branches in the
Cayman Islands, the Isle of Man and 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).
These three offshore branches have a total of 155 employees as
of December 2022.
iii. Subsidiaries in non-cooperative jurisdictions that are tax
resident in the United Kingdom
Grupo Santander also has two subsidiaries that were
incorporated in offshore jurisdictions (one in Bermuda without
activity and one in Guernsey with leasing activity) but are not
deemed offshore entities because they only operate from and
are tax resident in the UK and, thus, are subject to British tax
law.
Additionally, a subsidiary incorporated in Guernsey but tax
resident in the UK was liquidated in 2022.
iv. Other offshore holdings
From Brazil, Grupo Santander manages Santander Brazil Global
Investment Fund SPC, a segregated portfolio company located
in the Cayman Islands. Grupo Santander also has other non-
controlling financial interest of a reduced amount in entities
located in non-cooperative jurisdictions.
The European Union (EU)
As of February 2023, the EU blacklist comprises 16 jurisdictions
where Santander is only present in The Bahamas. In this
jurisdiction, Santander has two banks without third-party
activity, Santander Bank & Trust Ltd. and Santander Investment
Bank Limited, and one branch of the Swiss bank Banco
Santander International SA.
These three entities have a total of 27 employees as of
December 2022.
Additionally, the EU grey list comprises 18 jurisdictions which
have sufficiently committed to adapt their legislation to
international standards, subject to monitoring by the EU. Within
these jurisdictions, Santander is mainly present in Hong Kong
through a branch.
Organization for Economic Cooperation and Development
(OECD)
Grupo Santander is not present in any jurisdictions non-
compliant with both OECD standards on transparency and
exchange of information for tax purposes (Automatic exchange
of information standard -AEOI- and Exchange of information on
request standard -EOIR-) according to the last annual report of
the OECD Global forum on transparency and exchange of
information for tax purposes released in November 2022.
However, the Group is present in The Bahamas and Chile.
Although these territories have complete legal and regulatory
frameworks in place for the application of the AEOI standard,
they need to improve the effectiveness of this standard.
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1
3
3
2
2
3
1
1
1
1
1
EUR million
To dividends
—
—
—
—
A
Dividend paid at 31 December 2022
B
Complementary dividend
The Group's presence in offshore territories at the end of 2022
is as follows:
Council of the
EU blacklist
Sub. Branch
OECDa
Sub. Branch
Spanish
legislation
Sub. Branch
1
1
1
Presence of the
Group in non-
cooperative
jurisdictions
Jersey
Isle of Man
b
Guernsey
b
Bermuda
Cayman Islands
The Bahamas
2022
c
2021
a
Jurisdictions non-compliant with both OECD standards on transparency and
exchange of information for tax purposes (AEOI and EOIR). Jersey, the Isle of
Man and the Cayman Islands continue to fully comply with both OECD
standards.
b Additionally, there is one subsidiary constituted in Guernsey and one in
c
Bermuda, but residents for tax purposes in the UK.
In 2021 The Bahamas was not included in the EU blacklist. One subsidiary in
The Bahamas was merged in 2022.
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
2022, 2021 and 2020.
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 current annual results that the
board of directors will propose for approval by the shareholders
at the annual general meeting is as follows:
1,942
979
963
5,979
7,921
C
To voluntary reserves
Net profit for the year
A. Total amount paid as interim dividend, at the rate of EUR 5.83 fixed cents per
eligible share (recorded in 'Shareholders' equity - Interim dividends').
B. Fixed dividend of EUR 5.95 gross cents per eligible share, payable in cash as
from 2 May 2023. The total amount has been estimated on the assumption
that, after the implementation of the second buyback program charged to the
results of 2022, the number of the Bank's outstanding shares eligible for the
dividend will be 16,190,866,119. Therefore, the total dividend may be higher if
fewer shares are acquired in the buyback program than expected, and it will be
lower in the opposite case.
C. Estimated amount corresponding to a final dividend of EUR 963,356,534. 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 2022
shareholder remuneration policy that is implemented through
cash dividends (the interim dividend paid in November 2022 of
EUR 5.83 cents per share with dividend entitlement, approved
by the board of directors on 27 September 2022, and the
complementary dividend expected to be paid as of 2 May 2023,
of EUR 5.95 cents per share with the dividend entitlement,
proposed by the board of directors on 27 February 2023, and
therefore subject to approval by the General Meeting of
Shareholders.
In addition, the 2022 remuneration policy also includes
expected 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 charged
to the results of 2022, amounting to approximately EUR
979 million, was completed between November 2022 and
January 2023. A second share buyback program charged to
2022 results amounting to approximately EUR 921 million is
planned to be deployed. A capital reduction resolution has been
also submitted to the General Meeting of Shareholders to
redeem the shares acquired in the buyback program, subject to
the relevant regulatory authorization.
Finally, and although it is not part of the remuneration charged
to the 2022 financial year, it should be noted that pursuant to
the resolution of the Bank's General Meeting of Shareholders
held on 1 April 2022, on 2 May 2022 the Bank paid a
complementary cash dividend of EUR 5.15 cents per share
charged to the results of the 2021 financial year for an amount
of EUR 869 million (see Statement of Changes in total Equity).
Finally, also charged to the results of 2021, the Bank
implemented a repurchase program for an approximate amount
of EUR 865 million, which ended on 18 May 2022.
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The provisional accounting statement, prepared by the Bank
pursuant to legal requirements, evidencing the existence of
sufficient liquidity for the payment of the interim dividend on
the date and for the amount mentioned above, is as follows:
EUR million
Profit before taxes
Tax expense
Dividends paid in cash
Distributable maximum amount
Available liquidity
31 August 2022
3,829
(69)
—
3,760
130,519
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 (PPCC) recognised in equity and the capital
perpetual preference shares (PPCA) (see note 23), 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 PPCC
and PPCA (EUR million)
(note 23)
Of which:
Profit (Loss) from
discontinued
operations (non
controlling interest
net) (EUR million)
Profit (Loss) from
continuing
operations (non-
controlling interest
and PPCC and PPCA
net)
(EUR million)
Weighted average
number of shares
outstanding
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)
2022
2021
2020
9,605
8,124
(8,771)
(529)
9,076
(566)
7,558
(552)
(9,323)
—
—
—
9,076
7,558
(9,323)
16,848,344,667 17,272,055,430 17,316,288,908
16,848,344,667 17,272,055,430 17,316,288,908
0.539
0.438
(0.538)
—
—
—
0.539
0.438
(0.538)
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 (PPCC) recognised in
equity and the capital perpetual preference shares (PPCA) (see
note 23), 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
securities).
Accordingly, diluted earnings/loss per share were determined as
follows:
Profit (Loss) attributable
to the Parent (EUR
million)
Remuneration of PPCC
and PPCA (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 PPCC
and PPCA) (EUR
million)
Weighted average
number of shares
outstanding
Dilutive effect of
options/rights on shares
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)
2022
2021
2020
9,605
8,124
(8,771)
(529)
(566)
(552)
—
9,076
—
7,558
—
(9,323)
—
—
—
9,076
7,558
(9,323)
16,848,344,667 17,272,055,430 17,316,288,908
55,316,206
48,972,459
Not applicable
16,903,660,873 17,321,027,889 17,316,288,908
0.537
0.436
(0.538)
—
—
—
0.537
0.436
(0.538)
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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 2022 and 2021:
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 maximum remuneration established by the annual general
meeting was EUR 6 million in 2022 (EUR 6 million in 2021), with
two components: (a) an annual emolument and (b) attendance
fees.
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 2022 amounted to EUR 4.7 million (EUR 4.8 million in 2021).
Annual allotment
In accordance with the remuneration policy approved at the
general shareholders' meeting on 1 April 2022, the amounts for
serving and holding roles on the board and committees was the
same amount as initially approved for 2021, with the exception
of the yearly amount for serving on the board of directors,
which was modified from EUR 90,000 to EUR 95,000. The
annual amounts received individually by the directors in 2022
and 2021 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
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
Chair of the audit committee
Chair of the appointments committee
Chair of the remuneration committee
Chair of the risk supervision, regulation and
compliance committee
Chair of the responsible banking, sustainability
and culture committee
Chair of the innovation and technology committee
A
Lead independent director
Non-executive Vice Chair
2022
95,000
170,000
40,000
25,000
25,000
2021
90,000
170,000
40,000
25,000
25,000
40,000
40,000
15,000
15,000
25,000
70,000
50,000
50,000
25,000
70,000
50,000
50,000
70,000
70,000
50,000
70,000
110,000
30,000
50,000
70,000
110,000
30,000
A. Bruce Carnegie-Brown, in view of the positions held on the board and its
committees, in particular as Chair of the appointments and remuneration
committees and as lead independent 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.
Attendance fees
The directors receive fees for attending board and committee
meetings, excluding executive committee meetings, where no
attendance fees are received.
For 2022 the board voted to keep the same amounts set out in
the 2021 policy.
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Comparative of executive remuneration (Chair and CEO)
The board voted to maintain the same benchmark incentive for
Ana Botín and José Antonio Álvarez in 2022 as in 2021.Variable
contributions to pensions were not modified in 2022, so the
amounts are the 22% of the 30% of the last three assigned
bonus' average.
In 2022, the good business performance (which enabled Banco
Santander to reach a 13.37% underlying RoTE, above the end of
2021), the excellent execution of our strategy (with the highest
attributable profit ever), and the efficient capital management,
boosted the bonus pool once again and thus the variable
remuneration of corporate centre employees, (including
executive directors).
The fees for 2022 and 2021 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)
2022
2021
2,600
2,600
1,700
1,700
1,500
1,500
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
2024 and 2025) will be conditional on none of the malus
clauses being triggered.
– The accrual of the third, fourth, and fifth portion (payment
in 2026, 2027 and 2028), is linked to objectives related to
the period 2022—2024 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, and these
targets can reduce these amounts and the number of
deferred instruments, or increase them up to a maximum
achievement ratio of 125%, so executives have the
incentive to exceed their targets.
• 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 instruments, consisting of Banco Santander,
S.A. shares, Banco Santander, S.A. share options and restricted
stock units (RSUs) of PagoNxt, split as:
◦ the amount of PagoNxt RSUs set for each year; and
◦ the rest, shares and share options in equal parts, unless the
director chooses to receive options only.
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iii. Detail by director
The detail, by bank director, of the short-term (immediate) and
deferred (not subject to long-term goals) remuneration for
2022 and 2021 is provided below:
EUR thousand
2022
Bylaw-stipulated emoluments
Annual emolument
BoardF
95
Executive
committee
170
Audit
committee
—
Appointments
committee
—
Remuneration
committee
—
Risk
supervision,
regulation
and
compliance
oversight
committee
—
Responsible
banking,
sustainability
and culture
committee
—
Innovation
and
technology
committee
74
Attendance
fees and
commissions
41
Ana Botín
José Antonio
Álvarez
Bruce Carnegie-
Brown
Homaira Akbari
Javier BotínA
B
Álvaro Cardoso
C
R.Martín Chávez
Sol Daurella
Henrique de Castro
Gina Díez Barroso
1
Luis Isasi
Ramiro Mato
Sergio Rial
Belén Romana
Pamela Walkden
Germán de la
D
Fuente
E
Glenn Hutchins
Total 2022
Total 2021
95
280
95
95
24
48
95
95
95
95
95
95
95
95
170
170
—
—
—
—
—
—
—
170
170
—
170
—
66
3
1,561
1,536
—
—
1,020
1,020
—
—
40
—
—
—
—
40
—
—
40
—
40
110
31
—
301
270
—
75
—
—
—
13
25
—
25
—
—
—
—
—
—
1
139
126
—
75
—
—
—
8
25
25
—
25
—
—
—
—
—
1
159
175
—
—
—
—
—
11
—
—
—
40
40
—
110
40
—
—
241
268
—
—
15
—
4
—
15
—
—
—
65
—
15
—
—
—
114
125
25
25
25
—
—
29
—
25
—
—
—
—
25
—
—
1
229
245
A. All amounts received were reimbursed to Fundación Botín.
B.Stepped down as director on 1 April 2022.
C.Stepped down as director on 1 July 2022.
D.Director since 1 April 2022.
E.Director since 20 December 2022.
F.Also includes emoluments for other roles in the board.
1. Includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España board and committees meetings
39
75
69
34
11
40
70
76
52
82
90
36
94
78
40
4
930
1,036
587
2022 Annual report
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Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
2022
2021
Short-term and deferred (not subject to long-term goals) salaries of
executive directors
Variable - immediate
payment
In cash
1,688
1,139
In
instruments
1,689
1,140
Fixed
3,176
2,541
Deferred variable
In cash
1,013
684
In
instruments
1,013
684
Pension
Other
Total contribution remuneration
961
1,081
8,579
1,758
811
6,188
Total
11,001
9,086
Total
11,436
9,160
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,717
6,467
—
2,827
3,079
—
2,829
3,079
—
1,697
1,847
—
1,697
1,848
—
14,767
16,320
—
1,892
1,824
—
—
—
—
—
—
—
—
1,000
—
—
—
—
—
—
3,719
3,542
700
244
129
39
147
230
261
172
1,412
500
131
549
323
137
10
25,071
700
248
129
183
374
239
267
130
1,406
499
879
533
303
—
—
—
26,487
Ana Botín
José Antonio Álvarez
Bruce Carnegie-
Brown
Homaira Akbari
A
Javier Botín
B
Álvaro Cardoso
C
R.Martín Chávez
Sol Daurella
Henrique de Castro
Gina Díez Barroso
1
Luis Isasi
Ramiro Mato
Sergio Rial
Belén Romana
Pamela Walkden
Germán de la
D
Fuente
E
Glenn Hutchins
Total 2022
Total 2021
Footnotes in previous table.
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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
2022
2021
Variable subject to long-term
objectives
1
In cash
In
shares
In
share
options
In RSUs
Total
Total
1,064
404
404
255
2,128
2,316
718
1,782
273
677
273
677
172
428
1,436
3,564
1,563
3,880
Ana
Botín
José
Antonio
Álvarez
Total
1. Corresponds with the fair value of the maximum amount they are entitled to in
a total of 3 years: 2026, 2027 and 2028, 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 2022 and the levels
of achievement of similar plans in comparable entities, the fair
value considered is 70% of the variable remuneration subject to
long-term objectives. (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 2022 and 2021
variable remuneration plans.
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 2022
and 2021 the Bank’s directors did not receive any remuneration
in respect of these representative duties.
On the other hand, in their personal capacity, in 2022 Álvaro
Cardoso was paid BRL 150 thousand (EUR 28 thousand) as
member of the sustainability committee of Banco Santander
Brasil S.A., Homaira Akbari was paid USD 169 thousand (EUR
161 thousand) as member of the board of Santander Consumer
USA Holdings, Inc. and EUR 200 thousand as member of the
board of PagoNxt S.L., and Henrique de Castro and R. Martín
Chávez were each paid the same EUR 200 thousand as
members of the board of PagoNxt S.L. Likewise, Pamela
Walkden was paid GBP 125 thousand (EUR 147 thousand) as
member of Santander UK plc and Santander UK Group Holdings.
And Sergio Rial, as non-Executive Chair of Ebury Partners
Limited received a total pay of GBP 244 thousand (EUR
286 thousand) and as Chair of board of directors of Banco
Santander Brasil S.A. was paid BRL 10,981 thousand (EUR
2,000 thousand).
Likewise, Luis Isasi was paid EUR 1,000 thousand as non-
Executive Chair of the board of Santander España and for
attending its board and committee meetings (amounts paid by
Banco Santander, S.A.).
Additionally, Héctor Grisi has received at the end of 2022 a
payment of EUR 2,500 thousand as relocation expenses, for
settling in Spain to carry out his CEO role with effect from 1
January 2023.Because the payment is based on his annual
allowance capitalized over five years, in accordance with
corporate practices and policies, if the CEO terminates his
contract before said period, he will reimburse the proportional
share of that amount.
c) Post-employment and other long-term benefits
In 2012, the contracts of Ana Botín and 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.
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 2022 and 2021 for retirement
pensions were as follows:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2022
1,081
811
1,892
2021
1,041
783
1,825
Following is a detail of the balances relating to each of the
executive directors under the welfare system as of 31
December 2022 and 2021:
EUR thousand
Ana Botín
José Antonio Álvarez
Total
2022
46,725
18,958
65,683
2021
48,075
18,821
66,896
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
2022
20,988
17,345
38,333
2021
21,489
18,028
39,517
The insured capital has been modified in 2018 for Ana Botín and
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 2022 and 2021, the Group has disbursed a total amount
of EUR 48.2 million and EUR 25.5 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 2022 and 2021, no life insurance
commitments exist for the Group in respect of any other
directors.
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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 2022 and 2021 due to their participation
in the deferred variable remuneration systems, which
instrumented a portion of their variable remuneration relating
to 2022 and prior years, as well as on the deliveries, in shares or
in cash, made to them in 2022 and 2021 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 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
Grupo Santander’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.
Similarly, Banco Santander can claw back 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.
2021 was the last financial year in which a payment was made
in application of this plan.
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 variable remuneration of executive directors and certain
executives (including senior management) corresponding to
2022 has been approved by the board of directors and
implemented through the seventh 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 for executive
directors, to be paid, where appropriate, in five portions,
provided that the conditions of permanence in the Group,
according to the following accrual scheme:
• The accrual of the first and second parts (instalments in 2024
and 2025) is conditional on none of the malus clauses being
triggered.
• The accrual of the third, fourth and fifth parts (instalments in
2026, 2027 and 2028) is linked to non-concurrence of malus
clauses and the fulfilment of certain objectives related to the
2022‑ 2024 period. These objective and their respective
weights are:
– Banco Santander’s consolidated Return on tangible equity
(RoTE) target in 2024 (weight of 40%).
– 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 (weight of 40%).
– Five ESG (environmental, social and governance) metrics.
Each of the five Responsible banking targets have the
same weighting (and total weight of ESG objective, 20%).
The degree of compliance with the above objectives determines
the percentage to be applied to the deferred amount in these
three annuities, with a maximum achievement ratio of 125%, so
executives have the incentive to exceed their targets.
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 instruments.
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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.
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.
And among the specific cases that could lead to the application
of these clauses, of note the restatement of the annual financial
statements that does not result from a regulatory change, but
from incorrect application of accounting regulations or criteria,
as appreciated by supervisors and as long as it results in a lower
variable remuneration to be settled than that initially accrued or
where no remuneration would have been paid in accordance
with the variable remuneration system of the Entity or a specific
unit.
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.
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 2021, 31 December 2021 and 31 December 2022, as
well as the gross shares that were delivered to them in 2021
and 2022, 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 the deferred conditional and linked to multi-year
objectives in 2016, 2017, 2018, 2019, 2020, 2021 and 2022
were formalized.
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Share-based variable
remuneration
2016 variable remuneration
Ana Botín
José Antonio Álvarez
2017 variable remuneration
Ana Botín
José Antonio Álvarez
2018 variable remuneration
Ana Botín
José Antonio Álvarez
2019 variable remuneration
Ana Botín
José Antonio Álvarez
2020 variable remuneration
Ana Botín
José Antonio Álvarez
2021 variable remuneration
Ana Botín
José Antonio Álvarez
1
2022 variable remuneration
Ana Botín
José Antonio Álvarez
Maximum
number of shares
to be delivered 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)
110,029
74,264
184,293
94,083
62,919
157,001
413,215
276,129
689,344
532,316
355,749
888,065
310,615
168,715
479,330
—
—
—
—
—
—
—
—
—
—
—
—
—
(124,246)
(67,486)
(191,732)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(103,304)
(69,032)
(172,336)
(106,463)
(71,150)
(177,613)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(55,014)
(37,133)
(92,147)
(31,361)
(20,973)
(52,334)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,480,622
999,259
2,479,881
—
—
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.
Sergio Rial's 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, as of 31 December 2022, Rodrigo Echenique maintains the right to a maximum of 150,979 shares arising from his participation in the corresponding plans
during his term as executive director.
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Maximum
Instruments
number of matured but
not
Shares
delivered in
2022
(immediate
Shares
delivered in
Shares
2022
delivered in
(deferred 2022 (deferred
(deferred
consolidated payment 2021 payment 2020 payment 2019 payment 2018 payment 2017 payment 2016
variable
at January 1,
20222
remuneration)
variable
remuneration) remuneration) remuneration) remuneration) remuneration)
Shares
delivered in
2022
(deferred
Shares
delivered in
2022
(deferred
Shares
delivered in
2022
variable
variable
variable
variable
Variable
2022
remuneration Maximum
number of
(Maximum shares to be
number of delivered at
December
31, 2022
shares to be
delivered)
shares to be
delivered at
December 31,
2021
55,015
37,131
92,146
62,722
41,946
104,668
—
—
—
—
309,911
207,097
517,008
(206,618)
(138,072)
(344,689)
425,853
284,599
710,452
186,369
101,229
287,598
1,480,622
999,259
2,479,881
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(592,249)
(399,704)
(991,953)
—
—
—
—
—
—
—
—
—
—
(37,274)
(20,246)
(57,520)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(34,431)
(23,008)
(57,440)
(106,463)
(71,150)
(177,613)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(55,015)
(37,131)
(92,146)
(31,361)
(20,973)
(52,334)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31,361
20,973
52,334
68,862
46,017
114,879
319,390
213,449
532,839
149,095
80,983
230,078
888,373
599,555
1,487,928
585,079
394,916
979,995
585,079
394,916
979,995
2. After reviewing the results of the 3rd cycle of the deferred variable remuneration plan linked to multi-year targets (2018), the board of directors confirmed in 2022,
upon recommendation from the remuneration committee, a 33.3% achievement of the long-term metrics of the plan (as the following level of achievement was met
during 2018-2020 period: CET1 at 100% at 2020 year-end (the target was 11.30%); underlying EPS growth at 0% (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 2022, 2023
and 2024 in connection with this plan. Therefore, regarding the maximum number of shares to be delivered at December 31 of 2021 in relation with the last three
payments of the 2018 variable remuneration (309,911 and 207,097 shares in the case of Ana Botín and José Antonio Álvarez, respectively) only one third have been
delivered (corresponding to the 33.3% of the achievement mentioned above), with the rest of shares definitively not collected as "matured but not consolidated".This
applies to all persons under this plan.
Furthermore, the maximum number of share options to be
delivered regarding the 2022 variable remuneration plan is
1,575,335 options in the case of Ana Botín, and 1,063,316
options in the case of José Antonio Álvarez. Meanwhile, the
maximum number of RSUs of PagoNxt, S.L. to be delivered
under the current plan is 12,646 and 8,527 units for Ana Botín
and José Antonio Álvarez, respectively.
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In addition, the table below shows the cash delivered in 2022
and 2021, 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
2022
2021
Cash paid (immediate
payment 2021
variable
remuneration)
1,838
1,241
3,079
Cash paid (deferred
payments from 2020,
2019, 2018 and 2017
variable
remuneration)
1,102
726
1,827
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
Ana Botín
José Antonio Álvarez
Total
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 2021 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 2022 and 2021 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)
Deferred conditional variable remuneration plan and linked to objectives (2020)
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)
Deferred conditional variable remuneration plan and linked to objectives (2020)
In addition, EUR 702 thousand and EUR 1,213 thousand relating
to the deferred portion payable in cash of the aforementioned
plans were paid each in 2022 and 2021.
2022
—
—
33,783
36,543
98,092
—
2022
—
—
60,251
33,783
18,272
32,698
—
2021
—
60,251
64,659
164,462
130,790
—
2021
92,557
—
60,254
32,330
54,821
32,698
—
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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
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
Mr Germán de la Fuente Escamilla
Loans and
credits
20
7
—
23
49
1
—
—
—
—
—
—
5
—
—
—
105
2022
Guarantees
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Loans and
credits
25
4
—
16
69
—
—
—
—
—
—
—
1
—
—
—
115
2021
Guarantees
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
20
7
—
23
49
1
—
—
—
—
—
—
5
—
—
—
105
Total
25
4
—
16
69
—
—
—
—
—
—
—
1
—
—
—
115
g) Senior management
The table below includes the amounts relating to the short-
term remuneration of the members of senior management at
31 December 2022 and those at 31 December 2021, excluding
the remuneration of the executive directors, which is detailed
above. This amount has been reduced by 35% compared to that
reported in 2014 (EUR 80,792 thousand):
EUR thousand
Short-term salaries and deferred remuneration
Variable remuneration
(bonus) - Immediate
payment
Deferred variable
remuneration
Year
2022
2021
Number of
persons
14
15
Fixed
18,178
19,183
In cash
7,733
8,402
In shares2
7,733
8,402
In cash
3,398
3,648
3
In shares
3,399
3,648
Pensions
5,339
5,542
Other
1
remuneration
6,956
5,055
Total
52,736
53,880
1. Includes other remuneration items such as life and medical insurance premiums and localization aids and lastly RSUs from PagoNxt S.L., for his work as a director in said
entity.
2. The amount of immediate payment in shares for 2022 is 2,504,000 shares (2,706,819 Santander shares in 2021).
3. The deferred amount in shares not linked to long-term objectives for 2022 is 1,101,000 shares (1,175,191 Santander shares in 2021).
The board of directors approved the 2022 Digital
Transformation Incentive which is a variable remuneration
scheme split in two different blocks:
• the first one, with the same design as in previous years, that
delivers Santander shares and share options if the group hits
major milestones on its digital roadmap. It 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 2022 and 2021.
• And the second one, which delivers PagoNxt, S.L. RSUs and
premium priced options (PPOs), and is aimed at up to 50
employees whose roles are considered key to PagoNxt’s
success, including 1 senior executive who will receive EUR
500 thousand.
See note 46 to the 2022 Group's consolidated financial
statements for further information on the Digital
Transformation Incentive.
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In 2022, the ratio of variable to fixed pay components was
120% of the total for senior managers, well within the
maximum limit of 200% set by 2022 AGM.
Also, the detail of the breakdown of the remuneration linked to
long-term objectives of the members of senior management at
31 December 2022 and 31 December 2021 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
2022
2021
Number of
people
14
15
1
Variable remuneration
subject to long-term
objectives
Cash
payment
3,568
3,830
Share
payment
3,569
3,830
Total
7,137
7,660
1. Relates to the fair value of the maximum annual amounts for years 2026, 2027
and 2028 of the seventh cycle of the deferred conditional variable
remuneration plan (2025, 2026 and 2027 for the sixth cycle of the deferred
variable compensation plan linked to annual objectives for the year 2021).
Additionally, senior executives who stepped down from their
roles in 2022 consolidated salary remuneration and other
remuneration for a total amount of EUR 3,691 thousand (EUR
5,294 thousand in 2021). They also have the right to receive, in
total, EUR 447 thousand in variable pay subject to long-term
objectives (this right has been generated in 2021 for a total
amount of EUR 55 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
2022 and 31 December 2021 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)
Deferred conditional variable remuneration
plan and linked to objectives (2021)
2022
2021
—
—
—
—
—
3,475
18,500
150,445
76,053
164,428
155,758
803,056
949,917 1,274,450
1,438,437 1,829,720
2,711,926
—
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
2022 and 2021 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)
Deferred conditional variable remuneration plan
and linked to objectives (2019)
Deferred conditional variable remuneration plan
and linked to objectives (2020)
Deferred conditional variable remuneration plan
and linked to objectives (2021)
2022
2021
— 146,930
—
—
2,786
3,474
114,006 131,938
107,891
79,104
79,037 267,686
288,041 321,006
360,614 1,742,419
2,556,117
—
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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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 Ana Botín and 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 for some senior executives
and since April 1, 2018 for executive directors. 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 2022 in the pension system for
those who were part of senior management at year end
amounted to EUR 54 million (EUR 57 million at 31 December
2021).
The net charge to income corresponding to pension amounted
to EUR 5.3 million in 2022 (EUR 5.5 million in 31 December
2021).
In 2022 and 2021 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 2022 of this group amounts to EUR 98 million
(EUR 100 million at 31 December 2021).
h) Post-employment benefits to former directors
and former senior executive vice presidents
The post-employment benefits and settlements paid in 2022 to
former directors of the Bank, other than those detailed in
note 5.c amounted to EUR 5.6 million and EUR 5.6 million in
2021, respectively. Also, the post-employment benefits and
settlements paid in 2022 to former executive vice presidents
amounted to EUR 4.8 million and EUR 51.6 million in 2021,
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 2022 (EUR
0.17 million in 2021). Likewise, contributions to insurance
policies that hedge pensions for previous senior managers
amounted to EUR 3.1 million in 2022 (EUR 4.4 million in 2021).
During the 2022 financial year, no releases or charges were
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 or
former senior managers in 2022 and 2021.
In addition, 'Provisions - Pension Fund and similar obligations' in
the consolidated balance sheet as at 31 December 2022
included EUR 48 million in respect of the post-employment
benefit obligations to former Directors of the Bank (EUR
50 million at 31 December 2021) and EUR 99 million
corresponding to former senior managers (EUR 114 million at
31 December 2021).
i) Pre-retirement and retirement
The board of directors approved an amendment to the contracts
of the executive directors whereby Ana Botín and José Antonio
Álvarez ceased 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, Ana Botín
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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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
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 their residual maturity periods.
2022
2021
2020
11,595
3,608
—
—
—
15,375
26,970
15,180
11,790
—
—
26,970
—
—
—
15,657
19,265
13,275
5,990
—
—
19,265
16,502
10,397
—
673
—
46,518
63,693
8,891
27,321
27,487
—
(6)
63,693
26,024
4,474
18,468
34,863
6,834
90,663
—
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
—
12,136
—
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
At 31 December 2022 the gross exposure by impairment stage
of the assets accounted for amounts to EUR 61,898 million, EUR
1 million and EUR 0 million (EUR 54,833, EUR 0 million and EUR
1 million in 2021 and EUR 50,344 million, EUR 0 million and EUR
1 million in 2020), and the loan loss provision by impairment
stage amounts to EUR 6 million, EUR 0 million and EUR 0 million
(EUR 8 million, EUR 0 million and EUR 0 million in 2021 and
2020) in stage 1, stage 2 and stage 3, respectively.
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7. Debt securities
a) Detail
The detail, by classification, type and currency, of Debt
securities 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
The decrease in the year of the debt securities portfolio under
the heading 'Financial assets at fair value with changes in other
comprehensive income' of EUR 22,839 million is mainly due to
portfolio sales performed during the year.
The increase in the debt securities portfolio under the heading
'Financial assets at amortized cost' of EUR 37,846 million during
the year is mainly due to the origination of two new business
models whose goal is to hold financial assets to collect
contractual cash flows. These new business models pursue
mainly two different strategies:
• Optimization of excess liquidity for approximately
16,800 million through management aimed at making
profitable the liquidity maintained on the balance sheet to
comply with regulatory metrics through investment in HQLAs
(High Quality Liquid Assets), basically, public debt instruments
or bills very short-term central bank (terms not exceeding 2
years) and that offer higher returns than the alternative of
keeping the cash deposited in the central bank, with the
purpose of generating margin at maturity.
2022
2021
2020
41,403
1,134
2,542
75,083
73,554
193,716
26,876
121,018
10,176
35,468
404
(226)
193,716
63,903
6,732
37,749
35,841
49,717
193,942
(226)
193,716
26,750
957
2,516
97,922
35,708
163,853
20,638
102,976
12,324
27,850
280
(215)
163,853
45,197
6,304
34,229
35,907
42,431
164,068
(215)
163,853
37,894
700
2,979
108,903
26,078
176,554
30,397
110,570
10,133
25,337
401
(284)
176,554
58,850
7,372
29,009
35,139
46,468
176,838
(284)
176,554
• Management of the maturity of the balance sheet for
approximately EUR 14,500 million through the reconstruction
of ALCO portfolios that contribute to the generation of
financial margin to offset, at least partially, the higher
financial cost derived from the increase in the cost of
customer deposits and medium/long-term wholesale
financing in the face of rising interest rates, while at the same
time constituting a hedging position of the balance sheet/
long-term financial margin against potential future decreases
in interest rates. This investment is also made mainly through
liquid assets, sovereign debt, but at longer periods (3, 5, 7, 10
years).
At 31 December 2022, 2021 and 2020 the gross exposure by
impairment stage of the book assets under IFRS 9 amounted to
EUR 148,384 million, EUR 133,437 million and EUR 134,792
million in stage 1; EUR 75 million, EUR 128 million and EUR 72
million in stage 2, and EUR 404 million, EUR 280 million and
EUR 401 million in stage 3, respectively.
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b) Breakdown
The breakdown, by origin of the issuer, of debt securities at 31
December 2022, 2021 and 2020, 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
2022
2021
2020
Private
fixed-
income
1,015
2,545
2,572
1,948
6,141
2,830
8,161
8,950
9,201
481
28
Public
fixed-
income
26,876
3,013
3,603
8,329
11
9,443
9,655
22,318
28,191
17,578
10,009
Total
%
27,891 14.40%
5,558 2.87%
6,175 3.19%
10,277 5.31%
6,152 3.18%
12,273 6.34%
17,816 9.20%
31,268 16.14%
37,392 19.30%
18,059 9.32%
10,037 5.18%
Private
fixed-
income
3,773
3,334
3,008
1,215
4,759
2,848
8,922
5,634
5,446
517
51
Public
fixed-
income
20,638
2,097
3,845
1,531
52
12,727
3,422
21,465
29,251
14,572
9,467
Total
%
24,411 14.90%
3.31%
4.18%
1.68%
2.94%
9.51%
5,431
6,853
2,746
4,811
15,575
12,344
7.53%
27,099 16.54%
34,697 21.18%
9.21%
15,089
5.81%
9,518
Private
fixed-
income
1,588
3,099
3,095
1,047
2,924
3,126
8,211
6,386
5,179
435
41
Public
fixed-
income
30,397
2,795
6,462
4,688
2
11,400
2,891
14,645
33,316
19,053
8,082
Total
%
31,985 18.12%
3.34%
5.41%
3.25%
1.66%
8.23%
5,894
9,557
5,735
2,926
14,526
11,102
6.29%
21,031 11.91%
38,495 21.80%
19,488 11.04%
4.60%
8,123
1,560
390
5,960
2,908
45,822 147,894
7,520 3.88%
3,298 1.70%
193,716 100%
655
77
2,783
2,128
2,496
2,419
40,239 123,614 163,853
1.70%
1.52%
100%
274
182
3,372
3,098
4,320
4,138
35,587 140,967 176,554
1.91%
2.44%
100%
The detail, by issuer rating, of Debt securities at 31 December
2022, 2021 and 2020 is as follows:
EUR million
AAA
AA
A
BBB
Below BBB
Unrated
2022
2021
2020
Private
fixed-
income
13,481
9,542
10,058
5,181
2,974
4,586
Public
fixed-
income
5,494
30,502
48,341
29,900
33,657
—
4,586
45,822 147,894 193,716
%
Total
18,975
9.80%
40,044 20.67%
58,399 30.15%
35,081 18.11%
36,631 18.91%
2.37%
100%
Private
fixed-
income
15,956
2,005
8,594
5,234
3,584
4,866
Public
fixed-
income
1,773
26,355
44,359
20,304
30,823
—
Total
%
17,729 10.82%
28,360 17.31%
52,953 32.32%
25,538 15.59%
34,407 21.00%
4,866 2.97%
100%
Private
fixed-
income
14,088
1,714
6,228
6,515
3,431
3,611
Public
fixed-
income
2,099
18,784
53,655
31,204
35,164
61
40,239 123,614 163,853
35,587 140,967 176,554
Total
%
16,187 9.17%
20,498 11.61%
59,883 33.92%
37,719 21.36%
38,595 21.86%
3,672 2.08%
100%
During 2022, 2021 and 2020, 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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The detail, by type of financial instrument, of private fixed-
income securities at 31 December 2022, 2021 and 2020, net of
impairment losses, is as follows:
EUR million
Securitised mortgage bonds
Other asset-backed bonds
Floating rate debt
Fixed rate debt
Total
2022
2021
2020
9,222
7,120
12,397
17,083
45,822
5,806
6,304
8,081
20,048
40,239
5,926
5,479
7,829
16,353
35,587
c) Impairment losses
The changes in the impairment losses on debt securities are
summarised below:
EUR million
Balance at beginning of year
A
Net impairment losses for the year
Of which:
Impairment losses charged to
income
Impairment losses reversed with a
credit to income
Exchange differences and other items
Balance at end of year
Of which:
By geographical location of risk:
2022
215
16
2021
284
28
2020
474
79
30
49
91
(14)
(5)
226
(21)
(97)
215
(12)
(269)
284
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
2022
2021
2020
10,066
15,077
9,615
3,711
4,042
3,234
1,941
15,718
2,453
21,572
2,783
15,632
3,284
10,494
1,940
15,718
3,896
15,184
2,492
21,572
3,364
10,437
1,831
15,632
Note 29 contains a detail of the 'Other comprehensive income',
recognised in equity, on 'Financial assets designated at fair
value through other comprehensive income'.
b) Changes
The changes in 'Financial assets at fair value through other
comprehensive income' were as follows:
European Union
Latin America
26
200
25
190
21
263
EUR million
A. Of the EUR 16 million corresponding to net provisions for the year ended 31
December 2022 (EUR 28 million and EUR 79 million at 31 December 2021 and
2020, respectively), EUR 17 million relates to financial assets at amortized cost
(EUR 31 million and EUR 77 million at 31 December 2021 and 2020,
respectively) and EUR -1 million relates to financial assets designated at fair
value through other comprehensive income (EUR -3 million and EUR 2 million
at 31 December 2021 and 2020, respectively).
At 31 December 2022, 2021 and 2020 the loan loss provision by
impairment stage of the assets accounted for under IFRS9
amounted to EUR 25 million, EUR 26 million and EUR 25 million
in stage 1, EUR 2 million, EUR 8 million and EUR 2 million in
stage 2, and EUR 199 million, EUR 181 million and EUR 257
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
A
income (EIGR)
Changes in the RV hedged with
micro-hedging transactions
Balance at end of year
2022
2,453
(33)
2021
2,783
(276)
2020
2,863
833
(497)
(171)
(917)
18
1,941
117
2,453
4
2,783
A. 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 2022, 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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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
EUR million
Interest
rate risk
Currency
risk
Price risk
Other
risks
2022
2021
2020
Debit
Credit
balance balance balance balance balance balance
Credit
Credit
Debit
Debit
38,789 37,641 31,884 30,192 43,832 41,085
26,391 26,063 19,823 21,894 21,162 22,028
944
1,347
1,931
1,498
817
891
475
412
67,002 64,891 54,292 53,566 67,137 64,469
1,087
589
212
370
2022
9,550
2021
6,829
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
7,663
Financial assets at amortized cost 1,011,597 947,364
10,289
5,774
8,215
868
537
2020
296
552
24,121
9,267
881,963
Of which:
Impairment losses
(22,684)
(22,964)
1,036,004 972,682
(23,595)
916,199
b) Short positions
Following is a breakdown of the short positions (liabilities):
Loans and advances to customers
disregarding impairment losses
1,058,688 995,646
939,794
Note 50 contains a detail of the residual maturity periods of
'Financial assets at amortized cost'.
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.
EUR million
Borrowed securities
Debt instruments
Of which:
Banco Santander México, S.A.,
Institución de Banca Múltiple,
Grupo Financiero Santander
México
Banco Santander, S.A.
Equity instruments
Of which:
2022
2021
2020
1,979
825
625
1,362
617
993
825
—
389
625
—
289
Banco Santander, S.A.
934
318
289
Short sales
Debt instruments
Of which:
Banco Santander, S.A.
Banco Santander (Brasil) S.A.
Pierpont Capital Holdings LLC
Equity instruments
19,543
11,022
15,784
12,902
3,857
2,690
—
22,515
8,926
1,952
—
—
12,236
8,645
7,085
—
—
16,698
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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
A
Other OECD countries
South America (non - OECD)
Rest of the world
Interest rate formula
Fixed rate
Floating rate
2022
2021
2020
56,688
39,500
37,459
49,603
565,609 542,404 503,014
35,702
33,264
290,031 269,526 269,143
36,251
38,503
7,903
10,304
19,507
20,397
30,815
31,645
1,058,688 995,646 939,794
39,833
11,435
22,704
32,888
212,804 216,741 215,330
202,958 190,032 192,988
93,405
125,436 102,491
385,906 374,729 338,362
79,629
94,010
112,803
20,080
17,643
18,781
1,058,688 995,646 939,794
642,537 593,645 550,883
416,151 402,001 388,911
1,058,688 995,646 939,794
A.
Includes, mainly, customers from the United Kingdom.
At 31 December 2022, 2021 and 2020 the Group had granted
loans amounting to EUR 14,698 million, EUR 14,131 million and
EUR 12,104 million to Spanish public sector agencies which had
a rating at 31 December 2022 of A (ratings of A at 31 December
2021 and 31 December 2020), and EUR 12,467 million, EUR
10,263 million, and EUR 10,779 million to the public sector in
other countries (at 31 December 2022, the breakdown of this
amount by issuer rating was as follows: 3.6% AAA, 17% AA, 1%
A, 70.8% BBB, 6.8% below BBB and 0.8% without rating).
Without considering the public administrations, the amount of
the loans and advances at 31 December 2022, 2021 and 2020
amounts to EUR 1,031,523 million, EUR 916,911 million and
EUR 942,249 million, of which, EUR 998,689 million, EUR
939,645 million and EUR 886,118 million are classified as
performing, respectively.
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Following is a detail, by activity, of the loans to customers at 31
December 2022, net of impairment losses:
EUR million
Net exposure
Secured loans
C
Loan to value ratio
Total
24,436
Without
collateral
23,410
Of which Of which
other
property
collateral
collateral
869
157
Less than
or equal
to 40%
66
More
than
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%
862
18
73
More
than
100%
7
83,091
28,950
5,223
48,918
4,172
2,677
739
45,934
619
345,083
195,015
70,063
80,005
25,973
25,327
19,813
55,306
23,649
20,320
2,959
188,730
133,074
1,561
1,895
127,137
64,422
17,673
149
19,751
32,490
1,086
915
41,842
36,162
6,572
59
8,650
10,692
6,251
109
6,642
12,325
2,027
139
6,690
10,957
2,188
715
29,228
23,175
1,721
42
10,383
11,503
562,078
105,335
368,242
88,501
104,249 126,361 127,779
64,685
33,669
361,235
182,097
18,746
1,014,688
1,524
100,686
3,125
352,710
359,072
2,118
7,052
443,685
639
79,293
8,569
218,293
97,155 118,774 116,484
8,294
5,183
3,001
2,404
24,415
34,501
5,769
134,460 154,438 148,349 166,787
3,436
3,658
2,883
29,997
789
57,944
25,907
11,662
9,001
5,244
3,566
2,006
3,611
3,422
1,640
Public sector
Other financial institutions (financial
business activity)
Non-financial corporations 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
A
Total
Memorandum item
B
Refinanced and restructured transactions
In addition, the Group has granted advances to customers amounting to EUR 21,316 million, bringing the total of loans and advances to EUR 1,036,004 million.
Includes the net balance of the impairment of the accumulated value or accumulated losses in the fair value due to credit risk.
A.
B.
C. The ratio is the carrying amount of the transactions at 31 December 2022 provided by the latest available appraisal value of the collateral.
Note 53 contains information relating to the forborne loan
portfolio.
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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
849,939
50,476
31,837 932,252
(43,170) 43,170
(5,120)
13,459
578
(8,734)
(13,459)
1,831
5,120
8,734
(1,831)
(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
A.
It includes the effect of the stage 3 definition alignment with the accounting
default definition, mainly by Santander Consumer USA.
In addition, at 31 December 2022, the Group had EUR 322
million (EUR 420 million at 31 December 2021 and EUR 497
million at 31 December 2020) of exposure in assets purchased
with impairment of which EUR 271 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 2022, 2021 and 2020:
2022
EUR million
Balance at the beginning
of year
Movements
Transfers
To stage 2 from stage 1
A
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
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
Stage 1 Stage 2 Stage 3
Total
878,700
67,584
31,287
977,571
(31,811) 31,811
(11,143)
(8,487)
(18,907)
3,250
18,907
456
11,143
8,487
(3,250)
(456)
—
—
—
—
—
—
86,459
—
(8,839)
—
(2,568)
(12,235)
75,052
(12,235)
1,293
284
209
1,786
942,861
66,696
32,617 1,042,174
Stage 1 Stage 2 Stage 3
Total
817,906
66,104
30,318
914,328
(33,051) 33,051
(6,617)
17,796
271
(5,836)
(17,796)
1,865
6,617
5,836
(1,865)
(271)
—
—
—
—
—
—
62,629
—
(11,629)
—
(719)
(9,089)
50,281
(9,089)
19,766
1,825
460
22,051
878,700
67,584
31,287
977,571
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Following is the movement of the loan loss provision broken
down by impairment stage of loans and advances to customers
during 2022, 2021 and 2020:
2022
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
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
Stage 1 Stage 2 Stage 3
Total
4,188
5,226
13,550
22,964
(713)
(557)
215
9
414
—
70
3,046
(1,802)
(894)
400
2,333
4,029
1,380
(679)
(533)
(152)
4,586
3,182
(933)
(161)
(1,056)
—
207
5,940
(12,235)
2
5,298
(12,235)
279
3,626
5,127
13,931
22,684
Stage 1 Stage 2 Stage 3
Total
4,265
5,672
13,658
23,595
2,968
(1,086)
(1,025)
216
(578)
(237)
254
8
2,390
1,972
1,388
(771)
(544)
(59)
2,209
2,474
(760)
(67)
617
—
(141)
(1,557)
—
38
5,326
(9,089)
(201)
4,386
(9,089)
(304)
4,188
5,226
13,550
22,964
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
2022
22,964
2021
23,595
2020
22,242
11,676
8,762
13,385
19,879
18,240
20,909
(8,203)
—
(9,478)
—
(7,524)
(82)
(12,235)
(9,089)
(8,930)
279
22,684
(304)
22,964
(3,020)
23,595
13,931
8,753
13,550
9,414
13,658
9,937
2,493
20,191
2,496
20,468
2,679
20,916
In addition, provisions for debt securities amounting to EUR 16
million were recorded at 31 December 2022 (provisions
amounting to EUR 28 million and EUR 79 million as of 31
December 2021 and 2020, respectively), written-off assets
recoveries have been recorded in the year amounting to EUR
1,459 million at 31 December 2022 (EUR 1,383 million and EUR
1,221 million at 31 December 2021 and 2020, respectively).
EUR 630 million were recorded in the account for losses on
renegotiation or contractual modification at 31 December 2022
(EUR 0 and EUR 139 million at 31 December 2021 and 2020,
respectively) mainly due to the impact, on the one hand, of the
Moratorium law approved in July 2022 in Poland, and, on the
other hand, of the adjustment of the gross amount of mortgage
loans denominated and indexed to foreign currencies in this
same country (see note 25.e.).
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
10,863 million at 31 December 2022 (EUR 7,407 million and
EUR 12,382 million at 31 December 2021 and 2020,
respectively).
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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 2022:
3,835
4,474
13,933
22,242
EUR million
2020
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
2,880
(1,040)
(255)
(971)
(976)
303
294
53
1,840
2,131
1,095
(682)
(424)
(85)
2,386
2,066
(727)
(138)
1,966
—
(588)
535
—
(573)
7,009
(8,930)
(1,941)
9,510
(8,930)
(3,102)
4,265
5,672
13,658
23,595
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
2022
31,645
13,060
(12,235)
2021
30,815
9,390
(9,089)
2020
32,543
10,577
(8,930)
—
—
(39)
418
32,888
529
31,645
(3,336)
30,815
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.
Without associated real
collateral
With real estate collateral
With other collateral
Total
Gross
amount
Allowance
recognised
Estimated
collateral
A
value
14,066
10,909
7,913
32,888
7,684
2,889
3,358
13,931
—
7,848
3,998
11,846
A.
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:
At 31 December 2022, the Group’s written-off assets totalled
EUR 43,675 million (EUR 40,585 million and EUR 39,087 million
at 31 December 2021 and 2020, respectively).
EUR million
Retained on the balance sheet
Of which
Securitised mortgage assets
Of which: UK assets
Other securitised assets
A
Total
2022
82,603
2021
80,600
2020
88,662
16,265
4,144
66,338
82,603
19,523
5,295
61,077
80,600
30,145
9,034
58,517
88,662
A. Note 22 details the liabilities associated with these securitisation transactions.
At 31 December 2022, Grupo Santander had loans that had
been fully derecognised and for which it retained servicing
amounting to EUR 13,711 million (EUR 14,141 million and EUR
13,999 million at 31 December 2021 and 2020, respectively).
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11. Trading derivatives
The detail of the notional amounts and the market values of the
trading derivatives held by the Group in 2022, 2021 and 2020 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
2022
2021
2020
Notional
amount
Market
value
Notional
amount
Market
value
Notional
amount
Market
value
100,579
4,844,043
495,994
22
2,387
(1,261)
147,603
3,920,945
508,723
(11)
1,931
(228)
515,889
3,789,169
698,500
—
3,638
(891)
16,185
(6)
13,571
436
12,378
(133)
Foreign currency purchases and sales
Foreign currency options
Currency swaps
Securities and commodities derivatives and other
Total
384,024
54,967
496,441
71,237
6,463,470
423
150
(245)
641
2,111
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
5,830,329
(45)
(7)
(814)
920
2,668
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
2022
3,435
2021
4,089
2020
4,445
3,101
2,596
334
18
3,453
3,651
3,120
438
—
4,089
4,081
3,485
364
—
4,445
At 31 December 2022, the provisions recognised for the total
non-current assets held for sale totalled EUR 3,425 million (EUR
3,811 million and EUR 4,104 million at 31 December 2021 and
2020, respectively). The charges recorded in those years
amounted to EUR 204 million, EUR 239 million and EUR 250
million, respectively, and the recoveries during these exercises
are amounted to EUR 110 million, EUR 98 million and EUR 35
million, respectively.
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13. Investments
a) Breakdown
The detail, by company, of Investments is as follows:
EUR million
Associated entities
Merlin Properties, SOCIMI, S.A.
Caceis
Metrovacesa, S.A.
Zurich Santander Insurance
America, S.L. - Consolidated
CNP Santander
Ebury Partners Limited (note 3)
Other companies
Joint Ventures entities
U.C.I., S.A. - Consolidated
Santander Caceis Latam Holding 1, S.L. -
Consolidated (previously Santander Securities
Services Latam Holding, S.L)
Santander Vida Seguros y Reaseguros, S.A.
(note 3)
Fortune Auto Finance Co., ltd
Hyundai Capital UK Limited
Banco RCI Brasil S.A.
Other companies
2020
2021
2022
6,130
5,833
5,634
1,653 1,640 1,581
975 1,077
1,046
979 1,087 1,157
916
406
—
634
826
418
394
493
955
439
388
533
1,981
416
1,692
228
1,492
168
359
334
326
356
244
223
95
288
378
222
201
92
237
381
172
151
88
206
Total Associated entities and Joint ventures
7,615 7,525 7,622
Of the entities included above, at 31 December 2022, the
entities Merlin Properties, SOCIMI, S.A, Metrovacesa S.A. and
Compañía Española de Viviendas en Alquiler, S.A. are the only
listed companies.
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:
2022
1,508
2021
1,723
2020
1,862
Zurich Santander Insurance
America, S.L. - Consolidated
Caceis
526
337
526
337
526
337
b) Changes
The changes in the investments were as follows:
EUR million
Balance at beginning of year
Acquisitions (disposals) of companies
and capital increases (reductions)
Of which:
2022
7,525
2021
7,622
2020
8,772
142
94
676
Ebury Partners Limited (note 3)
Santander Vida Seguros y Reaseguros,
S.A. (note 3)
—
—
—
—
409
219
Changes in the consolidation method
(note 3)
Of which:
Ebury Partners Limited
Project Quasar Investments 2017, S.L.
Popular Spain Holding de Inversiones,
S.L.U. (former Allianz Popular, 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.- Consolidated
Merlin Properties, SOCIMI, S.A.
Other global result
Exchange differences and other changes
Balance at end of year
(320)
—
(1,359)
(382)
—
—
702
—
—
—
432
—
(956)
(409)
(96)
(560)
(662)
(186)
(160)
—
(15)
(124)
(40)
(139)
70
56
7,615
(230)
(144)
(60)
(60)
(31)
(52)
(13)
52
7,525
(80)
—
—
—
(37)
(17)
(1)
(184)
7,622
c) Impairment adjustments
During the years 2022, 2021 and 2020 there was no evidence of
significant impairment in the Group's associated interests.
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d) Other information
A summary of the financial information at the end of December
2022 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
Associates
Joint ventures
Zurich
Santander
Insurance
América, S.L. -
Consolidated
Caceis
Santander
Caceis Latam
Holding, S.L. -
Consolidated
CNP
Santander
U.C.I., S.A. -
Consolidated
Hyundai
Capital
UK
Limited
Fortune
Auto
Finance
Co., LTD
Merlin
Properties,
SOCIMI,
S.A.
A Metrovacesa,
S.A.
A
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
1,038
13,234
14,272
737
6,508
7,245
512
32
6,483
7,027
2,200
36,702
577
87,638
2,777 124,340
364
9,629
334 110,251
698 119,880
18
1
2,060
2,079
278
—
4,182
4,460
1,027
16,216
17,243
337
15,907
16,244
471
(759)
1,287
999
166
2,168
2,334
19
1,907
1,926
93
(86)
401
408
Total liabilities and equity
14,272
2,777 124,340
17,243
2,334
Ordinary activities income
Profit (loss) from continuing
operations
Profit (loss) for the year from
discontinuing operations
551
512
—
511
2,770
4,771
816
18
—
278
—
471
—
93
—
191
497
688
188
10
198
67
(242)
665
490
688
120
67
—
A. Data as of 31 December 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.
2022
2021
2020
104
104
149
149
174
174
Santander
Vida Seguros
y
Reaseguros,
S.A.-
Consolidated
(note 3)
Banco RCI
Brasil S.A.
79
1,725
1,804
190
1,051
1,241
89
(51)
525
563
5
1,939
1,944
109
1,582
1,691
40
(217)
430
253
308
11,228
11,536
182
10,574
10,756
(63)
280
563
780
2,593
2,064
4,657
2,346
1,868
4,214
68
(19)
394
443
176
1,863
2,039
29
1,521
1,550
57
12
420
489
11,536
4,657
2,039
1,804
1,944
263
809
257
784
292
(63)
—
68
—
57
—
89
—
40
—
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15. Liabilities and assets under insurance
contracts and reinsurance 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
2022
2021
2020
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)
65
226
163
63
389
14
53
747
(58)
(173)
(150)
(23)
(51)
(6)
(20)
(308)
7
53
13
40
338
8
33
439
56
209
146
63
451
20
34
770
(50)
(150)
(130)
(20)
(55)
(11)
(17)
(283)
6
59
16
43
396
9
17
487
51
189
126
63
561
23
86
910
(45)
(137)
(122)
(15)
(59)
(11)
(9)
(261)
6
52
4
48
502
12
77
649
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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 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 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
Additions / disposals (net) due to
change in the scope of consolidation
Additions / disposals (net)
Transfers, exchange differences and
other items
Balance at 31 December 2022
Accumulated depreciation
Balances at 1 January 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 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
Disposals due to change in the scope of
consolidation
Disposals
Charge for the year
Transfers, exchange differences and
other items
Balance at 31 December 2022
27,108
24,454
1,450
53,012
5,686
(16)
827
(3,023)
24,896
66
781
(214)
25,529
14
604
1,082
512
(1,844)
24,204
(257)
(1,076)
1,552
24,423
89
(822)
7
(29)
1,073
1,310
32
1,460
(4,835)
50,560
—
(64)
(191)
(359)
141
1,537
1,479
51,489
—
(64)
103
(282)
423
26,570
1,476
25,166
107
1,580
2,006
53,316
(11,974)
(5,210)
(144) (17,328)
(40)
527
(1,906)
—
2,387
—
—
11
(8)
(40)
2,925
(1,914)
(37)
(1,339)
(362)
3,948
1
A
96
384
4,429
1
A
109
153
4,692
(765)
(3)
167
(706)
1,850
(11,543)
(2,762)
(5,585)
8
(904)
(133) (17,261)
90
(1,217)
(1)
733
(1,733)
529
(12,015)
(7)
1,065
(1,821)
(114)
(12,892)
40
3,390
—
(3,083)
(5,238)
(30)
2,882
—
(3,192)
(5,578)
—
3
(10)
39
4,126
(1,743)
—
44
(612)
(9)
(2,563)
(149) (17,402)
(4)
(1,789)
4
16
(13)
(33)
3,963
(1,834)
—
164
(636)
(30)
(3,336)
(172) (18,642)
(4)
(2,265)
A.
Includes contract extensions on operating leases and repurchases.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
5,686
(37)
(1,339)
(362)
3,948
1
96
384
4,429
1
109
153
4,692
(765)
(3)
167
(706)
90
(1,217)
—
44
(612)
(4)
(1,789)
—
164
(636)
(4)
(2,265)
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EUR million
Impairment losses
Balances at 1 January 2020
Impairment charge for the year
Releases
Disposals due to change in the scope of
consolidation
Disposals
Exchange differences and other
Balance at 31 December 2020
Impairment charge for the year
Releases
Disposals due to change in the scope of
consolidation
Disposals
Exchange differences and other
Balance at 31 December 2021
Impairment charge for the year
Releases
Disposals due to change in the scope of
consolidation
Disposals
Exchange differences and other
Balance at 31 December 2022
Tangible assets, net
Balances at 31 December 2020
Balances at 31 December 2021
Balances at 31 December 2022
Tangible assets
Leased
out under
an operating Investment
property
lease
Total For own use
(23)
(70)
2
—
—
31
(60)
(17)
4
—
—
(29)
(102)
(33)
1
—
76
25
(33)
(333)
(11)
5
—
3
(28)
(364)
(8)
5
—
3
(44)
(408)
(29)
4
—
9
45
(379)
(449)
(185)
11
—
23
36
(564)
(169)
19
—
64
(115)
(765)
(157)
17
—
119
185
(601)
—
(4)
1
—
—
(6)
(9)
(13)
1
—
7
(1)
(15)
(2)
1
—
13
(11)
(14)
For own use
(93)
(104)
4
—
20
33
(140)
(144)
10
—
61
(42)
(255)
(95)
12
—
34
115
(189)
13,213
13,259
13,489
18,559
19,083
19,555
963 32,735
979 33,321
1,029 34,073
2,722
2,625
2,413
Of which:
For leasing
Leased
out under
an operating Investment
property
lease
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0
Total
—
(4)
1
—
—
(6)
(9)
(13)
1
—
7
(1)
(15)
(2)
1
—
13
(11)
(14)
2,722
2,625
2,413
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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 2020
Land and buildings
IT equipment and fixtures
Furniture and vehicles
Construction in progress and other items
Balances at 31 December 2021
Land and buildings
IT equipment and fixtures
Furniture and vehicles
Construction in progress and other items
Balances at 31 December 2022
The carrying amount at 31 December 2022 in the foregoing
table includes the following approximate amounts EUR 7,083
million (EUR 6,753 million at 31 December 2021 and EUR 6,299
million at 31 December 2020) 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
(3,215)
(4,416)
(3,854)
(58)
(11,543)
Impairment
losses
(133)
—
—
(7)
(140)
(3,675)
(4,335)
(3,954)
(51)
(12,015)
(4,467)
(3,984)
(4,389)
(52)
(12,892)
(240)
—
—
(15)
(255)
(175)
—
—
(14)
(189)
Cost
13,081
5,562
6,085
168
24,896
13,855
5,543
5,982
149
25,529
14,623
5,285
6,445
217
26,570
Carrying
amount
9,733
1,146
2,231
103
13,213
9,940
1,208
2,028
83
13,259
9,981
1,301
2,056
151
13,489
Of which:
for leasing
2,716
1
5
—
2,722
2,570
42
12
—
2,625
2,349
53
11
—
2,413
Of the EUR 19,555 million that the Group had assigned to
operating leases at 31 December 2022 (EUR 19,083 million and
EUR 18,559 million at 31 December 2021 and 2020,
respectively), EUR 13,389 million (EUR 13,630 million and EUR
13,473 million at 31 December 2021 and 2020, respectively)
relate to vehicles of Santander US Auto's business. The variable
lease payments of various items of this entity are not
significant.
In addition, the maturity analysis of the undiscounted payments
for assets leased out under operating leases from Santander US
Auto is as follows:
EUR million
Maturity Analysis
2023
2024
2025
2026
2022
2,811
5,243
4,762
1,171
d) Tangible assets - Investment property
The fair value of investment property at 31 December 2022,
2021, 2020 amounted to EUR 1,153, 1,088 and 1,055 million,
respectively. A comparison of the fair value of investment
property at 31 December 2022, 2021 and 2020 with the net
book value shows gross unrealised gains of EUR 124, 109 and
92 million, respectively, attributed completely to the group.
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The rental income earned from investment property and the
direct costs related both to investment properties that
generated rental income in 2022, 2021 and 2020 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 US Auto
Santander España
A
Santander Holding USA (ex. Auto)
Santander UK
Banco Santander - Chile
Grupo Financiero Santander (México)
Ebury Partners
Santander Consumer Nordics
Other companies
Total Goodwill
2022
3,503
1,444
1,304
1,075
1,040
1,039
998
844
599
548
469
298
215
365
2021
3,219
1,444
1,304
1,095
1,040
979
1,027
643
633
516
435
—
224
154
2020
3,109
1,444
1,314
1,104
1,040
904
1,027
594
592
571
399
—
216
157
13,741 12,713 12,471
A.
Includes the Amherst Pierpont Securities LLC' business (see note 3).
The changes in goodwill were as follows:
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 2022 there was an increase of EUR 494 million
(an increase of EUR 167 million in 2021 and a decrease of EUR
2,104 million in 2020), 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 t
potential impairment of its recorded goodwill with respect to its
recoverable amount. The first step that must be taken in
to perform this analysis is the identification of the cash-
generating units, which are the Group's smallest identif
iable
groups of assets that generate cash inflows that are largely
independent of the cash flows of other assets or groups of
assets.
order
he
The amount to be recovered of each cash-generating unit is
determined taking into consideration the carrying amou
(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.
nt
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.
EUR million
Balance at beginning of year
Additions (note 3)
Of which:
Ebury Partners
Santander Holding USA (ex. Auto) A
SAM Investment Holdings Limited
Impairment losses
Of which:
Santander UK
Santander Bank Polska
Santander Holding USA (ex. Auto)
Santander US Auto
Santander Consumer Nordics
Disposals or changes in scope of
consolidation
Exchange differences and other items
Balance at end of year
2022
2021
12,713 12,471
81
534
2020
24,246
429
316
158
—
—
—
—
—
—
—
—
—
—
—
271
—
(6) (10,100)
—
—
—
—
—
(6,101)
(1,192)
(1,177)
(1,153)
(277)
—
494
—
167
13,741 12,713
—
(2,104)
12,471
A. Acquisition of Amherst Pierpont Securities LLC (see note 3).
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 d
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
return on equity, among others).
ratio,
ata,
Regardless of whether there is any indication of impairment,
every year the Group calculates the recoverable amount
cash-generating unit to which goodwill, has been alloca
to this end, it uses price quotations, market references
(multiples), internal estimates and valuations performed by
internal and external experts.
of each
ted and,
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.
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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 2022, the Group has not recognised any impairment
losses.
During 2021, the Group recognised impairment losses of EUR
6 million of immaterial goodwill and 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 CGU 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. Those impairment losses 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.
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Following is a detail of the main assumptions taken into account
in determining the recoverable amount, at 2022 year-end, of
the most significant cash-generating units which were valued
using the discounted cash flow method:
Santander UK
Santander Bank Polska
Santander US Auto
B
Santander Holding USA (ex. Auto)
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
2022
Discount rateA
11.1%
15.6%
12.2%
12.6%
9.4%
12.2%
11.1%
11.0%
Nominal
perpetual
growth rate
2.5%
4.8%
2.8%
3.5%
2.3%
2.5%
2.3%
2.5%
A. Post-tax discount rate.
B. 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 2021 and 2020 are presented below for comparison
purposes:
Santander UK
Santander Bank Polska
Santander US Auto
B
Santander Holding USA (ex. Auto)
Santander Consumer Germany
SAM Investment Holdings, Limited
Santander Portugal
Santander Consumer Nordics
Discount rate
A
2021
9.2%
10.3%
10.6%
11.6%
8.3%
10.4%
9.7%
9.9%
2020
9.5%
10.0%
10.7%
11.6%
9.0%
10.1%
9.8%
10.1%
Nominal
perpetual
growth rate
2021
2.3%
3.5%
1.5%
3.0%
1.8%
2.5%
1.8%
2.0%
2020
2.3%
3.5%
1.5%
2.5%
1.8%
2.5%
1.8%
2.0%
A. Post-tax discount rate.
B. Weighted information of the main assumptions of the segments to which goodwill has been allocated.
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.
The variations reflected in the assumptions used in 2022 are
mainly a consequence of the current macroeconomic scenario,
as well as the increasing level of inflation and difficulties in
supply chains, which have led to a rapid increase in central
banks' benchmark interest rates in the main countries where
the Group's CGU are operating.
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
as reasonably possible changes in the business operations of
the cash-generating units are not contemplated.
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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 2022,
2021, and 2020 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
3 -7 years
Estimated
useful life 31/12/2021
10,712
4
9,189
1,519
(6,707)
(6,149)
(558)
(134)
—
—
3,871
Net
additions
and
disposals
1,757
—
1,748
9
—
—
—
—
—
—
1,757
Change in
scope of
consolidation
381
27
153
201
—
—
—
—
—
—
381
3-7 years
Estimated
useful life 31/12/2020
9,376
37
7,900
1,439
(5,809)
(5,307)
(502)
(130)
—
—
3,437
Net
additions
and
scope of
disposals consolidation
5
—
4
1
(2)
(1)
(1)
—
—
—
3
1,409
—
1,325
84
—
—
—
—
—
—
1,409
Application of
amortization
and
impairment
Exchange
differences
Amortization
and
impairment
—
and other 31/12/2022
12,502
33
10,721
1,748
(7,554)
(6,866)
(688)
(44)
—
—
4,904
163
2
128
33
(108)
(96)
(12)
66
—
—
121
(511)
—
(497)
(14)
412
403
9
99
—
—
—
(1,151)
(1,024)
(127)
(75)
(75)
—
(1,226)
Application of
Change in Amortization amortization
and
impairment
—
Exchange
and differences
impairment
(293)
(34)
(212)
(47)
232
178
54
61
—
—
—
and other 31/12/2021
10,712
4
9,189
1,519
(6,707)
(6,149)
(558)
(134)
—
—
3,871
215
1
172
42
(115)
(97)
(18)
—
—
—
100
(1,013)
(922)
(91)
(65)
(65)
—
(1,078)
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EUR million
Cost
Brand names
IT developments
Other
Accumulated amortisation
Development
Other
Impairment losses
Of which addition
Liberation
3-7 years
Estimated
useful life 31/12/2019
9,263
42
7,945
1,276
(5,686)
(5,139)
(547)
(136)
—
—
3,441
Net
additions
and
disposals
1,451
—
1,123
328
35
—
35
—
—
—
1,486
Change in
scope of
consolidation
(33)
—
(34)
1
49
49
—
—
—
—
16
Amortization
and
impairment
—
(896)
(792)
(104)
(142)
(142)
0
(1,038)
Application of
amortization
and
impairment
(241)
—
(224)
(17)
105
88
17
136
—
—
—
Exchange
differences
and other
(1,064)
(5)
(910)
(149)
584
487
97
12
—
—
(468)
31/12/2020
9,376
37
7,900
1,439
(5,809)
(5,307)
(502)
(130)
—
—
3,437
In 2022, 2021 and 2020, impairment losses of EUR 75 million,
EUR 65 million and EUR 142 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)
2022
83
2021
2020
157
88
635
1,345 1,990
3,003 2,610 2,806
5,536 3,683 7,362
9,967 8,440 10,891
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20. Deposits from central banks and credit
institutions
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:
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
2022
2021
2020
5,757
1,038
—
607
1,740
2,490
76,952 139,757 112,804
84,449 141,402 115,294
—
10
10
72,320 134,439 108,090
12,129
7,194
6,953
84,449 141,402 115,294
9,796
6,488
—
1,958
68,582
80,336
1,064
52,235
59,787
6,765
62,620
69,385
6,808
49,221
24,245
62
80,336
6,139
37,332
16,198
118
59,787
5,727
43,308
20,179
171
69,385
65,133 107,908 104,499
23,339
42,451
35,357
26,581
24,012
30,924
12,356
11,297
14,195
17,904
15,521
19,176
164,785 201,189 184,679
At 31 December 2022, the balance of the conditional long-term
financing of the European Central Bank (TLTRO- Targeted Long-
Term Refinancing Operation-) amounts to EUR 33,536 million,
which corresponds to TLRTO III (EUR 88,894 million and EUR
77,732 million at 31 December 2021 and 2020, respectively).
At 31 December 2022, the income recognized in the
consolidated income statement corresponding to TLTRO III
amounts to EUR 489 million (EUR 868 million and EUR
391 million at 31 December 2021 and 2020, respectively).
Note 50 contains a detail of the residual maturity periods of
financial liabilities at amortised cost.
21. Customer deposits
The detail, by classification, geographical area and type, of
Customer deposits 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
Geographical area
Spain
European Union (excluding Spain)
United Kingdom
United States and Puerto Rico
Rest of America
Rest of the world
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
2022
2021
2020
12,226
6,141
—
46,822
25,608
34,343
966,353
1,025,401
886,595
918,344
814,967
849,310
399,112 319,565 294,516
115,323 112,361 106,013
232,364 243,734 232,840
59,057
73,814
181,782 159,381 147,300
9,584
1,025,401 918,344 849,310
87,497
9,323
9,489
710,232 717,728 642,897
418,752
482,649
477,739
216,500
227,318
225,445
7,645
7,761
7,048
251,778 164,259 171,939
248,298 162,172 170,127
43
3
1,743
23
34,474
1,025,401 918,344 849,310
38
3
1,906
140
36,357
38
—
3,296
146
63,391
Note 50 contains a detail of the residual maturity periods of
financial liabilities at amortised cost.
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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
2022
2021
2020
—
—
—
5,427
5,454
4,440
274,912
280,339
240,709
246,163
230,829
235,269
211,597
25,717
43,025
280,339
194,362
25,938
25,863
246,163
191,577
21,686
22,006
235,269
The distribution of the book value of debt securities issued by
contractual maturity at 31 December 2022 is shown below:
EUR million
Subordinated debt
Senior unsecured debt
Senior secured debt
Promissory notes and other securities
Debt securities issued
Within 3
months
—
5,224
4,204
25,659
35,087
3 to 12
months
678
13,924
15,445
17,366
47,413
The distribution by contractual maturity of the notional amounts
of these debt securities issued at 31 December 2022 is as
follows:
EUR million
Subordinated debt
Senior unsecured debt
Senior secured debt
Promissory notes and other securities
Debt securities issued
Within 3
months
—
5,255
4,203
25,647
35,105
3 to 12
months
663
14,006
15,440
17,358
47,467
1 to 3
years
3,706
48,113
30,808
—
82,627
1 to 3
years
3,728
48,398
30,799
—
82,925
3 to 5
years
3,774
31,854
20,786
—
56,414
More than 5
years
17,559
28,342
12,897
—
58,798
Total
25,717
127,457
84,140
43,025
280,339
3 to 5
years
3,810
32,042
20,780
—
56,632
More than 5
years
17,502
28,510
12,892
—
58,904
Total
25,703
128,211
84,114
43,005
281,033
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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
2022
87,295
75,798
15,883
18,024
4,653
9,944
211,597
2021
90,348
66,581
13,340
9,131
3,757
11,205
194,362
2020
89,031
61,174
16,569
8,398
5,624
10,781
191,577
2022
Outstanding issue
amount in foreign
currency (Million)
87,295
80,930
14,084
101,835
4,230,507
Annual
interest rate
(%)
1.38%
3.10%
2.81%
12.52%
2.74%
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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:
Banco Santander, S.A.
Santander Consumer USA Holdings Inc.
Banco Santander (Brasil) S.A.
Santander UK Group Holdings plc
Santander Holdings USA, Inc.
Banco Santander - Chile
Santander Consumer Finance, S.A.
Santander Bank, National Association
SC Germany S.A., Compartment Consumer 2022-1
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México
PSA Financial Services Spain, E.F.C., S.A.
Santander Consumer Bank AS
Santander International Products, Plc.
PSA Banque France
Santander Factoring Sp. z o.o.
PSA Bank Deutschland GmbH
Santander Consumo 4, F.T.
SC Germany S.A., Compartment Consumer 2021-1
Auto ABS French Lease Master Compartment 2016
SC Germany S.A., Compartment Consumer 2020-1
SCF Rahoituspalvelut IX DAC
Redemptions and repurchases
Of which:
Santander Consumer USA Holdings Inc.
Banco Santander, S.A.
Santander UK Group Holdings plc
Santander Consumer Finance, S.A.
Santander Holdings USA, Inc.
Banco Santander (Brasil) S.A.
Banco Santander - Chile
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México
PSA Banque France
Santander Consumer Bank AS
SC Germany S.A., Compartment Consumer 2020-1
Santander Leasing S.A.
Santander Consumer Bank AG
Santander Factoring Sp. z o.o.
Banco Santander Totta, S.A.
Auto ABS French Lease Master Compartment 2016
Exchange differences and other movements
Balance at year-end
2022
194,362
—
66,033
2021
191,577
—
59,937
2020
208,455
785
54,905
19,243
13,315
11,233
10,178
2,315
1,486
1,293
1,222
972
837
706
619
599
60
32
20
—
—
—
—
—
(49,903)
(15,252)
(9,297)
(5,267)
(3,357)
(3,153)
(2,721)
(1,452)
(1,316)
(1,165)
(972)
(724)
(590)
(500)
(142)
(62)
—
1,105
211,597
11,766
15,771
14,996
3,372
—
1,158
1,169
252
—
541
—
779
914
815
819
600
1,531
1,496
900
—
—
(61,846)
(15,151)
(3,185)
(14,695)
(3,779)
(778)
(15,182)
(1,030)
(411)
(335)
(348)
(92)
(291)
—
(920)
(9)
(900)
4,694
194,362
10,220
12,246
11,036
6,320
1,269
766
2,394
—
—
1,770
605
773
1,588
385
391
—
—
—
300
1,800
650
(62,699)
(13,959)
(5,991)
(14,102)
(4,371)
(1,201)
(14,211)
(1,974)
(415)
(684)
(936)
—
(460)
—
(299)
(784)
—
(9,869)
191,577
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c) Notes and other securities
The notes of the Group (see Note 22.a) 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 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
Other mortgage securities
Of which: mortgage-backed bonds
Territorial covered bond
2022
40,138
2021
40,519
2020
35,753
1,549
43,650
22,049
352
84,140
1,487
41,779
23,197
630
82,928
2,274
49,425
24,736
869
86,047
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:
a. 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.
b. 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.
Additionally, Banco Santander, S.A. issues internationalization
certificates, which are securities whose capital and interest are
guaranteed by loans and credits that are linked to the financing
of export contracts or the internationalization of companies.
These internationalization certificates have been fully
repurchased by Banco Santander, S.A.
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) Mortgage-backed bonds
The members of the board of directors state that Banco
Santander operates in the field of issuances in the Spanish
mortgage market, has and has established express policies and
procedures that cover all the activities carried out and that
guarantee strict compliance with the mortgage market
regulations applicable to these activities for the purposes of the
provisions of Bank of Spain Circular 4/2017.
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.
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In accordance with Articles 18.1 and 21 of RDL 24/2021, 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).
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 fully comply 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 currently required by Bank of Spain circular
4/2017:
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
2022
2021
2020
80,946
83,088
76,554
65,779
64,896
57,382
9,769
11,133
17,610
The mortgage bonds issued by Banco Santander are securities
that, without prejudice to the universal patrimonial
responsibility of the issuer, and in accordance with the
provisions of RDL 24/2021, are specially guaranteed, together
with the rest of the issuer's obligations under a preferential
right on all the assets that make up the Mortgage Bonds
Coverage Set at any time without the need to affect said assets
as collateral by means of a public deed, or any registration in
any public registry or any other formality.
The Mortgage Bonds Coverage Set is made up of: (i) admissible
mortgage loans in accordance with the provisions of article 23
of RDL 24/2021, although it may also be made up of, likewise,
(ii) admissible liquid assets in accordance with the contained in
article 11 of RDL 24/2021, (iii) admissible substitution assets in
accordance with the provisions of the third section of article 23
of RDL 24/2021 and (iv) admissible derivative instruments in
accordance with the provisions of article 12 of the RDL 24/2021,
in the quantity and with the characteristics provided for in RDL
24/2021.
Mortgage bonds incorporate the credit right of their holder
against the issuing entity, guaranteed in the manner indicated in
the previous paragraph, and are accompanied by execution to
claim payment from the issuer after its expiration. The holders
of these titles have the character of singularly privileged
creditors, with the preference currently indicated in numbers 8
of article 1,922 and 6 of article 1,923 of the Civil Code over any
other creditors, in relation to all the assets that integrate the
Mortgage Bonds Coverage Set. Pursuant to current regulations,
all holders of the Issuer's covered bonds, regardless of their
issuance date, will have the same priority over the assets
included in the Mortgage Bonds Coverage Set.
In the event of bankruptcy, holders of identity cards, as long as
they are not considered 'persons specially related' to the issuing
entity in accordance with Royal Legislative Decree 1/2020, of
May 5, which approves the consolidated text of the Bankruptcy
Law (the 'Bankruptcy Law'), would enjoy the special privilege
established in number 7 of article 270 of the aforementioned
Bankruptcy Law, which will only apply to the part of the
bankruptcy credit that does not exceed the value of the
guarantee (calculated in accordance with article 44 of RDL
24/2021). Pursuant to the provisions of said Chapter, in the
event of bankruptcy of the Issuer, the coverage assets of the
Mortgage Bonds Coverage Set individualized and identified in
the special register where the Mortgage Bonds Coverage Set is
segregated in accordance with the certification issued by the
mortgage bond control body will be materially segregated from
the issuer's equity and will form a separate equity that will
operate in legal transactions represented by a special
administrator.
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Once the segregation has been carried out, in accordance with
the provisions of article 44.2 of RDL 24/2021, if the total value
of the assets that make up each separate patrimony is greater
than the total value of the liabilities guaranteed by said
separate patrimony plus the legal over-guarantee, contractual
or voluntary and the liquidity requirement, the special
administrator may decide whether to continue with the current
management of the corresponding separate equity until its
maturity or make a total or partial assignment of the separate
equity to another entity issuing guaranteed bonds. Otherwise,
the special administrator will request the liquidation of said
separate patrimony following the ordinary bankruptcy
procedure. The request for liquidation of the separate patrimony
will produce (a) the early maturity of all the issuer's securities
guaranteed by the assets that make up the separate patrimony
and (b) the beginning of the liquidation of the assets of the
separate patrimony. With the amount obtained in the
liquidation of the separate patrimony, after deducting the
expenses and costs derived from the liquidation of the same,
including the remuneration of the special administrator, the
holders of the mortgage bonds and the counterparties of
derivative contracts included in the Mortgage Bonds Coverage
Set (if applicable), in proportion to their credits regardless of the
age of the debt. If, once the liquidation of the separate equity
has been completed or all its liabilities have expired, there is a
remainder, this will correspond to the active mass of the issuer's
bankruptcy. If, on the contrary, full satisfaction of the credit is
not achieved, in accordance with the provisions of article 42.1 of
RDL 24/2021, the unsatisfied part will be recognized in the
issuer's bankruptcy with the same priority as that of the rights.
of credit of the ordinary unsecured creditors of the issuer.
Grupo Santander has a balance corresponding to mortgage
bonds at December 31, 2022 of EUR 22,049 million (all of them
issued in euros), which correspond to issues of Banco
Santander, SA (with an outstanding face value of EUR
22,099 million). The individual annual accounts of this company
detail the issues at 31 December of 2022 and 2021.
The issuing entity may repay the mortgage bonds early, if this
has been expressly established in the final conditions of the
issue in question and in the conditions established there.
None of the mortgage bonds issued by Banco Santander have
replacement assets involved.
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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
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
Issuances
A
Of which:
Banco Santander - Chile
Banco Santander, S.A.
Banco Santander (Brasil) S.A.
A
Redemptions and repurchases
Of which:
Banco Santander, S.A.
Santander UK plc
Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo
Financiero Santander México
Santander UK Group Holdings plc
Santander Bank, National Association
Exchange differences and other
movements
Balance at end of year
2022
2021
2020
26,196 21,880 21,062
4,075
5,340
119
113
—
—
(1,040)
—
4,469
871
(1,500)
353
3,722
—
(2,838)
(889)
(98)
(1,500)
—
(1,671)
(740)
(52)
—
—
—
—
—
—
(316)
(111)
651
(419)
25,926 26,196 21,880
476
A. The balance relating to issuances, redemptions and repurchases (EUR 921
million), together with the interest paid in remuneration of these issuances
including PPCC (EUR 1,251 million), is included in the cash flow from financing
activities.
EUR million
2021
13,857
8,236
1,535
879
1,689
26,196
2022
12,940
8,438
1,358
1,127
2,063
25,926
2020
13,570
5,991
565
—
1,754
21,880
2022
Outstanding issue
amount in foreign
currency (million)
12,940
9,009
1,204
6,367
Annual interest
rate (%)
3.40%
4.91%
4.18%
14.77%
c) Other disclosures
This caption includes contingent convertible 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:
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Issues by Banco Santander, S.A.
On July 6, 2022 and July 20, 2022, two subordinated issues
matured for a nominal amount of EUR 114 million and EUR
25 million, respectively.
At 25 April 2022, Banco Santander, S.A. proceeded to prepay all
the Tier 1 Contingently Convertible Preferred Securities with
ISIN code XS1602466424 and common code 160246642 in
circulation, for a total nominal amount of EUR 750 million and
which were traded on the Irish Stock Market 'Global Exchange
Market' (the 'PPCC').
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 US 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).
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 was carried out at par and the
remuneration of the PPCC, whose payment is subject to certain
conditions and is also discretionary, was 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 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 ten-year subordinated debenture issue of
EUR 1,250 million was carried out. The issue accrues annual
interest of 2.125% payable annually.
At 29 September 2017, Banco Santander, S.A. carried out issues
of 'PPCCs', for a nominal amount of EUR 1,000 million. The
remuneration of the PPCC, the payment of which is subject to
certain conditions and is also discretionary, was set 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.
Issues by Banco Santander - Chile
In January 2022, Banco Santander Chile carried out an issuance,
in the local market, of subordinated obligations with a term of 6
years, for an amount of UF 3.3 million (equivalent to USD
105 million), which accrues an annual interest of 1.25%.
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%.
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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.
Issues by Banco Santander México, S.A., Institución de Banca
Múltiple, Grupo Financiero Santander México
In January 2022, Banco Santander México, S.A. Multiple
Institution, Grupo Financiero Santander México proceeded to
redeem early a perpetual issue carried out at 30 December
2016 for a nominal amount of USD 500 million, of which 88.2%
of the issue had been acquired by the Group.
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.
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
2022
1,563
1,200
2021
1,475
650
2020
1,177
599
5,796
262
5,429
2,622
4,122
5,315
222
275
5,080
3,779
2,856
3,049
20,187 15,523 12,719
37,059 29,873 26,968
Note 50 contains a detail of the residual maturity periods of
other financial liabilities at each year-end.
Lease liabilities
The cash outflow of leases in 2022 was EUR 710 million (EUR
715 million and EUR 789 million in 2021 and 2020,
respectively).
The analysis of the maturities of lease liabilities at 31 December
2022, 2021 and 2020 is shown below:
Issues by Santander Bank Polska S.A.
EUR million
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
2022 amounted to EUR 992 million (EUR 648 million and EUR
571 million during 2021 and 2020, respectively).
In addition, interests from the PPCC and PPCA during 2022
amounted to EUR 529 million (EUR 566 million and EUR
552million in 2021 and 2020, respectively).
Maturity Analysis - Discounted
payments
Within 1 year
Between 1 and 3 years
Between 3 and 5 years
Later than 5 years
Total discounted payments at the end
of the year
2022
2021
2020
707
1,005
454
456
690
933
534
699
594
981
637
837
2,622
2,856
3,049
During 2022, 2021 and 2020 there were no significant variable
lease payments not included in the valuation of lease liabilities.
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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
Contingent liabilities and
commitments (note 2)
Other provisions
Provisions
2022
2021
2020
2,392
3,185
3,976
950
1,242
1,751
2,074
1,996
2,200
734
1,999
8,149
733
2,427
9,583
700
2,225
10,852
b) Changes
The changes in 'Provisions' in the last three years were as
follows:
EUR million
Balances at beginning of year
Incorporation of Group companies, net
Additions charged to income
Interest expense (note 39)
Staff costs (note 46)
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
Insurance premiums paid
Payments to external funds
Amounts used
Transfer, exchange differences and other changes
Balances at end of year
Post
employment
plans
3,185
—
128
73
57
(2)
10
(12)
(33)
242
(229)
(3)
(451)
—
(447)
2,392
Long term
employee
benefits
1,242
—
69
27
8
34
105
(71)
2022
Contingent
liabilities and
commitments
733
—
(27)
—
—
(27)
618
(645)
—
—
(363)
—
—
—
2
950
—
—
—
—
—
—
28
734
Other
provisions
4,423
—
1,876
—
—
1,876
3,484
(1,608)
—
—
—
—
—
(2,817)
591
4,073
Total
9,583
—
2,046
100
65
1,881
4,217
(2,336)
(33)
242
(592)
(3)
(451)
(2,817)
174
8,149
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EUR million
Balances at beginning of year
Incorporation of Group
companies, net
Additions charged to income
Interest expense (note 39)
Staff costs (note 46)
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
2021
2020
Post
employmen
t plans
3,976
Long term
employee
benefits
1,751
Contingent
liabilities and
commitments
700
Other
provisions
Total
4,425 10,852
Post
employment
plans
6,358
Long term
employee
benefits
1,382
Contingent
liabilities and
commitments
739
Other
provisions
Total
5,508 13,987
—
100
78
67
(45)
21
(66)
(8)
(1,705)
(201)
—
—
(440)
—
—
101
13
6
82
154
(72)
—
—
(605)
—
—
—
—
—
29
—
—
29
473
(444)
—
—
—
—
—
—
—
—
2,748
—
—
—
2,978
91
73
2,748
3,065
(317)
2,814
3,713
(899)
—
(8)
—
(1,705)
—
—
—
—
(806)
—
—
(440)
(2,961) (2,961)
1,463
3,185
(5)
1,242
4
733
211
4,423
1,673
9,583
(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)
1,934
—
—
(8)
2,549
95
76
2,378
1,934
3,541
2,258
(324) (1,163)
—
—
2
547
—
—
—
—
(711)
(1,551)
(1)
(333)
(2,485) (2,485)
(88)
700
(530) (1,144)
4,425 10,852
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
2022
2021
2020
1,245
1,709
1,881
895
884
1,188
1,176
1,695
1,676
29
44
449
1,118
1,432
1,646
55
54
56
3,342
3,335
4,427
4,419
5,727
5,719
i. Spanish entities - Post-employment plans and other similar
obligations
At 31 December 2022, 2021 and 2020, 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 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, to complete the plan
announced in 2020, an amount of EUR 139 million was
recognised, increasing the number of early retirements and
incentivized dismissals plan to 3,915 employees in the total
period.
In 2022, the provision made to cover the commitments with 446
employees covered by early retirement plans and incentivized
dismissals plan amounted to EUR 92 million.
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.
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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 38 million.
The expenses incurred by the Spanish companies in 2022, 2021
and 2020 in respect of contributions to defined contribution
plans amounted to EUR 101 million, EUR 91 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
Other similar obligations
2022
3.80%
PE2020 M/F
Col. Orden 1
2.00%
A
1.25%
2.00%
2021
0.90%
PE2020 M/F
Col. Orden 1
1.00%
A
1.25%
1.00%
2020
0.60%
PE2020 M/F Col.
Orden 1
1.00%
A
1.25%
1.00%
N/A
N/A
N/A
2022
3.80%
PE2020 M/F Col.
Orden 1
2.00%
2021
0.90%
PE2020 M/F Col.
Orden 1
1.00%
2020
0.60%
PE2020 M/F Col.
Orden 1
1.00%
N/A
N/A
0%
N/A
N/A
0%
N/A
N/A
0 %
A. 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 2022, 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 3.80%
(-50 bp) to -3.60% (+50 bp),respectively, and an increase or
decrease in the present value of the long-term obligations of
1.04% (-50 bp) to -1.02% (+50 bp), respectively.
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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:
Expected rate of return on plan assets
Expected rate of return on reimbursement rights
The funding status of the defined benefit obligations in 2022
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
Post-employment plans
2022
3.80%
3.80%
2021
0.90%
0.90%
2020
0.60%
0.60%
Other similar obligations
2022
3.80%
N/A
2021
0.90%
N/A
2020
0.60%
N/A
Post-employment plans
2022
2021
2020
Other similar obligations
2022
2021
2020
25
2,005
—
—
46
2,076
861
1,215
1,141
(24)
104
(6)
29
2,797
—
—
65
2,891
1,217
1,674
1,560
(30)
149
(5)
60
3,318
—
—
41
3,419
1,542
1,877
—
—
892
11
—
903
8
895
—
—
1,186
12
—
1,198
10
1,188
—
—
1,688
18
1
1,707
12
1,695
1,707
895
1,188
1,695
—
174
(4)
—
—
—
—
—
—
—
—
—
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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
A
Other
A.
Including reduction/settlement effect
In addition, in 2022 'Other comprehensive income – Items not
reclassified to profit or loss – Actuarial gains or (-) losses on
defined benefit pension plans' has decreased by EUR 295
million with respect to defined benefit obligations (decrease of
EUR 37 and increase of EUR 84 million in 2021 and 2020,
respectively).
The changes in the present value of the accrued defined benefit
obligations were as follows:
EUR million
Post-employment plans
2022
3
48
(4)
2021
5
24
(1)
2020
10
26
(1)
Other similar obligations
2022
1
25
—
2021
1
11
—
2020
1
9
—
—
2
—
(8)
41
—
13
—
(39)
2
—
2
—
(372)
(335)
(67)
—
92
—
51
(15)
—
139
(55)
81
(3)
—
772
(15)
764
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
Present value of the obligations at end of year
Post-employment plans
2022
2,891
2021
3,419
2020
5,494
Other similar obligations
2022
1,198
2021
1,707
—
3
78
—
(8)
(258)
—
2
(631)
2
(633)
(1)
2,076
6
5
36
—
(61)
(248)
(166)
13
(121)
9
(130)
8
2,891
—
10
39
—
(372)
(359)
(1,551)
2
163
91
72
(7)
3,419
—
1
25
92
—
(346)
—
—
(68)
(5)
(63)
1
903
—
1
11
139
(55)
(589)
—
—
(15)
(8)
(7)
(1)
1,198
2020
1,335
—
1
9
772
(15)
(392)
—
—
(3)
(8)
5
—
1,707
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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
2022
1,217
—
30
—
(78)
2
(303)
(7)
861
2021
1,542
6
12
(22)
(263)
15
(76)
3
1,217
2020
1,547
—
13
—
(94)
5
76
(5)
1,542
2022
10
—
—
—
(2)
—
(1)
1
8
2021
12
—
—
—
(2)
—
—
—
10
2020
14
—
—
—
(2)
—
—
—
12
Post-employment plans
Other similar obligations
2022
2021
2020
2022
2021
2020
149
—
4
(16)
—
(33)
104
174
—
1
(19)
1
(8)
149
192
—
1
(21)
—
2
174
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
In view of the conversion of the defined-benefit obligations to
defined-contribution obligations, the Group will not make
material current contributions in Spain in 2023 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 2022 for the next ten years:
EUR million
2023
2024
2025
2026
2027
2028 to 2032
498
426
358
307
251
807
636
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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 77 million in 2022 (EUR 89
million in 2021 and EUR 91 million in 2020).
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:
2022
4.88%
The S3 Middle
tables weighted
at 84% of the
CMI_2021
projection with
an initial addition
of 0.25%,
smoothing
2021
2020
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 an initial addition
of 0.15%,
smoothing
smoothing parameter 7 and
improving
1.25%.
addition of
0.15%,
parameter 7 and parameter 7 and
improving
1.25%.
improving
1.25%.
3.11%
1.00%
3.37%
1.00%
2.95%
1.00%
Annual
discount rate
Mortality
tables
Cumulative
annual CPI
growth
Annual salary
increase rate
Annual
pension
increase rate
The funding status of the defined benefit obligations in 2022
and the two preceding years is as follows:
EUR million
Present value of the obligations
Less-
Fair value of plan assets
Provisions - Provisions for pensions
Of which:
2022
8,982
2021
15,392
2020
15,472
10,152
(1,170)
17,244
(1,852)
15,575
(103)
Internal provisions for pensions
Net assets for pensions
29
44
(1,199)
(1,896)
449
(552)
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
2022
30
(37)
2021
33
2020
30
(6)
(12)
—
—
(7)
6
—
33
—
(1)
17
In addition, in 2022 'Other comprehensive income – Items not
reclassified to profit or loss – Actuarial gains or (-) losses on
defined benefit pension plans' increased by EUR 857 million
with respect to defined benefit obligations (decrease of EUR
1,475 million and increase of EUR 568 million in 2021 and 2020,
respectively).
The changes in the present value of the accrued defined benefit
obligations were as follows:
2.98%
3.21%
2.85%
EUR million
2022
2021
2020
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.
Any changes in the main assumptions could affect the
calculation of the obligations. At 31 December 2022, 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 7.05% (-50 bp) and -6.31%
(+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 4.72% (+50 bp) and -4.60% (-50 bp), respectively.
These changes would be offset in part by increases or decreases
in the fair value of the assets.
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
33
219
(465)
18
6
15,392 15,472 14,297
30
284
(445)
17
—
(933) 2,060
34
(916) 2,026
(771)
30
283
(487)
9
—
(5,660)
(144)
(5,516)
(585) 1,042
(17)
8,982 15,392 15,472
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The changes in the fair value of the plan assets were as follows:
EUR million
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
Fair value of plan assets at end of year
2022
2021
2020
17,244 15,575 14,755
296
320
225
(487)
262
(6,517)
(463)
(443)
274
285
541 1,492
(670) 1,081
(799)
10,152 17,244 15,575
In 2023 the Group expects to make current contributions to fund
these obligations for amounts similar to those made in 2022.
The main categories of plan assets as a percentage of total plan
assets are as follows:
Equity instruments
Debt instruments
Properties
Other
2022
—
51%
13%
36%
2021
10%
51%
10%
29%
2020
9%
55%
10%
26%
The following table shows the estimated benefits payable at 31
December 2022 for the next ten years:
EUR million
2023
2024
2025
2026
2027
2028 to 2032
471
408
432
457
481
2,632
iii. Other foreign subsidiaries
Certain of the consolidated foreign entities have acquired
commitments to their employees similar to post-employment
benefits.
At 31 December 2022, 2021 and 2020, 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
118 million in 2022 (EUR 106 million at 31 December 2021 and
EUR 103 million at 31 December 2020).
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 9.44% and 9.64%, 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 2022, 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 4.27% (-50 bp) and -3.95%
(+50 bp), respectively. These changes would be offset in part by
increases or decreases in the fair value of the assets.
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The funding status of the obligations similar to post-
employment benefits and other long-term benefits in 2022 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
The amounts recognised in the consolidated income statements
in relation to these obligations are as follows:
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
2022
31
64
2021
34
62
2020
35
72
8
8
—
(3)
108
11
3
(24)
(3)
83
11
5
—
(5)
118
In addition, in 2022 'Other comprehensive income – Items not
reclassified to profit or loss – Actuarial gains or (-) losses on
defined benefit pension plans' decreased by EUR 320 million
with respect to defined benefit obligations (decreased EUR 193
million and EUR 105 million in 2021 and 2020, respectively).
Of which
business in
Brazil
5,185
107
5,710
(632)
314
(52)
(894)
2022
7,578
107
7,321
150
1,166
(122)
(894)
2021
8,018
106
7,167
745
1,478
(64)
(669)
2020
8,434
112
7,182
1,140
1,694
(83)
(471)
The changes in the present value of the accrued 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
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
2022
2021
2020
8,018
—
31
546
—
8,434 10,717
(84)
35
465
—
(5)
34
429
(24)
(3)
(653)
(179)
5
8
(876)
5
(881)
681
(3)
(538)
—
3
3
(486)
16
(502)
171
(5)
(544)
—
3
5
176
23
153
(2,334)
7,578
8,018
8,434
The changes in the fair value of the plan assets were as follows:
EUR million
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
2022
2021
2020
7,167 7,182 8,826
(86)
410
(488)
63
536
(2,079)
7,321 7,167 7,182
(6)
411
(478)
152
(155)
61
—
570
(766)
198
(498)
650
In 2023 the Group expects to make contributions to fund these
obligations for amounts similar to those made in 2022.
639
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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
2022
11%
83%
1%
5%
2021
12%
83%
1%
4%
2020
11%
84%
1%
4%
The following table shows the estimated benefits payable at 31
December 2022 for the next ten years:
EUR million
2023
2024
2025
2026
2027
2028 to 2032
602
610
620
626
632
3,228
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
2022
2020
2021
1,768 1,595 1,647
539
779
1,977 2,049 2,239
328
1,243 1,339 1,475
4,073 4,423 4,425
Set forth below is the detail, by type of provision, of the balance
at 31 December 2022, 2021 and 2020 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
2022
679
2021
564
2020
600
301
437
328
1,094 1,104 1,163
349
745
395
19
641
990
69
36
810
749
951
897
4,073 4,423 4,425
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 Grupo Santander
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 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 those
related to the banking tax in Poland and Bank Levy in United
Kingdom.
The provisions for restructuring include only the costs arising
from restructuring processes carried out by the various Group
companies.
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Lastly, the Other heading contains very atomized and
individually insignificant provisions, such as the provisions to
cover the operational risk of the different offices of the Group.
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 the Group assesses the chances of
loss to be probable and the Group does not record provisions
when the chances of loss are possible or remote. Grupo
Santander determines the amounts to be provided for as its 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 2022 of the breakdown
provisions are shown below:
With respect to provisions for labor and other legal proceedings,
in Brazil, provisions of EUR 174 million and EUR 161 million
were recorded, making payments of EUR 241 million and EUR
252 million, respectively.
With respect to provisions for customer compensation, and
based on the best information available, the gross amount of
mortgage loans denominated and indexed to foreign currencies
in Poland has been adjusted, in accordance with IFRS 9, by the
new estimated cash flows, as described in Note 25.e.
On the regulatory framework side, EUR 53 million were
provisioned in the United Kingdom and a utilization of EUR 70
million was made in the year (Bank Levy). In addition, in Poland,
EUR 161 million were recorded under the regulatory framework
and paid during the year.
In December 2022, Santander UK plc paid a EUR 127 million
financial penalty to settle the Financial Conduct Authority's
(FCA) enforcement investigation into the anti-money laundering
systems and controls in the Business Banking division in the
period between 31 December 2012 and 18 October 2017. This
settlement concluded the FCA’s investigation.
e) Litigation and other matters
i. Tax-related litigation
At 31 December 2022 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 Programa de Integraçao Social
(PIS) and Contribuição para Financiamento da Seguridade
Social (COFINS), 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 and 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 (Imposto sobre a Renda das
Pessoas Jurídicas - IRPJ - and Contribuçao Social sobre o Lucro
Liquido -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 the administrative Court,
the Conselho Adminisitrativo de Recursos Fiscais (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.
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• 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
(Contribuição Provisória sobre Movimentação Financeira) 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.
• 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 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.
• Banco Santander (Brasil) S.A. filed a suspensive judicial
measure aiming to avoid the withholding income tax (Imposto
sobre a Renda Retido na Fonte - IRRF), on payments derived
from technology services provided by Group foreign entities. A
favorable decision was handed down and an appeal was filed
by the tax authority at the Federal Regional Court, where it
awaits judgment. No provision was recognized 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 691 million, and for lawsuits that
qualify as contingent liabilities is EUR 4,977 million.
• 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 definitively confirmed these
Decisions. The dismissal of the appeal, that only affects these
two decisions, had no impact on results.
At the date of approval of these consolidated annual accounts,
there are other less significant tax disputes.
ii. Non-tax-related proceedings
At 31 December 2022 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
2022 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 that two entities of the Axa
Group (hereinafter "Axa France" 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).
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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 717.2 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 was heard by the
Commercial Court on 22 and 23 February 2022 with
judgement reserved. Judgment was handed down by the
Commercial Court on 12 July 2022. The Commercial Court
upheld a significant part of the Santander Entities’ strike-out
plead. The Santander Entities have sought permission to
appeal aspects of the strike out decision on which they were
unsuccessful. Axa France updated the amount of losses
claimed from GBP 636 million (EUR 717.2 million) to GBP
670 million (EUR 755.5 million) in their Amended Particulars
of Claim dated 21 October 2022.
Regarding those claims admitted or those that may eventually
be made in the aforementioned appeal, there are factual
issues that will be resolved during the processing of the trial
that 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.
• 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 appealed this decision. This appeal is
pending.
In August 2021, a first instance court 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 2022.
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• '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 2022, the provision recorded for the economic plan
proceedings amounts to EUR 220 million.
• Floor clauses: as a consequence of the acquisition of Banco
Popular Español, S.A.U. ('Banco Popular'), 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 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 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 2022, after having processed most of the customer
requests, the potential residual loss associated with ongoing
court proceedings is estimated at EUR 60.1 million, amount
which is fully covered by provisions.
• Banco Popular´s acquisition: After the declaration of the
resolution of Banco Popular, some investors filed claims
against the EU’s Single Resolution Board decision, and the
FROB's resolution executed in accordance to the
aforementioned decision. Likewise, numerous appeals were
filed against Banco Santander, S.A. alleging that the
information provided by Banco Popular was erroneous and
requesting from Banco Santander, S.A. the restitution of the
price paid for the acquisition of the investment instruments or,
where appropriate, the corresponding compensation.
In relation to these appeals, on the one hand, the General
Court of the European Union (“GCUE”) selected 5 appeals from
among all those filed before the European courts by various
investors against the European institutions and processed
them as pilot cases. On 1 June 2022, the GCUE has rendered
five judgements in which it has completely dismissed the
appeals, (i) supporting the legality of the resolution
framework applied to Banco Popular, (ii) confirming the
legality of the action of the European institutions in the
resolution of Banco Popular and (iii) rejecting, in particular, all
the allegations that there were irregularities in the sale
process of Banco Popular to Banco Santander, S.A. Four of
these judgments have been appealed before the Court of
Justice of the European Union ("CJEU").
On the other hand, in relation to the lawsuits initiated by
investors directly against Banco Santander, S.A. derived from
the acquisition of Banco Popular, on 2 September 2020, the
Provincial Court of La Coruña submitted a preliminary ruling to
the CJEU in which it asked for the correct interpretation of the
Article 60, section 2 of Directive 2014/59/EU of the European
Parliament and of the Council of 15 May, establishing a
framework for the restructuring and resolution of credit
institutions and investment services companies. Said article
establishes that, in the cases of redemption of capital
instruments in a bank resolution, no liability will subsist in
relation to the amount of the instrument that has been
redeemed. On 5 May 2022, the CJEU has rendered its
judgement confirming that Directive 2014/59/EU of the
European Parliament and of the Council does not allow that,
after the total redemption of the shares of the share capital of
a credit institution or an investment services company subject
to a resolution procedure, the shareholders who have
acquired shares within the framework of a public subscription
offer issued by said company before the start of such a
resolution procedure, exercise against that entity or against its
successor, an action for liability for the information contained
in the prospectus, under Directive 2003/71/EC of the
European Parliament and of the Council, or an action for
annulment of the subscription contract for those shares,
which, taking into account its retroactive effects, gives rise to
the restitution of the equivalent value of said shares, plus the
interest accrued from the date of execution of said contract.
In respect to this judgement, in December 2022 the Spanish
Supreme Court submitted pre-judicial issues before the CJEU
in respect of its applicability to subordinated obligations
amortized with the resolution and to subordinated obligations
and/or preferred shares converted into shares before
resolution.
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Separately, 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 these
proceedings, Banco Santander, S.A. could potentially be
subsidiarily liable for the civil consequences. In view of the
CJEU ruling of 5 May 2022, the Bank has requested
confirmation of the exclusion of its subsidiary civil liability
status in this criminal proceeding. On 26 July 2022, the Court
has rejected this request stating that it is a matter to be
determined at a later procedural time. This decision has been
confirmed on appeal by the Chamber of the National Court by
sentence of 5 October 2022. 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. The CJEU judgement of 5 May
represents a very significant reduction in the risk associated
with these claims.
• 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. was sued in a legal proceeding in which
the plaintiff alleges that the Bank breached his contract as
CEO of the institution. In the lawsuit, the claimant mainly
requested a declaratory ruling that upholds the existence,
validity and effectiveness 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 legal action stating that the conditions to
which the appointment of that position was subject to were
not met; that the executive services contract required by law
was not concluded; and that in any case, the parties could
terminate the contract without any justified cause. On 17 May
2021, the plaintiff reduced his claims for compensation to EUR
61.9 million.
On 9 December 2021, the Court upheld the claim and ordered
the Bank to compensate the claimant in the amount of EUR
67.8 million. By court order of 13 January 2022, the Court
corrected and supplemented its judgment, reducing the total
amount to be paid by the Bank to EUR 51.4 million and
clarifying the part of this amount (buy out) was to be paid
under the terms of the offer letter, i.e., entirely in Banco
Santander shares, within the deferral period for this type of
remuneration at the plaintiff's former employer and subject to
the performance metrics or parameters of the plan in force at
the Bank, which was that of 2018. As explained in note 5 of
the report, the degree of performance of these objectives was
33.3%.
The Bank filed an appeal against the judgment before the
Madrid Court of Appeal, which was opposed by the plaintiff.
At the same time, the plaintiff filed an application for
provisional enforcement of the judgment in the first instance
court. A court order was issued ordering enforcement of the
judgment, and the Bank deposited in the court bank account
the full amount provisionally awarded to the claimant,
including interest, for an approximate sum of EUR.
35.5 million, within the voluntary compliance period.
On 6 February 2023, Banco Santander was notified of the
judgment of 20 January 2023 by which the Madrid Court of
Appeal partially upheld the appeal filed by the Bank. The
judgment has reduced the amount to be paid by EUR 8 million,
which, to the extent that this amount was already paid in the
provisional partial enforcement of the judgement of first
instance court, must be returned to the Bank together with
other amounts for interest, which the appeal judgement also
rejects.
The Bank has submitted a brief requesting a supplement to
the Madrid Court of Appeal’s judgment, as it understands that
it has not ruled on some substantial allegations over the
merits of the case made in the Bank’s appeal. The Bank will
file an extraordinary appeal for procedural infringement and
an appeal in cassation against the Madrid Court of Appeal’s
judgment before Spanish Supreme Court. Existing provisions
cover the estimated risk of loss.
• 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
MAA was originally entered into by Banco Popular and its
purpose is the rendering of acquiring services (point of sale
payment terminals) for businesses in the Spanish market. The
lawsuit was mainly based on the potential breach of clause 6
of the MAA, which establishes certain obligations of
exclusivity, non-competition and customer referral. On 16
December 2022, the Court ruled in favour of the Bank and
dismissed the plaintiff's claim in its entirety. The decision has
been appealed.
Taking into account the decision at first instance and following
the analysis carried out by the Bank's external lawyers, with
the best information available to date, it is considered that no
provision needs to be registered.
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• CHF Polish Mortgage Loans: On 3 October 2019, the 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.
In 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 Supreme Court met several times, with the last
session taking place on 2 September 2021. However, 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 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.
At the date of the Group's consolidated financial statements, it
is not possible to predict the Supreme Court’s and CJEU
decisions on individual cases. Santander Bank Polska and
Santander Consumer Bank Poland estimate legal risk using a
model which considers different possible outcomes and
regularly monitor court rulings on foreign currency loans to
verify changes in case law practice.
As of 31 December 2022, 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 gross amount of PLN 8,393.7 million (EUR
1,791.8 million). As of 1 January 2022, in accordance with
IFRS 9 and based on the new best available information, the
accounting methodology was adapted so that the gross
carrying amount of mortgage loans denominated and indexed
in foreign currencies is reduced by the amount in which the
estimated cash flows are not expected to cover the gross
amount of loans, including as a result of legal controversies
relating to these loans. In the absence of exposure or
insufficient gross exposure, a provision according to IAS 37 is
recorded.
As of 31 December 2022, the total value of adjustment to
gross carrying amount in accordance with IFRS9 as well as
provisions recorded under IAS37, amount to PLN
3,557.3 million (EUR 759.4 million) of which PLN
3,136.3 million (EUR 669.5 million) corresponds to
adjustment to gross carrying amount under IFRS 9 and PLN
421 million (EUR 89.9 million) to provisions recognized in
accordance with IAS 37. Throughout 2022, the adjustment to
gross carrying amount in accordance with IFRS9 amounted to
PLN 1,283.3 million (EUR 274 million), the additional
provisions under IAS37 amounted to PLN 236.8 million (EUR
50.6 million) and other costs related to the dispute amounted
to PLN 218.1 million (EUR 46.6 million).
These provisions represent the best estimate as at 31
December 2022. 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.
The Bank has been testing such settlements in relation to
different customer groups in parallel with own settlement
solutions. The results of the current tests have been
incorporated into the provision calculation model.
On February 16, 2023, the CJEU General Advocate (“AG”)
issued his opinion in case no. C-520/21 pending before the
CJEU, where it considers that Directive 93/13/EEC does not
oppose national legislative provisions, or the national
jurisprudence that interprets them, that allow the consumer
to exercise claims that go beyond the reimbursement of the
loan instalments disbursed under the mortgage loan contract
that is declared null and the payment of default interest at the
legal rate accrued from the date of the payment request.
However, it corresponds to the Polish courts to verify, in the
light of their national law, whether consumers have the right
to exercise this type of claim and, where appropriate, rule on
its admissibility. With regard to banks, the opinion of the AG is
that the Directive prevents a bank from exercising claims
against a consumer that go beyond the repayment of the
principal of the loan granted declared null and the payment of
default interest at the legal rate accrued from the date of the
payment request. The opinion is non-binding, so it does not
definitively resolve these issues, which will be decided in the
CJEU ruling that is expected in 2023. At the date of the
consolidated annual accounts, it is not possible to predict a
reliable estimate of the potential impact for the Group if the
CJEU assumed the opinion of the AG, since this would also
depend on the criterion adopted by the national courts.
On 17 February 2023, the KNF has issued a statement in
which upholds in full the opinion expressed by the Chairman
of the KNF before the CJEU on 12 October 2022, disagreeing
with the conclusions of the AG.
• 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.
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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 2022, 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
2022
457
8,445
5,707
2021
545
7,084
5,069
2020
498
6,309
5,529
14,609 12,698 12,336
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.
Santander Mexico has filed various constitutional review and
appeals against the recurso de amparo referred to above,
which have been dismissed by the Supreme Court of Justice of
the Nation. As of this date, an amparo review filed by the Bank
is pending to be resolved in the Collegiate Courts in the State
of Nuevo León, thus the judgment is not final. On 29 June
2022, Santander México, within the framework of the amparo
review filed by the Bank, requested the First Collegiate Court
in Civil Matters of the Fourth Circuit of Nuevo León the recusal
of two of the three Magistrates who rendered against
Santander Mexico, which has been resolved in favour of
Santander Mexico. Plaintiffs have requested the recusal of the
third Magistrate who ruled with a dissenting vote against the
recurso de amparo referred above.
Santander México believes that the actions taken should
prevail and reverse the decision against it. 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. At
the current stage of the proceedings, the provisions recorded
are considered to be sufficient to cover the risks deriving from
this claim.
• URO Property Holdings, SOCIMI SA: on 16 February 2022,
legal proceedings were commenced in the Commercial Court
of London against Uro Property Holdings SOCIMI SA (“Uro”), a
subsidiary of Banco Santander, S.A., by BNP Paribas Trust
Corporation UK Limited (“BNP”) in its capacity as trustee on
behalf of certain bondholders and beneficiaries of security
rights. The litigation concerns certain terms of a financing
granted to Uro which was supported by a bond issue in 2015.
The claimant seeks a declaration by the Court and a monetary
award against Uro, in connection with an additional premium
above the nominal value of the financing repayment as a
consequence of Uro having lost its status as SOCIMI (Sociedad
Anónima Cotizada de Inversión Inmobiliaria), such loss
causing the prepayment of the bond issue and, in the opinion
of the claimant BNP, also the obligation to pay the additional
premium by Uro. Uro denies being liable to pay that additional
premium and filed its defense statement and announced a
counterclaim against the claimant. The trial hearing has not
been scheduled yet. Furthermore, Uro filed a summary
judgement application for BNP's claim to be dismissed before
trial. The Commercial Court dismissed the application and Uro
is seeking permission to appeal this decision. It is estimated
that the maximum loss associated with this possible
contingency, amounts to approximately EUR 250 million.
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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 returns in
accordance with the tax regulations applicable to them.
b) Years open for review by the tax authorities
In June and November 2021 Spanish tax authorities formalized
acts with agreement, conformity and non-conformity relating to
the corporate income tax financial years 2012 to 2015. 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 the Central
Economic Administrative Court (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 consolidated annual accounts,
the Corporate Income Tax and other taxes audit for periods
2017 to 2019 are ongoing, and subsequent years up to and
including 2022, are subject to review.
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.
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:
EUR million
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
A
country
Of which:
Brazil
United Kingdom
United States
Chile
Poland
2022
2021
2020
15,250
—
15,250
14,547
—
14,547
(2,076)
—
(2,076)
4,575
4,364
(623)
61
210
362
472
(161)
(99)
(30)
(101)
634
(158)
(179)
(34)
—
560
(43)
(71)
(24)
—
Effect of profit or loss of associates
and joint ventures
Effect of reassessment of deferred
taxes
Permanent differences
and other B
Current income tax
Effective tax rate
(210)
(130)
29
—
9
2,500
60
4,486
29.42%
441
4,894
33.64%
3,364
5,632
—
Of which:
Continuing operations
Discontinued operations
(note 37)
Of which:
Current taxes
Deferred taxes
Income tax (receipts)/payments
4,486
4,894
5,632
—
—
—
4,272
214
5,498
3,799
1,095
4,012
4,214
1,418
2,946
A. 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 it includes mainly the impairment of goodwill.
B.
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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 2022, 2021 and 2020:
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
Other recognised income and expense
of investments in subsidiaries, joint
ventures and associates
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
2022
2021
2020
49
96
(510)
(82)
(530)
(165)
(19)
(13)
92
(26)
33
(9)
(2)
—
—
1,522
912
1,136
278
208
5
661
857
195
(51)
1,571
1
626
8
126
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.
In accordance with the Basel III legal framework included in
European law through Directive 2013/36 (CRD IV) and EU
Regulation 575/2013 on prudential requirements for credit
institutions and investment firms (CRR), and subsequently
amended by EU Regulation 2019/876 of the European
Parliament and of the Council, deferred tax assets which use
does not rely on obtaining future profits (referred to hereinafter
as 'monetizable tax assets') generated before 23 November
2016 are exempt from deduction from regulatory capital.
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The detail of deferred tax assets, by classification as
monetizable or non-monetizable assets, and of deferred tax
liabilities at 31 December 2022, 2021 and 2020 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
2022
A
Monetizable
10,660
—
10,660
—
—
7,696
2,964
—
—
—
—
—
—
Other
10,127
1,778
8,349
2,182
1,535
1,232
560
1,270
6,428
6,428
1,792
3,169
359
2021
A
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
A
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
A. 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 which determined such conversion were met at the end of that year (EUR 995 million). The Spanish tax authorities have expressly confirmed the nature of
these assets as monetizables, but they considered that conditions for conversion were not met at the end of 2017, without prejudice to the conversion in future years.
The Tax Administration position is being discussed at the Courts.
Besides, due to losses incurred in 2020, the Consolidated Tax Group in Spain converted EUR 642 million of monetizable tax assets into credit against the Tax
Administration in its corporate income tax return.
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.
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 directors. 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:
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.
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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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
making reasonable changes to the key assumptions, mainly by
adjusting 50 basis points for growth (gross domestic product)
and adjusting 50 basis points for inflation.
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 9,455 million, of which EUR 6,777 million were
for monetizable temporary differences with the right to
conversion into a credit against the Public Finance, EUR
1,847 million for other temporary differences and EUR
830 million for tax losses and credits.
Brazil
The deferred tax assets recognised in Brazil total EUR
6,461 million, of which EUR 3,759 million were for monetizable
temporary differences, EUR 1,950 million for other temporary
differences and EUR 752 million for tax losses and credits.
United States
The deferred tax assets recognised in the United States total
EUR 1,578 million, of which EUR 1,398 million were for
temporary differences and EUR 180 million for tax losses and
credits.
The Group estimates that the recognised deferred tax assets for
temporary differences, tax losses and credits in the different
jurisdictions will be recovered in a maximum period of 15 years.
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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
Also, the Group did not recognise deferred tax assets relating to
tax losses and deductions and other incentives amounting to
approximately EUR 10,800 million the use of which EUR 490
million is subject, among other requirements, to time limits.
Foreign
currency
balance
translation
differences and
other items
(Charge)/
Credit to
income
(Charge)/Credit
to asset and
liability valuation
adjustments
Acquisition
for the year
(net)
Balances at 31
December
2022
273
211
62
507
(487)
(487)
(214)
376
317
59
(320)
(149)
(149)
227
697
—
697
—
684
684
1,381
1
—
1
—
(14)
(14)
(13)
20,787
1,778
19,009
10,660
(6,428)
(6,428)
14,359
Balances at 31
December 2021
19,440
1,250
18,190
10,473
(6,462)
(6,462)
12,978
Balance at 31
December 2020
19,246
1,093
18,153
10,721
(5,933)
(5,933)
13,313
(Charge)/
Credit to
income
(209)
129
(338)
(273)
(886)
(886)
(1,095)
Foreign
currency
balance
translation
differences and
other items
(Charge)/Credit
to asset and
liability valuation
adjustments
Acquisition
for the year
(net)
193
28
165
25
(170)
(170)
23
209
—
209
—
528
528
737
1
—
1
—
(1)
(1)
0
Balance at 31
December
2021
19,440
1,250
18,190
10,473
(6,462)
(6,462)
12,978
Balances at 31
December 2019
22,758
3,427
19,331
11,233
(6,522)
(6,522)
16,236
(Charge)/
Credit to
income
(1,016)
(2,065)
1,049
613
(402)
(402)
(1,418)
differences and
other items
(2,465)
Foreign
currency
balance (Charge)/Credit to
translation asset and liability
valuation
adjustments
38
—
38
—
156
156
194
(266)
(2,199)
(1,125)
851
851
(1,614)
Acquisition
for the year
(net)
(69)
(3)
(66)
—
(16)
(16)
(85)
Balance at 31
December
2020
19,246
1,093
18,153
10,721
(5,933)
(5,933)
13,313
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f) Tax reforms
The following significant tax reforms were approved in 2022
and previous years:
In Spain, 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
addition, during 2022, Law 38/2022 established a new
temporary levy on credit institutions and financial credit
institutions for fiscal years 2023 and 2024. The levy will be
calculated as 4.8% of net interest and fees earned in the
business carried out in Spain in the precedent year and the
payment obligation will arise on the first day of each period.
Additionally, this law also established a 50% limitation on the
integration of negative individual taxable bases into the
consolidated tax group’s tax base. This limitation is expected to
be in force only in 2023, with a 10 year deadline for the reversal
of this positive adjustment.
In the United Kingdom, the Budget Act for 2021 increased the
main Corporation Tax rate from 19% to 25% with effect from 1
April 2023. In addition, and also with effect from 1 April 2023,
the Bank Surcharge tax rate was reduced from 8% to 3%, so the
corporate tax rate for banks is set at 28%.
In Brazil, Provisional Measure 1.115/2022 and the subsequent
Law 14,446, established a temporary increase from 31 August
2022 to 31 December 2022 in the rate of contribution on net
income (CSLL) of banks from 20% to 21% and for other financial
institutions, from 15% to 16% . This increase lifted the
aggregate tax rate -sum of CSLL and the corporate income tax
(IRPJ)- for banks to 46% (25% for income tax and 21% for CSLL),
and 41% for other financial institutions. In addition, Law
14,467/2022, with effect from 2025, amends the rules on the
tax deductibility of credit provisions in financial institutions,
bringing those rules closer to the accounting recognition
criterion. In the tax on financial operations (IOF) as of 1 January
2021, the rate of 0,38% on credit operations was reinstated (0%
for part of 2020), 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 4.08%
for natural persons). In 2022 Decree 10.997/2022 has
established the reduction to 0% of the IOF applicable to foreign
financing and lending transactions, regardless of the term of the
transaction, as from 21 March 2022, and a gradual reduction in
the rates applicable to foreign exchange transactions until their
reduction to 0% as from 2 January 2029.
In Argentina, Law n.º 27630 (National Bulletin 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 Argentina 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
2021, 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%) and
also reducing certain exemptions. Finally, since 2019, different
laws on the adjustment for tax inflation have been approved in
order to partially defer the adjustment.
In the United States, during 2022, the Inflation Reduction Act
(IRA) has been approved, which, among other measures,
imposes a minimum taxation on the accounting performance of
certain large companies, through the introduction of a new
Alternative Minimum Tax (AMT) as of 2023, calculated by
applying a rate of 15% on the profit determined on the basis of
the adjusted financial statements. The amount to be paid is
deductible in future years from the tax rate of ordinary
corporation tax.
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 2022, the European Commission approved
Directive 2022/2523 ensuring a minimum effective tax rate for
the global activities of large multinational groups. The Directive
that follows closely the OECD Inclusive Framework on Base
Erosion and Profit Shifting should be transposed by the Member
States throughout 2023, entering into force on 1 January 2024.
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 2022/23.
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.
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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
A
Modification of participation rates
Change of perimeter
Dividends paid to minority
shareholders
B
Changes in capital and other concepts
Balance at end of year
2022
10,123
10,123
248
(1,890)
2021
2020
9,846 10,588
9,846 10,588
(818)
(304)
76
581
1,159
(1,811)
31
1,529
(390)
(5)
(648)
(500)
95
(769)
8,481 10,123
1,063
(632)
(54)
(465)
164
9,846
A.
B.
Include the effects of the purchase of shares of Santander Holdings USA, Inc.
on Santander Consumer USA Holdings Inc. that occurred in 2022 and of the
public offer for the acquisition of shares of Banco Santander México, SA,
Institución de Multiple Banking, Grupo Financiero Santander México that
occurred in 2021 (see note 3.b).
Includes the effect of the amortization of AT1 UK by EUR 756 million.
The foregoing changes are shown in the consolidated statement
of changes in total equity.
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 (His
Majesty's Revenue and Customs) 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.
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
A
Other companies
2022
1,603
1,728
—
1,317
1,210
2021
1,559
1,543
1,255
1,042
1,023
2020
1,676
1,622
986
1,218
1,014
251
1,213
7,322
202
1,970
8,594
461
1,806
8,783
Profit/(Loss) for the year attributable to
non-controlling interests
1,159
1,529
1,063
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
TOTAL
—
323
280
259
196
494
311
292
251
75
201
255
198
233
81
42
59
62
44
8,481 10,123
61
34
9,846
A.
Includes perpetual Santander UK plc equity instruments convertible at the
option of Santander UK plc into preferred shares of Santander UK plc. During
2022, three issues were redeemed early for a nominal amount of GBP 1,700
million (EUR 1,977 million) of which the Group had repurchased GBP 1,050
million (EUR 1,221 million). At year-end, the outstanding balance on these
equity instruments amounted to GBP 500 million (EUR 564 million) (EUR 1,363
million and EUR 1,275 million in 2021 and 2020, respectively).
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c) Other information
The financial information on the subsidiaries with significant
non-controlling interests at 31 December 2022 is summarised
below:
A
EUR million
Total assets
Total liabilities
Net assets
Total income
Total profit
Santander Bank
Polska S.A.
52,665
47,506
5,159
2,474
542
Banco Santander
(Brasil) S.A.
184,165
168,627
15,538
12,910
2,822
Banco Santander -
Chile
78,425
72,845
5,580
2,449
956
Grupo Financiero
Santander México, Santander Consumer
USA
40,681
30,130
10,551
4,300
1,407
S.A.B. de C.V.
92,636
84,416
8,220
4,623
1,257
A. 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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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
2022
(35,628)
(4,635)
(3,945)
—
10
—
2021
(32,719)
(4,241)
(3,986)
—
(8)
—
2020
(33,144)
(5,328)
(5,002)
—
(2)
—
(672)
(157)
(308)
—
293
—
275
—
159
(293)
(275)
(159)
(28)
(30,993)
(6,750)
(20,420)
(2,437)
(1,002)
—
—
(384)
(90)
(28,478)
(4,283)
(23,887)
(276)
436
—
—
(468)
(16)
(27,816)
(3,124)
(26,911)
295
2,411
—
—
(487)
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 (increase of EUR 56 million in the year) is shown in
the consolidated statement of recognised income.
The endowment against equity in 2022 amounts to EUR 242
million - see note 25.b -, with the following breakdown:
• Reduction of EUR 295 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
0.90% to 3.80%.
• Reduction of EUR 171 million in the accumulates actuarial
losses relating to the Group's entities in Germany, mainly due
to the evolution experienced by the discount rate -increase
from 1.45% to 4.21%.
• Reduction of EUR 113 million in the accumulates actuarial
losses relating to the Group's entities in Portugal, mainly due
to the evolution experienced by the discount rate -increase
from 1.10% to 3.70%.
• Increase of EUR 857 million in the cumulative actuarial losses
relating to the Group´s businesses in the UK, mainly due to the
evolution of the asset portfolio and inflation in the short term.
These actuarial losses have been partially offset in the
obligations due to the evolution of the discount rate– increase
from 1.90% to 4.88%- and inflation in the long term -
reduction from 3.37% to 3.11%.
• Reduction of EUR 39 million in accumulated actuarial losses
corresponding to the Group’s business in Brazil, mainly due to
the increase in the discount rate -increase from 8.39% to
9.44% in the main pension benefits and 8.44% to 9.46% in the
main medical benefit.
• Increase of EUR 3 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 a reduction of EUR 186 million as a result of the evolution of
exchange rates and other movements.
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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 2022, 2021 and 2020 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
2022
30
84
15
244
373
246
127
(926)
(60)
—
(59)
(1,045)
(113)
(932)
2021
(896)
24
15
185
(672)
133
(805)
500
225
29
1,187
1,941
1,200
741
Capital gains by
valuation
Capital losses by
valuation
Net gains/losses by
valuation
Fair Value
25
39
13
496
573
500
73
(663)
(58)
(4)
(5)
(730)
(44)
(686)
(638)
(19)
9
491
(157)
456
(613)
759
170
31
1,493
2,453
1,521
932
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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
2020
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
1359
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 2022 reflects the positive effect of the
appreciation of the Brazilian real, the US dollar and the Mexican
peso and the negative effect of the depreciation of the pound
sterling whereas the change in 2021 reflected the positive
effect of the generalized appreciation of the main currencies,
especially the Brazilian real, the pound sterling, the US dollar
and the Mexican peso. 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.
Of the change in the balance in these years, a profit of EUR 496
million, a profit of EUR 167 million and a loss of EUR 2,104
million in 2022, 2021 and 2020, respectively relate to the
measurement of goodwill.
The detail, by country is as follows:
EUR million
Net balance at end of year
2022
(27,170)
2021
(28,170)
2020
(30,035)
Of which:
Brazilian real
Pound sterling
Mexican peso
Argentine peso
Chilean peso
US dollar
Polish zloty
Other
(16,735)
(4,219)
(3,010)
(1,755)
(2,081)
2,384
(999)
(755)
(17,440)
(3,415)
(3,088)
(2,109)
(2,039)
1,536
(809)
(806)
(17,417)
(4,205)
(3,091)
(2,288)
(1,776)
387
(788)
(857)
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The breakdown of translation differences by currency is as
follows:
EUR million
2022
Currency
Brazilian real
Pound sterling
Mexican peso
Argentine peso
Chilean peso
US dollar
Polish zloty
Other
Total Group
EUR million
2021
Currency
Brazilian real
Pound sterling
Mexican peso
Argentine peso
Chilean peso
US dollar
Polish zloty
Other
Total Group
EUR million
2020
Currency
Brazilian real
Pound sterling
Mexican peso
Argentine peso
Chilean peso
US dollar
Polish zloty
Other
Total Group
A. Profit and loss items are translated into euros at the average exchange rate for the year as described in note 2 a) ii.
Balance at the Balance at the end
beginning of the year
(15,913)
(3,504)
(2,012)
(2,109)
(1,852)
2,775
(678)
(594)
(23,887)
of the year Movement
1,714
(942)
880
355
247
1,287
(98)
24
3,467
(14,199)
(4,446)
(1,132)
(1,754)
(1,605)
4,062
(776)
(570)
(20,420)
From goodwill
376
(51)
56
—
31
102
(21)
3
496
Of which:
A
From results
(98)
(67)
18
—
5
(24)
—
(7)
(173)
From net assets
1,436
(824)
806
355
211
1,209
(77)
28
3,144
Balance at the Balance at the end
beginning of the year
(16,032)
(15,913)
of the year Movement
119
1,098
381
178
(2,012)
(3,504)
(2,109)
(1,852)
2,775
(678)
(594)
(23,887)
(402)
1,522
(40)
168
3,024
Of which:
From goodwill
30
A
From results
19
41
26
—
(55)
125
(9)
9
167
38
29
—
(43)
102
(1)
11
155
From net assets
70
1,019
326
178
(304)
1,295
(30)
148
2,702
(4,602)
(2,393)
(2,287)
(1,450)
1,253
(638)
(762)
(26,911)
A. Profit and loss items are translated into euros at the average exchange rate for the year as described in note 2 a) ii.
Balance at the Balance at the end
beginning of the year
(10,704)
(3,329)
(1,547)
(2,094)
(1,181)
2,833
(249)
(430)
(16,701)
of the year Movement
(5,328)
(1,273)
(16,032)
(4,602)
(2,393)
(2,287)
(1,450)
1,253
(638)
(762)
(26,911)
(846)
(193)
(269)
(1,580)
(389)
(332)
(10,210)
From goodwill
(1,280)
(455)
(59)
—
(18)
(143)
(133)
(16)
(2,104)
Of which:
A
From results
(190)
(4)
(2)
—
15
(58)
(5)
(10)
(254)
From net assets
(3,858)
(814)
(785)
(193)
(266)
(1,379)
(251)
(306)
(7,852)
A. Profit and loss items are translated into euros at the average exchange rate for the year as described in note 2 a) ii.
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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.
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 2022, 2021 and 2020
is as follows:
EUR million
Debt instruments
Issued by Public-sector
Spain
Rest of Europe
Latin America and rest of the world
Issued by Private-sector
Spain
Rest of EuropeA
Latin America and rest of the world
EUR million
Debt instruments
Issued by Public-sector
Spain
Rest of Europe
Latin America and rest of the world
Issued by Private-sector
Spain
Rest of Europe
Latin America and rest of the world
Revaluation gains
Revaluation losses
Net revaluation gains/
(losses)
Fair value
31 December 2022
26
268
196
—
11
16
517
(1)
(199)
(937)
(24)
(68)
(290)
(1,519)
25
69
(741)
(24)
(57)
(274)
(1,002)
9,312
17,593
40,873
5,727
5,203
4,590
83,298
Revaluation gains
Revaluation losses
Net revaluation gains/
(losses)
Fair value
31 December 2021
271
544
334
2
47
31
1,229
—
(118)
(438)
(20)
(171)
(46)
(793)
271
426
(104)
(18)
(124)
(15)
436
12,917
20,397
49,847
4,759
11,708
5,957
105,585
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EUR million
Debt instruments
Issued by Public-sector
Spain
Rest of Europe
Latin America and rest of the world
Issued by Private-sector
Spain
Rest of Europe
Latin America and rest of the world
Revaluation gains
Revaluation losses
Net revaluation gains/
(losses)
Fair value
31 December 2020
693
915
785
2
100
79
2,574
—
(69)
(73)
(7)
(11)
(3)
(163)
693
846
712
(5)
89
76
2,411
19,314
23,116
51,026
6,454
12,191
6,069
118,170
A. The revaluation losses decrease includes the effect of the transfer made by Santander Bank Polska, S.A. during 2022, from debt securities under the heading 'Financial
assets at fair value through other comprehensive income' to 'Financial assets at amortised cost' which has amounted for EUR 219 million in the Group's consolidated
annual accounts.
Santander Bank Polska, S.A. has decided to carry out a change of strategy in its business model which has entailed the cessation of a significant element of its
commercial activity corresponding to customer deposits. This decision has been publicly communicated. As a result, the assets, which corresponded to a business model
whose objective was to collect the principal and interest flows and the sale of such assets, which were directly related in origin to such liabilities, have to be reclassified
to a new business model whose objective is achieved through the collection of the principal and interest flows.
As established in IFRS 9, the transfer has been made prospectively; the financial asset has been reclassified to its fair value at the reclassification date and the
cumulative gain or loss previously recognized in other comprehensive income has been eliminated from equity. Consequently, the financial asset is measured at the
reclassification date as if it had always been measured at amortized cost and the cumulative gain or loss previously recognized in 'Other comprehensive income' (see
consolidated statement of recognized income and expense) is adjusted against the fair value of the financial asset at the reclassification date.
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 2022, 2021 and 2020, 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 7
million, EUR 19 million and EUR 19 million in 2022, 2021 and
2020, 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:
2022 2021 2020
(476)
117
(15)
(374)
(489)
7
6
(476)
(335)
(170)
16
(489)
Zurich Santander Insurance América, S.L.
(315)
(332)
(298)
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 2019, Banco Santander’s share 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.
Likewise, 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.
On 1 April 2022, there was a capital reduction amounting to
EUR 129,965,136.50 through the redemption of 259,930,273
shares, corresponding to the share buyback program carried out
in 2021.
Likewise, on 28 June 2022, Banco Santander decreased its
capital by an amount of EUR 143,154,722.50 through the
redemption of 286,309,445 shares, corresponding to the share
buyback program carried out during the first half of 2022.
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Both operations have not entailed the return of contributions to
the shareholders as Banco Santander was the owner of the
redeemed shares.
Therefore, Banco Santander's share capital at 31 December
2022 consisted of EUR 8,397 million, represented by
16,794,401,584 shares of EUR 0.50 of nominal value each and
all of them of a unique class and series. It includes 340,406,572
shares corresponding to the first 2022 share buyback program
(see note 1.g).
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.
As of 31 December 2022, Norges Bank was registered with the
CNMV with a direct significant shareholding of 3.006% of voting
shares of Banco Santander (3% is the commonly lowest
threshold provided under Spanish law to disclose a significant
holding in a listed company), as it had announced on 5 May
2022. Even though at 31 December 2022, 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 (14.23%),Chase Nominees Limited (6.88%), The Bank of
New York Mellon Corporation (4.82%), Citibank New York
(3.90%), BNP (3.28%) and EC Nominees Limited (3.04%).
At 31 December 2022, 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 2022 the shares of the following companies
were listed on official stock markets: Banco Santander
Argentina 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. and Getnet Adquirência e Serviços para Meios de
Pagamento S.A. - Instituição de Pagamento.
At 31 December 2022 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 50 million
shares, which represented 0.30% of Banco Santander’s share
capital (45 and 39 million shares, representing 0.26% and
0.22% of the share capital in 2021 and 2020, respectively). In
addition, the number of Banco Santander shares owned by third
parties and received as security was 232 million shares (equal
to 1.38% of the Bank’s share capital).
At 31 December 2022 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 decrease in 2020 was due to the reduction of EUR
361 million to cover the capital increase on 3 December (see
note 31). Also, in 2020 an amount of EUR 72 million, was
transferred from the Share premium account to the Legal
reserve (see note 33.b.i).
The decreased produced in 2021 for an amount of EUR 4,034
million was 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 31).
The decreased produced in 2022 by an amount of EUR
1,433 million has been the consequence of the difference
between the purchase value of the redeemed shares (EUR
1,706 million) and the par value of said shares (EUR 273 million)
(see note 4.a and consolidated statements of changes in total
equity) as a consequence of the capital decreases described in
note 31.a.
Likewise, in accordance with the applicable legislation, a reserve
has been provided for amortized capital charged to the issue
premium for an amount equal to the nominal value of said
amortized shares (EUR 273 million).
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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
A
Legal reserve
Own shares
Revaluation reserve Royal Decree-Law
7/1996
Reserve for retired capital
Unrestricted reserves
B
Voluntary reserves
Consolidation reserves attributable to the
Bank
Reserves of subsidiaries
Reserves of entities accounted for using
the equity method
2022
2,798
1,734
737
43
284
7,701
7,917
2021
2,543
1,734
755
2020
2,460
1,734
672
43
11
43
11
4,243 10,422
6,128
6,123
(216)
(1,880) 4,294
49,196 47,438 47,601
1,553
1,504
1,572
61,248 55,796 61,987
A. The board of directors has proposed to the general shareholders' meeting the
reclassification of the excess that the amount of the balance of the legal
reserve account shows over the figure that is equivalent to 20% of the
resulting share capital after the executed capital reductions, to be included in
the voluntary reserves account.
In accordance with the commercial regulations in force in Spain.
B.
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.
Also, in 2020 an amount of EUR 72 million, was transferred
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
met the percentage of 20% of the share capital, and at 31
December 2022 the Legal reserve was at 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.
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
Grupo Santander Holdings USA
Banco Santander - Chile
Santander Consumer Finance Group
Banco Santander Totta, S.A.
(Consolidated Group)
Banco Santander Argentina 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)
S.A)
Other companies and consolidation
adjustments
Of which, restricted
2022
2021
2020
14,663 14,325 14,067
8,447
8,558
8,358
5,437
4,324
3,875
3,858
3,297
2,527
2,140
1,316
4,753
4,913
3,194
3,502
2,940
2,318
1,990
1,307
4,230
4,793
3,404
4,186
2,960
2,161
1,748
1,335
1,050
869
695
310
277
247
(1,959)
(672)
(1,508)
49,196 47,438 47,601
3,155
3,392
3,614
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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 2022 amounted to EUR 688 million.
Additionally, at 31 December 2022 the Group had other equity
instruments amounting to EUR 175 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 31 December 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; 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 donations on an extraordinary basis
made by Banco Santander to the Banco Santander Foundation.
At 31 December 2021, the number of treasury shares held by
the Group was 277,591,940 (1.60% of the issued share capital).
During 2022, 713,359,786 shares of the Bank were acquired at
an average price of EUR 2.87 per share, of which 286,309,445
relate to the Share Buyback Program carried out during the first
half of 2022, and 220,942,806 relate to the new Share Buyback
Program started on November 22. Likewise, 546,239,718
shares were amortised (note 31) and 201,022,983 shares have
been transferred (of which 36,700,000 shares correspond to
two donations made by Banco Santander to the Banco
Santander Foundation) at an average price of EUR 2.85 per
share (excluding in the calculation of the average price the
transfers made by Banco Santander in the aforementioned
donations).
At 31 December 2022, the Group holds 243,689,025 shares of
the Bank's issued share capital (1.45%).
The effect on equity, net of tax, arising from the purchase and
sale of Bank shares is of EUR 7 million profit in 2022 (EUR 23
million and EUR 1 million profit in 2021 and 2020, 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:
Loans commitment granted
Of which impaired
Financial guarantees granted
Of which impaired
Financial guarantees
Credit derivatives sold
Other commitments granted
Of which impaired
Technical guarantees
Other
2020
2022
2021
274,075 262,737 241,230
274
12,377
124
12,358
19
64,538
548
33,526
31,012
615
10,758
188
10,715
43
75,733
781
40,158
35,575
653
12,856
521
12,813
43
92,672
608
50,508
42,164
The breakdown as at 31 December 2022 of the exposures and
the provision fund (see note 25) out of balance sheet by
impairment stage is EUR 370,729 million and EUR 331 million
(EUR 337,113 million and EUR 372 million in 2021 and EUR
310,435 million and EUR 377 million in 2020) in stage 1, EUR
7,092 million and EUR 191 million (EUR 10,531 million and EUR
200 million in 2021 and EUR 6,764 million and EUR 182 million
in 2020) in stage 2 and EUR 1,782 million and EUR 212 million
(EUR 1,584 million and EUR 161 million in 2021 and EUR
946 million and EUR 141 million in 2020) 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.
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.
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.
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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
Due to the replacement of the current rates by the alternative
rates defined in the note 53 of this report, in the section 'IBOR
Reform', 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 6.83% 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
2022
2021
2020
142,189 145,987 131,965
15,577
16,078
20,712
24,862
181,880 186,927 168,254
14,021
25,670
ii. Non-managed marketed funds
Additionally, at 31 December 2022 there are non-managed
marketed funds totalling EUR 48,379 million (EUR 48,385
million and EUR 38,563 million at 31 December 2021 and 2020,
respectively).
c) Third-party securities held in custody
At 31 December 2022 the Group held in custody debt securities
and equity instruments totalling EUR 231,263 million (EUR
236,153 million and EUR 209,269 million at 31 December 2021
and 2020, respectively) entrusted to it by third parties.
36. Hedging 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.).
• 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.
• 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.
Total hedging instruments affected
Fair value hedges
Interest rate risk
Interest rate and foreign exchange risk
Cash flow hedges
Interest rate risk
Interest rate and foreign exchange risk
Exchange rate risk
Post-transition date agreement
Fair value hedges
Interest rate risk
Interest rate and foreign exchange risk
Cash flow hedges
Interest rate risk
Interest rate and foreign exchange risk
USD LIBOR
17,001
13,907
3,094
12,740
9,454
3,278
8
29,741
14,879
11,785
3,094
11,573
8,295
3,278
26,452
As for the hedged items directly affected by the uncertainties
related to the IBOR reforms, their nominal amount is shown
below, which represents 2.17% of the total notional amount
hedged:
EUR million
Total hedge items directly affected
USD LIBOR
Fair value hedges
Interest rate risk
Cash flow hedges
Interest rate risk
Exchange rate risk
Post-transition date agreement
Fair value hedges
Interest rate risk
Cash flow hedges
Interest rate risk
201
201
9,357
9,349
8
9,558
201
201
8,202
8,202
8,403
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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 2022, 2021 and
2020:
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
Future interest rate
Currency swap
Credit risk
CDS
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
Option
Hedges of net investments in foreign
operations
Exchange rate risk
FX forward
Nominal
value
214,473
190,513
87,477
88,059
4,492
3,745
747
19,412
905
8,679
9,522
56
56
149,756
81,626
2,027
55,886
20,784
34,973
10,754
20,005
16,175
3,361
12,814
16,924
14,096
58
58
22,614
22,614
22,614
386,843
2022
Carrying amount
Assets
5,095
4,405
Liabilities
4,630
4,239
Changes in fair value used
for calculating hedge
ineffectiveness
3,351
2,554
Balance sheet line items
Hedging derivatives
2,950
1,367
147
147
—
543
4
261
266
—
—
2,730
137
—
59
49
1,358
267
951
1,046
—
1,046
180
179
9
9
244
244
244
8,069
3,203
623
25
25
—
366
80
—
286
—
—
3,767
1,325
—
1,494
(184)
746
172
455
292
161
131
1,403
1,364
1
1
831
831
831
9,228
(716)
3,468
(9)
(36)
27
805
(79)
922
(61)
1
1
(520)
(2,461)
51
(1,439)
(1,151)
1,760
773
982
(80)
(333)
249
261
241
—
—
(2,467)
(2,467)
(2,467)
364
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
Future interest rate
Interest rate and exchange rate risk
Of which:
Currency swap
Interest rate swap
Credit risk
Inflation 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
2021
Carrying amount
Assets
2,528
2,227
Liabilities
2,656
1,778
1,668
1
7
7
—
294
281
12
—
—
920
734
423
423
—
452
443
9
2
1
Nominal
value
206,957
176,176
66,904
97,321
21,238
13,909
7,329
9,326
7,397
1,650
173
44
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
392,948
—
70
20
396
280
100
1,425
95
1,330
52
51
5
199
199
199
4,761
—
155
182
657
42
606
400
2
393
679
678
1
650
650
650
5,463
Changes in fair value used
for calculating hedge
ineffectiveness
1,079
591
Balance sheet line items
Hedging derivatives
(377)
714
287
22
265
200
192
(7)
1
—
(1,703)
(526)
(155)
(212)
(409)
(112)
26
(133)
(815)
(112)
(702)
(247)
(232)
(3)
(1,159)
(1,159)
(1,159)
(1,783)
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
667
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Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | 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:
Futures
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
operations
investments
in
foreign
Exchange rate risk
FX forward
2020
Carrying amount
Assets
4,199
3,528
Liabilities
4,671
3,850
2,985
184
293
210
378
370
0
2,747
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
5,218
19,682
13,907
10,206
14
22,210
22,210
22,210
360,626
—
237
204
555
265
283
2,362
262
2,100
36
26
5
690
690
690
8,325
322
108
7
802
195
600
275
—
264
140
136
—
459
459
459
6,869
Changes in fair value used
for calculating hedge
ineffectiveness
(451)
(456)
Balance sheet line items
Hedging derivatives
(27)
(486)
11
11
(11)
(4)
5
235
78
(208)
135
145
(401)
(155)
(103)
679
129
550
(129)
(132)
8
2,340
2,340
2,340
2,124
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
Hedging derivatives
668
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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 BoE base rate. 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.
669
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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.
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 28,200 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.
670
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The following table sets out the maturity profile of the hedging
instruments used in Grupo Santander non-dynamic hedging
strategies:
31 December 2022
Up to one
month
6,588
5,120
One to three
months
9,811
8,822
Three months
to one year
37,723
34,074
One year to
five years
136,223
120,829
More than five
years
24,128
21,668
Total
214,473
190,513
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
Interest Future rate
Currency swap
Credit risk
CDS
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
Option
Hedges of net investments in foreign operations:
Exchange rate risk
FX forward
2,249
2,249
2,249
19,019
5,393
5,393
5,393
30,406
2,535
2,492
556
556
—
912
—
—
912
—
—
3,005
5,039
741
741
—
238
—
—
238
10
10
10,182
5,546
15,202
7,424
2,027
2,292
1,175
3,777
1,996
1,313
182
—
182
677
483
—
—
—
4,877
2,471
4,295
2,487
1,809
509
—
509
2,974
951
—
—
8,854
23,511
2,448
2,448
—
1,193
405
—
788
8
8
41,514
30,568
—
28,103
1,196
4,452
1,982
2,470
3,982
659
3,323
2,505
1,895
7
7
14,972
14,972
14,972
94,209
56,868
54,786
—
—
—
15,356
192
8,679
6,188
38
38
75,653
36,501
—
20,568
14,728
19,940
4,289
13,028
10,294
2,468
7,826
8,870
8,869
48
48
16,215
2,231
747
—
747
1,713
308
—
1,396
—
—
7,205
1,587
—
46
1,214
2,509
—
1,385
1,208
234
974
1,898
1,898
3
3
87,477
88,059
4,492
3,745
747
19,412
905
8,679
9,522
56
56
149,756
81,626
2,027
55,886
20,784
34,973
10,754
20,005
16,175
3,361
12,814
16,924
14,096
58
58
—
—
—
211,876
—
—
—
31,333
22,614
22,614
22,614
386,843
671
2022 Annual report
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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
Future interest rate
Interest rate and exchange rate risk
Of which:
Currency swap
Interest rate 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
31 December 2021
Up to one
month
5,546
4,324
One to three
months
11,786
9,978
Three months
to one year
45,119
33,873
One year to
five years
114,828
103,216
More than five
years
29,678
24,785
Total
206,957
176,176
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
—
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
—
4,189
25,588
11,013
11,013
—
199
198
—
—
34
42,398
56,120
5,550
586
4,964
5,898
4,437
1,232
44
120
17,912
4,370
2,365
—
2,365
2,528
2,066
418
—
—
66,904
97,321
21,238
13,909
7,329
9,326
7,397
1,650
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
311
58,930
7,920
15,506
2,719
9,885
11,165
2,505
7,660
7,246
7,245
49
—
136
6,115
3,856
—
2,800
3,324
1,099
2,225
2,240
2,240
5
7,652
69,471
16,846
27,343
8,381
15,004
21,609
3,604
17,005
11,741
10,503
56
Hedges of net investments in foreign operations:
Exchange rate risk
FX forward
4,097
4,097
4,097
27,317
5,346
5,346
5,346
20,340
13,235
13,235
13,235
78,813
2,916
2,916
2,916
220,577
—
—
—
45,901
25,594
25,594
25,594
392,948
672
2022 Annual report
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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:
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
31 December 2020
Up to one
month
7,132
5,616
One to three
months
14,221
9,667
Three months
to one year
44,897
39,921
One year
to five years
95,343
90,913
More than five
years
37,667
35,465
3,943
1,021
1,516
901
—
—
—
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
20,056
—
4,626
1,502
2,336
2,243
93
972
—
972
1,614
181
—
5,086
5,086
5,086
30,936
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
101,855
33,333
49,624
—
—
4,239
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
158,387
Total
199,260
181,582
94,713
69,740
9,037
8,422
8,434
7,704
207
27,826
3,192
—
—
2,202
2,104
—
11,725
1,976
139,156
74,731
—
385
1,181
1,714
—
1,714
3,037
1,019
2,018
4,997
4,997
1
—
—
—
49,392
7,492
46,547
12,123
23,483
9,151
13,425
27,021
5,218
19,682
13,907
10,206
14
22,210
22,210
22,210
360,626
673
2022 Annual report
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 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/CHF exchange rate
Average GBP/EUR exchange rate
Average GBP/USD exchange rate
Equity risk
Equity instruments
Nominal
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 2022
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
2,492
2.580
1.770
1.350
5,039
0.880
1.600
3.470
—
—
—
—
—
—
—
—
—
—
24,447
0.560
0.770
3.510
74
1.212
—
3.420
—
51,257
2.070
0.280
2.000
821
1.157
1.186
2.060
4.630
1,175
1.770
2,471
2.290
2,188
1.980
14,728
2.350
3,063
—
—
—
1.224
3,536
157.450
1.131
—
1.253
2,685
160.039
—
1.123
1.171
14,583
—
—
1.181
1.314
87,529
911
21,775
26,303
4,294
3.780
3.090
4.920
16
1.100
—
—
—
1,213
1.840
2,436
—
—
1.165
1.388
—
—
—
—
—
—
—
—
—
—
7
48
2
57
1,983
1.185
1.604
3.270
7,621
1.210
1.503
2.580
968
1.196
1.537
4.590
10,572
674
2022 Annual report
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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
0.090
1.080
1.440
127
1.205
3.290
53,427
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
675
2022 Annual report
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
0.820
3.020
2.890
147
1.141
4.640
53,170
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
676
2022 Annual report
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 (%) CZK
Average fixed interest rate (%) NOK
Average fixed interest rate (%) AUD
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 AUD/EUR exchange rate
Average MXN/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 (%) EUR/GBP
Average fixed interest rate (%) NZD/EUR
Average fixed interest rate (%) USD/MXN
Average fixed interest rate (%) USD/COP
Average fixed interest rate (%) EUR/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 NOK/EUR exchange rate
Average RON/EUR exchange rate
Average CHF/EUR exchange rate
Average USD/CLP exchange rate
31 December 2022
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
1,032
—
0.569
—
—
—
—
—
2.892
—
250
—
1.040
7.172
—
—
912
4.000
—
—
—
0.568
—
—
—
—
—
—
—
—
1.499
—
—
—
—
133.840
—
—
—
—
1,248
2.04
(0.406)
—
—
—
—
1.073
3.123
—
899
—
—
7.252
1.587
21.529
38
—
—
4.520
—
—
—
—
5.170
—
—
—
—
—
—
—
1.162
—
—
—
—
4.746
—
2,348
2.04
0.278
—
—
—
—
—
3.835
—
2,064
0.877
0.992
7.159
—
—
1,101
—
0.860
—
—
—
—
—
—
—
12.982
15.452
—
—
—
25.407
—
—
—
—
—
—
1.092
—
24,115
1.86
2.396
0.530
0.465
1.650
—
—
3.181
3.610
—
—
—
—
—
—
3,767
4.800
—
5.130
2.580
1.442
3.010
1.243
—
—
—
13.614
(0.140)
3.450
1.499
25.677
—
0.945
8.851
130.227
9.492
4.842
1.105
0.001
8,809
2.04
1.674
—
—
—
2.327
—
3.374
—
—
—
—
—
—
—
988
3.824
—
—
—
1.360
3.762
—
—
—
—
7.150
—
—
1.545
—
—
—
—
118.180
9.685
4.927
—
—
37,552
3,213
6,806
677
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Average NZD/EUR exchange rate
Average USD/MXN exchange rate
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 fixed interest rate (%) EUR/PEN
Average fixed rate (%) USD/COP
Average fixed interest rate (%) EUR/AUD
Average fixed interest rate (%) AUD/EUR
Average EUR/GBP 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
Inflation risk
Bond Forward instruments
Nominal
Average fixed interest rate (%) EUR
Exchange rate risk
Exchange instruments
Nominal
Average exchange rate GBP/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 USD/EUR exchange rate
Average PLN/EUR exchange rate
31 December 2022
EUR million
Up to one
month
—
—
One to three
months
—
—
Three months
to one year
—
0.051
One year to
five years
—
—
More than five
years
1.666
—
Total
—
9
8
38
—
55
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
3.207
—
—
—
—
—
—
—
—
—
0.654
597
6.496
15.398
—
—
1.084
—
—
—
—
—
—
0.252
—
1,451
—
—
—
0.305
1.173
1.604
4.885
120.568
1.102
—
26.131
—
—
2,250
(0.431)
4,500
(0.404)
11,453
(0.348)
10,000
(0.010)
—
—
—
—
11
1.156
22
1.153
2,020
6.554
953.549
—
0.869
25.130
—
4.832
4,711
5.797
955.790
4,935.121
0.873
23.968
—
4.837
700
0.322
99
1.142
13,839
5.866
944.113
—
0.876
22.156
1.158
4.991
—
—
—
—
—
—
—
—
—
—
—
—
184
—
—
—
—
—
1.562
—
—
—
10.242
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,235
28,203
700
132
20,570
678
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
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
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 COP/USD exchange rate
Average CZK/EUR exchange rate
Average EUR/GBP exchange rate
Average EUR/COP 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/COP exchange rate
Average USD/CLP exchange rate
Average NZD/EUR exchange rate
Average USD/MXN exchange rate
Credit risk
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
—
—
—
—
—
—
—
—
—
—
—
—
3,038
—
(0.031)
—
—
3.459
—
10,350
0.865
1.180
7.412
—
—
53
—
—
—
—
—
—
—
9.470
—
—
—
—
—
—
—
—
—
—
14.696
—
—
—
—
—
—
—
21,507
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
10,031
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
—
36,412
13,073
5,812
679
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Credit risk instruments
Nominal
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
—
19
34
120
0
173
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
—
5,191
(0.465)
1.765
—
4,848
6.7576
929.690
—
0.857
25.335
4.582
—
11,815
6.8411
949.615
4,538.997
0.855
25.192
4.634
1.167
1,848
—
—
0.305
1.113
0.882
1.604
4.885
120.568
—
—
26.131
—
—
38,314
(0.258)
—
1.650
2,916
—
—
—
0.875
—
—
1.233
408
—
—
—
—
—
1.562
—
—
1.102
10.242
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,434
47,784
23,357
680
2022 Annual report
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
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
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
17,430
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
14,294
4.072
1.927
0.403
—
3.562
—
—
—
—
—
—
—
1,083
4.66
—
—
—
—
1.281
3.605
1.243
7.231
—
—
1.508
—
—
—
—
—
125.883
36,371
7,990
4,804
681
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
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
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
—
—
—
—
0.001
0.050
One year to
five years
14.696
—
4.727
1.092
—
—
More than five
years
—
9.606
—
1.105
—
—
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
—
—
—
—
—
—
—
—
—
682
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
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 Grupo Santander´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.
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.
Banco Santander (Brasil) S.A. has, on the one hand, fair value
hedges to protect both assets and liabilities from fluctuations in
market rates. The market risk coverage management
methodology adopted by the Bank segregates transactions by
risk factor (BRL/USD exchange rate risk, pre-set interest rate risk
in BRL, USD interest rate risk, inflation….). The entity manages
this risk by contracting derivatives (Interest Rate Swaps or
Interest Rate Futures) to hedge assets or liabilities at a fixed
rate.
Brasil 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 or futures.
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.
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.
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.
Additionally, Banco Santander Chile uses fair value hedges with
cross currency swaps, interest rate swaps and call money swaps
to hedge its exposure to changes in the fair value of the hedged
item attributable to interest rates. The aforementioned hedging
instruments modify the effective cost of long-term issues, from
a fixed interest rate to a variable interest rate.
In addition, it also makes cash flow hedges in which it uses
cross currency swaps to cover the risk of variability of flows
attributable to changes in the interest rate of bonds and
interbank loans issued at variable rates, as well as to cover the
variation of foreign currency, mainly in United States dollars. To
hedge the inflation risk present in certain items, it uses both
forwards and cross currency swaps.
At Santander Bank National Association, Interest Rate Swaps are
used to leave commercial loans at a fixed rate at a variable rate
in USD indexed to 1-month Libor or SOFR, under cash flow
hedges.
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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 2022, 2021 and 2020:
EUR million
31 December 2022
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
126,665
121,605
2,792
59,837
53,239
1,040
2,126
—
142
5,558
—
—
(5,487)
(5,069)
(284)
(134)
—
—
(3,581)
(3,428)
—
(153)
—
—
Loans and advances / Deposits
and Debt securities / Debt
securities issued
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
22,614
22,614
149,279
—
—
59,837
(5,487)
(3,581)
(3,232)
(2,397)
(7)
(826)
—
(2)
475
2,458
(1,764)
39
(258)
—
—
—
—
—
—
—
(3,353)
(2,973)
(88)
(309)
14
3
2,467
2,467
(290)
(6,750)
(6,750)
(10,103)
—
—
—
—
—
—
(225)
(75)
(2)
1
(149)
—
—
—
(225)
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
125,479
64,531
51,395
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
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
25,594
25,594
219,543
—
—
51,395
462
453
(1,061)
(543)
(343)
(173)
—
(2)
1,639
494
115
778
249
3
1,159
1,159
1,737
—
—
—
—
—
—
(414)
(540)
81
330
(289)
4
(4,283)
(4,283)
(4,697)
—
—
—
—
—
—
(148)
(52)
8
—
(104)
—
—
—
(148)
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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
Fair value hedges
Interest rate risk
Exchange rate risk
Interest and Exchange rate
risk
Inflation risk
Credit risk
141,608
128,279
8,718
4,391
—
220
52,055
48,137
—
3,918
—
—
3,369
3,183
40
143
—
3
2,914
2,727
—
187
—
—
Loans and advances / Deposits
and Debt securities / Debt
securities issued
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
22,210
22,210
163,818
—
—
52,055
3,369
2,914
(2,340)
(2,340)
(2,073)
(3,124)
(3,124)
(2,715)
553
469
(13)
100
(4)
(3)
(286)
(69)
412
(741)
121
(9)
—
—
—
—
—
—
409
(98)
(68)
680
(111)
6
—
—
—
—
—
—
(33)
(1)
—
—
(32)
—
—
—
(33)
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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 2022 is EUR 756 million losses (EUR 460 million and
EUR 729 million profit in 2021 and 2020, respectively).
The net impact of the hedges are shown in the following table:
EUR million
31 December 2022
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
Net foreign investments hedges
Exchange rate risk
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
Net foreign investments hedges
hedges
Exchange rate risk
Earnings/
(losses)
recognised in
another
cumulative
overall result
Ineffective
recognised
in the
income
statement
119
155
(16)
(20)
(3,016)
(2,458)
(178)
(638)
258
—
(2,467)
(2,467)
(5,483)
(45)
1
(10)
(39)
3
—
—
—
74
Earnings/
(losses)
recognised in
another
cumulative
overall result
Ineffective
coverage
recognised
in the
income
statement
18
46
(55)
27
(938)
(491)
155
(350)
(249)
(3)
(1,159)
(1,159)
(2,097)
(64)
(34)
2
(35)
3
—
—
—
(46)
Line of the income
statement that includes the
ineffectiveness of cash Reclassified amount of reserves to the income
flows
statement due to:
Gains or losses financial
assets/liabilities
Cover transaction
affecting the income
statement
Line of the income
statement that
includes reclassified
items
Gains or losses financial
assets/liabilities
EUR million
31 December 2021
Interest margin/Gains
or losses financial
assets/liabilities
1,254
(370)
2,130
587
(1,093)
—
—
—
1,254
Line of the income
statement that includes the
ineffectiveness of cash Reclassified amount of reserves to the income
flows
statement due to:
Gains or losses financial
assets/liabilities
Cover transaction
affecting the income
statement
Line of the income
statement that
includes reclassified
items
Gains or losses financial
assets/liabilities
Interest margin/Gains
or losses financial
assets/liabilities
(801)
269
(262)
(350)
(458)
—
—
—
(801)
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EUR million
31 December 2020
Earnings/
(losses)
recognised
in another
cumulative
overall
result
Ineffective
coverage
recognised
in the
income
statement
104
9
1
92
2
(53)
69
(180)
170
(121)
9
2,340
2,340
2,287
(53)
7
9
(62)
(7)
—
—
—
51
Fair value hedges
Interest rate risk
Risk of Exchange rate
Risk of interest rate and exchange rate
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
Line of the income
statement that includes the
ineffectiveness of cash Reclassified amount of reserves to the income
flows
statement due to:
Gains or losses financial
assets/liabilities
Cover transaction
affecting the income
statement
Line of the income
statement that
includes reclassified
items
Gains or losses financial
assets/liabilities
Gains or losses financial
assets/liabilities
Interest margin/Gains
or losses financial
assets/liabilities
852
118
(131)
844
21
—
—
—
852
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(2,828)
(178)
(222)
155
187
(180)
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
Exchange rate risk
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
Interest rate and exchange rate risk
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
2022
2021
2020
(4,559) (2,829) (5,164)
(2,458)
(491)
69
370
(269)
(118)
(2,130)
262
131
1,952
(638)
(107)
(350)
(311)
170
(587)
350
(844)
(51)
258
(700) 1,014
(121)
(249)
1,093
458
(21)
(835)
0
(707)
(3)
(100)
9
—
—
—
(3)
—
9
Net foreign investments hedges
Exchange rate risk
(2,467) (1,159) 2,340
Amounts transferred to income
statements
Gain or loss in value CFE - recognized in
equity
Minorities
Taxes
Balance at end of year
—
—
—
(2,467) (1,159) 2,340
43
89
5
278
(9,187) (4,559) (2,829)
(57)
912
37. Discontinued operations
No operations were discontinued in 2022, 2021 or 2020.
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 2022, 2021 and 2020 is as follows:
Loans and advances, central banks
Loans and advances, credit institutions
Debt instruments
Loans and advances, customers
Other interest
2021
476
916
2020
2022
431
1,606
2,186
894
10,416 5,724 5,022
54,110 38,649 38,788
3,112
606
71,430 46,463 45,741
698
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.
39. Interest expense
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 2022, 2021 and 2020 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
2022
706
2,784
16,994
2021
338
1,140
5,452
2020
366
1,652
5,599
8,464
7,472
992
100
116
3,647
5,119
4,838
4,548
4,190
571
648
95
91
186
125
1,109
730
32,811 13,093 13,747
Most of the interest expense and similar charges was generated
by the Group’s financial liabilities that are measured at
amortised cost.
688
40. Dividend income
Dividend income includes the dividends and payments on equity
instruments out of profits generated by investees after the
acquisition of the equity interest.
The detail of Income from dividends as follows:
42. Commission expense
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 commission expense is as follows:
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
2022
2021
2020
EUR million
366
369
272
35
87
488
32
112
513
31
88
391
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:
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
2022
2021
2020
245
1,526
4,012
625
172
6,580
1,017
167
2,743
3,927
438
339
321
446
1,544
214
1,408
3,138
503
139
5,402
992
161
2,467
3,620
431
319
402
369
1,521
265
1,284
2,986
484
110
5,129
888
170
2,289
3,347
394
316
336
316
1,362
822
433
506
2,055
3,816
15,867
522
415
442
1,890
3,269
13,812
500
409
366
1,911
3,186
13,024
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
2022
2,554
1,872
18
664
1,523
77
340
1,106
4,077
2021
1,993
1,355
16
622
1,317
60
341
916
3,310
2020
1,856
1,249
12
595
1,153
26
248
879
3,009
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
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
A
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
A
through profit or loss, net
Gains or losses from hedge accounting,
net
2022
2021
2020
149
34
115
122
628
89
539
567
1,107
(31)
1,138
1,179
842
1,141
3,211
162
132
82
968
270
(171)
74
2,195
(46)
2,125
51
4,280
A.
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.
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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
2022
(542)
2021
(562)
2020
(2,093)
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
2022
44,962
11,595
17,175
16,192
45,079
13,777
67,002
2021
2020
34,812
46,589
3,608
9,481
13,549
12,139
17,655
24,969
30,223
41,573
19,119
12,849
67,137
54,292
170,820 138,446 168,148
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 2022 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 38,236
million at 31 December 2022.
Also, mortgage-backed assets totalled EUR 920 million.
• Debt instruments include EUR 35,118 million of Spanish and
foreign government securities.
At 31 December 2022 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
2022
78,299
7,497
11,754
59,048
5,427
22,515
64,891
—
2020
43,598
2,490
6,765
34,343
4,440
16,698
64,469
—
171,132 112,202 129,205
2021
40,946
1,645
7,552
31,749
5,454
12,236
53,566
—
At 31 December 2022, 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
2022 is EUR 1,044 million higher than their carrying amount
(EUR 81 million lower at 31 December 2021 and EUR
119 million lower at 31 December 2020).
Within Deposits, there are repurchase agreements amounting
to EUR 27,780 million at 31 December 2022.
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).
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45. Other operating income and expenses
Other operating income and Other operating expenses in the
consolidated income statements include:
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
2022
158
2021
211
2020
210
2,698
1,516
1,452
2,543
155
1,381
135
1,349
103
(2,540)
(1,305)
(1,242)
(2,309)
(231)
1,510
770
740
(2,803)
(661)
(2,142)
(1,097)
(208)
2,255
291
1,964
(2,442)
(283)
(2,159)
(1,063)
(179)
1,920
362
1,558
(2,342)
(350)
(1,992)
(1,258)
(1,135)
(1,016)
24
(1,005)
(212)
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.
46. Staff costs
a) Breakdown
The detail of Staff costs is as follows:
EUR million
Wages and salaries
Social Security costs
Additions to provisions for defined benefit
pension plans (note 25)
Contributions to defined contribution
pension funds
Other Staff costs
2022
9,563
1,441
2021
8,466
1,323
2020
8,070
1,277
65
73
76
296
1,182
12,547
286
1,068
11,216
283
1,077
10,783
b) Headcount
The average number of employees of Grupo Santander, as well
as the average number and distribution by professional
category of Banco Santander, S.A., was as follows:
Average number of employees
Banco Santander, S.A.
Executive directors and Senior
management
Other line personnel
Branches abroad
Total Group
2022
23,410
2021
24,512
2020
27,503
17
21,872
1,521
19
23,343
1,150
201,516 194,589
21
26,527
955
196,090
A. Does not include staff affected by discontinued operations.
The number of employees, at the end of 2022, 2021 and 2020,
was 206,462, 199,177 and 193,226, respectively.
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The functional breakdown (final employment), by gender, at 31
December 2022 is as follows:
Functional breakdown by gender
Europe
North America
South America
Senior managers
Other managers
Other personnel
Men
1,093
221
320
1,634
Women
478
66
134
678
Men
6,779
1,334
3,147
11,260
Women
3,893
621
2,096
6,610
Men
33,041
18,300
31,108
82,449
Women
40,919
23,055
39,857
103,831
The same information, expressed in percentage terms at 31
December 2022 is as follows:
Functional breakdown by gender
Europe
North America
South America
Senior managers
Other managers
Other personnel
Men
70%
77%
70%
71%
Women
30%
23%
30%
29%
Men
64%
68%
60%
63%
Women
36%
32%
40%
37%
Men
45%
44%
44%
44%
Women
55%
56%
56%
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, 2022, 2021 and 2020 are described below.
The number of employees in the Group with disabilities,
distributed by professional categories, at 31 December 2022, is
as follows:
Number of employees
A
Senior managers
Management
Collaborators
2022
13
136
3,965
4,114
A. 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 2021 and
2020, was 3,703 and 3,577, respectively.
Likewise, the average number of employees of Banco
Santander, S.A. with disabilities, equal to or greater than 33%,
during 2022 was 331 (288 and 319 employees during 2021 and
2020). At the end of fiscal year 2022, there were 444
employees (307 and 317 employees at 31 December, 2021 and
2020, 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 and (iv) Digital
Transformation Award 2022. The characteristics of the plans are
set forth below:
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Deferred
variable
remuneration
systems
(i) Deferred and
conditional
variable
remuneration
plan (2015,
2016, 2017,
2018, 2019,
2020, 2021 and
2022)
Description and plan beneficiaries
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, over three or five years
for the fifth, seventh, eighth, ninth,
tenth and eleventh cycles, and over
four or five years for the twelfth
cycle, 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.
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, eleventh and
twelfth cycle, the beneficiaries are
Material Risk Takers (Identified
staff) that are not beneficiaries of
the Deferred Multiyear Objectives
Variable Remuneration Plan.
Conditions
For the fifth and sixth cycles (2015 to 2016), the
accrual of the 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 on none of the
following circumstances existing during the period
prior to each delivery, 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 or risk profile
In the case of the seventh, eighth, ninth, tenth,
eleventh and twelfth 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
non-ocurrence of 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:
v.
significant failures in risk management 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
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.
Calculation Base
Fifth cycle (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 over 5 years deferral period.
• Division managers, country heads (of countries
which represent at least 1% of Group's economic
capital), 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
5 years (fifth cycle)
• Other beneficiaries: 60% paid immediately and 40%
deferred over 3 years.
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.
Twelfth cycle (2022):
• 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 4 years .
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Deferred
variable
remuneration
systems
(ii)Deferred
Multiyear
Objectives
Variable
Remuneration
Plan (2016,
2017, 2018,
2019, 2020,
2021 and 2022)
Description and plan beneficiaries
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 (four or five years for
the seventh cycle) 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 (regarding the instruments
part, executive directors in the
seventh cycle have the opportunity
to choose all in share options or half
in share options and half in 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), the last 2 fourths (in
the case of 4 years deferral) and 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.
Conditions
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, to non-
ocurrence 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:
Poor performance of the Group.
i.
ii. 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 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, taking into account the
following factors:
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. In the seventh
cycle, and only for executive directors: half in cash and
25% in share options and 25% in shares (unless the
director chooses to receive options only).
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.
Calculation Base
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 Grupo Santader’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.
In the seventh cycle (2022), the metrics for the
deferred portion subject to long-term objectives (two
last fourths and last three fifths, for the cases of four
years and five years deferrals) are:
• Banco Santander's consolidated Return on tangible
equity (RoTE) target in 2024.
• Relative Total Shareholder Return (TSR) measured
against a group of 9 credit institutions for the period
2022-2024.
• Five ESG metrics linked to our public targets of our
Responsible Banking agenda.
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Deferred
variable
remuneration
systems
(iii) Digital
Transformation
Award (2019,
2020 and 2021)
Description and plan beneficiaries
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.
Calculation Base
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 Grupo
Santander. 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).
Conditions
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 2019 incentive was measured based on
achievement of the following milestones: (i) Launch of
a Global Trade Services (GTS) platform; (ii) launch of a
Global Merchant Services (GMS) platform; (iii)
migration of our fully digital bank, OpenBank, to a
"next generation" platform and launch in 3 markets;
(iv) extension of SuperDigital in Brazil to at least one
other country; (v) and 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 were: (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.
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Deferred
variable
remuneration
systems
(iv) Digital
Transformation
Award (2022)
Description and plan beneficiaries
The board of directors approved the
2022 Digital
Transformation Incentive. It is a variable
remuneration scheme
splits in two different blocks:
• The first one, with the same
mechanism than previous years,
that delivers Santander shares and
share options if the group hits major
milestones on its digital roadmap. This
is aimed at a group of up to 250 (is
limited to 30 million euros)employees
whose functions are deemed essential
to Santander’s growth.
• And the second one, which delivers
PagoNxt, S.L. RSUs and premium prices
options (PPOs), and is aimed at up to 50
employees (and limited to 15 million
euros) whose roles are considered key
to PagoNxt’s success.
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.
Conditions
Performance of the first block of the incentive shall be
measured based on achievement of the following
milestones:
i. Edelweiss: Our Santander future retail architecture
EDELWEISS will mean moving from our current Core
centric banking architecture towards a Customer and
Data-Centric Core supported by lean Record
Processing engines.
ii. Simplification: Speed up the simplification of our
technology platform and business model by Reducing
the total number of applications in production and
reducing number of products in the regions.
iii. Agile: Agile ways of working enable a better and
faster reaction to customers’ needs and is based on a
value-driven delivery that increases efficiency by
reducing time-to-market and development costs, and
increasing quality. People working in Agile are more
collaborative, engaged, empowered and creative.
iv. In Digital Consumer Bank:
a) To create the BNPL platform connected to at least
one merchant in Netherlands and Germany, and to
make sure the platform is ready to connect in Spain.
b) To support the definition of Openbank US’s IT digital
strategy and achieve 2022 milestones in it.
c) To have the new leasing platform connected to
dealers in Italy.
d) To expand the Wabi B2B online business to
Germany. To execute the first B2B deal with an
Original Equipment Manufacturer or mobility player in
at least one country. To expand coches.com business
and platform to Portugal.
And in regard to the second block of digital incentive:
the consolidation of PagoNxt Core Perimeter.
Calculation base
The first block of thee 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 Grupo
Santander. 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.
The total achievement for 2022 Digital Incentive
was 96.5%.
The second block of Digital Incentive is structures in
restricted stock units (RSUs) and premium priced
Options (PPOs) of PagoNxt S.L. in a percentage
determined by the internal category of the
beneficiary. The total achievement for 2022 was
100%.
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 01/01/2020
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
Options granted (sharesave)
Options exercised
Options cancelled (net) or not exercised
Plans outstanding at 31/12/2022
Exercise
price in
pounds
A
sterling
Year
granted
Employee
group
Number
of
B
persons
Date of
commencement
of exercise
period
Date of
expiry of
exercise
period
1.65
2020
Employees
5,012
01/11/20 01/11/23
01/11/20 01/11/25
2.75
2.96
2.43
2021
Employees
4,142
01/11/21 01/11/24
01/11/21 01/11/26
1.86
2.95
1.89
2022
Employees
4,362
11/01/22 11/01/25
11/01/22 11/01/27
1.69
2.59
Number of
shares (in
thousand)
23,373
11,642
(860)
(12,993)
21,162
9,414
(48)
(4,592)
25,936
13,068
(242)
(8,774)
29,988
A. At 31 December, 2022, 2021 and 2020, the euro/pound sterling exchange rate was 1.1277, 1.1904 and 1.1168 , respectively.
B. Number of accounts/contracts. A single employee may have more than one account/contract.
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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 2020, 2021 and 2022:
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 2020,
2021 and 2022 and the levels of achievement of similar plans in
comparable entities,it has been considered that the fair value is
70%.
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 0.23 (GBP 0.20 and GBP 0.21
reported in 2021 and 2020, respectively).
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
Per diems and travel expenses
Insurance premiums
Other administrative expenses
2022
2,473
2021
2,182
2020
2,119
804
785
559
559
410
336
163
108
2,174
8,371
789
689
558
510
401
306
69
109
1,830
7,443
827
672
537
523
473
325
73
88
1,900
7,537
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
Audit-related services
Tax services
All other
Total
2021
2022
113.4 104.6
6.0
0.7
2.4
2020
99.4
6.0
0.8
1.2
125.1 113.7 107.4
6.4
0.5
4.8
The 'Audit' heading mainly includes audit fees for the individual
and consolidated financial statements of Banco Santander and
its subsidiaries of which PwC is the statutory auditor; for interim
consolidated financial statements of Banco Santander; for
integrated audits prepared in order to file Form 20-F for the
annual report with the SEC in the US regarding required entities;
the internal control audit (SOx) for required Group's entities; the
limited review of the financial statements; and the regulatory
auditor's reports on Grupo Santander's geographies.
The main fees under 'Audit-related services' include, comfort
letters, verifying financial and non-financial information (as
required by regulators), and other reviews of documents that,
due to their nature, the external auditor provides to be
submitted to domestic or foreign authorities.
The fees included under the heading 'Tax services' mainly
related to tax compliance and advisory services provided to
Group companies outside Spain, which are permitted in
accordance with independence regulations; none were for tax
planning advice.
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The 'Audit' heading includes the fees for the year's audit,
regardless of the date the audit was completed. Any subsequent
adjustments, which are not significant, and for purposes of
comparison, are shown in this note for each year. The fees
corresponding to the rest of the services are shown by when the
audit committee approved them.
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 (note 12)
Gain (loss) on sale (note 12)
Other gains and other losses
2022
7
(94)
101
—
7
2021
(52)
(141)
89
9
(43)
2020
(171)
(215)
44
—
(171)
The services commissioned from the Group's auditors meet the
independence requirements under applicable European and
Spanish law, the 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 auditor's role.
Lastly, the Group commissioned services from audit firms other
than PwC amounting to EUR 185.5 million in 2022 (EUR
263.8 million and EUR 172.4 million in 2021and 2020,
respectively).
c) Number of branches
The number of offices at 31 December 2022, 2021 and 2020 is
as follows:
Number of branches
Spain
Group
Group
2020
2021
2,989
1,998
7,231
7,597
9,229 10,586
2022
1,966
7,053
9,019
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
Losses
Tangible and intangible assets
Investments
2022
2021
2020
56
5
61
(49)
—
(49)
12
87
2
89
(36)
—
(36)
53
89
60
149
(34)
(1)
(35)
114
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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 2022, 2021 and
2020 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 securities
Loans and advances
Customers
Financial assets
at amortized cost
Debt securities
Loans and advances
Central banks
Credits institutions
Customers
Liabilities
Financial liabilities at amortized cost
Deposits
Central banks
Credit institutions
Customer deposits
A
Marketable debt securities
Other financial liabilities
Difference (assets less liabilities)
31 December 2022
EUR million
On demand
Within 3
months
3 to 12
months 1 to 3 years 3 to 5 years
More than 5
years
Total
223,073
—
—
—
—
—
223,073
—
—
—
—
45,322
—
45,322
—
7,565
37,757
268,395
731,837
718,366
117
7,172
711,077
—
13,471
731,837
(463,442)
19,215
19,011
204
204
194,757
7,956
186,801
14,139
22,578
150,084
213,972
236,565
193,092
6,991
30,557
155,544
34,408
9,065
236,565
(22,593)
5,425
4,528
897
897
137,632
7,417
130,215
—
2,756
127,459
143,057
144,666
96,667
18,311
15,901
62,455
46,480
1,519
144,666
(1,609)
15,377
13,884
1,493
1,493
196,939
21,459
175,480
—
3,580
171,900
212,316
168,984
82,663
47,018
9,670
25,975
81,051
5,270
168,984
43,332
17,693
16,631
1,062
1,062
135,156
6,715
128,441
—
139
128,302
152,849
81,808
19,343
4,506
3,925
10,912
55,359
7,106
81,808
71,041
25,588
21,029
4,559
4,559
437,238
30,007
407,231
1,236
9,900
396,095
462,826
59,998
1,756
9
1,357
390
57,614
628
59,998
402,828
83,298
75,083
8,215
8,215
1,147,044
73,554
1,073,490
15,375
46,518
1,011,597
1,453,415
1,423,858
1,111,887
76,952
68,582
966,353
274,912
37,059
1,423,858
29,557
A.
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.
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Assets
Cash, cash balances at Central Banks and other
deposits on demand
Financial assets at fair value through other
comprehensive income
Debt securities
Loans and advances
Customers
Financial assets
at amortized cost
Debt securities
Loans and advances
Central banks
Credits institutions
Customers
Liabilities
Financial liabilities
at amortized cost
Deposits
Central banks
Credit institutions
Customer deposits
A
Marketable debt
securities
Other financial liabilities
Difference (assets less liabilities)
31 December 2021
EUR million
On demand
Within 3
months
3 to 12
months 1 to 3 years 3 to 5 years
More than
5 years
Total
210,689
—
—
—
—
—
210,689
—
—
—
—
35,520
—
35,520
—
11,849
23,671
246,209
718,435
711,377
92
12,854
698,431
—
7,058
718,435
(472,226)
19,885
19,598
287
287
161,837
4,212
157,625
14,544
20,802
122,279
181,722
169,013
126,956
5,861
16,208
104,887
31,550
10,507
169,013
12,709
10,447
9,609
838
838
121,272
4,171
117,101
—
4,542
112,559
131,719
99,223
64,096
2,130
12,507
49,459
29,798
5,329
99,223
32,496
20,001
19,133
868
868
154,345
2,205
152,140
—
93
152,047
174,346
194,879
117,585
91,651
4,712
21,222
71,333
5,961
194,879
(20,533)
17,745
16,494
1,251
1,251
130,456
15,388
115,068
—
150
114,918
148,201
98,210
52,658
40,013
1,981
10,664
45,198
354
98,210
49,991
37,507
33,088
4,419
4,419
434,468
9,732
424,736
1,113
1,733
421,890
471,975
69,409
5,915
10
3,973
1,932
62,830
664
69,409
402,566
105,585
97,922
7,663
7,663
1,037,898
35,708
1,002,190
15,657
39,169
947,364
1,354,172
1,349,169
1,078,587
139,757
52,235
886,595
240,709
29,873
1,349,169
5,003
A.
Includes promissory notes, certificates of deposit and other short-term debt issues.
700
2022 Annual report
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Assets
Cash, cash balances at Central Banks and other
deposits on demand
Financial assets at fair value through other
comprehensive income
Debt securities
Loans and advances
Customers
Financial assets
at amortized cost
Debt securities
Loans and advances
Central banks
Credit institutions
Customers
Liabilities
Financial liabilities
at amortized cost
Deposits
Central banks
Credit institutions
Customer deposits
A
Marketable debt
securities
Other financial liabilities
Difference (assets less liabilities)
31 December 2020
EUR million
On demand
Within 3
months
3 to 12
months 1 to 3 years 3 to 5 years
More than
5 years
Total
153,839
—
—
—
—
—
153,839
—
—
—
—
51,513
—
51,513
—
21,337
30,176
205,352
640,613
632,305
150
14,370
617,785
—
8,308
640,613
(435,261)
11,084
10,908
176
176
117,335
4,184
113,151
10,762
8,950
93,439
128,419
175,269
132,337
10,499
22,385
99,453
33,257
9,675
175,269
(46,850)
7,738
7,019
719
719
109,561
5,760
103,801
—
3,910
99,891
117,299
93,296
61,142
3,216
9,940
47,986
30,994
1,160
93,296
24,003
19,923
18,365
1,558
1,558
150,399
3,059
147,340
673
3,207
143,460
170,322
175,238
109,856
83,112
5,618
21,126
59,526
5,856
175,238
(4,916)
21,302
19,969
1,333
1,333
120,376
5,257
115,119
—
34
115,085
141,678
80,041
32,464
15,827
5,934
10,703
47,143
434
80,041
61,637
58,123
52,642
5,481
5,481
409,194
7,818
401,376
1,064
400
399,912
467,317
118,170
108,903
9,267
9,267
958,378
26,078
932,300
12,499
37,838
881,963
1,230,387
83,731
22,287
—
4,373
17,914
1,248,188
990,391
112,804
62,620
814,967
59,909
1,535
83,731
383,586
230,829
26,968
1,248,188
(17,801)
A.
Includes promissory notes, certificates of deposit and other short-term debt issues.
701
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The detail of the undiscounted contractual maturities of the
existing financial liabilities at amortised cost at 31 December
2022, 2021 and 2020 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 2022
EUR million
On demand
Within 3
months
3 to 12
months 1 to 3 years 3 to 5 years
More than 5
years
Total
718,366
117
7,172
711,077
—
13,471
731,837
192,609
7,003
30,548
155,058
34,312
9,065
235,986
96,482
18,210
15,808
62,464
46,396
1,519
144,397
82,618
46,933
9,722
25,963
81,059
5,270
168,947
19,354
4,506
3,924
10,924
55,357
7,106
81,817
1,595
9
1,190
396
57,576
626
59,797
1,111,024
76,778
68,364
965,882
274,700
37,057
1,422,781
31 December 2021
EUR million
On demand
Within 3
months
3 to 12
months
1 to 3 years
3 to 5 years
More than 5
years
Total
705,129
83
12,683
692,363
—
7,059
712,188
120,654
5,862
16,184
98,608
32,575
10,507
163,736
62,896
2,131
11,867
48,898
30,618
5,329
98,843
116,343
91,327
4,504
20,512
73,131
5,961
195,435
52,031
39,579
1,945
10,507
46,367
354
98,752
5,884
10
3,950
1,924
64,318
663
70,865
1,062,937
138,992
51,133
872,812
247,009
29,873
1,339,819
31 December 2020
EUR million
On demand
Within 3
months
3 to 12
months
1 to 3 years
3 to 5 years
More than 5
years
Total
629,043
150
14,334
614,559
—
8,308
637,351
130,439
10,497
22,367
97,575
34,307
9,675
174,421
60,465
3,217
9,606
47,642
31,103
1,160
92,728
108,326
82,803
5,031
20,492
58,645
5,856
172,827
32,260
15,827
5,903
10,530
46,118
434
78,812
22,228
—
4,333
17,895
56,730
1,535
80,493
982,761
112,494
61,574
808,693
226,903
26,968
1,236,632
702
2022 Annual report
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 2022, 2021
and 2020 :
FINANCIAL ASSETS
Financial assets held for trading
Derivatives
Equity instruments
Debt securities
Loans and advances
Central banks
Credits institutions
Customers
Financial assets designated at fair value through
profit or loss
Debt securities
Loans and advances
Credit institutions
Customers
Non-trading financial assets mandatorily at fair
value through profit or loss
Equity instruments
Debt securities
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 3
months
3 to 12
months
31 December 2022
EUR million
1 to 3
years
3 to 5 More than 5
years
years
44,770
7,631
5,160
31,979
11,595
13,650
6,734
236
68
168
6
162
164
—
6
158
158
27,562
9,983
13,357
4,222
—
2,852
1,370
756
77
679
181
498
214
—
52
162
162
—
—
2,200
—
—
1,076
29,753
23,156
20,177
15,533
5,667
930
—
—
930
2,732
1,026
1,706
23
1,683
265
—
52
213
213
—
—
1,356
4,193
451
—
—
451
1,691
599
1,092
4
1,088
70
—
—
70
70
—
—
1,451
33,856
10,699
10,066
13,026
65
—
—
65
3,574
772
2,802
459
2,343
5,000
3,711
1,024
265
265
1,941
1,941
1,986
Total
156,118
67,002
10,066
41,403
37,647
11,595
16,502
9,550
8,989
2,542
6,447
673
5,774
5,713
3,711
1,134
868
868
1,941
1,941
8,069
(734)
46,636
(498)
29,110
(1,178)
32,928
(1,036)
22,353
(303)
46,054
(3,749)
177,081
703
2022 Annual report
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
Financial liabilities designated at fair value
through profit or loss
Deposits
Central banks
Credits institutions
Customers
A
Marketable debt securities
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL LIABILITIES
Within 3
months
3 to 12
months
31 December 2022
EUR million
1 to 3
years
3 to 5 More than 5
years
years
51,621
7,749
17,952
25,920
5,757
7,963
12,200
27,071
26,908
1,702
1,284
23,922
163
947
11
79,650
12,012
9,671
888
1,453
—
1,435
18
4,359
3,558
38
129
3,391
801
1,469
23,669
22,479
1,031
159
—
151
8
6,180
5,069
—
54
5,015
1,111
3,650
18,273
16,955
1,071
247
—
247
—
1,915
818
—
87
731
1,097
1,159
(52)
17,788
(140)
33,359
20
21,367
9,610
8,037
1,573
—
—
—
—
16,422
14,167
—
404
13,763
2,255
2,003
44
28,079
A.
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 3
months
3 to 12
months
31 December 2022
EUR million
1 to 3
years
3 to 5 More than 5
years
years
120,962
7,023
66,716
194,701
32,538
3,586
16,152
52,276
50,875
1,427
7,119
59,421
54,033
441
1,517
55,991
15,667
379
1,168
17,214
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.
Total
115,185
64,891
22,515
27,779
5,757
9,796
12,226
55,947
50,520
1,740
1,958
46,822
5,427
9,228
(117)
180,243
Total
274,075
12,856
92,672
379,603
704
2022 Annual report
Contents
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Within 3
months
3 to 12
months
31 December 2021
EUR million
1 to 3
years
3 to 5 More than 5
years
years
FINANCIAL ASSETS
Financial assets held for trading
Derivatives
Equity instruments
Debt securities
Loans and advances
Central banks
Credits institutions
Customers
Financial assets designated at fair value through
profit or loss
Debt securities
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
21,887
4,943
—
2,978
13,966
3,608
5,607
4,751
2,451
64
2,387
—
1,138
1,249
116
—
4
112
—
—
112
—
—
368
20,627
7,426
—
8,585
4,616
—
3,982
634
2,928
142
2,786
—
1,476
1,310
49
40
9
—
—
9
—
—
857
20,047
12,285
—
5,766
1,996
—
808
1,188
3,686
699
2,987
—
205
2,782
127
4
123
—
—
123
—
—
748
429
25,251
(11)
24,450
(304)
24,304
15,105
11,980
—
2,869
256
—
—
256
2,334
700
1,634
—
10
1,624
67
6
61
—
—
61
—
—
1,270
19
18,795
Total
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
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
277
53,270
410
146,070
705
2022 Annual report
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
A
Marketable debt securities
Hedging derivatives
Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
TOTAL FINANCIAL LIABILITIES
Within 3
months
3 to 12
months
31 December 2021
EUR million
1 to 3
years
3 to 5 More than 5
years
years
26,142
4,485
8,559
13,098
1,038
5,919
6,141
—
—
7,000
6,874
569
237
6,068
126
613
45
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
95
—
95
—
—
—
1,225
764
—
178
586
461
824
49
15,634
14,718
916
—
—
—
—
—
—
18,154
15,594
—
132
15,462
2,560
1,429
80
Total
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
5,463
248
33,800
11,865
22,103
14,848
35,297
117,913
A.
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 3
months
3 to 12
months
31 December 2021
EUR million
1 to 3
years
3 to 5 More than 5
years
years
123,529
3,617
52,359
179,505
27,587
4,251
12,008
43,846
51,999
1,749
7,297
61,045
49,781
687
1,539
52,007
9,841
454
2,530
12,825
Total
262,737
10,758
75,733
349,228
706
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FINANCIAL ASSETS
Financial assets held for trading
Derivatives
Equity instruments
Debt securities
Loans and advances
Credits institutions
Customers
Financial assets designated at fair value through
profit or loss
Debt securities
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
Within 3
months
3 to 12
months
31 December 2020
EUR million
1 to 3
years
3 to 5 More than 5
years
years
12,494
9,556
—
2,938
—
—
—
27,334
259
27,075
9,481
8,449
9,145
275
—
85
190
—
—
190
—
—
2,003
181
42,287
27,753
10,044
—
17,709
—
—
—
7,205
162
7,043
—
2,728
4,315
—
—
—
—
—
—
—
—
—
1,293
132
36,383
22,473
15,526
—
6,947
—
—
—
3,680
407
3,273
—
590
2,683
—
—
—
—
—
—
—
—
—
1,107
205
27,465
18,014
13,681
—
4,310
23
3
20
3,933
719
3,214
—
12
3,202
69
—
—
69
—
—
69
—
—
1,083
381
23,480
34,211
18,330
9,615
5,990
276
—
276
6,565
1,432
5,133
—
357
4,776
4,142
3,234
615
293
—
—
293
2,783
2,783
2,839
1,081
51,621
Total
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
1,980
181,236
707
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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 3
months
3 to 12
months
31 December 2020
EUR million
1 to 3
years
3 to 5 More than 5
years
years
20,481
4,338
16,143
—
—
—
—
—
—
15,200
15,168
1,707
3,785
9,676
32
—
2,819
9
38,509
6,286
5,800
486
—
—
—
—
—
—
2,228
1,954
783
935
236
274
—
588
40
9,142
17,635
17,566
69
—
—
—
—
—
—
2,893
2,497
—
1,493
1,004
396
—
748
16,036
16,036
—
—
—
—
—
—
—
1,121
518
—
171
347
603
—
641
74
21,350
64
17,862
20,729
20,729
—
—
—
—
—
—
—
26,596
23,461
—
381
23,080
3,135
—
2,073
99
49,497
Within 3
months
3 to 12
months
31 December 2020
EUR million
1 to 3
years
3 to 5 More than 5
years
years
114,221
2,661
43,734
160,616
28,207
3,732
10,497
42,436
47,876
4,134
5,101
57,111
40,458
1,169
3,207
44,834
10,468
681
1,999
13,148
Total
81,167
64,469
16,698
—
—
—
—
—
—
48,038
43,598
2,490
6,765
34,343
4,440
—
6,869
286
136,360
Total
241,230
12,377
64,538
318,145
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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
2022
2021
2020
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
122,391
—
94,256
60,105
3,210
—
1,085
20,274
62,046
747,138
1,296
21,834
11,881
—
—
23,886
1,089,023
—
—
—
—
—
893,531
4
24,372
998,286
105,457
65,345
—
49,314
76,882
66,448
—
50,494
2,460
—
2,248
—
1,230
9,103
24,015
18,347
78,086
680,774
1,666
22,350
10,066
—
—
22,631
990,065
—
—
—
—
—
796,395
10
20,420
875,242
79,688
610,152
1,671
21,617
9,609
—
—
26,433
918,763
—
—
—
—
—
726,516
13
22,801
818,171
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
securities
2022
2021
2020
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
1,073,490 1,053,703
— 64,968
988,735
1,002,190 1,006,711
—
69,840 936,871
932,300 940,258
—
65,755 874,503
73,554
70,373 37,805 19,254
13,314
35,708
35,378
13,558
12,158
9,662
26,078
26,532
6,753
11,899
7,880
1,147,044 1,124,076 37,805 84,222 1,002,049
1,037,898 1,042,089 13,558
81,998 946,533
958,378 966,790
6,753
77,654 882,383
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ii) Financial liabilities measured at other than fair value
EUR million
Liabilities
A
Deposits
Debt
securities
2022
2021
2020
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
1,111,887 1,108,918
— 258,701 850,217
1,078,587 1,076,876
— 286,613 790,263
990,391
990,807
— 263,517 727,290
274,912
263,191 106,169 124,939
32,083
240,709
246,697 109,346 115,034
22,317
230,829
241,174
91,771 125,031
24,372
1,386,799 1,372,109 106,169 383,640 882,300
1,319,296 1,323,573 109,346 401,647 812,580
1,221,220 1,231,981 91,771 388,548 751,662
A. At 31 December 2022, Grupo Santander had other financial liabilities that amounted to EUR 37,059 million, EUR 29,873 million in 2021 and EUR 26,968 million in 2020.
The main valuation methods and inputs used in the estimates
at 31 December 2022 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.
Grupo Santander announced at 4 April 2022 changes in the
reportable segments to reflect the new reporting structure
effective from the first quarter financial information of 2022.
The main changes, which have been applied to management
information for all periods included in the annual accounts,
relate to the following:
1. Reallocation of certain financial costs of the Corporate Centre
as follows:
a. Further clarity in the minimum requirement for own funds
and eligible liabilities (MREL) and total loss absorbing
capacity (TLAC) regulation makes it possible to allocate the
cost of eligible debt issuances to the country units.
b. Other financial costs, primarily associated with the cost of
funding the excess capital held by the units above the
Group's CET1 ratio, have been reassigned accordingly.
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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.
2. Downsizing of 'Other Europe':
a. The Corporate & Investment Banking branches of Banco
Santander, S.A. in Europe and other business lines
previously reported under 'Other Europe' have been now
integrated into the Spain unit to reflect how the business
will be managed and supervised, in line with other
regions.
Grupo Santander recasted the corresponding information of
earlier periods considering the changes included in this section
to facilitate a homogeneous comparison.
In addition to these changes, we completed the usual 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.
The above-mentioned changes have no impact on the Group’s
reported consolidated financial statements.
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.
• 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), Santander's New York branch and Amherst Pierpont
Securities (APS).
• South America: includes all the financial activities carried out
by Grupo Santander through its banks and subsidiary banks in
the region.
• 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.
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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 securities
A
Other financial assets
B
Other asset accounts
Total liabilities
Customer deposits
Central banks and credit institutions
Marketable debt securities
C
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
D
Europe
958,207
591,280
216,308
76,318
47,737
26,564
915,167
659,553
112,254
71,731
60,008
11,621
43,040
100,178
70,084
13,940
16,154
23,305
North
America
288,595
171,519
35,607
44,060
14,668
22,741
262,931
168,748
25,294
41,063
20,883
6,943
25,664
15,571
13,949
81
1,541
20,908
2022
Digital
Consumer
Bank
151,015
122,608
Corporate
Centre
262,218
5,785
12,311
7,644
190
8,262
137,986
58,544
39,169
33,749
1,820
4,704
13,029
880
—
—
880
3,089
123,230
8,588
271
124,344
178,651
895
71,225
98,733
309
7,489
83,567
—
—
—
—
—
South
America
292,925
144,812
52,358
57,106
19,854
18,795
268,417
137,661
42,921
35,063
41,445
11,327
24,508
65,251
58,156
—
7,095
1,077
Intra-Group
eliminations
Total
(218,301) 1,734,659
1,036,004
—
(126,078)
—
—
(92,223)
313,736
193,716
82,720
108,483
(126,078) 1,637,074
1,025,401
164,785
280,339
124,465
42,084
97,585
181,880
142,189
14,021
25,670
48,379
—
(126,078)
—
—
—
(92,223)
—
—
—
—
—
A.
B.
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.
C.
D. 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.
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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 securities
A
Other financial assets
B
Other asset accounts
Total liabilities
Customer deposits
Central banks and credit institutions
Marketable debt securities
C
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
D
Europe
943,875
590,610
219,154
67,068
37,250
29,793
899,007
619,486
156,257
73,629
38,706
10,929
44,868
114,698
82,641
15,994
16,063
25,572
2021
Digital
Consumer
Bank
148,005
113,937
Corporate
Centre
215,467
6,787
21,804
5,280
47
6,937
135,599
55,327
37,600
36,710
1,397
4,565
12,406
852
—
—
852
2,497
88,918
1,554
2,203
116,005
135,950
1,042
53,063
74,302
430
7,113
79,517
—
—
—
—
—
South
America
257,805
123,920
43,134
51,451
23,809
15,491
237,375
120,500
44,314
23,461
40,490
8,610
20,430
57,428
51,234
—
6,194
103
North
America
244,734
137,428
34,857
38,500
12,555
21,394
216,048
121,989
35,152
38,061
14,652
6,194
28,686
13,949
12,112
84
1,753
20,213
Intra-Group
eliminations
Total
(214,051) 1,595,835
972,682
—
(125,195)
—
—
(88,856)
282,672
163,853
75,864
100,764
(125,197) 1,498,782
918,344
201,189
246,163
95,675
37,411
97,053
186,927
145,987
16,078
24,862
48,385
—
(125,197)
—
—
—
(88,854)
—
—
—
—
—
A.
B.
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.
C.
D. 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.
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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 securities
A
Other financial assets
B
Other asset accounts
Total liabilities
Customer deposits
Central banks and credit institutions
Marketable debt securities
C
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
D
Europe
909,304
563,581
180,245
81,271
48,313
35,894
866,949
582,353
133,973
84,201
54,634
11,788
42,355
99,301
71,239
15,487
12,575
21,913
North
America
223,797
120,571
28,666
38,403
15,439
20,718
199,789
102,924
38,071
36,583
16,182
6,029
24,008
12,501
10,864
90
1,547
15,920
2020
Digital
Consumer
Bank
137,155
113,258
Corporate
Centre
182,587
5,044
12,058
5,659
30
6,150
124,720
51,399
32,046
35,965
1,370
3,940
12,435
475
—
—
475
658
61,174
1,917
1,645
112,807
106,044
826
38,041
57,240
493
9,444
76,543
12
12
—
—
—
South
America
238,746
113,745
43,154
49,304
17,342
15,201
218,927
111,808
42,049
21,280
35,456
8,334
19,819
55,965
49,850
—
6,115
72
Intra-Group
eliminations
Total
(183,339) 1,508,250
916,199
—
225,796
(99,501)
176,554
—
82,769
—
(83,838)
106,932
(99,501) 1,416,928
849,310
184,679
235,269
108,135
39,535
91,322
168,254
131,965
15,577
20,712
38,563
—
(99,501)
—
—
—
(83,838)
—
—
—
—
—
A.
B.
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.
C.
D. 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.
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The condensed income statements for the primary segments
are as follows:
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
Europe North America
9,705
12,565
1,958
4,493
204
821
449
151
12,316
18,030
(5,871)
(8,523)
6,445
9,507
(2,538)
(2,396)
(118)
(1,629)
3,789
5,482
(869)
(1,492)
2,920
3,990
—
—
2,920
3,990
43
179
2,877
3,811
2022
South
America
12,979
4,515
1,291
(761)
18,024
(6,675)
11,349
(5,041)
(544)
5,764
(1,549)
4,215
—
4,215
557
3,658
Digital
Consumer
Bank
4,022
843
60
344
5,269
(2,462)
2,807
(544)
(27)
2,236
(549)
1,687
—
1,687
379
1,308
Corporate
centre
(652)
(19)
(723)
(91)
(1,485)
(372)
(1,857)
10
(174)
(2,021)
(27)
(2,048)
—
(2,048)
1
(2,049)
Total
38,619
11,790
1,653
92
52,154
(23,903)
28,251
(10,509)
(2,492)
15,250
(4,486)
10,764
—
10,764
1,159
9,605
A. 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.
B. 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.
C.
D. '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 27 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.
E. 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 27 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.
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EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
Europe North America
8,072
10,574
1,644
4,344
224
756
914
260
10,854
15,934
(4,967)
(8,318)
5,887
7,616
(1,210)
(2,293)
(145)
(1,290)
4,532
4,033
(1,016)
(1,212)
3,516
2,821
—
—
3,516
2,821
556
71
2,960
2,750
2021
South
America
11,307
3,721
716
(407)
15,337
(5,379)
9,958
(3,251)
(474)
6,233
(2,360)
3,873
—
3,873
556
3,317
Digital
Consumer
Bank
4,041
821
8
229
5,099
(2,405)
2,694
(527)
(194)
1,973
(464)
1,509
—
1,509
345
1,164
Corporate
Centre
(624)
(28)
(141)
(27)
(820)
(346)
(1,166)
(155)
(190)
(1,511)
(24)
(1,535)
—
(1,535)
2
(1,537)
Total
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
A. 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.
B. 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.
C.
D. '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.
E. 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
recognised in results and Gains or losses on non-current assets held for sale not classified as discontinued operations.
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EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
Europe North America
8,394
9,518
1,684
4,000
251
868
628
(106)
10,957
14,280
(4,677)
(8,275)
6,280
6,005
(3,917)
(3,345)
(132)
(970)
2,231
1,690
(550)
(476)
1,681
1,214
—
—
1,681
1,214
261
78
1,420
1,136
2020
South
America
10,710
3,589
765
(209)
14,855
(5,357)
9,498
(3,924)
(320)
5,254
(1,918)
3,336
—
3,336
437
2,899
Digital
Consumer
Bank
4,014
771
16
116
4,917
(2,329)
2,588
(957)
49
1,680
(421)
1,259
—
1,259
301
958
Corporate
Centre
(642)
(29)
287
(25)
(409)
(329)
(738)
(31)
(412)
(1,181)
(151)
(1,332)
—
(1,332)
—
(1,332)
Total
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
A. 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.
B. 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.
C.
D. '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.
E. 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 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.
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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 four
businesses: Merchant, International Trade, Payments 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.
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The condensed income statements are as follows:
EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
2022
Santander
Corporate &
Investment
Banking
3,544
1,988
1,833
31
7,396
(2,898)
4,498
(251)
(131)
4,116
(1,119)
2,997
—
2,997
192
2,805
Wealth
Managemen
t &
Insurance
825
1,291
123
369
2,608
(1,041)
1,567
(14)
(26)
1,527
(347)
1,180
—
1,180
60
1,120
Retail
Banking
34,880
7,650
435
(280)
42,685
(18,568)
24,117
(10,210)
(2,135)
11,772
(2,931)
8,841
—
8,841
895
7,946
PagoNxt
22
881
(14)
64
953
(1,024)
(71)
(44)
(26)
(141)
(63)
(204)
—
(204)
12
(216)
Corporate
centre
(652)
(19)
(723)
(91)
(1,485)
(372)
(1,857)
10
(174)
(2,021)
(27)
(2,048)
—
(2,048)
1
(2,049)
Total
38,619
11,790
1,653
92
52,154
(23,903)
28,251
(10,509)
(2,492)
15,250
(4,486)
10,764
—
10,764
1,159
9,605
A. 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.
B. 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.
C. 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.
D. 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 27 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.
E. 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 27 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.
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EUR million
Underlying income statement (condensed)
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
2021
Santander
Corporate &
Investment
Banking
(SCIB)
2,921
1,744
766
188
5,619
(2,380)
3,239
(151)
(17)
3,071
(821)
2,250
—
2,250
137
2,113
Wealth
Management
& Insurance
477
1,248
100
416
2,241
(914)
1,327
(38)
6
1,295
(309)
986
—
986
44
942
Retail
Banking
30,595
7,045
839
390
38,869
(17,102)
21,767
(7,082)
(2,053)
12,632
(3,898)
8,734
—
8,734
1,345
7,389
PagoNxt
1
493
(1)
2
495
(673)
(178)
(10)
(39)
(227)
(24)
(251)
—
(251)
2
(253)
Corporate
Centre
(624)
(28)
(141)
(27)
(820)
(346)
(1,166)
(155)
(190)
(1,511)
(24)
(1,535)
—
(1,535)
2
(1,537)
Total
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
A. 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.
B. 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.
C. 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.
D. 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 included in the line provisions or reversal of provisions, net of the statutory income statement.
E. 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 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.
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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
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
2020
Santander
Corporate &
Investment
Banking
(SCIB)
2,842
1,542
670
202
5,256
(2,038)
3,218
(470)
(134)
2,614
(750)
1,864
—
1,864
118
1,746
Wealth
Management
& Insurance
394
1,154
99
383
2,030
(872)
1,158
(28)
1
1,131
(272)
859
—
859
37
822
Retail
Banking
29,401
6,986
1,132
(153)
37,366
(17,285)
20,081
(11,633)
(1,238)
7,210
(2,328)
4,882
—
4,882
921
3,961
PagoNxt
(1)
362
(1)
(3)
357
(443)
(86)
(12)
(2)
(100)
(15)
(115)
—
(115)
1
(116)
Corporate
Centre
(642)
(29)
287
(25)
(409)
(329)
(738)
(31)
(412)
(1,181)
(151)
(1,332)
—
(1,332)
—
(1,332)
Total
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
A. 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.
B. 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.
C. 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.
D. 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.
E. 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.
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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
2022
Reconciliation of underlying results to statutory results
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
Underlying
results
38,619
11,790
1,653
92
52,154
(23,903)
28,251
(10,509)
(2,492)
15,250
(4,486)
10,764
—
10,764
(1,159)
9,605
Adjustments
—
—
—
(37)
(37)
—
(37)
(327)
364
—
—
—
—
—
—
—
Statutory
results
38,619
11,790
1,653
55
52,117
(23,903)
28,214
(10,836)
(2,128)
15,250
(4,486)
10,764
—
10,764
(1,159)
9,605
A. 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.
B. 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.
C. 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.
D. 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 27 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.
E. 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 a release of EUR 27 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:
• Mainly, payment holidays in Poland.
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EUR million
2021
Reconciliation of underlying results to statutory results
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
Underlying
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
Adjustments
—
—
—
—
—
—
—
—
(713)
(713)
182
(531)
—
(531)
1
(530)
Statutory
results
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
A. 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.
B. 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.
C. 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.
D. 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.
E. 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.
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EUR million
2020
Reconciliation of underlying results to statutory results
Net interest income
Net fee income
A
Gains (losses) on financial transactions
B
Other operating income
Total income
Administrative expenses, depreciation and amortisation
C
Net operating income
Net loan-loss provisions
E
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
D
Underlying
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
Adjustments
—
—
—
(321)
(321)
(163)
(484)
(258)
(11,008)
(11,750)
(2,116)
(13,866)
—
(13,866)
(14)
(13,852)
Statutory
results
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)
A. 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.
B. 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.
C. 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.
D. 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.
E. 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 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'.
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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 securities
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
10,257
Members of the
board of directors
—
2022
227
489
8,822
463
256
3,611
938
2,301
—
372
1,357
189
(60)
(225)
1,541
(88)
3,535
11
201
3,323
—
—
—
—
—
11
—
11
—
—
—
—
—
—
—
—
2
1
1
—
Executive
vicepresident Other related parties
455
13
—
—
13
—
—
11
—
11
—
—
—
—
—
—
—
—
2
1
1
—
—
—
455
—
—
109
—
109
—
—
2
1
—
—
1
—
79
23
13
43
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EUR million
Assets
Cash, cash balances at central banks and other
deposits on demand
Loans and advances: credit institutions
Loans and advances: customers
Debt securities
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
9,386
Members of the
board of directors
—
2021
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
—
Executive
vicepresident Other related parties
384
14
—
—
14
—
—
11
—
11
—
—
—
—
—
—
—
—
2
1
1
—
—
—
384
—
—
197
—
197
—
—
1
1
—
—
—
—
76
17
13
46
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EUR million
Assets
Cash, cash balances at central banks and other
deposits on demand
Loans and advances: credit institutions
Loans and advances: customers
Debt securities
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
8,473
Members of the
board of directors
—
2020
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
—
The remaining required information is detailed in notes 5 and
46.c.
Executive
vicepresident Other related parties
95
24
—
—
24
—
—
16
—
16
—
—
—
—
—
—
—
—
1
—
1
—
—
—
95
—
—
159
—
159
—
—
3
2
—
—
1
—
52
3
13
36
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53. Risk management
a) Risk principles and culture
The principles on which Grupo Santander's risk management
and control are based are detailed below. They take into
account regulatory requirements, best market practices and are
mandatory:
1. All employees are risk managers who must understand the
risks associated with their functions and not assume risks
that will exceed the Group’s risk appetite or have an
unknown impact.
2. Senior managers must make sure Grupo Santander keeps its
risk profile within risk appetite, with consistent risk conduct,
action, communications, and oversight of our risk culture.
3. Independent risk management and control functions,
according to the three lines of defence model of Grupo
Santander.
4. Grupo Santander takes a forward-looking, comprehensive
approach towards all businesses and risk types.
5. Santander keeps thorough and timely reporting to properly
pinpoint, assess, manage and disclose risks.
1. Key risk types
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 (includes
fraud, technological, cyber, legal and conduct risks), financial
crime (includes, among others, money laundering, terrorism
financing, violation of international sanctions, corruption,
bribery and tax evasion), model, structural (includes risks
associated with insurance and pensions), 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.
Climate change and environmental risk could affect other risks
in different time horizons on account of physical damage, as
well as factors relating to the transition to a more sustainable
economy, such as legislative reform, technology and economic
agents. Given the nature of its operations, the Group has no
environment-related liabilities, expenses, assets or
contingencies of a material relevance to its consolidated equity,
financial situation and results.
Most exposures in sectors potentially affected by climate
change risk are with wholesale clients, whose preliminary
reviews, credit approval and credit ratings take such risk into
account. Customers’ ratings determine the parameters for
calculating loan loss (typically in terms of probability of default
or “PD”). Thus, when climate factors are relevant, in conjunction
with other elements of analysis, they have an impact on the
loan loss calculations which support capital and provisions.
The Group also passed the recent regulatory climate stress
tests, which had been classified as learning exercises for the
industry. Results showed that the Group’s coverage for potential
losses would be sufficient in view of portfolio maturity over
time.
Therefore, based on the best information available at the time
these consolidated annual financial statements were prepared,
the Group sees no additional environmental or climate change
risk having a substantial impact on its equity, financial situation
and results in 2022.
Still, this matter is constantly changing, and, like other banks,
the Group is working on developing more methodologies to
better measure potential loan loss in line with new
management needs, best practice, and regulators’ and
supervisors’ requirements.
2. Risk and compliance 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 business and support areas, which
are primarily accountable for managing the risk exposure
they originate, recognizes, measures, monitors and
reports on risks according to risk management policies,
models and procedures. Risk origination must be
consistent with the approved risk appetite and related
limits.
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– Second line: formed by risk and compliance & conduct
functions, independently oversees and challenges risk
management at the first line of defence to make sure
Grupo Santander keeps risks within risk appetite approved
by senior management and promote Risk Pro in the Group.
– Third line: Internal audit function, is fully independent to
give the board and senior managers assurance of high-
quality and efficient risk governance and management to
preserve our value, solvency and reputation.
Risk, compliance & conduct, and internal audit are sufficiently
separate and autonomous functions, with direct access to the
board and its committees.
2.2 Risk committee structure
The board of directors has final oversight of risk management
and compliance promoting a sound risk culture and reviewing
and approving risk appetite and frameworks, with support from
its risk, regulation and compliance committee and its executive
committee. The Group's risk governance keeps risk control and
risk-taking areas separate.
The Group chief risk officer (Group CRO), who leads the
application and execution of 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 handles
compliance risk and leads the application and execution of the
compliance and conduct risk strategy and provides the Group
CRO with a complete overview on the situation of risks being
monitored.
The Group CRO and the Group CCO report directly to both the
risk supervision, regulation and compliance committee and the
board of directors.
The executive risk, risk control and compliance and conduct
committees are executive committees with powers delegated
from 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:
• Inform the Group CRO, the Group CCO, the risk control
committee and the compliance and conduct committee if risks
are being managed within risk appetite;
• Regularly monitor each key risk type; and
• Overseeing measures to meet supervisors and auditors'
expectations.
Besides, Grupo Santander, in order to establish an adequate
control environment for the management of each risk types, 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 implement extra governance
measures for special situations, as it did with Brexit and the
covid-19 crisis. Since the beginning of the war in Ukraine,
Santander has strengthened the monitoring of all risks, with
special attention to the situation in Poland, monitoring of
macroeconomic performance, vulnerable sectors/customers,
cybersecurity, among other. In addition, the compliance team
have continuously reviewed the application of the sanctions.
Santander has no presence in, or hardly any direct exposure to,
Russia and Ukraine. Our special situations governance enabled
the Group to remain resilient against the consequences of the
war in Ukraine.
2.3 The Group's relationship with subsidiaries
Grupo Santander subsidiaries have a model for managing risk,
compliance and conduct that 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 to higher
standards according to local law and regulation.
Furthermore, the Group's aggregate oversight area advises and
validates subsidiaries on internal regulation and operations.
This reinforces a common risk management model across
Santander.
In 2022, Grupo Santander continued to build on our Group-
subsidiaries’ model through a regional approach, benefiting
from the Group's global scale to find synergy for standard
operations and platforms; to streamline processes; and tighten
control mechanisms to grow our business.
The Group CRO, the Group CCO and regional heads of risk are
involved in appointing, setting objectives for, reviewing and
compensating their country-unit counterparts to promote
proper risk management. Each subsidiary CRO/CCO interacts
regularly with the regional head of risk, the Group CRO and the
Group CCO in regional or country control meetings.
Local and global risk and compliance areas also meet to address
special matters. Country and regional units work closely to
effectively strengthen group-subsidiary relations through these
common initiatives:
• restructuring based on subsidiary benchmarks, strategic
vision, and advanced risk management infrastructures and
practices.
• exchange of best practices that will strengthen processes,
drive innovation and result in a quantitative impact.
• search for talent in risk and compliance teams with internal
mobility through the global risk talent programme and strong
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 aggregate level and types of risk that Grupo
Santander deems prudent for our business strategy, even in
unforeseen circumstances. In Grupo Santander, these principles
influence risk appetite:
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• Risk appetite is part of the board's duties. It prepares the risk
appetite statement (RAS) for the whole Group every year. In a
cascading down process, each subsidiary's board also sets its
own risk appetite.
• Comprehensiveness and forward-looking approach. Our
appetite includes of all material risks that Santander are
exposed to and defines our target risk profile for the current
and medium term with a forward-looking view considering
stress scenarios.
• Liquidity: Control of liquidity ratios under base and stress
scenarios (aligned with ILAAP)
• Concentration: Control of credit concentration on top clients,
portfolios and industries
• Non financial: Control on non financial risks aimed to
minimize events which could lead to financial loss, operative,
technological, legal and regulatory breaches, conduct issues
or reputational damage.
• Common standards and embedding in the day-to-day risk
b) Credit risk
management. Common standards and embedding in the day-
to-day risk management. The Group shares the same risk
appetite model, which sets common requirements for
processes, metrics, governance bodies, controls and
standards.. It also ensures an effective and traceable
embedding of our appetite into more granular management
policies and limits across our subsidiaries.
• Continuous adaptation to market best practices, regulatory
requirements and supervisors’ expectations.
• Aligning with business plans and strategy. The risk appetite is
a key point of reference for strategic and business planning.
Grupo Santander verifies that the three-year strategic plans,
the annual budget and capital and liquidity planning are
within the limits set in the RAS before Santander approves
them.
Grupo Santander's risk appetite and business model rest on the
following elements:
• A medium-low, predictable target risk profile, centred on
retail and commercial banking, internationally diversified
operations and a strong market share;
• Stable, recurrent earnings and shareholder remuneration,
sustained by a sound base of capital, liquidity and sources of
funding;
• Autonomous subsidiaries that are self-sufficient in terms of
capital and liquidity to ensure their risk profiles won't
compromise the Group’s solvency;
• An independent Risk function and a senior management
actively engaged in supporting a robust control environment
and risk culture; and
• A conduct model that protects our customers and our Simple,
Personal and Fair culture.
The risk appetite is expressed through qualitative statements
and limits on metrics representative of the bank’s risk profile at
present and under stress. Those metrics cover all risk types
according to our corporate risk framework. Grupo Santander
articulates them in five axes that provide the Bank with a
holistic view of all risks it incurs in the development of its
business model. These five axes are applicable to all
Santander's key risk types, and comprise:
• P&L volatility: Control of P&L volatility of business plan under
baseline and stressed conditions (aligned with ICAAP stress
test)
• Solvency: Control of capital ratios under baseline and stressed
scenarios (aligned with ICAAP)
1. Introduction to the credit risk treatment
Credit risk is the risk of financial loss due to the failure to pay or
impaired credit of a customer or counterparty Grupo Santander
has financed or maintains a contractual obligation with. It
includes counterparty risk, country risk and sovereign risk. It is
our most significant risk in terms of exposure and capital
consumption.
Credit risk management
Grupo Santander takes a holistic view of the credit risk cycle,
including the transaction, the customer and the portfolio, in
order to identify, analyse, control and decide on credit risk.
Credit risk identification facilitates active and effective portfolio
management and control. Grupo Santander classify external
and internal risk in each business to adopt any corrective or
mitigating measures through:
1.1. Planning
Grupo Santander´s planning helps to set business targets and
draw up action plans within our risk appetite statement.
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 portfolio credit
quality to measure credit risk, run internal controls to regularly
monitor credit strategy detect significant risk deviation and
potential impacts, and take corrective action.
They are suited to the Grupo Santander's risk appetite and
subsidiaries’ capital targets, having been reviewed and pre-
approved by senior managers before Group management
revises and validates them.
1.2. Risk assessment and credit rating
Risk approval generally depends on the applicant’s ability to
repay the debt, regardless of any collateral or personal
guarantees the Bank requires. Grupo Santander reviews their
regular sources of income, including funds and net cash flows
from any businesses.
Grupo Santander monitors credit rating drivers to calibrate the
decisions and ratings that Group credit quality assessment
models determine. Risk management uses these ratings for
many things like applying approval limits, pre-approvals,
monitoring risk, and policies on pricing credit.
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Grupo Santander then uses rating models to measure ability to
pay. Depending on each segment, credit rating 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: system of automatic evaluation of loan applications.
It automatically assigns customers an individual score retail
on which the subsequent decision is based. It is used for SME
segments without an assigned analyst.
Grupo Santander's parameter estimation models, based on
econometric models of past defaults and losses, calculate
economic and regulatory capital as well as IFRS 9 provisions for
each customer portfolio.
Grupo Santander regularly monitors and evaluates models'
suitability, predictive capacity, performance, granularity, and
compliance with policy, among other factors. Grupo Santander
reviews ratings with the latest financial and other relevant
information to assess credit risk due to depreciation caused by
customers’ lower creditworthiness and manage credit portfolios
according to the risk appetite and profile target set out in SCPs,
with exposure limits adjusted to an acceptable level for each
portfolio and counterparty and for new loan originations.
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, which are highly automated and digitalized,
determine the risk Grupo Santander 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. Santander also uses risk-based pricing
tools to make sure portfolio growth is sustainable.
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.
• Corporates and institutions that meet certain requirements
(strong relationships, rating, etc.) are subject to a simpler pre-
classification model that sets a recommended risk level for
each customer. Transactions above certain limits or with
special characteristics could require approval from a senior
credit analyst or a committee.
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.
1.3. 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. Grupo
Santander compares 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.
1.4. 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.
The monitoring process considers projections on the
performance of the operations and their characteristics, in
addition to any variation in their classification. Anticipation and
preventive monitoring uses transactional data sources and
advanced analytics (early warning engine) which determines
specific actions at the client level, based on the assigned
monitoring classification.
Monitoring 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.
• 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.
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1.5. Credit risk mitigation techniques
Grupo Santander generally approves risk according to a
borrower’s ability to make due payment, regardless of any
additional collateral or personal guarantees Santander may
require to modulate exposure.
To determine ability to pay, the Group analyse funds or cash
flows from businesses or other regular income, not including
guarantors or loan collateral which are always considered as a
secondary means of recourse.
In general, guarantees are to reinforce a credit transaction and
mitigate a loss if the borrower defaults. Our techniques to
mitigate credit risk cover various types of customer and product.
Some are for specific transactions (e.g. property) or a series of
transactions (e.g. derivatives netting and collateral). Santander
groups them by personal guarantees (with a solvent guarantor),
collateral (mainly in primary residence mortgages) and hedges
with credit derivatives.
The correct acceptance of these mitigation techniques is
established by ensuring their legal enforceability in all
jurisdictions. The entire process is subject to internal control and
effective monitoring of the valuation of the guarantees,
especially mortgages.
1.6. Collections & recoveries management
Collections & recoveries, an important area in risk management,
develops a global management strategy based on local
economic conditions, business models and other recovery-
related particulars, with a full approach and general action lines
for our subsidiaries. Recovery management follows regulatory
requirements set out in the EBA Guidelines on the management
of non-performing and forborne exposures.
For effective and efficient recoveries management, the area
segments customers based on certain aspects, using new digital
channels that help create value in Collections & Recoveries. It
follows hi-tech, digital procedures to handle large groups of
similar customer profiles and products; but it also adapts
management for customers who need an assigned manager
and tailored approach.
Collections & Recoveries splits recoveries into four phases:
arrears/early delinquency, default, write-offs and foreclosed
assets. To recover debt, the Group always seeks alternatives to
court action, like forbearance and other arrears management
techniques.
Grupo Santander also reviews debt instruments individually and
treat them as write-offs (even when they’re not past due) if the
Group sees signs of irreversible impairment that suggest
recovery to be remote. Though this may lead us to cancel all or
part of the gross carrying amount, the Group never interrupt
negotiations and legal proceedings to recover debt.
In markets where the real estate risk exposure is high, Grupo
Santander can take action to quickly dispose of assets, like
selling off portfolios or foreclosed assets with efficient sales
instruments to recover as many on-balance-sheet assets as
possible.
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2. Main aggregates and variations
Following are the main aggregates relating to credit risk from
our activities with customers:
A
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
B
Credit risk with customers
(EUR million)
2021
636,123
283,953
262,869
41,941
33,497
149,792
112,808
36,984
141,874
85,702
41,479
5,481
116,989
6,337
1,051,115
2022
639,996
293,197
253,455
41,755
33,350
185,614
140,452
45,107
167,348
101,801
47,811
5,844
125,339
5,824
1,124,121
2020
606,997
272,154
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
Credit impaired loans
(EUR million)
2021
19,822
13,403
3,766
1,442
1,210
3,632
2,624
1,009
6,387
4,182
1,838
198
2,490
903
33,234
2022
15,186
9,598
3,059
1,247
1,268
5,629
4,571
1,047
10,381
7,705
2,384
122
2,583
894
34,673
2020
20,272
14,053
3,138
1,584
1,496
2,938
2,025
913
5,688
3,429
2,051
93
2,525
344
31,767
NPL ratio (%)
2021
3.12
4.72
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
2022
2.37
3.27
1.21
2.99
3.80
3.03
3.25
2.32
6.20
7.57
4.99
2.08
2.06
15.35
3.08
2020
3.34
5.16
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
A. Management perimeter according to the reported segments
B.
Includes gross lending to customers, guarantees and documentary credits.
Key figures by geographic region are described below at 31
December 2022:
• Europe: The NPL ratio fell 75 bps to 2.37% from 2021 because
impaired loans decreased significantly in the UK, and in Spain
and Portugal due to the NPL portfolio sales.
• North America: The NPL ratio increased 61 bps to 3.03% from
2021, mainly due to increases at SC USA motivated by the
new definition of default.
• South America: The NPL ratio rose 170 bp from 2021 to
6.20%, due to increases in Brazil (mainly due to the retail
unsecured portfolio performance and a single name in SCIB)
and Chile, offset by the decrease in Argentina.
• Digital Consumer Bank: The NPL ratio decreased 7 bps to
2.06%, despite the decrease in automobile financing.
All support measures (moratoria) that the Group took in
response to the covid-19 pandemic have expired, with positive
behaviour thanks to economic recovery in 2021,and improved
sanitary-health environment in our main geographies.
Government liquidity programmes also remained in force in
2022, of which 77% of total credit granted was in Spain (77%
was secured by the Instituto de Crédito Oficial - ICO), and 12%
of total credit was in the UK, with 98% government-secured.
In the case of delinquent operations with ICO guarantee, the
transfer of the overdue guaranteed amounts will take place as
the guarantee is executed, regardless of whether the guarantor
is subrogated to the right to receive said amounts, according to
the regulation of these guarantees. The derecognition of the
transferred guaranteed amounts will entail the recognition, at
its fair value, of a collection right against the guarantor.
In addition, the Group is following the measures launched by
the governments of Spain, Portugal and Poland (for more
information please see note 10 c.) , aimed at relieving the
mortgage payment burden for vulnerable customers after the
increase in interest rates.
Information on the estimation of impairment losses
The calculation of credit risk provisions is performed at financial
asset level, estimating potential credit losses through the
difference between the expected cash flows and the contractual
cash flows, ensuring that the results are adequate considering
the status of the transaction, economic conditions and available
forward-looking information.
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) according to the status of each
instrument in relation to its level of credit risk:
• 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.
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• 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.
The classification of financial instrument in the IFRS 9 stages is
carried out in accordance with the guidelines through the risk
management policies of the subsidiaries, which are consistent
with the Group's policies.
Estimation of expected loss
Grupo Santander calculates impairment losses using
parameters (mainly EAD, PD, LGD and discount rate) based on
internal models, the stage in which each financial asset is
classified, and regulatory and management expertise. Far from
being a simple adaptation, Santander 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.
Determination of significant increase in credit risk
In order to determine the classification in stage 2, the Group
assesses whether there has been a significant increase in credit
risk (SICR) since the initial recognition of the transactions,
considering a series of common principles throughout the Group
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 and implemented
according to the approved governance.
The criteria thresholds used by the Group are based on a series
of principles, and develop a set of techniques. The principles are
as follows:
• Universality: all financial instruments subject to a credit rating
must be assessed for their possible SICR.
• Proportionality: the definition of the SICR must take into
account the particularities of each portfolio.
• Materiality: its implementation must be also consistent with
the relevance of each portfolio so as not to incur in
unnecessary costs or efforts.
• Holistic vision: the approach selected must be a combination
of the most relevant credit risk aspects (e.g. quantitative and
qualitative).
• Application of IFRS 9: the approach must take into
consideration IFRS 9 characteristics, focusing on a comparison
with credit risk at initial recognition, as well as considering
forward-looking information.
• Risk management integration: the criteria must be consistent
with those metrics considered in the day-to-day risk
management.
• Documentation: Appropriate documentation must be
prepared.
The techniques are summarised below:
• Stability of stage 2: in the absence of significant changes in
the portfolios credit quality, the volume of assets in stage 2
should maintain a certain stability as a whole.
• Economic reasonableness: at transaction level, stage 2 is
expected to be a transitional rating for exposures that could
eventually move to a deteriorating credit status at some point
or stage 3, as well as for exposures that have suffered credit
deterioration and whose credit quality is improving and
returns to stage 1.
• Predictive power: it is expected that the SICR definition avoids,
as far 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.
Identifying a significant increase in credit risk: when classifying
financial instruments under stage 2, Santander considers:
• Quantitative criteria: Grupo Santander reviews and quantifies
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, Grupo Santander considers
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. Santander supplements these qualitative
criteria with expert opinions.
When the presumption of a significant deterioration of credit
risk is removed, due to a sufficient improvement of the credit
quality, the obligor can be re-classified to Stage 1, without any
probationary period in Stage 2.
• Definition of default: Santander incorporated the new
definition to provisions calculation according to the EBA’s
guidelines; the Group is also considering applying it to
prudential framework. In addition, the default definition and
stage 3 have been aligned.
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Santander uses forward-looking information in internal
management and regulatory processes under several scenarios.
The Group's guidelines and governance ensure synergy and
consistency between these different processes.
2. 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 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.
Management overlays
During the 2022, the Group has used, through its process of
updating forward looking information and recalibration of
parameters, the overlay related to government support
measures in various countries that the Group had established as
of December 31, 2021 for an amount of 1,232 millions of euros.
At the end of 2022, Grupo Santander has EUR 1,471 million as
management overlays that include, among others, those
destined to cover the uncertainties resulting from the war in
Ukraine and the current macroeconomic context.
Exposure and impaired losses
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 table below shows the impairment losses
associated with each stage as of 31 December 2022, 2021 and
2020. In addition, depending on the transactions credit quality,
the exposure is divided into four categories according to
Standard & Poor's rating scale:
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
Impairment
C
losses
2022
Stage 1
172,440
394,084
272,456
11,799
850,779
Stage 2
1,506
10,601
32,653
21,436
66,196
Stage 3
—
—
—
32,608
32,608
Total
173,946
404,685
305,109
65,843
949,583
3,807
5,195
13,852
22,854
This definition considers the following criteria to classify
exposures as stage 3: financial instruments with one or more
payments more than 90 consecutive days past due,
representing at least 1% of the client's total exposure or the
identification of other criteria demonstrating, even in the
absence of defaults, that it is unlikely that the counterparty is
unlikely to meet all of its financial obligations.
The Group applies the default criteria to all exposures of the
impaired client. Where an obligor belongs to a group, the
default criteria may also be applied to all exposures of the
group.
The default classification is maintained during the 3-month
test period following the disappearance of all default
indicators described above, and this period is extended to one
year for forbearances that have been classified as default.
• Expected life of financial instruments: Santander estimates
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), Santander estimates its
expected life based on the total exposure period and effective
management practices to mitigate exposure.
The context and monitoring of the expected credit loss was
analysed and reviewed during the health crisis by covid-19 , and
was reinforced with collective analysis, monitoring of
government measures, monitoring of the evolution of the
Group's customers, as well as remedial management actions if
necessary. In terms of classification, 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.
At the end of December 2022 the credit risk provisions not
included any special measures or adjustments in relation to
health crisis by covid-19.
1. Forward-looking vision
To estimate expected losses, Grupo Santander requires a great
deal of expert analysis as well as past, present and future data.
Santander quantifies 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. These scenarios take into account the time value of
money, the relevant information available about past events
and current conditions, and projections of macroeconomic
factors that are considered important to estimate this amount
(e.g. GDP, house prices, rate of unemployment, among others).
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Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
Impairment
C
losses
2021
Stage 1
188,434
377,008
233,779
3,746
802,967
Stage 2
1,844
11,954
44,292
11,878
69,968
Stage 3
—
—
—
30,711
30,711
Total
190,278
388,962
278,071
46,335
903,646
4,149
5,103
12,873
22,125
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
Impairment
C
losses
2020
Stage 1
110,536
378,982
273,443
3,073
766,034
Stage 2
1,512
7,612
42,313
13,525
64,962
Stage 3
—
—
—
30,436
30,436
Total
112,048
386,594
315,756
47,034
861,432
4,458
5,461
13,503
23,422
A. Detail of credit quality ratings calculated for Group management purposes.
B. 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).
C.
The remaining units that form the totality of the Group
exposure, contributed EUR 123,796 million in stage 1; EUR
2,902 million in stage 2, and EUR 2,064 million in stage 3 (in
2021 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), and impairment losses of EUR 147 million in stage 1;
EUR 123 million for stage 2, and EUR 294 million in stage 3 (in
2021, EUR 408 million, EUR 322 million and EUR 841 million
and in 2020, EUR 180 million, EUR 393 million and EUR
277 million in stage 1, stage 2 and stage 3, respectively).
The remaining exposure, including all financial instruments not
included before, amounts to EUR 538,364 million (EUR
349,228 million in 2021 and EUR 478,093 million in 2020), and
it includes all undrawn authorized lines (loan commitments).
As of 31 December 2022, the Group had EUR 322 million net of
provisions (EUR 420 million and EUR 497 million at 31
December 2021 and 2020, 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.
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 collect mainly the most relevant risks
and 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 movement of +/-100
bp. 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 (excluding Santander
Consumer UK and Santander London Branch) declined year-on-
year by 3.6% (+1.8% in local currency) to EUR 253,455 million.
22.5% of Santander’s loan portfolio is in the UK.
At 1.21%, the NPL ratio fell 22 bps from December 2021, due to
a significant drop in the corporates segment following covid
relief measures and the positive performance of the real estate
market. The profile of the different segments remains stable.
Mortgage portfolio
Because of its size, Grupo Santander closely monitor Santander
UK’s mortgage portfolio for the entity itself and the Group.
As of 31 December 2022, the mortgage portfolio of Santander
UK grew by 5.5% in local currency to EUR 209,872 million. 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.
The high loan origination rate observed since 2021 carried on
into 2022, with very low credit risk. The economy slowdown
and the interest rate hikes have moderated the increasing pace
of house price increases from the second half of the year.
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, 2022, 2021
and 2020, is shown below.
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In addition, the exposure is divided in four tranches of the
Standard & Poor's rating scale, according to their current credit
quality:
Exposure and impairment losses by stage
EUR million
2022
A
Credit quality
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
Impairment
C
losses
Stage 1
85,930
118,585
16,831
220
221,566
Stage 2
827
7,547
11,093
978
20,445
Stage 3
—
—
—
3,059
3,059
Total
86,757
126,132
27,924
4,257
245,070
166
529
337
1,032
Exposure and impairment losses by stage
EUR million
2021
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
Impairment
C
losses
Stage 1
97,388
113,030
13,063
—
223,481
Stage 2
1,015
8,074
10,657
943
20,689
Stage 3
—
—
—
3,508
3,508
Total
98,403
121,104
23,720
4,451
247,678
135
372
460
967
Exposure and impairment losses by stage
EUR million
2020
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
Impairment
C
losses
Stage 1
41,757
142,308
34,965
—
219,030
Stage 2
111
2,116
16,814
—
19,041
Stage 3
—
—
—
3,229
3,229
Total
41,868
144,424
51,779
3,229
241,300
223
557
668
1,448
A. Detail of credit quality ratings calculated for Group management purposes.
B. 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).
C.
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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 2022 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
4.3%
6.0%
-4.4%
-0.4
Pessimistic
scenario 2
3.0%
7.3%
-4.6%
-0.5%
2023 - 2027
Pessimistic
scenario 1
2.7%
5.5%
-3.5%
-0.2%
Base scenario
3.1%
4.6%
-0.4%
0.7%
Optimistic
scenario 1
2.8%
4.4%
-0.7%
1.2%
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 2022, 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
2022
20%
10%
15%
50%
5%
2021
5%
20%
25%
45%
5%
2020
10 %
25 %
15 %
45 %
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 2022, 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
18.9%
-8.1%
10.1%
-6.0%
-10.8%
27.2%
7.1%
-4.0%
10.2%
-12.0%
-5.4%
10.5%
In relation to the previously mentioned management overlays,
UK has constituted EUR 328 million.
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 bps
and 30 bps.
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 293,197 million
(26% of Grupo Santander’s total). It is appropriately diversified
among products and customer segments.
The macroeconomic outlook is marked by an environment of
high uncertainty, where there are also factors that have an
opposite influence. Positive factors, such as the reactivation of
tourism after the end of the pandemic was declared together
with a better than expected macro economic performance, and
negative factors such as high inflation and the rise in interest
rates that will affect the purchasing power of families.
In this context, the activity had a different behaviour between
segments, since it grew significantly in consumer credit and
large corporates, but it remained stable in mortgages and
decreased significantly in SMEs, as customer positions were
maintained in the support and liquidity programs (financing
lines of the Official Credit Institute - ICO) without having to
require new financing.
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Total credit risk increased 3.3%from December 2021. The ICO
loans that were granted as a result of the pandemic (EUR
25,428 million) maintain a high weight in this segment.
The credit portfolio’s NPL ratio was 3.27%, 145 lower than in
December 2021. This better overall portfolio performance was
driven by customer support programmes, the regularization of
several restructured positions and portfolio sales.
The NPL coverage ratio remained at 51%. The cost of credit was
reduced to 0.61% (-31 bps vs. December 2021).
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, 2022, 2021
and 2020, is shown below. In addition, the exposure is divided in
four tranches of the Standard & Poor's rating scale, according to
their current credit quality:
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
Impairment
C
losses
2022
Stage 1
37,133
107,667
46,296
253
191,349
Stage 2
447
282
6,388
5,234
12,351
Stage 3
—
—
—
8,893
8,893
Total
37,580
107,949
52,684
14,380
212,593
507
666
3,472
4,645
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
Impairment
C
losses
2021
Stage 1
43,978
109,142
33,104
129
186,353
Stage 2
352
555
11,716
3,024
15,647
Stage 3
—
—
—
12,761
12,761
Total
44,330
109,697
44,820
15,914
214,761
422
580
5,005
6,007
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
Impairment
C
losses
2020
Stage 1
38,656
108,336
40,294
336
187,622
Stage 2
1,199
318
6,533
5,008
13,058
Stage 3
—
—
—
13,762
13,762
Total
39,855
108,654
46,827
19,106
214,442
479
732
5,277
6,488
A. Detail of credit quality ratings calculated for Group management purposes.
Excluding the SCIB branches business
B. 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).
C.
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 2022, is presented below:
2023-2027
Variables
Interest rate
Unemployment rate
Housing price change
GDP growth
Pessimistic
scenario Base scenario
2.3%
12.2%
3.3%
2.0%
2.6%
16.6%
2.3%
0.5%
Optimistic
scenario
2.0%
10.7%
3.8%
3.3%
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
2022
30%
40%
30%
2021
30%
40%
30%
2020
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
10.9%
-5.4%
4.4%
-3.6%
4.7%
-2.9%
2.6%
-2.0%
3.9%
-2.7%
3.4%
-2.3%
In relation to the previously mentioned management overlays,
Spain has constituted EUR 274 million.
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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. Regarding the
relative threshold, all operations that exceed 200% belonging to
customers with good credit quality (internal rating greater than
4) will be classified in stage 2 if they also exceed the absolute
threshold. On the other hand, those customer contracts with a
worse credit quality will be classified in stage 2 if it exceeds the
relative threshold or the absolute threshold.
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 63,688 million in 2022 (EUR
62,324 million and EUR 59,605 million in 2021 and 2020,
respectively), 99.55% of which have a mortgage guarantee
(99.33% and 99.35% in 2021 and 2020, respectively).
EUR Million
Home purchase loans to families
Without mortgage guarantee
With mortgage guarantee
2022
Gross amount
63,688
288
63,400
2021
EUR Million
Home purchase loans to families
Without mortgage guarantee
With mortgage guarantee
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
Of which:
impaired
1,088
24
1,064
Of which:
impaired
1,860
115
1,745
Of which:
impaired
1,850
75
1,775
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 26% (27% in 2021 and
2020).
• The 93% of the portfolio has a LTV below 80% calculated as
total risk/latest available house appraisal.
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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
2022
Loan to value ratio
Less than or
equal to 40%
17,877
132
More than
40% and less
than 60%
20,617
192
More than
60% and less
than 80%
20,225
220
More than
80% and less
than or equal
to 100%
3,294
181
More than
100%
1,387
339
Total
63,400
1,064
In November 2022, Royal Decree-Law 19/2022 was published,
which establishes a Code of Good Practices in response to the
rise in interest rates on mortgage loans for primary residences
and Royal Decree-Law 6/2012 of protection measures for
mortgage debtors without resources. The entity is analysing the
plausible impact based on different adherence hypotheses. The
code of good practices is focused on extending the term of the
operations (aids ranging between 2 and 7 years of extension).
Corporate & SME financing
Credit risk with SME and corporates in commercial banking
amounted to EUR 112,255 million, 2.3% lower than in
December 2021, mainly due to the fall in the portfolio of SMEs
of 4.3%. This is Santander Spain's main lending segment,
accounting for 39% of the total, at the level of CIB portfolio,
which in 2022 has come to include branches in Europe.
Most of the portfolio corresponds to clients who have been
assigned a credit analyst, who performs continuous
management of said clients during all phases of 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 5.79% in December 2022. The
NPL ratio decreased by 171 bps compared to December 2021,
due to a reduction in the delinquency stock in SMEs, due to the
proactive management of delinquent positions with the support
of portfolio sales.
Real estate activity
Santander has specialized teams that are in charge of managing
real estate business production and risk areas that cover the
entire life cycle of these operations.
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
2022
2021
2020
2,625
—
(295)
(3)
2,327
2,871
(1)
(230)
(15)
2,625
2,939
(6)
(24)
(38)
2,871
The NPL ratio of this portfolio ended the year at 4.04%
(compared with 5.07% and 6.13% at December 2021 and 2020,
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 35.11% (30.08% and
32.95% in 2021 and 2020, respectively).
2022
Excess of gross
exposure over
maximum
recoverable
amount of
effective
collateral
Gross amount
Specific
allowance
2,327
94
487
211
21
—
44
33
—
EUR Million
Financing for
construction
and property
development
(including land)
(business in
Spain)
Of which
impaired
Memorandum
items written-
off assets
Memorandum items: Data from the public
consolidated 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)
2022
Carrying amount
250,702
1,734,659
1,311
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For the 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.
• Medium-high level projects, conducting to contracted demand
and 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 2022, the net balance of these assets
amounted to EUR 2,971 million (gross amount of EUR 6,422
million; recognised allowance of EUR 3,451 million, of which
EUR 2,526 million related to impairment after the foreclosure
date).
At 31 December 2021, the net balance of these assets
amounted to EUR 3,591 million (gross amount: EUR
7,364 million; recognised allowance: 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 of
EUR 7,937 million; recognised allowance of EUR 3,975 million,
of which EUR 2,834 million related to impairment after the
foreclosure date).
At year-end, the distribution of this portfolio was as follows:
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
2022
Loans: gross amount
43
2,285
1,138
674
464
1,110
1,103
7
37
25
12
2,328
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 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.).
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The following table shows the detail of the assets foreclosed by
the businesses in Spain at the end of 2022:
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 439 million (mainly Project
Quasar Investment 2017, S.L. with EUR 405 million), and equity
instruments foreclosed or received in payment of debts
amounting to EUR 15 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.
The gross movement in foreclosed properties were as follows
(EUR billion):
Gross additions
Disposals
Difference
EUR Billion
2021
0.4
(1.1)
(0.7)
2022
0.2
(1.3)
(1.1)
2020
0.5
(0.9)
(0.4)
2022
Gross carrying
amount
Valuation
adjustments
Of which
impairment
losses on
assets since
time of
foreclosure
Net Carrying
amount
5,587
3,097
2,275
2,490
1,456
341
1,115
92
25
67
4,039
1,286
2,753
659
176
6,422
713
157
556
44
7
37
2,340
689
1,651
274
80
3,451
583
127
456
32
4
28
1,660
415
1,245
190
61
2,526
743
184
559
48
18
30
1,699
597
1,102
385
96
2,971
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Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
C
Impairment losses
2021
Stage 1
8,811
29,379
12,193
19
50,402
263
Stage 2
124
1,033
2,756
361
4,274
314
Stage 3
—
—
—
477
477
45
Total
8,935
30,412
14,949
857
55,153
622
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
C
Impairment losses
2020
Stage 1
3,284
14,821
24,350
30
42,485
344
Stage 2
48
1,730
2,459
518
4,755
316
Stage 3
—
—
—
403
403
42
Total
3,332
16,551
26,809
951
47,643
702
A. Detail of credit quality ratings calculated for Group management purposes.
B. 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).
C.
3.3. United States
Santander US’s credit risk increased to EUR 140,452 million at
the end of December 2022. It makes up 12.5% of Grupo
Santander's total credit risk.
Leases carried out exclusively under the Stellantis Group
agreement (primarily with highly creditworthy customers)
dropped 1.8% to EUR 13,400 million, providing stable and
recurring earnings. Risk management and residual value
mitigation measures remain a priority.
Santander US includes the following business units:
Santander Bank, National Association (SBNA)
Its activity is focused on commercial banking with 54% of the
portfolio distributed in individuals, and approximately 46% in
corporates. The bank's core strategic objectives include
continuing to improve customer experience, growing its
customer and deposit base with digital initiatives to transform
business and branches, and using its deposit base to build up its
Commercial Real Estate business. To maximize returns and
growth, retail and commercial banking mainly consists of
consumer credit, auto-lending and auto-leasing, but not
mortgages or any kind of loans or lines of credit secured by
collateral. In 2022 lending increased 12.8% across all
segments, helped by a stronger US dollar. Excluding the FX
effect, the increase was lower, standing at 6.3%.
The NPL ratio increased to 1.8% (+23 bp in the year) as of
December 2022 the cost of credit increased to 0.36% once the
provisions were normalized after the extraordinary releases of
2021 that were favoured by the fiscal support and stimulus
programs still in force at that time.
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, 2022, 2021 and 2020, is shown below. In addition,
the exposure is divided in four tranches of the Standard & Poor's
rating scale, according to their current credit quality:
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
C
Impairment losses
2022
Stage 1
6,884
20,768
30,359
308
58,319
392
Stage 2
145
366
2,225
558
3,294
241
Stage 3
—
—
—
459
459
74
Total
7,029
21,134
32,584
1,325
62,072
707
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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 2022 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
2022
18%
20%
33%
30%
2021
18%
20%
33%
30%
2020
18%
20%
33%
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 as of 2022 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
7.7%
-5.5%
12.8%
-6.1%
18.1%
-8.2%
20.3%
-9.5%
-22.8%
29.0%
-33.6%
48.0%
In relation to the previously mentioned management overlays,
SBNA has constituted EUR 215 million.
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 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 (from lower to higher credit quality, the
rating range goes from 1 to 9.3).
Pessimistic
scenario 2
2.5%
6.0%
-1.5%
1.8%
2023 - 2027
Pessimistic
scenario 1 Base scenario
3.4%
4.1%
0.1%
1.6%
2.9%
4.6%
-0.9%
2.1%
Optimistic
scenario
3.2%
3.4%
1.7%
2.8%
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. Originations in the auto
portfolio did not grow compared to the previous year, as a
reflection of the restriction in the supply of new vehicles and the
revaluation of used vehicles compared to the levels of previous
years.
As of 31 December 2022, risk indicators stabilized with the end
of covid relief programmes for customers and government
stimulus and with the new definition of default: NPLs increased
to to 12.1% (+584 bp in the year); and the cost of credit stood at
4.68% (+314 bp YoY). Non-performing coverage ratio fell to
87% (-89 pp in the year).
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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 2022, 2021 and 2020, is shown below. In addition,
the exposure is divided in four tranches of the Standard & Poor's
rating scale, according to their current credit quality:
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
C
Impairment losses
2022
Stage 1
—
171
14,564
7,735
22,470
672
Stage 2
—
—
512
5,108
5,620
1,232
Stage 3
—
—
—
3,870
3,870
1,452
Total
—
171
15,076
16,713
31,960
3,356
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
C
Impairment losses
Stage 1
417
800
18,655
222
20,094
524
2021
Stage 2
4
35
5,930
1,931
7,900
1,741
Stage 3
—
—
—
1,658.00
1,658
572
Total
421
835
24,585
3,811
29,652
2,837
Exposure and impairment losses by stage
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposure B
C
Impairment losses
Stage 1
359
1,330
20,585
905
23,179
911
2020
Stage 2
3
9
2,694
2,137
4,843
1,820
Stage 3
—
—
—
1,019
1,019
726
Total
362
1,339
23,279
4,061
29,041
3,457
A. Detail of credit quality ratings calculated for Group management purposes.
B. 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).
C.
SC USA reassessed the suitability of macroeconomic scenarios
and adjusted them in light of new information. At the end of
2022, Santander updated the most recent scenarios to calculate
IFRS 9 provisions by recalibrating and revising the forward-
looking information and risk model parameters. In this process,
it has been analysed that the scenarios and models adequately
capture the macroeconomic effects on the credit risk profile,
therefore no additional funds have been allocated in this regard.
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.
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The evolution forecasted in 2022 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
2022
18%
20%
33%
30%
2021
18%
20%
33%
30%
2020
18%
20%
33%
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 at the end of 2022 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
2.4%
-2.2%
-2.6%
2.8%
1.3%
-0.8%
1.6%
-0.9%
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
2.5%
6.0%
-1.5%
1.8%
-3.6%
2023 - 2027
Pessimistic
scenario 1 Base scenario
3.4%
4.1%
0.1%
1.6%
-3.6%
2.9%
4.6%
-0.9%
2.1%
-3.6%
Optimistic
scenario
3.2%
3.4%
1.7%
2.8%
-3.6%
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.
Santander Brasil's credit risk amounted to EUR 101,801 million.
It increased by 19% from 2021. Minus the exchange rate effect,
it grew by 6.2%. As of December 2022, Santander Brasil
accounts for 9% of Grupo Santander's loan book.
SME lending grew steadily, as practically all subsegments grew
in originations, especially among low-risk borrowers. As of
August, the relaunch of Government Guarantee Programmes for
all subsegments has contributed to the aforementioned
increase in production, in order to combat the effects of
generalized macroeconomic volatility.
Lending to corporates saw robust growth. New originations had
sound risk profiles, which helped keep credit quality indicators
within targets and reinforced the portfolio's profitability. The
more challenging environment has created some pressure; but
it hasn’t had any direct effect on provisions during the year.
2022 in Brazil was marked by economic instability and high
inflation rates, although it has been declining in the second half
of the year, standing at 5.8% in December (the lowest rate since
February 2021).
Because of inflation, benchmark rate (“Selic”) hikes and other
macroeconomic variables, together with the retail unsecured
portfolio performance and a single name in SCIB in the fourth
quarter, at 31 December 2022 loan-loss provisions reached EUR
4,417 million, a 63% year-on-year increase (excluding the effect
of the exchange rate, the increase would remain at 38%) Cost
of risk rose from 3.73% in 2021 to 4.79% in 2022.
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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, 2022, 2021 and 2020, is shown below. In
addition, the exposure is divided in four tranches of the
Standard & Poor's rating scale, according to their current credit
quality:
Exposure and impairment losses
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
Total exposureB
Impairment lossesC
Stage 1
18,033
35,902
31,269
432
85,636
575
2022
Stage 2
41
342
3,195
4,547
8,125
1,219
Stage 3
—
—
—
7,705
7,705
4,334
Total
18,074
36,244
34,464
12,684
101,466
6,128
2021
Exposure and impairment losses
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
C
Impairment losses
Stage 1
22,555
24,003
27,040
1,542
75,140
1,232
Stage 2
296
280
2,241
2,544
5,361
909
Stage 3
—
—
—
4,182
4,182
2,510
Exposure and impairment losses
EUR million
Credit quality A
From AAA to AA-
From A+ to BB
From BB- to B-
CCC and below
B
Total exposure
C
Impairment losses
Stage 1
13,226
25,460
25,180
986
64,852
971
2020
Stage 2
97
112
2,946
2,996
6,151
776
Stage 3
—
—
—
3,429
3,429
2,132
Total
22,851
24,283
29,281
8,268
84,683
4,651
Total
13,323
25,572
28,126
7,411
74,432
3,879
A. Detail of credit quality ratings calculated for Group management purposes.
B. 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).
C.
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
Pessimistic
scenario
2023-2027
Base
scenario
Optimistic
scenario
12.6%
15.2%
0.6%
-0.8%
33.2%
8.6%
11.1%
2.8%
1.1%
30.0%
6.4%
7.6%
7.9%
3.3%
23.9%
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
2022
10%
80%
10%
2021
10%
80%
10%
2020
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 2022 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
Other
0.7%
-0.3%
-0.5%
1.1%
-0.2%
0.9%
3.2%
-1.0%
-1.4%
8.9%
-1.5%
5.6%
1.7%
-0.9%
-1.5%
3.8%
-0.4%
2.4%
In relation to the previously mentioned management overlays,
Santander Brazil has constituted EUR 181 million .
Regarding the stage 2 classification determination, Santander
Brazil analyses whether any increase in PD for the entire
expected life of the operation is greater than the combination of
an absolute threshold and a relative threshold. The established
threshold is different for each portfolio depending on the
characteristics of the transactions, considering that a
transaction exceeds said threshold when the PD for the entire
life of the transaction increases a certain amount over the PD it
had at the time of initial recognition. The values of said absolute
thresholds depend on their calibration, carried out periodically,
currently ranging between 30% and 1% depending on the type
of product and the estimated sensitivity. Regarding the relative
threshold, they range mainly between 500% and 50%
depending on the type of product and the estimated sensitivity.
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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.
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 5.6% of the outstanding
credit risk with customers (lending to customers plus off-
balance sheet risks) as of December 2022.
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 from treasury, with money market
financing and counterparty risk products to satisfy the needs of
customers (especially credit institutions) and the Group.
Counterparty credit risk is the risk that a customer will default
before the final settlement of a transaction’s cash flows. It
creates a bilateral credit risk because it can affect both parties to
a transaction. It is also uncertain because it depends on market
factors, which can be volatile.
Grupo Santander manages counterparties with several credit
risk models based on their characteristics and needs. Model
segmentation is by business and risk treatment and based on
counterparty disclosures as well as the credit risk cycle. The
exposure that the counterparty credit risk model covers includes
derivatives contracts, repurchase agreements, securities and
commodities lending, long settlements and margin lending.
An infrastructure that can quickly and dynamically measure
current and potential exposure with various degrees of
aggregation and granularity to generate detailed reports is
important for decision-making.
To measure exposure, Santander uses two methods: “Mark-to-
market” (MtM) (replacement cost of derivatives), plus potential
future exposure (“add-on”); and the Monte Carlo simulation for
certain countries and products. In addition, Santander calculates
capital at risk and unexpected loss (e.g. economic capital, net of
collateral and recoveries, after deducting expected loss).
At market close, Santander recalculates its exposure by
adjusting transactions to a new time horizon, adapting potential
future exposure, and applying netting, collateral and other
mitigants. That way, Santander can check exposure daily
against the limits approved by senior management within risk
appetite. For risk control, the Group uses a real-time integrated
system that shows the exposure limit with a counterparty, for
any product and term, in all subsidiaries.
Counterparty credit risk can also give rise to “wrong-way” risk if
exposure to a portfolio or a counterparty increases but credit
quality declines. It can happen when rising default risk increases
exposure to a counterparty.
Another risk called “settlement risk” occurs if a party might fail
to hold their end of a contract and deliver the cash or security
needed to settle the transaction.
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The detail, by activity and geographical area of the Group's risk
concentration at 31 December 2022 is as follows:
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
A
2022
Other EU
countries
61,138
37,936
34,681
3,255
45,092
Spain
98,405
41,871
30,209
11,662
15,271
America
119,005
89,458
79,016
10,442
54,232
Rest of the
world
89,072
7,798
7,394
404
38,286
Total
367,620
177,063
151,300
25,763
152,881
440,137
114,556
96,354
165,017
64,210
22,797
5,178
267,976
144,186
566,559
361,377
185,097
20,085
1,704,260
3,278
2,502
53,355
55,421
90,597
65,077
17,074
8,446
360,700
3,569
1,415
56,243
35,127
99,133
36,552
60,497
2,084
339,653
8,149
1,113
111,912
43,843
141,266
45,611
90,609
5,046
568,978
7,801
148
46,466
9,795
235,563
214,137
16,917
4,509
434,929
A. 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 securities', 'Equity Instruments', 'Trading Derivatives', 'Hedging derivatives', 'Investments and
financial guarantees given'.
4.3 Vulnerable sectors identification
Grupo Santander carries out quarterly monitoring of exposure to
customers operating in sectors that could be affected by
macroeconomic conditions. The monitoring involves the use of
internal tools to forecast customer behaviour and trends in each
sector under several macro scenarios, as well as this
information:
• 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
Following the effects of the pandemic, in the second quarter of
2022, Grupo Santander adapted our definition of 'affected
sectors' to the current backdrop of rising energy and commodity
prices and high inflation, mindful of internal and external
factors.
4.4. 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.
Grupo Santander's standard for sovereign risk differs somewhat
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 from guarantees and other
financial instruments. However, its standard does generally
include entities run by regional, local and central governments.
Santander continues to track and manage transactions with
sovereign risk based on available information, such as reports
by rating agencies and international organizations. Grupo
Santander monitors each country where the Group has cross-
border1
could affect the country’s political or institutional stability and
assign its government or central bank a credit rating. This helps
us set limits for transactions with sovereign risk.
and sovereign risk. Santander analyses events that
At the end of December, Grupo Santander´s local sovereign
exposure, in currencies other than the official currency of the
country of issuance, is not significant (EUR 6,039 million, 1.4%
of total sovereign risk) according to our management criteria.
Furthermore, exposure to non-local sovereign issuers involving
2
cross-border risk is even less significant
2.1% of total sovereign risk).
(EUR 8,867 million,
Sovereign exposure in Latin America is mostly in local currency,
and is recognised in the local accounts and concentrated in
short- term maturities.
1. Risk with domestic public or private borrowers in foreign currency and
originated outside the country.
2. Countries that are not considered low risk by Banco de España.
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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
A
credit quality to set the maximum exposure limits
:
AAA
AA
A
BBB
Less than BBB
2022
27%
19%
34%
11%
9%
2021
15%
32%
26%
11%
16%
2020
18%
25%
25%
14%
18%
A.
Internal ratings are applied.
Sovereign exposure at the end of 31 December 2022 is shown in
the table below (data in million euros):
2022
Portfolio
2021
Financial assets Financial assets at fair
value through other
comprehensive
income
240
2,005
301
—
—
789
315
7,754
14
8,938
9,969
11,303
818
1,211
2,012
45,669
designated at fair
value through profit
or loss
2,666
(299)
(1,055)
—
—
205
53
4
(7)
3,503
8,017
2,627
175
123
1
16,013
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
Non-trading
financial assets
mandatorily at
fair value
through profit or
loss
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Financial assets at
amortized cost
26,189
3,750
8,169
—
—
4,657
1,738
957
125
10,857
5,742
3,376
5,492
630
1,529
73,211
Total net direct
exposure
29,095
5,456
7,415
—
—
5,651
2,106
8,715
132
23,298
23,728
17,306
6,485
1,964
3,542
134,893
Total net direct
exposure
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
119,020
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5. Forborne loan portfolio
The customer debt redirection policy incorporates the
regulatory requirements of the EBA guidelines on the
management of non-performing exposures, refinancing and
restructuring. This policy acts as a reference for the
transposition in our subsidiaries and shares the applicable
supervisory expectations
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 Santander must adapt payment obligations to
customers' current circumstances. Our forbearance policy also
defines classification criteria to ensure Grupo Santander
recognizes risks appropriately. They must remain classified as
non-performing or in watch-list for a prudential period for
reasonable certainty of repayment. In no case will repayments
be used to delay the immediate recognition of losses or so that
their use distorts the timely recognition of the risk of non-
payment.
Forbearances may never be used to delay the immediate
recognition of losses or hinder the appropriate recognition of
risk of default.
After several years where the stock had fallen as a result of the
positive economic situation in the main geographies, 2021 was
a year of inflection with a growth of 24% to address the
financial difficulties of our clients as a result of the situation
generated by the pandemic. During 2022 the stock of
readjustments has decreased lightly, and has stood at EUR
34,173 million. In terms of credit quality, 44% of the loans is
classified as credit impaired, with a coverage ratio of 44%. In
addition, 56% of the portfolio is classified as performing.
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
2022
Total
Without real guarantee
With real guarantee
Maximum amount of the
actual collateral that can be
considered
Number of
transactions
—
6,679
Gross
amount
—
227
Number of
transactions
—
31
Gross
amount
—
7
Real estate
guarantee
—
2
Rest of real
guarantees
—
—
1,210
321
785
339
88
312,934
9,578
60,003
8,419
4,790
15,578
125
1,890
570
5,878,455
6,199,278
5,790
15,916
492,232
553,051
9,492
18,257
423
4,835
9,715
86
1,834
48
3,502
5,422
—
—
—
—
—
—
Impairment of accumulated
value or accumulated losses in
fair value due to credit risk
—
6
61
3,912
208
4,287
8,266
—
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
2022
Of which, non-performing/Doubtful
Without real guarantee
With real guarantee
Maximum amount of the actual
collateral that can be
considered
Real estate Rest of real
guarantees
guarantee
—
—
—
2
Impairment of accumulated
value or accumulated losses
in fair value due to credit risk
—
5
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
Number of
transactions Gross amount
—
2
—
7
641
174,300
10,325
3,735,412
3,910,360
9
3,178
78
2,911
6,100
Number of
transactions
—
13
Gross
amount
—
5
620
135
39,479
4,890
1,255
246,751
286,863
335
4,055
9,085
22
2,741
213
1,917
4,682
6
886
33
910
1,802
—
—
—
—
—
—
55
3,439
188
3,122
6,621
—
In 2022, 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 2,379 million (2,480 million in 2021), without these
modifications having a material impact on the income
statement. Also, during 2022, 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 1,677 million (1,868 million in 2021).
The transactions presented in the foregoing tables were
classified at 31 December 2022 by nature, as follows:
• Credit impaired: 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.
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• 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 coverage market risks are
considered, such as correlation risk, market liquidity risk,
prepayment or cancellation risk and subscription risk.
• 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.
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.
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.
c) The owner must not have any other operation with amounts
past due by more than 90 consecutive days of material delay
on the date of the reclassification to the normal risk
category.
Attending to the credit attention 56% of the forborne loan
transactions are classified as other than non-performing.
Particularly noteworthy are the level of existing guarantees
(44% of transactions are secured by collateral) and the coverage
provided by specific allowances (representing 24% of the total
forborne loan portfolio and 44% 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.
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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.
Grupo Santander applies 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:
Risk metric values on the consolidated balance sheet
EUR million
Main market risk metric
Balance sheet
amount
VaR
Other
Main risk factor for
'Other' balance
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
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
223,073
156,118
5,713
8,989
85,239
1,147,044
8,069
(3,749)
104,163
1,734,659
115,185
55,947
1,423,858
9,228
(117)
32,973
1,637,074
97,585
156,118
3,711
815
1,941
115,185
223,073 Interest rate
2,002 Interest rate, spread
8,174 Interest rate, spread
83,298
Interest rate, spread
1,147,044 Interest rate, spread
8,069 Interest rate, exchange
rate
(3,749)
Interest rate
55,947 Interest rate, spread
1,423,858 Interest rate, spread
9,228 Interest rate, exchange
rate
(117)
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 2022 and 97.5% ES at
the end of December 2022:
A
VaR statistics and expected shortfall by risk factor
EUR million. VaR at 99% and ES at 97.5% with one day time horizon
2022
VaR (99%)
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
9.2
(7.8)
8.1
2.4
2.5
3.4
0.6
7.9
(5.1)
5.5
2.2
1.9
3.4
—
1.5
0.7
0.7
—
0.1
5.2
(1.3)
4.5
0.7
0.7
0.6
Average
14.1
(14.6)
12.6
4.2
4.8
5.4
1.7
12.2
(10.4)
10.2
3.6
3.4
5.4
—
2.3
(0.8)
2.2
0.1
0.8
8.0
(5.0)
7.0
1.6
2.7
1.7
Max
Latest
21.5
(30.5)
21.5
7.3
10.3
8.5
4.4
21.9
(16.8)
18.4
5.8
5.8
8.7
—
4.7
(4.0)
5.7
1.0
2.0
14.2
(19.8)
14.9
4.8
9.9
4.4
11.6
(15.5)
9.9
5.5
3.6
5.8
2.3
10.5
(14.2)
10.1
5.5
3.3
5.8
—
2.7
(1.1)
2.7
0.1
1.0
6.2
(4.2)
5.5
1.7
0.9
2.3
ES
(97.5%)
Latest
10.8
(15.6)
9.8
5.5
3.2
4.9
3.0
9.2
(12.0)
7.8
5.5
3.0
4.9
—
2.2
(1.3)
2.4
0.1
1.0
6.5
(4.4)
5.7
1.6
0.6
3.0
2021
VaR
2020
VaR
Average
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
—
2.5
(0.7)
2.5
0.1
0.6
5.9
(4.9)
5.5
1.2
2.8
1.3
Latest
12.3
(13.4)
9.1
5.1
5.7
5.1
0.7
9.9
(12.6)
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
Average
12.5
(13.0)
9.2
4.4
5.9
5.5
0.5
Latest
8.3
(11.8)
5.4
3.1
6.0
4.5
1.1
10.5
(10.7)
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
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 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 2022, VaR was slightly lower (EUR 0.7 million)
than at the end of 2021, consequence of an update in
calculation model and a lighter pressure in markets as inflation
started to moderate in some regions, as the Eurozone.
Although by risk factor, VaR has followed a generally stable
trend in recent years, in 2022 the average VaR rose by EUR
3.6 million compared to 2021. By risk factor, average VaR was
greater in all of them, specially in interest rate due to a higher
market volatility. The temporary increases in VaR are due 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 in 2022. Regarding to 99%
VaE, there was an exception the 15th of December as a
consequence of market volatility concurrent with the last
ECB's year meeting where a 50 bp interest rate hike was
confirmed.
By region, average VaR grew for all risk types in Europe and
South America, which have the highest market risk exposure.
• The exceptions observed in the past year are consistent with
the assumptions of the VaR calculation model.
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IBOR reform
Since 2013, different organizations and supranational
authorities (IOSCO and FSB) have promoted and monitored
initiatives aimed at carrying out reforms to strengthen interest
rate indices. In this context, in order to execute the transition in
a non-disruptive and progressive manner, central banks and
regulators from various jurisdictions have organized working
groups to recommend risk-free indices.
The objective was mainly to facilitate the transition to risk-free
indices identified in different jurisdictions, highlighting the
SONIA index as a replacement for the Libor in pounds, the SOFR
for Libor in dollars, and the €STR for Libor in euros.
In this sense, and as a result of the joint effort of authorities and
market participants, this transaction process has materialized in
different milestones during the period between 2019 and 2022,
remaining only in 2023 the execution of the substitution plans
for GBP LIBOR and USD LIBOR.
According with the regulatory milestones of the transition, the
USD LIBOR terms (overnight, 1M, 3M, 6M and 12M) will
continue to be calculated using the contributions of panel banks
until mid-2023, although their use for new operations was
limited. from the end 2021. The last date of publication of the
USD LIBOR for the overnight and 12M terms will be June 30,
2023. For the 1, 3 and 6 month terms, on November 23, 2022,
the FCA announced an inquiry of its proposal to require the
LIBOR administrator, IBA, to continue to publish these USD
LIBOR terms under a non-representative "synthetic"
methodology until the end of September 2024. After that date,
publication would cease permanently .
Regarding the GBP LIBOR, its publication is confirmed under the
synthetic methodology for the 3-month term until the end of
March 2024, while the 1- and 6-month terms will cease to be
published in March 2023.
In accordance with the milestones indicated, the Group and its
entities have focused on making all the contractual,
commercial, operational and technological changes necessary
to undertake the transition from these reference indices. In
2023, the following transition milestones will continue to be
met in the different jurisdictions where the Grupo Santander
operates.
Following is a detail of the carrying amount at 31 December
2022 of financial assets, financial liabilities, derivatives and loan
commitments that continue to be referenced to the pending
transition ratios:
EUR million
Gross Carrying amount
Referenced to LIBOR
of which USD
of which GBP
TOTAL
Loans and
advances
24,641
24,296
345
24,641
Debt securities
acquired
(Assets)
3,229
2,854
375
3,229
Deposits
9,150
8,840
310
9,150
Debt
securities
issued
(Liabilities)
6,931
5,063
1,868
6,931
Derivatives
(Assets)
12,897
12,561
336
12,897
Derivatives
(Liabilities)
12,385
12,339
46
12,385
Loan
Commitments
1,211
1,166
45
1,211
Additionally, see information included in note 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 2022 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, Grupo Santander can
fully monitor market risk in the banking book (excluding SCIB
trading activity). The Bank differentiates 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.
Structural VaR
Diversification effect
A
VaR Interest Rate
VaR Exchange Rate
VaR Equities
Min
538.5
(323.5)
266.2
400.4
195.4
2022
Average
664.0
(417.1)
350.8
493.4
236.9
Max
1,084.4
(489.5)
577.0
682.3
314.6
2021
2020
Latest
538.5
(422.4)
304.5
461.0
195.4
Average
993.7
(327.3)
400.7
600.6
319.7
Latest
1,011.9
(240.2)
287.8
655.2
309.1
Average
911.0
(349.8)
465.1
499.9
295.9
Latest
903.1
(263.4)
345.5
502.6
318.5
A.
Includes credit spread VaR on ALCO portfolios.
Structural interest rate risk
• Europe
At the end of December, the sensitivity of NII on our core
balance sheets and of Santander España’s EVE to interest rate
hikes was positive; but at Santander UK it was negative.
Across our footprint, exposure was moderate in relation to
annual budget and capital levels in 2022.
At the end of December, under the scenarios previously
described, significant risk of NII sensitivity to the euro amounted
to EUR 1,009 million; to the pound sterling, EUR 191 million; to
the US dollar, EUR 51 million; and to the Polish złoty, EUR
64 million, all with risk of rate cuts.
Significant risk of EVE sensitivity to yield curves of the euro was
EUR 2,820 million; of the pound sterling, EUR 440 million; of the
US dollar, EUR 11 million euros; and of the Polish złoty, EUR
91 million euros, mostly with risk of rate cuts.
• North America
At the end of December, sensitivity of NII on our North America
balance sheet to interest rate hikes was positive, while EVE
sensitivity was negative.
Exposure was moderate in relation to annual budget and capital
levels in 2022.
At the end of December, significant risk to NII was mainly in the
US and amounted to EUR 151 million.
The most significant risk to EVE was in the US and amounted to
EUR 763 million.
• South America
EVE and NII on our main 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 2022.
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At the end of December, most significant risk to NII was mainly
in Chile (EUR 72 million) and in Brazil (EUR 169 million).
Most significant risk to EVE was recorded in Chile (EUR
309 million) and in Brazil (EUR 386 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 2022, the hedged of the
different currencies that have an impact on our core capital ratio
was close to 100%.
In December 2022, our permanent exposures (with potential
impact on shareholders’ equity) were, from largest to smallest,
in US dollars, Brazilian reais, British pounds sterling, 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.
At the end of December 2022, 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. The
Group calculates its VaR with a set of market prices and proxies.
At the end of the year 2022, VaR at a 99% confidence level over
a one-day horizon was EUR 195 million (EUR 309 million and
EUR 319 million in 2021 and 2020, respectively.
3.2. Methodologies
Structural interest rate 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 Grupo Santander markets).
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:
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• 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.
• 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 uses the Basel regulatory definition and
calculates a set of metrics and stress scenarios in relation to
intraday liquidity risk to maintain a high level of management
and control. On the one hand, the regulatory liquidity metrics
(LCR, NSFR, etc.) are prepared following the regulatory criteria
established in the CRR-II and CRD IV. Regarding internal metrics,
liquidity scenarios are determined using a combination of
behavioral observation in actual liquidity crises occurred at
other banks, regulatory assumptions (e.g. the assumptions in
the LiST) and expert judgment.
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, Santander calculates 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
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iv. combined scenario consisting of a combination of more
severe idiosyncratic and market events (local and global)
occurring simultaneously and interactively.
v. climate scenarios where different stress cases derived from
the effects that climate change could have on the economy
are collected.
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):
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
2022
Amount
weighted
applicable
2021
Amount
weighted
applicable
127,285
177,887
3,308
3,562
312,042
206,507
81,925
3,422
5,446
297,300
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 20 May 2019.
The Regulation establishes that entities must have a net stable
financing ratio, as defined in the Regulation, higher 100% from
June 2021. The liquidity coverage ratio, broken down by
component, and the net stable funding ratio for the Group at
year-ends 2022 and 2021 are presented below:
EUR million
High-quality liquid assets-HQLAs
(numerator)
Total net cash outflows (denominator)
Cash outflows
Cash inflows
LCR ratio (%)
NSFR ratio (%)
2022
2021
312,042
204,759
270,748
65,989
297,300
181,953
233,294
51,341
152%
121%
163%
126%
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.
In the last quarter of 2022, Grupo Santander has begun to repay
in advance a significant part of the financing received under the
TLTRO-III program launched by the European Central Bank,
which originally matured in 2023. The replacement of these
funds has been carried out after having strengthened the
balance sheet through a combination of growth in customer
deposits, an increase in short-term instruments and greater
activity in medium and long-term issuances, which has allowed
Grupo Santander to maintain liquidity coverage ratios (LCR ) and
net stable funding (NSFR) at prudent levels after the repayment.
The movement in the composition of the buffer between 'Cash
and reserves available at central banks' to 'Level 1 marketable
assets' corresponds to a reclassification of deposits with the
Central Bank, due to the change in the remuneration of deposits
with the European Central Bank.
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
Finally, the moderate use of assets by Grupo Santander as
collateral in the sources of structural financing of the balance
sheet should be highlighted.
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 2022 (EUR thousand million):
Residual
maturities of the
liabilities
Committed assets
Guarantees
received
committed
Unmatured
44.6
<=1month
32.3
>1 month
<=3
months
10.6
>3 months
<=12
months
49.7
>1 year
<=2 years
39.2
>2 years
<=3 years
50.1
3 years
<=5 years
51.6
5 years
<=10 years
20.1
>10 years
10.7
Total
308.9
29.2
37.5
13.3
21.4
0.6
1.3
1.0
—
—
104.3
The reported Group information as required by the EBA at 2022
year-end is as follows:
On-balance-sheet encumbered assets
EUR billion
Carrying amount of
encumbered assets
197.3
8.3
71.7
31.6
308.9
Fair value of
encumbered assets
8.3
71.7
Fair value of non-
encumbered assets
1,143.5
7.4
122.0
152.8
1,425.7
Carrying amount of
non-encumbered
assets
7.4
125.8
Loans and advances
Equity instruments
Debt securities
Other assets
Total assets
Encumbrance of collateral received
EUR billion
Fair value of
encumbered
collateral received
or own debt
securities issued
104.3
1.3
4.8
98.2
—
Fair value of
collateral received
or own debt
securities issued
available for
encumbrance
29.4
—
6.8
22.5
0.1
Taken together, these two categories represent a total of EUR
413,200 million of encumbered assets, which give rise to EUR
313,200 million matching liabilities.
As of December 2022, total asset encumbrance in funding
operations represented 22.1% of the Group’s extended balance
sheet under EBA criteria (total assets plus guarantees received:
EUR 1,868,400 million as of December 2022). This percentage
has decreased from 26.1% that presented the Group as of
December 2021, mainly as a result of the early repayment of
collateralized financing with central banks, especially the
European Central Bank (TLTRO) and the Bank of England
(TFSME).
—
0.5
d) Capital risk
Collateral received
Loans and advances
Equity instruments
Debt securities
Other collateral received
Own debt securities
issued other than own
covered bonds or ABSs
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
Total sources of
encumbrance
(carrying amount)
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.
313.2
413.2
• Reviewing and challenging the execution of capital actions
proposed in line with capital planning and risk appetite.
On-balance-sheet encumbered assets amounted to EUR
308,900 million, of which 64% are loans (mortgage loans,
corporate loans, etc.). Guarantees received committed
amounted to EUR 104,300 million, relating mostly to debt
securities received as security in asset purchase transactions
and re-used.
Grupo Santander commands a sound solvency position, above
the levels required by regulators and by the European Central
bank.
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Regulatory capital
At 1 January 2023, at a consolidated level, the Group must
maintain a minimum capital ratio of 9.07% of CET1 (4.50%
being the requirement for Pillar I, 0.89% being the requirement
for Pillar 2R (requirement), 2.50% being the requirement for
capital conservation buffer, 1% being the requirement for
global systemically entity (G-SIB) and 0.18% being the
requirement for anti-cyclical capital buffer).
Grupo Santander must also maintain a minimum capital ratio of
10.87% of tier 1 and a minimum total ratio of 13.26%.
In 2022, the solvency target set was achieved. Santander’s CET1
ratio stood at 12.18%1
its organic capacity to generate capital. The key regulatory
capital figures are indicated below:
at the close of the year, demonstrating
Reconciliation of accounting capital with regulatory capital
EUR million
Subscribed capital
Share premium account
Reserves
Treasury shares
Attributable profit
C
Approved dividend
Shareholders’ equity on public
balance sheet
Valuation adjustments
Non-controlling interests
Total Equity on public balance sheet
Goodwill and intangible assets
Eligible preference shares and
participating securities
C
Accrued dividend
A
Other adjustments
B
Tier 1
2022
8,397
46,273
62,111
(675)
9,605
(979)
2021
8,670
47,979
56,606
(894)
8,124
(836)
2020
8,670
52,013
62,777
(69)
(8,771)
—
124,732 119,649 114,620
(33,144)
(32,719)
(35,628)
9,846
10,123
8,481
91,322
97,053
97,585
(15,711)
(16,132)
(17,272)
8,831
10,050
9,102
(942)
(5,169)
83,033
(895)
(7,624)
82,452
(478)
(5,734)
78,501
A. Fundamentally for non-computable non-controlling interests and deductions
and reasonable filters in compliance with CRR.
B. Figures calculated by applying the transitional provisions of IFRS 9.
C. Assumes 20% of ordinary profit, see note 4.a for proposed distribution of
results.
Note: Certain figures presented in this capital note have been rounded for ease of
presentation. Consequently, the amounts corresponding to the rows or columns of
totals in the tables presented in this note may not coincide with the arithmetic
sum of the concepts or items that make up the total.
The following table shows the capital coefficients and a detail of
the eligible internal resources of the Group:
Capital coefficients
EUR million
2022
2021
2020
8,831
9,102
69,399
72,402
10,050
74,202
Level 1 ordinary eligible capital
(EUR million)
Level 1 additional eligible capital
(EUR million)
Level 2 eligible capital (EUR million) 14,359
12,514
Risk-weighted assets (EUR million) 609,266 578,930 562,580
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
13.63%
2.36%
15.99%
14.24%
2.57%
16.81%
12.51%
12.18%
14,865
1.73%
1.45%
13.95%
2.23%
16.18%
12.34%
1.61%
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
Goodwill and intangible
assets
Others
Additional Tier I
Eligible instruments AT1
AT1-excesses-subsidiaries
Tier II
Eligible instruments T2
Gen. funds and surplus loans
loss prov. IRB
T2-excesses - subsidiaries
Total eligible capital
2022
2021
2020
74,202
8,397
72,402
8,670
69,399
8,670
(60)
(966)
(126)
46,273
62,246
(37,439)
7,416
7,684
(20,315)
47,979
58,157
(34,784)
6,736
6,394
(19,784)
52,013
64,766
(34,937)
6,669
(9,249)
(18,407)
(17,182)
(16,064)
(15,711)
(3,133)
8,831
8,344
487
14,359
14,770
(3,720)
10,050
10,102
(52)
14,865
15,424
(2,696)
9,102
8,854
248
12,514
13,351
—
75
—
(411)
97,392
(634)
97,317
(837)
91,015
Note: Banco Santander, S.A. and its affiliates had not taken part in any State aid
programmes.
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Global systemically important banks
Grupo Santander is one of 30 banks designated as global
systemically important banks (G-SIBs).
The designation as a globally systemic entity comes from a
measurement established by the regulators (FSB and BCBS) that
they have implemented based on five indicators (size,
interjurisdictional activity, interconnection with other financial
entities, substitutability and complexity). The application
methodology has been modified in December 2021,
incorporating, among other things, an additional score
considering the Member States of the SRM as a single
jurisdiction.
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 Grupo
Santander has 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).
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 429.a (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).
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
2022
2021
2020
83,033
1,750,626
82,452
1,536,516
78,501
1,471,480
4.74%
5.37%
5.33%
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Appendix
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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
Abbey Covered Bonds (Holdings) Limited United
Kingdom
Abbey Covered Bonds (LM) Limited
Abbey Covered Bonds LLP
United
Kingdom
United
Kingdom
Abbey National Beta Investments Limited United
Kingdom
Abbey National Business Office
Equipment Leasing Limited
United
Kingdom
Abbey National Nominees Limited
Abbey National PLP (UK) Limited
Abbey National Property Investments
Abbey National Treasury Services
Investments Limited
Abbey National Treasury Services
Overseas Holdings
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
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Mexico
A3T Luxco 1 S.A. (c)
Luxembourg
0.00% 100.00%
100.00%
A3T Luxco 2 S.A. (c)
Luxembourg
100.00%
0.00%
100.00%
Abbey Business Services (India) Private
Limited (d)
India
0.00% 100.00%
100.00%
100.00% Holding
company
100.00% Holding
company
100.00% Holding
company
Abbey National International Limited
Jersey
0.00% 100.00%
100.00%
100.00% Financial
services
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect Year 2022 Year 2021 Activity
0.00% 100.00%
100.00%
100.00% Real estate
EUR million (a)
Capital +
reserves
40
Net
results
1
Carrying
amount
12
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
100.00% Leasing
100.00%
Inactive
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
—
(b)
—
—
Securitization
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
—
Securitization
231
159
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
278
(1)
156
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%
Inactive
company
0.00% 100.00%
100.00%
100.00% Holding
company
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%
0.00% 100.00%
100.00%
0
0
0
1
20
4
(20)
0
0
0
0
0
0
0
0
(1)
21
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
0
0
0
0
0
0
0
0
0
0
52
(86)
233
1
1
0
4
(2)
48
(1)
0
0
0
0
0
0
0
0
0
0
894
3
1
0
4
0
766
Ablasa Participaciones, S.L. Unipersonal
Spain
100.00%
0.00%
100.00%
Aduro S.A.
Uruguay
0.00% 100.00%
100.00%
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%
0.00% 100.00%
100.00%
Allane Leasing GmbH
Austria
0.00% 46.95%
100.00%
100.00% Securities
company
100.00% Electricity
production
100.00% Holding
company
100.00% Payments and
collection
services
100.00% Holding
company
100.00% Fund
management
company
100.00% Renting
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Allane Location Longue Durée S.a.r.l.
Location
France
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect Year 2022 Year 2021 Activity
100.00% Renting
100.00%
0.00% 46.95%
Allane Mobility Consulting AG
Switzerland
0.00% 46.95%
100.00%
Allane Mobility Consulting B.V.
Netherlands
0.00% 46.95%
100.00%
Allane Mobility Consulting GmbH
Germany
0.00% 46.95%
100.00%
Allane Mobility Consulting Österreich
GmbH
Austria
0.00% 46.95%
100.00%
Allane Mobility Consulting S.a.r.l
France
0.00% 46.95%
100.00%
100.00% Consulting
services
100.00% Consulting
services
100.00% Consulting
services
100.00% Consulting
services
100.00% 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% Renting
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
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%
0.00% 100.00%
100.00%
100.00% Finance
company
100.00% Finance
company
100.00%
0.00%
100.00%
100.00% Real estate
100.00%
0.00%
100.00%
100.00%
Investment
fund
100.00%
0.00%
100.00%
100.00% Holding
company
0.00% 100.00%
100.00%
—
Holding
company
Alliance & Leicester Cash Solutions
Limited
Alliance & Leicester Commercial Bank
Limited
Alliance & Leicester Investments
(Derivatives) Limited
United
Kingdom
United
Kingdom
United
Kingdom
Alliance & Leicester Investments (No.2)
Limited
United
Kingdom
Alliance & Leicester Investments Limited United
Kingdom
Alliance & Leicester Limited
Alliance & Leicester Personal Finance
Limited
Altamira Santander Real Estate, S.A.
Alternative Leasing, FIL (Compartimento
B)
Amazonia Trade Limited
Amherst ASG Holdings, LLC
Amherst Pierpont Commercial Mortgage
Securities LLC
Amherst Pierpont International Ltd.
Amherst Pierpont Securities LLC
AN (123) Limited
United
Kingdom
United
Kingdom
Spain
Spain
United
Kingdom
United
States
United
States
Hong-Kong
United
States
United
Kingdom
0.00% 100.00%
100.00%
—
Securitization
0
0
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
0.00% 100.00%
100.00%
—
—
Intermediation
Securities
Investment
100.00% Holding
company
100.00% Holding
company
Andaluza de Inversiones, S.A. Unipersonal Spain
0.00% 100.00%
100.00%
ANITCO Limited
AP Acquisition Trust I
AP Asset Acquisition LLC
Apê11 Tecnologia e Negócios Imobiliários
S.A.
APSG GP LLC
United
Kingdom
United
States
United
States
Brazil
United
States
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
—
Trust company
0.00% 100.00%
100.00%
—
Financial
services
0.00% 81.26%
90.00%
90.00% Real estate
0.00% 100.00%
100.00%
—
Holding
company
3
366
0
37
0
0
1
7
0
0
(43)
0
1
0
0
0
(1)
0
EUR million (a)
Capital +
reserves
14
Net
results
3
Carrying
amount
0
1
(3)
1
(1)
(1)
14
192
1
0
0
0
0
0
0
0
(228)
20
108
0
0
0
1
0
0
0
4
0
0
0
0
0
0
0
0
0
(109)
6
0
0
0
0
0
0
0
175
0
0
0
0
0
0
0
0
0
0
105
0
225
(50)
175
0
3
323
0
27
0
0
1
5
0
767
2022 Annual report
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
Aquanima Brasil Ltda.
Aquanima Chile S.A.
Aquanima México S. de R.L. de C.V.
Aquanima S.A.
Artarien S.A. (o)
Location
Brazil
Chile
Mexico
Direct
Indirect Year 2022 Year 2021 Activity
0.00% 100.00%
100.00%
100.00% E-commerce
0.00% 100.00%
100.00%
100.00% Services
0.00% 100.00%
100.00%
100.00% E-commerce
Argentina
0.00% 100.00%
100.00%
100.00% Services
Uruguay
100.00%
0.00%
100.00%
100.00%
Insurance
auxiliary
services
Asto Digital Limited
Athena Corporation Limited
Atlantes Mortgage No. 2
Atlantes Mortgage No. 3
Atlantes Mortgage No. 4
Atual - Fundo de Invest Multimercado
Crédito Privado Investimento no Exterior
Auto ABS Belgium Loans 2019 SA/NV
Auto ABS DFP Master Compartment
France 2013
United
Kingdom
United
Kingdom
Portugal
Portugal
Portugal
Brazil
Belgium
France
Auto ABS French Leases 2021
France
Auto ABS French Leases Master
Compartment 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
France
France
France
Italy
Italy
Italy
Spain
Spain
Auto ABS Spanish Loans 2022-1, Fondo de
Titulización
Spain
Auto ABS UK Loans 2017 Holdings Limited United
Kingdom
Auto ABS UK Loans 2019 Holdings Limited United
Kingdom
Auto ABS UK Loans 2019 Plc
Auto ABS UK Loans Holdings Limited
Auto ABS UK Loans PLC
Autodescuento, S.L.
United
Kingdom
United
Kingdom
United
Kingdom
Spain
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Finance
company
100.00% Financial
services
—
—
—
(b)
(b)
(b)
0.00% 90.28%
—
—
—
—
—
—
100.00%
100.00%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.00% 93.89%
93.89%
Securitization
Securitization
Securitization
Investment
fund
Securitization
Securitization
—
—
—
Securitization
—
Securitization
—
—
—
—
—
Securitization
Securitization
Securitization
Securitization
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
93.89% Vehicles
purchased by
internet
Internet
IT services
Autohaus24 GmbH
Auttar HUT Processamento de Dados
Ltda.
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.
Germany
Brazil
0.00% 46.95%
0.00% 97.10%
100.00%
100.00%
100.00%
100.00%
Spain
Spain
Spain
Spain
Spain
99.99%
99.99%
99.99%
100.00%
99.97%
0.01%
0.01%
0.01%
0.00%
0.03%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00% Renting
100.00% Renting
100.00% Renting
100.00% Renting
100.00% Renting
EUR million (a)
Capital +
reserves
2
Net
results
0
Carrying
amount
0
3
3
4
0
12
(8)
0
0
0
433
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(3)
0
(7)
2
(3)
6
53
26
0
8
42
0
1
(1)
0
(2)
0
0
0
0
49
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
40
0
1
0
6
5
1
0
(11)
0
2
4
1
0
0
0
0
0
436
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
18
0
6
28
6
0
8
31
768
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
EUR million (a)
Capital +
reserves
3
Net
results
0
Carrying
amount
3
1
5
8
0
7,414
0
393
902
14
65
42
(4)
1
1
2
312
0
69
78
0
12
5
1
2
3
0
6,974
0
153
885
9
35
21
Subsidiaries of Banco Santander, S.A. 1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Aviación Laredo, S.L.
Location
Spain
Direct
99.00%
Indirect Year 2022 Year 2021 Activity
1.00%
100.00%
100.00% Air transport
Aviación Oyambre, S.L. Unipersonal
Aviación Santillana, S.L.
Aviación Suances, S.L.
Aviación Tritón, A.I.E.
Aymoré Crédito, Financiamento e
Investimento S.A.
Spain
Spain
Spain
Spain
Brazil
100.00%
99.00%
99.00%
99.99%
0.00%
1.00%
1.00%
0.01%
0.00% 90.28%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00% Renting
100.00% Renting
100.00% Air transport
100.00% Renting
100.00% Finance
company
Ireland
—
(b)
—
—
Securitization
Italy
Brazil
Spain
Brazil
Brazil
Chile
Brazil
Azor Mortgages PLC (j)
Banca PSA Italia S.p.A.
Banco Bandepe S.A.
Banco de Albacete, S.A. Unipersonal
Banco Hyundai Capital Brasil 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 Argentina S.A.
Banco Santander de Negocios Colombia
S.A.
Banco Santander International
0.00% 50.00%
50.00%
50.00% Banking
0.00% 90.28%
100.00%
100.00% Banking
100.00%
0.00%
100.00%
100.00% Banking
0.00% 45.14%
50.00%
50.00% Banking
0.00% 45.14%
50.00%
50.00% Banking
0.00% 67.13%
67.18%
67.18% Banking
3,920
889
3,860
0.04% 90.25%
90.90%
90.50% Banking
12,320
2,187
10,795
Mexico
0.00% 96.24%
100.00%
Mexico
0.00% 96.58%
100.00%
Mexico
0.00% 96.64%
100.00%
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
168
18
128
5
22
1
1
5
22
Argentina
Colombia
0.00% 99.82%
5.10%
94.90%
99.77%
100.00%
99.26% Banking
100.00% Banking
1,851
120
390
5
578
127
United
States
0.00% 100.00%
100.00%
100.00% Banking
1,226
134
1,360
Banco Santander International SA
Switzerland
0.00% 100.00%
100.00%
100.00% Banking
1,215
39
837
Banco Santander México, S.A., Institución
de Banca Múltiple, Grupo Financiero
Santander México
Mexico
21.19% 75.04%
96.24%
96.24% Banking
6,708
1,270
8,165
Banco Santander Perú S.A.
Banco Santander S.A.
Banco Santander Totta, S.A.
Bansa Santander S.A.
BEN Benefícios e Serviços Instituição de
Pagamento S.A.
Bilkreditt 6 Designated Activity Company
(j)
Bilkreditt 7 Designated Activity Company
(j)
Peru
Uruguay
Portugal
Chile
Brazil
Ireland
Ireland
99.90%
0.10%
100.00%
100.00% Banking
97.75%
2.25%
100.00%
100.00% Banking
0.00% 99.87%
99.96%
99.96% Banking
0.00% 100.00%
100.00%
100.00% Real estate
0.00% 90.28%
100.00%
—
—
(b)
(b)
—
—
Blecno Investments, S.L. Unipersonal
BRS Investments S.A.
Spain
Argentina
100.00%
0.00%
5.10% 94.90%
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% Payment
services
—
Securitization
—
Securitization
—
Real estate
100.00% Finance
company
100.00% Holding
company
100.00% Holding
company
Canyon Multifamily Impact Fund IV LLC (c) United
States
0.00% 98.00%
98.00%
98.00% Real estate
236
480
2,887
23
12
0
0
172
76
126
275
0
41
106
604
4
(1)
0
0
10
12
0
(2)
0
122
191
3,815
27
9
0
0
202
75
115
267
0
769
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Capital Street S.A.
Luxembourg
0.00% 100.00%
100.00%
Mexico
0.00% 99.97%
99.97%
Subsidiaries of Banco Santander, S.A. 1
Company
Capital Street Delaware LP
Capital Street Holdings, LLC
Capital Street REIT Holdings, LLC
Location
United
States
United
States
United
States
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
CCAP Auto Lease Ltd.
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
States
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
0.00% 100.00%
Indirect Year 2022 Year 2021 Activity
100.00% Holding
company
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Holding
company
100.00% Holding
company
100.00% Finance
company
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
0
Net
results
0
Carrying
amount
0
14
0
14
1,184
15
1,200
0
62
0
0
0
4
0
0
0
66
0
0
0.00% 100.00%
100.00%
100.00% Banking
343
56
251
0.00% 100.00%
100.00%
100.00% Holding
company
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00% Leasing
Centro de Capacitación Santander, A.C.
Mexico
0.00% 96.24%
100.00%
Certidesa, S.L. Unipersonal
Chrysler Capital Auto Funding II LLC
Chrysler Capital Master Auto Receivables
Funding 2 LLC
Chrysler Capital Master Auto Receivables
Funding LLC
Spain
United
States
United
States
United
States
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
Cobranza Amigable, S.A.P.I. de C.V.
Mexico
0.00% 85.00%
100.00%
100.00% Non-profit
institute
100.00% Aircraft rental
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
100.00% Collection
services
96.00% Asset
management
0.00% 96.00%
96.00%
0.00% 50.00%
100.00%
100.00% Banking
460
Community Development and Affordable
Housing Fund LLC (c)
Compagnie Generale de Credit Aux
Particuliers - Credipar S.A.
Compagnie Pour la Location de Vehicules
- CLV
United
States
France
France
Compartment German Auto Loans 2021-1 Luxembourg
Consulteam Consultores de Gestão,
Unipessoal, Lda.
Portugal
Consumer Totta 1
Crawfall S.A. (g) (j)
Credileads S.A.
Darep Designated Activity Company
Decarome, S.A.P.I. de C.V.
Deva Capital Advisory Company, S.L.
Unipersonal
Deva Capital Holding Company, S.L.
Unipersonal
Deva Capital Investment Company, S.L.
Unipersonal
Deva Capital Management Company, S.L.
Unipersonal
Deva Capital Servicer Company, S.L.
Unipersonal
Portugal
Uruguay
Uruguay
Ireland
Mexico
Spain
Spain
Spain
Spain
Spain
0.00% 50.00%
100.00%
100.00% Banking
—
100.00%
(b)
0.00%
—
—
Securitization
100.00%
100.00% Real estate
100.00%
—
(b)
0.00%
0.00% 100.00%
0.00%
0.00% 100.00%
100.00%
—
—
Securitization
100.00%
100.00%
100.00%
100.00%
100.00% Services
—
Advertising
100.00% Reinsurances
100.00% Finance
company
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Advisory
services
100.00% Holding
company
100.00% Holding
company
100.00% Advisory
services
100.00% Holding
company
100.00% Holding
company
Digital Procurement Holdings N.V.
Netherlands
0.00% 100.00%
100.00%
0
0
365
1
(64)
0
(258)
116
4
(1)
22
0
0
0
0
0
7
50
2
0
0
42
0
(8)
37
0
3
0
(1)
22
(1)
0
0
0
0
0
0
3
1
0
0
407
1
0
0
0
0
3
1
428
26
0
0
0
0
4
7
52
2
227
(17)
235
117
6
111
21
99
5
(13)
(10)
0
8
90
1
770
2022 Annual report
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
Diglo Servicer Company 2021, S.L.
Unipersonal
Location
Spain
Direct
Indirect Year 2022 Year 2021 Activity
0.00% 100.00%
100.00%
100.00% Real estate
management
Diners Club Spain, S.A. Unipersonal
Spain
100.00%
0.00%
100.00%
100.00% Cards
EUR million (a)
Capital +
reserves
19
Net
results
1
Carrying
amount
19
—
Securitization
(122)
185
—
Securitization
(329)
264
—
Securitization
(292)
172
100.00%
100.00% Services
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
Dirección Estratega, S.C.
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
Drive Auto Receivables Trust 2022-1
Drive Auto Receivables Trust 2022-2
Drive Auto Receivables Trust 2022-3
Drive Auto Receivables Trust 2022-4
Drive S.r.l.
Ductor Real Estate, S.L. Unipersonal
Ebury Brasil Consultoria Ltda. (q)
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
Italy
Spain
Brazil
0.00% 100.00%
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100.00%
0.00% 100.00%
0.00%
0.00% 66.54%
100.00%
100.00%
100.00%
—
Inactive
—
Inactive
—
Inactive
—
Inactive
—
Renting
100.00% Real estate
—
—
Consulting
services
Holding
company
Ebury Brasil Participacões Ltda. (q)
Brazil
0.00% 66.54%
100.00%
Ebury Facilitadora De Pagamentos Ltda.
(q)
Brazil
0.00% 66.54%
100.00%
—
Software
Ebury Finance Belgium NV (q)
Belgium
0.00% 66.54%
100.00%
Ebury Mass Payments Holdco Limited (q) United
Kingdom
Ebury Mass Payments Limited (q)
Ebury Partners Australia Pty Ltd. (q)
United
Kingdom
Australia
0.00% 66.54%
100.00%
0.00% 66.54%
100.00%
0.00% 66.54%
100.00%
Ebury Partners Belgium NV (q)
Belgium
0.00% 66.54%
100.00%
Ebury Partners Canada Limited (q)
Canada
0.00% 66.54%
100.00%
Ebury Partners China Limited (q)
Ebury Partners Finance Limited (q)
Ebury Partners Holdings Limited (q)
China
United
Kingdom
United
Kingdom
0.00% 66.54%
0.00% 66.54%
100.00%
100.00%
0.00% 66.54%
100.00%
Ebury Partners Hong Kong Limited (q)
Hong-Kong
0.00% 66.54%
100.00%
—
—
—
—
—
—
—
—
—
—
Finance
company
Holding
company
Payment
services
Finance
company
Payment
services
Finance
company
Inactive
Finance
company
Holding
company
Finance
company
9
0
44
57
49
71
60
37
50
1
0
37
40
46
66
72
79
80
0
0
0
0
5
25
1
2
0
0
0
5
1
60
3
5
(8)
0
3
0
0
0
0
(1)
1
0
0
0
0
0
3
0
21
0
0
(2)
0
0
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5
20
0
3
0
0
17
0
1
82
7
0
0
0
3
771
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Ebury Partners Limited (q)
Ebury Partners Markets Limited (q)
Ebury Partners SA (Pty) Ltd. (q)
Location
United
Kingdom
United
Kingdom
Republic of
South Africa
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
0.00% 66.54%
Indirect Year 2022 Year 2021 Activity
51.28% Holding
company
66.54%
0.00 % 66.54%
100.00%
—
Finance
company
0.00% 66.54%
100.00%
—
Inactive
Ebury Partners Switzerland AG (q)
Switzerland
0.00% 66.54%
100.00%
Ebury Partners UK Limited (q)
Ebury Payments PTE Ltd. (q)
Ebury Technology Limited (q)
EDT FTPYME Pastor 3 Fondo de
Titulización de Activos
United
Kingdom
Singapur
United
Kingdom
Spain
0.00% 66.54%
100.00%
0.00% 66.54%
100.00%
—
—
—
Finance
company
Electronic
money
Payment
services
0.00% 66.54%
100.00%
—
Software
—
(b)
—
—
Securitization
Elcano Renovables, S.L.
Spain
0.00% 70.00%
70.00%
Electrolyser, S.A. de C.V.
Elevate Tech Platforms, S.L. Unipersonal
Mexico
Spain
0.00% 96.24%
0.00%
100.00%
100.00%
100.00%
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.
Peru
100.00%
0.00%
100.00%
France
Brazil
Brazil
Brazil
Brazil
Portugal
0.00% 90.00%
0.00% 90.28%
0.00% 90.28%
0.00% 58.26%
0.00% 90.28%
0.00% 51.00%
90.00%
100.00%
100.00%
60.00%
100.00%
100.00%
Financiera El Corte Inglés, E.F.C., S.A.
Spain
0.00% 51.00%
51.00%
Finsantusa, S.L. Unipersonal
Spain
0.00% 100.00%
100.00%
70.00% Holding
company
100.00% Services
Holding
company
—
100.00% Finance
company
90.00%
Inactive
100.00% Services
100.00%
60.00%
100.00%
100.00% Finance
Insurance
IT services
IT services
company
51.00% Finance
company
100.00% Holding
company
First National Motor Business Limited (j)
United
Kingdom
First National Motor Contracts Limited (j) United
Kingdom
First National Motor plc
First National Tricity Finance Limited
Fondation Holding Auto ABS Belgium
Loans
Fondo de Titulización de Activos
Santander Consumer Spain Auto 2014-1
Fondo de Titulización PYMES Santander
15
Fondo de Titulización Santander
Consumer Spain Auto 2016-1
Fondo de Titulización Santander
Consumer Spain Auto 2016-2
Fondo de Titulización Santander
Financiación 1
United
Kingdom
United
Kingdom
Belgium
Spain
Spain
Spain
Spain
Spain
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%
Inactive
0.00% 100.00%
100.00%
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
100.00%
100.00% Finance
company
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
100.00% Fund
management
company
Fondo de Titulización, RMBS Santander 7 Spain
Fondos Santander, S.A. Administradora de
Fondos de Inversión (en liquidación) (j)
Uruguay
—
(b)
0.00% 100.00%
EUR million (a)
Capital +
reserves
250
Net
results
(6)
Carrying
amount
531
5
0
5
56
0
(48)
0
0
0
2
33
1
126
134
2
52
8
278
0
0
0
0
0
5
(31)
148
0
(5)
0
0
0
0
4
0
110
2
(1)
8
1
58
0
0
0
0
0
2
34
1
213
121
0
54
4
140
1,257
(2)
1,020
0
0
0
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6
0
0
0
0
0
0
0
0
772
2022 Annual report
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)
Direct
Indirect Year 2022 Year 2021 Activity
0.00% 66.54%
100.00%
—
IT services
0.00% 66.54%
0.00% 100.00%
100.00%
100.00%
—
IT services
100.00% Finance
company
—
(b)
—
—
Securitization
0.00% 100.00%
100.00%
100.00% Securitization
0.00% 100.00%
100.00%
100.00% Securitization
(1)
0.00% 100.00%
100.00%
100.00% Securitization
0.00% 100.00%
100.00%
—
Holding
company
0.00% 100.00%
100.00%
—
Securitization
—
(b)
—
—
Securitization
0.00% 90.28%
100.00%
0.00% 90.28%
100.00%
—
—
Investment
fund
Investment
fund
Company
Foreign Exchange Solutions (UK) Limited
(q)
Foreign Exchange Solutions S.L. (q)
Fortensky Trading, Ltd.
Fosse (Master Issuer) Holdings Limited
Fosse Funding (No.1) Limited
Fosse Master Issuer PLC
Fosse Trustee (UK) Limited
Freedom Depository Holdings, LLC
Freedom Depository, LLC
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.
Location
United
Kingdom
Spain
Ireland
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
States
United
States
Spain
Brazil
Brazil
Portugal
0.00% 99.87%
100.00%
100.00% Securitization
GC FTPYME Pastor 4 Fondo de Titulización
de Activos
Spain
Gesban México Servicios Administrativos Mexico
Globales, S.A. de C.V.
Gesban Santander Servicios Profesionales
Contables Limitada
Chile
—
(b)
—
—
Securitization
0.00% 100.00%
100.00%
100.00% Services
0.00% 100.00%
100.00%
100.00% Accounting
services
Spain
99.99%
0.01%
100.00%
100.00% Services
Gesban Servicios Administrativos
Globales, S.L.
Gesban UK Limited
United
Kingdom
0.00% 100.00%
100.00%
Gestión de Inversiones JILT, S.A.
Unipersonal
Spain
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. - Instituição de
Pagamento
Getnet Argentina S.A.U.
Brazil
0.04% 97.07%
97.10%
Argentina
0.00% 100.00%
100.00%
Getnet Europe, Entidad de Pago, S.L.
Unipersonal
Getnet Fundo de Investimento em
Direitos Creditórios
Getnet Merchant Solutions UK Ltd
Spain
Brazil
United
Kingdom
0.00% 100.00%
100.00%
0.00% 90.28%
100.00%
0.00% 100.00%
100.00%
Getnet Sociedade de Credito Direto S.A.
Brazil
0.00% 97.10%
100.00%
Gira, Gestão Integrada de Recebíveis do
Agronegócio S.A. (e)
Brazil
0.00% 72.23%
80.00%
100.00% Payments and
collection
services
100.00% Services
100.00% Holding
company
89.91% Payment
services
100.00% Payment
methods
100.00% Payment
services
— Investment
fund
— Financial
services
100.00% Finance
company
80.00% Consulting
services
GNXT Serviços de Atendimento Ltda.
Brazil
0.00% 97.10%
100.00%
— Telemarketing
Golden Bar (Securitisation) S.r.l.
Golden Bar Stand Alone 2016-1
Italy
Italy
—
—
(b)
(b)
—
—
— Securitization
— Securitization
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
0
0
0
1
0
0
0
0
83
350
7
0
1
1
5
1
15
(1)
(1)
0
0
81
0
0
0
0
0
11
38
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
85
350
8
0
0
0
1
0
15
0
444
102
356
26
(10)
215
1
0
14
1
4
0
0
2
0
0
7
(3)
(1)
0
0
16
207
1
0
21
0
3
0
0
773
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
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
Golden Bar Stand Alone 2022-1
Gravity Cloud Technology, S.L.
Grupo Empresarial Santander, S.L.
Location
Italy
Italy
Italy
Italy
Italy
Italy
Spain
Spain
% of ownership
held by
Banco Santander
Direct
—
—
—
—
—
—
100.00%
99.62%
Indirect
(b)
(b)
(b)
(b)
(b)
(b)
0.00%
0. 38%
Grupo Financiero Santander México, S.A.
de C.V.
Mexico
100.
00%
0.00%
100.
00%
Percentage of voting
power (k)
Year 2022 Year 2021 Activity
—
—
—
—
—
—
100.00%
00%
100.
Securitization
—
—
Securitization
— Securitization
— Securitization
— Securitization
— Securitization
—
IT services
100.
00% Holding
company
100.
00% Holding
company
EUR million (a)
Capital +
reserves
0
0
0
0
0
0
33
3,985
Net
results
0
0
0
0
0
0
1
571
Carrying
amount
0
0
0
0
0
0
31
2,861
5,093
954
5,164
100.00%
—
100.00%
Automotive
— Securitization
3
0
0
0
—
— Securitization
(53)
(1)
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 Santander, S.L. Unipersonal
Holmes Funding Limited
Holmes Holdings Limited
Holmes Master Issuer plc
Holmes Trustees Limited
Hyundai Capital Bank Europe GmbH
Spain
Portugal
Portugal
Ireland
Portugal
Ireland
Spain
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Germany
0.00% 100.00%
—
—
—
—
—
0. 00%
(b)
(b)
(b)
(b)
(b)
100.00%
—
—
—
100.00%
—
Securitization
— Securitization
Securitization
—
Holding
company
100.00%
0.00%
100.00%
100.00%
100.00%
Securitization
—
(b)
—
— Securitization
0.00%
100.00%
100.00%
100.00%
Securitization
(11)
(1)
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.
Insurance Funding Solutions Limited
Interfinance Holanda B.V.
Inversiones Capital Global, S.A.
Unipersonal
Inversiones Marítimas del Mediterráneo,
S.A.
Isar Valley S.A.
Isla de los Buques, S.A.
Klare Corredora de Seguros S.A.
Landcompany 2020, S.L.
Langton Securities (2008-1) plc (j)
Laparanza, S.A.
United
States
United
Kingdom
Netherlands
Spain
Spain
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
Holding
company
Finance
company
Holding
company
Holding
company
0.00%
100.00%
100.00%
100.00%
Inactive
Luxembourg
—
(b)
—
— Securitization
Spain
Chile
Spain
United
Kingdom
Spain
99.98%
0.02%
100.00%
100.00%
Finance
company
0.00% 33.63%
50.10%
17.66%
82.34%
100.00%
50.10%
100.00%
Insurance
brokerage
Real estate
management
Securitization
—
(b)
—
100.00%
61.59%
0.00%
61.59%
100.00%
0.00%
0.00%
90.28 %
100.00%
100.00%
61.59%
Agricultural
holding
— Real estate
100.00% Collection
services
Lerma Investments 2018, S.L. Unipersonal Spain
Brazil
Liderança Serviços Especializados em
Cobranças Ltda.
2
0
0
0
0
0
820
0
0
0
0
391
6
3,649
0
0
109
0
0
1
0
(4)
(46)
(13)
563
8
0
2
0
2
157
58
0
0
701
7
3,596
0
0
98
4
8
1
4
0
17
1
53
0
0
(1)
(1)
0
0
(3)
1,701
(22)
1,689
0
28
10
46
0
0
2
1
0
16
13
42
774
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Liquetine, S.L. Unipersonal
Liquidity Limited
Luri 6, S.A. Unipersonal
Lynx Financial Crime Tech, S.A.
Unipersonal
MAC No. 1 Limited
Master Red Europa, S.L.
Mata Alta, S.L. Unipersonal
% of ownership
held by
Banco Santander
Direct
Indirect
0.00% 70.00%
Percentage of voting
power (k)
Year 2022 Year 2021 Activity
100.00%
Location
Spain
United
Kingdom
Spain
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
Spain
0.00% 100.00%
100.00%
United
Kingdom
Spain
Spain
—
(b)
—
96.34%
0.00%
0.00% 61.59%
96.34%
100.00%
100.00% Renewable
energies
100.00% Factoring
100.00% Real estate
investment
— IT services
— Mortgage
credit
company
96.34 % Cards
100.00% Agricultural
holding
70.00% Payment
methods
100.00% Financial
advisory
Mercadotecnia, Ideas y Tecnología,
S.A. de C.V.
Mexico
0.00% 70.00%
70.00%
Merciver, S.L.
Spain
99.90%
0.10%
100.00%
Mercury Trade Finance Solutions S.A.S. Colombia
Mercury Trade Finance Solutions SpA
Mercury Trade Finance Solutions, S.A.
de C.V.
Chile
Mexico
Mercury Trade Finance Solutions, S.L.
Merlion Aviation One Designated
Activity Company
Mob Soluções em Tecnologia Ltda. -
EPP
Spain
Ireland
Brazil
0.00% 50.10%
0.00% 50.10%
0.00% 50.10%
100.00%
100.00%
100.00%
100.00% IT services
100.00% IT services
100.00% IT services
0.00% 50.10%
(b)
—
50.10%
—
50.10% IT services
—
Renting
0.00% 56.88%
100.00%
—
Advertising
Mobills Corretora de Seguros Ltda.
Brazil
0.00% 56.88%
100.00%
—
Insurance
brokerage
Mobills Labs Soluções em Tecnologia
Ltda. - EPP
Monetus Investimentos S.A.
Motor 2016-1 Holdings Limited
Motor 2016-1 PLC
Motor 2017-1 Holdings Limited
Motor 2017-1 PLC (j)
Motor Securities 2018-1 Designated
Activity Company
Mouro Capital I LP
Multiplica SpA
Brazil
Brazil
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Ireland
United
Kingdom
Chile
0.00% 56.88%
100.00%
—
IT services
0.00% 56.88%
100.00%
—
Securities
Investment
—
(b)
—
—
Securitization
0.00% 100.00%
100.00%
100.00% Securitization
—
(b)
—
—
Securitization
0.00% 100.00%
100.00%
100.00% Securitization
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00% Investment
fund
100.00% Payment
services
Munduspar Participações S.A.
Brazil
80.00%
0.00%
80.00%
—
Holding
company
Navegante Américo Vespucio SpA
Naviera Mirambel, S.L. Unipersonal
Naviera Trans Gas, A.I.E.
Naviera Trans Iron, S.L. Unipersonal
Naviera Trans Ore, A.I.E.
Naviera Transcantábrica, S.L.
Naviera Transchem, S.L. Unipersonal
NeoAuto S.A.C.
Chile
Spain
Spain
Spain
Spain
Spain
Spain
Peru
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
—
Real estate
100.00% Finance
company
99.99%
100.00%
99.99%
0.01%
0.00%
0.01%
100.00 % 0.00%
0.00%
100.00%
0.00% 55.00%
100.00%
100.00%
100.00%
100.00%
100.00%
55.00%
100.00% Renting
100.00% Leasing
100.00% Renting
100.00% Leasing
100.00% Leasing
55.00% Vehicles
purchased by
internet
Newcomar, S.L., en liquidación (j)
Spain
40.00% 40.00%
80.00%
80.00% Real estate
EUR million (a)
Capital +
reserves
1
Net
results
0
Carrying
amount
2
(1)
0
0
1,358
13
1,390
2
0
1
0
1
1
0
0
0
10
32
0
1
2
2
0
0
0
0
0
0
0
0
7
0
0
0
0
1
(3)
0
0
1
(1)
0
0
0
0
2
0
1
0
14
1
0
0
0
22
0
0
0
2
1
0
0
0
0
0
822
(84)
305
5
27
73
0
34
26
28
5
1
1
1
(1)
(1)
(1)
0
(2)
0
9
0
0
0
0
4
74
105
0
38
21
17
4
1
1
0
775
—
(b)
—
—
Securitization
(2)
(1)
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Novimovest – Fundo de Investimento
Imobiliário
Location
Portugal
% of ownership
held by
Banco Santander
Direct
Indirect
0.00% 78.64%
Percentage of voting
power (k)
Year 2022 Year 2021 Activity
78.74%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
78.74% Investment
fund
100.00% E-commerce
—
Services
100.00% Banking
100.00% Banking
100.00% Commerce
100.00% IT services
United States
Germany
Argentina
Spain
Spain
Argentina
0.00% 100.00%
0.00% 46.95%
0.00% 99.91%
0.00%
0.00% 100.00%
0.00% 100.00%
100.00%
Spain
Mexico
99.97%
0.03%
0.00% 100.00%
100.00%
100.00%
100.00% Services
100.00% Financial
services
Mexico
0.00% 96.24%
100.00%
—
Inactive
NW Services CO.
One Mobility Management GmbH
Open Bank Argentina S.A.
Open Bank, S.A.
Open Digital Market, S.L.
Open Digital Services Argentina S.A.U.
en liquidación (j)
Open Digital Services, S.L.
Open Mx Servicios Administrativos,
S.A. de C.V.
Openbank Santander México, S.A. de
C.V., S.O.F.O.M., E.R., Grupo Financiero
Santander México
Operadora de Carteras Gamma, S.A.P.I.
de C.V.
Mexico
100.00%
0.00%
100.00%
Optimal Investment Services SA
Switzerland
100.00%
0.00%
100.00%
Optimal Multiadvisors Ireland Plc /
Optimal Strategic US Equity Ireland
Euro Fund (m) (p)
Optimal Multiadvisors Ireland Plc /
Optimal Strategic US Equity Ireland US
Dollar Fund (m) (p)
Paga Después, S.A. de C.V.
PagoFX Europe S.A. (c)
PagoFX UK Ltd
PagoNxt Ltd
PagoNxt Merchant
SoluçõesTecnológicas Brasil Ltda.
PagoNxt Merchant Solutions FZ-LLC
PagoNxt Merchant Solutions India
Private Limited
Ireland
0.00%
0.00%
0.00%
Ireland
0.00%
0.00%
0.00%
Mexico
0.00% 100.00%
100.00%
Belgium
United
Kingdom
United
Kingdom
Brazil
United Arab
Emirates
India
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
PagoNxt Merchant Solutions, S.L.
Spain
0.00% 100.00%
100.00%
PagoNxt One Trade UK Ltd
United
Kingdom
0.00% 100.00%
100.00%
PagoNxt OneTrade España, E.D.E., S.L. Spain
0.00% 100.00%
100.00%
100.00% Holding
company
100.00% Fund
management
company
0.00% Fund
management
company
0.00% Fund
—
management
company
Financial
services
100.00% Inactive
100.00% Payment
services
100.00% Holding
company
100.00% IT services
100.00% Financial
services
100.00% Financial
services
100.00% Holding
company
100.00% Financial
services
100.00% Financial
services
Mexico
0.00% 100.00%
100.00%
—
IT services
PagoNxt Payments Platform México,
S.A. de C.V.
PagoNxt Solutions, S.L.
Pagonxt Trade Brasil Ltda.
PagoNxt Trade Chile SpA
PagoNxt Trade Services, S.L.
PagoNxt Trade, S.L.
PagoNxt, S.L.
Spain
Brazil
Chile
Spain
Spain
Spain
0.00% 100.00%
100.00%
100.00% Payment
services
0.00% 100.00%
100.00%
—
Financial
services
0.00% 100.00%
0.00% 100.00%
0.00% 100.00%
0.00%
100.00%
100.00%
100.00%
100.00%
100.00%
—
Services
100.00% Services
100.00% IT services
100.00% Holding
company
100.00% Holding
company
100.00% Logistic
services
Parasant SA
Switzerland
100.00%
0.00%
100.00%
Paytec Logística e Armazém Ltda.
Brazil
0.00% 97.10%
100.00%
Paytec Tecnologia em Pagamentos
Ltda.
Brazil
0.00% 97.10%
100.00%
100.00% Commerce
EUR million (a)
Capital +
reserves
217
Net
results
3
Carrying
amount
174
7
0
46
550
0
0
116
0
0
10
44
0
0
4
2
6
6
2
0
(23)
15
0
0
(87)
(1)
0
1
2
0
24
566
0
0
0
0
0
8
(1)
29
0
0
0
(1)
(2)
(3)
0
0
4
1
4
6
85
(30)
54
2
1
1
0
2
1
1,098
(93)
1,175
0
2
0
36
0
0
231
277
2,289
1,212
0
3
0
(1)
0
(16)
0
0
(87)
(101)
(229)
0
1
0
21
0
0
144
180
2,616
(3)
969
0
2
0
5
776
2022 Annual report
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
PBD Germany Auto 2018 UG
(Haftungsbeschränkt) (j)
PBD Germany Auto Lease Master 2019 Luxembourg
Luxembourg
PBD Germany Auto Lease Master S.A.,
Compartment 2021-1
Location
Germany
PBD Germany Auto Loan 2021 UG
(Haftungsbeschränkt)
Germany
Direct
—
—
—
—
Indirect
(b)
(b)
(b)
(b)
Year 2022 Year 2021 Activity
—
—
—
—
— Securitization
— Securitization
— Securitization
— Securitization
PBE Companies, LLC
Pereda Gestión, S.A.
United States
Spain
0.00% 100.00%
0.01%
99.99%
100.00%
100.00%
100.00% Real estate
100.00% Securities
brokerage
Phoenix C1 Aviation Designated
Activity Company
Ireland
—
(b)
—
— Renting
Phoenix S.A.
Uruguay
0.00% 100.00%
100.00%
Pierpont Advisory Management LLC
United States
0.00% 100.00%
100.00%
Pierpont Capital Holdings LLC
United States
0.00% 100.00%
100.00%
Pierpont Financial Services LLC
United States
0.00% 100.00%
100.00%
Pingham International, S.A. (j)
Pony S.A.
Portal Universia Argentina S.A.
Portal Universia Portugal, Prestação de
Serviços de Informática, S.A.
Uruguay
Luxembourg
Argentina
Portugal
—
0.00% 100.00%
(b)
0.00% 75.75%
0.00% 100.00%
100.00%
—
75.75%
100.00%
100.00% Payment
methods
— Administrative
services
— Holding
company
— Financial
services
100.00% Inactive
— Securitization
75.75% Internet
100.00% Internet
Prime 16 – Fundo de Investimentos
Imobiliário
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%
0.00% 40.22%
50.00%
50.00%
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
United
Kingdom
0.00% 50.00%
100.00%
PSA Financial Services Nederland B.V. Netherlands
0.00% 50.00%
100.00%
PSA Financial Services Spain, E.F.C.,
S.A.
Spain
0.00% 50.00%
50.00%
PSA Renting Italia S.p.A.
Punta Lima Wind Farm, LLC
Italy
United States
0.00% 50.00%
0.00% 100.00%
100.00%
100.00%
Punta Lima, LLC
Retail Company 2021, S.L. Unipersonal Spain
Retop S.A. (f)
Uruguay
United States
0.00% 100.00%
0.00%
0.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Return Capital S.A.
Brazil
0.00% 90.28%
100.00%
50.00% Banking
50.00% Banking
100.00% Finance
company
100.00% Finance
company
50.00% Finance
company
100.00% Finance
company
100.00% Finance
company
50.00% Finance
company
100.00% Renting
100.00% Renewable
energies
100.00% Leasing
100.00% Real estate
100.00% Finance
company
100.00% Collection
services
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
0
0
0
117
52
18
0
0
0
0
0
0
11
1
0
0
0
0
0
117
4
0
4
0
301
(57)
244
(3)
0
0
0
0
0
0
0
0
0
497
1,142
3
95
38
323
58
684
13
45
45
259
19
47
62
1
14
5
28
18
60
12
(6)
(6)
(4)
7
0
0
0
0
0
16
229
881
0
47
10
159
26
363
3
39
39
255
61
1,131
12
1,031
Brazil
0.00% 90.28%
100.00%
100.00% Investment
fund
22
(2)
Riemersma Leasing B.V.
Riobank International (Uruguay) SAIFE
(p)
Roc Aviation One Designated Activity
Company
Roc Shipping One Designated Activity
Company
Rojo Entretenimento S.A.
SAFO Alternative Lending, S.L.
Unipersonal
Netherlands
Uruguay
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
—
Renting
100.00% Inactive
Ireland
Ireland
Brazil
Spain
—
—
(b)
(b)
—
—
—
Renting
—
Renting
0.00% 85.41%
0.00% 100.00%
94.60%
100.00%
94.60% Real estate
—
Finance
company
7
0
(4)
(4)
23
0
2
0
(1)
0
2
0
21
0
0
0
21
0
777
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
100.00%
0.00%
100.00%
—
Investment
fund
0.00% 100.00%
100.00%
100.00% Leasing
282
18
164
0.00% 100.00%
100.00%
100.00% Fund
Subsidiaries of Banco Santander, S.A. 1
Company
SALCO, Servicios de Seguridad
Santander, 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.
Spain
Brazil
Brazil
United
Kingdom
United
Kingdom
United
Kingdom
Spain
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Location
Spain
Direct
99.99%
Indirect
0.01%
Year 2022 Year 2021 Activity
100.00% Security
100.00%
Mexico
0.00% 100.00%
100.00%
92.37%
7.63%
100.00%
0.00% 90.28%
100.00%
0.00% 90.28%
100.00%
100.00% Fund
management
company
100.00% Holding
Company
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
100.00% Financial
advisory
100.00% Leasing
Santander Asesorías Financieras
Limitada
Chile
0.00% 67.44%
100.00%
0.00% 100.00%
100.00%
Santander Asset Finance (December)
Limited
Santander Asset Finance Opportunities Luxembourg
United
Kingdom
Santander Asset Finance plc
Santander Asset Management -
S.G.O.I.C., S.A.
United
Kingdom
Portugal
Santander Asset Management Chile
S.A.
Santander Asset Management
Luxembourg, S.A.
Santander Asset Management S.A.
Administradora General de Fondos
Chile
0.00% 100.00%
100.00%
Luxembourg
0.00% 100.00%
100.00%
Chile
0.00% 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%
0.00% 100.00%
100.00%
Santander Asset Management, S.A.,
S.G.I.I.C.
Spain
0.00% 100.00%
100.00%
Santander Auto Lease Titling Ltd.
Santander Back-Offices Globales
Mayoristas, S.A.
Santander Banca de Inversión
Colombia, S.A.S.
United States
Spain
0.00% 100.00%
0.00%
100.00%
100.00%
100.00%
Colombia
100.00%
0.00%
100.00%
Santander Bank & Trust Ltd.
Santander Bank Polska S.A.
Santander Bank, National Association United States
Santander Brasil Administradora de
Consórcio Ltda.
Bahamas
Poland
Brazil
67.41%
0.00% 100.00%
0.00%
0.00% 100.00%
0.00% 90.28%
100.00%
67.41%
100.00%
100.00%
Santander Brasil Gestão de Recursos
Ltda.
Santander Capital Structuring, S.A. de
C.V.
Brazil
0.08% 99.92%
100.00%
Mexico
0.00% 100.00%
100.00%
Santander Capitalização S.A.
Santander Cards Ireland Limited
Brazil
Ireland
0.00% 90.28%
0.00% 100.00%
100.00%
100.00%
management
company
100.00% Securities
Investment
100.00% Fund
management
company
100.00% Fund
management
company
100.00% Holding
company
100.00% Management
of funds and
portfolios
100.00% Fund
management
company
Leasing
100.00% Services
—
100.00% Advisory
services
100.00% Banking
67.41% Banking
100.00% Banking
100.00% Services
100.00% Securities
Investment
100.00% Investment
Company
100.00% Insurance
100.00% Cards
EUR million (a)
Capital +
reserves
2
Net
results
0
Carrying
amount
1
35
26
188
1,373
92
1,597
3
(3)
0
125
112
192
0
0
0
1
58
74
42
0
0
0
0
5
4
0
0
0
0
1
43
0
42
9
0
4
3
221
40
260
0
2
1
374
5,091
10,201
179
445
13
(17)
(8)
4
0
4
12
14
8
52
0
0
0
3
523
276
77
39
(1)
92
0
12
0
0
132
186
157
393
0
1
2
332
4,361
10,475
232
520
0
67
0
778
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Subsidiaries of Banco Santander, S.A. 1
Company
Santander Cards Limited
Santander Cards UK Limited
Santander Chile Holding S.A.
Location
United
Kingdom
United
Kingdom
Chile
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect
0.00% 100.00%
Year 2022 Year 2021 Activity
100.00%
100.00% Cards
0.00% 100.00%
100.00%
22.11% 77.75%
99.86%
Santander Consulting (Beijing) Co., Ltd. China
0.00% 100.00%
100.00%
Santander Consumer (UK) plc
United
Kingdom
United States
Santander Consumer Auto Receivables
Funding 2013-B2 LLC
Santander Consumer Auto Receivables United States
Funding 2018-L1 LLC
Santander Consumer Auto Receivables United States
Funding 2018-L3 LLC
Santander Consumer Auto Receivables United States
Funding 2018-L5 LLC
Santander Consumer Auto Receivables United States
Funding 2019-B1 LLC
United States
Santander Consumer Auto Receivables
Funding 2020-B1 LLC
Santander Consumer Auto Receivables United States
Funding 2020-L1 LLC
Santander Consumer Auto Receivables United States
Funding 2020-L2 LLC
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%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
Santander Consumer Auto Receivables
Funding 2022-B1 LLC
Santander Consumer Auto Receivables
Funding 2022-B2 LLC
Santander Consumer Auto Receivables
Funding 2022-B3 LLC
United States
0.00% 100.00%
100.00%
United States
0.00% 100.00%
100.00%
United States
0.00% 100.00%
100.00%
100.00% Finance
company
99.84% Holding
company
100.00% Advisory
services
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% Finance
company
100.00% Finance
company
100.00% Finance
company
—
—
—
—
Finance
company
Finance
company
Finance
company
Finance
company
United States
Santander Consumer Auto Receivables
Funding 2022-B4 LLC
Santander Consumer Auto Receivables United States
Funding 2022-B5 LLC
Santander Consumer Auto Receivables United States
Grantor Trust 2021-D
Santander Consumer Auto Receivables United States
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 Credit Services
Limited
Santander Consumer Finance Global
Services, S.L.
Germany
Norway
Austria
Poland
Italy
United
Kingdom
Spain
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
—
Inactive
0.00% 100.00%
100.00%
100.00% Inactive
0.00% 100.00%
100.00%
100.00% Inactive
0.00% 100.00%
0.00% 100.00%
0.00% 100.00%
0.00% 80.44%
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
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
100.00%
0.00%
100.00%
Santander Consumer Finance Limitada Chile
49.00% 34.24%
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%
0.00% 80.44%
100.00%
100.00%
100.00% Banking
100.00% Leasing
EUR million (a)
Capital +
reserves
95
Net
results
0
Carrying
amount
95
154
2
109
1,579
271
1,522
9
1
4
947
146
294
(88)
273
119
161
53
(18)
117
18
0
0
0
0
0
0
0
3,313
2,403
424
744
833
(37)
6
91
88
368
56
9,328
2
84
22
20
31
85
33
10
9
(134)
(162)
(267)
(183)
0
0
0
469
211
58
77
92
0
3
0
23
49
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5,070
2,251
363
478
603
0
5
140
52
163
60
852
(1)
10,025
2
Santander Consumer Finanse Sp. z o.o.
w likwidacji (j)
Poland
0.00% 80.44%
100.00%
100.00% Services
15
0
12
779
2022 Annual report
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 Consumer Holding Austria
GmbH
Location
Austria
Direct
Indirect
0.00% 100.00%
Year 2022 Year 2021 Activity
100.00% Holding
company
100.00%
Santander Consumer Holding GmbH
Germany
0.00% 100.00%
100.00%
Santander Consumer Inc.
Canada
0.00% 100.00%
100.00%
100.00% Holding
company
100.00% Finance
company
Santander Consumer Leasing GmbH
Santander Consumer Mobility Services,
S.A.
Germany
Spain
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
100.00% Leasing
100.00% Renting
Santander Consumer Multirent Sp. z
o.o.
Santander Consumer Operations
Services GmbH
Santander Consumer Receivables 10
LLC
Santander Consumer Receivables 11
LLC
Santander Consumer Receivables 15
LLC
Santander Consumer Receivables 16
LLC
Poland
0.00% 80.44%
100.00%
100.00% Leasing
Germany
0.00% 100.00%
100.00%
100.00% Services
United States
0.00% 100.00%
100.00%
United States
0.00% 100.00%
100.00%
United States
0.00% 100.00%
100.00%
United States
0.00% 100.00%
100.00%
100.00% Finance
company
100.00% Finance
company
—
—
Finance
company
Finance
company
Santander Consumer Receivables 17
LLC
Santander Consumer Receivables 3 LLC United States
United States
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
—
Inactive
Santander Consumer Receivables 7 LLC United States
0.00% 100.00%
100.00%
Santander Consumer Receivables
Funding LLC
Santander Consumer Renting S.r.l.
Santander Consumer Renting, S.L.
Santander Consumer S.A.
United States
0.00% 100.00%
100.00%
Italy
Spain
Argentina
0.00% 100.00%
0.00% 100.00%
0.00% 99.82%
100.00%
100.00%
100.00%
Santander Consumer S.A. Compañía de
Financiamiento
Colombia
79.02% 20.98%
100.00%
Santander Consumer Services GmbH
Santander Consumer Services, S.A.
Austria
Portugal
0.00% 100.00%
0.00% 100.00%
100.00%
100.00%
Santander Consumer Spain Auto
2019-1, Fondo de Titulización
Santander Consumer Spain Auto
2020-1, Fondo de Titulización
Santander Consumer Spain Auto
2021-1, Fondo de Titulización
Santander Consumer Spain Auto
2022-1, Fondo de Titulización
Spain
Spain
Spain
Spain
Santander Consumer Technology
Services GmbH
Santander Consumer USA Holdings Inc. United States
Germany
—
—
—
—
(b)
(b)
(b)
(b)
—
—
—
—
Santander Consumer USA Inc.
United States
0.00% 100.00%
100.00%
100.00% Finance
company
100.00% Finance
company
100.00% Finance
company
—
Renting
100.00% Renting
100.00% Finance
company
100.00% Finance
company
100.00% Services
100.00% Finance
company
— Securitization
— Securitization
— Securitization
— Securitization
EUR million (a)
Capital +
reserves
364
Net
results
0
Carrying
amount
518
5,564
317
6,077
82
70
12
58
12
1,113
653
0
0
0
397
713
4
4
38
18
22
0
13
0
0
0
0
13
93
(4)
5
1
(1)
(95)
(71)
(48)
0
5
(211)
2
(1)
3
(3)
(1)
0
1
0
0
0
0
3
48
151
12
26
18
0
0
0
0
0
0
0
0
4
38
15
23
0
6
0
0
0
0
22
0.00% 100.00%
100.00%
100.00% IT services
24
0.00% 100.00%
100.00%
—
(b)
0.00% 96.24%
—
100.00%
80.22% Holding
company
100.00% Finance
company
— Securitization
100.00% Cards
3,816
1,203
6,067
4,300
1,007
5,307
0
1,490
0
312
0
1,734
0.00% 67.21%
100.00%
0.00% 83.24%
100.00%
0.00% 90.28%
100.00%
100.00% Insurance
brokerage
100.00% Securities
company
100.00% Securities
company
78
52
9
4
59
46
142
22
148
780
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
Santander Corretora de Câmbio e
Valores Mobiliários S.A.
Spain
Mexico
Chile
Chile
Brazil
2022 Annual report
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 Corretora de Seguros,
Investimentos e Serviços S.A.
Location
Brazil
Direct
Indirect
0.00% 90.28%
Year 2022 Year 2021 Activity
100.00%
100.00% Insurance
brokerage
Spain
Santander Customer Voice, S.A.
Santander de Titulización, S.G.F.T., S.A. Spain
0.50%
99.50%
81.00% 19.00%
100.00%
100.00%
Santander Distribuidora de Títulos e
Valores Mobiliários S.A.
Brazil
0.00% 90.28%
100.00%
100.00% Services
100.00% Fund
management
company
100.00% Securities
company
EUR million (a)
Capital +
reserves
816
Net
results
250
Carrying
amount
960
2
5
0
3
2
2
100
(17)
75
0.00% 100.00%
100.00%
—
Inactive
Santander Drive Auto Receivables
Grantor Trust 2022-A
Santander Drive Auto Receivables LLC United States
United States
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 Drive Auto Receivables
Trust 2022-5
Santander Drive Auto Receivables
Trust 2022-6
Santander Drive Auto Receivables
Trust 2022-7
Santander Drive Auto Receivables
Trust 2022-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
United States
United States
United States
United States
United States
United States
United States
Santander Drive Auto Receivables
Trust 2023-1
Santander Equity Investments Limited United
United States
Santander España Servicios Legales y
de Cumplimiento, S.L.
Santander Estates Limited
Santander European Hospitality
Opportunities
Kingdom
Spain
United
Kingdom
Luxembourg
0.00% 100.00%
100.00%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100.00% Finance
company
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Inactive
—
Inactive
0.00% 100.00%
100.00%
99.97%
0.03%
100.00%
100.00% Finance
company
100.00% Services
0.00% 100.00%
100.00%
100.00% Real estate
100.00%
0.00%
100.00%
100.00% Investment
fund
100.00% Finance
company
Santander F24 S.A.
Poland
0.00% 67.41%
100.00%
—
Securitization
(171)
—
Securitization
(279)
—
Securitization
(288)
0
0
46
60
50
24
47
32
(9)
(46)
0
0
0
0
0
0
0
0
0
28
9
(6)
23
2
0
0
24
35
39
58
76
114
101
138
196
259
199
(139)
(193)
(195)
(267)
(314)
(323)
(156)
0
0
6
1
(1)
(4)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
33
8
0
20
2
781
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
0.00% 100.00%
100.00%
100.00% Banking
351
45
436
EUR million (a)
Capital +
reserves
415
Net
results
(1)
Carrying
amount
392
8
37
208
3
0
1
11
73
0
0
15
1
126
3
0
100.00% Finance
company
100.00% Financial
advisory
100.00% Financial
services
100.00% Holding
company
100.00% Finance
company
—
Investment
fund
100.00% Investment
fund
18
0
66
(4)
(1)
7
15
0
19
327
(13)
357
(21)
455
22
23
0
478
1,638
187
1,586
Subsidiaries of Banco Santander, S.A. 1
Company
Santander Facility Management
España, S.L. Unipersonal
Santander Factoring S.A.
Santander Factoring Sp. z o.o.
Santander Factoring y Confirming, S.A.
Unipersonal, E.F.C.
Spain
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Location
Spain
Direct
100.00%
Indirect
0.00%
Year 2022 Year 2021 Activity
100.00%
100.00% Real estate
Chile
Poland
0.00% 99.86%
100.00%
100.00% Factoring
0.00% 67.41%
100.00%
100.00% Financial
services
100.00%
0.00%
100.00%
100.00% Factoring
Santander Finance 2012-1 LLC
United States
0.00% 100.00%
100.00%
Santander Financial Exchanges Limited United
100.00%
0.00%
100.00%
100.00% Financial
services
100.00% Inactive
Santander Financial Services plc
Santander Financiamientos S.A.
Kingdom
United
Kingdom
Peru
100.00%
0.00%
100.00%
Santander Financing S.A.S.
Colombia
100.00%
0.00%
100.00%
Santander Finanse Sp. z o.o.
Poland
0.00% 67.41%
100.00%
Santander Fintech Holdings, S.L.
Spain
100.00%
0.00%
100.00%
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.
Santander Global Cards & Digital
Solutions, S.L.
United
Kingdom
Brazil
100.00%
0.00%
100.00%
—
(b)
—
Brazil
0.00% 90.28%
100.00%
Chile
Brazil
Spain
0.00% 99.86%
100.00%
100.00% Financial
services
0.00% 100.00%
100.00%
100.00% IT consulting
100.00%
0.00%
100.00%
100.00% IT services
Santander Global Consumer Finance
Limited
Santander Global Facilities, S.A. de C.V. Mexico
United
Kingdom
0.00% 100.00%
100.00%
100.00%
0.00%
100.00%
100.00% Finance
company
100.00% Services
Santander Global Services S.A. (j)
Uruguay
0.00% 100.00%
100.00%
100.00% Services
Santander Global Services, S.L.
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. Unipersonal
Spain
Spain
Brazil
Chile
Spain
100.00%
0.00%
100.00%
100.00% Real estate
100.00%
0.00%
100.00%
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
Santander Green Investment, S.L.
Spain
99.97%
0.03%
100.00%
100.00% Holding
company
Santander Guarantee Company
Santander Hipotecario 2 Fondo de
Titulización de Activos
Santander Hipotecario 3 Fondo de
Titulización de Activos
United
Kingdom
Spain
Spain
0.00% 100.00%
100.00%
100.00% Leasing
—
—
(b)
(b)
—
—
—
Securitization
—
Securitization
Santander Holding Imobiliária S.A.
Brazil
0.00% 90.28%
100.00%
100.00% Real estate
6
36
25
7
143
0
393
19
4
21
454
32
4
0
0
81
2
(1)
(4)
0
5
0
(1)
(2)
0
2
8
40
17
7
152
0
394
18
1
20
36
438
0
0
0
0
4
32
3
0
0
77
Santander Holding Internacional, S.A.
Spain
99.95%
0.05%
100.00%
100.00% Holding
company
4,057
67
2,432
782
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Santander Investment, S.A.
Spain
100.00%
0.00%
100.00%
100.00%
Banking
1,309
Activity
Holding
company
Finance
company
Subsidiaries of Banco Santander, S.A. 1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Santander Holdings USA, Inc.
Location
United States
Direct
100.00%
Indirect
0.00%
Year 2022 Year 2021
100.00%
100.00%
Santander Inclusión Financiera, S.A. de
C.V., S.O.F.O.M., E.R., Grupo Financiero
Santander México
Santander Innoenergy Climate VC I,
S.C.R., S.A. (i)
Santander Innoenergy Climate VC II,
S.C.R., S.A. (i)
Mexico
0.00% 96.24%
100.00%
100.00%
Spain
Spain
0.00%
100.00%
100.00%
—
Inactive
0.00%
100.00%
100.00%
—
Inactive
Santander Insurance Agency, U.S., LLC
United States
0.00%
100.00%
100.00%
100.00%
Insurance
Santander Insurance Services UK
Limited
Santander Intermediación Correduría
de Seguros, S.A.
Santander International Products, Plc.
(l)
United
Kingdom
Spain
100.00%
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
Ireland
99.99%
0.01%
100.00%
100.00%
Santander Inversiones S.A.
Chile
0.00%
100.00%
100.00%
100.00%
Asset
management
Insurance
brokerage
Finance
company
Holding
company
Santander Investment Bank Limited
Bahamas
0.00%
100.00%
100.00%
100.00%
Banking
Santander Investment Chile Limitada
Chile
0.00%
100.00%
100.00%
100.00%
Santander Investment Securities Inc.
United States
0.00%
100.00%
100.00%
100.00%
Finance
company
Securities
company
Santander Investments GP 1 S.à.r.l.
Luxembourg
0.00%
100.00%
100.00%
100.00%
Santander Inwestycje Sp. z o.o.
Poland
0.00%
67.41%
100.00%
100.00%
Santander ISA Managers Limited
United
Kingdom
0.00%
100.00%
100.00%
100.00%
Santander Lease, S.A., E.F.C.
Spain
100.00%
0.00%
100.00%
100.00%
Fund
management
company
Securities
company
Management
of funds and
portfolios
Leasing
Ireland
—
(b)
—
—
Securitization
Santander Leasing Poland
Securitization 01 Designated Activity
Company (j)
Santander Leasing S.A.
Santander Leasing, LLC
United States
0.00% 100.00%
100.00%
100.00% Leasing
Santander Lending Limited
United
Kingdom
0.00%
100.00%
100.00%
100.00%
Spain
100.00%
0.00%
100.00%
100.00%
Mortgage
credit
company
Insurance
intermediary
Santander Mediación Operador de
Banca-Seguros Vinculado, S.A.
Santander Merchant Platform
Operations, S.A. de C.V.
Mexico
0.00% 98.16%
100.00%
Santander Merchant Platform Services,
S.A. de C.V.
Mexico
0.00% 98.16%
100.00%
Santander Merchant Platform
Solutions México, S.A. de C.V.
Santander Merchant Platform
Solutions Uruguay S.A.
Mexico
0.00% 98.16%
100.00%
Uruguay
0.00% 100.00%
100.00%
Santander Merchant S.A.
Argentina
5.10% 94.90%
100.00%
Santander Mortgage Holdings Limited United
Kingdom
0.00% 100.00%
100.00%
100.00% Financial
services
100.00% Financial
services
100.00% Holding
company
100.00% Payment
methods
100.00% Finance
company
100.00% Holding
company
EUR million (a)
Capital +
reserves
15,477
Net
results
1,316
Carrying
amount
13,468
14
—
—
1
42
26
1
(7)
—
—
0
1
3
0
7
—
—
1
43
18
0
1,237
198
1,032
468
508
517
1
20
43
61
0
5
41
(2)
8
0
0
5
7
0
583
321
516
245
1
7
6
51
0
36
2
239
50
2
1
(1)
8
1
0
0
1
234
3
2
1
148
32
150
8
1
(23)
(3)
0
1
5
2
0
783
Poland
0.00%
67.41%
100.00%
100.00%
Leasing
152
15
Santander Leasing S.A. Arrendamento
Mercantil
Brazil
0.00% 90.28%
100.00%
100.00% Leasing
1,964
101
1,864
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
EUR million (a)
Capital +
reserves
(39)
Net
results
414
Carrying
amount
381
85
14
184
Subsidiaries of Banco Santander, S.A. 1
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Santander Paraty Qif PLC
Location
Ireland
Direct
Indirect
0.00% 90.28%
Year 2022 Year 2021 Activity
100.00%
100.00% Investment
Company
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
Ireland
Santander Prime Auto Issuance Notes
2018-B Designated Activity Company
Ireland
Santander Prime Auto Issuance Notes
2018-C Designated Activity Company
Ireland
Santander Prime Auto Issuance Notes
2018-D Designated Activity Company
Ireland
Santander Prime Auto Issuance Notes
2018-E Designated Activity Company
Ireland
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
Santander Private Banking Gestión,
S.A., S.G.I.I.C.
Spain
100.00%
0.00%
100.00%
Santander Private Banking s.p.a. in
Liquidazione (j)
Santander Private Banking UK Limited United
Italy
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
100.00% Pension fund
management
company
100.00% Pension fund
management
company
—
Securitization
—
Securitization
(31)
—
Securitization
(7)
—
Securitization
(28)
(11)
—
Securitization
(15)
100.00% Fund
management
company
100.00% Finance
company
100.00% Holding
company
Santander Private Real Estate Advisory
& Management, S.A.
Santander Private Real Estate Advisory,
S.A.
Santander Real Estate, S.A.
Kingdom
Spain
Spain
Spain
99.99%
0.01%
100.00%
100.00% Real estate
100.00%
0.00%
100.00%
100.00% Real estate
100.00%
0.00%
100.00%
100.00% Inactive
Santander Retail Auto Lease Funding
LLC
United States
0.00% 100.00%
100.00%
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
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)
—
—
—
—
—
—
—
—
—
—
100.00% Finance
company
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Inactive
—
Securitization
—
Inactive
Argentina
Santander Río Asset Management
Gerente de Fondos Comunes de
Inversión S.A.
Santander RMBS 6, Fondo de
Titulización
Santander S.A. Sociedad Securitizadora Chile
Spain
0.00% 100.00%
100.00%
100.00% Fund
management
company
Securitization
—
(b)
—
—
0.00% 67.25%
100.00%
100.00% Fund
management
company
3
(4)
64
13
0
2
(7)
(1)
(6)
10
1
3
0
0
0
0
0
35
7
288
338
392
4
15
1
0
87
70
67
67
93
0
0
0
(1)
0
16
0
1
0
1
0
0
30
43
53
52
48
14
22
0
32
0
8
0
0
4
16
1
0
0
0
0
0
0
0
0
0
0
0
3
0
1
784
2022 Annual report
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 Secretariat Services Limited United
Location
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.
Direct
Indirect
0.00% 100.00%
0.00% 100.00%
Kingdom
United States
Spain
100.00%
0.00%
100.00%
Year 2022 Year 2021 Activity
100.00 % Holding
company
100.00 % Securities
company
100.00 % Insurance
100.00%
100.00%
Mexico
0.00% 96.24%
100.00%
100.00 % Services
Mexico
0.00% 96.24%
100.00%
100.00 % Services
Santander Technology USA, LLC
United States
0.00% 100.00%
100.00%
100.00 % IT services
Santander Tecnología Argentina S.A.
Argentina
0.00% 99.83%
100.00%
100.00 % IT services
Santander Tecnología México, S.A. de
C.V.
Santander Totta Seguros, Companhia
de Seguros de Vida, S.A.
Mexico
0.00% 96.24%
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%
Santander Towarzystwo Funduszy
Inwestycyjnych S.A.
Poland
50.00% 33.70%
100.00%
99.91 % Holding
company
100.00 % Fund
management
company
Santander Trade Services Limited
Hong-Kong
0.00% 100.00%
100.00%
100.00 % Inactive
Santander Trust S.A.
Argentina
0.00% 99.99%
100.00%
100.00 % Services
Santander UK Group Holdings plc
Santander UK Investments
Santander UK Operations Limited
Santander UK plc
Santander UK Technology Limited
Santander Valores S.A.
Santander Wealth Management
International SA, en liquidation (j)
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Argentina
77.67% 22.33%
100.00%
100.00%
0.00%
100.00%
0.00% 100.00%
100.00%
0.00% 100.00%
100.00%
100.00 % Holding
company
100.00 % Finance
company
100.00 % Finance
company
100.00 % Banking
0.00% 100.00%
100.00%
100.00 % IT services
5.10% 94.73%
100.00%
100.00 % Securities
company
Switzerland
0.00% 100.00%
100.00%
100.00 % Inactive
Santusa Holding, S.L.
Spain
69.76% 30.24%
100.00%
SC Austria Consumer Loan 2021
Designated Activity Company
SC Austria Finance 2020-1 Designated
Activity Company
SC Germany Auto 2014-2 UG
(haftungsbeschränkt) (j)
SC Germany Auto 2016-2 UG
(haftungsbeschränkt)
SC Germany Auto 2018-1 UG
(haftungsbeschränkt) (j)
SC Germany Auto 2019-1 UG
(haftungsbeschränkt)
SC Germany Consumer 2014-1 UG
(haftungsbeschränkt) (j)
SC Germany Consumer 2018-1 UG
(haftungsbeschränkt)
SC Germany Mobility 2019-1 UG
(haftungsbeschränkt)
Ireland
Ireland
Germany
Germany
Germany
Germany
Germany
Germany
Germany
SC Germany S.A.
Luxembourg
—
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
—
100.00 % Holding
company
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
27
(2)
26
1,473
128
1,188
12
3
73
7
52
92
0
0
(11)
7
0
15
12
3
62
10
50
47
3,008
1,508
5,352
4
24
0
16
2
0
10
16
0
13,935
1,359
17,015
48
7
(2)
0
45
17
13,075
956
14,913
40
4
0
1
0
0
6
4
0
8,940
273
6,504
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
785
2022 Annual report
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)
Year 2022 Year 2021 Activity
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
Company
SC Germany S.A., Compartment
Consumer 2020-1
SC Germany S.A., Compartment
Consumer 2021-1
SC Germany S.A., Compartment
Consumer 2022-1
SC Germany S.A., Compartment
Mobility 2020-1
SC Germany Vehicles 2013-1 UG
(haftungsbeschränkt) (j)
SC Germany Vehicles 2015-1 UG
(haftungsbeschränkt) (j)
Location
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Germany
Germany
SC Poland Consumer 23-1 Designated
Activity Company
Ireland
SCF Ajoneuvohallinto I Limited (j)
Ireland
SCF Ajoneuvohallinto II Limited (j)
Ireland
SCF Ajoneuvohallinto IX Limited
SCF Ajoneuvohallinto KIMI VI Limited
(j)
Ireland
Ireland
SCF Ajoneuvohallinto VII Limited (j)
Ireland
SCF Ajoneuvohallinto VIII Limited
Ireland
SCF Ajoneuvohallinto X Limited
Ireland
SCF Ajoneuvohallinto XI Limited
Ireland
Direct
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Indirect
(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
100.00% Real estate
management
— Securitization
— Securitization
SCF Eastside Locks GP Limited
SCF Rahoituspalvelut I Designated
Activity Company (j)
SCF Rahoituspalvelut II Designated
Activity Company (j)
SCF Rahoituspalvelut IX DAC
SCF Rahoituspalvelut KIMI VI
Designated Activity Company (j)
SCF Rahoituspalvelut VII Designated
Activity Company (j)
SCF Rahoituspalvelut VIII Designated
Activity Company
SCF Rahoituspalvelut X DAC
SCF Rahoituspalvelut XI Designated
Activity Company
SCM Poland Auto 2019-1 DAC
SDMX Superdigital, S.A. de C.V.,
Institución de Fondos de Pago
Electrónico
Secucor Finance 2021-1, DAC
United
Kingdom
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Mexico
0.00% 100.00%
100.00%
—
—
—
—
—
—
—
—
—
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
—
—
—
—
—
—
—
—
—
0.00% 100.00%
100.00%
100.00% Payment
platform
Ireland
—
(b)
—
— Securitization
Services and Promotions Delaware
Corp.
United States
0.00% 100.00%
100.00%
100.00% Holding
company
Services and Promotions Miami LLC
United States
0.00% 100.00%
100.00%
100.00% Real estate
Servicios de Cobranza, Recuperación y
Seguimiento, S.A. de C.V.
Sheppards Moneybrokers Limited
Shiloh III Wind Project, LLC
Mexico
0.00% 85.00%
85.00%
85.00% Finance
company
United
Kingdom
United States
0.00% 100.00%
100.00%
100.00%
Inactive
0.00% 100.00%
100.00%
100.00% Renewable
energies
— Securitization
11
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
0
0
4
0
64
57
39
0
344
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(1)
0
2
3
2
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
3
0
66
60
32
0
345
786
2022 Annual report
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
Silk Finance No. 5
Location
Portugal
Direct
—
Indirect
(b)
Year 2022 Year 2021 Activity
—
— Securitization
SMPS Merchant Platform Solutions
México, S.A de C.V
Sociedad Integral de Valoraciones
Automatizadas, S.A. Unipersonal
Sociedad Operadora de Tarjetas de
Pago Santander Getnet Chile S.A.
Mexico
0. 00% 98.
16%
100.00%
100.00%
Spain
Chile
100.00%
0.00%
100.00%
100.00%
0.00%
67.13%
100.00%
100.00%
Socur S.A. (f)
Uruguay
100.00%
0.00%
100.00%
100.00%
Payments and
collection
services
Appraisals
Payments and
collection
services
Finance
company
Solarlaser Limited
Solution 4Fleet Consultoria
Empresarial S.A.
Sovereign Community Development
Company
Sovereign Delaware Investment
Corporation
United
Kingdom
Brazil
0.00%
100.00%
100.
00%
100.00%
Inactive
0.00%
72.23%
80.00%
80.00%
Vehicle rental
United States
0.00%
100.00%
100.00%
100.00%
United States
0.00%
100.00%
100.00%
100.00%
Sovereign Lease Holdings, LLC
United States
0.00%
100.00%
100.00%
100.00%
Holding
company
Holding
company
Financial
services
EUR million (a)
Capital +
reserves
9
Net
results
42
Carrying
amount
0
145
32
173
1
12
58
0
3
41
143
235
2
4
13
0
(1)
1
4
1
1
11
59
0
1
42
147
236
Sovereign REIT Holdings, Inc.
United States
0.00%
100.00%
100.00%
100.00% Holding
company
8,035
159
8,194
Sovereign Spirit Limited (n)
Bermudas
0.00%
100.00%
100.00%
100.00% Leasing
SSA Swiss Advisors AG
Switzerland
0.00%
100.00%
100.00%
100.00%
Sterrebeeck B.V.
Netherlands
100.00%
0.00%
100.00%
100.00%
Asset
management
Holding
company
Suleyado 2003, S.L. Unipersonal
Spain
0.00%
100.00%
100.00%
100.00% Securities
Investment
Summer Empreendimentos Ltda.
Brazil
0.00%
90.28%
100.00%
100.00%
Real estate
management
Superdigital Argentina S.A.U.
Argentina
0.00%
100.00%
100.00%
100.00%
IT services
Superdigital Colombia S.A.S.
Colombia
0. 00%
100.00%
100.
00%
100.00%
IT services
Superdigital Holding Company, S.L.
Spain
0.00%
100.00%
100.
00%
100.00%
Superdigital Instituição de Pagamento
S.A.
Superdigital Perú S.A.C.
Brazil
Peru
0.00%
100.00%
100.00%
100.00%
0.00%
100.00%
100.00%
100.00%
Holding
company
Payment
services
Financial
services
Suzuki Servicios Financieros, S.L.
Spain
0.00%
51.00%
51.00%
51.00%
Intermediation
Svensk Autofinans WH 1 Designated
Activity Company
Ireland
—
(b)
—
— Securitization
Swesant SA
Switzerland
0.00%
100.00%
100.00%
100.00% Holding
company
SX Negócios Ltda.
SX Tools Soluções e Serviços
Compartilhados Ltda.
Tabasco Energía España, S.L.
Unipersonal
Taxagest Sociedade Gestora de
Participações Sociais, S.A.
Brazil
Brazil
Spain
0.00%
90.28%
100.00%
100.00%
Telemarketing
0.00%
90.28%
100.00%
— Services
100.00%
0.00%
100.00%
100.00%
Portugal
0.00%
99.87%
100.00%
100.00%
Holding
company
Holding
company
Taxos Luz, S.L. Unipersonal
Spain
0.00%
70.00%
100.00%
Teatinos Siglo XXI Inversiones S.A.
Chile
50.00%
50.00%
100.00%
— Renewable
energies
100.00% Holding
company
0
1
0
0
0
4
4,771
633
10,840
31
(1)
28
4
3
1
1
(2)
0
4
2
0
144
(12)
132
46
1
12
0
63
13
33
1
56
0
(11)
100
(1)
2
0
42
2
1
0
0
0
0
0
0
0
14
31
0
0
9
1,869
285
2,136
The Alliance & Leicester Corporation
Limited
United
Kingdom
0.00%
100.00%
100.00%
100.00%
Real estate
The Best Specialty Coffee, S.L.
Unipersonal
Spain
100.00%
0.00%
100.00%
100.00%
Restaurant
services
14
2
0
(1)
14
1
787
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
1
Subsidiaries of Banco Santander, S.A.
Company
Time Retail Finance Limited (j)
TIMFin S.p.A.
Tonopah Solar I, LLC
Location
United
Kingdom
Italy
United
States
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Direct
Indirect Year 2022 Year 2021 Activity
100.00% Services
100.00%
0.00% 100.00%
0.00%
51.00%
51.00%
0.00% 100.00%
100.00%
51.00% Finance
company
100.00% Holding
company
Tornquist Asesores de Seguros S.A.
(j)
Argentina
0.00%
99.99%
99.99%
99.99% Inactive
Toro Corretora de Títulos e Valores
Mobiliários Ltda.
Brazil
0.00%
56.88%
63.00%
Toro Investimentos S.A.
Brazil
0.00%
56.88%
91.32%
Totta (Ireland), PLC (h)
Ireland
0.00%
99.87%
100.00%
60.00% Securities
company
100.00% Securities
company
100.00% Finance
company
EUR million (a)
Capital +
reserves
0
Net
results
0
Carrying
amount
0
45
5
0
53
38
451
(4)
0
0
1
0
5
28
5
0
31
22
450
Totta Urbe - Empresa de
Administração e Construções, S.A.
Portugal
0.00%
99.87%
100.00%
100.00% Real estate
98
(10)
100
Trabajando.com Mexico, S.A. de C.V.
en liquidación (j)
Mexico
0.00% 100.00%
100.00%
100.00% Services
Trade Maps 3 Ireland Limited (j)
Ireland
—
(b)
—
—
Securitization
Trans Rotor Limited (j)
Transolver Finance EFC, S.A.
Tresmares Santander Direct
Lending, SICC, S.A.
Tuttle and Son Limited
Universia Brasil S.A.
United
Kingdom
Spain
100.00%
0.00%
100.00%
100.00% Renting
0.00%
51.00%
51.00%
51.00% Leasing
Spain
99.60%
0.00%
99.60%
99.60% Fund
management
company
United
Kingdom
Brazil
0.00% 100.00%
100.00%
100.00% Inactive
0.00% 100.00%
100.00%
100.00% Internet
Universia Chile S.A.
Chile
0.00%
86.84%
86.84%
86.84% Internet
Universia Colombia S.A.S.
Colombia
0.00% 100.00%
100.00%
100.00% Internet
Universia España Red de
Universidades, S.A.
Spain
0.00%
89.45%
89.45%
89.45% Internet
0
0
0
71
685
0
0
0
0
2
0
0
0
3
19
0
0
0
0
0
0
0
0
17
678
0
0
0
0
2
Universia Holding, S.L.
Spain
100.00%
0.00%
100.00%
100.00% Holding
company
20
(5)
17
Universia México, S.A. de C.V.
Mexico
0.00% 100.00%
100.00%
100.00% Internet
Universia Perú, S.A.
Peru
0.00%
99.76%
99.76%
99.76% Internet
Universia Uruguay, S.A.
Uruguay
0.00% 100.00%
100.00%
100.00% Internet
Uro Property Holdings, S.A.
Spain
99.99%
0.00%
99.99%
Verbena FCVS - Fundo de
Investimentos em Direitos
Creditórios (e)
Wallcesa, S.A.
Wave Holdco, S.L.
Waycarbon Soluções Ambientais
e Projetos de Carbono S.A.
Spain
Brazil
Brazil
—
(b)
—
Spain
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
0.00%
80.00%
100.00%
—
Consulting
services
0
0
0
0
0
0
0
0
0
178
(22)
179
(3)
(928)
0
27
3
6
0
0
0
0
(1)
21
788
2022 Annual report
Contents
Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
1
Subsidiaries of Banco Santander, S.A.
% of ownership
held by
Banco Santander
Percentage of voting
power (k)
Company
Waypoint Insurance Group, Inc.
WIM Servicios Corporativos, S.A.
de C.V.
WTW Shipping Designated
Activity Company
Location
United
States
Mexico
Direct
0.00% 100.00%
Indirect Year 2022 Year 2021 Activity
100.00% Holding
company
100.00%
0.00% 100.00%
100.00%
100.00% Advisory
services
Ireland
100.00%
0.00%
100.00%
100.00% Leasing
EUR million (a)
Capital +
reserves
9
Net
results
0
Carrying
amount
9
0
16
0
(3)
0
9
a. Amount according to the provisional books of each company as of the date of publication of these annexes, generally referring to 31 December 2022 without
considering, where appropriate, interim dividends that have been made during the year. In the book value (net provision cost), the percentage of ownership of the Group
has been applied to the figure of each of the holding companies, without considering the impairment of goodwill made in the consolidation process. The data for foreign
companies are converted into euros at the exchange rate at the end of the year.
b. Companies over which effective control is maintained.
c. Data as at 31 December 2021, latest available accounts.
d. Data as at 31 March 2022, latest accounts available.
e. Data as at 30 June 2022, last accounts available.
f. Data as at 30 September 2022, last accounts available.
g. Data as at 31 July 2022, last accounts available.
h. Data as at 30 November 2022, last accounts available.
i. Recently created company, with no available financial information.
j. Company in liquidation as at 31 December 2022.
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.
l. Company resident for tax purposes in Spain.
m. Data as of 30 June 2022, latest available accounts.
n. Company resident for tax purposes in the United Kingdom.
o. Data as at 28 February 2022, last accounts available.
p. Companies in liquidation. Pending registration.
q. Data as at 30 April 2022, latest available accounts.
(1) Companies issuing preference shares are listed in Annex III, together with other relevant information.
789
2022 Annual report
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
EUR million (a)
Capital +
reserves
—
Asset
—
Net
results
—
356
356
67
64
139
0
—
—
4
171
405
20
12
19
0
—
—
4
2
343
20
4
12
20
0
—
—
0
(21)
63
Company
Abra 1 Limited (k)
Location
Cayman
Island
% of ownership
held by Banco
Santander
Percentage of
voting power (f)
Direct
—
Indirect
(h)
Year
2022
—
Year
2021 Activity
Leasing
—
Achmea Tussenholding, B.V. (b)
Netherlands
8.89%
0.00%
8.89%
Administrador Financiero de
Transantiago S.A.
Chile
0.00% 13.43%
20.00%
8.89% Holding
company
20.00% Payments and
collection
services
Aegon Santander Portugal Não Vida
- Companhia de Seguros, S.A.
Aegon Santander Portugal Vida -
Companhia de Seguros Vida, S.A.
Aeroplan - Sociedade Construtora
de Aeroportos, Lda. (e)
Portugal
0.00% 48.96%
49.00%
49.00% Insurance
Portugal
0.00% 48.96%
49.00%
49.00% Insurance
Portugal
0.00% 19.97%
20.00%
20.00% Inactive
Aguas de Fuensanta, S.A. (e) (k)
Alcuter 2, S.L. (k)
Spain
Spain
36.78%
37.23%
0.00%
0.00%
36.78%
37.23%
36.78% Food
37.23% Technical
services
Type of
company
Joint
ventures
—
Associated
Joint
ventures
Joint
ventures
—
—
—
Alma UK Holdings Ltd (b)
Altamira Asset Management, S.A.
(consolidado)
Apolo Fundo de Investimento em
Direitos Creditórios
Attijariwafa Bank Société Anonyme
(consolidado) (b)
AutoFi Inc. (b)
United
Kingdom
Spain
30.00%
0.00%
30.00%
30.00% Holding
company
Joint
ventures
0.00% 15.00%
15.00%
15.00% Real estate
—
Brazil
0.00% 30.09%
33.33%
33.33% Investment
fund
Joint
ventures
Morocco
0.00%
5.10%
5.10%
5.10% Banking
—
53,452
4,898
461
United
States
0.00% 19.75%
19.75%
—
E-commerce —
Autopistas del Sol S.A. (b)
Argentina
0.00% 14.17%
14.17%
14.17% Motorway
concession
Avanath Affordable Housing IV LLC United
States
0.00%
7.27%
7.27%
—
Investment
Company
Banco RCI Brasil S.A.
Brazil
0.00% 36.02%
39.89%
39.89% Banking
Mexico
0.00% 50.00%
50.00%
50.00% Banking
7
156
258
1,945
7
77
188
215
244
79
—
—
Joint
ventures
Joint
ventures
Banco S3 Caceis México, S.A.,
Institución de Banca Múltiple
Bank of Beijing Consumer Finance
Company
Bank of Shanghai Co., Ltd.
(consolidado) (b)
Bizum, S.L. (b)
CACEIS (consolidado)
Campo Grande Empreendimentos
Ltda. (k)
China
China
Spain
France
Brazil
0.00% 20.00%
20.00%
20.00% Finance
Associated
1,430
125
company
6.54%
0.00%
6.54%
6.54% Banking
—
360,213
24,944
2,993
20.92%
0.00%
20.92%
—
Payment
services
0.00% 30.50%
30.50%
30.50% Custody
services
Associated
11
2
1
Associated
124,340
4,182
278
0.00% 22.86%
25.32%
—
Inactive
—
Cantabria Capital, SGEIC, S.A.
Spain
Car10 Tecnologia e Informação S.A. Brazil
50.00%
0.00%
0.00% 42.13%
50.00%
46.67%
50.00% Venture capital Associated
46.67% Internet
Joint
ventures
CCPT - ComprarCasa, Rede Serviços
Imobiliários, S.A.
Centro de Compensación
Automatizado S.A.
Centro para el Desarrollo,
Investigación y Aplicación de
Nuevas Tecnologías, S.A. (b)
CIP S.A.
CNP Santander Insurance Europe
Designated Activity Company
CNP Santander Insurance Life
Designated Activity Company
Portugal
0.00% 49.98%
49.98%
49.98% Real estate
Chile
0.00% 22.38%
33.33%
services
33.33% Payments and
collection
services
Joint
ventures
Associated
Spain
0.00% 49.00%
49.00%
49.00% Technology
Associated
3
3
Brazil
0.00% 16.13%
17.87%
—
Financial
services
Associated
468
Ireland
49.00%
0.00%
49.00%
49.00% Insurance
Associated
1,075
Ireland
49.00%
0.00%
49.00%
49.00% Insurance
Associated
1,226
354
189
119
—
0
13
0
21
—
0
0
0
11
(8)
(3)
1
37
8
12
—
0
(2)
0
5
0
49
40
52
790
2022 Annual report
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)
Company
CNP Santander Insurance Services
Ireland Limited
Location
Ireland
Direct
49.00%
Indirect
0.00%
Year
2022
49.00%
Year
2021 Activity
49.00% Services
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
Spain
Spain
20.18%
0.00%
20.18%
20.18% Finance
company
23.33%
0.55%
23.88%
23.88% Credit
insurance
EUR million (a)
Capital +
reserves
Type of
company
Associated
Associated
Joint
ventures
—
—
Asset
26
37
1
179
1,078
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.
Compañía para los Desarrollos
Inmobiliarios de la Ciudad de
Hispalis, S.L., en liquidación (d) (e)
Connecting Visions Ecosystems, S.L. Spain
Spain
Corkfoc Cortiças, S.A. (c)
CSD Central de Serviços de Registro
e Depósito Aos Mercados
Financeiro e de Capitais S.A.
Desarrollo Eólico las Majas VI, S.L.
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.
Spain
24.07%
0.00%
24.07%
24.07% Real estate
Associated
556
353
21.98%
0.00%
21.98%
21.98% Real estate
promotion
—
38
(325)
19.90%
0.00%
19.90%
19.90% Consulting
services
Joint
ventures
Portugal
Brazil
0.00% 27.55%
0.00% 18.06%
27.58%
20.00%
27.58% Cork industry —
—
Financial
services
Associated
Spain
Spain
Spain
Spain
Spain
45.00%
0.00%
45.00%
0.00% 55.00%
55.00%
0.00% 55.00%
55.00%
0.00% 55.00%
55.00%
0.00% 55.00%
55.00%
45.00% Renewable
energies
55.00% Renewable
energies
55.00% Renewable
energies
55.00% Renewable
energies
55.00% Renewable
energies
55.00% Renewable
energies
55.00% Renewable
energies
55.00% Renewable
energies
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
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%
Euro Automatic Cash Entidad de
Pago, S.L.
European Hospitality Opportunities
S.à r.l. (b)
Spain
50.00%
0.00%
50.00%
50.00% Payment
Associated
Luxembourg
0.00% 49.00%
49.00%
services
49.00% Holding
company
Evolve SPV S.r.l.
Italy
—
(h)
—
—
Securitization
Joint
ventures
Joint
ventures
Portugal
0.00% 36.57%
36.62%
36.62% Real estate
—
35
(6)
1
0
1
0
0
0
FAFER- Empreendimentos
Urbanísticos e de Construção, S.A.
(b) (e)
Federal Home Loan Bank of
Pittsburgh (b)
United
States
0.00%
6.05%
6.05%
—
Banking
Federal Reserve Bank of Boston (b) United
States
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
Spain
Spain
Spain
Spain
Spain
Spain
0.00% 19.12%
19.12%
20.09% Banking
—
—
—
—
—
—
(h)
(h)
(h)
(h)
(h)
(h)
—
—
—
—
—
—
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
— Securitization
—
—
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
35,264
2,482
81
214,885
1,640
113
269
337
454
397
154
0
0
0
0
0
0
7
0
0
0
0
0
0
791
Net
results
1
3
0
21
96
27
0
(1)
0
0
1
0
0
0
0
0
0
0
5
11
0
152
431
1
20
37
6
1
1
1
1
1
1
1
1
3
38
52
1
1
1
1
1
1
1
54
1
91
0
2022 Annual report
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
Location
Spain
Direct
—
Indirect
(h)
Percentage of
voting power (f)
Year
Year
2022
2021 Activity
—
—
Securitization
Spain
Spain
Spain
Spain
Spain
—
—
—
—
—
(h)
(h)
(h)
(h)
(h)
—
—
—
—
—
—
Securitization
—
Securitization
—
Securitization
—
Securitization
—
Securitization
Company
Fondo de Titulización, RMBS Prado
IX
Fondo de Titulización, RMBS Prado
V
Fondo de Titulización, RMBS Prado
VI
Fondo de Titulización, RMBS Prado
VII
Fondo de Titulización, RMBS Prado
VIII
Fondo de Titulización, RMBS Prado
X
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% 14.05%
10.00%
Gire S.A.
Argentina
0.00% 58.22%
58.33%
50.00% Finance
company
4.99% Finance
company
20.00% Collection
services
58.33% Payments and
collection
services
Securitization
—
—
Securitization
50.01% Finance
company
50.00% Insurance
brokerage
36.36% Securities
investment
40.20% Holding
company
HCUK Auto Funding 2017-2 Ltd
United
Kingdom
HCUK Auto Funding 2022-1 Limited
(m)
United
Kingdom
Healthy Neighborhoods Equity
Fund I LP (b)
Hyundai Capital UK Limited
United
States
United
Kingdom
—
—
(h)
(h)
—
—
0.00% 22.37%
22.37%
22.37% Real estate
—
0.00% 50.01%
50.01%
Hyundai Corretora de Seguros Ltda. Brazil
0.00% 45.14%
50.00%
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%
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.
Mexico
Spain
Spain
Spain
Chile
0.00% 40.84%
0.00% 50.00%
40.84%
50.00%
20.00% IT services
50.00% Real estate
0.00% 50.00%
50.00%
50.00% Real estate
25.42%
0.00%
0.00% 49.00%
25.42%
49.00%
25.42% Venture capital —
49.00% Real estate
Associated
and securities
investment
49.00% Real estate
and securities
investment
40.00% Industrial
machinery rent
Associated
35.70% Business
services
Joint
ventures
J.C. Flowers I L.P. (b) (l)
LB Oprent, S.A. (b)
United
States
Spain
0.00%
0.00%
0.00%
0.00% Holding
company
—
40.00%
0.00%
40.00%
Loop Gestão de Pátios S.A.
Brazil
0.00% 32.23%
35.70%
Mapfre Santander Portugal -
Companhia de Seguros, S.A.
Massachusetts Business
Development Corp. (consolidado)
(b)
MB Capital Fund IV, LLC (b)
Merlin Properties, SOCIMI, S.A.
(consolidado) (b)
Portugal
0.00% 49.94%
49.99%
49.99% Insurance
Associated
United
States
United
States
Spain
0.00% 21.61%
21.61%
21.61% Finance
company
0.00% 21.51%
21.51%
19.01%
5.63%
24.64%
21.51% Finance
company
24.77% Real estate
investment
—
—
Type of
company
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Associated
Joint
ventures
Associated
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
—
—
Associated
Joint
ventures
Joint
ventures
EUR million (a)
Capital +
reserves
0
Asset
479
Net
results
0
277
311
467
422
566
0
0
0
0
0
2,039
434
10
277
157
395
456
13
2
84
76
0
0
12
4,658
381
1
0
0
2
0
1
0
(112)
0
4
0
1
11
285
11
285
2
4
8
17
75
27
3
1
0
7
14
27
0
0
0
0
0
54
(1)
(14)
4
0
0
(1)
65
0
0
0
(2)
0
0
0
36
34
(1)
1
(2)
0
3
2
Associated
14,273
6,585
512
792
Inversiones ZS América SpA
Chile
0.00% 49.00%
49.00%
Associated
395
395
2022 Annual report
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
Company
Metrovacesa, S.A. (consolidado) (b)
Location
Spain
Direct
31.94%
Indirect
17.50%
Percentage of
voting power (f)
Year
Year
2021
2022
49.44%
49.44%
Activity
Real estate
promotion
Type of
company
Associated
EUR million (a)
Capital +
reserves
2,061
Asset
2,777
Net
results
18
Niuco 15, S.L. (k)
Ocyener 2008, S.L.
Spain
Spain
57.10%
0.00%
57.10%
37.23% Technical
—
—
—
—
0.00% 45.00%
45.00%
services
45.00% Holding
company
Associated
Operadora de Activos Beta, S.A. de
C.V.
Mexico
49.99%
0.00%
49.99%
49.99% Finance
Associated
company
Pag10 Fomento Mercantil Eireli
Brazil
0.00% 42.13%
46.67%
46.67% Factoring
Joint
ventures
Payever GmbH
Germany
0.00% 10.00%
10.00%
10.00% Software
Associated
Platinum Care, S.A.
Spain
0.00% 50.00%
50.00%
—
Holding
company
Play Digital S.A.
Argentina
0.00% 15.35%
15.38%
15.70% Payment
platform
Joint
ventures
Associated
POLFUND - Fundusz Poręczeń
Kredytowych S.A.
Poland
0.00% 33.70%
50.00%
50.00% Management
company
Associated
Portland SPV S.r.l.
Italy
—
(h)
—
—
Securitization
Procapital - Investimentos
Imobiliários, S.A. (b) (e)
Project Quasar Investments 2017,
S.L. (consolidado) (b)
Promontoria Manzana, S.A.
(consolidado) (b)
PSA Corretora de Seguros e
Serviços Ltda.
Redbanc S.A.
Redsys Servicios de Procesamiento,
S.L. (consolidado)
Portugal
0.00% 39.97%
40.00%
40.00% Real estate
Spain
Spain
49.00%
0.00%
49.00%
20.00%
0.00%
20.00%
Brazil
0.00% 45.14%
50.00%
49.00% Holding
company
20.00% Holding
company
50.00% Insurance
brokerage
Chile
Spain
0.00% 22.44%
33.43%
33.43% Services
24.90%
0.06%
24.96%
24.96% Cards
Relevante e Astuto, S.A.
Portugal
0.00% 70.00%
70.00%
70.00% Real estate
management
Spain
0.00% 50.00%
50.00%
50.00% Real estate
Retama Real Estate, S.A.
Unipersonal
Rías Redbanc S.A.
RMBS Belém No.2
RMBS Green Belém No. 1
Portugal
Uruguay
Portugal
0.00% 25.00%
25.00%
25.00% Services
—
—
—
(h)
(h)
—
—
—
Securitization
—
Securitization
2
0
0
3
5
23
29
195
0
2
0
0
2
5
42
20
0
13
0
0
0
0
(3)
(24)
0
0
0
5,861
679
(317)
0
11
75
0
0
2
4
0
(46)
(1)
Associated
953
279
(55)
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%
50.00% Securities
company
50.00% Holding
company
199
170
San Preca Federal I Fundo de
Investimento em Direitos
Creditorios Não-Padronizados
Sancus Green Investments II, S.C.R.,
S.A. (b)
Santander Allianz Towarzystwo
Ubezpieczeń na Życie S.A.
Santander Allianz Towarzystwo
Ubezpieczeń S.A.
Brazil
0.00% 45.14%
50.00%
—
Investment
fund
Spain
0.00% 41.60%
41.60%
43.29% Venture capital —
Poland
0.00% 33.03%
49.00%
49.00% Insurance
Associated
303
Poland
0.00% 33.03%
49.00%
49.00% Insurance
Associated
Santander Assurance Solutions, S.A. Spain
0.00% 66.67%
66.67%
66.67% Insurance
intermediary
Joint
ventures
Santander Auto S.A.
Brazil
0.00% 45.14%
50.00%
50.00% Insurance
Associated
Santander Caceis Colombia S.A.
Sociedad Fiduciaria
Colombia
0.00% 50.00%
50.00%
50.00% Finance
Santander Caceis Latam Holding 1,
S.L.
Santander Caceis Latam Holding 2,
S.L.
Spain
Spain
0.00% 50.00%
50.00%
0.00% 50.00%
50.00%
company
50.00% Holding
company
50.00% Holding
company
Joint
ventures
Joint
ventures
Joint
ventures
731
722
2
2
Joint
ventures
—
—
Joint
ventures
Associated
Associated
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
1
34
126
0
21
4
333
241
237
10
4
82
14
39
6
1
0
0
168
10
5
12
36
5
6
6
0
0
0
28
28
0
0
27
9
1
5
0
10
0
793
2022 Annual report
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
Indirect
0.00% 49.00%
Year
2022
49.00%
Year
2021 Activity
49.00% Insurance
EUR million (a)
Capital +
reserves
185
Asset
770
Net
results
44
Type of
company
Joint
ventures
0.00% 49.99%
49.99%
49.99% Insurance
Associated
123
65
0.00% 49.00%
49.00%
49.00% Insurance
Joint
ventures
1,023
333
37.23%
0.00%
37.23%
37.23% Technical
—
—
—
—
services
0.00%
8.38%
12.48%
12.48% Services
Associated
SIBS-SGPS, S.A. (consolidado) (b)
Portugal
0.00% 16.53%
16.55%
0.00% 20.00%
20.00%
20.61%
0.00%
20.61%
16.55% Management
of portfolios
20.00% Investment
company
20.61% Payment
methods
—
—
Associated
27.15%
0.00%
27.15%
27.15% Construction
materials
—
45.70%
0.00%
45.70%
45.70% Payment
25.35%
0.25%
25.60%
22.21%
0.00%
22.21%
25,311
586
(1,626)
Chile
0.00% 19.66%
29.29%
Associated
8
Ireland
—
(h)
—
—
Leasing
services
25.60% Financial
services
22.21% Financial
services
29.29% Securities
deposits
Spain
Spain
Spain
Chile
United
States
Spain
Spain
Spain
Spain
Spain
Malta
Malta
United
States
Brazil
Company
Santander Generales Seguros y
Reaseguros, S.A.
Santander Mapfre Seguros y
Reaseguros, S.A.
Santander Vida Seguros y
Reaseguros, S.A.
Sepacon 31, S.L. (k)
Servicios de Infraestructura de
Mercado OTC S.A
Siguler Guff SBIC Fund LP (b)
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)
Sociedad Interbancaria de
Depósitos de Valores S.A.
Solar Maritime Designated Activity
Company (b)
STELLANTIS Insurance Europe
Limited
STELLANTIS Life Insurance Europe
Limited
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.
Tonopah Solar Energy Holdings I,
LLC (k)
Trabajando.com Chile S.A.
Transbank S.A.
Tresmares Growth Fund II, S.C.R.,
S.A.
Tresmares Growth Fund III, S.C.R.,
S.A.
0.00% 50.00%
50.00%
50.00% Insurance
0.00% 50.00%
50.00%
50.00% Insurance
0.00% 20.50%
20.50%
17.10% Renewable
energies
0.00% 17.13%
18.98%
18.98% Security
Associated
Brazil
0.00% 17.13%
18.98%
18.98% Telecommunic
ations
Associated
Brazil
Brazil
United
States
Chile
Chile
Spain
Spain
0.00% 17.13%
0.00% 17.13%
0.00% 26.80%
0.00% 33.33%
0.00% 16.78%
0.00%
40.00%
18.98%
18.98%
26.80%
33.33%
25.00%
40.00%
40.00%
0.00%
40.00%
18.98% IT services
19.81% ATM
26.80% Holding
company
33.33% Services
25.00% Cards
40.00% Holding
company
40.00% Holding
company
Tresmares Growth Fund Santander,
S.C.R., S.A. (n)
Spain
100.00%
0.00% 100.00% 100.00% Holding
Company
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%
UCI Mediação de Seguros
Unipessoal, Lda.
UCI Servicios para Profesionales
Inmobiliarios, S.A. Unipersonal
Portugal
0.00% 50.00%
50.00%
Spain
0.00% 50.00%
50.00%
50.00% Real estate
services
50.00% Holding
company
50.00% Financial
services
50.00% Holding
company
50.00% Insurance
brokerage
39
396
28
749
102
112
17
14
67
14
5
15
36
11
7
(1)
60
11
176
74
79
1
160
—
(1)
93
42
32
53
148
245
110
220
111
107
4
527
—
2
1,648
54
41
59
794
261
1
2
0
1
1
0
0
0
Joint
ventures
—
—
Joint
ventures
Joint
ventures
Joint
ventures
—
Associated
Associated
Joint
ventures
Associated
Associated
—
—
—
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
(1)
44
1
44
1
0
4
1
0
2
0
28
16
(2)
(3)
(2)
0
9
—
1
29
12
9
(1)
(2)
0
0
0
0
794
2022 Annual report
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)
Company
Unicre-Instituição Financeira de
Crédito, S.A.
Unión de Créditos Inmobiliarios,
S.A. Unipersonal, EFC
Location
Portugal
Direct
Indirect
0.00% 21.83%
Year
2022
21.86%
Year
2021 Activity
21.86% Finance
company
Spain
0.00% 50.00%
50.00%
50.00% Mortgage
credit
company
VCFS Germany GmbH
Germany
0.00% 50.00%
50.00%
50.00% Marketing
Brazil
—
(h)
—
—
Securitization
EUR million (a)
Capital +
reserves
110
Asset
452
Net
results
24
11,247
1,080
(53)
1
0
217
196
1,755
107
70
41
0
20
16
14
Type of
company
Associated
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
Joint
ventures
189
937
384
(14)
936
382
Associated
Associated
Associated
1,497
1,490
United
Kingdom
Brazil
Brazil
Brazil
Spain
Spain
Spain
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.
Zurich Santander Brasil Seguros
S.A.
Zurich Santander Holding (Spain),
S.L. Unipersonal
Zurich Santander Holding Dos
(Spain), S.L. Unipersonal
Zurich Santander Insurance
América, S.L.
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.
0.00% 50.01%
50.01%
50.01% Leasing
0.00% 63.20%
70.00%
70.00% Services
0.00% 48.79%
48.79%
48.79% Insurance
Associated
15,099
359
183
0.00% 48.79%
48.79%
48.79% Insurance
Associated
0.00% 49.00%
49.00%
0.00% 49.00%
49.00%
49.00%
0.00%
49.00%
49.00% Holding
company
49.00% Holding
company
49.00% Holding
company
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
60
254
326
Mexico
0.00% 49.00%
49.00%
49.00% Insurance
Associated
1,169
Uruguay
0.00% 49.00%
49.00%
49.00% Insurance
Associated
42
36
24
60
45
18
44
193
101
322
6
37
26
158
8
a. Amount according to the provisional books at the date of publication of these annexes of each company, generally referring to 31 December 2022, except where
otherwise indicated due to the fact that the annual accounts are pending formulation. The data for foreign companies are converted into euros at the exchange rate at
the end of the year.
b. Data as at 31 December 2021, latest available accounts.
c. Data as at 31 December 2019, latest available accounts.
d. Data as at 30 November 2021, latest available accounts.
e. Company in liquidation as at 31 December 2022.
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 2021, latest available accounts.
j. Data as at 30 June 2022, latest available accounts.
k. Company with no financial information available.
l. Company in liquidation. Pending registration.
m. Data as at 30 September 2022, latest available accounts
n.
.Investment managed discretionally by a manager outside the Santander Group, the voting rights not being, in this case, decisive in determining control of the entity.
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Appendix III
Issuing subsidiaries of shares and preference shares
% of ownership held
by Banco Santander
EUR million (a)
Company
Emisora Santander España, S.A. Unipersonal
Santander UK (Structured Solutions) Limited
Sovereign Real Estate Investment Trust
Location
Spain
Direct
100.00%
United
Kingdom
United States
0.00%
0.00%
Indirect Activity
0.00% Finance
company
100.00% Finance
company
100.00% Finance
company
Cost of
Capital Reserves preferred
0
2
0
0
0
5,231
(3,477)
0
55
Net
results
0
0
13
a. Amount according to the books of each interim company as at 31 December 2022, converted into euro (in the case of foreign companies) at the year-end exchange rate.
796
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Auditor's report | Consolidated financial statements | Notes to the consolidated financial statements | Appendix
Appendix IV
Notifications of acquisitions and disposals of
investments in 2022
Details of the notifications of acquisitions and disposals of
participations for 2022 in accordance with Article 125 of the
Securities Market Law may be found below:
On 13 May 2022, Banco Santander, S.A. disclosed to the CNMV
the decrease of its stake in REPSOL, S.A. below the 3%
threshold, keeping a stake of 2.291%, as of 9 May 2022.
With respect to compliance with Article 125 of the Securities
Market Law, no communications required under this article
were made in 2020. 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..
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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 2022, 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.
(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.
b) Capital increases in progress
At 31 December 2022, there were no approved capital
increases.
f) Non-Group entities which hold, directly or through
subsidiaries, 10% or more of equity
Not applicable.
c) Share capital authorised by the shareholders at the general
meeting
The shareholders resolved at the Annual General Meeting held
on 1 April 2022, 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
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).
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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.
Additionally, the company issued GBP 50 million additional tier
1 (AT ) capital securities to Santander UK Group Holdings plc on
19 December 2022.
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.
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.
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 2022 year-end, the bank’s treasury shares
consisted of 31,161,607 ordinary shares and 31,161,607
preferred shares, with a total of 62,323,214 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) In the event of transformation, merger, consolidation or spin-
off of the company.
b) 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.
b) Capital increases in progress
No approved capital increases are in progress.
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 2022, 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.
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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 2022, 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 2022 there were no approved capital increases.
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) 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.
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 November 30, 2022, an Extraordinary Shareholders' Meeting
of Banco Santander México, S.A. was held at which it was
approved (a) to cancel the registration of all of the shares
representing the capital stock of the Company in the National
Securities Registry maintained by the National Banking and
Securities Commission and to delist them from the Mexican
Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.), and
(b) delist the American Depositary Shares (each representing
five series "B" shares of the Company) from the New York Stock
Exchange and delist the Company's series "B" shares and such
American Depositary Shares from registration with the US
Securities and Exchange Commission; and (c) to conduct certain
tender offers for the series "B" shares representing the capital
stock of the Company and the American Depositary Shares,
which tender offers are expected to take place in the first
quarter of 2023.
b) Ongoing capital stock increases.
To this date there are not ongoing capital stock increases.
c) Authorized Capital by the Shareholders Meeting.
On April 20, 2021, the Company held an Extraordinary General
Shareholders' Meeting, at which, among other items, it was
approved an increase in the authorized capital stock of the
Company to 6,825,447,481.00 Mexican pesos represented by
1,805,300,000 unsubscribed and unpaid shares, which are held
in treasury so that the Company may issue Capital Instruments
representing non-preferred subordinated debt, This increase
was approved by the National Banking and Securities
Commission (CNBV) through official communication number
312-3/10039041/2021 dated November 8, 2021.
As a result of said agreement, the Company requested the
update of the registration of the shares representing the capital
stock of Banco Santander Mexico, S.A. in the National Securities
Registry, which was authorized by the CNBV through official
communication number 153/2800/2022 dated May 20, 2022.In
the aforementioned official communication, it was requested
that the Company adjusted the amounts in pesos corresponding
to the capital stock to include cents, and therefore, through an
Extraordinary General Stockholders' Meeting held on July 19,
2022, the corresponding adjustment was made, which was
authorized by the CNBV through official communication number
312-3/93573/2023 dated January 3, 2023.
The capital stock of the Bank is 32,485,600,109.44 Mexican
pesos represented by a total of 8,592,294,357 shares with a
nominal value of 3.780782962 Mexican pesos each one; divided
in 4,385,824,012 stocks “F” Series and 4,206,470,345 shares
“B” Series. The capital stock is constituted as follows:
• Paid-in and subscribed capital of the Bank is
25,660,152,628.14 Mexican pesos represented by a total of
6,786,994,357 shares with a nominal value of 3.780782962
Mexican pesos each one; divided in 3,464,309,145 shares “F”
Series and 3,322,685,212 shares Series.
• The authorized capital stock for the conversion of obligations
into shares of the Company is 6,825,447,481.30 Mexican
pesos, represented by a total of 1,805 ,300,000 shares with a
nominal value of 3,780782962 Mexican pesos each; divided
into 921,514,867 Series “F” shares and 883,785,133 Series
“B shares ". which are kept in the treasury of the Bank.
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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.
Instrument
Issuance Program of unsecured bonds and
unsecured certificates of deposit
Type
Revolving
Term
4-
Mar-2026
The approved debt issuance of Banco Santander México, S.A.,
Institución de Banca Múltiple, Grupo Financiero Santander
México is currently composed as follows:
Amount
55,000 million Mexican pesos, or its $35,040 million Mexican
equivalent in UDIs, dollars or any
other foreign currency
Available
pesos
Private banking structured bonds Act with
subsequent placements (JBSANPRIV 21-1)
Not
RevolvingA
28-
Ene-2026
20,000 million Mexican pesos
With fix rate according to
Banxico 31/Dec/ 2022
$3,356 million Mexican pesos
Private banking structured bonds Act with
subsequent placements (JBSANPRIV 22-1)
Not
RevolvingA
9-
Mar-2027
20,000 million Mexican pesos
$0 million Mexican pesos
Private banking structured bonds Act with
subsequent placements (JBSANPRIV 22-2)
Not
RevolvingA
28-
Oct-2027
20,000 million Mexican pesos
Public banking structured bonds Act with
subsequent placements (JBSANPRIV 22-1)
Capital Notes (Tier 2 Capital)
Senior notes 144.ª/RegS
Subordinated Notes, perpetual and convertible
(Tier 1)
Not
Revolving
Not
Revolving
Not
Revolving
Not
Revolving
16-
Dic-2027
10,000 million Mexican pesos
1-Oct-2028 1,300 million American dollars
N/A
17-
Abr-2025
perpetual
1,750 million American dollars
N/A
700 million American dollars
N/A
$14,719 million Mexican
pesos
$10,000 million Mexican
pesos
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
1,000 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 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 million 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 million American dollars covers in
full the sum of the repurchase of the Subordinated Notes 2013,
for 1,222,907,000 American dollars.
Regarding the acquisition of the Subordinated Notes 2013: (a)
the acquired total amount was 1,222,907,000 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 American dollars.
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
million.
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.
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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 2022, 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) Non-Group entities which hold, directly or through
subsidiaries, 10% or more of equity
Not applicable.
g) Quoted equity instruments
Not applicable.
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 April 20, 2021, a General Extraordinary Shareholders'
Meeting of Banco Santander México was held, where among
other issues, it was approved that the Bank may issue
subordinated non preferential perpetual and convertible capital
notes, to be placed abroad, in accordance with the Banco de
Mexico authorization.
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
million 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 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.
f) Entities outside the Group which own, directly or through
subsidiaries, a stake equal to or greater than 10% of the
equity.
Not applicable.
g) Equity instruments admitted to trading.
Not applicable.
6. Banco Santander Totta, S.A
a) Number of equity instruments held by the Group
The Group holds 1,391,241,670 ordinary shares through its
subsidiaries: Santander Totta, SGPS, S.A. with 1,376,219,267
shares, Taxagest Sociedade Gestora de Participações Sociais,
S.A. with 14,593,315 shares, and Banco Santander Totta, S.A.
with 429,088 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.
b) Capital increases in progress
At 31 December 2022, there were no equity increases in
progress.
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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.
8. Banco Santander - Chile
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 2022, there were no approved capital
increases.
c) Capital authorised by the shareholders at the general
meeting
Share capital at 31 December 2022 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, 2022, 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, 2022, there were no equity increases in
progress.
c) Capital authorised by the shareholders at the general
meeting
There was no share capital increase in 2022.
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.
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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 20.5 billion, including more than EUR 9.7 billion in
taxes incurred directly (corporate income tax, non-recoverable
value added tax (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 5,498 million in 2022, with an effective tax
rate of 36.1%) 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 4,486 million in 2022,
representing an effective rate of 29.4%, see note 27). 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 2022.
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The breakdown of information is as follows:
Jurisdiction
Germany
Argentina
Austria
Bahamas
Belgium
Brazil1
Canada
Chile
China
Colombia
United Arab Emirates
Spain2
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 (EUR million)
1,701
1,810
198
10
60
12,315
60
2,388
14
66
1
7,122
7,607
174
104
867
2
103
1
(18)
48
547
30
375
4,459
245
87
152
2,749
1,339
—
6,694
20
172
160
455
52,117
2022
Employees
5,206
8,274
334
27
160
52,483
216
9,762
82
730
42
33,157
14,185
208
150
975
24
187
75
1
70
1,015
78
21
28,841
502
265
616
12,183
5,274
3
19,905
25
235
295
1,488
197,094
Gross profit or loss before
tax (EUR million)
633
410
106
3
24
3,513
18
1,024
(9)
8
—
(378)
2,258
90
65
487
(4)
14
—
(30)
30
279
21
366
1,555
142
34
62
941
798
—
2,472
11
58
51
198
15,250
Tax on profit or loss (EUR
million)
167
34
21
—
6
1,295
5
(2)
—
11
—
1,652
610
25
23
74
—
5
—
1
1
50
2
107
331
64
77
26
182
135
—
553
1
—
4
38
5,498
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 438 million.
Includes the Corporate Centre.
At 31 December 2022, the Group’s return on assets (ROA) was 0.63%.
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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 2022
fiscal year in eXtensible HyperText Markup Language (XHTML) format and, with respect to the main consolidated
financial statements and the notes to the consolidated 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 2022 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), 27 February 2023
ANA PATRICIA BOTÍN-SANZ DE SAUTUOLA Y O’SHEA
Chair
HÉCTOR BLAS GRISI CHECA
Chief Executive Officer
BRUCE CARNEGIE-BROWN
Vice Chair
JOSÉ ANTONIO ÁLVAREZ ÁLVAREZ
Vice Chair
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MEMBERS:
HOMAIRA AKBARI
FRANCISCO JAVIER BOTÍN-SANZ DE SAUTUOLA
Y O’SHEA
SOL DAURELLA COMADRÁN
HENRIQUE MANUEL DRUMMOND BORGES
CIRNE DE CASTRO
GERMÁN DE LA FUENTE ESCAMILLA
GINA LORENZA DÍEZ BARROSO AZCÁRRAGA
GLENN HOGAN HUTCHINS
LUIS ISASI FERNÁNDEZ DE BOBADILLA
RAMIRO MATO GARCÍA-ANSORENA
BELÉN ROMANA GARCÍA
PAMELA ANN WALKDEN
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.
808
Shareholder and investor relations
Santander Group City
Pereda, 2ª planta
Avda. de Cantabria, s/n
28660 Boadilla del Monte
Madrid
Spain
Telephone: (+34) 91 276 92 90
accionistas@santander.com
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.
Customer service department
Apartado de Correos 35.250
28080 Madrid
Fax: 91 759 48 36
santander_reclamaciones@gruposantander.es
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
Banking Ombudsman in Spain
(Defensor del cliente en España)
Mr José Luis Gómez-Dégano
Calle Raimundo Fernández Villaverde, 61
28003 Madrid
Telephone: (+34) 91 429 56 61
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