Banco Santander SA
Annual Report 2023

Plain-text annual report

Think Value Think Customer Think Global 2023 Annual report santander.com 2023 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.     325 Economic and financial review 328 Economy, regulation and competition 332 Group selected data 334 Group financial performance 377 Financial information by segment 427 Research, development and innovation (R&D&I) 430 Significant events since year end 431 Trend information 2024 441 Alternative performance measures (APMs) 451 Risk, compliance & conduct management 454 Risk, compliance & conduct management 459 Risk management and control model 465 Credit risk 477 Market, structural and liquidity risk 489 Capital risk 491 Operational risk 497 Compliance & conduct risk 503 Model risk 505 Strategic risk 507 ESG risk factors 513 Glossary of terms, acronyms and abbreviations Consolidated directors’ report 7 8 9 10 12 Business model and strategy The Santander Way Our business model 2023 results Looking ahead 19 Responsible banking Consolidated non-financial information statement Responsible banking overview 23 28 Materiality assessment Supporting the transition 30 Responsible investment 44 Acting responsibly towards employees 46 Acting responsibly towards customers 55 Supporting communities 61 64 Business conduct 70 Our progress in figures 89 106 Sustainability reporting standards and references 174 Independent verification report Further information 177 Corporate Governance 180 2023 Overview 186 Ownership structure 192 Shareholders and general meeting 199 Board of directors 250 Senior management team 182 Remuneration 278 Group structure and internal governance 280 287 Other corporate governance information Internal control over financial reporting (ICFR) Auditor's report and consolidated financial statements 521 Auditor's report 547 Notes to the consolidated financial 531 Consolidated financial statements statements 780 Appendix General information     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 consolidated directors’ report This report was approved unanimously by our board of directors on 19 February 2024 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'. 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 'External auditor report' of the 'Corporate governance' chapter. 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. 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. 'Alternative performance measures (APMs)' of the 'Economic and financial review' chapter and section 9.8 'Alternative performance measures (APMs)' of the 'Responsible banking' chapter. 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. 4   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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; • acquisition integration and challenges arising from deviating management’s resources and attention from other strategic opportunities and operational matters; 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. • 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. 5 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 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. 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. Glossary of terms, acronyms and abbreviations To facilitate a better understanding of this annual report, a glossary of terms, acronyms and abbreviations has been included at the end of the consolidated directors' report. 6 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Business model and strategy The Santander Way Our business model 2023 results Looking ahead 8 9 10 12 7 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The Santander Way Our purpose Our aim Our how To help people and  businesses  prosper To be the best open financial services platform by acting responsibly and earning the lasting loyalty of our people, customers, shareholders and  communities Everything we do should  be Simple, Personal and Fair An engaged and talented team which motivates generates support for our communities customer loyalty so we deliver leading to strong financial results for our shareholders 8 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our business model Generating value for our stakeholders CUSTOMER FOCUS Building a digital bank with branches → Customer focus is the essence of our strategy. Our multichannel offering enables us to fulfil all our customers' financial needs, making us their global, trusted and responsive partner. → Our customer growth investments are centred around three Total customers (mn) basic things: competitive prices, a frictionless digital experience and being a trusted financial partner. → We are building a digital bank with branches to make our customers' lives easier, giving them the power to decide how they want to interact with us (in person at our over 8,000 branches, contact centres, digital channels, …). → Every year, we strive to enhance our customer experience and satisfaction. All this is reflected in customer growth. SCALE Active customers (mn) 2023 165 100 2022 160 99 Global & in-market scale Tangible progress on our transformation → Santander has a unique combination of global scale and local leadership (top 3 in lending, deposits and mutual funds in most of our markets). → Our activities are organized under five global businesses: Retail & Commercial Banking, Digital Consumer Bank, Corporate & Investment Banking, Wealth Management & Insurance, and Payments. → These five global businesses support value creation based on the profitable growth and operational leverage that ONE Santander provides. → Our global approach to technology and development of global platforms is helping provide our customers with a frictionless digital experience. s e s s e n i s u b l a b o l G Retail & Commercial Banking Digital Consumer Bank Corporate & Investment Banking Wealth Management & Insurance Payments ONE Santander Europe North America South America DCB Europe DIVERSIFICATION Business, geographical and balance sheet → Our simple and well-targeted range of products and services meets the needs of a wide spectrum of customers: individuals, SMEs, mid-market companies, large corporates, wealthy customers, first-time banking customers, auto customers and dealers, and card customers. → Our diversified geographical footprint is well balanced between developing and mature markets. → Santander has a strong, simple and diversified balance sheet, with a low exposure to market risk and is highly collateralized and made up mainly of loans. → Diversification and a medium-low risk profile deliver recurrent pre-provision profit, with among the lowest volatility across peers. Group net operating income (pre-provision profit) EUR billion These are the foundations of our new phase of value creation for our shareholders 9 182324242420232423252626242528322008200920102011201220132014201520162017201820192020202120222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 results We delivered record profit... → Record results with 5mn new customers YoY contributing to double-digit revenue growth → First year of ONE Transformation driving profitable growth and structural efficiency improvement → Strong balance sheet, with solid credit quality metrics and a higher capital ratio → Delivering double-digit value creation and higher shareholder remuneration FY’23 Attributable Profit €11.1bn +15% FY’23 Revenue €58bn +11% - Cost to income - 44.1% –173bps CoR 1.18% +0.19pp RoTE 15.1% +169bps FL CET1 12.3% +0.2pp TNAVps + DPS EPS +15% Cash DPS +c.50% +21.5% Note: Based on underlying P&L. YoY changes in euros. In constant euros: attributable profit +18% and revenue +13%. TNAVps + dividend per share (DPS) includes the €5.95 cent cash dividend paid in May 2023 and the €8.10 cent cash dividend paid in November 2023. Implementation of 2023 shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals. For more details, see section 3.3 ‘Dividends and shareholder remuneration’ in the ‘Corporate Governance’ chapter. … and achieved all our 2023 financial targets Revenue A Efficiency ratio CoR FL CET1 RoTE A. YoY change in constant euros. 2023 targets 2023 achievement Double-digit growth 44-45% <1.2% >12% >15% +13% 44.1% 1.18% 12.3% 15.1% ü ü ü ü ü 10     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 highlights for our regions 2023 vs. 2022 Europe North America South America DCB Europe Attributable profit (€ bn) Contribution to A Group's profit Efficiency 5.5 2.4 3.0 1.2 45% 20% 25% 10% 42.1% 49.1% 38.5% 47.6% DCB Europe is the Digital Consumer Bank defined under the criteria prior to the 20 December 2023 announcement. A. As % of total operating areas, excluding the Corporate Centre. RoTE 14.5% 9.8% 14.4% 12.3% North America Europe We are leveraging the strength of our global businesses to accelerate the transformation of our businesses in the US and Mexico We remain focused on customer experience and service quality, and on making the structural changes needed to develop a common operating model for Europe South America DCB Europe (former DCB) We are focused on increasing the value we bring to the Group and on working to become the most profitable bank in each of the countries where we operate in the region Continue to reinforce our auto leadership through strategic alliances, leasing and subscription. In non-auto, keep upscaling our buy now, pay later business. Transformation for future growth deploying a simpler organizational structure to deliver through best-in-class digital platforms, launching new channels and products For more details, see section 4 'Financial information by segment’ in the ‘Economic and financial review' chapter. 11   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Looking ahead We are well positioned to continue driving additional profitable growth in 2024 Our consistent track record and the implementation of ONE Santander make us confident of delivering the following 2024 targets 2024 Group targets Revenue Efficiency CoR FL CET1 after Basel III implementation Mid-single growth digit A <43% c.1.2% >12.0% RoTE 16% Double-digit growth of TNAV per share + dividend per share through-the-cycle A. YoY revenue growth in constant euros, but Argentina in current euros. Note: All targets presented in this chapter are market dependent and do not represent guidance. Actual results may vary materially. A new phase of profitability and growth underpinned by three tenets Think Value Delivering double-digit value creation, on average through-the-cycle Think Customer Building a digital bank with branches with well targeted products and services to grow our customer base Think Global Best customer experience leveraging our global and in-market scale, network and technology capabilities to accelerate profitable growth 12 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Think Value Delivering double-digit value creation, on average through-the-cycle 2025 targets vs. 2023 figures Strength FL CET1 >12% 12.3% Shareholder remuneration Payout 50% Cash dividend + SBB 50% annually Disciplined capital allocation RWAs with RoRWA > CoE c.85% 84% Profitability RoTE 15-17% 15.1% Note: our shareholder remuneration policy is approximately 50% payout split in approximately equal parts (cash and share buybacks). Cash DPS against 2023 results estimated as 25% of the profit for the year. Implementation of 2023 shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals. For more details, see section 3.3 ‘Dividends and shareholder remuneration’ in the ‘Corporate Governance’ chapter. Think Customer Building a digital bank with branches with well targeted products and services to grow our customer base Customer centric Total customers (mn) Active customers (mn) 2023 165 100 2025 targets c. 200 c. 125 Simplification & automation Efficiency ratio (%) 44.1 c.42 Customer activity Transactions volume per active customer (month, % growth) 10 c. +8% Note: total transactions include merchant payments, cards and electronic A2A payments. Target: c.+8% CAGR 2022-25. 13   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Think Global Best customer experience leveraging global and in-market scale, network and technological capabilities to accelerate profitable growth → A simpler and more efficient operating model that enables us to capture the full potential of our business model to deliver profitable growth. Our new model capitalizes on our strategic advantage of combining global capabilities with local expertise Serve our customers better Grow more and faster Be more efficient More resilient balance sheet Better risk management from a global perspective across business lines Improved and more disciplined capital allocation for higher profitability → Our transformation started in 2015 with CIB, the first business we managed as a global platform, followed by Wealth Management & Insurance, PagoNxt and Cards. In 2023, we completed the last step towards ONE Santander consolidating retail and commercial and consumer banking activities under two new global businesses: Retail & Commercial Banking and Digital Consumer Bank. 14       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our five global businesses Retail & Commercial Banking Driving growth and efficiency on the back of our new model and proprietary technology Customer experience Operational leverage Global platform 2025 target Product simplification and digital first Common operating model, globally leveraging process automation Proprietary back-end (Gravity) and our cloud based front-end (ODS) technologies c.17% RoTE 15.1% 2023 <42% C/I 43.1% 2023 Active customers (mn) +1% A # of products –16% (k) A # of non-commercial FTEs per mn total customers –1.5% Key drivers A. Metrics cover all products and employees in the branch network. Note: new global business definitions as published on 20 December 2023. 15 74.675.12022202310.18.420222023657647Jun-23Dec-23   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Digital Consumer Bank Transforming into a best-in-class, global business and operating model Customer experience Operational leverage Global platform 2025 target Global relationship management (OEMs, importers and retailers) Operational & commercial benchmark to maximize profitability and growth From multiple country- specific platforms to global platforms (e.g. leasing, BNPL) >14% RoTE 11.5% 2023 c.40% C/I 42.8% 2023 Total customers (mn) +1% Retail deposits cost-to-serve (bps) –8bps # of non-commercial FTEsA per mn total customers –0.4% Key drivers A. DCB Europe only. Note: new global business definitions as published on 20 December 2023. Corporate & Investment Banking Playing to our strengths to better serve our corporate customers and institutions Customer experience Operational leverage Global platform 2025 target Trusted advisor for our customers, leveraging our global and local products Continue growing fee and transactional business through our global centres of expertise and tech Optimize capital returns on the back of global origination and distribution capabilities >20% RoTE 17.5% 2023 <45% C/I 45.0% 2023 % customer related revenue +1.7pp Fee growth (constant € bn) +14% % Total revenue / RWA +0.8pp Key drivers Note: new global business definitions as published on 20 December 2023. 16 25.225.420222023118110202220234394372022202381.883.5202220231.92.1202220235.96.720222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Wealth Management & Insurance Accelerating our customers' connectivity with our global product platforms Customer experience Operational leverage Global platform 2025 target Providing our customers with a specialized product & service proposition in all countries Leverage our global operations and factories to connect countries and increase collaboration with CIB and Retail Global platforms and infrastructure to improve efficiency and time-to-market c.60% RoTE 72.2% 2023 c.10% Revenue growth +22% 2023 Assets under A (€ bn) management +14% Collaboration fees (€ bn) +6% Revenue growth B including ceded fees (€ bn) +11% Key drivers A. Includes off-balance sheet assets and deposits. B. Includes all fees generated by asset management and insurance businesses, even those ceded to the commercial network. Note: new global business definitions as published on 20 December 2023. Revenue CAGR 22-25 target. Payments Seizing a growing opportunity by capturing scale through global platforms Customer experience Operational leverage Global platform 2025 target Deliver best-in-class payment solutions leveraging our global and local scale Reduce cost per transaction through capex optimization and operational efficiency Migrate volumes to common global platforms to gain scale and offer competitive pricing in the open market PagoNxt >30% EBITDA margin 24.8% 2023 c.30% Revenue growth +17% 2023 # transactions (bn per month) +15% Cost per transaction (€ cents, PagoNxt) –16% % open market revenue (PagoNxt) +2.2pp Key drivers Note: transactions include merchant payments, cards and electronic A2A payments. New global business definitions as published on 20 December 2023. PagoNxt revenue CAGR 22-25 target. 17 402460202220233.43.6202220235.15.7202220232.63.0202220234.13.52022202313.615.820222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management In summary, our common operating model supports value creation based on the profitable growth and operational leverage that our global platforms provide 2023 vs. 2022 Revenue (€bn) Contribution to A Group revenue 30 +12% 12 +1% 8 +17% 3 +22% Revenue (€bn) 5 +12% 51% 21% 13% 6% Contribution to A Group's revenue 9% Efficiency 43.1% -157bps 42.8% +86bps 45.0% +171bps 37.9% -333bps Efficiency 44.2% -235bps Note: YoY change in constant euros. New global business definitions as published on 20 December 2023. A. As % of total operating units, excluding the Corporate Centre. B. Global businesses’ RoTEs are adjusted based on the Group’s deployed capital. For more information, see section 8 'Alternative Performance Measures' of 'Economic and financial review' chapter. B RoTE 15.1% +1.0pp 11.5% -4.0pp 17.5% +1.6pp 72.2% +19.8pp 2025 RoTE target B c.17% >14% >20% c.60% EBITDA margin PagoNxt 2025 EBITDA margin PagoNxt target 24.8% +15.7pp >30% ESG commitments: we are creating value for our shareholders by focusing on delivering profitable growth in a responsible way Green finance raised and facilitated (since 2019) Socially responsible investments (AuMs) Financial inclusion (# People) 2023 €114.6bn €67.7bn 1.8mn 2025 targets €120bn €100bn 5mn Note: information has been verified with limited assurance by PricewaterhouseCoopers Auditores, S.L. For more details, see the 'Responsible banking' chapter and metrics definitions in 9.8 'Alternative performance measures (APMs)' in the same chapter. Not taxonomy. Financial inclusion (#people, mn): starting Jan-23. Does not include financial education. 18   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Responsible banking Consolidated non-financial information statement 19 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our sustainability strategy supports our purpose to help people and businesses prosper. We are on track to meet our targets announced at our Investor Day Green finance EUR 114.6 bn A EUR 120 bn target by 2025 EUR 220 bn target by 2023 Socially responsible investment AUM EUR 67.7 bn Financial inclusion 1.8 mn EUR 100 bn target by 2025 EUR 5 mn target by 2025 We are progressing towards our net zero ambition Set 2 new decarbonization targets for 2030 for corporate auto manufacturing portfolio and auto lending portfolio in Europe. Progress on portfolio alignment in relevant portfolios, including disclosure of financed emissions for UK Mortgages and Brazil Agriculture. Progress embedding climate and environmental factors in our risk management practices, leveraging on market good practices and supervisory expectations, including setting three additional risk appetite limits consistent with our decarbonization strategy. We are helping society → EUR 352,181 million to finance homes and EUR 208,276 million to purchase other goods. B → EUR 346,211 million to help set up or grow companies (39% to individuals and SMEs). B → 212,764 employees. EUR 13,726 million paid in wages and benefits. → EUR 174 million invested in communities, including EUR 105 million to promote higher education, employability and entrepreneurship, benefitting 2.7 million people. We have a target to deploy EUR 400 million in education, employability and entrepreneurship between 2023 and 2026. A. Preliminary data as final League Tables for 2023 were not yet available at date of editorial closing.. This information will be updated to year end in the next Climate Finance Report.. B. Credit stock as of 31 December 2023. 20     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 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 and Bloomberg Gender Equality Index), 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 9.1 'Stakeholder engagement' and 1. '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 2023 consolidated management report. Scope This chapter covers the core activities of Banco Santander and its subsidiaries from 1 January to 31 December 2023 (for more details, see Notes 3 and 53 to the consolidated financial statements and sections 3 and 4 in the 'Economic and financial review' chapter). 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 2022 Responsible banking chapter are explained in the related section as well as in the 9.7 'Scope of information' and the 10.4 'Global Reporting Initiative (GRI) content index' sections. Regulation, reporting standards and other references that this chapter addresses This chapter meets Spain’s Act 11/2018, EU guidelines 2017/ C215/01 on non-financial reporting, European Taxonomy regulation (Regulation (EU) 2020/852 and Commission Delegated Regulations 2021/2139 and 2021/2178 amended by Delegated Regulations 2022/1214, 2023/2485 and 2023/2486), 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 10. 'Sustainability 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. 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. 21 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8. Our progress in figures 8.1 Tax contribution 8.2 Customers 8.3 Financial inclusion 8.4 Community investment 8.5 Employees 8.6 Green transition 8.7 Equator principles 8.8 Country by country report (according to GRI 207-4) 9. Further information 9.1 Stakeholder engagement 9.2 Main internal regulations and governance 9.3 Our targets 9.4 Double Materiality Assessment and sources 9.5 EU Taxonomy 9.6 Sustainable finance and investment classification system (SFICS) 9.7 Scope of information 9.8 Alternative performance measures 10. Sustainability reporting standards and references 10.1 Non-financial information Act 11/2018 content index 10.2 UN Global Compact content index 10.3 UNEP FI Principles for Responsible Banking reporting index 10.4 Global Reporting Initiative (GRI) content index 10.5 Sustainability Accounting Standards Board (SASB) content index 10.6 Stakeholder Capitalism Metrics content index 10.7 Task Force on Climate related Financial Disclosure (TCFD) content index 10.8 SDGs contribution content index 10.9 GFANZ transition planning 11. Independent verification report Responsible banking overview I. Santander's support for society II. Our culture III. Our sustainability strategy IV. 2023 highlights V. Recognition VI. Governance 1. Materiality assessment 1.1 Material sustainability matters 1.2 Impacts, risks and opportunities 2. Supporting the green transition 2.1 Our strategy and ambition 2.2 Governance 2.3 Risk management 2.4 Metrics and targets 2.5 Supporting our customers in the green transition 2.6 Nature and biodiversity 2.7 Our environmental footprint 3. Responsible investment 4. Acting responsibly towards employees 4.1 Talent 4.2 Employee experience 4.3 Working conditions and social dialogue 5. Acting responsibly towards customers 5.1 Customer experience and satisfaction 5.2 Consumer protection 5.3 Financial health and inclusion 5.4 Privacy, data protection and cybersecurity 6. Supporting communities 6.1 Support for higher education, employability and entrepreneurship 6.2 Other community support programmes 7. Business conduct 7.1 Conduct standards 7.2 Ethical channels 7.3 Environmental, social and climate change risk management 7.4 Financial crime compliance and relations with political parties 7.5 Acting responsibly towards suppliers 23 23 24 25 26 27 27 28 28 29 30 31 32 33 33 38 42 43 44 46 46 48 52 55 55 56 57 59 61 61 63 64 65 66 67 68 69 70 71 72 74 75 76 84 86 87 89 89 92 94 95 97 126 127 128 131 132 137 138 151 162 165 170 171 173 174 22       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Responsible banking overview Our purpose is to help people and businesses prosper. I. Santander's support for society 1. We drive economic growth by helping people and businesses prosper. → EUR 352,181 million to help people buy homes and EUR 208,276 million to purchase other goods. A → EUR 346,211 million to help set up or grow companies (39% to individuals and SMEs). A → EUR 10,937 million paid to suppliers. 91% are local and account for 94% of total procurement turnover. → EUR 9,664 million in total taxes paid by the Group. EUR 10,250 million in taxes channelled from customers to tax authorities. → Santander’s stock of credit contributes to generating economic activity of more than EUR 290 billion, around B 2.5% of GDP on average in the main countries where we operate. 2. We help create jobs. → 212,764 employees. EUR 13,726 million paid in wages and benefits. → 53% of our workforce are women, 31.4% of whom are in senior executive positions. 40% of our board members are women. C → In 2023 we achieved our target of ~0% Equal Pay Gap two years ahead. B → Santander’s stock of credit helps support more than 8 million jobs in the main countries where we operate. 3. We tackle global challenges. D → EUR 20.2 billion in green finance raised and facilitated and EUR 67.7 billion assets under management in Socially Responsible Investment. → 1.8 million new people financially included and a total of 1.2 million underbanked entrepreneurs supported through EUR 1,172 million in credit disbursed. → EUR 174 million invested in communities, including 105 million to promote higher education, employability and entrepreneurship, benefitting 2.7 million people. A. Credit stock as of 31 December 2023. B. Source: Deloitte. C. The year-end figure is 0.44%. Having met the target set the Group has set itself the objective of maintaining a EPG in line with best market practices. D. Preliminary data as final League Tables for 2023 were not yet available at date of editorial closing. This information will be updated to year end in the next Climate Finance Report. 23     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management II. Our culture Santander’s corporate culture, The Santander Way, is the bedrock of our success. Our values (Simple, Personal and Fair), our corporate behaviours (T.E.A.M.S), our leadership principles and our robust risk culture (Risk Pro) guide us every day. In 2022 we launched our new corporate behaviours and in 2023 we progressed in their implementation: • We continued to hold regular Town Halls and share communications reinforcing the importance of displaying our behaviours on a daily basis. • Some of our HQ offices have been decorated with T.E.A.M.S signage to make our behaviours visible to all employees and customers. • We continued to assess how to improve our efforts through our employee listening programme - YourVoice. • We aligned our processes with our culture and adapted our succession planning to ensure that employees earmarked for promotion were also cultural ambassadors. • We continued to promote our culture through our performance review, MyContribution, where 50% is based on 'what' we do, 40% on 'how' we do it and 10% on our risk management. • We held the Santander Week, which saw all our units celebrate our culture together, with a kick-off to the week given by the chair, CEO and regional heads. • Local CEOs held events with the participation of their executive teams to reinforce the T.E.A.M.S behaviours and to celebrate The Santander Way as one team. Our values Simple Personal Fair Our behaviours Our leadership principles → Promote a 'Group First' mindset → Lead transformation → Build, develop and grow talent → Display T.E.A.M.S. flawlessly → Drive diversity, equity and inclusion Our strong risk management culture 24 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management III. Our sustainability strategy GRI 2-22, 2-23 Our sustainability strategy focuses on issues that are material to Santander. We conduct a double materiality assessment to identify the topics that pose the biggest risks to, and create commercial opportunity for the bank; and where we can have the biggest impact. Ambition Action E Support the transition to a low-carbon economy S Promote inclusive growth G Strong governance and culture across the organization → Support and engage with customers in accelerating their transition, and develop a best- in-class sustainable finance and investment proposition. → Progress with decarbonizing our portfolios to align to net zero by 2050, while considering other environmental goals. → Promote employees' wellbeing and equal treatment and opportunity for all. → Support financial inclusion by promoting access to financial products and services and financial health, including financial literacy. → Foster customer information transparency and data privacy. → Support education, employability and entrepreneurship. → Drive culture, conduct and ethical behaviour, doing everything the Santander Way: Simple, Personal and Fair. → Continue integrating ESG in governance and our core activities, and enhancing capabilities across teams including business, risk management and data reporting. Our sustainability strategy aims to help the business grow, be aligned to our stakeholders’ expectations, and make Santander more resilient through strong risk management, robust data quality and privacy, transparency, a vibrant culture and clear governance. Our sustainability goals are consistent with the Group’s business approach – Think Value, Think Customer and Think Global. We want to: 1. create value for shareholders; 2. be the partner of choice for our customers in their transition to a low carbon economy and support their financial inclusion; 3. use our scale and local leadership to tackle global challenges in the markets where we operate. 25 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management IV. 2023 highlights New targets and commitments: → We increased two ESG targets at our Investor Day: 35% of senior executive positions to be held by women by 2025 and to financially include 5 million people between 2023 and 2025. → To help fulfil our ambition to be net zero by 2050, in 2023 we have set two new decarbonization targets for 2030 in the transport sector: auto lending in Europe and auto manufacturing. This way, we now have seven targets in five high emitting sectors. → We have set a target to invest EUR 400 million between 2023-2026 to foster education, employability and entrepreneurship. Progress on ESG: → In Corporate & Investment Banking, we raised and facilitated EUR 20.2 bnA EUR 114.6 bn since 2019: • Santander remains among the top banks in renewable finance in 2023, reaching in green B energy project finance, with 85 transactions and EUR 6.7 bn in financing. • We financed the construction of green assets and an EV battery gigafactory plant, signed green loans with clients such as Grenergy, structured sustainable transactions in Export and Supply Chain finance, and launched Green Deposits. • We advised on several corporate finance transactions in the renewable energy sector and acted as sole financial advisor in one of the largest ever hydrogen transactions globally at the time. → In Retail & Commercial Banking, in 2023, we strengthened our green proposition with new solutions for clients, e.g.: • Green mortgages, electric vehicles or financing of solar panel installations (11 partnerships for solar panel solutions across our three regions). At the end of the year, we had a stock of EUR 22.6 bn in mortgages aligned with the EU Taxonomy. • EUR 1.4 bn in new financing agreements with multilateral development banks to finance the investment and liquidity needs of our customers in Europe and Latin America. • The EIB granted EUR 300 million to Banco Santander Brasil for small-scale solar energy investments. → Our SRI AUM amounted to EUR 67.7 bn, of which EUR 48.1 bn are from SAM and EUR 19.6 bn from our Private Banking services associated with third party funds: • 70.8% of financed emissions from SAM’s portfolio were either aligning to net zero or under either individual or collective engagement in which SAM is involved. • SAM Spain was the first asset manager to adhere to and report on the CNMV stewardship code compliance. → In Digital Consumer Bank, in 2023, in Europe we financed more than 208,000 new electric vehicles, with volume of EUR 6.5 bn. This equals a market share of EV sales in Europe of over 10%. → In Cards, in 2023, we acquired 37 million cards (72% of the year's total) made of sustainable materials (recycled PVC or PLA).C → We exceeded our target for 30% of senior executive positions by 2025 to be held by women in Q2, reaching 31.4% by year end. Additionally, we have reached our target of Equal Pay gap close to zero two years in advance. → We financially included 1.8 million new people through our access and finance initiatives and granted EUR 1,172 m in microloans to a total of 1.2 million underbanked entrepreneurs during the year. In addition, we reached 11.5 million people with financial education initiatives, including content in social media. → We invested EUR 174 million in our communities: • EUR 105 million in supporting education, employment and entrepreneurship through Santander Universities, our unique global initiative. In 2023 we granted 28,849 scholarships. • EUR 69 million in other programmes with 2.2 million people helped. For more details, see section 9.3 'Our targets'. A. Preliminary data as final League Tables for 2023 were not yet available at date of editorial closing. This information will be updated to year end in the next Climate Finance Report. B. When referred to 'green' or 'sustainable' products or services without further detail, these comply with SFICS. For more information, see section 9.6 'Sustainable Finance and Investment Classification System (SFICS)' of this chapter. C. PLA cards: Polylactic acid (PLA) is a sustainable plastic substitute made with renewable bio-sourced resources. Recycled PVC cards: manufactured using plastic waste from the packaging and printing industries reducing first-use plastic. 26         2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management V. Recognition Ratings In 2023, we maintained our position in MSCI (AA) and remain in the DJSI World and European Index for Banks. In CDP we maintained our positioning at Leadership level, however decreased from A to A-. We improved our position in Sustainalytics, scoring 19.7 points (-2.7 points) and placing in the 'low risk' category. We scored 65 points (+4 points) in Moody’s and 4.7 points (+0.6 points) in FTSE4Good. A. In CDP we remain in Leadership level and in DJSI we remain in the World and European Indexes. B. Not rated in 2023. C. Based on 2022 information. Updated score not available on the date this Annual Report was issued. Awards World’s best bank for financial inclusion by Euromoney for the third year in a row; World’s best bank for SMEs and World’s best bank for emerging markets by Euromoney (Euromoney Awards for Excellence). We were the highest ranked bank on Fortune's list of 50 companies that are changing the world, owing to Santander Universities support for education, entrepreneurship and employability over the past 27 years. VI. Governance Supervision The responsible banking, sustainability and culture committee (RBSCC) is the highest governance body that oversees drawing up and implementing the Group’s sustainability strategy and policies, supporting the board of directors. The RBSCC met six times in 2023. The audit, remuneration and risk committees also supported and reviewed sustainability topics. Accountability The Responsible Banking Forum, which comprises senior Group executives, monitors and guides the execution of our sustainability strategy. It met six times in 2023. The Management meeting, chaired by the CEO, reviewed progress with the Group’s sustainability agenda on three occasions. The Group’s Responsible Banking unit works continuously to define, execute and monitor our sustainability strategy with the Responsible Banking network in our core markets, global businesses and corporate functions. Incentives In 2023, our reward schemes included ESG as a lever to make Santander teams’ actions consistent with our goals. Variable remuneration (which applies to all units) has included ESG since 2020 and long-term incentives (which apply to senior executives) since 2022. In both cases, the scorecards leverage on Santander ESG public targets, including climate, green finance, financial inclusion, DE&I and SRI. For more details on our policies and governance structure, see section 9.2 'Main internal regulations and governance' 27   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. Materiality assessment 1.1 Material sustainability matters GRI 3-2 In 2023, we carried out a double materiality assessment based on the Global Reporting Initiative (GRI) and elements from the Corporate Sustainability Reporting Directive (CSRD). It covered two dimensions: Impact materiality Financial materiality How business affects people and/or the environment through positive and negative impacts. How sustainability matters can affect financial results through risk and opportunity. The sustainability matters we consider in this assessment are those set out in the European Sustainability Reporting Standards (ESRS). We carried out the exercise at subtopic-level, even though the final results are presented at topic-level; and the scope is Grupo Santander. The thresholds used to categorize the material aspects are Critical, Significant, Important, Informative and Minimal. According CSRD, a sustainability matter is material if it is above the category of Important, regardless of whether the relevance comes from the impact side or from the financial side (risks and opportunities). The table below shows the assessment and materiality for each sustainability matter with a breakdown by impact, risk and opportunity. Three sustainability matters – Climate Change, Consumers and End Users, and Business Conduct - are material (Significant or Critical), and two – Own Workforce and Affected Communities – are informative. The results have been carried out with a mid- term time horizon (~3 years). Financial materiality Impact materiality Risk Opportunity Double materiality (final output) Sustainability matters ESRS E1: Climate Change ESRS E2: Pollution ESRS E3: Water and marine resources ESRS E4: Biodiversity and ecosystems ESRS E5: Resource use & circular economy ESRS S1: Own workforce ESRS S2: Workers in the value chain ESRS S3: Affected Communities ESRS S4: Consumers and end-users ESRS G1: Business conduct Thresholds: ¢ Critical ¢ Significant ¢ Important ¢ Informative ¢ Minimal We conducted this assessment using the best available information and tools, and consulting Santander’s key stakeholders. See section 9.4 'Double Materiality Assessment sources'. The materiality assessment informs our sustainability strategy (see section III 'Our sustainability strategy'). The materiality assessment is connected to key risk management processes across the Group, as it is an input for the top & emerging risks exercise, and it is connected to the Climate Risk materiality (see section 10.2 'ESG factors risk management'). This climate materiality serves to prioritize our climate strategy and targets and inform risk appetite. 28 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1.2 Impacts, risks and opportunities GRI 3-1 To assess the materiality of each sustainability matter, we have identified the derived impacts, risks and opportunities (IROs). The table below details the IROs for the three material sustainability matters and the two informative matters. Impact Risk Opportunities Climate change Santander can have a positive impact by financing customers’ transition to a low-carbon economy. This transition will benefit the reduction of total emissions released into the atmosphere, thus making a positive contribution to the Paris Agreement. Business conduct Santander’s behaviour and actions have an influence due to the bank’s leadership in the markets where we operate. Consumers and end - users Santander can have a positive impact on consumers and end users due to our ability to help customers access financial services and in promoting their financial health. Own workforce Santander employs over 200,000 people worldwide. We aim to have a positive impact on our workforce through working conditions, remuneration schemes and Diversity, Equity and Inclusion policies. Affected communities Santander can have a positive impact by using our scale and local leadership to help the communities where we operate access basic needs (affordable housing, water and sanitation, etc.) and make a positive contribution to the sustainable development goals (SDGs). Climate change can cause economic losses to our customers, who might be affected by physical or transition risk. These risks could lead to increased default rates or reduced value of collaterals. Our diversification by geography and sector reduces this risk across our balance sheet and we manage this risk by embedding climate into risk management. For more details, see section 2.3 Risk Management. Inadequate behaviour or conduct could lead to fines and reputational risk. Fostering a solid corporate culture in which everything we do should be Simple, Personal and Fair is how we mitigate this risk. Lack of transparency in customer information or unfair disclosure may lead to customer dissatisfaction and complaints, which would entail direct and indirect costs. Data privacy events may hamper customers’ trust. A deterioration in the financial health of our customers may increase the risk of default on loans. We mitigate this risk by developing a solid corporate culture and behaviours and policies to set clear guidelines about how we deal with customers, process customer data and interact with vulnerable customers. Less motivated people could lead to higher rotation and absenteeism, which could increase our cost base. Poor talent retention can also harm our performance. Our own workforce strategy seeks to mitigate this risk with initiatives in areas such as diversity, equity and inclusion, culture, and health and well-being. Some of the activities we finance can pose environmental and social risk related to the communities where these operations take place. We mitigate this risk through our Environmental, Social and Climate Change (ESCC) policy and other internal controls. Supporting our customers in their transition has become a key business driver. Our target is to raise or facilitate €220 bn in green finance by 2030. To do so, we are building capabilities and developing our value proposition for customers across sectors and activities (finance, investment, advisory etc.). Applying a solid corporate culture and conduct when dealing with customers can earn their trust and help set us apart. Robust data privacy measures and Know Your Customer protocols can boost our revenue by building trust with customers. Our financial inclusion proposition is also a source of new customers. A well skilled and diverse workforce boosts results by increasing productivity, fostering innovation and enhancing customer satisfaction. Financing basic needs in the regions where we operate (affordable housing, water and sanitation, etc.) is an opportunity to increase revenue. Our financial education proposition and our support for higher education, employability and entrepreneurship help build trust and enhance the perception of the bank in the communities where we operate. Thresholds: ¢ Critical ¢ Significant ¢ Important ¢ Informative ¢ Minimal 29 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2. Supporting the green transition Our ambition is to achieve net zero carbon emissions by 2050. We 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 Provide customers with a wide range of solutions to support their transition to a low-carbon economy Remain carbon neutral in own operations and consume 100% electricity from renewable sources A  2025 by Manage climate and environmental risk according to regulatory and supervisory expectations Our targets: Electricity from renewable A sources Carbon neutral in our own operations B Green finance raised and C facilitated (EUR bn) AuMs in Socially Responsible Investments (SRI) (EUR bn) Thermal coal-related power & mining phase out (EUR bn) Emissions intensity of power generation portfolio Absolute emissions of energy (oil & gas) portfolio Emissions intensity of aviation portfolio Emissions intensity of steel portfolio New in 2023 Emissions intensity of auto manufacturing portfolio Emissions intensity of auto lending portfolioD 2018 43% 2019 50% 2020 57% 2021 75% 2022 88% 2023 2025/2030 target 97% 100% by 2025 19 33.8 65.7 94.5 114.6 Every year 120 bn by 2025 220 bn by 2030 27.1 53.2 67.7 100 bn by 2025 7 5.9 4.9 0 by 2030 0.21 0.17 0.19 23.84 22.58 27.43 92.47 93.05 97.21 1.58 1.40 1.36 149 138 137 0.11 tCO2e / MWh in 2030 16.98 mtCO2e in 2030 61.71 gCO2e/ RPK in 2030 1.07 tCO2e/ tS in 2030 103 gCO2/vkm in 2030 75-89 gCO2e/vkm in 2030 From…To Cumulative target Commitment Achieved A. In countries where we can verify electricity from renewable sources at Banco Santander properties. It considers the 10 main countries in which we operate. B. Scope 1 and 2 emissions and scope 3 emissions from employee commuting and business travel. It considers wholly owned companies in Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the United Kingdom and the United States. C. Preliminary data as final League Tables for 2023 were not yet available at the date of editorial closing. CIB contributed EUR 20.2 billion to the green finance target, including EUR 5.6 bn in Project Finance; EUR 2.8 bn in financial advice; EUR 5.8 bn in green bonds (DCM); EUR 0.2 bn in export finance (ECAs); and EUR 5.8 bn in M&A, according to Dealogic, Infralogic, TXF and Mergermarket league tables. In 2023 there was no significant contributions from ECM and Project bonds. 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. This information will be updated to year end in the next Climate Finance Report. D. Consumer lending for acquisition of passenger cars, covering a significant majority of the exposure in Europe. 30                 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2.1 Our strategy and ambition 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 and emissions from our lending, advisory and investment services. Since 2021, we are a founding member of the Net Zero Banking Alliance (NZBA, under the United Nations Environment Programme Finance Initiative), committing the Group to: → support the transition of operational and attributable greenhouse gas (GHG) emissions from lending and investment portfolios towards pathways to net zero by mid-century; and → set intermediate targets for priority GHG emitting sectors for 2030 (or sooner). 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) in 2021 as part of its commitment to fight 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 transition and achieve net zero carbon emissions by 2050: 1) Align our portfolio with the Paris Agreement goals to help limit warming to a 1.5ºC rise above preindustrial levels; and set sector portfolio alignment targets in line with the NZBA and with NZAMi. 2) Help our customers' green transition, raising or facilitating 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 in SRI by 2025. 3) Reduce our impact on the environment, implementing efficiency measures, sourcing all our electricity from renewable energy by 2025 and remaining carbon neutral in our operational1 carbon footprint. 4) Embed climate in risk management and understand and manage the sources of climate change risks in our portfolios. For more details on our 'Climate Finance Report' and the net zero announcement press release, see our corporate website santander.com. For more details on SAM’s strategy, see 'Our net zero strategy' in section 3. 'Responsible Investment'. Our approach Transitioning entails allocating the correct resources and focus capabilities on decarbonizing the most material, high-emitting sector portfolios. The methodologies we have developed inform our plans to decarbonize our credit portfolios, especially the ones directly related to fossil fuels. To support our approach, the Group’s climate risk management area 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. This goes beyond sectors for which we have targets and covers others that are highly prone to transition risk. Our key governance bodies regularly review progress with our main climate-related pillars, which consist of portfolio alignment, support our customers' green transition, reduce our environmental impact and embed climate in risk management. Disclosing our approach is key to helping markets and other stakeholders assess how we embed climate-related initiatives in our processes and policies, and report on our climate-related performance. We use the Taskforce on Climate-related Financial Disclosures (TCFD) and GFANZ Financial Institutions Net Zero Transition Plans as the frameworks to disclose our approach to integrating climate in our investment strategy and help us draw up our transition plan. 2023 highlights 2 → We raised or facilitated EUR 20.2 bn (EUR 114.6 bn since 2019) and took advantage of climate finance opportunities to make progress with our green finance target (See 'Supporting our customers in the transition'). → We set additional decarbonization targets for the automotive sector for 2030: one for the auto manufacturing portfolio (-31% intensity emissions vs 2020); and one for the auto lending sector portfolio in Europe (range between -35% and -45% intensity emissions vs 2022). → We updated our Sustainable Finance and Investment Classification System (SFICS) based on lessons learned and market trends. The SFICS provides criteria to flag the Group's financing and investment activities as sustainable (that help mitigate or adapt to climate change). → We developed a methodology for tiering customers according to their degree of alignment forecast for 2030 for the energy, steel and aviation sectors. We enhanced quality assessments 1 2 Scope 1 and 2 emissions and scope 3 emissions from employee commuting and business travel. It considers wholly owned companies in Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the United Kingdom and the United States. Preliminary data as final League Tables for 2023 were not yet available at the date of editorial closing. This information will be updated to year end in the next Climate Finance Report. 31 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management of transition plans, based on updated benchmark methodologies and sector research. The tiering assessment helped set risk appetites in relation to these targets. → We supported the University of Oxford with funding for a Transition Finance Centre of Excellence, which works in developing transition finance, best practice, new tools and insights. We also participated in the Banking for Impact on Climate in Agriculture (B4ICA) initiative, contributing through the development of methodologies to help the sector transition to low carbon. → We continued to embed environmental and climate factors in policies, risk appetite and risk management. We strengthen our risk management cycle with initiatives such as 'The Climate Race', a target operating model to embed environmental and climate change (E&CC) factors in all stages of credit approval. → We conducted an internal assessment of dependencies and impacts with the available data and methodologies regarding nature and biodiversity. → In 2023, 97% of our electricity came from renewable sources. We have been reducing our carbon footprint since 2011 and mitigating beyond the value chain the remaining CO2e emissions from our own operations since 2020. 2.2 Governance 201-2, FS1, FS2, FS3 Climate change and green transition oversight bodies: • The board of directors oversees our activity regarding climate change and the green transition. In 2023, the board discussed these topics at seven meetings, including the Climate-Net Zero ambition plan, the ESCC policy review and disclosure reports. Additionally, business units and global businesses report annually to the board on their main ESG initiatives. • The responsible banking, sustainability and culture committee (RBSCC) assists the board of directors in fulfilling its oversight responsibilities with respect to the responsible business strategy and sustainability issues of the Company and its Group. During 2023, this board committee has reviewed and discussed items related to climate change at five sessions in 2023. • The RBSCC coordinates its activities with the other board committees, in particular with the risk supervision, regulation, and compliance committee and with the board audit committee. The first one, has assessed the ESG policies and ESG risk appetite and the latter has supervised financial and non-financial reporting and disclosures, as well as related ESG processes and controls. • At the level of the Group's executive committees, other governance bodies such as the risk control committee, the strategy committee and the financial accounting and reporting committee are involved in the review of: ESCC risk policies, risk appetite and risk management; the definition of ESG strategy; and the review of ESG disclosure, reporting, processes and controls. • The Responsible Banking Forum (RBF) discussed climate change and/or green finance at its six meetings in 2023. As this body supervises consistency across the Group on key issues, it reviewed and escalated the mentioned topics, as well as criteria tools to label products and services as sustainable, developments in tagging standards, and decarbonization plan overviews. • The management meeting chaired by the CEO, reviews the day-to-day implementation of ESG activities related to climate change and green finance. For more details on the topics discussed by the RBSCC and actions taken, see section 4.9 'Responsible banking, sustainability and culture committee' in the 'Corporate governance' chapter. For more details on ESG training, see 'Global Training' in section 4.1. Main areas involved in implementing our climate change strategy Pillar of the climate change strategy Aligning our portfolio with the Paris Agreement goals Supporting our customers in the green transition Reducing our environmental impact Embedding climate in risk management Main areas Responsible banking, global businesses and local units set alignment targets Green Finance, CIB (ESG solutions), SCF and Wealth Management & Insurance Facilities, General services and Responsible banking Global and local teams across all areas of Risk and Compliance 32   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • In 2023 we continued to embed climate management in • The 2023 internal audit plan, based on the annual risk business-as-usual across CIB, Risk and Responsible Banking. For instance, CIB set up a dedicated team for portfolio alignment and strengthened its corresponding governance. • Beyond CIB, a number of local units are engaged in a process coordinated by Group Responsible Banking. The objective is to progress the decarbonization agenda, promote knowledge and expertise sharing among local teams, and seek out synergy to design reliable transition plans. • Other corporate-level initiatives and groups that 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; and the sustainable bonds working group oversees sustainable bonds issues. 2.3 Risk management GRI 2-25, 201-2 • We’re gradually embedding climate and environmental factors in our risk management and cross-cutting enterprise risk management processes such as the risk appetite and the identification of emerging risks exercise, among others. • Risk appetite: In 2023, we approved new quantitative metrics for energy (oil and gas), steel, and aviation, which will be implemented in 2024. • Emerging risks: Exercise with the spotlight on such emerging ESG risks as greenwashing, the environment and biodiversity. • Materiality assessment: We run a quarterly materiality assessment to pinpoint the loan portfolios with the highest physical and transition risk. Additionally, we progressed in our materiality assessment' methodology beyond credit risk during 2023. • Embedding ESCC factors in loan approval and monitoring: Including ESCC factors in loan approval and tracking through our 'The Climate Race' operating model has helped us embed ESCC in our strategy. This model is underpinned by strategic planning, risk management, loan approval and monitoring, models and systems, and culture and governance. assessment, continued to uphold the monitoring of ESG criteria and embedding of climate risk. In 2023, the Internal audit function monitored the progress of our key initiatives to meet ESG disclosure requirements and embed climate change in the bank’s business processes and risk management. • Since 2020, Santander has assessed green finance and progress made on climate targets and other ESG targets for the Group's variable remuneration scheme. For more details on ESG in remuneration schemes, see section 6.4 'Directors' remuneration policy for 2024, 2025 and 2026' in the 'Corporate governance' chapter. • Evolution of the Klima management tool: In Q3’23 we have integrated a physical risk assessment module into our tool, which allows the identification of physical risks in collaterals and client portfolios, adjusting their vulnerability by economic activity. • ESG training: Grupo Santander employees can undertake specific ESG training. We also have training pills and top case studies to share best practice. Course content includes materiality assessments, scenario analyses, physical risk, and analysis of sectors subject to ESCC factors. • Increase awareness on nature and biodiversity: At Santander we know some of our customers’ endeavours may have bad consequences for the environment. That’s why we run two simultaneous exercises under an internal risk assessment methodology to assess environmental impact and dependency. • Regulatory exercise: in 2023, we took part in the EBA regulatory exercise climate risk scenario analysis (Fit-for-55), covering credit risk, market risk, commissions and incomes, and real estate risks. For more details on our risk management approach and progress, see section 10.'ESG risk factors' in 'Risk, compliance and conduct management.' chapter. For more details on our Climate Finance Report, visit our corporate website santander.com. 2.4 Metrics and targets GRI 2-24, 3-3, 201-2 To reach net zero in carbon emissions by 2050, our initial focus has been on the most material sectors and lending, which is our most material financial activity. We disclose scope 1, 2 and 3 emissions performance data and other climate relevant metrics (e.g., energy consumption). We report on our renewable electricity and carbon neutrality in our own operation targets. We also began to disclose financed scope 3 emissions (category 15) in 2021, in relation to our decarbonization commitments. Portfolio alignment We joined the UN Collective Commitment to Climate Action (CCCA) when it launched in September 2019. We announced our ambition to achieve net zero carbon emissions by 2050 in February 2021, which was already stated in the 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. 33 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We use internal methodologies that take input and recommendations from the NZBA guidelines, the PCAF standard, GFANZ (Glasgow Financial Alliance for Net Zero) publications, SBTi (Science Based Targets initiative) and other standards. We also use external data and models from third parties with recognised market reputation/expertise. We rely on financial information from our customers (e.g., total equity and total debt), as well as non-financial information (e.g., GHG emissions, production data, and physical emissions intensities). Though the non-financial information required is becoming more available as more companies begin to report GHG emissions, it still falls short in certain sectors and regions. Where available, such metrics may not be timely or fully accurate. If no public emissions data exist, we estimate them based on a proxy (average emissions by industry, country, etc.). Once we can quantify our customers' total emissions, we would be able to apply our attribution factor in line with the PCAF approach to determine Santander’s financed emissions. Roadmap for delivery on net zero • Our materiality assessment of physical and transition risks enables us to focus on high GHG emission intensity sectors and begin developing specific decarbonization strategies for sectors defined within NZBA, which are relevant in view of our clients' profile. • We monitor and review our targets, as new methodologies and more precise and timely information become available in the market. Decarbonization targets As part of our ambition to reach net zero carbon emissions by 2050, we prioritize the high-emitting sectors (which also bear high and very high transition risk according to our climate materiality) to which we have a material exposure and must act now to support the transition to a low-carbon economy. In 2021 and 2022 we set targets for the wholesale segment in the power generation, coal and oil and gas, aviation and steel portfolios. In 2023, we focused on the automotive sector from two perspectives: auto manufacturing (wholesale segment) and auto lending (consumer lending for the acquisition of passenger 3 cars in Europe). Under our current assessment of NZBA sectors , aluminium, cement and shipping are not deemed material. Therefore, we are not setting targets for these sectors. Within the NZBA sectors, we are also making headway with analysing, measuring and acting to help decarbonize other climate-related sectors such as agriculture, mortgages and commercial real estate, which are key in the retail segments. The climate performance dynamics of these sectors are heavily dependent on their regulatory landscape. There is currently a lack of public policies, actions and specific plans and measures at the level the changes require for a net zero pathway. We continue to work with clients in these sectors on their decarbonization efforts and internal monitoring of their performance; but we understand we should refrain from setting public targets until their regulatory landscape is sufficiently supportive. We have been actively and constructively sharing our understanding and experience of these policy gaps with authorities, as well as other sectors, and plan to keep doing so. Given our footprint, we see markedly different environment landscapes in the regions where we operate. Our aim is to help our customers transition and contribute to their decarbonization, while understanding the constraints and limitations they may face in different jurisdictions and the gaps that make setting targets in certain sectors unfeasible. Weighting the E, the S and the G appropriately across our strategy is key to avoid undermining other ESG goals, while we pursue tackling climate change. The transition must be just and orderly. In this 2023 annual report, we publish two additional decarbonization targets for the automotive sector. These targets focus on the most important sources of emissions in the auto sector value chain: (i) emissions from cars produced by manufacturers (scope 3 - use of sold products); and (ii) emissions from cars financed to end-users, plus grid emissions (in line with PCAF guidelines). Achieving these targets relies heavily on public policies, build-up of EV-infrastructure (e.g., charging points), and consumer behaviour in key auto markets. In addition, we publish the financed emissions of two relevant portfolios of the group, mortgages in the United Kingdom and agriculture in Brazil, and the progress in the alignment of these portfolios. 3 The NZBA guidelines consider these sectors: agriculture; aluminium; cement; coal; commercial and residential real estate; iron and steel; oil and gas; power generation; and transport. 34     2023 Annual report Contents Decarbonization targets Sector Scenario Emissions Metric Baseline Power generation IEA Net Zero 2050 Scope 1 tCO2e/MWh 0.21 (2019 baseline year) A Energy (Oil & Gas) IEA Net Zero 2050 Scope 1 + 2 + 3 mtCO2e Aviation IEA Net Zero 2050 Scope 1 + 2 gCO2e/RPK Steel IEA Net Zero 2050 Scope 1 + 2 tCO2e/tS 23.84 (2019 baseline year) 92.47 (2019 baseline year) 1.58 (2019 baseline year) Auto manufacturing C Auto lending A IEA Net Zero 2050 Scope 3 gCO2/vkm 149 (2020 baseline year) IEA Net Zero 2050 Scope 1 + 2 gCO2e/vkm 137 (2022 baseline year) Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2020 0.17 2021 2030 targets 0.19 0.11 (-46%) 22.58 27.43 16.98 (-29%) 93.05 97.21 61.71 (-33%) 1.40 149 N/A 1.36 1.07 (-32%) 138 B 103 (-31%) N/A 75-89 (-35-45%) Thermal coal Phase-out targets to eliminate exposure by 2030 to power generation customers with a revenue dependency on coal of over 10%, and thermal coal mining A B Use of sold products. Target reduction is -25% vs 2021 reference C Consumer lending for the acquisition of passenger cars, covering a significant majority of the exposure in Europe. Power generation Our portfolio includes corporate clients as well as project finance (PF) deals. In 2021, our emission intensities slightly increased from 0.17 in 2020 to 0.19 tCO2e/MWh. The main causes were (i) reduction of the relative weight of renewable PF in the overall portfolio; and (ii) temporary adverse climate conditions such as drought in Brazil (which caused hydroelectric generation to be replaced by conventional generation). However, our corporate clients’ emission intensities improved. Energy (Oil & Gas) The absolute financed emissions of our portfolio increased 4.85 mtCO2e from 2020 to 2021. According to the IEA (International Energy Agency), global energy-related carbon dioxide emissions rose 6% in 2021 to 36.3 billion CO2e tons, their highest ever level. The increase in drawn exposure (used to calculate financed emissions) has been driven by the post-COVID economic recovery and the global price increases in 2021, causing financed emissions to rise with it. Aviation Emission intensity increased from 93.05 in 2020 to 97.21 gCO2e/RPK in 2021, driven by a reduction in the exposure to some of the less polluting customers, while the emission intensities of individual airlines started to normalize in the second COVID-affected year. The materiality of this sector in terms of exposure and financed emissions declined in a trend that should spill over into the coming years. With the current levels of sustainable aviation fuel (SAF) and efficiency gains, we see the decarbonization in the aviation sector happening slower than expected. Steel Reduction in emission intensity from 1.40 to 1.36 tCO2e/tonS was mainly driven by improvements of individual clients. Availability of reliable data is especially challenging in this sector as a significant amount of our customer base is yet to report GHG emissions. The automotive sector is one of the key sectors to tackle in the transition to a low-carbon economy. According to the International Energy Agency (IEA), road transport accounts for over 15% of global energy-related emissions. The switch from internal-combustion engines (ICE) to electric vehicles (EV) and plug-in hybrid electric vehicles (PHEV) is the most important decarbonization lever for this sector. We are helping our auto manufacturer customers adapt their business models and product offering towards EVs and PHEVs. As we are a leading auto end-user lender in Europe, we are also helping our retail customers finance purchases of an increasing number of EVs and PHEVs. As part of our net zero ambition, we are committing to decarbonize our global auto manufacturing and European auto lending loan portfolios, with a 2030 target and a 2030 target range, respectively. 35   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Auto manufacturing We set our 2030 target based on the NZE 2050 scenario from the IEA, in line with existing decarbonization targets. The key component for decarbonizing the sector is the switch to electric cars. Emission intensity improved from 149 gCO2/vkm in 2020 to 138 in 2021, mostly due to a general reduction of emissions in the industry, complemented by a slight contribution of the portfolio effect. The 2030 target entails a 31% reduction, from 149 gCO2/vkm in 2020 to 103 gCO2/vkm in 2030. Auto lending Santander Digital Consumer Bank measured the financed emissions of its auto lending portfolio in 16 units (13 countries in Europe) following the PCAF (Partnership for Carbon Accounting Financials) methodology, and used the IEA NZE 2050 as a reference pathway. In 2022, which was taken as the baseline year, SCF Auto emissions were 137 gCO2e/vkm. SCF set a decarbonization range for 2030 of 75-89 gCO2e/vkm, which would entail a reduction of 35-45% in its financed emissions. The fulfillment of both targets for the automotive sector will depend on, among other conditions, several external factors such as: → Regulation and policy: Effective government measures and policies are needed to reach the EV sales and decarbonization levels that net zero scenario requires. Countries will need to meet the timelines set to end sales of ICE. The introduction of low emissions zones would support this change. Further adoption of subsidies on EV purchases will be key to drive up penetration, as we have seen in the Nordic countries. → Technology: A guaranteed supply of the required materials to produced EVs and PHEVs at scale is needed, to match demand. Also, reducing EV and PHEV production costs is needed to ensure affordability in comparison with the less clean alternative (ICE), and thus ensure a just transition. → Infrastructure: Reaching a high penetration of EVs and PHEVs will require a deep transformation of the supply chains and the infrastructure that powers them (increasing the number of charging points and their performance) to shift from a model of predominantly ICE cars to an EV and PHEV majority. The investment needed for this infrastructure will require support from governments and other actors, which could be affected by conflicting interests such as energy security. Decarbonization plans Further to the five existing decarbonization targets published in 2021 and 2022, and the two new targets in automotive sector, in 2023 we also worked on the decarbonization assessments of other climate-relevant portfolios including mortgages, commercial real estate and agriculture sectors. The selection of sector portfolios for this exercise considered their materiality both at group and country level within the NZBA list of high emitting sectors. The objective of these sectors/portfolios assessments is to understand the level of financed emissions in each case, identify levers to progress on decarbonization and understand the feasibility of a net zero decarbonization pathway. The exercise comprised: baseline-financed emissions calculations, expected trajectory towards 2030, internal and external decarbonization levers analysis (considering supply and demand aspects, the regulatory framework and support for sectors decarbonization), internal governance established to monitor the decarbonization progress of each portfolio, identification of commercial opportunities and initiatives to improve data quality to help decarbonize the customers from these portfolios. Further details are provided below in relation to the UK mortgage and Brazil agriculture exercises. Mortgages Santander UK adopted the Partnership for Carbon Accounting Financials (PCAF) framework to calculate financed emissions associated with the Mortgages portfolio. Financed emissions were calculated at property level using the value at origination, the outstanding loan amount as at 31 December 2022, and building emissions taken from the EPC assessment for the property. Where no EPC exists, we used nearby properties with a similar age and type to infer the EPC or, where this wasn’t possible, a regression model trained with multiple known property characteristics. This resulted in a PCAF score of 3.3 and portfolio coverage of over 99% over a EUR 211.05 bn portfolio. Our baseline emissions as at 31 2 . December 2022 were 39.72 kgCO2e/m We also undertook an analysis to understand how we could decarbonize our mortgage lending across two scenarios (a low success scenario broadly aligned to current UK policy and a high success scenario reflecting plausible but more ambitious policy action). In both scenarios we assessed the actions within or outside our control. This analysis will be used to inform our ongoing green finance strategy and public policy engagement over the coming years. In both scenarios we believe the 2030 net zero targets will be challenging to achieve and require further market and policy developments outside of our control. In light of this analysis and while we will continue to advocate for policy change and maintain our existing green proposition, the key is to enhance our knowledge of the barriers people face in taking action; and to develop the partnerships and propositions required so that we’re best placed to meet our customers’ needs when the policy landscape changes. Agriculture Agriculture and land-use change account for 75% of gross CO2e emissions in Brazil. The agribusiness sector makes up more than 20% of Brazil’s GDP. Measuring the sector's financed emissions is, however, not trivial. Agriculture comprises a complex and extensive value chain, with varying sources, types, and quantities of GHG emissions. Moreover, agriculture practices and emissions vary depending on the commodity, management techniques and geographic location, among other factors. 36 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Given the core role of farms in the agriculture value chain, our initial assessment covered scope 1 and 2 emissions originating from farm-gate activities and the land use change (LUC) associated with farmland. Guidelines for setting net zero targets in the agricultural sector are still under development. To overcome the lack of methodology, Santander Brasil, in collaboration with WayCarbon, estimated its financed emissions based on the PCAF methodology, the GHG Protocol and IPCC accounting guidelines, adapted to the landscape in Brazil and the agricultural sector. Santander Brasil’s on-balance credit exposure to farms with primary production was EUR 1.80 bn in March 2022. We 4 estimated financed emissions from that portfolio 6.20mtCO2e/year: 81.9% estimated for land management, 18% for LUC and less than 1% for energy consumption. The PCAF 5 . quality score is 3.3 amount to Though land use change is Brazil's main source of emissions, this category is not the most representative for us. Santander Brasil monitors all financed properties against illegal deforestation daily (see more details in ‘Santander and the Amazon’), which contributed to lower emissions in this category. • helping customers build a low-carbon agriculture future though green finance solutions and innovative financial transactions (for more details, see Sustainable Innovation); • engaging with the Government and local and global forums to share methodologies, open the broader debate to improve data and accelerate decarbonization in agriculture; and • taking part in the Banking for Impact on Climate in Agriculture (B4ICA) initiative, led by the World Business Council for Sustainable Development (WBCSD), contributing with the development of methodologies to guide the sector in the transition to a low-carbon economy. Customer engagement in CIB Our approach aims to facilitate the achievement of our emissions targets and to develop a strong understanding of our customers’ transition strategies towards low carbon business models. To do this, we have established a two-step approach to categorize our customers according to their emissions pathway and perceived quality of their transition plans. In 2023 we implemented this approach for additional sectors beyond Power, where targets have been set and adapted where necessary to account for sector differences. The first step involves assessing how our customers’ emissions trajectory aligns with our current sectoral baseline and future sectoral portfolio targets. The second step focuses on four pillars: Targets, Action Plan, Disclosure and Governance. We draw on established transition plan assessment methodologies to inform our assessment. How strong we perceive each customer’s transition plan to be across each pillar will influence how we ultimately tier them. Two step tiering system - GHG emissions profile alignment • Current GHG emissions profile • Future targeted GHG emissions trajectory • Assessment of alignment with Santander’s pathway • Internal methodology to assess perceived quality of transition plans • Developed using established transition plan assessment methodologies Quality and ambition of quantitative targets to reduce GHG emissions Depth of decarbonization strategy to achieve GHG emissions reduction targets Transparency on GHG emissions reporting across relevant scopes Management oversight and governance of transition strategy 2. Action plan 3. Disclosure 4. Governance In 2023, we expanded the two-step tiering assessment to include Energy, Steel and Aviation. Initial assessments were completed for both steps. Subsequently, transition plan quality assessments were reviewed and enhanced, drawing on updated reference methodologies and sector-specific research. This led to the inclusion of additional sector-specific questions for assessing transition plan quality. Following GHG Protocol guidance, we measure LUC emissions considering a 20-year legacy, including legal deforestation, which is characteristic of some properties in the country. Transition plan quality assessment In addition to its importance in food production, agriculture can be an agent of transformation to decarbonize a country through nature-based solutions. Transition Pillar Overview Our approach to support decarbonization levers towards a low- carbon agriculture portfolio. It includes: 1. Targets 4 5 Considering different commodities (such as soy, corn, rice, sugarcane, cotton, and coffee, measured in tons) and meat and dairy products (measured per head of cattle), in addition to the land use change (measured in hectares), currently not consolidated into a single physical emission intensity. Since there is no specific methodology for agriculture, PCAF score was adapted considering the data available in primary production portfolio that made possible to measure land management emissions. 37   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We have also implemented training for senior staff in CIB on transition topics, in collaboration with external experts. In 2023, multiple sessions took place involving senior bankers on climate regulations and taxonomies; greenwashing; climate pathways to net zero; frameworks to assess customers' transition plans; and others. Our tiering system output has four categories (Leader, Strong, Moderate and Weak) that help inform how we prioritize engagement topics and enrich dialogue with our customers, while contributing to meeting our own portfolio emissions targets. Our client tiering allows for tailored transition dialogue to support them in navigating the low carbon transition, with the expectation that initially worse-tiered customers will migrate to better tiers over time. Tier Categories Description Tier 1 Leader Tier 2 Strong Tier 3 Moderate Tier 4 Weak • Emissions profile fully aligned with Santander’s pathway • Strong transition plan • Emissions profile fully aligned with Santander’s pathway but improvement needed in transition plan; or • Strong transition plan but emissions profile partially aligned with Santander’s pathway • Emissions profile partially aligned with Santander’s pathway, but improvement needed in transition plan; or • Emissions profile not aligned with Santander’s pathway, but strong transition plan • Emissions profile not aligned with Santander’s pathway • Weak transition plan 2.5 Supporting our customers in the green transition GRI 3-3, FS8, SASB FN-IB-410a.2, FN-IB-410a.3 As a large financial institution, we have a responsibility and an opportunity to help our customers in their transition to a low- carbon economy. Enhancing our sustainable finance and advisory proposition in all our divisions and regions is critical to meeting our green and climate transition objectives. Corporate and Investment Banking (CIB) In 2023, CIB continued building its ESG platform and embedding ESG in the organization. We integrated ESG experts within business, risk, portfolio management and compliance teams. We further embedded our sustainable finance classification system governance across regions and businesses to ensure a consistent approach to our sustainable finance activity. Santander has been a leader in renewable energy project finance over the last decade. In 2023, we remained among the top banks in number of deals and deal value globally, with 85 transactions and EUR 6.7 bn in financing. The following section shows how CIB supported customers in their transition to low carbon business models in 2023. CIB highlights Project Finance (PF) CIB acted as Mandated Lead Arranger, Bookrunner and Underwriter in the EUR 727 million financing of the construction of 21 photovoltaic (PV) generation assets with a total capacity of 1.2GW for Cobra Instalaciones y Servicios in Spain. CIB also acted as Sole Commercial Underwriter for 50% of the financing for Solaria Energía y Medio Ambiente, S.A, MLA, and Sole Hedge Provider and Account Bank in green financing for the construction of 24 PV assets in Spain with a total capacity of 1,085MW and total financing of EUR 553 million. This is a landmark transaction and an important milestone for Banco Santander as it is one of the largest renewable project financings in Spain with a fully merchant revenue stream. CIB acted as Mandated Lead Arranger, BPIAE and Sinosure Facility Agent, Green Loan Coordinator and Hedge Provider in financing the first NMC Batteries EV battery gigafactory plant. The plant is being built by Envision in France and will supply batteries to Renault as part of its electrification strategy. A ‘first of its kind’ for Santander, this transaction represents an important milestone for our Sustainable Tech Platform. Debt Capital Markets (DCM) During 2023, CIB continued to help clients strengthen their sustainability commitments within debt capital markets. Santander acted as Sustainability Structurer for a number of inaugural bond transactions in several countries. In Europe, we assisted Electricity North West (ENW), a UK distribution network operator that issued an inaugural £425m green bond, with proceeds used to finance their clean energy and environmentally friendly projects; PSA Banque France, the financing arm of Groupe PSA, that issued a €500m green bond with proceeds that will finance the acquisition of zero specific CO2 emissions vehicles; and Cyfrowy Polsat, the largest media and telecommunications group in Poland, that issued a PLN 2.67bn sustainability-linked bond to increase its share of energy consumption to 30% from zero-emission sources. 38 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Corporate Finance In 2023, CIB advised on several corporate finance transactions in the renewable energy sector. On the Iberian Peninsula, Santander supported Bruc Energy in the sale of a 49% stake in a 1.1GW solar PV portfolio to Interogo; and supported Ardian on the sale of a 422MW portfolio of wind farms and 435MW hybrid PV farms to Naturgy. In Poland, CIB advised EDP on the sale of 300MW operating wind farms and PV pipeline to Orlen. In the offshore wind sector, we were sell-side advisor to Iberdrola in the sale of a 49% stake in Baltic Eagle offshore wind farm to Masdar, the largest ever M&A deal involving an offshore wind asset in the Baltic Sea. Our ESG Sustainable Tech team advised PATRIZIA Infrastructure on its equity investment in an EV charging rollout programme in Germany managed by Numbat, a specialist developer and operator of high-power EV charging solutions. PATRIZIA will invest over EUR 70 million to install 400 ultrafast EV charging stations at 200 supermarkets in Germany. Combining our hydrogen expertise and our capabilities in France, CIB acted as sole financial advisor to Forvia and Michelin in the sale of a stake in Symbio to Stellantis, one of the largest ever hydrogen transactions globally at the time. Building on our successful year-and-a-half strategic partnership, in September 2023, CIB acted as joint advisor to EIT InnoEnergy, a leading innovation engine in sustainable energy, in raising over €140m in private capital. The proceeds will be used to accelerate and de-risk the development of hundreds of EIT InnoEnergy portfolio companies. Since signing a collaboration agreement with EIT InnoEnergy in April 2022, Santander CIB has supported several InnoEnergy startups. This includes advising France’s biggest battery manufacturer, Verkor, on its partnership with Renault, and financing to Germany’s leading hydrogen power solutions company, HPS. In Latin America, CIB acted as Joint Sustainability Structurer for a number of bond issuers, such as the Federative Republic of Brazil, that issued a US$2bn inaugural sustainable bond; and Grupo Energía de Bogotá (GEB), an integrated energy and utility company with presence in Colombia, Peru, Guatemala and Brazil, that issued its first US$400m sustainable bond. We also acted as Joint Sustainability Structurer for the Republic of Chile, that issued US$2.25bn and €750m dual-tranche sustainability- linked bonds, the first sovereign instruments to include a social target around the percentage of women members on the boards of companies that report to the local market regulator. In addition, CIB was named the 'Most impressive bank for ESG Capital Markets in LatAm' at the 2023 Global Capital Bond Awards. Global Transaction Banking (GTB) In 2023, CIB continued to embed sustainability in our Global Transaction Banking products. In Export Finance, we provided a sustainability-linked Export Development Guarantee with the British ECA (UKEF) to Easyjet, which was structured with bespoke ESG KPIs. We signed a green loan with Grenergy, secured with the coverage of a Cesce Green Investment Policy, aimed at financing projects that contribute to the fight against climate change and that also includes a hybrid derivative as part of the structure. CIB acted as export finance financial advisor for the development of two gigafactories for battery manufacturing in Europe and the US. We also acted as Green Coordinator for an ECA Buyer Credit with the German ECA, Euler Hermes, for the National Authority of Tunnels in Egypt. In Supply Chain Finance, we structured a sustainability-linked solution with Cellnex, a Spanish telco company with presence in 11 countries across Europe, to improve the adoption of sustainability practices for their supply chain through CDP’s Supply Chain assessment programme. The programme relies on Santander to onboard and actively manage more than 3,000 of its suppliers. We also signed a confirming solution with Henkel, a global chemical and consumer goods company, to structure its ESG Confirming programme in Latin America. In addition, we signed a confirming solution with a leading US energy company for the provision of solar and wind turbine equipment to generate renewable energy. In Cash Management, we launched Green Deposits to help our clients align their liquidity management needs with environmentally sustainable activities. In Trade and Working Capital Solutions, we signed a sustainability-linked guarantee line with two European aerospace companies. We also provided Structured Secured Inventory Finance to one of our clients whose objective was to invest in renewable PV projects in Spain. As recognition for our work in ESG, the MacIntyre Wind Farm transaction won 'Renewable Energy Deal of the Year' at the TXF Export Finance Deals of the Year 2022 awards for the construction of the largest wind farm in the southern hemisphere – CIB’s Export & Agency Finance team acted as lender and facility agent. 39 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Retail and Commercial banking Our Green Finance strategy aims to: put our clients at the centre to help them address energy transition challenges; implement a global green finance Target Operating Guidelines across all our markets leveraging global systems; and become a business engine of profitable growth for the Group. Our ambition is to be a world leader in environmental finance that delivers value to our clients. 3. Infrastructure: tools and systems These common infrastructure tools already implemented or under implementation provide technical and operational efficiencies and scalability: the SFICS System, an automated tool for panels that we introduced in our core markets to support with the assessment and tagging of transactions against our classification system; and the global Green Dashboard and ESG Data Hub, which enable us to track business performance and the integrity of the data used. 2. Protect the Bank: zero tolerance to greenwashing We drew up Green Finance Target Operating Guidelines to protect the Group from greenwashing risk, aligned with supervisory expectations on climate matters. We set up ESG certification forums in Europe and South America to ensure transactions and products are consistent with the sustainable finance and investment classification system (SFICS) before labelling them as green. In addition, we created Green Product Inventories in our core markets where we have implemented standards, validated evidences and established robust control and approval procedures. The Global Green Finance team is developing a global training course to upskill all employees who manage green finance in our markets to support the transition of our clients. 2023 highlights 1. Grow the Bank To grow environmental finance, we have developed a business strategy of end-to- end solutions, and trained Retail and Commercial banking teams to meet customers’ and client´s needs. The global Green Finance team leverages its synergy with CIB, where we serve big corporates, being a driver of transition for the rest of the value chain. We offer sustainability-linked loans to our clients to support their transition needs, irrespective of sector. In 2023, Santander signed several agreements to help our clients in their sustainable transition journey through the referral and financing of solar panel installations or to support them decarbonizing their real estate portfolio. We partnered with selected providers of energy transition services, among others: CBRE, ANERR and Holaluz in Spain; Myenergi in the UK for EV chargers; Powen and Edge-IFC in Mexico; Solarity in Chile; and YPF Solar in Argentina. We’ve also launched pilot projects in other geographies. At Santander we are currently offering 11 partnerships for solar panel solutions across our three regions (Europe, South America and North America). 40 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our customer propositions Sector What we finance Value proposition 2023 Renewables Real Estate Mobility Agriculture Waste & Water Management Circular economy Renewable energy production and transportation. Energy storage. Financing of solar panels, wind farms and battery and storage battery production. 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 transport and infrastructure. Leasing and financing of electric and hybrid vehicles (<50 g CO2 per passenger-km), charging stations, bicycle lanes and others. Sustainable and protected agriculture. Land and forest conservation. Sustainable farming. Financing of sustainable agriculture practice such as more efficient irrigation systems, machinery and reduced fertilizer use. Activities to adapt to, or mitigate, climate change; preserve biodiversity; boost the circular economy and waste & water management. Financing of water, waste and soil treatment, greater energy efficiency, lower emissions and conservation. Global collaborations in 2023 International Financial Corporation (IFC) We signed the first agreement with the IFC to promote sustainable construction practices in Mexico in terms of energy efficiency and the environment. This is a certificate of excellence that ensures sustainable construction (EDGE). Coldwell Banker Richard Ellis (CBRE) We entered into a collaboration agreement with CBRE, one of the world’s largest commercial real estate services and investment firms, to contribute to the decarbonization of the real estate sector in Spain, with advice and financing aimed at improving the energy efficiency of buildings. European Investment Bank (EIB) In March, the EIB and Banco Santander in Spain signed off an advisory agreement to support the Bank in green product development, eligibility screening and the integration of the regulatory requirements of the EU Taxonomy for sustainable activities into banking operations. In July, the EIB granted €300 million to Banco Santander Brasil for small-scale solar energy investments. Global Gateway Global Gateway is a new strategy promoted by the European Commission to support EU Member States’ financial and development institutions and private sectors through investments to improve supply chains around the world and help developing countries fight climate change. Strategic partnerships to drive transition Santander cooperates with multilateral development banks (MDBs) to finance the investment and liquidity needs of our customers in Europe and Latin America. 14 out of the 25 new financing agreements we signed in 2023 worth a total EUR 1,388 million will contribute to providing competitive financing to projects that promote a low-carbon economy and environmental sustainability. They include sustainable building construction, renewable energy generation, energy efficiency investment, green mortgages, and clean mobility. 41 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2.6 Nature and biodiversity GRI 304-2 In 2023 we continued making progress with our nature and biodiversity assessment on dependencies and impacts. We carried out an internal exercise based on the LEAP approach combining Science Based Targets Network's (SBTN) sectoral materiality tool and the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool methodologies. We continue to monitor and engage with working groups that draw up future regulatory and market standards in nature and biodiversity disclosure, such as the Task force on Nature-related Financial Disclosures (TNFD) Forum, PRB Biodiversity community, and Banking Environmental Initiative (BEI). Santander and the Amazon in Brazil Santander is working to protect the Amazon rainforest and promote sustainable development, which is critical to tackling climate change and conserving biodiversity. We need economic growth, but it must be green. For decades, deforestation has been destroying the Amazon in Brazil. While logging, mining and large infrastructure projects in the region have all played a role, agriculture, cattle ranching, property speculation and a lack of clear land titles are key drivers. In addition to our global policy on environmental, social and climate change risk management and our commitment to the Equator Principles, we are taking extra care when lending to customers in Brazil with operations in the Amazon, for instance: • In addition to the Plano Amazônia coalition (see below), we have cooperated with Brazil’s banking federation, Febraban, in setting best practices in a protocol for the financing of the beef sector so that it does not contribute to deforestation. By signing the protocol, Santander aligned its commitment with that of the Brazilian financial industry to require beef processing clients with slaughterhouses in the Brazilian Legal Amazon region to end illegal deforestation by December 2025 6 from direct suppliers of cattle and Tier 1 indirect suppliers. • Well before the publication of the Febraban protocol, Santander Brasil began engaging with meatpacking clients about ending deforestation in their supply chain by 2025. This engagement led to several of them declaring commitments online in 2022 and developing plans to check on indirect Tier 1 suppliers. • 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. We run 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 check 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. 6 Tier 1 indirect supplier: supplier of the direct supplier Plano Amazônia In July 2020, Santander Brasil announced an alliance with the two other largest private sector banks in Brazil called 'Plano Amazônia' to promote sustainable development in the Amazon. Three years on from the creation of Plano Amazônia, we assessed the progress, challenges and lessons learned, which led us to restructure the 10 measures initially set out under three strategic objectives: Forest Conservation, Promotion of the Bioeconomy, and Access to Connectivity. We have projects for each new strategic objective. In ‘Forest Conservation’, we shared with Febraban the lessons learned from the implementation of the document of good practices in the meat supply chain, which prompted the creation of a self- regulatory Febraban Protocol. Regarding ‘Promoting the Bioeconomy’, the Jornada Amazônia Platform progressed as planned, with five announcements to launch the training of 508 people, the selection of 70 startups for the pre-acceleration cycle and 22 startups for the acceleration cycle. The Platform also launched a micro corporate venture capital programme that will help attract investment in the market and create partnerships with large companies to accelerate the growth of startups. In 2023, Santander supported the Instituto Povos da Floresta (Forest People Institute) to provide fast and quality internet service for around 4,000 remote communities in the Amazon by 2025. Our support enabled a pilot project involving 30 communities to test the Startlink service. Communities that did not have access to electricity also received a kit with photovoltaic panels and batteries, so they were able to access the Starlink service. Now 300 communities have access to the Internet, with 7,450 registered users and 23,000 beneficiaries. Sustainable Innovation In 2023, Santander Brasil created the Sustainable Innovation area to carry out scalable innovative operations in emerging technologies and businesses, provide sustainable funding and perform actions that position the bank as a leader in innovative sustainable finance. We identified 12 priority segments in the bioeconomy, transport, low-carbon agriculture and renewable energy sectors with high market potential. Through Alliance for Sustainable Mobility and other strategic alliances, we signed a deal with Didi Group (known as '99' in Brazil) to create one of the largest electric car fleets in Brazil. It included the acquisition of 300 BYD electric cars by the company Dahruj that will make up the fleet of the company '99'. Under the Innovative Finance for the Amazon, Cerrado and Chaco Initiative (IFACC), we issued a green CRA worth USD 47.24m, together with Rabobank, the AGRI3 fund and British retailers Tesco, Sainsbury's and Waitrose for the Responsible Commodities Facility (RCF) initiative, with the aim of producing deforestation-free soy in the Cerrado, following IFACC socio- environmental standards. For more details on 'Santander and the Brazilian Amazon', visit our corporate website santander.com or our 'Climate Finance Report'. 42 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2.7 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 As part of our ambition to achieve net zero carbon emissions by 2050, our strategy to lessen the environmental impact of our operations involves: reducing and offsetting CO2e emissions we're unable to reduce by mitigating beyond our value chain; reducing and handling waste responsibly; and raising employees’ and other stakeholders’ awareness of environmental issues. We’ve been measuring our environmental footprint since 2001. Since 2011, our energy efficiency and sustainability initiatives have helped us cut: • electricity consumption by 38% • CO2e emissions by 69%, and • paper consumption by 83%. Our 2022-2025 Energy efficiency and sustainability plan includes more than 100 measures to reduce our electricity 7 consumption by 18% and emissions from our own operations by 68% compared to 2019 (the last comparable year prior to the pandemic). Some of them are: • installing 8 MW of solar panels on our buildings across our footprint for self-consumption. We have 8.8 MW installed in Brazil, Chile and Spain, with further projects under way in 2024. • purchasing renewable electricity in every country where it’s possible to certify its origin. The renewable energy we purchase and produce accounts for 97% of our total consumption, which is close to our 100% target by 2025; • using new technology to reduce paper consumption and waste; • continuing to obtain environmental and sustainability certifications for our buildings: • 38% of our employees work in buildings certified to ISO 14001 or ISO 50001 management systems; this is above the 36% ambition considered in our 2022-2025 plan. • Today, almost all of Santander’s headquarters in our core markets are LEED, BREEAM or ISO 14001-certified. • creating more parking spaces at our buildings for electric and plug-in hybrid vehicles – charging these vehicles is free for employees. We have over 1,709 of these spaces in the Group's core markets, exceeding our target of 1,250 by 2025; • raising awareness among employees through global and local comms campaigns and surveys on the importance of reducing waste and consumption. Each subsidiary’s internal portal also posts news and topics of interest relating to the environment and the Group’s ESG initiatives. Our measures are consistent with Santander's targets to source 8 , in 100% of our electricity from renewable energy sources addition to other measures to reduce emissions (our main goal), 9 and to remain carbon neutral in our own operations mitigating beyond value chain the emissions we’re unable to in our own operations. by We follow a strict carbon credits selection process that includes due diligence on compliance and consistency with our environmental policies. These are also certified under some of the industry's most well-known standards. Moreover, all of the carbon credits we purchased in 2023 were ratified by an independent rating agency to ensure their integrity. Santander monitors voluntary carbon credit markets to adapt our offsetting strategy to best practice. Using electricity from renewable sources 97% of the electricity our buildings consume comes from renewable sources; in Brazil, Chile, Germany, Mexico, Portugal, Spain and the UK, that figure is 100%. Our target is to reach 8 . 100% for our entire footprint by 2025 Waste management Since 2021, our offices and buildings in our core markets have been free of single-use plastics to meet our public target. The Grupo Santander City and Santander España’s central services buildings have ‘Zero waste’ certification. 2023 Environmental footprint 10 805 million kWh total electricity 97% renewable electricity 3,444,543 GJ energy consumption 172,711 t CO2e total emissions (market based) Scope 1 25,755 t CO2e direct emissions Scope 2 21,516 t CO2e indirect emissions from electricity and other (market based) Scope 3 125,441 t CO2e indirect emissions from employee commuting and business travel 7 8 9 10 Scope 1 and 2 emissions and scope 3 emissions from employee commuting and business travel from the operational control approach of GHG Protocol, where we have full authority to introduce and implement Group's operational policies. In countries where we can verify electricity from renewable sources at Banco Santander properties of wholly owned companies in Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the United Kingdom and the United States. Scope 1 and 2 emissions and scope 3 emissions from employee commuting and business travel. It considers wholly owned companies in Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the United Kingdom and the United States. A two-year environmental footprint table, showing employee consumption and emissions is available under 8.'Our progress in figures' section in this chapter. Scope 3 - Category 15 Investments (Financed emissions) is also disclosed in this section. 43     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3. Responsible investment SASB FN-CB-240a.1, FN-CB-240a.3, FN-CB-240a.4, Sustainable investment GRI FS8, FS11 Santander Asset Management GRI FS8, FS11 We continue to expand our sustainable investment proposition for customers and progress towards our goal of reaching EUR 100 billion of socially responsible investment (SRI) AUM by 2025. 11 12 Our SRI AUM in Wealth Management & Insurance grew 27% year on year to EUR 67.7 billion : EUR 48.1 bn in Santander Asset Management and EUR 19.6 bn from third party funds in Private Banking. This was on the back of our successful investment product strategy, which drew on the Sustainable Finance Disclosure Regulation (SFDR), the Green MiFID regulation in the EU, and enhancements we made to our advisory services on socially responsible investment. We continued the work on decarbonizing Santander Asset Management's (SAM) portfolio as part of the Net Zero Asset 13 Managers initiative (NZAMi) and through engagement with the companies we invest in. In 2023, SAM España and Santander Pensiones signed up to the CNMV’s Code of Good Practices — SAM España was the first fund manager to do so. Our voting activity earned us a special mention from ShareAction in their latest voting report 'Voting Matters'. SRI AUM (EUR billion) 12 In 2023, we continued to broaden our SRI product and service range, with a focus on the transformation of personalized pension plans under article 8 of the SFDR. We also launched new products such as Santander US Equity ESG. We enhanced our voting and engagement policy and methodology. We made progress on our goal to reach net zero by 2050 and strengthened our leadership in the ESG investment community. In 2023, 70.8% of financed emissions in high-impact climate sectors were subject to Santander engagement or aligned with Net Zero — a target set by the initiative. Innovating and transforming SRI products We have EUR 48.1 billion in SRI AUM in Santander Asset Management (+28% YoY) in 8 countries. We broadened our SFDR-compliant product range (article 8 and 9 funds). Our thematic proposition includes funds that focus on climate (Santander Innoenergy Climate and Santander Sostenible Bonos), renewable energy (Santander Iberia Renewable Energy), and social objectives (Santander Prosperity). In 2023, our solidarity funds donated to several NGOs to educate young people at risk of exclusion and help vulnerable women search for jobs, among other causes. Our Santander Responsabilidad Solidario fund won 'Best solidarity fund' at the Expansión-Allfunds Awards. SAM’s SRI products SRI products in SAM’s core markets +27% 2022 vs 2023 11 12 13 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. Does not include SAM funds distributed by Private Banking to avoid double counting. We have committed to cutting CO2 emissions in half from 50% of our AUM that have targets to align with the NZAMi by 2030. We could increase this target as more data becomes available. For more details, visit our website santanderassetmanagement.es/sostenibilidad. 44 53.267.7100202220232025     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Team, methodology and policies We have a global ESG team and leaders who promote Santander’s global SRI investment strategy in our core markets. We continue to enhance our methodology to embed ESG factors in our processes and manage the principal adverse impacts of our portfolio in the EU and in our SRI products. We revised our voting and engagement policy and strategies. We continue to promote better climate performance and transparency through Climate Action 100+. We also joined the IIGCC Net Zero initiative and published our second stewardship report. SAM España published its first voting and engagement report on compliance with the CNMV's Code of Good Practices. For more details on our ESG approach, visit our website santanderassetmanagement.com/sustainability. For more details, see our stewardship activities report at santanderassetmanagement.com/content/view/11966/file/ SAM_Stewardship_Report_221123_EN.pdf Private Banking GRI FS8, FS11 Our third-party funds SRI AUM amounted EUR 19.6 billion at 2023 year end. Our global list of funds that can be advised to clients comprised mostly article 8 and 9 funds (SFDR) (over 80% of the total). We also added new article 8 and 9 funds to our alternative investment proposition. In 2023, we introduced reports for Private Banking International (PBI) clients with easy-to-understand environmental and social metrics. We also rolled out SRI mandates to other markets. We want to embed ESG in portfolio management and advisory services in eight markets by 2025. In 2023, Euromoney named us 'Best private bank for ESG investing' in Chile, while Citywire named us 'Best private bank for ESG positioning' in Spain. Insurance By 2023 year end, we had extended our insurance offering to protect sustainable assets, activities and vulnerable individuals based on the Group’s sustainable finance and investment 14 classification system (SFICS) to 8 countries. We’re also cooperating with our partners to broaden SRI in their investment policies and product ranges to cover risk associated to sustainability factors. Insurance products aligned with SFICS 14 Core insurance products in our geographies Personal accident insurance for Seniors Auto Insurance Dependency Insurance Senior Home Insurance Life Insurance for low income people Personal accident insurance for low income people Micro mobility Insurance Motor insurance for EV Life Insurance for low income people Health Insurance for self employed or low income people Life Insurance for low income women Life Insurance for micro- entrepreneurs Life Insurance for low income people Multirisk Insurance for SMEs (photovoltaic pannels) For more details, visit our website santanderprivatebanking.com 14 For more details on our SFICS see section 9.6 'Sustainable Finance and Investment Classification System (SFICS)' of this chapter. 45   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4. Acting responsibly towards employees We want to be an employer of choice. Our approach is based on three pillars: Main regulations Human resources framework Having the right talent and skills in place to enable the Bank's transformation; attracting and engaging the best talent, with a strong focus on employee development; and having a best-in-class employee value proposition. Putting the employee at the centre of all we do; working to have the best culture and a great employee experience delivered through diversity, equity and inclusion, culture, and health and well- being initiatives; and listening to employees so we can continuously improve. Driving change in the company; shaping a more dynamic organization that’s ready to face the future with a positive impact on society; having the best organizational design; utilizing new ways of working to drive value; and holding meaningful conversations with our stakeholders. For more information related to the level of approval and public disclosure, see section 9.2 'Main internal regulations and governance' 4.1 Talent GRI 2-17, 3-3, 404-2, FS4 Attracting talent Our talent attraction strategy focuses on positioning ourselves as an employer of choice, providing a great candidate experience when hiring and onboarding, and moving fast to respond to the ever-changing needs of our business. In 2023 we delivered: a. Digital Transformation: We adopted a Group-wide Acquisition Tracking System in our core markets which enabled us to become more efficient in our hiring. Through digitalization, we reduced time to hire and improved the candidate experience. We also launched a test of a new platform to help us screen high volumes of applications quickly, as well as other machine learning solutions to assist with candidate selection. Remuneration policy Performance management policy Learning and development policy Group Succession policy Culture policy General health, safety and wellbeing policy International mobility policy b. Graduate Programmes: We have programmes to attract young and emerging talent across all our markets, staying well positioned with new candidates joining the market. In 2023 we attended key local and global e-employment events and worked with Universia to reach into University talent. c. We bolstered our employee value proposition (EVP): our focus in 2023 was specifically on STEM talent. Through our Global BeTech! programme we offer hybrid working models for tech teams and more agile ways of working. In 2023 we: i. ii. launched a website which shares the STEM EVP and tech job offers; simplified the way candidates find their ideal role (through improving the search) and enhanced the application process to improve the candidate experience; 46 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management iii. launched campaigns to position technical content strategically on social networks to reach a wider STEM audience; This year we promoted both permanent and temporary mobility as the best way to meet business needs and offer our employees real development opportunities. iv. created a sense of community with over 100 Santander IT experts worldwide who now create technical content and share it on social media to help position the Santander brand; v. opened new technology hubs in Malaga, Warsaw and Valencia in order to attract a wider range of STEM talent to Santander, outside of our normal catchment areas; and vi. held inclusion initiatives to hire and train talent with people with disabilities in the tech field, such as the Technology for persons with disabilities programme in Brazil that attracted 1,100 candidates (87 individuals hired and 100 hours training per person). Developing talent Talent management In 2023 we put a keen focus on being close to the needs of our businesses and helping them anticipate their future talent needs. We created talent programmes that help individuals meet their individual growth aspirations, while considering business demands. Our Potential In 2023 implemented a 'potential assessment model' in all units which saw 109,946 current employees go through a thorough assessment of their potential in order to propose personalized development actions based on individual needs. The implementation of the model helped us improve our succession planning and we are meritocratic in our decision making by using data-driven insights captured during this process. Mobility matters We simplified our internal mobility proposition with four simple and transparent forms of mobility that are consistent with the business and employee needs: LONG-TERM POSITIONS 1. International assignments (EXPATS) 2. Permanent movements TEMPORARY COLLABORATIONS (GIGs) 1. Project-based assignments (Mundo Santander) 2. SWAP programme We posted our internal opportunities on our Global Job Posting website, which is accessible to employees, and we saw 18,134 opportunities posted there and 14.7% of our current workforce had an upward change to higher management level on 2023. Our Global Project Marketplace allows any business or support area to form temporary teams of the Group's best professionals. A project is proposed and posted on our Global Job Posting website and is visible to all employees of the Group, and anyone who meets the requirements can apply. Learning and development Our learning and development policy sets the standards for the programmes we offer our employees. We continued to enhance our catalogue of learning solutions aligned to the most critical skills our businesses demand. We continued to reinforce a culture where employees are encouraged to lead their own development and ensure their skills and knowledge stay relevant. They can do this by taking advantage of our digital learning platform, accessible to them 24/7. Current and future leaders We put specific attention on development programmes for key segments of our employee base with two key programmes in 2023: a. Young Leaders: It’s a nine-month development programme for our younger generation to contribute to the Bank's strategy, increase their exposure and grow as leaders through new experiences. In 2023, its third edition took place. b. Elevate: Our global executive learning ecosystem for professionals in leadership positions once again enabled a cohort of employees to enjoy five tailor-made learning experiences while interacting and collaborating with their peers from other countries or business areas. 47   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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: • Fostering innovation and digital skills: We ran expert programmes and boot camps focused on data analytics, programming, computational thinking, cybersecurity, cloud and artificial intelligence, which are key disciplines in the transformation of our people and businesses. • Core banking skills: We continue to develop core knowledge through our Global Risk and Internal Audit schools, as well as specific content for the Finance, Corporate & Investment Banking, Wealth Management & Insurance, Digital Consumer Bank and Payments areas. • Global mandatory training: According to our risk culture and strategy, we delivered the required pills and e-learning courses to ensure our knowledge on regulation and alignment with core risks. In addition, each subsidiary has mandatory courses on the laws of its jurisdiction. • ESG: We have progressed with our training strategy with the development of new content required for all employees. We have also certified more employees as experts in Sustainable Finance. In addition to this, we continued promoting our ESG Talks, a series sharing knowledge and insights related to ESG topics, with internal experts from Corporate & Investment Banking, Risk, Human Resources, Digital Consumer Bank, Wealth Management & Insurance and Retail & Commercial Banking for the areas involved in our sustainability agenda. We also trained our employees on diversity and inclusion, health and safety, customer and supplier relations, the environment and anti-corruption. And finally, we increased our library of learning related to responsible banking topics. In 2023, the board of directors completed training programmes on climate change, ESG risks, and regulation. 4.2 Employee experience GRI 2-7, 2-29, 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 (DE&I) SASB FN-AC-330a.1, FN-IB-330a.1 At Santander, diversity, equity and inclusion (DE&I) are part of the common enablers of our Corporate Culture Policy (linked to the Group's transformation) and are governed at the highest level. We have an ongoing Strategic DE&I Plan (2020-2025) to promote an inclusive working environment where everyone can be themselves. Our three DE&I principles can be found in the Corporate Culture policy. In 2023, our employees' inclusion sentiment (in terms of gender, nationality, sexual orientation, religion, etc.) was 9.3 out of 10 (+0.5 above the finance sector benchmark and in the top 5% of the A finance sector ) A. 2023 Your Voice Survey We are also part of global initiatives that support DE&I, such as: Gender equity Women represents 53% of our workforce and 31.4% in senior executive positions. We work to have more balanced presence between women and men across the Group: 1. Women on the board 2. Women in senior executive positions 40% 31.4% We maintain rigorous standards for hiring, promotions, succession planning and talent pipelines to strengthen diversity. We also promote implicit bias training, as well as mentoring, networking and other actions aimed at creating a more inclusive environment. We are committed to having women members make up between 40% and 60% of our board of directors In early 2023, we raised our public target to have women in at least 35% of our senior executive positions in 2025. Santander leaders are involved in achieving this target as part of their long- term incentives 48   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We commit to reduce the equal pay gap between women and men performing similar roles to ~0% by 2025. 1. Equal Pay 2. Gender Pay Gap c. 0% We have accomplished the target for 2025 (~0%) two years early. We set up fair pay programmes to eliminate the equal pay gap. They include systematic reviews tied to remuneration cycles (merit- based promotions and bonuses). 27.8% Santander addresses the gender pay gap with a methodology based on best practices and common guidelines for the Group. The pay gap in 2023 decreased compared to the previous year (30.2% in 2022). 1. The equal pay gap measures '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. The year-end figure is 0.44%. Having met the target set the Group has set itself the objective of maintaining a pay equity ratio in line with best market practices. 2. The gender pay gap measures differences in remuneration 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 & Commercial 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. Ethnic and cultural diversity We are monitoring ethnicity data in three of our geographies: the UK, the US and Brazil. Across our units we are making efforts to enhance visibility and awareness of cultural diversity. Employee resource groups Various employee resource groups help us promote and support diversity in our local units, for example: Women LGBTIQ+ Santander Woman Network (2019) EmpowHer (2017) Women in Business (2015) >8,000 members in 10 countries Embrace (2015) >5,000 members in 5 countries Persons with disabilities Black colleagues Enable (2022) Thrive (2020) Habilidade não tem limites (2018) >1,000 members BOLD (2017) Reach (2015) alento não tem cor (2018) T >1,300 members We run initiatives to promote gender equality in the job market: 2023 highlights: → The group has a minimum standard in each unit of 14 guaranteed weeks in primary parental leave and 4 weeks in secondary available to 88.9% of our employees. → We support' Women in Tech' programmes in order to attract female talent in technology and digital. Currently, 30.1% of STEM jobs are held by women. Several prestigious bodies praised our work in this area in 2023. We were the highest ranked bank and received the second highest score among all the companies analysed in the Bloomberg Gender-Equality Index (GEI). Persons with disabilities We closed 2023 with 4,701 employees with disabilities (2.2% of our workforce). As part of our DE&I strategy, we want to boost the inclusion of people with disabilities by increasing the number of hires and promotions and foster accessibility. In 2023, we developed a comprehensive guide on supporting colleagues with neurodiversity with the aim of making reasonable adjustments during the assessment (MyContribution) process to make it fairer. LGBTIQ+ Building a strong culture of inclusion and creating a safe and supportive environment where everyone can be themselves are crucial for LGTBIQ+ people. Anti-harassment protocol We prepared a global anti-harassment protocol as a common framework to establish minimum standards and to fight against discrimination and behaviour that contravenes sexual freedom and moral integrity. Across all of our units, 30,086 current employees were trained in non-discriminatory behaviours and 19,485 in anti-sexual harassment during the year. Training We offered unconscious bias training and inclusive mindset training to employees, both of which are mandatory for all of our executives. Local units have action plans in place based on their own characteristics and conditions to further support quality DE&I training. Employee health and well-being Santander is committed to being one of the world's healthiest companies and to building a culture of care and awareness for our organization and for society. 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. At the core of this strategy is our global policy on health, safety and well-being. The consistent, Group-wide deployment of this strategy saw our units implement hundreds of actions worldwide, aligned to mental and emotional health, nutrition and obesity, employees with disabilities, and other health priorities in 2023. 49 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management To review the right focus and successful implementation, we continued to check our employees’ satisfaction and opinions through internal surveys. In 2023, we asked them about general health and well-being, physical health, mental and emotional well-being, social care, and Santander’s support. We continue to promote our employees’ health and wellness, and help them get trusted, affordable solutions through a range of benefits. In 2023, all employees could access health-related services, platforms (like 'Gympass' for sports centres) and apps for nutrition, mental health, exercise, meditation, specialist care, physiotherapy and other services free of charge or at reduced market rates. 8.4 (out of 10) Average employee rating of the statement 'Employee health and well-being is a priority at Santander' (+0.4 above the finance sector benchmark, and in the top 25% of the finance A ). sector A. 2023 Your Voice Survey Occupational health We have collective agreements at bank and sector level, which consider employee health and occupational risk prevention, offering our employees check-ups regularly and after extended absences. Santander cooperated with competent local institutions on public health initiatives during the year. We revised our occupational risk prevention plans with employees' councils, implementing them through: a. regular workplace and ergonomic assessments of health and safety risks and preventative measures to handle or eliminate them; b. regular psychosocial risk assessments; c. prevention measures when designing, procuring or acquiring offices, furniture, equipment, products and IT equipment; and d. procedures to safe working conditions. The Occupational Risk Prevention area draws up plans with other units, including these measures to prevent or minimize the risks they detect and review: a. Employee awareness and continuous training in postural hygiene, emergencies and first aid. b. 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, ISO 14001 in Brazil or ISO 45001 and ISO 14001 for our corporate centre, the Grupo Santander City, in Spain. For more details on absenteeism, see section 8. 'Our progress in figures'. BeHealthy We aim to raise awareness about health and well-being through our global BeHealthy programme, which celebrated its seventh year in 2023. Throughout the year, we ran hundreds of initiatives, activities and events around the world, involving thousands of employees and following the programme’s four pillars: know your numbers (self-awareness), eat well (healthy nutrition), move (physical health) and be balanced (mental & emotional well-being). In April, to celebrate World Health Day, we held BeHealthy Week, bringing health and well-being to the focus of Santander worldwide, with daily, in-person and virtual events. Through an online campaign, #SantanderBeHealthy, our employees were encouraged to share their own healthy habits and nominate a colleague to do the same. During the year, 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. Dr Robert Waldinger, from Harvard Medical School, joined us for a global event to celebrate World Mental Health Day, which over 3,000 employees followed live. 50 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Employee feedback SASB FN-AC-510a.2, FN-CB-510a.2, FN-IB-510a.2 Your Voice is our regular listening strategy to gather employees’ feedback. In 2023 we undertook three global surveys, using cutting edge technology: • 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. • 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. The surveys we ran in 2023 showed very positive results overall. For more details, see section 7.2 'Ethical channels'. Key findings of our 2023 Your Voice survey 8.5 Engagement In line with the financial and other sectors benchmark Stable across all three rounds in 2023 Support from managers and colleagues highlighted as positive. Simplification of processes is an improvement area, with plans underway. 62 A eNPS 91% Aggregated participation B 22 above finance sector benchmark 26 above all sectors benchmark Top 10% for financial sector 1.6 million Comments received eNPS distribution 22% Passives 70% Promoters 8% Detractors A. eNPS (employee Net Promoter Score) is a method of measuring employee satisfaction. B. 169,590 employees participated in the survey out of the total base of employees eligible to participate, i.e. those who met some criteria such as not being on leave, working in the company for at least 3 months. Volunteering Every year, we enhance our volunteering programme to help our communities prosper, promote our volunteer employees’ commitment to social causes and pride in belonging to Santander, and develop their cross-cutting skills. We worked with Fundación Banco Santander to launch Santander Best Africa, a programme where 30 volunteers spent a week visiting and assessing the social and sustainability projects that Fundación funds in Senegal and Gambia. In 2023, financial education was a key strategic pillar in every market where we operate. Preventing early school-leaving and boosting the job skills of people with disabilities, women, children in difficulty and other vulnerable groups also remained a priority. +27K employees participating in social activities +83K labour hours volunteered Each subsidiary develops its own programme based on local needs. In Spain, we ran several programmes to bolster the digital skills of girls in deprived areas, senior citizens, and other vulnerable groups. For more details, see section 6.2 'Other community support programmes’. 51   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.3 Working conditions and social dialogue GRI 2-17, 2-19, 3-3, 404-2, 404-3 Performance management 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 1,152 employees subject to a deferred variable pay scheme because their decisions can have a material impact. 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 instruments and subject to potential reduction ('malus') or recovery ('clawback'). MyContribution MyContribution is our common performance management model. We update it regularly, and it is aligned to our culture. Key initiatives in 2023 → We updated short-term variable remuneration for executive directors. For 2023, corporate bonus metrics included the new strategic priorities announced at the 2023 Investor Day, maintaining the focus on customers (with active customers as the main metric), as well as RoTE (which continues to be part of the scheme). The third pillar included as a metric is capital, to outline the importance of capital generation throughout the business. → We introduced a relative performance multiplier that may reduce or increase the result from the metrics mentioned above, based on results versus top peers in each market on metrics considered more relevant for each country/business (and for the Group, the weighted average of countries results): such as Net Interest Margin, Cost/Income Ratio, Non- Performing Loans etc. → We simplified the qualitative assessment for the short-term bonus by reducing the number of components from seven to four, covering risk, compliance, network collaboration and ESG (responsible banking). For more details on board remuneration, see section 6. 'Remuneration' in the 'Corporate governance’ chapter. 52 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Corporate benefits We offer several benefits to our employees in all geographies. Each local unit has programmes that adapt to local circumstances. Benefits range from free services for employees and their families to discounts on products and services. In 2023, 13,726 million euros were paid in wages and benefits. 8.7 (out of 10) Employees’ rating of the question on whether they are satisfied with the amount of flexibility they have in A their work schedules A. 2023 Your Voice Survey 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. For example, in Spain, our Santander Contigo programme helps employees with daily tasks, legal and IT support, and other services. For more details, see 'Employee health and well-being' in section 4.2. Enhancing our ways of working In 2023 we focused on: 1. Strengthening our new ways of working framework with local adaptations (based on local regulations on flexible working); 2. Monitoring the impact of new ways of working on our productivity, engagement, and employer attractiveness. a. 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. b. For engagement, we asked employees to provide feedback on the new ways of working. c. For attractiveness, we followed up with job applicants to learn their views on our new ways of working; 3. Taking steps to evolve our 'hybrid with flexibility' culture by: a. Reviewing our office strategy – rationalizing location and space arrangements to improve access and collaboration; b. Implementing technology that enables employees to be productive and engaged in a hybrid environment (to understand their workload and ways to improve individual digital balance). Agile working We continued to implement agile methodologies and organizational structures across the business to improve 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. We also boosted our Agile Training Academy with several learning modules available for all levels and specializations. Agile skills are one of the 'critical skills' for all employees to encourage them to take advantage of reskilling opportunity. We also piloted the tools that will help teams set and manage objectives in more agile way. We set out five 'ways of working' principles → The customer comes first. Customer and business impact must take precedence in any working arrangement. → Managers play a critical role in organizing their team's work. Team and individual productivity are key to building working models. → The office is our main place of work. Workplaces are no longer just where we do our job; they're also social space that meets diverse working needs and affords the best opportunity for collaboration, innovation and creativity. Building critical mass at workspaces is key to our culture. → Test and learn approach trough constant listening that evolves over 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. Enabling the business In 2023 we continued to use our common global platforms for human capital management. We promoted data-driven people decisions and enabled both business leaders and people managers to be fully informed about their teams by: • offering new chatbots to interact with HR; • providing a OneHR portal for all enquiries to be routed through; • promoting mobile first technology across key HR processes; and • using the data of their teams for talent processes. Social protection Santander offers additional protection to public programmes related to loss of income due to sickness, occupational accident, acquired disability and paternal leave. In the markets where Santander operates, we strive to offer employees enhanced conditions regarding sickness and occupational accident. For example, in Spain, employees receive full pay during periods of sickness and absence due to occupational accident. Moreover, actions to complement public pension in case of death or temporary disability. 53 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Collective bargaining In 2023, 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. Meetings held in 2023: • Occupational health and safety committees • Equality plan follow-up committee • Subsidiaries’ equality plan negotiation • Santander employee pension plan control committee • Training committee • Employment committee • Other meetings: • Meetings with subsidiaries’ union committees • Bilateral meetings with trade union representatives 54 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 5. Acting responsibly towards customers Our approach is to make every customer experience Simple, Personal, and Fair. Main regulations Compliance and conduct; Cybersecurity Corporate frameworks The customer is at the centre of everything we do. We constantly listen to our customers to deliver the best practices. Customer conduct risk management model Approval of products and services policy Customer service, dissatisfactions handling and root-cause analysis policy We place great importance on protecting vulnerable groups who may be susceptible to financial vulnerability or situations that may impact their ability to make informed decisions through solutions to financially include people and boost our customers' financial health. Vulnerable customers, consideration of special circumstances and prevention of overindebtedness policy We apply high standards to enable individuals to maintain control over their personal data, while protecting and providing resources to keep it safe online. Data protection policy For more information related to the level of approval and public disclosure, see section 9.2 'Main internal regulations and governance' 5.1 Customer experience and satisfaction GRI 2-29, 3-3, FS5, FS6 Customer satisfaction We measure individual and SME customer satisfaction (Net promoter score — NPS) and experience through surveys on service, reputation and products in each of our core markets. We draw up and execute actions plans on the back of the survey findings. The management committee monitors these plans and NPS is included as part of our remuneration schemes for all employees. In 2023, we sent over 9 million surveys to customers from all segments to find out how we can enhance their experience and our products and services. Results showed improvements in customer service at our contact centres and in the perception of the bank’s innovation. In 2023, we ranked in the top 3 for NPS in seven of our core markets. For more details, see tables 4, 5 and 6 in section 8.2. 'Customers'. Top 3 A for NPS in 7 markets A.Santander US has a separate target and is not included. 55 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 5.2 Consumer protection GRI 2-26, 3-3, 416-1, 417-1, FS15 Customer conduct risk model Being responsible means going above and beyond minimum legal requirements to offer customers products and services that are Simple, Personal, and Fair (SPF). Our Product governance and consumer protection area oversees and reviews how we follow our customer conduct risk model. The model sets out the requirements applicable to the product and service design, sales, post-sales, and execution. We focus on the following areas. For more details, see section 7.2 'Compliance and conduct risk management' in 'Risk, compliance & conduct management' chapter. Product governance Santander’s product and service approval policy, supported by local decision-making bodies and the corporate product governance forum, helps to provide that products and services are designed to meet the needs of the target market, at a fair price and in a transparent manner. Processes and controls set across life cycle taking into account the interests of our customers. Conduct in sales We assess the customers´ needs and characteristics to offer the most adequate products for each of them. Commercial teams training and remuneration schemes play a vital role in embedding conduct standards in our culture and daily operations: → In 2023, we revised mandatory training on customer conduct risk management for all employees in the Group. It complements specific programmes that sales teams must complete to master the skills needed to explain and sell products and services properly to customers. → At least 40% of sales units' variable pay was based on customer satisfaction and quality metrics. Our commercial banking model promotes Rating de Oficinas, a scheme to give branches a customer conduct and quality rating that impacts on employees’ pay, raises greater awareness and encourages proactive management of conduct-related risk. In 2023, we rolled out these pay schemes to our call centres, which are becoming increasingly crucial in a multi-channel environment. Conduct in fraud management In 2023, we continued to build on the customer impact component of our fraud management analysis that we began rolling out in 2022. The Compliance and conduct, Cybersecurity and Secure User Experience, Cards, and Non-financial risk areas worked together on drawing up lines of action to embed conduct in fraud management. Vulnerable customers In 2023, we continued consolidating our strategy to serve vulnerable customers, and specially to prevent over- indebtedness. In addition, the Group best practices were upgraded to internal regulation for the subsidiaries. This will ensure a common approach throughout the Group for employee training, recognition of vulnerable customers, case escalation, product and service design, recoveries, fraud management and assistance for senior citizens and people with disabilities. We defined metrics to proactively identify and address the needs of customers in vulnerable circumstances. We launched a global awareness training programme on helping vulnerable customers. Some clear indications of our vulnerable customer strategy's forward momentum are: → We instituted customer protocol for senior citizens and people with disabilities to prevent exclusion and enhance their experience. → In Brazil, we published Febraban’s practices for engaging with vulnerable customers, in which Santander had a prominent role. For more details on our vulnerable customer initiatives, see section 5.3 'Financial health and inclusion’. Complaints handling We manage customer issues and complaints proactively by carrying out root-cause analysis and learning from our mistakes. In 2023 we evolved the complaints management procedure to the customer service and dissatisfaction management policy, to align it with the SPJ strategy and with the global businesses operating model. We introduced guidelines for local units to implement standards for access, management, communication, review, reporting and governance that produce the best services possible for our customers. We're also working on a guide for customer service in contact centres using behavioural economics, with the aim of identifying the key moments and actions in the process, minimising the process biases. 56 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management To manage customers’ expectations better, most units have invested in upgrades of dissatisfaction management tools and advanced analysis techniques to recognize the root causes of complaints and get the most out of customer feedback. We continued our comprehensive analysis of customer complaints and survey data, using artificial intelligence to identify the root cause. Our proof of concept in Brazil and Mexico used over 27 million data sets. The developed methodology takes advantage of the benefits of applying algorithms to customer voice, maximizing the analysis of structured and unstructured information available in our systems Complaint type (%) A,B Resolution A,B (%) A. Personal protection insurance (PPI) claims are not factored into volume, product distribution or resolution time figures. B. The Group uses the same standard claims metric for all geographies. 5.3 Financial health and inclusion GRI 3-3, 203-1, 203-2, 413-1, FS7, FS13, FS14, FS16 Financial inclusion and health are a priority for Santander in reducing inequality and promoting prosperity and entrepreneurship, and a component of how we identify customers facing financial distress. Our analysis of the World Bank’s Global Findex Database 2021 in relation to our targets and the gap in access to the banking system in each of our markets confirmed that our target is consistent with our market share. To deliver on this, we established processes for developing products and services, training our teams, and engaging with external parties 15 . Santander wants to help tackle the financial inclusion challenges in the markets where we operate. In Latin America, our main objective is to provide access to the financial system. In mature markets, we want to make sure nobody has to exit it. In 2023, we were named the world's best bank for financial inclusion. → The World's Best Bank for Financial Inclusion (Euromoney) for the second year in a row. Having exceeded our target to financially empower 10 million people between 2019 and 2025 (reaching 11.8 million in 2022), we set a new target to financially include 5 million more between 2023 and 2025. We use the UNEP FI Principles as a guide. 15 Check out what we do at santander.com/financial-inclusion-report Our targets Financially empowered people 2019 2022 11.8 mn B Target achieved three years early A Financially included people 1.8 mn Target B +5 mn 2023 2024 2025 In 2023, we financially included 1.0 mn people through access initiatives; and 0.8 mn people through finance initiatives. A. Based on internal financial inclusion methodology that takes into account international best practice and has been endorsed by an independent third party. Includes the principles, definitions and standards we use consistently across our footprint to count the number of people we include financially through initiatives, products and services for access and finance. B. Cumulative figure since 2019. 57 19.936.91.327.46.28.3Banking proceduresLoansInvestmentsPayments methodsInsuranceOthers81.218.8In favour of the BankIn favour of the customer 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Access GRI FS7, FS13, FS14 Promoting access to cash and 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 communitiesB 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 of saleC Basic accounts D Financial solutions for vulnerable groups We offer financial support to vulnerable groups so customers will have access to basic products and know how to use them. Support to senior citizen E customers We also have global initiatives such as GetNet provides payment services to merchants to boost simplicity, speed and security. 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 promote social mobility and help low-income and underbanked entrepreneurs set up and grow businesses. Microfinance programmes Supporting customers in financial distress We have debt relief programmes that include payment deferrals and line of credit 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 supply G Credit support for low-income households/people with difficulty getting creditH A. In Spain, branches in remote (or sparsely populated) areas to facilitate access to credit and combat social exclusion in communities of less than 10,000 inhabitants. In Portugal, branches in low-income, small or isolated regions, such as the Azores and Madeira. In Argentina, we have financial inclusion branches and remote agents in the marginal environment of Buenos Aires and vulnerable communities. In Poland, ATMs in municipalities where there is no Santander branch or partner point of sale. In Uruguay, 3 mobile branches have been installed in the country since 2020 to reach areas with low levels of banking penetration. B. Agreements with Correos Cash in Spain, partnerships with retailers such as Oxxo or 7Eleven in Mexico, and agreements with third parties in Uruguay (e.g. Abitab, Red C. D. E. Pagos). In Poland, we included the Cashless Poland programme to promote the use of payment terminals in localities where the use of digital media is low and the use of our associated Partners Outlets. In Chile we included Mas Lucas. In some countries, we have basic bank accounts that go beyond regulation in order to serve the bottom of the pyramid. For example, the Cuenta LIfe in Chile or the no-fee account for vulnerable customers in Spain. In several countries we have value propositions aimed at the elderly. For example, tailor-made products for retirees in Mexico and Argentina, services such as Here & Now in Portugal to help seniors with limited digital skills, or third-party access initiatives in the UK to support seniors who need to be cared for. F. We have programmes in many countries to help people with debt problems. In Portugal, we have the Iris programme to help customers manage defaults. In the UK, we help vulnerable customers get out of arrears with self-service tools and direct financial assistance, and in Spain, we have financing programmes for vulnerable groups to relieve their mortgage debts. In Spain, the bank participates in the Social Housing Fund, which facilitates renting for people on low income. It also has affordable rental housing. In the US, as part of its Inclusive Communities plan, Santander provides low-interest mortgages and mortgage insurance for low-income homebuyers. G. H. We have initiatives to help groups with difficulties in accessing credit; among them, in Spain, we lend to SMEs at their risk limit; in the US, we lend to small businesses operating in low- and moderate-income communities; in Argentina, we lend to entrepreneurs with low credit histories. In Mexico, special credit programmes are offered to people at the bottom of the pyramid. 58       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Promoting financial education GRI FS7 y FS16 Financial education is fundamental to financial health and inclusion, and to helping people and businesses prosper. We aim to help our customers better understand banking products and financial concepts and risks to make the right decisions for their financial well-being, while promoting market stability. 5.4 Privacy, data protection and cybersecurity GRI 418-1; SASB FN-CF-230a.2, FN-CF-230a.3 Privacy and data protection Our standards give people greater control over their data, and ensure we only use data where strictly necessary and for the specific purposes for which we collect it. We apply all reasonable measures designed to erase or rectify data that are inappropriate, inaccurate or incomplete and to only store personal data for as long as strictly necessary for their legitimate use. Our security measures are aimed at preserving the 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; In 2023, 11.5 million people accessed our financial education initiatives, includes social media as a tool to boost our younger customers’ financial knowledge. For more details on financial education, visit our website santander.com/en/our-approach/inclusive-and-sustainable-growth/ financial-education • special training on data protection for DPOs and data controllers; promotion of corporate initiatives and the exchange of best practices among units; • employee training and awareness; and • constant monitoring of regulatory developments to update and consolidate criteria, methodologies and documents. Cybersecurity At Santander, cybersecurity is embedded in our culture. It is a part of our employee performance reviews. In 2023, we made our teams more aware of cybersecurity, with: • an update to our mandatory cybersecurity course; • local subsidiaries’ responsibility to abide by the General Data Protection Regulation (GDPR) and local regulation on data protection; • specialized training for high-risk groups such as payment agents, IT professionals and developers, board members and executives; • 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; and • a corporate oversight programme based on management indicators; 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 strengthen our commitment to personal data protection are: • standardized approach to monitoring and reporting model among units; • cooperation 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, regular KPI reports and security incidents management; • awareness campaigns about new hacking techniques; and • regular phishing testing that helps us become more resilient to threats and encourages employees and third-party contractors to report incidents or suspicious messages through the relevant channels. We implemented these initiatives to help our customers and broader society stay safe online: • 'Cyber Heroes' interactive training, where our employees and the public can test their knowledge of online safety and fraud prevention. Available in Argentina, Brazil, Chile, Mexico, Portugal, Spain, Poland, and the UK, with a 9 out of 10 rating. • 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 ('Everyday Cyber'), a global cybersecurity awareness campaign to help our customers and society adopt better security habits for enhanced protection against fraud. We leverage our reach through our corporate sponsorships, such as Rafa Nadal and League of Legends (strategy online game), to engage more audiences using their unique tones and language. These campaigns provide our audiences with a multichannel conversation experience across websites, social media, mass media outlets, and targeted communication. 59   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • In other Santander markets, the cyber awareness campaign 'Tarot' in Uruguay was awarded the best radio programme in the Health & Education and Institutional categories in the 'Campana de Oro' Awards. • Titania: Santander’s latest initiative to raise awareness and promote learning about cybersecurity in the form of a fiction podcast. With over 1 million plays, this podcast was named as the Best Podcast at the National Radio Ondas Awards and has received a bronze award from the International Advertisement Bureau (IAB) for Best Branded Content Strategy. In 2023, we continued to promote collaboration on cybersecurity with public and private organizations: • Santander has had a key role in the creation of FS-ISAC Europe (Financial Services Information Sharing and Analysis Center) for the exchange of information in Europe and currently Santander holds the European Board’s Chair. This organization, established in The Hague, has more than 1,000 members from 174 entities, including major banks, Swift and Europol. • Santander is part of the leadership team of the US Ransomware Task Force, whose objective is to improve the prevention and response capabilities against ransomware attacks. • Santander actively contributes to the World Economic Forum (WEF) in the fight against cybercrime, highlighting the Cybercrime Atlas initiative, whose objective is the disruption of cybercriminal networks. For more information on our cybersecurity plan and the initiatives undertaken during the year, see section 5. 'Research, development and innovation (R&D&I)' in 'Economic and financial review' chapter; and section '6.2 Operational risk management' in 'Risk, compliance & conduct management' chapter. 60 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6. Supporting communities Progress in 2023 GRI 3-3, 203-1, 203-2, 413-1 ó Over 174 million euros in community investment in 2023 16 ó Support for higher education, employability and entrepreneurship ó Other community support programmes 105 million euros invested 69 million euros invested 16 6.1 Support for higher education, employability, and entrepreneurship GRI 3-3, 203-1, 203-2, 413-1 498,930 1,238 105 million euros invested people and businesses helped 17 partner universities and academic institutions in 26 countries 18 Banco Santander has supported education, employability, and entrepreneurship for over 27 years. Over this period, we have invested over 2.3 billion euros in partnership with more than 1,200 universities and institutions in 17 . 26 countries, helping over 1.5 million people and businesses In 2023 alone, we invested 105 million euros and helped nearly 499,000 people and businesses. We plan to invest 400 million euros between 2023 and 2026. We want to boost people’s job prospects and help entrepreneurs and SMEs develop their businesses through support for education, employability and entrepreneurship. We help adults at university and beyond, when continuous learning and job skills are vital in an ever-changing landscape. We provide training and resources to help businesses create opportunity, take root and grow through each stage of their development. In 2023, Fortune magazine named Santander as one of the companies giving back the most to make the world a better place in its 'Change the World' list of 50 companies that are helping address some of society’s biggest challenges. Santander is the highest ranked bank in the list, thanks to this support for the past 27 years. 1. Education Our support for education involves promoting access to higher education, training and the resources that students need, and helping to the institutional transformation, mainly in the digital field. We do this through: → Partnerships with 1,238 18 universities, institutions and organizations in 26 countries. → MetaRed, a collaborative network of heads of public and private higher education institutions in Latin America, Spain and Portugal. It focuses on three of the biggest challenges that universities are facing: Digital transformation (MetaRed TIC), student startups (MetaRed X), and sustainability (MetaRed ESG). For more details, visit the website metared.org 16 17 18 Includes social contributions of foundations. In addition, Banco Santander made a donation of 6,617,008 Banco Santander shares to Fundación Banco Santander 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 The variation in respect to previous years responds to a reclassification as explained in section 8.4 of this chapter Includes universities, institutions and organizations that have an agreement with Santander Universities, Universia and Fundación Universia. For Santander Universities alone, the figure is 904 academic entities in 12 countries. 61     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management → Fundación Universia, a global torch-bearer in diversity, equity and inclusion, which participates in international forums of the United Nations, the International Labour Organization and UNESCO. 475 scholarships for university students with disabilities 50 people with disabilities hired by companies 160 people helped through the Plan 19 Circular For more details, visit the website fundacionuniversia.net 3. Entrepreneurship Our support for entrepreneurship is channelled through Santander X, where we help small business owners and SMEs create opportunity, take root and grow. We provide access to the training, advice and resources needed to launch and scale up a business. We help entrepreneurs give visibility to the most outstanding projects, and to connect with other businesses through a global community. 7,036 entrepreneurship and business initiatives helped For more details, visit the website santanderx.com → Campus Digital, which offers a new model for universities to engage with students. With a user-friendly digital experience, it enhances university life by streamlining student procedures and communications, adapting to users’ needs, and ensuring data privacy. It offers services such as digital credentials, tuition fee payments, certificates, timetables and discounts. For more details, visit the website mycampusdigital.com th → 5 Universia International Rectors’ Summit, (Valencia, Spain), one of the world’s leading events for rectors. 1,200 people attended, including 700 academic leaders from 14 countries. Over 4,500 students and entrepreneurs were connected, representing our 1.5 million people and businesses supported. For more details, visit the website santander.com/universities 2. Employability Our support for employability involves promoting job skills and access to the job market. We do this through these initiatives: → Santander Open Academy (formerly Santander Scholarships), a global learning and professional development platform that offers scholarships and job skills training for people of all ages. It offers grants and scholarships for top institutions all over the world, fully subsidized courses and free learning for skills in high demand. For more details, visit the website santanderopenacademy.com → Universia, our initiative to help universities and training centres connect young people with companies so they can find a job. 636 partner universities and institutions with Universia in 22 countries For more details, visit the website universia.net 19 Plan Circular is supported by the European Investment Fund and boosts the access to training in digital skills. 62 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6.2 Other community support programmes GRI 3-3, 203-1, 203-2, 413-1 69 2.2 million euros in social million people helped investment 20 21 We aim to improve people's access to education and culture and support well- being: ó Childhood education ó Social welfare ó Arts and sciences Helping children and young people get a well-rounded, quality education. Helping vulnerable people and those at 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. Fundación Banco Santander also encourages employees and customers to get involved in its initiatives and programmes. For more details, see ‘Volunteering’ in section 4. 'Acting responsibly towards employees'. In Spain, Fundación Banco Santander works to build a fair, inclusive and sustainable society by financing and running several cultural, educational, social and environmental projects. Links and descriptions of our main initiatives are available on our corporate website and in our local responsible banking reports (also available on our corporate website). 22 In 2023, Santander made a donation to Fundación Banco Santander for a total of 6,617,008 Banco Santander shares. The donated shares are meant to help the foundation financially: it can use the dividends to cover some (if not all) of the cost of fulfilling its founding purposes Bank's art collection and financing numerous literary, educational, social, cultural and environmental productions and activities, in which the reconfiguration of the Bank's headquarters on Paseo de Pereda in Santander and our relations with universities in Spain will play an important role. For more details, go to the website fundacionbancosantander.com/es/ fundacion/transparencia. . These include managing the For more details on Fundación Banco Santander’s core work, visit the website fundacionbancosantander.com/es/ fundacion/memorias 20 21 22 Includes social contributions from the Group’s foundations. Based on the People Helped internal methodology, which considers international best practices. Calculated with partners’ certified data or with conservative estimates based on recognized conversion factors. For more details, see Note '34. Other equity instruments and own shares' in the 'Consolidated financial statements'. 63     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7. Business conduct Our approach is to act responsibly and with integrity across our value chain Main regulations Risk corporate ; Compliance and conduct corporate; and Financial crime and compliance corporate frameworks Our code of conduct sets out shared principles and values set out in The Santander Way. General code of conduct Code of conduct in securities markets Corporate defence policy Canal Abierto (whistleblowing) policy Environmental, social and climate change risk Tax policy Conflict of interest Policy Defense sector Financing for sensitive sectors Our commitment to ethical principles is reflected in our determination to fight corruption, and our status as a signatory to the United Nations Global Compact. Anti-bribery and corruption policy (ABC policy) Financing of political parties policy Anti-money laundering and countering the financing terrorism policy Our business conduct principles apply to vendors. Third-party certification policy Outsourcing and third- party management model For more information related to the level of approval and public disclosure, see section 9.2 'Main internal regulations and governance' 64         2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7.1 Conduct standards GRI 2-15, 2-25, 3-3, FS1, 207-1, 207-2, 207-3 7.1.1. Code of conduct Our General code of conduct (GCC) promotes equal opportunity, diversity and non-discrimination, zero tolerance for sexual or work-related harassment, respect for others, work-life balance, human rights, and environmental protection. It is also one the core elements to prevent criminal risk. All Group employees — general workforce, top management and members of the management bodies of the companies that make up Grupo Santander — must be aware of and comply with the GCC. The Internal Audit area regularly reviews compliance with the GCC, with autonomy to check that it and subsidiary- level versions are appropriate and effective. For more details, see section 7.2 ‘Compliance and conduct risk management’ in the ‘Risk management and compliance’ chapter. Core initiatives → #Yourconductmatters: campaigns via email, Intranet and other media to boost employees’ awareness of the GCC and related policy, as well as of Canal Abierto and the latest whistleblower protection laws. We also trained the Group’s board members, who are key to avoiding and mitigating risk, setting a global corporate culture based on ethical principles and complying with internal and external rules. Sessions included compliance risks they are exposed to, how these risks may arise, and how to avoid them. 7.1.2. Procurement management policy Our procurement management policy sets out how employees negotiating with vendors should conduct themselves to prevent conflict of interest and keep information confidential. 7.1.3. Code of conduct in securities markets (CCSM) Approved by the board in 2020, the CCSM 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 relevant policies and tools to help detect potential violations and consistent management through a conduct framework. → Recommendations posted on the Intranet to prevent conflicts of interest between employees and the Group, and to review and manage conflicts. Employees who are bound by the CCSM must complete mandatory training which outlines on the obligations contained in this code. 23 → Handling reports received through our ethical channel, Canal Abierto, enhancing processes based on lessons learned. → Common principles and guidelines on offering and receiving courtesies or invitations from third parties, according to the terms of our ABC policy. → Managing employees´ queries on ethics and rules in the GCC. Training Every year, all our employees undertake mandatory training on the GCC and conduct rules they must follow in their day-to-day, learn why every employee's conduct matters; and how to handle conflicts of interest and gifts and invitations from people outside Grupo Santander. In 2023, several of the Group’s units ran sessions for core service providers on our culture of compliance and ethical behaviour. 7.1.4. Principles of action in tax matters Santander’s tax strategy sets out the tax principles that the entire Group must follow. The board of directors approves it and revises it regularly 24 . 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 adhered to the Spanish Code of Good Tax Practices and the UK Code of Practice on Taxation for Banks, and more recently to the Portuguese Code of Good Tax Practices. We also 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. For more details on the Group's tax contribution, see section 8. 'Our progress in figures'. 23 24 When joining and renewing every three years Last updated in October 2022. 65 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Core principles of Santander’s tax strategy → Satisfy our tax obligations based on a reasonable → Communicate Santander's total tax contribution clearly, interpretation of tax laws, grounded on their spirit and intention. → Respect the rules on transfer pricing and pay taxes in each jurisdiction according to our operations, 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 enable our customers to avoid paying taxes. 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 a stake in, entities registered in countries or territories considered 'non-cooperative jurisdictions' without board approval; and properly monitor the Group's operations in such territories25 . For more details on the Group’s tax strategy, visit our corporate website santander.com. 7.2 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 different languages including local according to the common standards of the corporate Canal Abierto. Minimum standards include subsidiary CEOs endorsement, communication to employees of the importance of using the channel, information on how incidents have been handled and lessons learned, easy access to the channel and anonymity (if desired), external platforms to receive reports according to best practice, mechanisms to manage conflicts of interest in internal investigations of the reports, and regular internal audits. These standards have been part of our Canal Abierto policy since 2020. Canal Abierto is mainly set up to receive reports from employees; however, some subsidiaries’ local channels are open to vendors, customers, investors and other stakeholders, who can report violations of the GCC. Business incidents or complaints outside of Canal Abierto’s scope are not accepted on these channels. In 2023, Banco Santander, S.A. made these amendments to Canal Abierto to comply with Spain's law (Whistleblower Protection Act): • Revised the Canal Abierto policy and the related usage and operation procedure, which the board of directors had approved in June. Both are available on our corporate website and the Canal Abierto platform. • The Chief Compliance Officer appointed as responsible for Canal Abierto at Banco Santander, S.A.. We also worked on a protocol to standardize internal investigations in the Group´s units with less tradition in this matter. 26 In 2023, the Group’s channels received 3,611 reports , relating to: i) violations of our General code of conduct (63.4%), with key concerns over workplace harassment, internal fraud, product marketing, and anti-money laundering; ii) human resources- related conduct (30.2%), with key concerns over conflict due to a lack of leadership, and a failure to demonstrate corporate behaviours; and iii) other categories (6.4%). The Group received 125 reports about equal opportunity and non-discrimination; 12 led to disciplinary action, including 6 dismissals. There is no record of any lawsuits filed by an employee or their representatives against Banco Santander, S.A. in relation to incidents of discrimination or violation of fundamental rights. 27 The Group also received 15 reports regarding corruption, which led to 2 dismissals. We received 267 reports from third parties (207 from customers and 60 from vendors). All reports submitted on Canal Abierto are handled appropriately, whether they are found to be substantiated or not. In 2023, the number of closed reports and disciplinary actions has decreased due to the fact that in Brazil, cases identified by the control areas are no longer considered for Canal abierto purposes. • We made these changes to the channels we run in our other units in Spain (Santander Digital Consumer Bank, Openbank and PagoNxt) and shared them with the rest of the Group’s units as best practice. Received reports Closed reports Disciplinary action which led to dismissal 2023 3,611 2,929 655 366 2022 3,935 3,477 907 387 25 26 27 At 2023 year end, we had one subsidiary and three branches in offshore jurisdictions. For more details, see Note 3 c) to the consolidated financial statements. Not including PagoNxt entities outside Headquarters or the SCF joint ventures with Stellantis. For more details, see section 10.4 'Global Reporting Initiative (GRI) content index' (2-27). 66 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7.3 Environmental, social and climate change risk management GRI 2-23, 2-24, 2-25, 3-3, 411-1, 413-2, FS2, FS3, FS10, FS11 Santander embeds environmental and social standards in risk management, focusing on priority sectors to support sustainable and inclusive growth and uphold human rights. The Group has an internal procedure to manage the environmental and social (E&S) risks of project-related transactions. This procedure guides the application of the EP. Our Environmental, social and climate change (ESCC) risk management policy (which we review every year) sets out the standards for investing in, and providing financial products and services generation and distribution, mining and metals, and soft commodities (especially retail customers dedicated to farming and ranching in the Amazon). to companies and customers in oil and gas, power 28 A financial manager completes a questionnaire before a team of analysts conducts an overall assessment of the client's ESCC 29 . risks in the applicable sectors The ESCC risk and compliance departments delve deeper into cases that uncover red flags. They submit the findings of their analysis (and its impact on credit and other risks) to the bank’s risk approval committees, who use them in decision-making. According to the methodology we use to analyse customers’ climate transition plans, we carry out an annual assessment of ESCC risk for CIB clients in sectors where we have set decarbonization targets (oil and gas, power generation, automotive, steel, and aviation) to categorize them based on their greenhouse gas emissions, emissions targets, and transition risk management. The Group applies the precautionary principle to its analysis and management of core ESCC risk. In 2023, the ESCC risk and compliance departments worked with the business units to strengthen governance and ESCC risk management in sustainable finance transactions. We set up teams of experts to assess sustainable finance for new customer segments. These teams participate in expert panels to establish criteria and ensure consistency in operations tagging. We continued to ensure that we understand how ESCC risk affects our customers so as to make our risk assessments more rounded and to offer customers support in their transition. In addition to the analysis performed by the ESCC risk teams, the Financial crime compliance (FCC) teams establish controls to mitigate environmental crimes detailed in the following section. For more details on environmental, social and climate risk management, see ‘Risk, compliance & conduct management’ chapter. For more information on Santander’s environmental, social and climate change risk management policy, see section 9.2 'Main internal regulations and governance'. Equator Principles Equator Principles (EP) is a voluntary framework for financial institutions to identify, assess, and manage environmental and social risks when financing projects. We have been applying these principles to project-related transactions (especially project finance) since 2009. The assessment of transactions that potentially require application of EP starts with a Preliminary Assessment conducted by Front Office. The ESCC Risk Global function sits at CIB, reporting directly to Global Head of CIB Risk. ESCC Risk oversees Front Office´s Preliminary Assessment; also providing training and ad-hoc support to Front Office. Based on the conclusions of the Preliminary Assessment, an environmental and social risk review is conducted for applicable transactions, according to the following guidelines: • For projects with minimal or no adverse environmental and social risks and/or impacts (category C), the initial assessment is considered sufficient. • For 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 measures (category B) in designated countries, the Front Office must complete a due diligence questionnaire that includes the findings of the E&S risk assessment. The ESCC risk area provides guidance throughout this process. • For category A (with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented) and B projects that involve high-risk factors or are in non-designated countries, the ESCC risk area manages the due diligence procedure and prepares an E&S risk assessment report. • The findings of the E&S assessment form part of the application for financing that is submitted to the risk approval committees before a decision is made. • We also use other E&S policies, procedures and rules when deciding to grant project financing or project-related business loans. In 2023, we analysed 41 projects that fell within the scope of the Equator Principles (for more details, see table 8.7 ’Equator Principles). Human rights protection Our board-approved Responsible banking and sustainability policy sets out Santander’s ESG commitments, including human rights protection for our employees, customers, suppliers and the communities we serve. It upholds the highest standards, such as the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the Universal Declaration of Human Rights. • We run initiatives to combat discrimination, forced labour, and child exploitation as well as to preserve freedom of association and collective bargaining, our employees’ health, and decent employment. For more details, see section 4. 'Acting responsibly towards employees'. 28 29 Transactions that entail credit risk, insurance, advisory services, equity, and asset management. Sectors covered by the ESCC Risk management policy and additional tactical sectors included in the CIB Procedure, as well as other material businesses and sectors depending on the geography and local legal requirements 67 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • We protect our customers’ human rights through responsible business practices and the protection of their data. We also assess the human rights impact on transactions that fall within the scope of the Equator Principles. For more details, see section 5. 'Acting responsibly towards customers’ . • We improved our supplier questionnaires and environmental, social and human rights analysis to respect for human rights throughout our supply chain. For more details, see section 7.5 'Acting responsibly towards suppliers’. We're also enhancing human rights questionnaires to include risks to customers in the supply chain under our ESCC risk management policy. Grievances mechanism Canal Abierto is our grievance mechanism to protect human rights in the Group’s operations, according to principle 31 of the UNGPs. It can be found at https://secure.ethicspoint.eu/ domain/media/eseu/gui/105329/index.html For more details, see section 7.2 'Ethical channels’. 7.4 Financial crime compliance and relations with political parties GRI 205-2, 3-3, 415-1 SASB FN-AC-510a.1, FN-CB-510a.1, FN-IB-510a.1 ABC risk awareness workshops with staff from the Acquisitions team, and courses for board members. Relations with political parties Santander is committed to the principles of transparency, honesty and impartiality in its engagement with political parties and other entities with public and social purposes that are also political in nature. These principles prohibit any act of corruption by Santander’s employees and managers. Our board executive committee-approved policy on political party funding (available on our corporate website) has applied to all our subsidiaries worldwide since 2016. Except as provided below, it prohibits making monetary or in-kind donations and contributions to elections. However, it allows subsidiaries to sponsor special events or activities, provided they have been approved by the Group executive committee and are consistent with Santander's objectives and operations. Santander US participates in a US political action committee with full transparency and in compliance with US law. Grupo Santander may only finance political parties on an exceptional and arm's length basis approved by the Group executive committee. The policy prohibits total or partial debt cancellation for political parties and their affiliates. While the terms of any 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. For more details on financial crime, see section 7.2 ‘Compliance and conduct risk management’ in ‘Risk management and compliance’ chapter. Financial crime compliance (FCC) for vulnerable customers Our FCC due diligence for customers supports the Group's commitment to 'reducing the stigma in providing financial services to vulnerable customers', so that our business units mitigate financial crime risk responsibly. In 2023, the United Nations singled out Santander’s leading practices in its report Strengthening Financial Inclusion to Protect Against Modern Slavery: Applying Lessons to Bank Forcibly Displaced Persons/ Refugees. Three of the report’s five case studies were on Santander: Openbank, Santander España and Santander Polska. FCC tackling environmental crime Sectors with high exposure to environmental crime are considered 'restricted' and subject to further due diligence requirements. Our customer screening tools include specific terms and content related to environmental crime. We engage in various public-private partnerships as part of our commitment to detect, disrupt and deter environmental crime. Our Head of Financial Crime Compliance Framework & Policies continues to chair the quarterly United Nations Office on Drugs and Crime's (UNODC) private sector dialogue on the disruption of financial crimes related to forestry crimes. In 2023 this initiative extended to cover all environmental crime. Financial institutions, authorities, investigative law enforcement units and supranational governmental bodies came together to discuss intelligence sharing, typologies and policy strategies on disrupting the financial crime networks behind all crimes against nature. In 2023, Santander continued to play a pivotal role in the launch of the Latin American chapter of the United for Wildlife’s Financial Taskforce against illegal wildlife trade. FCC for anti-bribery and corruption, and training The Group continued to prioritize embedding its anti-bribery and corruption (ABC) compliance framework in 2023, with a strong commitment from marketing, sponsorships, supplier management, human resources and other key functions that are exposed to high ABC risk. The Group’s training plan continued to combine introductory ABC courses with more detailed and customized content for certain teams. In 2023, stand-out sessions included technical training on penalty enforcement, 68   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7.5 Acting responsibly towards suppliers GRI 3-3, 204-1, 308-1, 308-2, 414-1, 414-2 Our corporate third-party certification policy provides a methodology for all subsidiaries to make sure that our suppliers meet the Group’s minimum requirements. In addition to traditional legal, tax, technical and ethical standards, it includes such sustainability standards as human rights and diversity and inclusion for suppliers that provide risk services to the Group. Risk services are services provided by suppliers that handle highly sensitive data or where a disruption in their services could severely damage the business. ESG standards in procurement In 2023 we continued to work on procedures to assess our suppliers’ compliance with ESG standards. 30 31 32 representing 43% , have completed a Group • 3,001 suppliers risk services includes, among others, ESG aspects such as the existence of codes of conduct and anti-corruption policies, human and labour rights, or other elements included in international standards such as UN Global Compact. of those that provide certification that 33 • We worked on drawing up and implementing a new ESG approval methodology to classify our suppliers according to risk, including a criticality assessment. Supporting our suppliers’ sustainability transition We have created initiatives to support our suppliers and help them meet the requirements of domestic, European and international ESG regulatory frameworks: → We work with our most important suppliers on sustainability action plans to enhance their understanding of ESG. → We promote the UN Global Compact training programme to help our suppliers access knowledge and tools to tackle sustainability challenges. Other key aspects → 10,937 million euros were paid to suppliers. 91% of our of our suppliers are locally based, accounting for 94%34 turnover. → In 2023, we implemented a new corporate tool to standardize certification in all our core markets as well as to review key risks such as cybersecurity, business continuity, physical security, facilities and data protection, anti-bribery and corruption, data integrity and other additional risks. The assessment consists of questionnaires on carbon footprint, gender and disability inclusion, flexible working, minimum wage, good corporate governance and other factors. → We built up expert teams in our markets to consider ESG standards in negotiations and risks assessments under the new methodology. We use the assessment findings to work with suppliers on remediation plans and specific ESG training. → We’re working to extend our ethical channels for suppliers to the rest of our core markets. ESG standards in suppliers' negotiations In 2023 we introduced ESG standards in tenders for certain product and service taxonomies with an environmental and social impact. The ESG standards we require in tenders include the product or service's carbon footprint, the use of recycled or renewable materials, energy efficiency, accessibility for people with disabilities, and corporate social responsibility compliance in the supply chain. 30 31 32 33 34 Geographies with other local certification processes that do not include review of similar ESG criteria (USA, Peru, Colombia, Asia, Poland and wholesale branches) are not considered. The remaining 57% have been exempted on the basis of the criteria defined in the Group's third-party certification policy. Data at the end of November This certification is done through specific questionnaires about different topics (including ESG issues), and is subject to the approval of the corresponding local supplier forum, in case that any of these questionnaires are not passed. If this situation occurs, the forum will assess each case based on the Group's risk appetite in the matter and the mitigation plans which mitigate that risk. Geographies with local payment systems such as Poland, Uruguay and some Santander Digital Consumer Bank companies are not considered in the data. 69 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8. Our progress in figures GRI 2-4 8.1 Tax contribution Table 1. Total taxes paid 8.2 Customers Table 2. Group customers Table 3. Dialogue by channel Table 4. Group NPS Table 5. Group NPS by channel Table 6. Customers satisfaction Table 7. Total complaints 8.3 Financial inclusion Table 8. Financially empowered people Table 9. Microfinance 8.4 Community investment Table 10. Community investment Table 11. Outputs and outcomes 8.5 Employees Table 12. Employees by region and gender Table 13. Functional distribution by gender Table 14. Workforce by age bracket Table 15. Type of employment contract Table 16. Yearly average of contracts by gender Table 17. Yearly average of contracts by age bracket Table 18. Yearly average of contracts by role Table 19. Employees working in their home countries Table 20. Employees with disability by region Table 21. Headcount covered by collective agreement 71 71 72 72 72 73 73 73 74 74 74 74 75 75 75 76 76 76 76 77 77 78 78 78 78 79 Table 22. New hires by age bracket Table 23. New hires by gender Table 24. Dismissals Table 25. External turnover rate by gender Table 26. External turnover rate by age bracket Table 27. Remuneration by role, gender and region Table 28. Average remuneration of senior management Table 29. Ratio of the bank’s minimum annual salary to the legal minimum annual salary by country and gender Table 30. Training Table 31. Hours of training by category Table 32. Hours of training by gender Table 33. Absenteeism by gender and region Table 34. Accident rate Table 35. Occupational health and safety 8.6 Green transition Table 36. Green finance Table 37. Financed emissions for alignment Table 38. Environmental footprint 8.7 Equator principles Table 39. Equator principles 8.8 Country by country report (according to GRI 207-4 Table 40. Country by country report (according to GRI 207-4) 79 79 79 80 80 81 81 82 83 83 83 83 83 84 84 84 84 85 86 86 87 87 70       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8.1 Tax contribution GRI 201-1 In 2023, our tax contribution totalled EUR 19,914 million, including EUR 9,664 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 35 are taxed, including EUR 17 in taxes paid directly by Santander and EUR 18 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 5,214 million, which represents an effective rate of 31.7%). 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 58.7% 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 4,276 million, which represents an effective rate of 26% (see note 27 of the consolidated annual accounts). 1. 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 2023 Other taxes paid 1,310 500 190 281 90 282 2,653 583 497 93 389 100 20 1,682 111 4 4,450 Corporate income taxA 323 728 302 150 173 518 2,194 1,396 840 167 54 57 48 2,562 446 12 5,214 Total taxes paid by B the Group 1,633 1,228 492 431 263 800 4,847 1,979 1,337 260 443 157 68 4,244 557 16 9,664 Third-party C taxes 1,642 569 220 252 2 (3) 2,682 3,141 916 352 2,186 50 16 6,661 898 9 10,250 Total contribution 3,275 1,797 712 683 265 797 7,529 5,120 2,253 612 2,629 207 84 10,905 1,455 25 19,914 A. The Group's income tax for the year 2022 amounted to EUR 5,498 million. B. Total own taxes paid for all these concepts amounted to EUR 9,664 mn, broken down as EUR 5,214 mn in corporate income tax, EUR 1,004 mn in non-recoverable VAT and other sales taxes, EUR 1,766 mn in employer-paid payroll taxes, EUR 85 mn in property taxes, EUR 224 mn in Spanish temporary bank levy, EUR 385 mn in bank levies and EUR 986 mn in other taxes. C. Total third-party taxes amounted to EUR 10,250 mn, broken down as EUR 2,946 mn in salary withholdings and employees' social security contributions, EUR 768 mn in recoverable VAT, EUR 2,217 mn in tax deducted at source on capital, EUR 310 mn in non-resident taxes, EUR 417 mn in property taxes, EUR 217 mn in stamp taxes, EUR 2,017 mn in taxes related to the financial activity and EUR 1,358 mn in other taxes. 71   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8.2 Customers GRI 2-26,2-29, FS6 2. GROUP CUSTOMERS A Europe Spain United Kingdom Portugal Poland B Others Europe South America C D Brazil Chile Argentina Others South America North America F United States México F Others- North America Digital Consumer Bank Santander Consumer Bank Santander Digital Total G 2023 46,293,433 15,022,877 22,480,761 2,908,192 5,877,433 4,170 73,028,442 62,804,350 4,052,314 4,771,370 1,400,408 25,027,302 4,510,043 20,517,259 0 20,192,858 17,665,556 2,527,302 164,542,034 2022 45,563,811 14,319,525 22,402,482 2,922,944 5,696,967 221,894 69,553,448 60,117,170 3,577,094 4,385,406 1,473,778 24,980,487 4,523,339 20,239,179 217,969 19,746,178 17,793,206 1,952,972 159,843,924 var. 2% 5% —% (1)% 3% (98)% 5% 4% 13% 9% (5)% —% —% 1% (100)% 2% (1)% 29% 3% A. Figures corresponding to total customers. 2022 data has been redefined to accommodate 2023 reporting segments. B. Includes the rest of Private Banking and other CIB Europe. In 2023 Superdigital is not included, because it is a business that has been discontinued. C. Private Banking: Decision groups. D. Includes Uruguay, Peru and Colombia. In 2023 Superdigital is not included, because it is a business that has been discontinued. E. Includes BPI Miami F. In 2023 Superdigital is not included, because it is a business that has been discontinued. G. SCF includes customers in all European countries, including the UK. 3. DIALOGUE BY CHANNEL Branches Number of branches Digital banking B (millions) Digital customers A 2023 2022 Var .2023/2022 %. 8,518 9,019 54.2 51.5 (5.6)% 5.2 % A. Santander Consumer Finance not included. B. Counts once for customers of both Internet and mobile banking. 72 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4. GROUP NPS Argentina Brazil Chile Uruguay Spain Poland Portugal UK Mexico USA 2022 2021 2020 2019 1 4 1 2 3 3 2 5 2 9 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 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. 5. GROUP NPS BY CHANNEL A Branch Contact center B Internet Mobile 2023 70 72 67 67 2022 66 60 62 65 2021 64 43 58 69 A. Internal NPS. Monthly data. Last information available from December 2023 (it may vary throughout the year). Obtained from customer surveys issued within 48 hours of their contact with the bank via any channel. Weighted average of active Group customers. B. Internet: Excluding Chile and Uruguay. 6. CUSTOMER SATISFACTION A 2023 2022 2021 2020 Argentina Brazil Chile Uruguay Spain Poland Portugal UK Mexico USA B Group 92 88 89 95 89 95 86 96 98 89 91 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 A. Net customer satisfaction: calculation of 100% of customers minus percentage of dissatisfied customers. B. Linear average of net satisfaction across all geographies. 73 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7. TOTAL COMPLAINTS A C SpainB Portugal United Kingdom E D Poland Brazil Mexico Chile Argentina F US G SCF 2023 88,326 4,789 25,309 6,272 207,211 68,565 8,441 5,525 5,712 33,074 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 A. Compliance metrics based on group-wide criteria, homogeneous for all geographies. B. Spain increases only due to a rebound in claims for mortgage formalization expenses, with a general reduction in the rest of the cases.. Includes Open Bank S.A. C. Portugal increased mainly due to cost of living crisis with regulatory changes in mortgages D. The United Kingdom is affected by a change in the perimeter where insurance has been included, once complaints for personal protection insurance (PPI) have been standardized. E. Poland increased due to changes in terms and conditions and operational changes. F. The United States has included the Santander Consumer unit in the report. G. The increase in SCF is mainly due to complaints for the reduction of upfront costs in case of early repayment of CQS in SCF Italy and discretionary management fees in SCF UK. 8.3 Financial inclusion GRI 203-1, 203-2, 413-1 A 8.1 Financially included people million people (Accumulated since 2023) Access Finance Total 2023 1.0 0.8 1.8 A. During 2023 a new public target of Financially Included People has been made, which considers Access and Finance initiatives (the previous commitment also considered Financial Education initiatives). As a result, the methodology for calculating Financially Included People has been redefined, and the difference with the previous year does not allow full comparability (-0.2 million vs 2022). Data for 2023 reflect only new financially included persons vs. previous year. Unique people. Each year only new financially included people are added. 8.2 People helped through Financial education initiatives million people Financial educationA 2023 11.5 A,B 2022 2.7 2021 1.3 A. As a result of what is explained in note A of the table above, the methodology for calculating the number of people helped through financial education initiatives has also been redefined, and the difference with the previous year is not comparable. 2023 figures now includes social media initiatives to promote financial education, which makes the figure increase significantly year on year. B. Unique people. Each year only new people helped are added. 9. Microfinance million euros / people Total credit disbursedA B Total micro-entrepreneurs supported 2023 1,172.3 1.2 2022 950.0 1.6 2021 571.0 1.0 A. The increase in credit disbursed is mainly due to the bank's commitment to expand its microfinance programmes in Latin America. 74 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8.4 Community investment GRI 203-1, 203-2, 413-1, FS7 10. 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, employability, and entrepreneurship Other local initiatives Total 2023 2022 2021 105 69 174 100 63 163 106 46 152 11. Outputs and outcomes We have developed internal methodologies to measure people helped of our Santander Universities programme and our local community support initiatives, respectively. 11.1 People helped through Santander Universities programmes people helped Higher educationA Employability B 2023 28,849 463,045 7,036 498,930 2022 49,490 195,798 20,739 266,027 2021 40,632 98,480 23,120 162,232 A Entrepreneurship A Total A. The variation in Education and Entrepreneurship programmes respond to the reclassification derived from the new taxonomy of Santander Universities, approved in 2023 and aligned to the People Helped internal methodology. This new taxonomy also includes a correction factor of 10% on the total consolidated data for the year to avoid duplication. B. The increase in the number of people helped in Employability is mainly due to the extension of our portfolio programmes to new types of courses as part of Santander Universities' strategy to support employability. Furthermore this also considers changes in taxonomy to align to the People Helped internal methodology. A 11.2 People helped from local initiatives million people Support for childhood education Support for social welfare Support for the arts and science Others Total 2023 0.6 1.0 0.1 0.5 2.2 2022 0.4 0.9 0.0 1.0 2.3 2021 0.8 1.3 0.0 0.0 2.1 A. The nature and depth of initiatives is very diverse, both between them and comparing to initiatives of Santander Universities. 75 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8.5 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 12. EMPLOYEES BY REGION AND GENDER Region Spain Brazil Chile Poland Argentina Mexico Portugal UK USA Others Total No employees 2023 35,266 57,868 9,576 13,361 8,365 31,239 5,303 24,221 12,579 14,986 212,764 2022 34,153 55,632 9,544 13,053 8,228 29,389 5,251 22,905 13,971 14,336 206,462 % men 2023 53 46 44 34 51 47 51 47 44 51 47 2022 52 44 44 33 52 47 51 45 43 50 46 % women 2023 47 54 56 66 49 53 49 53 56 49 53 2022 48 56 56 67 48 53 49 55 57 50 54 A. At year end. Employee data is broken down according to geographical criteria (2022 data has been updated to this criteria) and cannot be compared to the figures in the 'Economic and financial review' chapter, which follow management criteria. A 13.1 DISTRIBUTION BY ROLE AND GENDER 2023 B Senior executives C Other executives Europe North America South America Group total Men 1,073 202 305 1,580 68.2% 71.1% 68.4% 68.6% Women 500 82 141 723 31.8% 28.9% 31.6% 31.4% Total 1,573 284 446 2,303 Women Men 10,704 58.4% 3,778 60.0% 3,878 58.9% Total 7,629 41.6% 18,333 6,300 2,522 40.0% 6,586 2,708 41.1% 18,360 58.8% 12,859 41.2% 31,219 Other employees Women Men 31,413 16,387 32,709 80,509 45.2% 38,062 43.7% 21,111 45.3% 39,560 44.9% 98,733 Total 54.8% 69,475 56.3% 37,498 54.7% 72,269 55.1% 179,242 A. At year end. B. Includes Group Sr. Executive VP. Executive VP and VP. C. The variation in executives includes the effect of internal reclassification and harmonization of the management levels of employees carried out across Grupo Santander. A 13.2 DISTRIBUTION BY ROLE AND GENDER 2022 Europe North America South America Group total 1,093 221 320 1,634 Men B Senior executives Women 478 66 134 678 69.6% 77.0% 70.5% 70.7% 30.4% 23.0% 29.5% 29.3% Total 1,571 287 454 2,312 Other executives Other employees Men Women Men Women 6,779 1,334 3,147 11,260 63.5% 68.2% 60.0% 63.0% 3,893 621 2,096 6,610 Total 36.5% 10,672 1,955 31.8% 40.0% 5,243 37.0% 17,870 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. The higher number of women senior executives is due to the progress made on the public Responsible Banking commitment regarding women in senior executive positions, which aims to have women in 35% of senior management roles by 2025. A 14.1. WORKFORCE BY AGE BRACKET 2023 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 5,563 5,206 12,311 23,080 6.22% 11.81% 15.52% 10.85% 19,992 17,859 30,516 68,367 22.37% 40.51% 38.48% 32.13% 29,111 11,713 24,156 64,980 32.57% 26.57% 30.46% 30.54% 14,320 3,427 6,101 23,848 16.02% 7.77% 7.69% 11.21% 20,395 5,877 6,217 32,489 22.82% 13.33% 7.84% 15.27% 76                                   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 14.2. WORKFORCE BY AGE BRACKET 2022 Number and % of total A,B 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% A 15.1. TYPE OF EMPLOYMENT CONTRACT IN 2023 Europe North America South America Group total Europe North America South America Group total Permanent/Full-time Men Women 40,888 51.4% 20,216 46.5% 36,654 46.6% 97,758 48.5% 38,681 48.6% 23,246 53.5% 41,962 53.4% 103,889 51.5% Total 79,569 43,462 78,616 201,647 Permanent/Part-time Men 860 13.7% 107 21.7% 27 33.3% 994 14.5% Women 5,434 86.3% 386 78.3% 54 66.7% 5,874 85.5% Total 6,294 493 81 6,868 Temporary/Full-time Temporary/Part-time Men 1,270 40.6% 44 35.5% 211 35.2% 1,525 39.6% Women 1,855 59.4% 80 64.5% 389 64.8% 2,324 60.4% Total Men 3,125 124 600 3,849 172 43.8% 0% 0% 172 43.0% 0 0 Women 221 56.2% 100% 100% 228 57.0% 3 4 Total 393 3 4 400 A. At year end. B. From 2023 the type of contract in Brazilian contact center units will be computed as 'full-time', taking into account the standard 6-hour working day. A 15.2. TYPE OF EMPLOYMENT CONTRACT IN 2022 Europe North America South America Group total Europe North America 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% 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 3,980 681 397 5,058 Men 161 42.8% 3 60.0% 24 47.1% 188 43.5% Women 215 57.2% 2 40.0% 27 52.9% 244 56.5% Total 6,115 449 4,573 11,137 Total 376 5 51 432 16. 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 95,851 1,052 1,516 179 98,598 2023 Women 104,281 6,080 2,310 245 112,916 Total 200,133 7,132 3,826 424 211,514 2022 Women 97,216 9,199 2,545 275 109,235 Men 88,260 1,924 1,921 176 92,281 Total 185,476 11,123 4,466 451 201,516 77                           2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 17.1. YEARLY AVERAGE OF CONTRACTS BY AGE BRACKET IN 2023 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 19,753 643 820 131 21,347 aged 26-35 64,064 1,567 1,682 137 67,450 aged 36-45 62,171 2,261 854 84 65,370 aged 46-50 22,962 793 207 23 23,985 aged over 50 31,183 1,867 264 50 33,363 Total 200,133 7,132 3,826 424 211,514 17.2. YEARLY AVERAGE OF CONTRACTS BY AGE BRACKET IN 2022 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 16,667 3,169 1,153 150 21,139 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 18. YEARLY AVERAGE OF CONTRACTS BY ROLE 2023 2022 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 2,262 6 18 0 2,287 31,531 456 382 83 32,452 19. EMPLOYEES WORKING IN THEIR HOME COUNTRY A,B Other Executives Managers employees Other Total Executives Managers employees 166,978 10,953 4,342 434 182,707 16,304 163 104 17 16,588 2,194 7 20 0 2,221 166,340 200,133 7,132 3,826 424 176,776 211,514 6,669 3,426 341 % Europe North America South America Group total Executives 2023 90.21 77.73 97.06 89.20 2022 88.22 91.29 91.85 89.32 Other employees Total 2023 91.26 94.15 98.23 94.68 2022 94.33 99.69 98.23 96.92 2023 91.03 91.70 98.12 93.81 Total 185,476 11,123 4,466 451 201,516 2022 94.22 99.63 98.19 96.84 A. At year end. B. We gather the country of birth following local regulations and requirements in most of our units. Employees who preferred not to disclose this information (representing 17.8% of the total, mainly in Poland, the United Kingdom and the United States) are counted as born in the country where they are employed at the end of the year.. A,B 20.1 EMPLOYEES WITH DISABILITIES BY REGION % 2023 2.19 0.92 2.94 2.21 Europe North America South America Group total 2022 1.98 0.67 2.80 1.99 A. At year end. B. In US and UK, employees with disabilities are counted through self-identification. A,B 20.2. EMPLOYEES WITH DISABILITIES Number of employees Spain Rest of the Group Group total 2023 570 4,131 4,701 2022 564 3,550 4,114 A. At year end. B. In US and UK, employees with disabilities are counted through self-identification. 78 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management A 21. HEADCOUNT COVERED BY COLLECTIVE AGREEMENT Countries Spain Brazil Chile Poland Argentina Mexico Portugal UK US Other business units Total Group 2023 % 99.95 96.77 100.00 0.00 81.06 28.24 88.25 99.32 0.00 37.51 70.3 Employees 35,247 55,998 9,576 0 6,781 8,823 4,680 24,057 0 5,621 149,575 2022 % 99.94 97.18 99.48 0.00 86.05 27.64 90.46 96.63 0.00 45.98 70.89 Employees 34,132 54,061 9,494 0 7,080 8,122 4,750 22,134 0 6,592 146,365 A. At year end. Data is broken down according to geographical criteria (2022 data has been updated to this criteria). A 22.1. NEW HIRES BY AGE BRACKET IN 2023 % of total Europe North America South America Group total aged <= 25 25.61 29.44 32.23 29.79 aged 26-35 40.44 44.68 42.37 42.40 aged 36-45 20.75 16.94 18.94 18.95 aged over 45 6.32 4.40 3.57 4.50 aged > 50 6.87 4.53 2.89 4.35 A. In 2023, the calculation criteria and systems for all geographies have been unified. A 22.2. NEW HIRES BY AGE BRACKET IN 2022 % of total Europe North America South America Group total A. UK categorises all new employee registrations as new hires. 23. NEW HIRES BY GENDER A 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 Europe North America South America Group total Men 14.66% 26.74% 27.84% 21.97% 2023 Women 12.79% 22.27% 28.29% 20.71% Total 13.68% 24.31% 28.09% 21.29% 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% A. UK categorises all new hires as new hires. A 24. DISMISSALS by gender and role Senior executives C Other executives Other employees Total Group Men 57 759 5,226 6,042 %B 3.58% 4.17% 6.89% 6.13% 2023 Women 18 612 7,497 8,127 2022 B % 2.63% 4.72% 7.77% 7.20% Total 75 1,371 12,723 14,169 B % 3.28% 4.22% 7.20% 6.70% Men 58 378 5,771 6,207 B % Women B % 3.55% 3.36% 7.00% 6.51% 17 216 7,837 8,070 2.51% 3.27% 7.55% 7.26% Total 75 594 13,608 14,277 B % 3.24% 3.32% 7.31% 6.92% 79                                 2023 Annual report Contents by gender and age aged <=25 aged 26-35 aged 36-45 aged 46-50 aged >50 Total Group Men 960 2,100 1,609 502 871 6,042 2023 Women 1,547 2,608 2,308 619 1,045 8,127 Total 2,507 4,708 3,917 1,121 1,916 14,169 Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Men 1,002 2,025 1,539 558 1,083 6,207 2022 Women 1,546 2,719 2,229 594 982 8,070 Total 2,548 4,744 3,768 1,152 2,065 14,277 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 variation in executives includes the effect of internal reclassification and harmonization of the management levels of employees carried out across Grupo Santander. A 25. EXTERNAL TURNOVER RATE BY GENDER % of total Europe North America South America Group total Men 9.60 25.31 22.88 17.69 2023 Women 10.49 23.29 29.37 20.40 Total 10.07 24.21 26.41 19.14 Men 10.36 31.28 24.68 19.90 2022 Women 10.30 28.35 30.89 21.93 A. Excludes temporary leaves of absence and transfers to other Group companies. A 26.1 EXTERNAL TURNOVER RATE BY AGE BRACKET % of total 2023 Europe North America South America Group total aged <= 25 28.31 39.96 51.95 43.94 aged 26-35 15.38 25.87 25.17 22.55 aged 36-45 7.30 19.06 20.17 14.26 aged 46-50 4.57 18.75 16.25 9.68 aged over 50 8.45 20.74 18.71 12.72 A. Excludes temporary leaves of absence and transfers to other Group companies. Total 10.33 29.68 28.09 20.99 Total 10.07 24.21 26.41 19.14 80               2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management A 26.2. 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 Total 10.33 29.68 28.09 20.99 A. Excludes temporary leaves of absence and transfers to other Group companies. A 27. REMUNERATION BY ROLE, GENDER AND REGION Senior executives B Other executives Men 498,350 796,406 584,353 550,670 Women 348,263 576,925 325,287 368,162 GPG ratio (Median)C 18.8% 29.0% 35.6% 28.0% GPG-SAB ratio D (Median) 13.3% 13.7% 20.0% 17.9% Men 147,649 150,795 158,856 150,169 Women 108,662 97,475 134,045 108,384 GPG ratio C (Median) 15.1% 29.3% 12.7% 20.0% GPG-SAB ratio D (Median) 15.1% 30.5% 9.9% 18.8% 493,914 469,180 5.3% 134,691 132,943 1.3% Other employees Total Men Women 43,839 36,278 22,611 33,846 54,880 51,546 30,464 44,223 Ratio GPG C (Median) 17.9% 19.8% 21.8% 23.3% GPG-SAB ratio D (Median) 16.3% 22.6% 24.5% 22.4% 38,516 38,276 0.6% Men Women 52,404 43,176 25,735 40,310 80,843 74,118 40,607 64,318 Ratio GPG C (Median) 22.4% 30.2% 25.9% 27.8% 64,318 60,793 40,310 37,606 5.8% 7.2% 27.8% 30.2% (7.8%) GPG-SAB ratio D (Median) 19.8% 28.0% 29.1% 29.0% 29.0% 29.8% (2.6%) Total employees 65,983 57,110 32,666 51,535 51,535 48,232 6.8% aged <= 25 aged 26-35 aged 36-45 aged 46-50 aged over 50 14,792 14,060 5.2% 29,882 27,551 8.5% 51,887 48,002 8.1% 70,415 65,336 7.8% 79,958 74,744 7.0% Total 51,535 48,232 6.8% Europe North America South America Group total 2023 average remuneration 2022 average remuneration Variation 2023 vs. 2022 (%) Europe North America South America Group total 2023 average remuneration 2022 average remuneration Variation 2023 vs 2022 (%) By age bracket 2023 average remuneration 2022 average remuneration Variation 2023 vs 2022 (%) A. The average total remuneration of employees includes annual base salary, pensions and variable remuneration paid in the year. B. Includes Group Sr. Executive VP. Executive VP and VP. C. GPG Ratio (median) includes annual base salary and variable remuneration paid in the year.Gender Pay Gap has decreased for 2nd consecutive year and it becomes the lowest historical data. D. GPG Ratio - ABS (median) includes annual base salary paid in the year. 28.1 AVERAGE REMUNERATION OF SENIOR MANAGEMENT (with variable remuneration not linked to long-term objectives) Thousand euros 2023 Women Total Men 2022 Women Executive directors Non-executive directors Senior management Men 8,257 368 4,112 11,544 327 1,645 9,900 352 3,583 9,086 285 4,365 11,001 304 1,574 Total 10,044 292 3,767 81                             2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 28.2 AVERAGE VARIABLE REMUNERATION OF SENIOR MANAGEMENT LINKED TO LONG- TERM OBJECTIVES (fair value) Thousand euros 2023 Women Total Men 2022 Women Executive directors Senior managementA Men 1,537 563 2,243 189 1,890 483 1,436 597 2,128 191 Total 1,782 510 A. Additionally, in 2023, one senior executive received EUR 200,000 of the Digital Transformation award from PagoNxt S.L. In 2022, one senior executive also received EUR 500,000 of the Digital Transformation award from PagoNxt S.L. 28.3 SENIOR MANAGEMENT COMPOSITION Number Executive directors Non-executive directors Senior management Men 1 8 11 2023 Women Total Men 2022 Women Total 1 5 3 2 13 14 1 8 11 1 5 3 2 13 14 29.1 RATIO OF THE BANK’S MINIMUM ANNUAL SALARY TO THE LEGAL A MINIMUM ANNUAL SALARY BY COUNTRY AND GENDER, 2023 % Legal minimum wage Argentina Brazil Chile US Spain Mexico Poland Portugal B UK Men 315% 121% 213% 276% 141% 100% 101% 184% 112% Women 315% 121% 213% 276% 141% 100% 101% 184% 112% % legal minimum wage 315% 121% 213% 276% 141% 100% 101% 184% 112% A. The lowest salary paid by the companies in the country over the minimum legal salary of the country. B. From 2023 for the UK, the legal minimum wage is considered to be that for employees over 23, which is higher than the +18 and apprentices considered in 2022. 29.2 RATIO OF THE BANK’S MINIMUM ANNUAL SALARY TO THE LEGAL MINIMUM ANNUAL SALARY BY COUNTRY AND GENDER, 2022 A,B % Legal minimum wage Germany Argentina Brazil Chile US Spain Mexico Poland Portugal UK Men 191% 377% 241% 160% 234% 154% 145% 100% 170% 223% Women 191% 377% 241% 140% 232% 150% 145% 100% 170% 223% % Legal minimum wage 191% 377% 241% 150% 233% 152% 145% 100% 170% 223% A. The lowest salary paid by the companies in the country over the minimum legal salary of the country. B. In 2022 only the employees of Banco Santander Brazil, Banco Santander Chile and Banco Santander Mexico were taken into account; and from 2023 we have also compared the employees of the other companies in these three countries. 82 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 30. TRAINING Total hours of training % employees trainedA Total attendees Hours of training per employeeB Total investment in trainingC Investment per employee Cost per hour % women participants Employee satisfaction (up to 10) 2023 2022 6,067,569 89.48 6,775,921 28.69 60,162,751 284.44 9.92 50.42 8.93 6,884,251 100.00 5,748,422 33.34 71,630,151 346.94 10.40 55.18 9.81 A. Calculation based on year-end headcount. B. Calculation based on average headcount for the year. C. The decrease in investment in training is due to Banco Santander's efforts to optimise the resources invested by increasing e-learning training. 31. HOURS OF TRAINING BY CATEGORY 2023 2022 Hours Average Hours Average Senior executives Other executives Other employees Group total 77,889 857,455 5,132,225 6,067,569 34.06 26.42 29.03 28.69 87,353 493,474 6,303,424 6,884,251 37.78 27.61 33.84 33.34 32. HOURS OF TRAINING BY GENDER 2023 Average 29.6 27.88 28.69 2022 Average 33.15 33.51 33.34 Men Women Group total 33. ABSENTEEISM BY GENDER AND REGION A,B Europe North America C South America Group total 2023 Women 4.55 1.66 5.29 4.22 Men 2.13 0.84 2.18 1.89 Total 3.39 1.28 3.87 3.13 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 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 2023. This indicator only considers absences of at least 15 days due to accidents or common illness. C. Criteria, processes and systems have been harmonized to homogenize the calculation of medical absences and non-occupational accidents in all countries. D. In 2023, 16.9 million equivalent hours of absenteeism due to common illness and non-occupational accidents, counted in calendar days from the day of onset to the reinstatement of the medical leave, a criterion that will be applied from 2023. In 2022, there were 9.8 million hours counted in working days. 34. ACCIDENT RATE % A,B Europe North America South America Group total 2023 Women 0.09 0.03 0.00 0.04 Men 0.02 0.03 0.01 0.02 Total 0.06 0.03 0.00 0.03 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 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 2023. This indicator only considers accidents of at least 15 days. 83 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 35. OCCUPATIONAL HEALTH AND SAFETY A,B Frequency rateC D Severity rate No. of fatal occupational accidents E Work-related illness F Total number of accidents 2023 Women 1 0.06 0 12 271 Men 1 0.03 0 3 128 Total 1 0.04 0 15 399 2022 Women 2 0.09 0 0 477 Men 1 0.04 1 0 239 Total 1 0.06 1 0 716 A. Occupational injuries that can be documented are reported, without exception for serious injuries. There have been no significant changes in occupational health and safety trends, apart from natural evolution and prevention actions. Criteria, processes and systems have been harmonized to homogenize the calculation of medical absences and non-occupational accidents in all countries, with global criteria. 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 2023. This indicator only considers accidents of at least 15 days. C. Number of occupational accidents with leave for every 1,000,000 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. Starting in 2023 it’s been reported globally, following the local regulation for occupational illnesses where they are regulated country-wide or for specific jobs. F. Refers to occupational accidents with sick leave and includes commute-related accidents. 8.6 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, FS11 A 36. Green finance EUR bn Raised and facilitated Accumulated since 2019 2023 20.2 114.6 2022 28.8 94.5 2021 31.9 65.7 2020 14.8 33.8 A. From January to September 2023, CIB contributed EUR 20.2 billion to the green finance target. According to Dealogic, Infralogic, 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. This information will be updated to year end in the next Climate Finance Report. Preliminary figures as final league tables were not yet available at editorial close. A 37. Financed emissions for alignment Sector Power generation Energy (Oil & Gas) Aviation Steel Auto - manufacturing E Agro F Auto - lending Mortgages G B Year 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2022 2022 2022 Exposure (drawn amount €bn) 10.31 10.23 6.67 8.25 2.44 2.02 1.31 1.42 4.45 3.90 1.80 55.27 211.05 Emissions scope 1 D 1 + 2 + 3 1 + 2 1 + 2 D 3 1 + 2 1 + 2 1 + 2 Absolute emissions (mtCO2e) 4.59 4.24 22.58 27.43 1.08 0.84 2.14 1.90 3.49 2.67 6.20 5.84 2.63 Physical emissions intensity 0.17 tCO2e/MWh 0.19 tCO2e/MWh 73.60 tCO2e/TJ 74.36 tCO2e/TJ 93.05 grCO2e/RPK 97.21 grCO2e/RPK 1.40 tCO2e/tS 1.36 tCO2e/tS 149 gCO2/vkm 138 gCO2/vkm N/A 137 gCO2e/vkm 2 39.72 kgCO2e/m Financial emissions intensity (mtCO2e/ EUR bn lent) 0.45 0.41 3.38 3.33 0.44 0.42 1.63 1.33 0.79 0.68 3.52 0.11 0.01 Overall PCAF C score 2.5 2.8 3.6 3.9 3.7 3.2 3.1 3.1 3.1 3.0 3.3 3.2 3.3 A. In the case of corporate business loans, Banco Santander calculates the Total Value of the Company (used to obtain the emissions attribution factor) by adding the total equity and debt of the company in order to avoid the high volatility in market capitalization. B. Obtaining emissions data from our customers is a challenge. As they disclose more non-financial information worldwide, the quality of our reporting on finance emissions will improve. In some other retail sectors, we rely on availability of emissions information for the different asset types as well as business information. C. 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 for emissions, physical intensity, and production data. For CIB portfolios CDP is the main source for GHG emissions and Trucost for production, we also used Asset Impact and Annual Reports as secondary sources to cover information gaps. We rely on Transition Pathway Initiative to measure physical intensity for certain sectors, such as Autos, O&G and Steel. In other retail sectors, we rely on the good quality of business information but also on data suppliers to improve and expand their emission databases. D. Scope 3 - category 11: use of sold products. E. Agriculture portfolio in Brazil. Considering different commodities (such as soy, corn, rice, sugarcane, cotton, and coffee, measured in tons) and meat and dairy products (measured per head of cattle), in addition to the land use change (measured in hectares), currently not consolidated into a single physical emission intensity. Since there is no specific methodology for agriculture, PCAF score was adapted considering the data available in primary production portfolio that made possible to measure land management emissions. Data as of March 2022. F. Consumer lending for the acquisition of passenger cars, covering a significant majority of the exposure in Europe. G. Mortgages portfolio in the United Kingdom. Assessment includes Scope 1 and 2 emissions based on actual (where available) and modelled EPC's. From our total lending on the balance sheet, about 8.0% of our exposure are from sectors for which Santander published emissions decarbonization targets for high-emitting sectors (power generation, energy (oil and gas), aviation, steel, auto manufacturing and auto lending) and around 17.8% of total SCIB lending. Using baselines exposures with different time horizons as per above table, and balance sheet exposures as of December 2022. 84     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 38. ENVIRONMENTAL FOOTPRINT 2022-2023 A 2023 2022 Var. 2023-2022 (%) B ) /employee) Consumption 3 Water (m Water (m3 Normal electricity (millions of kwh) Green electricity (millions of kwh) Total electricity (millions of kwh) Total internal energy consumption (GJ) Total internal energy consumption per employee (GJ/employee) C Total paper (t) Recycled or certified paper (t)C Total paper per employee (t/employee)C Waste C Paper and cardboard waste (kg) Paper and cardboard waste per employee (kg/employee)C Greenhouse gas emissionsH D Direct emissions (t CO2e) Indirect electricity emissions and other (t CO2e)-market based Indirect electricity emissions and other (t CO2e)-location based G Indirect emissions from displacement of employees (t CO2e) Total emissions (t CO2 e)- market based Total emissions per employee(t CO2e/employee) E,F E,F 1,858,645 9.56 25.63 779.68 805.31 3,444,543 17.72 4,932 4,417 0.025 3,787,667 19.49 25,755 21,516 205,292 125,441 172,711 0.89 1,887,857 9.75 97.42 745.82 843.24 3,431,272 17.73 5,849 4,860 0.030 4,123,740 21.30 21,967 30,917 217,906 81,535 134,419 0.69 -1.5 -1.9 -73.7 4.5 -4.5 0.4 0.0 -15.7 -9.1 -15.9 -8.1 -8.5 17.2 -30.4 -5.8 53.8 28.5 28.0 A. For 2023 information is included for more than 96% of the employees in the main countries of operation: Germany, Argentina, Brazil, Chile, Spain, Mexico, Poland, Portugal, United Kingdom and the United States; the data consolidation approach is based on operational control of GHG Protocol, where we have full authority to introduce and implement Group's operational policies. B. Santander consumes water exclusively from public water supply networks. C. The reduction in paper consumption and paper waste continues the downward trend of recent years, in line with the digitalization of the Group and society. D. These emissions are from direct energy consumption: natural gas, diesel and fleet fuel consumption where applicable (Mexico, Brazil, Chile and Poland this year), and correspond to Scope 1, as defined by the GHG Protocol standard. To calculate these emissions, emission factors DEFRA 2023 for fiscal year 2023 and DEFRA 2022 for fiscal year 2022 have been applied. The increase in Scope 1 is due to the increase in the vehicle fleet and the higher commercial activity post-pandemic. On the other hand, the consumption of natural gas and diesel continues the downward trend of recent years. E. These emissions include those derived from electricity consumption and correspond to scope 2 as defined by the GHG Protocol standard. For 2023, they have been calculated with the International Energy Agency (IEA) 2023 emission factors. For 2022, the 2021 IEA emission factors were used. Indirect electricity emissions - market-based: for the calculation of these emissions, it has been taken into account that the countries of Germany, Spain, Mexico, Brazil, Chile, Portugal and the UK consume 100% electricity from renewable sources, and for Argentina, Poland and USA this percentage is 79.7%. For the remaining non- renewable electricity consumed, the IEA emission factor for each country has been applied. Indirect electricity - location-based emissions: the IEA emission factor corresponding to each country has been applied for all purchased electricity consumed, regardless of its source of origin (renewable or non-renewable). These emissions also include district heating consumption of buildings in Poland. The emission factor used is the 2022 factor from the URE - Urząd Regulacji Energetyki (ure.gov.pl). F. The reduction in indirect electricity emissions is due to the increase in the purchase of electricity from renewable sources, self-production in our own buildings with solar panels (5.8 million of kWh of auto produced in 2023) and energy efficiency measures. G. These emissions include emissions from employee commuting in each country (networks and central services) by individual car, company car and/or public transport (75,380 t CO2e in 2023), and from employee business travel by plane, train and/or car (50,061 t CO2e in 2023). The distribution of employees by type of travel is based on surveys, statistics or reasonable estimates. For the calculation of emissions from employee commuting, the conversion factors DEFRA 2023 for fiscal year 2023 and DEFRA 2022 for fiscal year 2022 have been applied. For the conversion of aviation kms, the DEFRA 2023 factors that include the direct effects of CO2, CH4 and N2O have been used in 2023, aligned with market practice. In 2022 indirect impacts were included. Emissions derived from the use of courier services are not included, nor those derived from the transport of funds, nor those from any other purchase of products or services, nor those indirectly motivated by the financial services provided. H. Group's total emissions increased in 2023, mainly due to the return of employees to branches after the lifting of restrictions and the recovery of business travel and the improvement of the group's operational control procedures in the countries. 85     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8.7 Equator principles GRI 411-1, 413-2, FS10, FS11 39. 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 8 0 2 3 1 2 4 4 0 5 3 8 0 Project Finance B 24 0 2 1 19 2 3 21 0 22 2 24 0 C 4 0 0 0 4 0 2 2 0 4 0 4 0 Project Related Corporate Loans B 0 A 4 C 1 Project-Related Refinance and Project-Related Acquisition for Project Finance B 0 A 0 C 0 0 0 1 0 3 0 2 2 0 4 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 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. 86       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8.8 Country by country report (according to GRI 207-4) 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): Table 40. Country by country report (according to GRI 207-4). EUR million 2023 Jurisdiction Germany Argentina Australia Austria Bahamas Belgium BrazilD Canada Chile China Colombia United Arab Emirates SpainE United States Denmark Finland France Greece Hong Kong India Ireland Isle of Man Italy Jersey Luxembourg Mexico Norway Netherlands Peru Poland Portugal United Kingdom Romania Singapore Sweden Switzerland Uruguay Consolidated group total Revenue from third-party sales A Revenue from intra-group transactions Tangible assets other than cash and cash equivalents with other tax jurisdictions A B 1,635 1,643 6 238 36 70 12,568 90 2,241 13 89 4 8,565 7,335 219 122 1,158 14 175 0 2 -78 850 -39 460 5,991 344 138 202 3,584 2,113 6,623 5 45 187 174 601 57,423 -97 -67 0 -20 9 51 -137 -16 4 16 4 4 1,986 -272 -4 -21 -236 -5 -57 2 18 128 -269 72 72 -51 -101 25 -6 18 -55 -9 0 -25 -33 -9 -8 911 3,675 449 2 14 1 66 1,731 1 521 2 2 1 10,806 13,550 143 39 90 1 8 0 824 10 93 11 0 1,962 8 119 5 268 461 1,917 0 1 2 66 53 36,902 Corporate income tax C accrued on profit/loss 76 235 0 18 0 7 1,353 3 289 0 1 0 378 479 26 10 31 0 5 0 3 3 52 1 216 737 -7 98 21 390 399 685 0 1 -3 10 51 5,568 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 194 million in accrued corporate income tax. Includes Corporate Centre. 87 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. Some 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. 88 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9. Further information 9.1 Stakeholder engagement GRI 2-29, 3-3, FS5 9.1.1 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. Regarding the relationship with our shareholders, Banco Santander’s priority is to maximize value for, and retain the trust and loyalty of our 3.7 million shareholders worldwide. Our Shareholder and Investor Relations team works to uphold shareholders’ rights, ensure we are transparent, strengthen shareholder relations, foster fluid dialogue, promote shareholder involvement in the bank’s business, and facilitate their engagement with top management For more details, see section 1. 'Economy, regulation and competition'' in the 'Economic and financial review' chapter. For more details, see sections 2.1 'Share capital', 2.6 'Stock market information', 3.1 'Shareholder communication and engagement' and 3.3 'Dividends and shareholder remuneration' in the Corporate Governance chapter. Key dialogue channels for stakeholders People 91% aggregated participation A in Your voice Survey 3,611 complaints received through ethical channels Customers +9 million customer satisfaction surveys 453,224 complaints received Shareholders 9,120 responses from retail shareholders on their perception of Santander as a bank that is Simple, Personal and Fair 239,238 responses from retail shareholders and institutional investors in quality studies and surveys C Communities 1,238 partner universities and B institutions +400 social media profiles +30 million followers 206 events with retail shareholders 930 contacts with institutional investors (47 on ESG matters) A. 169,590 employees participated in the survey out of the total base of employees eligible to participate in the survey, i.e. who met some criteria such as not being on leave, working in the company for at least 3 months, etc. B. This figure includes universities that have an agreement with Santander Universities, Universia and Fundación Universia´s in 26 countries. Taking Santander Universities alone, the figure is 904 universities and academic institutions in 12 countries. Includes 9,120 retail shareholder responses received through the Santander perception survey as Simple, Personal and Fair. C. 89       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.1.2 Helping society tackle global challenges: 2030 agenda Our activity contributes 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 Other SDGs on which Banco Santander also has an impact SDG 8. Decent Work and Economic Growth 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. SDG 13. Climate Action 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. SDG 16. Peace, Justice, and Strong Institutions 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. For more details, see section 10.8 'SDGs contribution content index'. SDG 1. No Poverty 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. SDG 5. Gender Equality We promote an inclusive and diverse workplace, ensuring equal opportunity as a strategic priority. We also run initiatives to drive diversity. SDG 10. Reducing Inequality 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. SDG 12. Responsible Consumption and Production 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. SDG 4. Quality Education 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. SDG 7. Affordable and Clean Energy 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. SDG 11. Sustainable Cities and Communities We finance sustainable infrastructure and promote access to affordable housing to guarantee basic services and inclusive economic growth. SDG 17. Partnerships for the Goals We participate in prominent local and international initiatives and working groups. 90   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.1.3 Partnerships to promote our sustainability agenda GRI 2-23 We drive our responsible banking agenda through a number of local and international initiatives and working groups, including: UNEP Finance Initiative We are an active member of UNEP FI and a founding signatory to the United Nations Principles for Responsible Banking. United Nations Global Compact 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. 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. World Business Council for Sustainable Development (WBCSD) As members of WBCSD, in 2023, we continued participating in the Banking for Impact on Climate in Agriculture (B4ICA) initiative. Banking Environment Initiative (BEI) 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. CEO Partnership for Economic Inclusion Since 2018 we have been 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. The Partnership has concluded by end of 2023. Other international and local initiatives that Santander supports → UN Women's Empowerment Principles → Round Table on Responsible Soy → The Valuable 500 → UN Principles for Responsible Investment → CDP → UN Global Investors for Sustainable Development (GISD) Alliance → Green Recovery Alliance of the European Union → Equator Principles → Partnership for Carbon Accounting Financials (PCAF) → Working Group on Sustainable Livestock → Climate Leadership Council → The Wolfsberg Group → United For Wildlife’s Financial Taskforce against the illegal wildlife trade → United Nations Office on Drugs and Crime's (UNODC) Private Sector Dialogue on the Disruption of Financial Crimes Related to Environmental Crimes 91   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.2 Main internal regulations and governance GRI 2-23, 2-24, 3-3, FS1 In 2023, we continued to work on embedding ESG standards in all the Group’s operations and procedures. We rolled out our Responsible banking model to local units. This model sets out the roles and responsibilities in critical sustainability management and underpinned the development of operating models for Green Finance, risk, ESG reporting and other areas Cross-cutting regulations to embed ESG standards in our business model A Responsible banking framework Responsible banking and sustainability policy Responsible banking model Establishes responsible banking as a strategic topic for Grupo Santander and all local units. Sets out our sustainability principles, commitments, targets and strategy (including human rights protection) to create long-term stakeholder value. Sets out the roles and responsibilities of the first, second and third line of defence in all responsible banking-related activity to drive our sustainability agenda, embed ESG standards and achieve our goals. In addition to these regulations , which apply to all the Group’s units and businesses, we have regulations on Own workforce (see section 4.'Acting responsibly towards employees' ); Consumers and end users (see section 5.'Acting responsibly towards customers' ); donations policy (see section 6.'Supporting communities' ); and Business conduct (see section 7.'Business conduct' ). All regulations (corporate frameworks, models, policies and procedures) referred to maintain a high level of governance, and the highest standards in terms of their elaboration, approval, and in the monitoring of their local transposition. The approval of the regulations shall be the responsibility of the board of directors or its committees, when the regulated matter falls within their scope of responsibility according to their rules and regulations approved by the board of directors. The regulations approved by the board under this chapter are as follows: . Corporate frameworks in all cases must be 35 → Relevant corporate frameworks related to sustainability: Responsible Banking, Risk; Cybersecurity; Compliance and conduct ; Financial Crime and compliance; Human resources. → Relevant policies related to sustainability: Responsible banking and sustainable; Code of conduct; Code of conduct in securities markets; Corporate Defence; Environmental, social and climate change risk; Tax ; Conflict of interest; Defence sector; Anti-money laundering and countering the financing terrorism; Remuneration; Performance management; Group Succession; Culture. Santander publicly maintains key regulations at our website santander.com/en/our-approach/policies and santander.com/ codes-of-conduct. 35 For more information, please visit our website santander.com/rules-and-regulations-board-of-directors. 92 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 sustainability agenda according to our corporate strategy and policies. We issue guiding principles for subsidiaries and global business units to embed our responsible banking agenda across the Group. In 2023, the network held 5 virtual meetings to discuss progress on the Group's agenda and we ran the fifth Responsible Banking workshop, which was physically attended by representatives from all businesses and geographies. The network discussed priority areas of sustainability strategy, including climate and environment, social agenda, ESG risk management, sustainable business, materiality assessment, and reporting. Governance GRI 2-9, 2-12, 2-13, 2-14, 3-3, FS1, FS2, FS3 Board of directors The board of directors performs the following functions: • approves the Responsible Banking agenda and set the strategy • approves the culture policy and related policies on responsible business and sustainability matters and, in particular, on environmental and social matters; • ensures that the alignment of the responsible banking strategy is consistent with Group strategy; • reviews the performance against the public commitments and that the metrics are covered within the responsible banking agenda; • tracks key initiatives • reviews subsidiaries’ strategies. Responsible banking, sustainability & culture committee (RBSCC) The committee supports the board and oversees the Group's responsible banking agenda and strategy. For more details, see section 4.9 ´Responsible banking, sustainability and culture committee activities in 2023´ in the Corporate governance chapter The RBSCC coordinates its activities with the other board committees, in particular with the risk supervision, regulation, and compliance committee, the board audit committee and the remuneration committee. The first one has assessed the ESG policies and ESG risk appetite, the second has supervised financial and non-financial reporting and disclosures, as well as related ESG processes and controls and the third has approved the sustainability incentives in reward schemes . 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 2023, the committee was informed 3 times on progress made with the responsible banking agenda. Responsible banking forum 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. 93   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.3 Our targets 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. Green finance raised and facilitated A (cumulative)(EUR bn) 2018 2019 19 bn 2020 2021 2022 2023 33.8 bn 65.7 bn 94.5 bn 114.6 bn Target 120 bn by 2025 220 bn by 2030 Socially Responsible Investments AuMs (EUR bn) Electricity used from renewable B energy sources Thermal coal-related power & mining phase-out (EUR bn) Emissions intensity of power generation portfolio Absolute emissions of energy (oil & C gas) portfolio Emissions intensity of aviation portfolio C,D C Emissions intensity of auto manufacturing portfolio Emissions intensity of auto lending portfolioE Women in senior executives positions (%)F Equal pay gap G Financially empowered people (cumulative)H Financially included people I (cumulative) Investment to foster education, employability and entrepreneurship 27.1 bn 53.2 bn 67.7 bn 100 bn by 2025 88% 97% 100% by 2025 5.9 bn 4.9 bn 0 by 2030 43% 50% 57% 0.21 0.17 75% 7 bn 0.19 23.84 22.58 27.43 92.47 93.05 97.21 0.11 tCO2e / MWh in 2030 16.98 mtCO2e in 2030 61.71 grCO2e / RPK in 2030 1.07 tCO2e / tS in 2030 103 gCO2/vkm in 2030 75-89 gCO2e/ vkm in 2030 20% 3% 22.7% 23.7% 26.3% 29.3% 31.4% 35% by 2025 2% 2% 1% 1% c. 0% ~0% by 2025 2.0 mn 4.9 mn 7.5 mn 11.8 mn 1.8 mn 105 mn 10 mn by 2025 5mn between 2023-2025 €400m between 2023-2026 C Emissions intensity of steel portfolio 1.58 1.40 149 1.36 138 137 Cumulative target From… to… Commitment Achieved In 2023, we also continued to: → make progress on aligning key portfolios, including disclosure of emissions for UK Mortgages and Agriculture in Brazil. → have 40-60% women members on the board of directors. J → be carbon neutral in our own operations → keep our offices and buildings in our core markets free of single-use plastics in fulfilment of our public target. in our core markets. 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. Preliminary data as final League Tables for 2023 were not yet available at date of editorial closing; data will be updated to year end in the next Climate Finance Report. In countries where we can verify electricity from renewable sources at Banco Santander properties. It considers the 10 main countries in which we operate. 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 upcoming 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 6.Supporting the green transition. 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. Consumer lending for acquisition of passenger cars in Europe, covering a significant majority of the exposure. F. Senior executive positions make up 1% of the total workforce G. Equal pay gap based on same jobs, levels and functions. The year-end figure is 0.44%. Having met the target set (two years ahead of schedule), the Group has set itself the objective of maintaining a pay equity ratio in line with best market practices. H. Unbanked, underbanked and financially vulnerable individuals who receive tailored finance solutions and become more aware and resilient through financial education. I. Additional 5 million of included people, considering unbanked, underbanked and financially vulnerable individuals who receive tailored finance solutions relates to access and finance. J. Scope 1 and 2 emissions and scope 3 emissions from employee commuting and business travel.It considers wholly owned companies in Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the United Kingdom and the United States. 94 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.4 Double Materiality Assessment and sources GRI 2-29, 3-1, 3-2 We’re enhancing our methodology based on the Corporate Sustainability Reporting Directive (CSRD). We made two key updates in 2023: • The list of topics considered for the assessment are the sustainability matters described in the European Sustainability Reporting Standards (ESRS 1- Appendix A). • We used quantitative data (where possible) to assess impact, risk, and opportunity (IROs) more comprehensively. We also used stakeholder input to complement data-based analysis. In line with double materiality assessment requirements, Santander assessed impact materiality and financial materiality separately using the best available tools and data. 36 • We used the UNEP FI impact tool to assess impact materiality. • To assess financially material risks, Santander leverages on internal risk exercises (such as the Klima tool –see section 10.2 'Climate and environmental risk management' in 'Risk, compliance & conduct management' chapter – and initial assessments on Nature) and external data sources such as . Financial opportunities are informed by Santander’s SASB internal forecasts and supplemented with industry research. 37 Stakeholders input As part of our DMA exercise, we consulted an extensive list of internal and external stakeholders. Their input was key to understand the relevance of the opportunities arising from sustainability matters and overlayed our quantitative exercise. External UNEP-FI Impact tool SASB Additional market research Internal Klima tool Nature internal assessment Financial planning forecasts Description Assess positive and negative impacts of Santander’s business, including exposure to different sectors and products. Main source for the assessment of risks in Social and Governance sustainability -related matters. Consulted sources such as IEA, CDP, OECD, and WEF to complement the internal forecasts when evaluating sustainability business opportunity assessments. Santander’s internal climate risk assessment tool, which analyses climate physical and transition risk per sector. Leveraging on Encore, Santander has performed an assessment to identifying main key impacts and dependencies to nature sustainability related matters. Santander’s internal revenue forecast per business sector. 38 We conducted the double materiality assessment at ESRS sub- topic level. We considered Santander’s business model for each sub-topic, with results by business segment (including private individuals, consumers, corporates, payments, Wealth Management & Insurance) and own operations. The results have been carried out with a mid-term time horizon (~3 years). We gathered stakeholder feedback in different ways. This table shows each stakeholder group and sample size. Retail Customers =N 9000+ N = 9000+ Investors NGOs Senior management Employees Regulators and 39 supervisors =N 8N = 8 =N 5N = 5 =N 8N = 8 =N c.200 N = c.200 N = c.200 =N 2N = 2 Engagement was mainly through surveys as the most straightforward way to quantify their feedback and embed it in the exercise. We also interviewed different teams to enlarge and contextualize the information received. The survey demonstrates some consistency among all six stakeholder groups. Three topics consistently arise among their priorities: fighting climate change, protecting customer data, and ensuring transparency and inclusivity. However, there are also some differences: • Retail customers prioritize social (privacy and security personal data) and governance matters (transparency and honesty). • Employees and senior management have balanced priorities across E, S and G. • Investors’, regulators’ and NGOs’ top priorities are environmental matters. 36 37 38 39 United Nations Environment - Finance Initiative.The context module was conducted in the Group's five largest geographies as allowed by the tool. The consumer banking and institutional banking modules included entire Group's perimeter. Sustainability Accounting Standards Board. IEA-Internationa Energy Agency, CDP-Carbon Disclosure Project, OECD-Organisation for Economic Co-operation and Development, WEF-World Economic Forum. We consulted the two main functions of the Group that monitor this activity. 95   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management As the final step, we scaled each of the matters based on quantitative data and stakeholders' input. Then, we set the thresholds for an item to be material. We applied a five point scale of Critical, Significant, Important, Informative and Minimal. For Santander, a sustainability matter is material if it is above the category of Important, regardless of whether it comes from the impact side or from the financial side (risks and opportunities). Summary of the model Impact materiality 'Material if connected to actual or potential significant impacts related to the matter on people or the environment' OR Positive and negative impact Financial materiality 'Material if it triggers or may trigger financial effects on undertakings, i.e., generates or may generate risks or opportunities that influence or are likely to influence the future cash flows' Risks Opportunities + UNEP-FI Portfolio data Climate Tool scores (ESRS E1) Biodiversity + Internal analysis (ESRS E2-5) Assessment (ESRS S & G) Internal revenue forecast per business sector Industry research Stakeholder overlay (surveys inputs from NGOs, Retail customers, Employees, Senior management, regulatory views, and investors) Changes in our methodology as we based on CSRD One of the main changes to the CSRD is the list of sustainability matters. This renders Santander’s previous exercise slightly incomparable to 2023's. Nevertheless, we mapped and assessed the consistency of current materiality with the previous materiality assessment list of topics. The results, as shown below, reflect high consistency between both exercises considering the topics that were material in 2022 (crucial topics). Material topics in 2022 ESRS topic 2023 Customer experience and satisfaction Financial health Green finance and SRI Consumers and end-users: • Material topic. • Strong mapping. Customer experience and satisfaction included having a value proposition and service tailored to customer needs. Consumers and end-users: • Material topic • Strong mapping. We considered all our efforts to foster financial health as a key strategy to promote social inclusion of consumers and end-users. Climate change: • Material topic. • Strong mapping. Green finance and socially responsible investment referred specifically to business opportunities arising from climate change. Environmental and social risk management • No mapping. The 2022 topic included all the risks arising from sustainability matters. Our approach in 2023 was to consider this topic as represented in the risk dimension across all sustainability matters. Culture, conduct and ethical behaviour Business conduct • Material topic • Strong mapping. We consider culture and doing everything simple, personal and fair as one of the key levers of business conduct. 96           2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.5 EU Taxonomy Information about Article 8 of the EU Taxonomy Regulation On December 21 the European Commission disclosed additional guidelines on the interpretation and implementation of the EU Taxonomy disclosure obligations regarding aligned and eligible activities by financial undertakings. In order to comply with the criteria established in these guidelines, a best-effort analysis has been performed to incorporate these criteria into the information disclosed. Santander's GAR is 2.6 (CapEx-based) . Santander´s & 2.4 (turnover-based) eligibility is 36%. 45 The difference between the eligible volumes and aligned volumes (i.e., eligibility ratio vs GAR) is mainly driven by three reasons: → European Taxonomy criteria is strict. Many activities which do not meet its thresholds, do contribute to the transition of a greener economy. In fact, the Platform for Sustainable Finance recently released a report showing that the average CAPEX alignment ratio from corporates disclosing the information was 18%. → The numerator and denominator are not symmetric. Santander has 18% of the adjusted balance sheet exposure (GAR denominator) to non-financial corporations not subject to NFRD (mainly SMEs and companies from outside EU), which cannot be included as eligible or aligned financing, therefore environmentally sustainable. → There are limitations to the available data and documentation. For example, according to the Platform report, only ~1,400 corporates subject to NFRD are disclosing alignment information (whereas the universe is ~11,500). Also, there is still a lack of robust evidence to verify alignment in specific purpose lending, especially when it comes to validate DNSH and MSS. In 2020, the European Union adopted the Taxonomy Regulation establishing a list of activities that can qualify as environmentally sustainable subject to the Non-Financial Reporting Directive (NFRD) disclose how their operations align with the EU Taxonomy. and the obligation for companies 40 41 In response to the disclosure requirement, in 2021 and 2022 Santander published the eligibility ratio. This ratio shows the proportion of activities on our balance sheet that are included in the list of EU Taxonomy activities, but without determining if they are aligned. For the first time in 2023, financial institutions are required to publish the green asset ratio (GAR) for two climate objectives and the eligibility ratio of the four remaining objectives. To be aligned to the European taxonomy, activities must meet the specific taxonomy criteria and ensure that it causes no significant harm to any of the other environmental objectives (DNSH) and meets minimum social safeguards (MSS). As required under the Disclosures Delegated Act, our GAR represents the exposures aligned with the EU Taxonomy in the numerator divided by total on-balance sheet volumes , and amounts for 2.6 (CapEx-based) and 2.4 (turnover-based). The exposures aligned to the EU Taxonomy and included in the numerator are: 42 → Aligned exposures in the household loan portfolio: residential property loans (mortgages) and vehicle loans.43 → Aligned exposures to financial and non-financial corporations subject to NFRD based on the alignment ratio publicly disclosed by the counterparties (both CapEx and turnover- based alignment). As for the eligible volumes, our eligibility ratio for the two climate-related objectives is 36% (both CapEx and turnover- based), considering eligible vehicles, mortgages and building renovation portfolios, as well as information disclosed by financial and non-financial counterparties. As for the additional eligibility ratio corresponding to the volumes of the four remaining objectives and the additional activities of the two climate-related objectives recently included in the EU Taxonomy, the ratio is 0,7% (both CapEx and turnover-based)44 . In this ratio the eligible volumes corresponding to counterparties have been estimated based on the Statistical Classification of Economic Activities in the European Community (NACE), as the counterparties have not made their ratio publicly available yet to be able to consider them in our calculation. 40 These are: 1) climate change mitigation 2) climate change adaptation, 3) sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity and ecosystems. NFRD applies to large, listed companies, banks, or insurance companies that meet certain criteria, such as having a balance sheet total in excess of EUR 20 million, a turnover in excess of EUR 40 million, or an average number of employees in excess of 500 during the fiscal year. Not including exposure to sovereigns, central banks, and the trading portfolio. Following the technical screening criteria of the EU Taxonomy Regulation. As for compliance with DNSH criteria, we followed EU Taxonomy requirements based on prudence and efficient assessment. We ran MSS criteria validation according to the recommendations of the Platform on Sustainable Finance and respective regulation. Including only exposures to non-financial corporates subject to NFRD (totalling 26bn) and excluding eligibility volumes already reported for the same NACE codes under the eligibility ratio for the climate-related objectives (objectives 1 and 2). Calculation for the two climate-related objectives. For the flow of volumes, the Green Asset Ratio is 1.9 (CapEx-based) and 1.6 (turnover-based). 41 42 43 44 45 97   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Based on a voluntary disclosure, we complement the GAR with an additional ratio to overcome some of these limitations: → Voluntary GAR (European & symmetric): 6.1% • The numerator of this ratio remains the same as in the previous ratio, purely exposures to the EU Taxonomy aligned in Europe. • In the denominator, we only keep portfolios where we can tag exposures as environmentally sustainable: NFRD European financial and non-financial corporations, households, and local governments. We excluded (non-exhaustive list): Non- NFRD companies (since they do not have reporting obligations), cash & interbank loans, derivatives, goodwill, etc. In the following pages there is the complete disclosure, including the templates set out in the Taxonomy Regulation. For more details on how our financial strategy, product design and relations with customers and counterparties comply with the EU Taxonomy, please see the sections 2. 'Supporting the green transition' and 10.9 'GFANZ transition planning'. 98 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation Main KPI Green asset ratio (GAR) stock 31,151 2.4 2.6 70.3 33.9 29.7 Total environmentally sustainable assets (1) KPI (3) KPI (4) % coverage (over total assets) (5) % of assets excluded from the numerator of the GAR (Article 7.2 and 7.3 and Section 1.1.2. of Annex V) % of assets excluded from the denominator of the GAR (Article 7.1 and Section 1.2.4 of Annex V) Additional KPIs GAR (flow) Trading book(6) Financial guarantees Assets under management Fees and commissions income(6) Total environmentally sustainable activities (2) 7,079 142 829 KPI 1.6 0.9 0.6 KPI 1.9 1.8 1.1 % coverage (over total assets) 50.6 % of assets excluded from the numerator of the GAR (Article 7.2 and 7.3 and Section 1.1.2. of Annex V) % of assets excluded from the denominator of the GAR (Article 7.1 and Section 1.2.4 of Annex V) 36.0 49.4 (1) Total environmentally sustainable assets used for turnover KPI. Total environmentally sustainable assets used for Capex KPI amounts to EUR 33,422 million (2) Total environmentally sustainable assets used for turnover KPI. Total environmentally sustainable assets used for Capex KPI amounts to EUR 8,435 million for GAR flow, EUR 289 million for financial guarantees and EUR 1,550 million for assets under management (3) Based on the Turnover KPI of the counterparty (4) Based on the CapEx KPI of the counterparty (5) % of assets covered by the KPI over banks´ total assets (6) Fees and Commissions and Trading Book KPIs shall only apply starting 2026 99 2023 Annual report 1. Assets for the calculation of GAR (Capex) Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Million EUR GAR - Covered assets in both numerator and denominator Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation Financial undertakings Credit institutions Loans and advances Debt securities, including UoP Equity instruments Other financial corporations of which investment firms Loans and advances Debt securities, including UoP Equity instruments of which management companies Loans and advances Debt securities, including UoP Equity instruments of which insurance undertakings Loans and advances Debt securities, including UoP Equity instruments Non-financial undertakings Loans and advances Debt securities, including UoP Equity instruments Households of which loans collateralised by residential immovable property of which building renovation loans 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy- aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy- aligned) Total [gross] carrying amount Of which Use of Proceeds Of which transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Proceeds Of which transitional Of which enabling 2023 661,433 465,892 33,416 29,115 6,975 1,640 60 28,156 22,517 20,257 2,261 0 5,639 1,987 1,455 313 219 141 141 0 0 1,892 1,892 0 0 25,910 24,347 1,563 0 7,544 6,241 5,232 1,009 0 1,303 438 138 300 0 102 102 0 0 318 318 0 0 10,901 10,367 534 0 510 3 3 0 0 507 349 49 300 0 11 11 0 0 0 0 0 0 3,791 3,315 476 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 0 0 0 0 10 0 0 0 0 1 1 0 0 0 0 0 0 395 395 0 0 607,245 447,326 29,115 29,115 6,569 366,626 356,979 22,545 22,545 528 528 0 0 0 0 349 2 2 0 0 347 307 7 300 0 1 1 0 0 0 0 0 0 1,291 1,063 228 0 0 0 0 0 4 4 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 56 49 7 0 0 0 0 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 7 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 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 5 0 0 0 0 0 465,953 33,422 29,115 6,975 1,645 7,548 6,245 5,236 1,009 0 1,303 438 138 300 0 102 102 0 0 318 318 0 0 10,957 10,416 541 0 510 3 3 0 0 507 349 49 300 0 11 11 0 0 0 0 0 0 3,798 3,322 476 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 0 0 0 0 10 0 0 0 0 1 1 0 0 0 0 0 0 395 395 0 0 447,326 29,115 29,115 6,569 356,979 22,545 22,545 528 0 0 0 0 89,820 6,569 6,569 6,569 349 2 2 0 0 347 307 7 300 0 1 1 0 0 0 0 0 0 1,296 1,068 228 0 0 0 0 0 100 of which motor vehicle loans 89,820 89,820 6,569 6,569 6,569 2023 Annual report Million EUR 28 29 30 31 Local governments financing Housing financing Other local government financing Collateral obtained by taking possession: residential and commercial immovable properties Assets excluded from the numerator 32 for GAR calculation (covered in the denominator) 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Financial and Non-financial undertakings SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations Loans and advances of which loans collateralised by commercial immovable property of which building renovation loans Debt securities Equity instruments Non-EU country counterparties not subject to NFRD disclosure obligations Loans and advances Debt securities Equity instruments Derivatives On demand interbank loans Cash and cash-related assets Other categories of assets (e.g. Goodwill, commodities etc.) 48 Total GAR assets 49 Assets not covered for GAR calculation 50 51 Central governments and Supranational issuers Central banks exposure Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy- aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy- aligned) Total [gross] carrying amount Of which Use of Proceeds Of which transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Proceeds Of which transitional Of which enabling 2023 122 75 46 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 122 75 46 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 122 75 46 5,595 621,271 478,101 141,389 139,095 22,909 141 2,140 155 296,567 272,256 21,525 2,787 5,421 11,911 8,621 117,217 1,288,300 465,892 33,416 29,115 6,975 1,640 60 7 0 5 465,953 33,422 29,115 6,975 1,645 545,242 137,606 230,835 101 2023 Annual report Million EUR 52 Trading book 53 Total assets Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy- aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy- aligned) Of which Use of Proceeds Of which transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Proceeds Of which transitional Of which enabling 2023 Total [gross] carrying amount 176,800 1,833,542 465,892 33,416 29,115 6,975 1,640 Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations 54 Financial guarantees 55 Assets under management 56 57 Of which debt securities Of which equity instruments 15,573 137,531 39,836 43,158 644 4,979 3,613 1,365 285 1,550 837 713 0 0 0 0 4 77 26 52 152 665 440 225 60 26 36 7 29 7 0 0 0 0 0 0 0 0 0 5 0 0 0 0 465,953 33,422 29,115 6,975 1,645 669 5,015 3,621 1,394 286 1,550 837 713 0 0 0 0 4 77 26 52 152 665 440 225 102 2023 Annual report 1. Assets for the calculation of GAR (Turnover) Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Million EUR Total [gross] carrying amount Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy- aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy- aligned) Of which Use of Proceeds Of which transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Proceeds Of which transitional Of which enabling 2023 GAR - Covered assets in both numerator and denominator Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation Financial undertakings Credit institutions Loans and advances Debt securities, including UoP Equity instruments Other financial corporations of which investment firms Loans and advances Debt securities, including UoP Equity instruments of which management companies Loans and advances Debt securities, including UoP Equity instruments of which insurance undertakings Loans and advances Debt securities, including UoP Equity instruments Non-financial undertakings Loans and advances Debt securities, including UoP Equity instruments Households of which loans collateralised by residential immovable property of which building renovation loans 661,433 464,201 31,142 29,115 6,834 28,156 22,517 20,257 2,261 0 5,639 1,987 1,455 313 219 141 141 0 0 1,892 1,892 0 0 25,910 24,347 1,563 0 7,899 6,892 5,883 1,009 0 1,006 280 127 153 0 99 99 0 0 317 317 0 0 8,855 8,617 237 0 310 1 1 0 0 309 172 19 153 0 17 17 0 0 0 0 0 0 1,718 1,509 208 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4 0 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 0 260 258 2 0 607,245 447,326 29,115 29,115 6,569 366,626 356,979 22,545 22,545 528 528 0 0 0 0 of which motor vehicle loans 89,820 89,820 6,569 6,569 6,569 Local governments financing Housing financing 122 75 122 75 0 0 0 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 799 208 0 0 0 0 208 155 2 153 0 0 0 0 0 0 0 0 0 591 552 39 0 0 0 0 0 0 0 474 373 15 15 0 0 358 41 41 0 0 0 0 0 0 317 317 0 0 101 83 18 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 9 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 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 7 0 0 0 0 0 0 0 464,675 31,151 29,115 6,834 8,272 6,907 5,898 1,009 0 1,365 321 168 153 0 99 99 0 0 634 634 0 0 8,955 8,700 255 0 310 1 1 0 0 309 172 19 153 0 17 17 0 0 0 0 0 0 1,727 1,518 208 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4 0 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 0 260 258 2 0 447,326 29,115 29,115 6,569 356,979 22,545 22,545 528 0 0 0 0 89,820 6,569 6,569 6,569 122 75 0 0 0 0 0 0 807 208 0 0 0 0 208 155 2 153 0 0 0 0 0 0 0 0 0 598 560 39 0 0 0 0 0 0 0 103 2023 Annual report Million EUR 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Other local government financing Collateral obtained by taking possession: residential and commercial immovable properties Assets excluded from the numerator for GAR calculation (covered in the denominator) Financial and Non-financial undertakings SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations Loans and advances of which loans collateralised by commercial immovable property of which building renovation loans Debt securities Equity instruments Non-EU country counterparties not subject to NFRD disclosure obligations Loans and advances Debt securities Equity instruments Derivatives On demand interbank loans Cash and cash-related assets Other categories of assets (e.g. Goodwill, commodities etc.) 48 Total GAR assets 49 Assets not covered for GAR calculation 50 51 52 Central governments and Supranational issuers Central banks exposure Trading book Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) 2023 Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Of which environmentally sustainable (Taxonomy- aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy- aligned) Of which Use of Proceeds Of which transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Proceeds Of which transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 46 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total [gross] carrying amount 46 46 0 0 5,595 621,271 478,101 141,389 139,095 22,909 141 2,140 155 296,567 272,256 21,525 2,787 5,421 11,911 8,621 117,217 1,288,300 464,201 31,142 29,115 6,834 799 474 9 0 8 464,675 31,151 29,115 6,834 807 545,242 137,606 230,835 176,800 53 Total assets 1,833,542 464,201 31,142 29,115 6,834 799 474 9 0 8 464,675 31,151 29,115 6,834 807 104 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Million EUR Total [gross] carrying amount Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy- aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy- aligned) Of which Use of Proceeds Of which transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Proceeds Of which transitional Of which enabling Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations 54 Financial guarantees 55 Assets under management 56 57 Of which debt securities Of which equity instruments 15,573 137,531 39,836 43,158 494 4,302 3,308 993 142 825 445 380 0 0 0 0 3 57 11 46 98 431 269 162 6 406 233 173 0 4 0 3 0 0 0 0 0 4 0 3 500 4,708 3,541 1,167 142 829 446 384 0 0 0 0 3 57 11 46 99 435 269 165 2023 105 2023 Annual report 2. GAR sector information (Capex) Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Breakdown by sector - NACE 4 digits level (code and label) Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount Of which environmentally sustainable (CCM) Mn EUR Of which environmentally sustainable (CCM) Mn EUR Of which environmentally Mn EUR sustainable (CCA) Of which environmentally Mn EUR sustainable (CCA) Of which environmentally sustainable (CCM+CCA) Mn EUR Of which environmentally sustainable (CCM+CCA) Mn EUR 2023 1 A Agriculture, forestry and fishing 2 B910 - Support activities for petroleum and natural gas extraction 3 Other B Mining and quarrying 4 5 6 C1086 - Manufacture of homogenised food preparations and dietetic food C1920 - Manufacture of refined petroleum products C2410 - Manufacture of basic iron and steel and of ferro- alloys 7 C2442 - Aluminium production 8 C2732 - Manufacture of other electronic and electric wires and cables 9 C2733 - Manufacture of wiring devices 10 C2910 - Manufacture of motor vehicles 11 C3011 - Building of ships and floating structures 12 C3020 - Manufacture of railway locomotives and rolling stock 13 Other C Manufacturing 14 D3511 - Production of electricity 15 D3512 - Transmission of electricity 16 D3513 - Distribution of electricity 17 D3514 - Trade of electricity 18 Other D Electricity, gas, steam and air conditioning supply 19 E Water supply 20 F4110 - Development of building projects 6 151 37 69 121 120 62 99 55 516 74 143 482 5 77 14 0 90 51 39 57 40 190 7 76 84 1,594 1,343 145 512 315 74 89 192 138 399 295 66 1 10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 6 151 37 69 121 120 62 99 55 516 74 143 482 5 77 14 0 90 51 39 57 40 190 7 76 84 1,594 1,343 145 512 315 75 89 192 138 399 295 67 1 10 106 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Breakdown by sector - NACE 4 digits level (code and label) Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount Of which environmentally sustainable (CCM) Mn EUR Of which environmentally sustainable (CCM) Mn EUR Of which environmentally Mn EUR sustainable (CCA) Of which environmentally Mn EUR sustainable (CCA) Of which environmentally sustainable (CCM+CCA) Mn EUR Of which environmentally sustainable (CCM+CCA) Mn EUR 2023 21 F4120 - Construction of residential and non-residential buildings 22 F4211 - Construction of roads and motorways 23 F4222 - Construction of utility projects for electricity and telecommunications 24 F4299 - Construction of other civil engineering projects n.e.c. 25 F4312 - Site preparation 26 F4321 - Electrical installation 27 Other F Construction 28 29 G4711 - Retail sale in non- specialised stores with food, beverages or tobacco predominating G4778 - Other retail sale of new goods in specialised stores 30 Other G Wholesale and retail trade 31 H4910 - Passenger rail transport, interurban 32 H4950 - Transport via pipeline 33 H5221 - Service activities incidental to land transportation 34 Other H Transport and storage 35 I5510 - Hotels and similar accommodation 36 Other I Accommodation and food service activities 37 J6110 - Wired telecommunications activities 38 J6120 - Wireless telecommunications activities 39 J6399 - Other information service activities n.e.c. 40 Other J Information and communication 41 L6810 - Buying and selling of own real estate 84 187 328 156 130 94 105 92 94 349 57 92 425 71 321 29 91 228 504 110 68 18 3 3 5 5 6 5 5 0 62 7 84 2 4 0 0 3 5 0 2 8 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 27 0 18 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 4 0 84 187 328 156 130 94 105 92 94 350 57 92 425 71 321 29 91 255 504 128 68 18 3 3 5 5 6 5 5 0 62 7 84 2 4 0 0 3 6 0 6 8 107 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Breakdown by sector - NACE 4 digits level (code and label) Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount Of which environmentally sustainable (CCM) Mn EUR Of which environmentally sustainable (CCM) Mn EUR Of which environmentally Mn EUR sustainable (CCA) Of which environmentally Mn EUR sustainable (CCA) Of which environmentally sustainable (CCM+CCA) Mn EUR Of which environmentally sustainable (CCM+CCA) Mn EUR 2023 42 L6820 - Renting and operating of own or leased real estate 43 L6831 - Real estate agencies 44 Other L Real estate activities 45 M6920 - Accounting, bookkeeping and auditing activities; tax consultancy 46 M7010 - Activities of head offices 47 M7022 - Business and other management consultancy activities M7490 - Other professional, scientific and technical activities n.e.c. Other M Professional, scientific and technical activities N7711 - Renting and leasing of cars and light motor vehicles N7712 - Renting and leasing of trucks N8299 - Other business support service activities n.e.c. Other N Administrative and support service activities O Public administration and defence, compulsory social security 48 49 50 51 52 53 54 55 P Education Q Human health services and social work activities R Arts, entertainment and recreation 56 57 58 S Other services 264 205 26 115 534 77 134 46 130 60 159 126 0 14 18 2 519 1 26 0 99 251 7 45 12 48 5 0 23 0 0 2 0 63 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 264 205 26 115 534 77 134 46 130 60 159 126 0 14 18 2 525 1 26 0 99 251 7 45 12 48 5 0 23 0 0 2 0 63 1. Exposures in the banking book towards those sectors covered by the Taxonomy (NACE sectors 4 levels of detail), using the relevant NACE Codes on the basis of the principal activity of the counterparty. A threshold above 0.5% of the eligible exposure has been set for reporting NACE at level 4. All other NACEs outside this threshold are reported at level 1. 108 2023 Annual report 2. GAR sector information (Turnover) Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Breakdown by sector - NACE 4 digits level (code and label) Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount Of which environmentally sustainable (CCM) Mn EUR Of which environmentally sustainable (CCM) Mn EUR Of which environmentally Mn EUR sustainable (CCA) Of which environmentally Mn EUR sustainable (CCA) Of which environmentally sustainable (CCM+CCA) Mn EUR Of which environmentally sustainable (CCM+CCA) Mn EUR 2023 1 A Agriculture, forestry and fishing 2 B910 - Support activities for petroleum and natural gas extraction 3 Other B Mining and quarrying 4 5 C2410 - Manufacture of basic iron and steel and of ferro- alloys C2420 - Manufacture of tubes, pipes, hollow profiles and related fittings, of steel 6 C2442 - Aluminium production 7 C2732 - Manufacture of other electronic and electric wires and cables 8 C2751 - Manufacture of electric domestic appliances 9 C2910 - Manufacture of motor vehicles 10 C3011 - Building of ships and floating structures 11 C3020 - Manufacture of railway locomotives and rolling stock 12 C3313 - Repair of electronic and optical equipment 13 Other C Manufacturing 14 D3511 - Production of electricity 15 D3512 - Transmission of electricity 16 D3513 - Distribution of electricity 17 D3514 - Trade of electricity 18 Other D Electricity, gas, steam and air conditioning supply 19 E3600 - Water collection, treatment and supply 20 Other E Water supply 5 101 20 132 52 84 56 48 484 81 143 55 243 843 100 338 137 30 53 39 4 15 9 50 4 45 16 0 50 10 83 0 40 537 75 174 108 8 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 101 20 132 52 84 56 48 484 81 143 55 243 843 100 338 137 30 53 39 4 15 9 50 4 45 16 0 50 10 83 0 40 537 75 174 108 8 1 1 109 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Breakdown by sector - NACE 4 digits level (code and label) Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount Of which environmentally sustainable (CCM) Mn EUR Of which environmentally sustainable (CCM) Mn EUR Of which environmentally Mn EUR sustainable (CCA) Of which environmentally Mn EUR sustainable (CCA) Of which environmentally sustainable (CCM+CCA) Mn EUR Of which environmentally sustainable (CCM+CCA) Mn EUR 2023 21 F4110 - Development of building projects 22 F4120 - Construction of residential and non-residential buildings 23 F4211 - Construction of roads and motorways 24 F4222 - Construction of utility projects for electricity and telecommunications 25 F4299 - Construction of other civil engineering projects n.e.c. 26 F4312 - Site preparation 27 F4321 - Electrical installation 28 Other F Construction 29 G Wholesale and retail trade 30 H5221 - Service activities incidental to land transportation 31 Other H Transport and storage 32 I5510 - Hotels and similar accommodation 33 Other I Accommodation and food service activities 34 J6110 - Wired telecommunications activities 35 J6120 - Wireless telecommunications activities 36 J6399 - Other information service activities n.e.c. 37 Other J Information and communication 38 L6810 - Buying and selling of own real estate 39 L6820 - Renting and operating of own or leased real estate 40 L6831 - Real estate agencies 41 Other L Real estate activities 42 M6920 - Accounting, bookkeeping and auditing activities; tax consultancy 43 M7010 - Activities of head offices 214 81 192 314 164 122 109 105 168 421 177 250 26 59 365 504 97 74 267 234 26 66 488 14 12 3 1 18 0 8 15 15 1 36 0 0 4 30 0 1 9 1 18 2 42 158 0 0 1 0 0 0 0 0 0 0 0 0 0 2 49 0 15 0 0 0 0 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 5 0 0 0 0 1 0 214 81 193 315 164 122 109 105 169 421 177 250 26 61 414 504 112 74 267 234 26 74 488 14 12 4 1 18 0 8 15 15 1 36 0 0 4 32 0 7 9 1 18 2 43 158 110 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Breakdown by sector - NACE 4 digits level (code and label) Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD Non-Financial corporates (Subject to NFRD) SMEs and other NFC not subject to NFRD [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount [Gross] carrying amount Of which environmentally sustainable (CCM) Mn EUR Of which environmentally sustainable (CCM) Mn EUR Of which environmentally Mn EUR sustainable (CCA) Of which environmentally Mn EUR sustainable (CCA) Of which environmentally sustainable (CCM+CCA) Mn EUR Of which environmentally sustainable (CCM+CCA) Mn EUR 2023 44 45 46 M7022 - Business and other management consultancy activities M7112 - Engineering activities and related technical consultancy M7490 - Other professional, scientific and technical activities n.e.c. 47 Other M Professional, scientific and technical activities 48 N7711 - Renting and leasing of cars and light motor vehicles 49 N7712 - Renting and leasing of trucks 50 N8010 - Private security activities 51 N8299 - Other business support service activities n.e.c. 52 Other N Administrative and support service activities 53 O Public administration and defence, compulsory social security 54 P Education 55 Q Human health services and social work activities 56 R Arts, entertainment and recreation 95 46 99 3 127 58 49 157 92 0 14 17 0 8 16 35 0 10 0 0 0 11 0 0 1 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 96 46 100 3 127 58 49 157 93 0 14 17 0 8 16 35 0 10 0 0 0 11 0 0 1 0 57 S Other services 534 21 24 1 558 21 1. Exposures in the banking book towards those sectors covered by the Taxonomy (NACE sectors 4 levels of detail), using the relevant NACE Codes on the basis of the principal activity of the counterparty. A threshold above 0.5% of the eligible exposure has been set for reporting NACE at level 4. All other NACEs outside this threshold are reported at level 1. 111 2023 Annual report 3. GAR KPI stock (Capex) % (compared to total covered assets in the denominator) GAR - Covered assets in both numerator and denominator Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation Financial undertakings Credit institutions Loans and advances Debt securities, including UoP Equity instruments Other financial corporations of which investment firms Loans and advances Debt securities, including UoP Equity instruments of which management companies Loans and advances Debt securities, including UoP Equity instruments of which insurance undertakings Loans and advances Debt securities, including UoP Equity instruments Non-financial undertakings Loans and advances Debt securities, including UoP Equity instruments Households of which loans collateralised by residential immovable property of which building renovation loans of which motor vehicle loans 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Of which Proceeds transitional Of which enabling Proportion of total assets covered 2023 70.4 26.8 27.7 25.8 44.6 0 23.1 22 9.5 96 0 72 72 0 0 16.8 16.8 0 0 42.1 42.6 34.2 0 73.7 97.4 100 100 5.1 1.8 0 0 0 0 9 17.6 3.4 96 0 7.7 7.7 0 0 0 0 0 0 14.6 13.6 30.4 0 4.8 6.1 0 7.3 4.4 1.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.8 6.1 0 7.3 0 0 0 0 0 0.2 0 0 0 0 0.9 0.9 0 0 0 0 0 0 1.5 1.6 0 0 1.1 0 0 7.3 0.2 1.2 0 0 0 0 6.2 15.4 0.5 96 0 0.5 0.5 0 0 0 0 0 0 5 4.4 14.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.2 0.2 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 70.4 26.8 27.7 25.8 44.6 0 23.1 22 9.5 96 0 72 72 0 0 16.8 16.8 0 0 42.3 42.8 34.6 0 73.7 97.4 100 100 5.1 1.8 0 0 0 0 9 17.6 3.4 96 0 7.7 7.7 0 0 0 0 0 0 14.7 13.6 30.4 0 4.8 6.1 0 7.3 4.4 1.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.8 6.1 0 7.3 0 0 0 0 0 0.2 0 0 0 0 0.9 0.9 0 0 0 0 0 0 1.5 1.6 0 0 1.1 0 0 7.3 0.2 1.2 0 0 0 0 6.2 15.4 0.5 96 0 0.5 0.5 0 0 0 0 0 0 5 4.4 14.6 0 0 0 0 0 36.1 1.5 1.2 1.1 0.1 0 0.3 0.1 0.1 0 0 0 0 0 0 0.1 0.1 0 0 1.4 1.3 0.1 0 33.1 20 0 4.9 112     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management % (compared to total covered assets in the denominator) 28 29 30 31 Local governments financing Housing financing Other local government financing Collateral obtained by taking possession: residential and commercial immovable properties 32 Total GAR assets 2023 Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.6 2.3 0.5 0.1 100 100 100 0 36.2 Of which Use of Proceeds Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 100 100 0 36.2 Of which Use of Of which Proceeds transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.6 2.3 0.5 0.1 0 0 0 0 0 Proportion of total assets covered 0 0 0 0.3 70.3 113     2023 Annual report 3. GAR KPI stock (Turnover) % (compared to total covered assets in the denominator) GAR - Covered assets in both numerator and denominator Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation Financial undertakings Credit institutions Loans and advances Debt securities, including UoP Equity instruments Other financial corporations of which investment firms Loans and advances Debt securities, including UoP Equity instruments of which management companies Loans and advances Debt securities, including UoP Equity instruments of which insurance undertakings Loans and advances Debt securities, including UoP Equity instruments Non-financial undertakings Loans and advances Debt securities, including UoP Equity instruments Households of which loans collateralised by residential immovable property of which building renovation loans of which motor vehicle loans 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Of which Proceeds transitional Of which enabling Proportion of total assets covered 2023 70.2 28.1 30.6 29 44.6 0 17.8 14.1 8.7 49 0 70.2 70.2 0 0 16.7 16.7 0 0 34.2 35.4 15.2 0 73.7 97.4 100 100 4.7 1.1 0 0 0 0 5.5 8.7 1.3 49 0 12 12 0 0 0 0 0 0 6.6 6.2 13.3 0 4.8 6.1 0 7.3 4.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.8 6.1 0 7.3 1 0 0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 1 1.1 0.2 0 1.1 0 0 7.3 0.1 0.7 0 0 0 0 3.7 7.8 0.1 49 0 0 0 0 0 0 0 0 0 2.3 2.3 2.5 0 0 0 0 0 0.1 1.3 0.1 0.1 0 0 6.4 2.1 2.8 0 0 0 0 0 0 16.8 16.8 0 0 0.4 0.3 1.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 70.3 29.4 30.7 29.1 44.6 0 24.2 16.1 11.5 49 0 70.2 70.2 0 0 33.5 33.5 0 0 34.6 35.7 16.3 0 73.7 97.4 100 100 4.7 1.1 0 0 0 0 5.5 8.7 1.3 49 0 12 12 0 0 0 0 0 0 6.7 6.2 13.3 0 4.8 6.1 0 7.3 4.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.8 6.1 0 7.3 1 0 0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 1 1.1 0.2 0 1.1 0 0 7.3 0.1 0.7 0 0 0 0 3.7 7.8 0.1 49 0 0 0 0 0 0 0 0 0 2.3 2.3 2.5 0 0 0 0 0 36.1 1.5 1.2 1.1 0.1 0 0.3 0.1 0.1 0 0 0 0 0 0 0.1 0.1 0 0 1.4 1.3 0.1 0 33.1 20 0 4.9 114     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management % (compared to total covered assets in the denominator) 28 29 30 31 Local governments financing Housing financing Other local government financing Collateral obtained by taking possession: residential and commercial immovable properties 32 Total GAR assets 2023 Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.4 2.3 0.5 0.1 100 100 100 0 36 Of which Use of Proceeds Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 100 100 0 36.1 Of which Use of Of which Proceeds transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.4 2.3 0.5 0.1 0 0 0 0 0 Proportion of total assets covered 0 0 0 0.3 70.3 115     2023 Annual report 4. GAR KPI flow (Capex) % (compared to total covered assets in the denominator) GAR - Covered assets in both numerator and denominator Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation Financial undertakings Credit institutions Loans and advances Debt securities, including UoP Equity instruments Other financial corporations of which investment firms Loans and advances Debt securities, including UoP Equity instruments of which management companies Loans and advances Debt securities, including UoP Equity instruments of which insurance undertakings Loans and advances Debt securities, including UoP Equity instruments Non-financial undertakings Loans and advances Debt securities, including UoP Equity instruments Households of which loans collateralised by residential immovable property of which building renovation loans of which motor vehicle loans 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Of which Proceeds transitional Of which enabling Proportion of total new assets covered 2023 59.5 29.8 28.7 28.6 44 0 39.8 55.7 40.9 96 0 7.8 7.8 0 0 0.5 0.5 0 0 42.6 43.7 34.5 0 66.1 98.9 100 100 6.8 2.7 0 0 0 0 26.7 54.4 14 96 0 0 0 0 0 0 0 0 0 16.9 15 31.1 0 6 6.1 0 12 4.7 3.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 6.1 0 12 0 0 0 0 0 0.3 0 0 0 0 0 0 0 0 0 0 0 0 1.1 1.3 0 0 3.9 0 0 12 1 2.3 0 0 0 0 22.7 54.4 14 96 0 0 0 0 0 0 0 0 0 6.6 5.5 14.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.1 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 59.5 29.8 28.7 28.6 44 0 39.8 55.7 40.9 96 0 7.8 7.8 0 0 0.5 0.5 0 0 42.8 43.9 34.5 0 66.1 98.9 100 100 6.8 2.7 0 0 0 0 26.7 54.4 14 96 0 0 0 0 0 0 0 0 0 16.9 15.1 31.1 0 6 6.1 0 12 4.7 3.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 6.1 0 12 0 0 0 0 0 0.3 0 0 0 0 0 0 0 0 0 0 0 0 1.1 1.3 0 0 3.9 0 0 12 1 2.3 0 0 0 0 22.7 54.4 14 96 0 0 0 0 0 0 0 0 0 6.6 5.5 14.9 0 0 0 0 0 14.5 1.7 1.5 1.5 0 0 0.2 0.1 0 0 0 0 0 0 0 0 0 0 0 1.5 1.3 0.2 0 11.4 3.8 0 3.7 116     Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) 2023 Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) 2023 Annual report % (compared to total covered assets in the denominator) 28 29 30 31 Local governments financing Housing financing Other local government financing Collateral obtained by taking possession: residential and commercial immovable properties 32 Total GAR assets Of which Use of Of which Proceeds transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.9 1.3 0.9 0.3 100 100 100 0 17.1 Of which Use of Proceeds Of which enabling Of which Use of Of which Proceeds transitional Proportion of total Of which new assets covered enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 100 100 0 17.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.9 1.3 0.9 0.3 50.6 117     2023 Annual report 4. GAR KPI flow (Turnover) % (compared to total covered assets in the denominator) GAR - Covered assets in both numerator and denominator Loans and advances, debt securities and equity instruments not HfT eligible for GAR calculation Financial undertakings Credit institutions Loans and advances Debt securities, including UoP Equity instruments Other financial corporations of which investment firms Loans and advances Debt securities, including UoP Equity instruments of which management companies Loans and advances Debt securities, including UoP Equity instruments of which insurance undertakings Loans and advances Debt securities, including UoP Equity instruments Non-financial undertakings Loans and advances Debt securities, including UoP Equity instruments Households of which loans collateralised by residential immovable property of which building renovation loans of which motor vehicle loans 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling Of which Use of Proceeds Of which enabling Of which Use of Of which Proceeds transitional Of which enabling Proportion of total new assets covered 2023 58.6 30.1 30.3 30.3 44 0 27.8 29.2 37.8 49 0 0 0 0 0 0.5 0.5 0 0 33.8 36.3 15.4 0 66.1 98.9 100 100 5.7 1.7 0 0 0 0 16.7 27.6 3.8 49 0 0 0 0 0 0 0 0 0 7.6 6.8 13.6 0 6 6.1 0 12 4.7 3.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 6.1 0 12 0 0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0.8 0.9 0.2 0 3.9 0 0 12 0.5 1.4 0 0 0 0 13.6 27.6 3.8 49 0 0 0 0 0 0 0 0 0 2.9 2.9 2.5 0 0 0 0 0 0.1 0.1 0 0 0 0 1.3 0 0 0 0 0 0 0 0 43.8 43.8 0 0 0.4 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 58.7 30.2 30.3 30.3 44 0 29.1 29.2 37.8 49 0 0 0 0 0 44.3 44.3 0 0 34.2 36.7 15.4 0 66.1 98.9 100 100 5.7 1.7 0 0 0 0 16.7 27.6 3.8 49 0 0 0 0 0 0 0 0 0 7.6 6.8 13.6 0 6 6.1 0 12 4.7 3.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 6.1 0 12 0 0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0.8 0.9 0.2 0 3.9 0 0 12 0.5 1.4 0 0 0 0 13.6 27.6 3.8 49 0 0 0 0 0 0 0 0 0 2.9 3 2.5 0 0 0 0 0 14.5 1.7 1.5 1.5 0 0 0.2 0.1 0 0 0 0 0 0 0 0 0 0 0 1.5 1.3 0.2 0 11.4 3.8 0 3.7 118     2023 Annual report % (compared to total covered assets in the denominator) 28 29 30 31 Local governments financing Housing financing Other local government financing Collateral obtained by taking possession: residential and commercial immovable properties 32 Total GAR assets Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) Of which towards taxonomy relevant sectors (Taxonomy-eligible) 2023 Of which environmentally sustainable (Taxonomy-aligned) Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.6 1.3 0.9 0.1 100 100 100 0 16.9 Of which Use of Proceeds Of which enabling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 100 100 0 16.9 0 0 0 0 0 Of which environmentally sustainable (Taxonomy-aligned) Of which Use of Of which Proceeds transitional 0 0 0 0 0 0 0 0 0 0 0 0 Proportion of total Of which new assets covered enabling 0 0 0 0 0 0 0 0 1.6 1.3 0.9 0.1 50.6 119     2023 Annual report 5. KPI off-balance sheet exposures (Capex stock) Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) 2023 % (compared to total eligible off-balance sheet assets) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) 1 Financial guarantees (FinGuar KPI) 2 Assets under management (AuM KPI) 4.1 3.6 1.8 1.1 Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0.1 1 0.5 0.2 0 0 0 Of which Use of Proceeds 0 0 Of which enabling 0 0 5. KPI off-balance sheet exposures (Turnover stock) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0.1 1 0.5 4.3 3.6 1.8 1.1 Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) 2023 % (compared to total eligible off-balance sheet assets) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) 1 Financial guarantees (FinGuar KPI) 2 Assets under management (AuM KPI) 3.2 3.1 0.9 0.6 Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0 0.6 0.3 0 0.3 0 0 Of which Use of Proceeds 0 0 Of which enabling 0 0 Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0 0.6 0.3 3.2 3.4 0.9 0.6 120 2023 Annual report 5. KPI off-balance sheet exposures (Capex flow) Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) 2023 % (compared to total eligible off-balance sheet assets) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) 1 Financial guarantees (FinGuar KPI) 2 Assets under management (AuM KPI) 5.9 7.6 2 2.2 Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0 1.2 1.1 0.4 0 0 0 Of which Use of Proceeds 0 0 Of which enabling 0 0 5. KPI off-balance sheet exposures (Turnover flow) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0 1.2 1.1 6.3 7.6 2 2.2 Climate Change Mitigation (CCM) Climate Change Adaptation (CCA) TOTAL (CCM + CCA) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible) 2023 % (compared to total eligible off-balance sheet assets) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) 1 Financial guarantees (FinGuar KPI) 2 Assets under management (AuM KPI) 4 6.5 0.5 2.3 Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0 0.4 1.7 0 0.2 0 0 Of which Use of Proceeds 0 0 Of which enabling 0 0 Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned) Of which Use of Proceeds 0 0 Of which transitional Of which enabling 0 0 0.4 1.7 4 6.7 0.5 2.3 121 Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 Annual report 6. Nuclear and fossil gas related activities Nuclear energy related activities The undertaking carries out, funds or has exposures to research, development, demonstration 1 and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. Nuclear energy related activities The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels. The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels. The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels. 2 3 4 5 6 NO YES YES YES YES NO 6. Nuclear and fossil gas related activities: Taxonomy-aligned economic activities (denominator) - Capex CCM+CCA CCM CCA 6. Nuclear and fossil gas related activities: Taxonomy-aligned economic activities (denominator) - Turnover CCM CCM+CCA CCA Nuclear energy related activities Amount % Amount % Amount % Nuclear energy related activities Amount % Amount % Amount % Amount and proportion of taxonomy- aligned economic activity 1 referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 2 referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 3 referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 4 referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 5 referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 6 referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of other taxonomy-aligned economic 7 activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI 8 Total applicable KPI 0 16 123 0 0 0 0 0 0 0 0 0 0 16 123 0 0 0 0 0 0 0 0 0 33,284 2.6 33,277 33,422 2.6 33,416 2.6 2.6 0 0 0 0 0 0 7 7 0 0 0 0 0 0 0 0 Amount and proportion of taxonomy- aligned economic activity 1 referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 2 referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 3 referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 4 referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 5 referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 6 referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of other taxonomy-aligned economic 7 activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI 8 Total applicable KPI 0 0 76 0 1 0 0 0 0 0 0 0 0 0 76 0 1 0 31,074 2.4 31,065 31,151 2.4 31,142 0 0 0 0 0 0 2.4 2.4 0 0 0 0 0 0 9 9 Note 1: The denominator of the applicable KPI is 1,288,300 millions of euro Note 1: The denominator of the applicable KPI is 1,288,300 millions of euro 0 0 0 0 0 0 0 0 122 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6. Nuclear and fossil gas related activities: Taxonomy-aligned economic activities (numerator) - Capex 6. Nuclear and fossil gas related activities: Taxonomy-aligned economic activities (numerator) - Turnover Nuclear energy related activities Amount % Amount % Amount % Nuclear energy related activities Amount % Amount % Amount % CCM+CCA CCM CCA CCM+CCA CCM CCA Amount and proportion of taxonomy- aligned economic activity 1 referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 2 referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 3 referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 4 referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 5 referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 6 referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI 0 16 0 0 0 16 0 0 123 0.4 123 0.4 0 0 0 0 0 0 0 0 0 0 0 0 Amount and proportion of other taxonomy-aligned economic 7 activities not referred to in rows 1 to 6 above in the numerator of the applicable KPI 8 Total amount and proportion of taxonomy-aligned economic activities in the numerator of the applicable KPI 33,284 99.6 33,277 99.6 33,422 100 33,416 100 0 0 0 0 0 0 7 7 0 0 0 0 0 0 0 0 Amount and proportion of taxonomy- aligned economic activity 1 referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 2 referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 3 referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 4 referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 5 referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI Amount and proportion of taxonomy- aligned economic activity 6 referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the numerator of the applicable KPI 0 0 0 0 0 0 0 0 76 0.2 76 0.2 0 1 0 0 0 0 0 1 0 0 0 0 Amount and proportion of other taxonomy-aligned economic 7 activities not referred to in rows 1 to 6 above in the numerator of the applicable KPI 8 Total amount and proportion of taxonomy-aligned economic activities in the numerator of the applicable KPI 31,074 99.8 31,065 99.7 31,151 100 31,142 100 0 0 0 0 0 0 9 9 0 0 0 0 0 0 0 0 123 2023 Annual report 6. Nuclear and fossil gas related activities: Taxonomy-eligible but not taxonomy-aligned economic activities - Capex CCM+CCA CCM CCA Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6. Nuclear and fossil gas related activities: Taxonomy-eligible but not taxonomy-aligned economic activities - Turnover CCA CCM+CCA CCM Nuclear energy related activities Amount % Amount % Amount % Nuclear energy related activities Amount % Amount % Amount % 1 2 3 4 5 6 Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of other taxonomy-eligible but not 7 taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI Total amount and proportion of taxonomy eligible but not 8 taxonomy- aligned economic activities in the denominator of the applicable KPI 0 0 0 84 13 0 0 0 0 0 0 0 0 84 13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 432,433 33.6 432380 33.6 54 432,530 33.6 432477 33.6 54 0 0 0 0 0 0 0 0 1 2 3 4 5 6 Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of other taxonomy-eligible but not 7 taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI Total amount and proportion of taxonomy eligible but not 8 taxonomy- aligned economic activities in the denominator of the applicable KPI 0 0 84 0 0 0 0 0 84 0 0 0 0 0 0 653 0.1 653 0.1 0 9 0 0 0 9 0 0 0 0 0 432,780 33.6 432,313 33.6 468 433,527 33.7 433,059 33.6 468 0 0 0 0 0 0 0 0 124 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6. Nuclear and fossil gas related activities: Taxonomy non-eligible economic activities - Capex 6. Nuclear and fossil gas related activities: Taxonomy non-eligible economic activities - Turnover Nuclear energy related activities Amount % Nuclear energy related activities Amount 1 Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI 2 3 4 5 6 Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of taxonomy- eligible but not taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI 7 Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI 8 Total amount and proportion of taxonomy eligible but not taxonomy- aligned economic activities in the denominator of the applicable KPI 0 0 0 0 0 0 0 0 0 0 0 0 822,367 822,367 63.8 63.8 1 2 3 4 5 6 Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI 7 Amount and proportion of other taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI 8 Total amount and proportion of taxonomy-non-eligible economic activities in the denominator of the applicable KPI % 0 0 0 0 0 0 0 0 0 0 0 0 823,644 63.9 823,644 63.9 125 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.6 Sustainable finance and investment classification system (SFICS) GRI FS8 Sustainable finance is key to meeting our ambition to be net zero carbon emissions by 2050. We continue to build on our sustainable finance guidelines, which we first published in February 2022. In 2023, we updated them based on developments in regulation and market practice. The latest version also includes socially responsible investment standards and is now called the Sustainable finance and investment classification system (SFICS). The SFICS outlines common standards to consider an asset or activity as environmental, social or sustainable in all the Group’s units and businesses. It draws on such international market guidelines, standards and principles as the EU Taxonomy (including the four new environmental targets for 2023), ICMA Principles, LMA Principles, UNEP FI Framework and the Climate Bonds Standard. The SFICS enables us to track our sustainable activity, support product development and mitigate greenwashing risk. We updated the SFICS based on lessons learned and market trends. It now features: A sustainability approach for customers that complements the activity-based approach. Additional details on manufacturing, real estate, sustainable agriculture and other activities. New activities that come to light on the back of developments in the EU Taxonomy and to cover new environmental goals related to water, waste, the circular economy and biodiversity. We will continue working to evolve the SFICS in line with market developments and business practice, to have a comprehensive set of criteria that enables us to classify green and transition activities to support our customers transition and contribute to our net zero ambition. Internationally recognized sector principles and guidelines that the SFICS draws on EU taxonomy ICMA Green/ Social Bond Principles LMA Green Loan Principles LMA Sustainability Linked Loan Principles ICMA Sustainability Linked Bond Principles Febraban taxonomy (Brazil) UNEP FI framework Climate Bond Standards Eligible products Dedicated purpose Sustainability-linked financing → Proceeds go towards eligible environmental and social → Sustainability-linked transactions designed to help our activities and initiatives. customers achieve their ESG objectives. → Eligibility criteria: Activities with a specific environmental and social purpose under accepted standards that follow internationally recognized sector guidelines and principles (ICMA, LMA, Climate Bonds Standard) and the EU Taxonomy. → Transaction structured to achieve pre-determined sustainability performance targets (ESG ratings and metrics). → Alignment with sector standards (ICMA and LMA). Update in 2023 to the Green, social and sustainability funding global framework Updated in 2023, this framework is the reference for all environmental, social and sustainability-labelled funding instruments traded in sustainable capital markets and enables all Grupo Santander entities to issue based on it. It replaces our previous Global sustainable bond and Green bond frameworks. Consistent with best market practice and investor expectations, it covers use of proceeds, project assessment 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 also consistent with the SFICS. 126 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.7 Scope of information The following table outlines the scope of information in the different areas of information of this chapter. Where specific limitations exist for one or more indicators, when these are significant, they are reflected in each corresponding section and in the GRI (Global Reporting Initiative) Content Index. Topics Scope of information Business conduct Ethical channel Socio-environmental risk (Equator Principles) Responsible procurement Acting responsibly towards customers NPS and customer satisfaction Customer complaints Financial health and inclusion Main Group companies in: Argentina, Brazil, Chile, Spain, Mexico, Poland, Portugal, United Kingdom, United States, Uruguay, Colombia, Peru, Switzerland, Bahamas, and Digital Consumer Bank subsidiaries and branches. Full Group scope (Corporate & Investment Banking business). Main companies of the Group in: Argentina, Brazil, Chile, Germany, Mexico, Portugal, Spain, United Kingdom, United States and United States. Main companies of the Group in: Argentina, Brazil, Chile, Spain, United States, Mexico, Poland, Portugal and United Kingdom, Uruguay. All Group entities (>1% of reported claims volume in 2023) Main companies of the Group in: Argentina, Brazil, Colombia, Chile, Chile, Germany, Mexico, Peru, Poland, Portugal, Spain, United Kingdom, United States and Uruguay. Acting responsibly towards our employees Employees Supporting communities Support for higher education, employability and entrepreneurship Full Group scope Other community support programmes Supporting the green transition Green finance Portfolio alignment Agreements with multilateral development banks Environmental footprint Responsible investment SRI AuMs Other topics Corporate governance Customers Tax contribution Litigation and penalties Communications with shareholders and investors Main companies of the Group in: Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, United Kingdom, United States, United Kingdom and Uruguay, in addition to Fundación Universia. Main Group companies in: Germany, Argentina, Brazil, Colombia, Chile, Spain, United States, Mexico, Poland, Portugal, United Kingdom, Uruguay, and the rest of the countries in which DCB operates, as well as Foundations associated to the Group (e.g. Fund. Banco Santander in Spain, Santander Foundation in the UK, etc). Corporate & Investment Banking. Corporate & Investment Banking for thermal coal, power generation, energy (oil & gas), aviation, steel and auto manufacturing portfolios. DCB for the auto loan portfolio. Full Group scope. Companies that have signed financing operations (loans, guarantees, risk, sharings or securitisations) with multilateral development banks (MDBs). Wholly owned companies in: Argentina, Brazil, Chile, Germany, Mexico, Poland, Portugal, Spain, the United Kingdom and the United States. Wealth Management & Insurance: SAM and Private Banking Banco Santander, S.A. Full Group scope Full Group scope Full Group scope Banco Santander, S.A. 127 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.8 Alternative performance measures (APMs) The following are additional alternative performance measures (APMs) to those listed in section 8 of the chapter 'Economic and Financial Review'. Data related to tax contribution The profits obtained, and the taxes accrued and paid, correspond to the countries where we operate. Taxes paid by the Group Third-party taxes Total tax contribution The taxes Santander pays directly are included in the cash flow statement and mainly stem from the corporate income tax paid. They also include non-recoverable value added tax (VAT), employers' social security contributions, charges levied on banks and financial transactions in the geographies were we operate, and other taxes.. See data in the section 8.1 Tax contribution of this chapter. These are those generated by the development of our economic activity. This is the sum of salary withholdings and employees' social security contributions, recoverable VAT, tax deduced at source on capital, non- resident taxes, property taxes, stamp taxes, taxes related to the financial activity, and others. See data in the section 8.1 Tax contribution of this chapter. The Group's total tax contribution includes the taxes paid by the Group as a direct cost and the taxes collected from third parties in the course of our economic activity. See data in the section 8.1 Tax contribution of this chapter. It reflects how the Bank complies with its commitment to tax transparency in the jurisdictions where it operates. Additionally, the "Taxes paid by the Group" metric is a requirement of the GRI standard, GRI 201-1: Direct economic value generated and distributed. For more information see: https:// www.globalreporting.org/ Data related to the country by country report Revenue from third-party sales Revenue from intra-group transactions with other tax jurisdictions 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. Data available on the section 8.8 Country by country report of this chapter. Tangible assets other than cash and cash equivalents Composed of tangible assets, non-current assets held for sale and inventories. See data in section 8.8 Country by country report of this chapter. Corporate income tax accrued on profit/loss The accrued corporate income tax is a current-year expense and does not include deferred taxes. See data in section 8.8 Country by country report of this chapter. Metrics required by GRI 207-4: Country-by-Country Report. This standard requires the presentation of a country-by-country report with financial, economic and tax information on each jurisdiction in which Grupo Santander operates. These indicators are complemented by the other indicators (not considered alternative performance measures) available in Appendix VI. Annual banking report of the Group's annual accounts (see page 820 of the annual accounts). For more information see: https:// www.globalreporting.org/ 128 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Data related to sustainable finance Green finance raised and facilitated Financing volume of renewable energy projects Financing volume of renewable electric vehicles Credit disbursed to microentrepreneurs (EUR) It reflects Santander's commitment and contribution to helping our customers, and society as a whole, in the transition to a low-carbon economy. Nominal amount of project finance, financial advisory, project bonds, green bonds (DCM), export finance (ECA), mergers and acquisitions (M&A), and equity capital markets (ECM) transactions ranked by the SCFS panel and reported in the League Tables of Dealogic, Inframation News, TXF and Mergermarket since the beginning of the year. See data in section 2.6 Supporting a green transition and 8.6 Green transition (table 36. Green finance) in this chapter. Nominal amount of renewable energy projects (greenfield and brownfield) financed since the beginning of the year and reported externally as reported in Infralogic's League Tables for project financing. See data in section IV. 2023 highlights of this chapter. Financing volume of vehicles powered exclusively by a rechargeable electric battery (no petrol engine). See data in section IV. 2023 highlights of this chapter. Total amount of credit disbursed during the year to low-income entrepreneurs with low access to banking services, or with difficulties in accessing credit, with the objective of creating and/or growing their businesses. Data includes information on microfinance programmes in Brazil, Colombia, Mexico and Peru. See data in section IV. 2023 highlights and 8.3 Financial inclusion (table 9. Microfinance) of this chapter. It reflects Santander's commitment and contribution to help address financial inclusion challenges in the markets where we operate. Data related to responsible investment Socially responsible investment assets under management (SRI AUM) Value corresponding to total volume of assets under management registered as article 8 - promoting ESG characteristics - and 9 - with explicit sustainability objectives - of the SFDR regulation (EU Reg. 2019/2088) except for illiquid investments in Private Banking which are reported in terms of committed capital. Includes assets managed by Santander Asset Management (SAM) in the EU and with equivalent criteria in geographies where SFDR does not apply (mainly Latam) and Third Party Funds. See data in section 3. Responsible investment of this chapter. It reflects Santander's commitment and contribution to promote responsible investment. It also allows our managers to have a more complete vision of the assets in which to invest and identify competitive advantages and prevent potential risks. It reflects the bank's commitment to training and lifelong learning for its employees. Data related to employees training Cost per hour Investment per employee Total investment in training Sum of total training expenditure divided by total hours of training completed by active employees in the period. See data in section 8.5 Employees (table 30. Training) of this chapter. Total expenditure on training divided by the average number of employees per year. See data in section 8.5 Employees (table 30. Training) of this chapter. Sum of all expenditures accrued in Learning Activities, during the period, including: Direct costs from trainers who are employed as Employees (i.e. Total Compensation prorated for the dedication to training activities), but not including Salaries of Learning and Development Employees, External suppliers / vendors expenses paid and budgeted by the Learning department (for any type of service: training design, training sessions delivery, communications, consulting), logistic and facilities costs (training rooms, catering, accommodation and travel, materials), Labour cost of employees within the Learning Department (actual amounts accrued during the period, including gross compensation - all items-, plus company taxes - contributions, ), IT costs and licenses plus their applicable services; expenditures in Marketing and Communications paid and budgeted by the Learning Department.; Other expenses See data in section 8.5 Employees (table 30. Training) of this chapter. 129 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Data related to community investment 1 At Banco Santander, we measure our investment in community outreach according to the Business for Societal Impact (B4SI) methodology, which is an international benchmark for the Global Reporting Initiative (GRI), S&P Dow Jones Sustainability Index and other standards and indices. Support (investment) for education, employment and entrepreneurship Support (investment) for other local initiatives Total community investment Total amount invested to support education, employment and entrepreneurship. See data in section 6. Supporting communities and 8.4 Community investment (table 10. Community investment)of this chapter. Total amount invested through local initiatives to promote childhood education, social welfare (especially among vulnerable groups), art and culture. See data in section 6. Supporting communities and 8.4 Community investment (table 10. Community investment)of this chapter. Sum of investment in education, employability and entrepreneurship, plus investment in other community support programmes. See data in section 6. Supporting communities and 8.4 Community investment (table 10. Community investment)of this chapter. It reflects Santander's commitment and contribution to promoting (beyond our business operations) the progress and inclusive and sustainable growth of the communities where we are present. Data related to suppliers Payments to suppliers % Turnover of locally contracted suppliers (M EUR) Total amount of payments made to suppliers outside the Group (excludes payments made by the Group in Poland). See data in section 7.5 Acting responsibly towards suppliers of this chapter. % of the Group's total turnover made to suppliers based in the same geography where the services are purchased (excludes payments made by the Group in Poland). Turnover from locally contracted suppliers is divided by total turnover to suppliers. See data in section 7.5 Acting responsibly towards suppliers of this chapter. It reflects the Group's economic contribution through the purchase of products and services in its operations. It also reflects our commitment to the local economies of the geographies in which we operate. Specific data requested by ESG standards GRI 201 -1. Direct economic value generated and distributed Direct economic value generated and distributed (EVG&D) on an accruals basis, including the basic components for the organization’s global operations as listed below. i. Direct economic value generated: revenues; ii. Economic value distributed: operating costs, employee wages and benefits, payments to providers of capital, payments to government by country, and community investments; iii. Economic value retained: ‘direct economic value generated’ less ‘economic value distributed’. See data in section 7.5 Acting responsibly towards suppliers of this chapter. Economic performance indicator that reflects how an organisation has generated economic wealth for its stakeholders. It is a requirement of the GRI standard (201-1: Direct economic value generated and distributed). For more information see: https:// www.globalreporting.org/ 130 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10. Sustainability reporting standards and references 10.1 Non-financial information Act 11/2018 content index 10.2 UN Global Compact content index 10.3 UNEP FI Principles for Responsible Banking reporting index 10.4 Global Reporting Initiative (GRI) content index 10.5 Sustainability Accounting Standards Board (SASB) content index 10.6 Stakeholder Capitalism Metrics content index 10.7 Task Force on Climate related Financial Disclosure (TCFD) content index 10.8 SDGs contribution content index 10.9 GFANZ transition planning 132 137 138 151 162 165 170 171 173 131 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.1 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. 21); Materiality assessment (p. 28); Double materiality assessment and sources (p. 95). 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): Main internal regulation and governance (p. 92); Business conduct (p. 64) (Environmental, social and climate change risk management section). 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 2-23 GRI 3-3 0. General Information 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. Acting responsibly towards employees (p. 46); Acting responsibly towards customers (p. 55); Acting responsibly towards suppliers (p. 69); Supporting the green transition (p. 30); Responsible investment (p. 44). Our progress in figures (p. 70). Impact, risk and opportunities (p. 29); Business conduct (p. 64) (Environmental, social and climate change risk management section); Supporting the green transition (p. 30); Acting responsibly towards customers (p. 55); Risk, compliance and conduct management chapter (p. 451). GRI 2-24 GRI 3-3 GRI 2-12 132 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Consumption of raw materials and measures taken to Information 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. 30); Business conduct (p. 64) (Environmental, social and climate change risk management). At the end of the 2023 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. 30) (Reducing our environmental footprint). GRI 3-3 GRI 305-5 Supporting the green transition (p. 30) (Our environmental footprint). Supporting the green transition (p. 30) (Our environmental footprint); Our progress in figures (p. 70) (Environmental footprint) Supporting the green transition (p. 30) (Our environmental footprint); Our progress in figures (p. 70) (Environmental footprint) Supporting the green transition (p. 30) (Our environmental footprint); Our progress in figures (p. 70) (Environmental footprint) Supporting the green transition (p. 30) (Our environmental footprint); Our progress in figures (p. 70) (Environmental footprint) Supporting the green transition (p. 30) Supporting the green transition (p. 30) GRI 3-3 GRI 301-1 GRI 306-2 GRI 303-5 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. 30) (Nature and biodiversity). GRI 304-2 133 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2. Social 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. 70). Our progress in figures (p. 70). Our progress in figures (p. 70). Our progress in figures (p. 70). Acting responsibly towards employees (p. 46) (Diversity, equity and inclusion section). Our progress in figures (p. 70). Acting responsibly towards employees (p. 46) (Transforming the way we work section). Our progress in figures (p. 70). Acting responsibly towards employees (p. 46) (Transforming the way we work section). Our progress in figures (p. 70). Acting responsibly towards employees (p. 46) (Gender equality section). Acting responsibly towards employees (p. 46) (Employees’ health and well-being section). Our progress in figures (p. 70). Acting responsibly towards employees (p. 46) (Collective bargaining). Acting responsibly towards customers (p. 55); Stakeholders engagement (p. 89). Our progress in figures (p. 70). Acting responsibly towards employees (p. 46) (Employees’ health and well-being section) Business conduct (p. 64) (Ethical channels) Acting responsibly towards employees (p. 46) (Attracting talent and Developing talent sections). Total number of hours of training by professional categories. Our progress in figures (p. 70). 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 404-1 134   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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, Equalit (Chapter III of Organic Law 3/2007, of 22 March, effective equality of women and men), measure promote employment, protocols against sexual based harassment, Policy against all types of dis and, where appropriate, integration of protocols sexual and gender-based harassment and proto all types of discrimination and, where appropriat management of diversity Application of due diligence procedures in the field of Human Rights y plans for the s taken to and gender- crimination against cols against e, 3. Human Rights Prevention of the risks of Human Rights violations and, where appropriate, measures to mitigate, manage and repair any possible abuses committed 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 Chapter/section of the annual report Correspondence with GRI indicators/Other regulations Acting responsibly towards employees (p. 46) (Diversity, equity and inclusion section); Acting responsibly towards customers (p. 55); Supporting communities (p. 61). GRI 3-3 Acting responsibly towards employees (p. 46) (Diversity, equity and inclusion section); Supporting communities (p. 61). GRI 3-3 Main internal regulations and governance (p. 92); Business conduct (p. 64) (Environmental, social and climate change risk management and Human rights protection section); Acting responsible towards suppliers (p. 69). Main internal regulations and governance (p. 92); Business conduct (p. 64) (Environmental, social and climate change risk management and Human rights protection section); Acting responsible towards suppliers (p. 69). Business conduct (p. 64) (Ethical channels section). Acting responsibly towards employees (p. 46) Business conduct (p. 64) (Environmental, social and climate change risk management and Human rights sections) Main internal regulations and governance (p. 92); Business conduct (p. 64) (Financial crime compliance section). Risk, compliance and conduct management chapter: 7.2 Compliance and conduct risk management section (p. 497). Main internal regulations and governance (p. 92); Business conduct (p. 64) (Financial crime compliance section). Risk, compliance and conduct management chapter: 7.2 Compliance and conduct risk management section (p. 497). Supporting communities (p. 61). 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 413-1 135   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Chapter/section of the annual report Supporting communities (p. 61). Financial health and inclusion (p. 57). Business conduct (p. 64) (Environmental, social and climate change risk management). The impact of the company’s activity on local towns and villages and in the country. Supporting communities (p. 61). Financial health and inclusion (p. 57). Relations maintained with the representatives of local communities and the modalities of dialogue with them. Association or sponsorship actions Stakeholder engagement (p. 89). 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. 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 5. Information on the company 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 Tax information: The profits obtained country by country Taxes on benefits paid Public grants received EU Taxonomy 6. Other relevant information Acting responsibly towards suppliers (p. 69). GRI 2-6 GRI 3-3 Acting responsibly towards suppliers (p. 69). GRI 204-1 GRI 308-1 GRI 414-1 Acting responsibly towards suppliers (p. 69). GRI 3-3 Acting responsibly towards customers (p. 55). Risk, compliance and conduct management chapter: 7.2 Compliance and conduct risk management section (p. 497) Acting responsibly towards customers (p. 55). Risk, compliance and conduct management chapter: 7.2 Compliance and conduct risk management section (p. 497) Auditor's report and 2023 annual consolidate accounts (p. 519) (Annex VI Annual banking report) and Auditor's Report and 2022 annual consolidate accounts (Annex VI Annual banking report). Our progress in figures (p. 70) (8.1 Tax contribution) GRI content index (p. 151). Information related to article 8 of EU Taxonomy: Responsible investment (p. 44); EU Taxonomy (p. 97). 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 and 2021/2178 as amended by Delegated Regulations (EU) 2022/1214, 2023/2485 and 2023/2486 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, 2-9, 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, 207-2, 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, 401-2, 401-3, 403-2, 403-3, 403-5, 403-6, 403-8, 404-3, 415-1, 417-3. 136 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.2 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. Reference in the 2023 Annual report Correspondence with GRI indicators Principles Human rights Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights. Businesses should make sure they are not complicit in human Business conduct (p. 64) (Ethical rights abuses. channels section); Acting responsibly towards employees (p. 46) (Employee feedback subsection) Principle 2: Labour Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. Principle 4: 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. Principle 9: Businesses should encourage the development and diffusion of environmentally friendly technologies. Supporting the green transition (p. 30) (Our environmental footprint section). Our progress in figures (p. 70). Anti-Corruption Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. Main internal regulations and governance (p. 92); Business conduct (p. 64) (Financial crime compliance and relations with political parties section); Compliance and conduct risk (p. 497) (Compliance and conduct risk management section) Main internal regulations and governance (p. 92); Business conduct (p. 64) (sections: Conduct standards, Environmental, social and climate change risk management, Acting responsibly towards suppliers) Acting responsibly towards employees (p. 46) (Working conditions and social dialogue section). Business conduct (p. 64) (Environmental, social and climate change risk management section). Business conduct (p. 64) (Environmental, social and climate change risk management section). Acting responsibly towards employees (p. 46) (Diversity, equity and inclusion (DE&I) subsection). Supporting the green transition (p. 30). GRI 308-1 Supporting the green transition (p. 30). 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 GRI 302-1, 302-4, 303-5, 305-1, 305-2, 305-3, 305-4, 305-5 GRI 302-4, 305-5 GRI 2-23, 2-27, 205-1, 205-2 137   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.3 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. Links and references Corporate website - santander.com • About us • Our approach 2023 Digital Annual Review 2023 Annual report • Business model and strategy chapter • Economic and financial review chapter Santander is a retail bank that operates in three regions (Europe, North America and South America) and in 10 core markets. We structure our operations into five global businesses: Retail & Commercial Banking; Digital Consumer Bank; Corporate & Investment Banking; Wealth Management & Insurance; and Payments. We want to be the best digital and open financial services platform by acting responsibly and earning the lasting loyalty of employees, customers, shareholders and broader society. Our purpose is to help people and businesses prosper. We strive to make sure that everything we do is Simple, Personal and Fair. Our strategy is to create value for all our stakeholders. With a talented and motivated team, we earn our customers’ trust and achieve strong financial results for our shareholders, which in turn enables us to support the communities we serve. Our business model is based on three pillars: • Customer focus. Digital bank with branches. We are transforming our business and operating model through technology-based initiatives to build a digital bank with branches that enables our customers to access financial services through several channels. • Our scale: Our scale in each core market, coupled with our global reach, drives profitable growth and competitive advantage over local peers. • Diversification: Our diversification by geography (in emerging and mature markets) and business (with presence in every sector — retail customers, SMEs, corporates, etc.) enables us to keep net interest income stable. By numbers: • Total customers served: 165 million • Gross loans and advances to customers: EUR 1,015 billion • Distribution by region: Europe (55%); North America (16%); South America (16%); Digital Consumer Bank (13%). • Distribution by segment: retail customers (63%), SMEs and corporates (24%); CIB (13%). 138   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 which ones: Modern Slavery Act 2015 UK ☐ None of the above Banco Santander is firmly committed to driving inclusive and sustainable growth. Our purpose is to help people and businesses prosper. Our operations and investments contribute to several United Nations' Sustainable Development Goals (SDGs) and to the Paris Agreement. We pinpointed three SDGs on which the Group has the greatest impact (8, 13 and 16) and eight more to which we also make a 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 set our ambition to be net zero in CO2 emissions by 2050. We also drive our responsible banking agenda through local and international initiatives and working groups. We comply with all regulatory requirements regarding ESG disclosure. The Responsible Banking chapter of the 2023 Annual Report is the Group’s consolidated non-financial information statement. It provides detailed information in accordance with Spain’s Act 11/2018, which transposes Directive 2014/95/EU into Spanish law. Our Pillar 3 ESG risk disclosures also cover new market requirements. Our three priorities as a responsible bank are: • Support the transition to a low-carbon economy: • Support and engage with customers in accelerating their transition, and develop a best-in-class sustainable finance and investment proposition. • Progress with decarbonizing our portfolios to align to net zero by 2050, while considering other Links and references 2023 Digital Annual Review • About us 2023 Annual report - Responsible banking chapter • III. Our sustainability strategy • 9.1 Stakeholder engagement • 10.8 SDGs contribution content index Other references • Santander UK Modern Slavery Statement - santander.co.uk/about- santander/investor-relations/modern- slavery-statement environmental goals. • Promote inclusive growth: • Promote employees' wellbeing and equal treatment and opportunity for all. • Support financial inclusion by promoting access to financial products and services and financial health, including financial literacy. • Foster customer information transparency and data privacy. • Support education, employability and entrepreneurship. • Strong governance and culture across the organization: • Drive culture, conduct and ethical behaviour, doing everything the Santander Way: Simple, Personal and Fair. • Continue integrating ESG in governance and our core activities, and enhancing capabilities across teams including business, risk management and data reporting. 139 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 1 target-setting. The impact analysis shall be updated regularly 2 and fulfil the following 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 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 Grupo Santander performs an annual materiality assessment to identify the most pressing sustainability matters. In 2023, we took a double-materiality approach based on the Corporate Sustainability Reporting Directive (CSRD). Our assessment covered two dimensions: impact materiality and financial materiality. Impact materiality assesses the potential positive and negative impacts of sustainability matters on people and the environment. We used the UNEP FI impact tool to assess impact materiality. The assessment covered the entire group, including information on all our businesses (Retail & Commercial Banking; Digital Consumer Bank; Corporate & Investment Banking; Wealth Management & Insurance; and Payments) and our own operations. It did not consider our vendors’ value chain. Links and references 2023 Annual report - Responsible banking chapter • 1.1 Material sustainability matters • 1.2 Impact, risks and opportunities • 9.4 Double Materiality Assessment and sources 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 (unepfi.org/wordpress/wp-content/uploads/2022/05/Impact-and-Target- Process-V-1.1-09.05.2022.pdf). 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 for business, corporate and investment banking portfolios (i.e. sector exposure or industry breakdown in %), and/or ii) by products & services and by types of customers for consumer and retail banking portfolios. 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. Santander used the Consumer Banking and Investment Banking modules. The Consumer Banking module (52% of total assets, not including cash and debt securities) included products and credit volumes in the retail segment (mainly mortgages and consumer loans). The Investment Banking module (48%) included credit volumes in business segments (from SMEs to corporates), split by NACE sector. Links and references 2023 Annual report - Responsible banking chapter • 1.1 Material sustainability matters • 1.2 Impact, risks and opportunities • 9.4 Double Materiality Assessment and sources 2023 Annual report - Risk management and compliance chapter • 3. Credit risk c) Context: What are the main challenges and priorities related to sustainable development in the main countries/regions in which your bank and/or 4 your clients operate? Please describe how these have been considered, including what stakeholders you have engaged to help inform this element of the impact analysis. We used the Context module as input to point out the key sustainability challenges in the markets where the Group operates. We conducted this assessment on the Group’s five biggest markets (Spain, the UK, Brazil, Mexico and the US) in the three regions where we are present (Europe, North America and South America). The key sustainability challenges across the Group's footprint according to the Context module of the UNEPFI tool are: • availability, accessibility, affordability, which for us relates significantly to financial inclusion; and • climate stability We also included feedback from other main stakeholders — customers, regulators and NGOs – to confirm our findings and prioritize areas of focus. Links and references 2023 Annual report - Responsible banking chapter • 1.1 Material sustainability matters • 1.2 Impacts, risks and opportunities • 2. Supporting the green transition • 5.3 Financial health and inclusion • 9.4 Double Materiality Assessment and sources 3. ‘Key sectors’ relative to different impact areas, i.e. those sectors whose positive and negative impacts are particularly strong, are particularly relevant here. 4. Global priorities might alternatively be considered for banks with highly diversified and international portfolios. 140 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Based on these first 3 elements of an impact analysis, what positive and negative impact areas has your bank identified? Which (at least two) 5 significant impact areas did you prioritize to pursue your target setting strategy (see 2.2) ? Please disclose. The two main areas of impact, which we made pivotal components of our strategy, are: • availability, accessibility, affordability, which for us relates significantly to financial inclusion; and • climate stability The positive impacts outweigh the negative impacts in both areas. Based on banks’ business models, we consider these areas of impact to: • promote the financial health and inclusion of our customers; and • help our customers transition to a low-carbon economy. Links and references 2023 Annual report - Responsible banking chapter • III. Our sustainability strategy • 1.1 Material sustainability matters • 1.2 Impact, risks and opportunities • 2. Supporting the green transition • 5.3 Financial health and inclusion • 9.4 Double Materiality Assessment and sources 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. 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 main impacts within the two selected areas are: • availability, accessibility, affordability: Positive impact from retail exposure; and • climate stability: Impact from the most emissions-intensive sectors, such as mining, manufacturing, energy, transport, and storage. Links and references 2023 Annual report - Responsible banking chapter • 1.1 Material sustainability matters • 1.2 Impact, risks and opportunities • 9.4 Double Materiality Assessment and sources • 2. Supporting the green transition • 5.3 Financial health and inclusion 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 6 significant (potential) positive and negative impacts? Scope: Portfolio composition: Context: Performance measurement: ☒ Yes ☒ Yes ☒ Yes ☐ Yes ☐ No ☐ In progress ☐ In progress ☐ ☐ In progress ☐ No ☒ In progress ☐ No 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. 141 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 7 The targets following elements of target setting (a-d), for each target separately: have to be Specific, Measurable (qualitative or quantitative), Achievable, Relevant and Time-bound (SMART). Please disclose the 8 a) Alignment: which international, regional or national policy frameworks to align your bank’s portfolio with 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. Links and references 2023 Annual report - Responsible banking chapter • 2. Supporting the green transition • 5.3 Financial health and inclusion Climate finance report • 5. Metrics and targets 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, a coalition of leading banks that represent 41% of global banking assets) as a key banking sector initiative to help us drive our net zero ambition. Since setting our ambition, we’ve announced seven decarbonization targets for the most emissions- intensive sectors. These sectors are power generation; thermal coal mining and power generation; oil and gas; aviation; steel; auto manufacturing; and auto lending. According to our last assessment, aluminium, cement and maritime transport are not material to Santander. Within the NZBA sectors, we are also making headway with analysing, measuring and acting to help decarbonize other climate-related sectors such as agriculture, mortgages and commercial real estate, which are key in the retail segments. The climate performance dynamics of these sectors are heavily dependent on their regulatory landscape. There is currently a lack of public policies, actions and specific plans and measures at the level the changes require for a net zero pathway. We continue to work with clients in these sectors on their decarbonization efforts and internal monitoring of their performance; but we understand we should refrain from setting public targets until their regulatory landscape is sufficiently supportive. We have been actively and constructively sharing our understanding and experience of these policy gaps with authorities, as well as other sectors, and plan to keep doing so. Regarding financial inclusion, having exceeded our target to financially empower 10 million people between 2019 and 2025 (reaching 11.8 million in 2022), in 2023 we set a new target to financially include 5 million more between 2023 and 2025 through access and financing initiatives. We came up with an internal methodology to calculate the number of people we financially include. It considers best international practice and received independent, third-party validation. Santander also has an active role in the UNEP FI Working Group on Financial Health and Inclusion, which underpins the methodology we use. 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. 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. 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. Regarding climate change, we set baselines for our decarbonization targets. Baseline: We use 2019 as the baseline for four of our targets. For auto manufacturing and auto lending, we use 2020 and 2022, respectively. In financial inclusion, we achieved our target to financially empower 10 million people between 2019 and 2025 through access, financing and education initiatives three years early in 2022. To revise this target, in 2023 we conducted a study using reliable public information (i.e. from the World Bank) to pinpoint the barriers to financial services in our core markets. Based on that study and the initiatives we’re running, we set a new target to financially empower 5 million people between 2023 and 2025. Links and references • 2. Supporting the green transition • 5.3 Financial health and inclusion Climate finance report • 5. Metrics and targets 142 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9 ): Please disclose the targets for your first and your second area of most significant impact, c) SMART targets (incl. key performance indicators (KPIs) 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 reach net zero carbon emissions by 2050 by aligning our portfolio with the Paris Agreement goals: • Target/KPI 1: Thermal coal mining and power generation phase-out. From 7 bn (2021) to 0 by 2030. • Target/KPI 2: Reduce the emissions intensity of the power generation portfolio from 0.21 tCO2e/MWh • Target/KPI 3: Reduce the absolute emissions of the energy portfolio (oil and gas) from 23.84 mtCO2e Links and references 2023 Annual report - Responsible banking chapter • IV. 2023 highlights • 2. Supporting the green transition • 5.3 Financial health and inclusion (2019) to 0.11 tCO2e/MWh by 2030. (2019) to 16.98 mtCO2e by 2030. 61.71 grCO2e/RPK by 2030. tCO2e/tS by 2030. • Target/KPI 4: Reduce the emissions intensity of the aviation portfolio from 92.47 grCO2e/RPK (2019) to • Target/KPI 5: Reduce the emissions intensity of the steel portfolio from 1.58 tCO2e/tS (2019) to 1.07 • New target for 2023/KPI 6: Reduce the emissions intensity of the auto manufacturing portfolio from 149 gCO2/vkm (2020) to 103 gCO2/vkm by 2030. • New target for 2023/KPI 7: Reduce the emissions intensity of the auto lending portfolio from 137 gCO2e/vkm (2022) to 75- 89 gCO2/vkm by 2030. Helping customers transition to a low-carbon economy • Target/KPI 8: Invest or mobilize EUR 120 billion in green finance between 2019 and 2025, and EUR 22 billion by 2023. Helping customers transition to a sustainable economy Target/KPI 9: EUR 100 billion in socially responsible investment by 2025. Financial health and inclusion. Our aim is to help people access and use basic financial services, and provide tailored finance to individuals and SMEs with difficulty accessing credit or that are in financial distress through financial education initiatives that help maximize our impact. • Target 1: Financially empower 5 million people between 2023 and 2025. • Target/KPI 1: # people benefited from access to, and use of, basic financial services through simple payment platforms and cash services in remote and small communities. • Target/KPI 2: # microentrepreneurs, customers in financial distress and low-income households with difficulty getting credit for housing or basic financial needs supported. 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 2023 Annual report - Responsible banking chapter • IV. 2023 highlights • 2. Supporting the green transition • 5.3 Financial health and inclusion Climate change We drew up a climate strategy and are working to (1) set and implement decarbonization targets in the highest-emitting sectors, reporting on progress and action plans every year; (2) support our customers’ transition (rolling out solutions and ramping up our green operations), which we pledge to do as part of our action plan; (3) embed climate in risk management and revise the risk appetite of our portfolios though decarbonization targets; and (4) manage the environmental footprint of our own operations, with multi-year plans agreed for all units. Financial health and inclusion We promote financial health and inclusion through these three initiatives: • Access. Helping people access and use basic financial services through simple payment platforms and cash 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. • Financial health. We help people manage their finances better in the short, medium and long term by expanding their knowledge of finance and making concepts easy to understand, which enables them to make more informed decisions. Our access and finance initiatives contribute towards our public target to financially empower five million people. 9. Key Performance Indicators are chosen indicators by the bank for the purpose of monitoring progress towards targets. 143 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 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. Links and references 2023 Annual report - Responsible banking chapter • IV. 2023 highlights • 2. Supporting the green transition • 5.3 Financial health and inclusion Climate change We set the wheels in motion to implement our financed emissions reduction targets. This includes engaging with customers on climate matters; gathering data as part of our analysis on the risk of exclusion; and linking targets to senior executives’ remuneration. In 2023, we took this approach with sectors other than power generation (oil and gas, steel, and aviation) and set targets that adapt to their particularities. Our approach seeks to facilitate the achievement of emissions targets and develop a solid understanding of our customers’ strategies to transition to low-carbon business models. We base our approach on governance procedures run by our customer relations and risk teams and overseen by senior managers to guide our portfolio management. Its four stages are gather, assess, engage and review. We used several internationally recognized references such as the Cambridge Institute for Sustainability Leadership's (CISL) 'Let's Discuss Climate' guide and adapted them to our needs and objectives. Financial health and inclusion After achieving our target (in 2022) to financially empower 10 million people, in 2023 we: • conducted a study using reliable public information (i.e. from the World Bank) to pinpoint the barriers to financial services in our core markets. Based on that study and the initiatives we’re running, we set a new target to financially empower 5 million people between 2023 and 2025; • updated our methodologies on measuring the number of people we financially empower and who benefit from our financial education programme; and • began reporting progress every quarter through automated control to ensure the quality and consistency of information. In 2023, we financially included further 1.8 million people through access and lending solutions. 144 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Principle 3: Clients and Customers We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations. 3.1 Client engagement Does your bank have a policy or engagement process with clients and customers 10 in place to encourage sustainable 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 ). It should include information on relevant policies, actions planned/implemented to support clients’ transition, selected indicators on client engagement and, where possible, the impacts achieved. 11 Links and references 2023 Annual report - Responsible banking chapter • 7. Business conduct • 9.2 Main internal regulations and governance Corporate website - santander.com • Our approach/Policies - santander.com/en/our-approach/ policies Our Responsible banking and sustainability policy sets out the general principles, commitments, objectives and strategy that guide the Group’s progress with responsible banking and sustainability matters. The aim is to promote long-term value creation for all our stakeholders by acting on opportunity and managing risk. By fulfilling our purpose to help people and businesses prosper, we grow as a business and support society’s efforts to face global challenges, which drives our ambition in environmental, social and governance. We also have other policies that support our responsible banking strategy in such areas as compliance and conduct, cybersecurity, customer conduct risk management, customer service, product and service approval, sensitive sectors, data protection, and treatment of vulnerable customers. We want to act responsibly to make sure that every customer has a Simple, Personal and Fair experience with us. These are our key initiatives in this area: • We are continuously enhancing procedures that impact on customers’ experience with products and services, based on our NPS scores. In 2023, we enhanced contact centre and innovation-related procedures. • To enhance our sales of products and services, 40% of our sales units' variable pay is based on customer satisfaction and quality metrics. We included the contact centre in this variable pay scheme for the first time in 2023. • We have several initiatives for vulnerable customers, including a customer service protocol for senior citizens and people with disabilities. As part of our customer engagement, our Environmental, social and climate change risk management policy sets out how we identify, assess, monitor and manage environmental and social risks and other climate change-related operations. Together with the Equator Principles, we analyse operations in relation to investment in entities, the provision of financial products or services in the oil and gas, power generation and mining and metallurgy sectors, as well as those derived from soft commodity businesses. 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. 145 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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.). These are the main growth opportunities that Banco Santander has identified: • Green finance: All our initiatives are to help our customers transition to a low-carbon economy. For large corporates, we focus on renewable energy and sustainable technology solutions. In Retail & Commercial Banking, we identified five areas of priority: green buildings, clean mobility, renewables, sustainable agriculture, and the circular economy. • AUM in socially responsible investment: We run initiatives to reach our goal of EUR 100 billion of socially responsible investment (SRI) AUM by 2025 • Financial inclusion/Microfinance: Our microfinance operations in Brazil, Mexico, Uruguay, Colombia, Peru and other Latin American markets aim to help microentrepreneurs set up and grow their businesses. • Financial inclusion/Access: We have the opportunity to provide access through bank accounts and digital solutions and wallets to those at the base of the pyramid. Links and references 2023 Annual report - Responsible banking chapter • IV. 2023 highlights • 1.1 Material sustainability matters • 1.2 Impact, risks and opportunities • 9.4 Double Materiality Assessment and sources • 2. Supporting the green transition • 5.3 Financial health and inclusion Principle 4: Stakeholders We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals. 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 have identified as relevant in relation to the impact analysis and target setting process? 12 ) you ☐ In progress ☒ 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. ☐ No Our materiality assessment includes inputs from customers, employees, senior managers, investors, supervisors, regulators and NGOs. Their contributions were key to understand the importance of the impact, risk and opportunity of sustainability matters. This stakeholder feedback supplemented our double-materiality assessment. We engaged our stakeholders mainly through surveys, which are the most direct way of incorporating their feedback into the materiality assessment. We also conducted interviews with our teams to build on the information we received. Findings are somewhat consistent across the six stakeholder groups we surveyed. Their primary concerns include the fight against climate change, customer data protection, transparency, and inclusion. Beyond the annual materiality assessment, we run continuous active listening and engagement initiatives throughout the year. We conduct surveys and have speak-up channels for employees and customers. We assess external factors to identify risk and opportunity and to gauge our impact on the community. We respond to demands from analysts, investors and ratings agencies 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. Links and references 2023 Annual report - Responsible banking chapter • 1.1 Material sustainability matters • 1.2 Impact, risks and opportunities • 9.4 Double Materiality Assessment and sources • 9.1 Stakeholder engagement 12. Such as regulators, investors, governments, suppliers, customers and clients, academia, civil society institutions, communities, representatives of indigenous population and non-profit organizations 146 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Principle 5: Governance & Culture We will implement our commitment to these Principles through effective governance and a culture of responsible banking 5.1 Governance Structure for Implementation of the Principles Does your bank have a governance system in place that incorporates the PRB? ☐ In progress ☒ 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 ☐ No • which committee has responsibility over the sustainability strategy as well as targets approval and monitoring (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. Santander’s ESG governance 1) The board of directors approves and oversees the implementation of policies and strategies related to our corporate culture and values, responsible practices and sustainability. It also ensures that all the Group's employees are aware of our codes of conduct and act ethically, and comply with the law, customs and good practices of the sectors and countries in which we operate. 2) The responsible banking, sustainability and culture committee (RBSCC) oversees the Group's responsible banking programme and strategy. This committee comprises between three and nine directors (all independent or non-executive), with a majority independent directors. 3) The Responsible Banking Forum promotes and implements 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. The Forum also ensures alignment on key issues, including the review and submission of reports to the RBSCC. 4) The management meeting, chaired by the CEO, is where we discuss our quarterly progress with the responsible banking agenda (including climate change), with a focus on the implementation of the TCFD recommendations and ESG business opportunity. Remuneration linked to sustainability targets Sustainability is part of our short-term (variable remuneration) and long-term reward schemes. In both cases, Santander has scorecards to assess progress with sustainability matters, which are largely based on public targets. The long-term incentive scorecard for 2022-2024 comprises the following metrics: the percentage of senior positions held by women; the number of financially empowered people; the amount of green finance invested and mobilized and SRI AUM; and the phase-out of exposure to thermal coal mining and power generation. Links and references 2023 Annual report - Responsible banking chapter • VI. Governance • 4. Acting responsibly towards employees (Performance management and remuneration) • 9.2 Main internal regulations and governance 2023 Annual report - Corporate governance chapter • 4. Board of directors • 6. Remuneration Corporate website - santander.com • Corporate governance - santander.com/en/shareholders-and- investors/corporate-governance ◦ Rules and regulations of the Board of directors ◦ Board of directors ◦ Board committees 147 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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). Our corporate culture, The Santander Way', is the bedrock of our success. Our values (Simple, Personal and Fair), our corporate behaviours (TEAMS), our leadership principles and our robust risk culture (Risk Pro) guide our day-to-day operations. Employee training on sustainability is key to Santander. We further developed our three-tier training strategy and created a global ESG content platform: • We have global mandatory ESG training for all employees, Sustainability for all. • We continued to run ESG Talks, a series of webinars with internal experts for the areas that work on our sustainability agenda. Links and references 2023 Annual report - Responsible banking chapter • II. Our culture • 2. Supporting the green transition • 4. Acting responsibly towards employees • We provided the content for employees to obtain Santander ESG Commitment Fundamentals, International Sustainable Finance Specialist-IASE level II and other sustainability certifications. In 2023, 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 information disclosure. We also trained our employees on the Code of conduct, diversity and inclusion, health and safety, customer and vendor relations, the environment, anti-corruption, cyber security, and other topics. We believe it is key to lead by example when promoting sustainability awareness and culture. 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.38% of our employees work in buildings certified to ISO 14001 or ISO 50001 management systems; this is above the 36% ambition considered in our 2022-2025 plan. Today, almost all of Santander’s headquarters in our core markets are LEED, BREEAM or ISO 14001- certified. Some buildings in Brazil, Germany, Poland and Spain are LEED Gold or Platinum-certified, while the Grupo Santander City and Santander España’s central services buildings have ‘Zero waste’ certification. Santander runs global and local employee awareness campaigns on the importance of reducing waste and consumption. Each subsidiary posts news and feature articles on the environment and the Group’s ESG initiatives on its internal portal. In 2023, we observed Earth Hour for the 14th year in a row by switching off the lights at the Group’s most emblematic buildings. 148 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 5.3 Policies and due diligence processes Does your bank have policies in place that address environmental and social risks within your portfolio? 13 Please 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. Links and references 2023 Annual report - Responsible banking chapter • 7. Business conduct (Environmental, social and climate change risk management) • 9.2 Main internal regulations and governance Corporate website - santander.com • Our approach - Policies santander.com/en/our-approach/ policies 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 who are subject to the policy through 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. After conducting environmental and social due diligence on projects, we ask our customers for mitigation plans based on their risk rating. In 2023, we kicked off an initiative to identify and assess the actual and potential adverse impact on human rights that our operations may cause or contribute to, or that may be linked to our operations, products or services through business relationships, based on the recommendations of international frameworks such as the UNGPs and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. In addition to this initiative (the findings of which we will publish in 2024), we assess the socio-environmental impact of our operations on customers and vendors. • Customers: Per the Environmental, social and climate change risk management policy, we analysed customers who are subject to the policy through a detailed questionnaire and one-off, project-related transactions in accordance with the Equator Principles and such international regulations as the International Finance Corporation Performance Standards. After conducting environmental and social due diligence on projects, we asked our customers for mitigation plans based on their risk rating. • Vendors: We assess vendors who provide risk services to the bank through special questionnaires on environmental, social, human rights and good governance matters. We use the assessment findings to work with vendors on remediation plans and specific ESG training. In 2023, we worked on drawing up and implementing a new ESG approval methodology to classify our vendors according to risk, including a criticality assessment and action plans for vendors with the highest ESG risk. 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)? ☐ No ☒ Yes Does your bank have measures in place to promote a culture of sustainability among employees (as described in 5.2)? ☐ No ☒ Yes ☐ In progress ☐ No 149 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 fifth report on the Principles for Responsible Banking. It 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). PricewaterhouseCoopers Auditores, S.L. is an independent firm that also audited Banco Santander, S.A.’s consolidated non-financial and financial statements for 2023. Links and references 2023 Annual report - Responsible banking chapter • 11. 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 This chapter meets Spain’s Act 11/2018, EU Guidelines 2017/C215/01 on non-financial reporting, the European Taxonomy regulation (Regulation (EU) 2020/852 and Commission Delegated Regulations 2021/2139 and 2021/2178), the GRI Standards, and the GRI G4 guidelines on financial services disclosures. It also considers 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 the UN Principles for Responsible Banking, the TCFD recommendations, the 2030 Agenda, the UN Sustainable Development Goals and the GFANZ requirements on transition plans. Links and references 2023 Annual report - Responsible banking chapter • About this chapter • 10. Sustainability 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 governance structure for implementing the PRB)? Please describe briefly. 14 , target setting 15 and We will continue to make headway with identifying material items, risk and opportunity. Links and references 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 ☐ Gaining or maintaining momentum in the bank ☒ Customer engagement ☐ Stakeholder engagement ☐ Getting started: where to start and what to focus on in the beginning ☒ Data availability ☒ Conducting an impact analysis ☒ Data quality ☒ Assessing negative environmental and social impacts ☐ Access to resources ☐ Choosing the right performance measurement methodology/ies ☐ Reporting ☒ Setting targets ☐ Other: … ☐ Assurance ☐ Prioritizing actions internally If desired, you can elaborate on challenges and how you are tackling these: 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. 150     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.4 Global Reporting Initiative (GRI) content index GRI 1 Statement of use GRI 1 used Grupo Santander has reported in accordance with the GRI Standards for the period between 01 January 2023 and 31 December 2023 Foundation 2021 Sectoral standard of application Financial Services (GRI G4) GRI Standards - GENERAL DISCLOSURES GRI Standard Disclosure 2-1 Organizational details Page Business model and strategy (p. 7); Note 1.a to the consolidated financial statements (p. 531). 2-2 Entities included in the 2023 consolidated directors’ report (Introduction)(p.4); organization's sustainability reporting About this chapter (p.21); Notes 3 and 53 to the consolidated financial statements; and Sections 3 and 4 of the Economic and financial review. 2023 consolidated directors’ report (Introduction)(p.4); 2-3 Reporting period, frequency and contact point About this chapter (p.21). 2-4 Restatements of information Our progress in figures (p. 70). Note 1.d to the consolidated financial statements (p. 531). 2-5 External assurance 2-6 Activities, value chain and other business relationships 2-7 Employees About this chapter (p.21); Independent verification report (p. 174). Business model and strategy (p.7); Section 4 of the Economic and financial review; Auditor´s report and annual consolidated accounts (p. 531)(Appendix I. Subsidiaries of Banco Santander, S.A.). Our progress in figures (p. 70). Note 1.d to the consolidated financial statements (p. 548). GRI 2: GENERAL DISCLOSURES 2-8 Workers who are not employees 2-9 Governance structure Main internal regulation and governance (p. 92); and composition Corporate Governance chapter of the annual report. (p. 177) (4. Board of directors). Corporate Governance chapter of the annual report (p. 177)(4.2 Board composition). 2-10 Nomination and selection of the highest governance body 2-11 Chair of the highest governance body 2-12 Role of the highest governance body in overseeing the management of impacts Corporate Governance chapter of the annual report (p. 177)(4.3 Board functioning and effectiveness). Main internal regulation and governance (p. 92); Corporate Governance chapter of the annual report (p. 177)(4.3 Board functioning and effectiveness; 4.9 Responsible banking, sustainability and culture committee). Main internal regulation and governance (p. 92); 2-13 Delegation of responsibility for managing Corporate Governance chapter of the annual report (p. impacts 177)(4.3 Board functioning and effectiveness; 4.9 Responsible banking, sustainability and culture committee). Omission Reason Explanation - - - - - - - - - - - - - - - - - - - - - - - - - - - D 1 - - - - - - - - - - 151 2023 Annual report Contents GRI Standard Disclosure 2-14 Role of the highest governance body in sustainability reporting 2-15 Conflicts of interest Page Main internal regulation and governance (p. 92); Corporate Governance chapter of the annual report (p. 177)(4.3 Board functioning and effectiveness; 4.9 Responsible banking, sustainability and culture committee). Business conduct (p.64); Corporate Governance chapter of the annual report (p. 177)(4.12 Related-party transactions and other conflicts of interest); Auditor's report and consolidated annual accounts (p. 519). 2-16 Communication of critical concerns 2-17 Collective knowledge of the highest governance body Corporate Governance chapter of the annual report (p. 177)(sections 4.4 to 4.10); Auditor's report and consolidated annual accounts (p. 519). Acting responsibly towards employees (p. 46) (3.3.2 Ensuring we have the right talent and skills); Corporate Governance chapter of the annual report (p. 177) (4.3 Board functioning and effectiveness). Corporate Governance chapter of the annual report (p. 177) (4.3 Board functioning and effectiveness). 2-18 Evaluation of the performance of the highest governance body 2-19 Remuneration policies Acting responsibly towards employees (p. GRI 2: GENERAL DISCLOSURES 2.20 Process to determine remuneration 46)(Performance review and remuneration subsection); Corporate Governance chapter of the Annual Report (p. 177)(6. Remuneration). Corporate Governance chapter of the Annual Report (p. 177)(4.7 Remuneration committee activities in 2023; 6. Remuneration). 2-21 Annual total compensation ratio 2-22 Statement on sustainable development strategy 2-23 Policy commitments Our sustainability Strategy (p. 25); 2023 Highlights (p. 26); Main internal regulation and governance (p. 92); Business conduct (p.64). Business model and strategy (p. 7); Our sustainability Strategy (p. 25) 2-24 Embedding policy commitments 2-25 Processes to remediate negative impacts 2-26 Mechanisms for seeking advice and raising concerns Main internal regulation and governance (p. 92); Business conduct (p.64); Acting responsibly towards employees (p. 46); Acting responsibly towards customers (p. 55); Acting responsibly towards suppliers (p. 69); Supporting the green transition (p. 30); Responsible investment (p. 44). Corporate Governance chapter of the annual report (p. 177) (4. Board composition); Risk management and compliance chapter (p. 451)(7. Compliance and conduct risk). Business conduct (p.64); Acting responsibly towards customers (p.55); Supporting the green transition (p. 30) (Risk management section). Risk management and compliance chapter (p. 451). Our culture (p.24); Business conduct (p.64)(Ethical channels); Risk management and compliance chapter (p. 451)(7.2 Compliance and conduct risk management). Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Omission Reason Explanation - - - - - - - - - - - - - - - - - - - - C - - - - - - - - - - - - - - - - - - 152     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management GRI Standard Disclosure 2-27 Compliance with laws and regulations GRI 2: GENERAL DISCLOSURES 2-28 Membership associations 2-29 Approach to stakeholder engagement 2-30 Collective bargaining agreements Page 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 final approval of the settlement on 17 October 2023 and entered a final approval order of the class action settlement on 15 December 2023. In September 2021, the Financial Supervisory Authority of Norway (NFSA) carried out an IT/AML inspection at Santander Consumer Bank, AS Norwegian operations. The purpose of the inspection was to assess the bank´s compliance with certain provisions in the Norwegian IT Regulation and AML legislation. In October 2022, NFSA issued its assessment establishing that SCB Nordics had deficiencies in complying with the Norwegian AML legislation and in November 2022 it imposed an administrative fine for an amount of EUR 15,000,000 which was paid in January 2023. See also GRI 206-1, 416-2, 417-2, 417-3, 418-1 and note 25 of annual consolidated accounts (p. 519) Santander participates in industry associations representing financial activity in the countries where it operates, as the AEB in the case of Spain Stakeholder engagement (p. 89); Materiality assessment (p. 28); Double materiality assessment and sources (p. 95). Acting responsibly towards employees (p. 46) (Collective bargaining); Our progress in figures (p. 70). Omission Reason - - Explanation 2 - - - - - - - - - 153 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management GRI Standards - Topic-specific disclosures See material and non-material issues in sections 1.1 'Material sustainability matters' and 9.2 'Double Materiality Assessment methodology and sources' Disclosure Location Scope Omission Reason Explanation GRI standard MATERIAL TOPICS GRI 3: MATERIAL TOPICS 3-1 Process to determine material topics 3-2 List of material topics Materiality assessment (p. 28); Double materiality Materiality assessment (p. 28); Double materiality assessment and sources (p. 95). assessment and sources (p. 95). CLIMATE CHANGE GRI 3 MATERIAL TOPICS 3-3 Management of material topics Business model and strategy (p. 7). Supporting the green transition (p. 30). Business conduct (p. 64). Main internal regulation and governance (p. 92). Stakeholder engagement (p. 89). Risk, compliance and conduct management chapter (p. 451). GRI 201: ECONOMIC PERFORMANCE GRI 302: ENERGY 201-2 Financial implications and other risks and opportunities due to climate change 302-1 Energy consumption within the organization Supporting the green transition (p. 30) (Governance, and risk management) Risk management and compliance chapter (p. 507) (10. Climate and environmental risk). Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70)(Environmental footprint). 302-2 Energy consumption outside of the organization Our progress in figures (p. 70)(Environmental footprint). 302-3 Energy intensity Our progress in figures (p. 70)(Environmental footprint). 302-4 Reduction of energy consumption Supporting the green transition (p. 30) (Our environmental footprint). 302-5 Reductions in energy requirements of products and services 305-1 Direct (Scope 1) GHG emissions GRI 305: EMISSIONS Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70) (Environmental footprint). 305-2 Energy indirect (Scope 2) GHG emissions Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70) (Environmental footprint). 305-3 Other indirect (Scope 3) GHG emissions Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70) (Environmental footprint). 305-4 GHG emissions intensity Our progress in figures (p. 70) (Environmental footprint) 305-5 Reduction of GHG emissions Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70) (Environmental footprint) 305-6 Emissions of ozone-depleting substances (ODS) 305-7 Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions - - - - - - - - - - - - - - - - Group Group Main countries of operation Main countries of operation Main countries of operation Main countries of operation - Main countries of operation Main countries of operation Main countries of operation Main countries of operation Main countries of operation - - - - - - - - - - A - - - - - A A - - - - 4 4 4 4 5 4 4 4 4 4 5 5 154   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management GRI standard FS8 FS11 Disclosure Monetary value of products and services designed to deliver a specific environmental benefit for each business line broken down by purpose Percentage of assets subject to positive and negative environmental or social screening BUSINESS CONDUCT GRI 3 MATERIAL TOPICS 3-3 Management of material topics GRI 204: PROCUREMENT PRACTICES GRI 205: ANTI- CORRUPTION GRI 206: ANTI- COMPETITIVE BEHAVIOUR 204-1 Proportion of spending on local suppliers 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 and actions taken 206-1 Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices GRI 207: TAX 207-1 Approach to tax 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 GRI 308: SUPPLIER ENVIRONMENTAL ASSESSMENT GRI 414: SUPPLIER SOCIAL ASSESSMENT 308-1 New suppliers that were screened using environmental criteria 308-2 Negative environmental impacts in the supply chain and actions taken 414-1 New suppliers that were screened using social criteria 414-2 Negative social impacts in the supply chain and actions taken Location Supporting the green transition (p. 30). Responsible investment (p. 44). Scope Group Business conduct (p. 64) (Environmental, social and climate change risk management); Responsible investment (p. 44). Group Business model and strategy (p. 7). Business conduct (p. 64). Acting responsibly towards suppliers (p. 69); Main internal regulation and governance (p. 92). Stakeholder engagement (p. 89). Risk, compliance and conduct management chapter (p. 451). Acting responsibly towards suppliers (p. 69). Risk, compliance and conduct management chapter (p. 451). Business conduct (p. 64) (Finance crime compliance). Risk, compliance and conduct management chapter (p. 451). Business conduct (p. 64) (Ethical channel). Risk, compliance and conduct management chapter (p. 451). The Bank has not received final sanctions for this concept. Additional information on litigation and other Group contingencies can be found in note 25 of Auditor’s report and annual consolidated accounts. Business conduct (p. 64) (Principles of action in tax matters). Business conduct (p. 64) (Principles of action in tax matters). Business conduct (p. 64) (Principles of action in tax matters). Our progress in figures (p. 70) (Country-by-country report); Auditor's report and 2023 annual consolidate accounts (p. 519) (Annex VI Annual banking report); Audit report and consolidated annual accounts 2022 (Annex VI Annual banking report). Acting responsibly towards suppliers (p. 69). Acting responsibly towards suppliers (p. 69). Group Group (excluded Poland) Group Group Group Group Group Group Group Group Group (excluded Poland) - Group (excluded Poland) - Omission Reason Explanation - - - - - - - - - - - - - - - - - - D 7 - - - - - - - - - - - D - D - - - - 3 2 - - - - - 6 - 6 155 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Omission Reason Explanation Scope Group - - GRI standard GRI 415: PUBLIC POLICY Disclosure 415-1 Political contributions FS9 Coverage and frequency of audits to assess implementation of environmental and social policies and risk assessment procedures CONSUMERS AND END-USERS GRI 3 MATERIAL TOPICS 3-3 Management of material topics GRI 416: CUSTOMER HEALTH AND SAFETY 416-1 Assessment of the health and safety impacts of product and service categories 416-2 Incidents of non- compliance concerning the health and safety impacts of products and services 417-1 Requirements for product and service information and labelling GRI 417: MARKETING AND LABELLING 417-3 Incidents of non- compliance concerning marketing communications 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data Percentage of the portfolio for business lines by specific region, size (e.g. micro/ SME/ large) and by sector GRI 418: CUSTOMER PRIVACY FS6 Location 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 Grupo Santander General Code of Conduct. In 2023 we made a contribution of $78,684 to the US Political Action Committee. Business conduct (p. 64)(Relations with political parties) 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 2023 ended with an overall rating of 'need improvement'. Business model and strategy (p. 7). Acting responsibly towards our customers (p. 55). Main internal regulation and governance (p. 92). Stakeholder engagement (p. 89). Economic and financial review (p. 325). Acting responsibly towards our customers (p.55). The Commercialization Committee evaluates potential impact of all products and services, previously they are launched onto the market. These impacts include, among others, clients security and compatibility with other products. The Bank has not received final sanctions for this concept. Additional information on litigation and other Group contingencies can be found in note 25 of Auditor’s report and annual consolidated accounts. Acting responsibly towards our customers (p. 55)(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. Additional information on litigation and other Group contingencies can be found in note 25 accounts. The Bank hasn't received any sanctions concerning this matter. Additional information on litigation and other Group contingencies can be found in note 25 of Auditor’s report and annual consolidated accounts.. The Bank hasn't received any sanctions concerning this matter. Additional information on litigation and other Group contingencies can be found in note 25 of Auditor’s report and annual consolidated accounts. Acting responsibly towards customers (p. 55). Stakeholder engagement (p. 89) (Helping society tackle global challenges: 2030 agenda section). Our progress in figures (p. 70). Group - Group Group Group Group Group Group Grupo Group - - - - - - - - - - - - - - - - - 417-2 Incidents of non- compliance concerning product and service information and labelling of Auditor’s report and annual consolidated - - - - 2 - 2 2 2 - 156 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management GRI standard FS15 Disclosure Policies for the fair design and sale of financial products and services Location Scope Omission Reason Explanation Acting responsibly towards customers (p. 55) (Consumer protection). Group - - - OTHER NON-MATERIAL TOPICS ON WHICH INFORMATION IS REPORTED FOR GREATER TRANSPARENCY OWN WORKFORCE GRI 202: MARKET PRESENCE 202-1 Ratios of standard Our progress in figures (p. 70). entry level wage by gender compared to local minimum wage 202-2 Proportion of senior management hired Corporate Human Resources Model aims to attract from the local community and retain the best professionals in the countries in Our progress in figures (p. 70). The Group GRI 401: EMPLOYMENT GRI 403: OCCUPATIONAL HEALTH AND SAFETY 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 403-1 Occupational health and safety management system which it operates. Acting responsibly towards employees (p. 46)(Talent. Attracting talent). Our progress in figures (p. 70). Benefits detailed in 'Acting responsibly towards employees'(p. 46) (section 'Corporate benefits') are regarding only full-time employees. Corporate Governance chapter (p. 177) Information unavailable. 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. Acting responsibly towards employees (p. 46) (Employee experience. Employee health and 403-2 Hazard identification, risk assessment, and incident wellbeing). investigation 403-3 Occupational health services Acting responsibly towards employees (p. 46) (Employee experience. Employee health and wellbeing). At Banco Santander SA, the percentage of Representation in the Security Committee is 100%. 403-4 Worker participation, consultation, and communication on occupational health and safety 403-5 Worker training on Acting responsibly towards employees (p. 46) (Employee experience. Employee health and occupational health and wellbeing). safety Acting responsibly towards employees (p. 46) 403-6 Promotion of (Employee experience. Employee health and worker health wellbeing). 100% of Banco Santander own employees are at work. 403-8 Workers covered by an occupational health covered by health and safety management systems and safety management system 403-9 Work-related injuries Acting responsibly towards employees (p. 46) (Employee experience. Employee health and wellbeing). Our progress in figures (p. 70). Our progress in figures (p. 70). 403-10 Work-related ill health Group Req. b D 1 Group Group Group - Group Group Group Banco Santander S.A. and SCF Group Group Group - - - - - - - - - - - Group Req. b Group Req. b - - - D - - - - - - - D D - - - 8 - - - - - - - 1 1 157 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management GRI standard GRI 404: TRAINING 404-1 Average hours of AND EDUCATION Disclosure 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. GRI 405: DIVERSITY 405-1 Diversity of AND EQUAL OPPORTUNITIES governance bodies and employees 405-2 Ratio of basic salary and remuneration of women to men 406-1 Incidents of discrimination and corrective actions taken GRI 406: NON- DISCRMINATION AFFECTED COMMUNITIES Location Acting responsibly towards employees (p. 46)) (Talent. Attracting talent). Our progress in figures (p. 70) 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. Acting responsibly towards employees (p. 46) (Talent. Developing talent). Acting responsibly towards employees (p. 46) (Working conditions and social dialogue. Performance review and remuneration). Santander regularly appraises employee performance; at the end of 2023, 74.2% of our employees had a performance review in which their contribution to Santander's results, their alignment with risk management and our TEAMS corporate culture were evaluated. Additionally, 14,065 retail branch employees in Mexico will have their performance review during the first quarter of 2024. In total, 80.8% of the workforce receives a MyContribution. Acting responsibly towards employees (p. 46) (Employee experience. Diversity, equity and Inclusion). Our progress in figures (p. 70). Corporate governance chapter of the Annual Report (p. 177). Acting responsibly towards employees (p. 46) (Employee experience. Diversity, equity and Inclusion). Our progress in figures (p. 70). Business conduct (p. 64). Acting responsibly towards employees (p. 46) (Employee experience. Active listening). Risk management and compliance chapter (p. 451). GRI 203: INDIRECT 203-1 Infrastructure ECONOMIC IMPACT Financial health and inclusion (p. 57). Supporting to communities (p. 61) investments and services supported 203-2 Significant indirect Financial health and inclusion (p. 57). Supporting to communities (p. 61) economic impacts The Bank ensures, through social and 411-1 Incidents of environmental risk assessments in their financing violations involving rights operations under the Equator Principles, that no of indigenous people violations of the indigenous peoples’ rights occur in such operations. In 2023, a total of 41 operations were evaluated in this respect. Financial health and inclusion (p. 57). Supporting communities (p. 61) Grupo Santander has several programmes in its 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. 413-1 Operations with local community engagement, impact assessments, and development programs GRI 411: RIGHTS OF INIDGENOUS PEOPLE GRI 413: LOCAL COMMUNITIES 413-2 Operations with significant actual and potential negative impacts on local communities Monetary value of products and services designed to deliver a specific social benefit for each business line broken down by purpose Access points in low- populated or economically disadvantaged areas by type FS7 FS13 Business conduct (p. 64) (Environmental, social and climate change risk management). Financial health and inclusion (p. 57). Financial health and inclusion (p. 57). Scope Group Group Group Group Group Group Group Group Group Group Group Group Group Omission Reason Explanation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - D 7 - - D 7 - - - - 158 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Omission Reason Explanation GRI standard FS14 FS16 Disclosure Initiatives to improve access to financial services for disadvantaged people Initiatives to enhance financial literacy by type of beneficiary Location Financial health and inclusion (p. 57). Financial health and inclusion (p. 57). Scope Group Group - - OTHER GRI (NON-MATERIAL) TOPICS ON WHICH THE BANK REPORTS ON A VOLUNTARY BASIS FOR GREATER TRANSPARENCY GRI 201: ECONOMIC PERFORMANCE GRI 301: MATERIALS 2023 57,716 57,423 0 313 -20 32,807 1,298 7,945 13,726 9,664 174 24,909 € million Economic value generated1 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 Payments to providers of capital (dividends) Operating costs (except taxes) Employee wages and benefits 2 Payments to government CSR investment Economic value retained (economic value generated less economic value distributed) 1. Gross income plus net gains on asset disposals. 2. Our progress in figures (p. 70) (8.1 Tax contribution) provides additional information on the taxes paid. 3. For comparative issues see Auditor's report and 2022 annual consolidate accounts. 201-1 Direct economic value generated and distributed 201-3 Defined benefit plan obligations and other retirement plans The liability for provisions for pensions and similar obligations at 2023 year-end amounted to EUR 2,225 million (p. 531). Endowments and contributions to the pension funds in the 2023 financial year have amounted to EUR 352 million. The detail may be consulted in Auditor´s report and annual consolidated accounts (p. 547)(Note 47.a to annual consolidated accounts). For comparative purposes see Audit report and consolidated annual accounts 2022. The Bank has not received significant subsidies or 201-4 Financial assistance received from public aids during 2022 and 2023. The detail may be consulted in Annual banking report, section e) government Public subsidies (p. 820). Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70)(Environmental footprint). 301-1 Materials used by weight or volume GRI 303: WATER AND EFFLUENTS 303-5 Water consumption 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. 70)(Environmental footprint). Group - - - - - Group Group Main countries of operation Main countries of operation - - - - - - - - - - - - 4 4 159 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Location Scope Group Supporting the green transition (p. 30) (Nature and biodiversity) Group GRI standard GRI 304: BIODIVERSITY GRI 306: WASTE Disclosure 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 306-1 Waste generation and significant waste- related impacts 306-2 Management of significant waste-related impacts 306-3 Waste generated Supporting the green transition (p. 30) Supporting the green transition (p. 30) Supporting the green transition (p. 30) (Our environmental footprint). Our progress in figures (p. 70) (Environmental footprint) 306-4 Waste diverted from disposal Our progress in figures (p. 70) (Environmental footprint) 306-5 Waste directed to disposal Our progress in figures (p. 70) (Environmental footprint) FS1 FS2 FS3 FS4 FS5 Policies with specific environmental and social components applied to business lines Procedures for assessing and screening environmental and social risks in business lines Processes for monitoring clients´ implementation of and compliance with environmental and social requirements included in agreements of transactions Process(es) for improving staff competency to implement the environmental and social policies and procedures as applied to business lines Interactions with clients/ investees/business partners regarding environmental and social risks and opportunities Main internal regulation and governance (p. 92). Supporting the green transition (p. 30) (Corporate governance). Business conduct (p. 64) (Environmental, social and climate change risk management). Main internal regulation and governance (p. 92). Supporting the green transition (p. 30) (Corporate governance). Business conduct (p. 64) (Environmental, social and climate change risk management). Main internal regulation and governance (p. 92). Supporting the green transition (p. 30). Business conduct (p. 64) (Environmental, social and climate change risk management). Acting responsibly towards employees (p. 46). (Talent). Group Our culture (p. 24). Stakeholder engagement (p. 89) (Joint initiatives to promote our agenda). Shareholder value (p. 27). Risk management and compliance chapter (p. 451). Group Group Group Main countries of operation Main countries of operation Main countries of operation Main countries of operation Main countries of operation Group Group Group Omission Reason Explanation - - - - - - - - - - - - - - A 5 - A A - - - - - - - - - - - 5 5 4 4 4 4 4 - - - - - 160 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management GRI standard FS10 FS12 Disclosure Percentage and number of companies held in the institution´s portfolio with which the reporting organization has interacted on environmental or social issues 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 Location Conduct and ethical behaviour (p. 64) (Environmental, social and climate change risk management). Scope Group Omission Reason Explanation - D 7 Grupo Santander 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. Group 0 0 0 A. Not applicable; B. Legal prohibitions; C. Confidentiality constraints; D. Information unavailable / incomplete 1. Information unavailable. 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. According to a materiality criteria, information included refers to judicial, administrative or regulatory proceedings and other claims that are concluded with unfavorable judgments, fines or sanctions greater than Euro 1 million, as well as those judicial, administrative or regulatory proceedings and other claims that are concluded with unfavorable judgments, fines or sanctions between Euro 100.000 euros and Euro 1 million euros but which have a “high” reputational impact according to our risk assessment. Only those cases where sanctions or fines have been confirmed in administrative proceedings or judicial proceedings where an unfavorable judgment has been rendered in first instance are reported. Once a matter is reported following the explained criteria, no additional updates will be reported until the sanctions, fines or judgments are final. Class actions and/or mass proceedings are not reported. Judicial, administrative, or regulatory proceedings and other claims that have already been included in note 25 of the consolidated annual accounts are not reported. 3. Information is provided on the total number of reports received through Canal Abierto related to gifts and invitations/corruption and bribery. 4. The scope and limitations of this indicator are described on Our progress in figures. 5. 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. 6. A new ESG approval methodology has been implemented which will allow us to classify all our suppliers according to their risk level by 2024, evaluating them in each case according to their criticality. 7. 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. 8. 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 2023. In the medium and long term the Group will evaluate the possibility of reporting this indicator. 161                   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.5 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 Grupo Santander, if applicable, on a consolidated basis, and not just the segments relevant to the particular industry. The information will refer to the 2023 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. 519). Topic Data Security Financial Inclusion & Capacity Building Industry Commercial Banks Consumer Finance Commercial Banks Consumer Finance Commercial Banks Commercial Banks Commercial Banks Commercial Banks Accounting Metric (1) Number of data breaches, (2) percentage involving personally identifiable information (PII), (3) number of account holders affected. Description of approach to identifying and addressing data security risks. (1) Number and (2) amount of loans outstanding qualified to programs designed to promote small business and community development. FN-CB-230a.2 FN-CF-230a.3 FN-CB-240a.1 (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 ‘Risk Pro’ in 'Our culture' section of this chapter (p. 24).; and to ‘Relevant mitigation actions’ in section 6.2 of 'Risk, compliance and conduct management chapter' (p. 451). of this chapter (p. 55). Refer to 5. ‘Acting responsibly towards customers‘ section For more detail see note 10. ‘Loans and advances to customers´ in the Auditor's report and consolidated financial statements (p. 519). Additionally, all the information related to microfinance programmes are available on the 5.3 ‘Financial health and inclusion‘ section of this report (p. 57). Refer to ‘Amounts past due‘ and ‘Impairment of financial assets‘ in 3.3 'Key metrics' section of the Risk management and compliance chapter. (p. 451). Also refer to notes 2.g and 10.d of the consolidated accounts in the Auditor's report and consolidated financial statements (p. 519). Refer to 5.3 ‘Financial health and inclusion‘ section of this chapter (p. 57). In 2023, Grupo Santander has financially included 1.8 million people. For further information refer to ‘5.3 Financial health and inclusion‘ section of this chapter (p. 57). 162 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 451). Refer to 7.3 ‘Environmental, social and climate change risk management’ on business conduct section (p. 64), and the 10. ‘ESG risk factors‘ (p. 507).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 2. ‘Supporting the green transition’ section of this chapter (p. 30). Refer to 2. ‘Supporting the green transition‘ section of this chapter (p. 30). 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. 519). Refer to 7.2 ‘Ethical Channels’ in the section 4. 'Acting responsibly towards employees' of this chapter (p. 46). 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), Grupo Santander´s scores are (end-2022 data): • Score: 190 • Complexity: 102 • Cross-jurisdictional: 483 • Interconnectedness: 147 • Size: 174 • Substitutability: 42 Refer to ‘Capital planning and stress tests’ in the section 3.5 'Capital management and adequacy' (p. 362) of the Economic and Financial chapter. 163 Global Systemically Important Bank (G-SIB) score, by category FN-CB-550a.1. FN-IB-550a.1. According to the ‘2023 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 2023). 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Topic Employee Diversity & Inclusion Industry Commercial Banks, Investment Banking & Brokerage Activity metrics Commercial Banks Commercial Banks Code FN-AC-330a.1 FN- IB-330a.1 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 FN-CB-000.A checking and savings accounts by segment: (a) personal and (b) small business. (1) Number and (2) value of FN-CB-000.B loans by segment: (a) personal, (b) small business, and (c) corporate. Response Refer to 8. 'Our progress in figures' section of this chapter (p. 70). For further information, refer to ‘Diversity & Inclusion’ section of 4. ‘Acting responsibly towards employees’ this chapter (p. 46). 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. 519). Refer to ‘Consolidated annual accounts‘ in Auditor's report and consolidated financial statements (p. 519). 164 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.6 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. 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 'Business model and strategy' (p. 7) chapter reflects how we help people and businesses prosper whilst adopting ESG practices. Additionally, in 'Our sustainability strategy' (p. 25) 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. 177). Refer to 'Santander's support for society' (p. 20), '2023 Highlights' (p. 20) and 'Our sustainability strategy' (p. 25) sections in 'Responsible banking' chapter. 1. Refer to ´Performance review and remuneration´ in 'Acting responsibly towards employees' section (p. 46) in 'Responsible banking' chapter. 2. Refer to ´Remuneration´ section (p. 252) in 'Corporate governance' chapter. 1. Refer to Financial Crime Compliance on 7.2 'Compliance and conduct risk management' section (p. 497) in 'Risk, compliance and conduct management' 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. 639) of the consolidated accounts. 3. Refer to Financial Crime Compliance on 7.2 'Compliance and conduct risk management' section (p. 497) in 'Risk, compliance and conduct management' chapter. Refer to pages 13-14 in our Code of Conduct (available in our corporate website). In addition see 7.2 'Compliance and conduct risk management´ (p. 497) in 'Risk and compliance management' section on 'Risk, compliance and conduct management' chapter. And ´Ethical channels´ on ´Business conduct´ section (p. 64) in 'Responsible banking' chapter. 165 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Theme Risk and Opportunity Oversight Stakeholder Engagement Planet Climate Change Metric 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 ‘Litigation and other matters‘ in the note 25.e (p. 639) of the consolidated accounts. Refer to ´Principles of action in our relationship with political parties´ in 'Business conduct' section in 'Responsible banking' chapter (p. 64) The Financing of political parties policy is available on our corporate website. Refer to 'Risk and opportunities' section in 'Risk, compliance and conduct management' chapter (p. 451). In addition, we report our progress in implementing TCFD recommendations (including Risk management) in 'Responsible banking' chapter (p. 30). Our Environmental, social and climate change risk policy is available at our corporate website. Refer to 'Materiality assessment' (p. 28) and 'Double materiality assessment and sources' (p. 95) section in 'Responsible banking' chapter. Refer also to 'Our sustainability strategy' (p. 25). Refer to Environmental footprint 2022-2023 table in 'Our progress in figures' section in 'Responsible banking' chapter (p. 70). • Total emissions (market based): 172,711 T CO2e • Scope 1: 25,755 T CO2eT2e • Scope 2 – market based: 21,516 T CO2e • Scope 2 – location based: 205,292 T CO2e • Scope 3: 125,441 T CO2e Refer to 'Supporting the green transition' (p. 30) and 'TCFD content index' (p. 170) sections in 'Responsible banking' chapter, were we report our progress in implementing TCFD recommendations. In 2020, we became carbon neutral in 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. 507) in 'Risk management and compliance' chapter. Refer to 'Supporting the green transition' section (p. 30) 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. 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 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). Refer to Environmental footprint 2022-2023 table in 'Our progress in figures' section (p. 70) in 'Responsible banking' chapter. In 2022, Santander consumed 1,858,645 m3 from the public network, equalling a consumption of 9.56 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 Nature and biodiversity on 'Supporting the green transition' section (p. 70) of the 'Responsible banking' chapter. 166 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Theme Single-use plastics Prosperity Employment and wealth generation Metric 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. Community and social vitality Additional tax remitted Total tax paid by country for significant locations 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. Response Refer to Our environmental footprint on 'Supporting the green transition' section (p. 30) 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. 70) in 'Responsible banking' chapter. 1. See: • Table 22.1. Distribution of new hires by age bracket • Table 23. Distribution of new hires by gender 2. See: • Table 25. External turnover rate by gender • Table 26. 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. 151). • Economic value generated in 2023: EUR 57,716 million • Economic value distributed: EUR 31,476 million • Economic value retained EUR 26,240 million 1.a Revenue: EUR 57,423 million 1.b Operating cost: EUR 25,425 million 1.c Employee wages and benefits: EUR 13,726 million 1.d Payments to providers of capital: N/A 1.e Payments to government: EUR 9,664 million (total taxes) 1.f Community investment: EUR 174 million Further detail for 1a-c refer to Group financial performance section on Economic and financial review chapter (p. 334). Further detail for 1d refer to 3.3 Dividends in Shareholders section on Corporate governance chapter (p. 195). Further detail for 1e refer to 'Total taxes paid' table on 8. 'Our progress in figures' in 'Responsible banking' chapter (p. 70). 2. Grupo Santander did not receive significant public subsidies in 2023. Refer to 'Annual banking report', e) (p. 820). 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. 325) in 'Economic and financial review' chapter. - Note 47. Other general administrative expenses (p. 696) of consolidated annual accounts. 2. Refer to 3. 'Shareholders. Engagement and general meeting' section (p. 177) in 'Corporate governance' chapter. Refer to 'Total taxes paid' table on 'Our progress in figures' section in 'Responsible banking' chapter (p. 70). Refer to 'Total taxes paid' table on 'Our progress in figures' section in 'Responsible banking' chapter (p. 70). Refer to 'Total taxes paid' table on 'Our progress in figures' section in 'Responsible banking' chapter (p. 70). 167 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Theme Innovation in better products and services Metric 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 Innovation and technological development are strategic pillars of Grupo Santander. As in previous years, the European Commission's 2023 EU Industrial R&D Investment Scoreboard (based on 2022 data) recognized our technological effort. We were the first Spanish bank 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 2,197 million. Refer to 'Research, development and innovation (R&D&I)' section in 'Economic and financial review' (p. 427). Additional information refer to note 18 in 'Audit's report and consolidated financial statements' (p. 619) Refer to 'Our progress in figures' section (p. 70) of the Responsible Banking chapter. Additional information on how we promote DEI refer to ´Diversity, equity and inclusion´ in 'Acting responsibly towards employees' section (p. 46) 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 (0%). Refer to ´Equal pay´ in 'Acting responsibly towards employees' section (p. 46) on 'Responsible banking' chapter. 1. Refer to 'Our progress in figures' section (p. 70) in 'Responsible banking' chapter. Table 29 ´Ratio between the Bank’s minimum annual salary and the legal minimum annual salary by country and gender 2023´. We take as a reference the Bank’s minimum annual salary in each country. 2. Refer to 6. 'Remuneration section' (p. 252) on 'Corporate governance' chapter. Refer to ´Protecting human rights´ in 'Environmental, social and climate change risk management' on 'Business conduct' section (p. 64) 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. 639). 168 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 70) in 'Responsible banking' chapter. - Table 21. Coverage of the workforce by collective agreement 1. Refer to 'Our progress in figures' section (p. 70) on the 'Responsible banking' chapter. • Table 34. Accident rate • Table 35. Occupational health and safety 2. Refer to 'Our wellbeing' in 'Acting responsibly towards employees' section on 'Responsible banking' chapter (p. 46). Refer to 'Our progress in figures' section (p. 70) in 'Responsible banking' chapter. • Table 30. Training • Table 31. Hours of training by category • Table 32. Hours of training by gender • 28.7 hours per employee • EUR 284.4 of investment per employee. 169 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.7 Task Force on Climate related Financial Disclosure (TCFD) content index Reference in Climate Finance Report 2022 - June 2023 3. Governance; 5. Metrics and targets - Action plan - Power generation sector alignment 3. Governance; 6. Financing Governance a TCFD Recommendations Describe the board’s oversight of climate- related risks and opportunities. Reference in this Annual Report 2.2 Governance; 9.2 Main regulations and governance Strategy Risk Management Metrics and Targets b a b c a b c a b c Describe management’s role in assessing and 2.2 Governance; 9.2 Main regulations managing climate-related risks and opportunities. and governance; 2.3 Risk Management; the green transition - ESG governance in Santander 2.5 Supporting our customers in the Asset Management green transition 2.1 Our strategy and ambition 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 2.4 Metrics and targets 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) Green Transition - Environmental emissions, and the related risks. 2.3 Risk management Footprint 2023-2023 2.7 Our environmental footprint; 8.6. Describe the targets used by the organization 2.4 Metrics and targets to manage climate-related risks and opportunities and performance against targets. 2. Strategy - Climate risks and opportunities; Resilience of Santander’s strategy. Scenario analysis 4. Risk management - I. Identification; II. Planning; III. Assessment; IV. Monitoring; V. Mitigation; VI. Reporting 5. Metrics and targets - Aligning our portfolio to the Paris agreement 5. Metrics and targets - Decarbonization targets - Financed emissions; Our environmental footprint 5. Metrics and targets - Decarbonization targets 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 170   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.8 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 2023 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 7.b Expand infrastructure and improve technology to provide modern and sustainable energy services • Supporting communities (p.61) (Other community support programmes section). • Acting responsibly towards customers (p. 36) (Consumer protection section) • Financial health and inclusion (p. 57) • Financial health and inclusion (p. 57) • Supporting communities (p. 61) (Support for higher education, employability and entrepreneurship section). • Supporting communities (p. 61) (Support for higher education, employability and entrepreneurship section). • Supporting communities (p. 61) (sections: Support for higher education, employability and entrepreneurship, Other community support programmes). • Supporting communities (p. 61) (sections: Support for higher education, employability and entrepreneurship, Other community support programmes). • Financial health and inclusion (p. 57) • Acting responsibly towards employees (p. 46) (Employee experience section). • Acting responsibly towards employees (p. 46) (Employee experience section). • Supporting the green transition (p. 30) (Supporting our customers in the green transition section). • Supporting the green transition (p. 30) (Supporting our customers in the green transition section). 171   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Summary of SDG target Reference in the 2023 Annual report SDG 8 8.3 Promote development-orientated policies that s production, job creation, entrepreneurship, creativit innovation, and promote the start-up and growth of and medium-sized enterprises through access to fin and other means. 8.4 Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation [...] upport y and micro, small ancial services 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 health and inclusion (p. 57) • Supporting communities (p. 61) (Support for higher education, employability and entrepreneurship section). • Supporting the green transition (p. 30) (Our environmental footprint section). • Acting responsibly towards employees (p. 46) (Diversity, equity and inclusion (DE&I) section) • Supporting communities (p. 61) (Support for higher education, employability and entrepreneurship section). • Supporting communities (p. 61) (Support for higher education, employability and entrepreneurship section). • Business conduct (p. 64) (Ethical channels section) • Acting responsibly towards employees (p. 46) • Financial health and inclusion (p. 57) • Financial health and inclusion (p. 57) • Supporting communities (p. 61) (Other community support programmes section) • Financial health and inclusion (p. 57) • Business conduct (p. 64) (Environmental, social and climate change • Supporting communities (p. 61) (Other community support risk management section) programmes section). • Supporting the green transition (p. 30) (Our environmental footprint section) • Supporting the green transition (p. 30) (Our environmental footprint section) • Supporting the green transition (p. 30) (Our environmental footprint section) • See Responsible Banking chapter (p. 19) • Supporting the green transition (p. 30) • Business conduct (p. 64) • About this chapter (p. 21) • Stakeholder engagement (p. 89) • Stakeholder engagement (p. 89) • Stakeholder engagement (p. 89) (Partnerships to promote our agenda section) 172 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.9 GFANZ transition planning Reference in this report 2.1 Our strategy and ambition 2. Strategy: Our Ambition, Our Reference in Climate Finance Report 2022 - June 2023 Foundations GFANZ recommendations Objectives and priorities Implementation strategy Products and services Activities and decision-making Policies and conditions Engagement strategy Engagement with clients and portfolio companies Engagement with industry 2.5 Supporting our customers in the green transition 2.2 Governance; 9.2 Main regulations and governance 7. Business conduct; 9.1 Stakeholder engagement 2.5 Supporting our customers in the green transition; 7.3 Environmental, social and climate change risk management 9.1 Stakeholder engagement Engagement with government and public sector 9.1 Stakeholder engagement Metrics and Targets Governance Metrics and targets 2.4 Metrics and targets Roles, responsibilities, and remuneration 2.2 Governance; 9.2 Main regulations and governance Skills and culture 4. Acting responsibly towards employees - A talented and motivated team strategy, Our objectives and priorities, Our approach 6. Financing the green transition 3. Governance: Climate change and green transition oversight, Main areas involved in the implementation of the climate change strategy 3. Governance:Policies and guidance; 4. Risk management: Monitoring 4. Risk management: Santander and the Brazilian Amazon; 5. Metrics and targets: Action plan 7. Partnerships: Sector working groups 7. Partnerships: Engagement with regulators, industry bodies and other stakeholders 5. Metrics and targets 3. Governance: Climate change and green transition oversight; 6. Financing the green transition: ESG governance in Santander Asset Management 3. Governance: ESG culture and skills development 173   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 11. Independent verification report GRI 2-5 174 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 175 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 176 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Corporate governance 177 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Clear and robust corporate governance to ensure a long-term sustainable business model Broad and balanced shareholder base Aligned with high corporate governance standards Balanced and diverse board of directors Banco Santander has the highest score in the Spanish Association for Standardisation and Certification's (AENOR) Good Corporate Governance Index (GCGI V2.0), which verifies aspects such as composition and functioning of the board and its committees, shareholders' general meeting, remuneration policy, compliance and transparency. 15 directors 66.67% independent directors 40% women 5 geographies of origin 178 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. 2023 Overview 180 5. Senior management team Statement from Glenn Hutchins, Lead Independent Director 1.1 Board skills and diversity 1.2 Board effectiveness 1.3 Remuneration policy 1.4 Engagement with our shareholders 1.5 Achievement of our 2023 goals 1.6 Priorities for 2024 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 and general meeting 3.1 Shareholder communication and engagement 3.2 Shareholder rights 3.3 Dividends and shareholder remuneration 3.4 2023 AGM 3.5 Our next AGM in 2024 4. Board of directors 4.1 Our directors 4.2 Board composition 4.3 Board functioning and effectiveness 4.4 Executive committee activities in 2023 4.5 Audit committee activities in 2023 4.6 Nomination committee activities in 2023 4.7 Remuneration committee activities in 2023 4.8 Risk supervision, regulation and compliance committee activities in 2023 4.9 Responsible banking, sustainability and culture committee activities in 2023 4.10 Innovation and technology committee activities in 2023 4.11 International advisory board 4.12 Related-party transactions and other conflicts of interest 180 181 181 182 183 183 185 186 186 186 187 188 188 191 192 192 194 195 196 198 199 200 208 214 221 223 229 233 237 241 245 247 248 6. Remuneration 6.1 Principles of the remuneration policy 6.2  Remuneration of directors for supervisory and  collective decision-making duties: policy applied in 2023 6.3 Remuneration of directors for  executive  duties 6.4 Directors' remuneration policy for 2024, 2025 and 2026 6.5 Preparatory work and decision-making for the remuneration policy; remuneration committee involvement 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 250 252 252 252 255 267 275 276 277 278 278 278 8. Internal control over financial reporting (ICFR) 280 8.1 Control environment 8.2 Risk assessment in financial reporting 8.3 Control activities 8.4 Information and communication 8.5 Monitoring of system functioning 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 References on compliance with recommendations on Spanish Corporate Governance Code 9.4 Reconciliation to the CNMV’s remuneration report model 9.5 Statistical information on remuneration required by the CNMV 280 281 282 283 284 284 287 287 290 312 314 315 179       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. 2023 Overview "It is our goal as members of the board of directors of Banco Santander to increase shareholder value by delivering the sustainable results outlined at our Investor Day in February 2023. We believe that effective governance and rigorous oversight are key enablers to accomplishing these plans for success. As a result, the board paid close attention in 2023 to our operating model and succession planning process in addition to our other important governance tasks. One key strategic initiative in 2023 was to consolidate all activities across our footprint under five global businesses. In 2024 onwards, we will closely monitor the execution of this strategy to ensure that it accomplishes the intended customer benefits, operating efficiencies and clarity in external reporting. In 2023, we further supported the Group's strategic goals with a disciplined succession process, implementing key appointments to the board and senior management. First, the board oversaw the transition of the Chief Executive Officer, who reports directly to the board. In particular, we focused on monitoring the split of responsibilities between the Executive Chair and the Chief Executive Officer. Secondly, we managed the handover of the Lead Independent Director responsibilities from Bruce Carnegie-Brown to me as of October 2023. Bruce will stay on the board until the AGM and also continue to chair the nomination committee until then. All of us at Santander are deeply grateful to him for his many years of effective service. Further, under Bruce’s leadership during the year, we conducted a rigorous nomination process for new directors to replace him and Ramiro Mato, who will also be stepping down from the board. As a result, we nominated Carlos Barrabés and Antonio Weiss, who will both join the board shortly. I am delighted to welcome them and I am sure that we will greatly benefit from their broad experience and contributions. The board believes that effective governance is key to the successful development and execution of the Group’s strategy. To this end, we will continue to deepen diversity on our board, recognizing the benefits of a mix of gender, background, origin, skills, knowledge, experience and familiarity with our key markets to support our strategy. In particular, we commissioned an external evaluation of the board and its committees in order to continue to improve our overall effectiveness. We were pleased by the results which concluded that the board continues to operate effectively, while also identifying some areas for improvement. See more details in 'Board effectiveness review in 2023', in section 4.3. Importantly, the board also strongly believes in the value of engaging directly with our stakeholders. As part of that, Bruce Carnegie-Brown and I conducted an extensive engagement with shareholders in 2023/2024 ahead of the AGM (see more details in section 3.1 'Shareholder communication and engagement’). We deeply appreciate the time and effort expended by many of our shareholders to share their questions and recommendations with us. Looking back to 2023, I would like to thank Ramiro Mato, for his constructive challenges and contributions, and Bruce Carnegie-Brown for his exceptional professionalism and commitment to the Group. I also would like to compliment José Antonio Álvarez, now our non-executive board colleague and Vice Chair, for his many years of executive service to the Group. Their work will redound to the benefit of all of our stakeholders for years to come. Looking ahead, we are committed to increasing shareholder value in a manner consistent with the highest industry standards for serving our customers, employees and communities, while fulfilling our supervisory expectations and governance obligations. We are also mindful that the volatile geopolitical, economic and market conditions of 2023 could extend into the coming year. Working closely with our executive team, our board is confident that we will continue to create long-term, sustainable value for all stakeholders in 2024 and beyond." Glenn Hutchins, Vice Chair and Lead Independent Director 180 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1.1 Board skills and diversity Appointments in 2023 Throughout 2023, we continued to renew and strengthen the board, reflecting our strong commitment to ensuring a balance of expertise and skills and diversity. The changes have reinforced the board's banking, financial, technological and digital expertise, 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. Two thirds of board members are independent directors and 40% are women, in line with our balanced representation target of 40-60% of both genders, and also with the diversity objectives set out in European and Spanish regulations (Directive (EU) 2022/2381, of 23 November 2022, on improving the gender balance among directors of listed companies and related measures, and Draft Organic Law on Equal Representation and Balanced Presence of Women and Men, which will implement the above mentioned directive). The board changes in 2023 and the proposed changes to the annual general meeting called for 21 or 22 March 2024 at first or second call, respectively (2024 AGM), are as follows: • Héctor Grisi is the Group CEO with effect from 1 January 2023. He succeeded José Antonio Álvarez, who remains on the board of directors as non-executive Vice Chair. • Glenn Hutchins was appointed as Vice Chair and Lead Independent Director with effect from 1 October 2023, after a rigorous process lead by the nomination committee, replacing Bruce Carnegie-Brown in the role. Bruce Carnegie-Brown remains on the board of directors as non-executive director and has communicated to the board his intention to not stand for re-election at the 2024 AGM, stepping down with effect as from that same date. • The board of directors agreed on 19 February 2024 to submit the nominations of both Carlos Barrabés and Antonio Weiss as new independent directors to the 2024 AGM (subject to regulatory approval), to fill the vacancies to be left by Bruce Carnegie-Brown and Ramiro Mato, who has also communicated his intention to not stand for re-election and step down as director on the later of the date on which the general meeting takes place and the date on which the regulatory approval for the appointment of Antonio Weiss is obtained. See section 3.5 'Our next AGM in 2024'. Carlos Barrabés is considered an influential e-commerce pioneer. He brings vast experience of the Spanish market, especially in digitalization and innovation, with a focus on using technology for socio-economic development, promoting talent, and helping people and institutions get the most out of the digital transformation. In turn, Antonio Weiss brings solid experience of the US market, which is one of the Group's strategic markets, and, in particular, in the financial sector, where he held different executive positions, and in the regulatory and public policy area. Changes to the 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 and Bruce Carnegie-Brown stepped down on 1 October 2023. • Audit committee: its composition remained unchanged in 2023. In April 2024, after expiry of Pamela Walkden's four- year term of office, Germán de la Fuente will replace her as Chair of this committee. Pamela Walkden will remain as a member. • Nomination committee: Belén Romana joined the committee on 1 January 2024. • Remuneration committee: Glenn Hutchins was appointed Chair on 1 October 2023, replacing Bruce Carnegie-Brown. • Risk supervision, regulation and compliance committee: Germán de la Fuente became a member on 1 January 2023. • Responsible banking, sustainability and culture committee: Gina Díez Barroso was appointed to the committee on 31 January 2023. • Innovation and technology committee: Héctor Grisi joined with effect from 1 January 2023 and Bruce Carnegie-Brown stepped down with effect from 1 October 2023. 1.2 Board effectiveness Board effectiveness review and actions to continuously improve 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 practices need to adapt to business and strategic needs, so we continuously monitor them and look for opportunities for improvement. The annual board effectiveness review is key in our governance model and allows us to verify the quality and effectiveness of our governance bodies functioning. We periodically enlist the help of external independent advisors for the annual board effectiveness review, who enrich the outcomes with objective contributions. We also review individual and collective skills to ensure the board’s competence and diversity are sufficient for it to function effectively and hold management to account through constructive challenge. In 2023, the nomination committee monitored execution of the action plan resulting from the 2022 internal board effectiveness review, which was successfully completed. In addition, the board conducted its annual effectiveness review in 2023 with the collaboration of an external independent firm (Spencer Stuart), covering its structure, organizational and functional model, dynamics and internal culture, depth of challenge, embeddedness of previous review outcomes, committee performance, as well as each director’s performance and contribution. Both the areas for improvement and the recommendations were reviewed by the nomination committee and the board of directors in January 2024 and the resulting 181   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management action plan was approved in February 2024. See 'Board effectiveness review in 2023' in section 4.3 for additional information. Group and subsidiary board relations The ongoing strength of the ties between the Group's and its subsidiaries' boards of directors is key to effective oversight of policies, controls and corporate culture. The volatile environment of the previous years reinforces the need for effective cross-border cooperation, which our proven Group Subsidiary Governance Model (GSGM) facilitates. Our strength of governance is maintained by a number of coordination mechanisms that are in place between the Group and subsidiaries. In particular, the presence of a number of Group directors and top managers on our subsidiary boards, further reinforces the Group's oversight and control mechanisms and supplements the local boards with required skillsets. See section 7. 'Group structure and internal governance'. In addition, we promote additional collaboration mechanisms to further strengthen the Group and subsidiary connectivity as follows: Inaugural Subsidiary Chairs Meeting In October 2023, the Executive Chair hosted for the first time a meeting with the Chairs of the board of directors of the main subsidiaries, accompanied by specific non-executive directors (mainly local Chairs of the nomination committees and Lead Independent Directors) in Boadilla del Monte, Madrid. The arranged sessions were both informative and helpful in the context of their important role in driving our One Santander approach and associated strategy. They reflected on how their full support and alignment with Group expectations was key, helping to cement their sense of belonging to Santander and the importance of our global strategy and associated initiatives. As part of that, the meeting covered strategic business considerations, ESG insights, cybersecurity, talent management and governance expectations, among others. The event was highly successful and promoted a sense of community among our subsidiaries. Further engagement opportunities will be explored in 2024. Group and subsidiary committee relations Banco Santander audit; responsible banking, sustainability and culture; and risk supervision, regulation and compliance committee Chairs attended specific subsidiary committee meetings during 2023. In turn, they invited their local counterparts to join the respective Group meetings throughout the year. This helped to enhance communication and the sharing of topics of common interest and best practices. In 2023, we also held a convention with the Chairs of the risk supervision, regulation and compliance committees 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 productive, with universal positive feedback received from participants. In addition, the Chair of the audit committee hosted two virtual meetings with the subsidiary audit committee Chairs, which again provided a platform for sharing key messages across subsidiaries as well as facilitating ongoing connectivity. Further meetings of Chairs of these and other committees are planned in 2024 and beyond. Induction & Training We have continued to share our training, induction and development methodology and associated content with subsidiaries in order to promote best practices and drive consistency of approach on a group-wide basis. Specifically, in 2023 we scheduled training sessions with local directors covering cyber, ESG, financial crime, finance and targets disclosed at our Investor Day of 2023 in London, and talent management related matters, amongst others. See 'Director training and induction programmes' in section 4.3. Group board visits Every year at least one board session is held in one of the Group's key geographies. As part of these visits, directors meet top management in the unit in order to better understand the local financial sector. In 2023, the board of directors met in Lisbon, Portugal, with a specific focus on our business and strategy 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 and engagement with the corporate teams. Throughout 2023, the boards of Santander Bank Polska, Santander UK and Santander Mexico held specific meetings in our headquarters. The above mentioned practices will continue in 2024 and beyond. 1.3 Remuneration policy In 2023, we updated the remuneration policy for the Group’s executive directors and key executives to make it consistent with the new strategic plan disclosed at our Investor Day on 28 February 2023. The 2023 compensation principles and composition will remain into 2024, 2025 and 2026, with just a few changes to simplify the bonus scheme: • The number of steps for setting the yearly variable remuneration is reduced by converting the relative performance multiplier against the market into one of the elements of the qualitative assessment, instead of being an 182 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management In 2023 we continued to combine traditional and virtual communication channels, which has allowed us to meet the needs of our approximately 3.7 million shareholders, encouraging their involvement in our corporate governance. See 'Engagement with shareholders in 2023' in section 3.1. At the 2023 AGM, we once again gave our shareholders, spread around the world, the option to attend in person or remotely. This flexibility enables them to participate in the meeting without needing to travel. A key shareholder engagement activity in 2023 was our Investor Day, held on 28 February, where the Group’s Executive Chair, the CEO and the Group Chief Financial Officer (CFO) presented our strategy and business and financial targets for the next three years to analysts and investors. The new organizational structure that we presented to shareholders in September 2023 is a major step in our vision of becoming the best open financial services platform and will help us achieve the targets we announced at Investor Day. This structure brings together all our operations in these five global businesses: Retail & Commercial Banking; Digital Consumer Bank; Payments; Corporate & Investment Banking; and Wealth Management & Insurance. intermediate step between the result of quantitative metrics and the qualitative assessment. • However, to ensure that the multiplier is sufficiently relevant, its weight will be +/-10%, higher than the rest of the elements in the qualitative assessment, which will have a weight of +/-5%, after reducing the Network Collaboration item from +/-10% to +/-5% and merging Compliance and Risk into one. As regards long-term remuneration, metrics related to return on tangible equity (RoTE) and total shareholder return (TSR) will be upheld. However, as for sustainability, updated targets are set in diversity (women in senior executive positions), financial inclusion and green finance. A new metric relating to the percentage of socially responsible investments over the total assets under management is included. The maximum award ratio is upheld at 125%, so that executives are incentivized to outperform. The variable remuneration of executive directors in 2024 shall be 50% in cash and 50% in Banco Santander shares. The variable remuneration of the rest of the Identified Staff in 2024 shall also be 50% in cash and 50% in Banco Santander shares. 1.4 Engagement with our shareholders We are firmly committed to reporting information of the highest quality to align Santander’s interests with those of its shareholders, through sustainable growth and long-term value creation, and to retain shareholders’ confidence. 1.5 Achievement of our 2023 goals The 2022 annual report disclosed our corporate governance goals and priorities for 2023. The following chart describes how we delivered on each priority. 2023 goals How we delivered Ensure a smooth transition of the new Chief Executive Officer and new Group Chief Risk Officer (CRO) To oversee the orderly transition into the CEO and CRO roles, providing ongoing support and constructive challenge to both Héctor Grisi and Mahesh Aditya. The board oversaw the smooth transition of the new CEO and CRO and ensured that their onboarding was robust, enabling them to be truly effective in their roles. Their transition was further facilitated by the fact that both were already familiar with the Group, in line with the board’s focus on continuing to develop the quality of our internal pipeline of talent. Specifically, the board supported Héctor Grisi during his transition as new CEO, and in particular, José Antonio Álvarez, who remains as a non-executive director, providing an ongoing transitional reference throughout 2023. In addition, the non-executive directors met with Héctor Grisi in a private session to retrieve his early views and comments after three months in the role. In turn, Mahesh Aditya transitioned into the CRO role assisted by a structured transition with the former CRO and, in addition to his direct and unfettered access to the board and its committees, has maintained regular informal meetings with the Chair of the risk supervision, regulation and compliance committee. Both executives have visited a significant number of units across our footprint to engage directly with the local management team to gain a deeper understanding and knowledge of the idiosyncrasies of our key businesses. They also successfully completed their induction programmes to the board’s satisfaction. 183 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 goals How we delivered Progressing in our ESG commitments To oversee the fulfilment of our ESG commitments to reach net zero emissions by 2050, accelerating 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. We continued to progress on our ESG targets. In particular: • We expanded our capabilities to measure carbon emissions and approved new decarbonization targets for specific sectors. • We raised EUR 20.1 billion of green finance in 2023 (EUR 114.6 billion since 2019), towards our target of EUR 120 billion by 2025. • We increased our financial inclusion target, and the goal is now to financially include 5 million people by 2023-2025. In 2023, we have financially empowered 1.8 million people. • We invested EUR 105 million to support education, employability and entrepreneurship through Santander Universidades, helping 498 thousand people (2.7 million since 2019). Governance effectiveness To continue enhancing the overall effectiveness of the board with an appropriate composition and ensuring that its role is discharged in the most tangible and effective manner. To consolidate the enhancements delivered as part of our action plan executed in 2022, following the review of our governance arrangements. • 31.4% of our senior managers are women (35% target by 2025). We continued to prioritize diversity and inclusion awareness and equal opportunity regardless of gender, culture, sexual orientation or disability. See the 'Responsible banking' chapter for additional details. In 2023, we successfully managed succession planning throughout Santander, most notably conducting a rigorous and effective process that led to the appointment of Glenn Hutchins as new Lead Independent Director with effect from 1 October 2023. Glenn Hutchins replaced Bruce Carnegie-Brown, who had been in the role for almost nine years. We continued to work on an appropriately refreshed board of directors ensuring diversity in its broadest sense. As part of that, we will shortly welcome Carlos Barrabés and Antonio Weiss, whose appointments have been submitted to the 2024 AGM (subject to regulatory approval), further reinforcing the board's composition to ensure that we are well placed to address the challenges ahead in our business and taking into account feedback from previous board effectiveness reviews. In 2023, the nomination committee monitored execution of the action plan resulting from the 2022 internal board effectiveness review, which was successfully completed. In addition, the board conducted its annual effectiveness review in 2023 with the collaboration of Spencer Stuart as independent expert. The findings of the review concluded that the board and its committees operate effectively. See 'Board effectiveness review in 2023' in section 4.3. As part of that, the split of responsibilities between the Executive Chair and the CEO, together with the executive chair model, were positively rated by Spencer Stuart in 2023. The board verified that the arrangements to manage the Group with five global businesses were aligned with governance principles and management of the Group, whilst respecting the current governance structure of subsidiaries that are autonomous in capital and liquidity and aligned with accelerating transformation across the Group, with CEOs / Country Heads as ultimately responsible for the budget, execution of the customer and commercial strategy and financial delivery. 184 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 goals How we delivered Balance sheet strength and long-term shareholder value To maintain the solvency of the balance sheet and in particular, the quality of the credit risk portfolio as a key priority due to the current economic environment. To maintain our focus on capital management and capital allocation to businesses with high returns on risk-weighted assets (RoRWA). To promote the generation of long-term and sustainable shareholder value creation through consistent and reliable returns growth while continuing to build capital strength organically to ensure strong shareholder remuneration and the resources required to deliver our strategic transformation. Even if the global economy in 2023 did better than expected, the board maintained a conservative risk appetite during the year given the increasing geopolitical risk and its potential macroeconomic implications, higher interest rates, and continued inflation, although the latter moderated its increase. During 2023, we continued maintaining a very active discipline of capital allocation and we have conducted a qualitative improvement in our asset mobilization capabilities. In 2023 we delivered a strong performance in the first year of our new phase of shareholder value creation that we outlined at the 2023 Investor Day. As part of that, the board continued to drive our potential through leveraging our unique business model based on the customer (building a digital bank with branches), scale (global and in-market scale) and diversification (business, geography and balance sheet). Specifically, we delivered on all our 2024 public targets disclosed to the market as follows: • Revenue and customer growth: revenue increased 13% in constant euros (11% in current euros) up to EUR 57,647 million and with customer numbers climbed five million to 165 million (vs.160 million customers in 2022). • Strength: CET1 above 12%, closing the year at 12.3% (vs. 12.0% in 2022), where we have maintained a disciplined capital allocation methodology and prudent risk management. • Profitability: RoTE above 15%, closing the year with a 15.1% RoTE (vs. 13.4% in 2022). • Cost discipline: the efficiency ratio improved in 2023 to 44.1% (vs. 45.8% in 2022), despite the impact of inflation on costs. • Conservative risk appetite: the Group cost of risk remained in line with the target below 1.2% at 1.18% at the end of 2023 (vs. 0.99% in 2022). • Shareholder remuneration: in 2023 the payout remained at 50% and TNAV raised up to EUR 4.76 per share (vs. EUR 4.26 per share in 2022). The paid cash dividend in 2023 amounted to 14.05 euro cents per share, which entailed a combined increase of TNAV and dividends of 15%. 1.6 Priorities for 2024 The board set the following priorities for 2024: • Transformation We will oversee the execution of agreed plans to build a digital bank with branches with a single platform, optimizing the product portfolio and enhancing the customer experience, simplifying processes and implementing the new operating model. • Five global businesses We will oversee the consolidation of our activities across all markets under five global businesses and the change of reporting of financial results aligned to this model, with the support of the audit committee. • People We will continue to enhance our employee value proposition, ensuring that they are aligned with our corporate culture and that we are focused on attracting and retaining the best talent to fulfil our strategy. As part of that, succession planning will remain high on our agenda. • Progressing in our ESG targets We will oversee the fulfilment of our ESG targets to ensure that we remain on track to reach net zero emissions by 2050, accelerating finance to help our customers in their transition to a low carbon economy. In addition, we will continue taking care of the sustainability and responsible banking agenda, including our objectives on financial inclusion and customer welfare. • Long-term shareholder value The board will promote the generation of long-term and sustainable shareholder value creation through consistent returns growth while maintaining our capital management discipline. This will ensure strong shareholder remuneration and the resources required to deliver our strategic transformation. • Governance effectiveness We will remain focused on the overall effectiveness and composition of the board and its committees, ensuring that their role is discharged in the most tangible and effective manner. 185 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2. Ownership structure → Broad and balanced shareholder base → A single class of shares → Authorized capital consistent with best practice to provide the necessary flexibility 2.1 Share capital Our share capital comprises ordinary shares, each with a par value of EUR 0.50. Every share belongs to the same class and carries the same voting, dividend and other rights. We do not have any bonds or securities that can be converted into shares other than the contingent convertible preferred securities (CCPS) mentioned in section 2.2 'Authority to increase capital'. As at 31 December 2023, Banco Santander's share capital amounted to EUR 8,092,073,09.50, divided into 16,184,146,059 shares. In 2023, we amended our share capital twice, through the cancellation of the shares repurchased under the buyback programmes that formed part of the shareholder remuneration policy for 2022: • by EUR 170,203,286 (c. 2.03% of share capital), under the authorization of the 2022 AGM. On 20 March 2023, the capital reduction was registered with the Commercial Registry; and • by EUR 134,924,476.50 (c. 1.64% of share capital), in the terms agreed at the 2023 AGM. On 30 June 2023, the capital reduction was registered with the Commercial Registry. On 30 January 2024, the board of directors agreed, under the authorization of the 2023 AGM, to reduce the share capital in the amount of EUR 179,283,743.50, by cancelling the 358.567.487 repurchased own shares (c. 2.22% of share capital), acquired through the first buyback programme carried out within the 2023 shareholder remuneration policy (First 2023 Buyback Programme). The share capital is currently EUR 7.912.789.286 represented by 15.825.578.572 shares. Since November 2021, date on which the first buyback programme of those executed within the framework of the shareholder remuneration policy was completed, Banco Santander has reduced its share capital by c. 9%. At the 2024 AGM, the board of directors has submitted to vote the cancellation of the shares that will be acquired through the second share buyback programme charged against 2023 results (Second 2023 Buyback Programme); as well as, if appropriate, within any new buyback programmes that the board may implement or by other legally permitted means. See sections 2.5 'Treasury shares' and 3.5 'Our next AGM in 2024'. We have a diversified and balanced shareholder structure, with 3,662,377 shareholders as at 31 December 2023, broken down by type, geographical provenance and number of shares as follows: Type of investor A Board Institutional Retail Total %  of  share  capital 1.20% 58.75% 40.05% 100% A. Shares owned or represented by directors. For more details, 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 distribution Europe The Americas Rest of the world Total Number of shares 1-3,000 3,001-30,000 30,001-400,000 Over 400,000 Total %  of  share  capital 73.07% 25.26% 1.67% 100% %  of  share  capital 8.67% 16.91% 11.78% 62.64% 100% 2.2 Authority to increase capital Under Spanish law, shareholders at the general meeting have the authority to increase the share capital and may delegate power to the board of directors to increase the 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. By 31 December 2023, our board of directors had received authorization from shareholders to approve or carry out the following capital increases: • Authorized capital to 2025: Shareholders at the 2022 AGM granted authorization to the board to increase share capital on one or more occasions by up to EUR 4,335,160,325.50 (50% of the capital at the time of that AGM). The board was granted this authorization for a period of three years (until 1 April 2025). The board can issue shares for cash consideration with or without pre-emptive rights for shareholders, and for capital 186 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management increases to back any convertible bonds or securities issued under its authority granted at the 2023 AGM. 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 2022 AGM). However, under the Spanish Companies Act, this limit does not apply to capital increases to convert CCPS (which shall be converted into newly-issued shares if the CET1 ratio falls below a predetermined threshold). This authorization was used for the two CCPS issues carried out in 2023. The board of directors has proposed to have this authority renewed at our 2024 AGM. See section 3.5 'Our next AGM in 2024'. • 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 in force at the time of the CCPS issue. 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 authorized to issue additional CCPS and other convertible securities and instruments in accordance with a resolution passed at the 2023 AGM that allows convertible instruments and securities to be issued for up to EUR 10 billion or an equivalent amount in another currency (two CCPS issues were executed in 2023 under this authorization). Any capital increase resulting from the conversion of shares and other convertible instruments will occur according to the capital increase authorization made at the time those instruments were issued. Date of issuance 19/03/2018 14/01/2020 06/05/2021 06/05/2021 21/09/2021 16/11/2023 16/11/2023 Nominal amount EUR 1,500 million EUR 1,500 million USD 1,000 million EUR 750 million EUR 1,000 million USD 1,150 million USD 1,350 million Discretionary remuneration per annum 4.75% for the first 7 years 4.375% for the first 6 years 4.75% for the first 6 years 4.125% for the first 7 years 3.625% for the first 8 years 9.625% for the first 5 years and 6 months 9.625% for the first 10 years Conversion predetermined threshold If, at any time, the CET1 ratio of Banco Santander or the Group is lower than 5.125% Maximum number of shares in case of conversion A 416,666,666 604,594,921 391,389,432 352,278,064 498,007,968 447,470,817 525,291,828 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 at 31 December 2023, there was no holder of a significant shareholding greater than 3% of the voting shares of Banco Santander registered with the CNMV (minimum threshold provided under Spanish law to disclose a significant holding in a listed company). Though the following shareholdings held by asset managers were registered with the CNMV as at 31 December 2023, their related notifications state that the shares are being held on behalf of third parties (funds or other investment entities or the portfolios they manage) and that none of them exceeds 3% of the voting rights that Banco Santander shares afford. Significant shareholding Date of entry in CNMV register 24/10/2019 16/06/2022 Name BlackRock Inc Dodge & Cox A % holding 5.426 3.038 A. Percentage of capital as at the date of notification to the CNMV. The changes in 2023 notified to the CNMV with regard to significant shareholdings are detailed below: Significant shareholding Shareholder name Norges Bank Date 8/3/2023 A. Shares and financial instruments. % previous % subsequent share share 3.006 2.996A Likewise, though as at 31 December 2023 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 (14.97%), Chase Nominees Limited (6.89%), The Bank of New York Mellon Corporation (5.98%), Citibank (3.87%) and BNP Paribas (3.09%). There may be some overlap in the holdings declared by the above mentioned custodians and asset managers. Lastly, as at 31 December 2023, 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). 187 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our Bylaws and the Rules and regulations of the board of directors set out an appropriate regime for analysing and approving related-party transactions with significant shareholders. See section 4.12 'Related-party transactions and other conflicts of interest'. 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 the execution 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: 2.5 Treasury shares Shareholder approval The acquisition of treasury shares was last authorized at our 2023 AGM, for five years and subject to these provisions: • Treasury shares held cannot exceed 10% of Banco Santander's share capital at any time, which is the legal limit set under the Spanish Companies Act. • The acquisition price may not be lower than the par value of the shares, nor exceed by more than 3% the highest of the following two: the price of the last independent transaction or the highest independent offer at that time at the trading venue where the purchase is made. • The board may set the purposes and the procedures in which • Transfer restrictions. Any transfer of Banco Santander shares it may apply. 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 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 brother of our Group Executive Chair (Ana Botín)). 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 its 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 at 31 December 2023, the parties to this agreement held 109,032,191 shares in Banco Santander (0.67% of its capital at such time), which were therefore subject to the voting syndicate. They include 80,355,819 shares (0.50% of its capital by close of 2023) that are also subject to the referred 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. Treasury shares policy On 27 June 2023, 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 potential 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 Grupo Santander's obligations to deliver shares to our employees and directors. • Serve any other purpose authorized by the board within the legal limits and those set at the general meeting. In this regard, Banco Santander made during the year the donation 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 operational criteria for carrying out treasury share trades, unless in exceptional circumstances as per the policy or carried out through mechanisms, such as buyback programmes, with a regulation of their own. These criteria include rules on: • Responsibility for execution of these trades, which falls on the Investments and Holdings department, which is kept separate from the rest of Banco Santander. • Venues. Trades must generally be carried out in the orders market of the continuous market (mercado continuo) of Spanish stock exchanges. • Volume limits. Trades must generally not exceed 15% of the average daily trading volume for Banco Santander shares in the previous 30 sessions on the relevant trading venue. 188 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Price limits. In general, (a) buy orders should not exceed by more than 3% the higher of (i) the price of the last independent transaction prior to the relevant acquisition or (ii) the highest independent bid at that time on the trading venue where the purchase is made; 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. • Time limits, including a black-out period that applies (a) during the 15 calendar days prior to the publication of each quarterly financial information and (b) if Banco Santander has decided to delay the disclosure of inside information according to market abuse regulations, until such information is disseminated. In the case of buyback programmes, the specific regulations establish a black-out period of 30 calendar days prior to the publication of annual and semi-annual results, which, however, will not apply when the buyback programme is managed by a third party or when the issuer has a temporary buyback programme in place. • 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 2022 results According to the 2022 shareholder remuneration policy, two buyback programmes were executed: • In the first buyback programme, executed from 22 November 2022 to 31 January 2023, we acquired 340,406,572 treasury shares (2.03% of share capital). Under the authorization of the 2022 AGM, on 1 February 2023 the board resolved to reduce Banco Santander’s share capital through the cancellation of the repurchased shares. • In the second buyback programme, executed from 1 March to 21 April 2023, we acquired 269,848,953 treasury shares (1.64% of share capital). In the terms agreed by the 2023 AGM, on 24 April 2023 the board resolved to reduce Banco Santander’s share capital through the cancellation of the repurchased shares. See section 2.1 'Share capital'. First 2023 Buyback Programme Under the authorization of the 2023 AGM, and according to the 2023 shareholder remuneration policy, on 26 September 2023 the board resolved to execute a new share buyback programme for a maximum amount of EUR 1,310 million, equivalent to approximately 25% of the Group reported profit (excluding non- cash, non-capital ratios impact items) in first semester 2023. In the First 2023 Buyback Programme (executed from 28 September 2023 to 25 January 2024, once the required regulatory authorization was obtained), we acquired 358,567,487 treasury shares (representing approximately 2.22% of Banco Santander’s share capital), at a weighted average price per share of EUR 3.65. On 30 January 2024, the board resolved to reduce the share capital in the amount of EUR 179,283,743.50, by cancelling the 358,567,487 repurchased shares. For more details on the share capital reductions, see section 2.1 'Share capital' Second 2023 Buyback Programme Under the same AGM approval and also according to the 2023 shareholder remuneration policy, on 19 February 2024 the board resolved to execute a new share buyback programme worth EUR 1,459 million. The appropriate regulatory authorization has already been obtained and the execution of which will begin from 20 February 2024. The board had submitted the resolution to vote at the 2024 AGM for the share capital reduction by cancelling repurchased shares. See section 3.5 'Our next AGM in 2024'. Activity in 2023 As at 31 December 2023, Banco Santander and its subsidiaries held 297,815,673 shares, which accounted for 1.84% of Banco Santander´s share capital (compared to 243,689,025, 1.45% of the share capital, at 31 December 2022). The chart below summarizes the monthly average proportion of treasury shares to share capital throughout 2022 and 2023. Monthly average of daily positions in treasury shares % of Banco Santander’s share capital at month end 2023 1.75% 2.16% 1.46% 1.50% 1.72% 1.68% 0.08% 0.08% 0.08% 0.64% 1.25% 1.56% January February March April May June July August September October November December 2022 1.64% 1.62% 1.65% 1.96% 1.68% 1.62% 0.02% 0.10% 0.11% 0.05% 0.15% 0.98% 189     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management In 2023, Banco Santander and its subsidiaries' treasury share trades amounted to the following values: Acquisitions and transfers of treasury shares in 2023 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 39,020,430 19,510,215 135,372,000 3.47 50,793,292 A 25,396,646 A 157,268,000 A B 3.46 13,031,000 B 196,118,212 98,059,106 649,037,000 3.31 196,118,212 98,059,106.00 649,037,000 3.31 676,155,035 911,293,677 338,077,518 2,324,924,000 455,646,839 3,109,333,000 3.44 3.41 N/A A 246,911,504 N/A A 123,455,752 N/A A 806,305,000 N/A B 3.34 N/A B 13,031,000 A. Including a donation that Banco Santander made to Fundación Banco Santander during the year totalling 6,617,008 treasury shares. For more details, see section 6.2 'Other community support programmes' of the ‘Responsible banking’ chapter. B. Excluding the donation 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 transfers) or there is a change in the number of total voting rights. A Significant changes in treasury shares in 2023 Reported on B 13/01/2023 8/02/2023 24/03/2023 20/04/2023 5/07/2023 19/10/2023 13/12/2023 acquired since last notice 1.06% 1.01% 1.02% 1.03% 0.54% 1.06% 1.00% % of voting rights represented by shares transferred since last notice 0.22% 0.23% 2.54% 0.18% 2.03% 0.46% 0.19% held at reference date of notice 1.40% 2.18% 0.70% 1.55% 0.09% 0.68% 1.50% A. Percentages calculated with share capital at the date of disclosure. B. Corrects notice dated 27 December 2022. Transactions with financial instruments The transactions with financial instruments with Banco Santander shares as the underlying asset carried out by Banco Santander of its own accord in 2023 for the purpose of discretionary treasury share management are as follows: • In Q1'23, we reduced the investment position by a delta (i.e. net exposure to share price changes) equalling 6,000,000 shares. • The final position at year end was a positive aggregated delta equalling 3,000,000 shares worth a total EUR 9,576,000. • The instruments used were total return equity swaps, to be settled at maturity exclusively in cash. 190 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2.6 Stock market information Markets Banco Santander shares are listed on Spanish stock exchanges (Madrid, Barcelona, Bilbao and Valencia), the New York Stock Exchange as American Depositary Shares (ADS), the London Stock Exchange as Crest Depositary Interests (CDI) and the Warsaw Stock Exchange. Likewise, until 28 December 2023, Banco Santander shares were listed on the traditional listing of the Mexican Stock Exchange (BMV) and from 29 December 2023 the shares are listed only in the International Quotation System (SIC) of said stock exchange. Market capitalization and trading As at 29 December 2023, Banco Santander occupies the second position in the eurozone and in the twenty-first world by market value among financial institutions, with a market capitalization of EUR 61,168 million. 11,132 million Banco Santander shares traded in the year for an effective value of EUR 38,144 million and a liquidity ratio of 68%. 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) 2023 16,184.1 2022 16,794.4 3.780 35% 3.970 06/12/2023 2.812 03/01/2023 3.447 61,168 2.803 (5%) 3.482 10/02/2022 2.324 15/07/2022 2.795 47,066 11,132.3 14,217 43.7 55.3 38,143.5 149.6 40,262 156.7 191     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3. Shareholders and general meeting → One share, one vote, one dividend → No takeover defences in our Bylaws → High shareholder 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 those of its shareholders, through sustainable growth and long- term value creation, retaining shareholders' and broader society's trust. For that, we: • provide information to shareholders and investors that meets their expectations and upholds our culture and values; and • communicate and engage with them regularly so that senior managers and governance bodies consider their views. Our policy on communication and engagement with shareholders and investors, available on our corporate website, sets out the principles that govern the aforementioned activities: • Protection of all shareholders' rights and lawful interests. We facilitate the exercise of rights for shareholders, provide them with information and give them opportunities to have a say in our corporate governance. • Equal treatment and non-discrimination. We treat investors in the same situation equally. • Fair disclosure. We make sure that the information we disclose is transparent, truthful and consistent according to applicable law. • Appropriate disclosure of information. We report appropriate and relevant information to meet our shareholders’ and investors’ needs and expectations, and make sure it is clear, concise and accurate. • Compliance with law and corporate governance rules. We adhere closely to the laws and regulations on inside and price- sensitive information in addition to following the principles of cooperation and transparency with supervisory and regulatory bodies. The policy also sets out: • the roles and responsibilities of the main governance bodies and internal functions involved in communication and engagement; • the channels for information disclosure and communication; and • the ways in which we engage with shareholders and investors. The policy also applies to relations with agents that advise, recommend or guide our shareholders and investors, such as financial and ESG analysts, proxy advisers and ratings agencies. Moreover, Banco Santander has board-approved frameworks on branding and communications, and on 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, which help ensure that all our shareholders and other stakeholders are properly informed about our strategy, targets and results, as well as about our culture and values Engagement with shareholders in 2023 As part of our policy on communication and engagement with shareholders and investors, we carried out the following activities during the year: • The annual general meeting. The ordinary general meeting is the most important annual event for our shareholders. We strive to encourage them to attend and participate in the meeting, in an informed way. See 'Participation at general meetings' and 'Right to information' in section 3.2. The annual general meeting is broadcast live on our corporate website, where its recordings are made available in full afterwards. This enables shareholders who cannot attend the meeting and other stakeholders to remain fully informed of deliberations and adopted resolutions. The 2023 AGM was hybrid, allowing shareholders to attend in person or remotely. Our general meeting attendance app ensures shareholders can fully 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. Our high shareholder participation rate at the most recent general meetings proves the effectiveness of our electronic means of attendance, delegation and remote voting prior to the meeting. Also, the vast quorum and voting results at our 2023 AGM show just how important we consider shareholder engagement through general meetings. See section 3.4 '2023 AGM'. Once again, Banco Santander's management system for the 2023 AGM received AENOR certification for sustainable events in compliance with the UNE-ISO 20121. • Quarterly results presentations. We present our results at the end of each quarter on the same day we make them public. The presentation can be followed live, via conference call or streamed on our website. We release the related 192   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management quarterly financial report and presentation material on the same day before the markets open. During the presentation, questions can be asked or emailed to: investor@gruposantander.com. In 2023, we gave our first, second and third quarter results presentations on 25 April, 26 July and 25 October, respectively. Our fourth quarter results presentation took place on 31 January 2024. • Investor and strategy days. We organize investor and strategy days where we explain our strategy and targets for the next three years to investors and other stakeholders in a broader context than in results presentations. Investors can interact directly with senior managers and some directors. We publish announcements about these meetings and provide related documents well in advance. Our most recent investor day was held in London on 28 February 2023. For more details, see section 1.4 'Engagement with our shareholders'. The information we made available at those events is not included in this annual report nor considered part of it. • Other activities. We know that a single format for communicating with shareholders and investors is not valid for everyone. For this reason, in 2023 and early 2024, we carried out the activities detailed in the table below to meet their diverse needs and expectations. Other activities → Regular meetings between the Lead Independent Director and key investors → Investor roadshows → Interaction with retail shareholders → Studies and surveys Since October, our Lead Independent Director, Glenn Hutchins, accompanied by Bruce Carnegie-Brown, met with institutional investors, particularly in the months leading up to the AGM. In total, he met with 17 institutional investors, who represent approximately 24.6% of share capital. Our Shareholder and Investor Relations team had 930 meetings (both in person and virtually) with 379 investors, including 47 meetings focused on ESG matters. We engaged with 36.18% of share capital. Our Shareholder and Investor Relations team held 206 events (online, in person and hybrid). Attendees accounted for 8.4% of the capital held by retail shareholders in Spain. Shareholders engaged with the Group’s senior management at several of these events. We received 239,238 shareholders and investors opinions through quality surveys and studies, of which 9,120 corresponded to opinions received in the SPF (Simple, Personal and Fair) survey of Banco Santander. Communication with proxy advisors and other analysts We have always recognized the value our investors place on open and proactive dialogue with proxy advisers, 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 2023, we continued to engage with the main proxy advisers (providing them with information and explanations, among others, about proposed resolutions submitted to vote at the 2023 AGM so they could make voting recommendations) and ESG ratings agencies. Corporate website Our corporate website includes all the information on corporate governance as required by law and, in particular, (i) Banco Santander’s key internal regulations (Bylaws, Rules and regulations of the board, Rules and regulations for the general shareholders meeting, etc.); (ii) information on the board of directors and its committees, as well as directors’ skills and professional biographies; and (iii) all the information related to general meetings. Information on our corporate governance can be found at https://www.santander.com/en/shareholders-and- investors/ corporate-governance (included for information purposes only). The contents of our corporate website are not incorporated by reference to this annual report nor should be considered part of it for any purpose. In addition, our corporate website provides extensive institutional, financial and sustainability information about the Group as well as other information we consider to be of interest to our shareholders and, in general, to all our stakeholders worldwide. Its design enables us to be transparent and enhance user experience by providing quality information about Santander. Other channels In order to maximize the dissemination and quality of information, we offer shareholders and investors an app (Santander Shareholders and Investors) compatible for Android and Apple iOS that contains a broad range of information about the Group. We also engage with shareholders through various channels, such as an email address, telephone lines, WhatsApp, postal service and virtual office. In addition, we regularly post information about Banco Santander on our official Twitter and LinkedIn accounts. The contents included in these profiles are not incorporated by reference to this annual report nor should be considered part of it for any purpose. 193   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3.2 Shareholder rights One share, one vote, one dividend Our Bylaws provide for one share class only (ordinary shares), which grant all shareholders the same rights. Each Banco Santander share entitles its holder to one vote and there is no preferential treatment in dividend payouts. The Bylaws fully adhere to the one share, one vote, one dividend principle. Voting rights and unrestricted share transfers There are no non-voting or multiple-voting shares, nor limitations to the number of votes a shareholder can cast, or any other restriction on exercising voting rights, except for those prescribed by law or set out in our Bylaws should the acquisition of the shares infringe regulations. There are no quorum requirements or qualified majorities other than those prescribed by law. Neither Banco Santander's Bylaws nor any other means restrict the transferability of shares, which is subject only to restrictions prescribed by law. Furthermore, our Bylaws do not include any neutralization provisions, as set out in the Spanish Securities Market Act, which would apply in takeover bids. The shareholders’ agreement mentioned in section 2.4 'Shareholders' agreements' contains transfer and voting restrictions on the shares that are subject to it. Acquisition of significant shareholdings The acquisition of a significant shareholding or influence in Banco Santander is subject to regulatory approval or non- objection, as applicable, by the supervising authority, as banking is a regulated sector. Furthermore, as Banco Santander is a listed company, any parties wishing to acquire control over it and/or enter into any other lawful scenario must launch a tender offer for its shares. Such acquisitions are largely regulated 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. • Act 10/2014, of 26 June, on the organization, supervision and solvency of credit Institutions and its implementing regulation, Spanish Royal Decree 84/2015, of 13 February. • Act 6/2023, of 17 March, on the Securities Markets and on Investment Services. The acquisition of a significant holding in Banco Santander may also require approval by other domestic and foreign regulators with supervisory powers over Banco Santander or its subsidiaries' operations and shares listings, or other actions concerning such regulators or subsidiaries; and other authorities pursuant to foreign investment regulations in Spain or other countries where we operate. Participation at general meetings All registered holders of shares found on record at least five days prior to the day of a general meeting are entitled to attend. Banco Santander facilitates shareholder participation by allowing them to exercise their rights to attend, delegate, vote and participate at general meetings using remote communications systems. Shareholders can attend general meetings virtually. 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 the meeting is held, allows shareholders to add to the agenda items included in the meeting notice, 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 notice and proposal of resolutions 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 resolution 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 notice is posted. Any shareholder, irrespective of their stake, can also request the removal of directors or the filing of corporate liability action against any director to be put to a vote at the general meeting, even when not on the agenda. Right to information From the time the general meeting notice is posted until the fifth day before the general meeting date on first call, shareholders can submit the written requests for information or clarification they may deem pertinent, or any written questions they deem relevant to the items on the meeting agenda. Moreover, in the same manner and within the same period, shareholders can submit written requests for clarification about information Banco Santander has sent to the CNMV since the last general meeting or about auditor’s reports. Banco Santander posts all shareholder-requested information and the answers it provides on its corporate website. Shareholders may also exercise their right to receive information at the meeting. Where information cannot be given during the course of the meeting, it will be provided in writing within seven days. 194   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Quorum and majorities for passing resolutions at the general meeting The quorum and majorities set out in our Bylaws and Rules and regulations for general meetings in order to hold a valid meeting and adopt corporate resolutions are those set out under Spanish law. Except for certain matters mentioned below, on first call, shareholders accounting for at least 25% of the subscribed share capital with voting rights must be in attendance 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 the general meeting, shareholders voting by remote means, 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 attending in person or by proxy cast more votes in favour than against. The quorum and majorities required to amend the Bylaws, issue shares and bonds, make structural changes and vote on other significant resolutions permitted by law are those set out below for amending the Bylaws. Furthermore, in accordance with laws applying to credit institutions, 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 above 100% (up to 200%) for executive directors and other employees whose professional activities have a material impact on the Group's risk profile; otherwise, a three-quarters majority will be necessary. Decisions about acquiring, selling or contributing core assets to another company or similar corporate transactions shall require shareholder approval at general meetings when the law so dictates. Our Bylaws have no further requirement in this regard. Rules for amending our Bylaws Shareholders at the general meeting have the authority to approve any amendment to the Bylaws. However, the board can also decide to change the registered office within Spain. The directors 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, which shall be provided to shareholders at the time the general meeting to debate the proposed amendment is called. 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 and 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 in attendance. 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 in attendance. When less than 50% of the subscribed share capital with voting rights is in attendance, 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. Bylaws amendments are subject to ECB approval. However, amendments that are exempt from authorization but must still be reported to the ECB include the change of the registered office within Spain, share capital increases, adding mandatory or prohibitive laws or regulations to the Bylaws, changing the wording in order to comply with court or administrative rulings and any others the ECB has declared exempt due to a lack of materiality in response to prior consultations. 3.3 Dividends and shareholder remuneration Remuneration against 2023 results With regard to the 2023 results, the board followed a policy of allocating approximately 50% of the Group reported profit (excluding non-cash, non-capital ratios impact items) to shareholder remuneration, distributed as approximately 50% in cash dividends and 50% in share buybacks. • Interim remuneration. On 26 September 2023, the board resolved to: • Pay an interim cash dividend against the 2023 results of 8.10 euro cents per share entitled to the dividend (equivalent to approximately 25% of said Group reported profit in H1’23); it was paid from 2 November 2023. • Execute the First 2023 Buyback Programme worth up to EUR 1,310 million (equivalent to approximately 25% of said Group reported profit in H1’23). See 'First 2023 Buyback Programme' in section 2.5. • Final remuneration. Under the 2023 shareholder remuneration policy, on 19 February 2024 the board of directors resolved to: • Submit a resolution at the 2024 AGM to approve a final cash dividend in the gross amount of 9.50 euro cents per share entitled to dividends. If approved at the AGM, the dividend would be payable from 2 May 2024. • Implement the Second 2023 Buyback Programme worth 1,459 million euros, for which the appropriate regulatory authorization has been obtained and the execution of which will begin from 20 February 2024. For more details, see 'Second 2023 Buyback Programme' in section 2.5. 195 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Once the above-mentioned actions are completed, total shareholder remuneration for 2023 will total 5,538 million euros (approximately 50% of the Group reported profit - excluding non-cash, non-capital ratios impact items- in 2023), distributed as approximately 50% in cash dividends (2,769 million euros) and 50% in share buybacks (2,769 million euros). These amounts have been estimated assuming that, as a consequence of the partial execution of the Second 2023 Buyback Programme, the number of outstanding shares entitled to a final cash dividend will be 15,483,617,874. Therefore, that amount may be higher if fewer shares than planned are acquired in the Second 2023 Buyback Programme; otherwise, it will be lower. Remuneration against 2024 results For the 2024 results, the board intends to continue applying the same policy, consisting in a total shareholder remuneration of approximately 50% of the Group reported profit (excluding non- cash, non-capital ratios impact items), distributed in approximately equal parts in cash dividend and share buybacks, thus continuing the one applied with respect to 2023. The shareholder remuneration policy is subject to future corporate and regulatory approvals. 3.4 2023 AGM We held our annual general meeting on 31 March 2023, on second call, both in person and by electronic means. Quorum and attendance The quorum (among shareholders present and represented) was 67.564%, broken down as follows: Quorum breakdown Present In person and virtual attendance Remote voting By post or direct delivery By electronic means Represented By post or direct delivery By electronic means Total 3.358 % 0.717 % 0.423 % 2.218 % 64.206 % 5.592 % 58.614 % 67.564 % Approved resolutions and voting results All items on the agenda were approved. Votes in favour of the board’s proposals averaged 98.08%. 99.72% of votes approved the corporate management for 2023 and 90.78% of the votes approved the directors' remuneration policy for 2023, 2024 and 2025. None of the agenda items listed in the notice convening the meeting received less than 89.22% of votes in favour. 196   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The following chart summarizes the resolutions approved and voting results: 1. Annual accounts and corporate management 1A. Annual accounts and directors’ reports for 2022 1B. Consolidated statement of non-financial statements for 2022 1C. Corporate management for 2022 2. Application of results for 2022 3. Board of directors: appointment, re-election or ratification of directors 3A. Setting of the number of directors 3B. Ratification of the appointment and re-election of Mr Héctor Blas Grisi Checa 3C. Ratification of the appointment and re-election of Mr Glenn Hogan Hutchins 3D. Re-election of Mrs Pamela Ann Walkden 3E. Re-election of Ms Ana Patricia Botín-Sanz de Sautuola y O'Shea 3F. Re-election of Ms Sol Daurella Comadrán 3G. Re-election of Ms Gina Lorenza Díez Barroso Azcárraga 3H. Re-election of Ms Homaira Akbari 4. Re-election of the external auditor for financial year 2023 5. Share capital and convertible securities B For 99.68 99.79 99.72 99.75 99.60 99.54 98.87 99.49 98.15 97.03 98.58 99.50 99.31 VOTES A B Blank C Against Abstention C Quorum D 0.32 0.06 0.21 0.06 0.28 0.06 0.25 0.06 0.40 0.06 0.46 0.07 1.13 0.06 0.51 0.07 1.85 0.06 2.97 0.07 1.42 0.07 0.50 0.07 0.69 0.06 0.27 0.22 0.58 0.21 0.27 0.31 0.31 0.30 0.42 0.29 0.30 0.31 0.28 67.56 67.56 67.56 67.56 67.56 67.56 67.56 67.56 67.56 67.56 67.56 67.56 67.56 5A. Reduction in share capital in the maximum amount of EUR 757,225,978.50, through the cancellation of a maximum of 1,514,451,957 own shares 99.32 0.68 0.05 0.21 67.56 5B. Reduction in share capital in the maximum amount of EUR 822,699,750.50, through the cancellation of a maximum of 1,645,399,501 own shares 5C. Authorisation for the Bank and its subsidiaries to be able to acquire own shares 5D. Delegation to the board of the power to issue securities convertible into shares of the Bank within a 5-year period and subject to a maximum aggregate limit of EUR 10,000 million. Setting of standards to determine the bases for and terms and conditions applicable to the conversion and granting of powers to increase capital. Delegation to exclude pre-emptive rights 6. Remuneration 6A. Directors' remuneration policy 6B. Setting of the maximum total annual remuneration of directors in their capacity as directors 6C. Approval of the maximum ratio of fixed and variable components of total remuneration of executive directors and other employees belonging to categories with professional activities that have a material impact on the risk profile 6D. Deferred Multiyear Objectives Variable Remuneration Plan 6E. Application of the Group’s buy-out regulations 6F. Annual directors' remuneration report (consultative vote) 99.28 98.72 0.72 0.05 1.28 0.05 0.19 0.19 67.56 67.56 96.65 3.35 0.05 0.22 67.56 90.78 9.22 0.06 0.27 67.56 97.66 2.34 0.06 0.26 67.56 98.52 96.72 1.48 0.06 3.28 0.06 98.38 1.62 0.07 89.22 10.78 0.06 0.30 1.47 0.33 0.26 0.23 67.16 67.56 67.56 67.56 67.56 7. Authorization to the board and grant of powers for conversion into public instrument 99.74 0.26 0.06 8 to 23. Corporate action to demand director liability and dismissal and removal E of directors 0.00 100.00 0.00 0.03 64.92 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 2023 AGM. D. Percentage of Banco Santander's share capital on the date of the 2023 AGM. E. Items 8 to 23, not included on the agenda, were put to a separate vote. They refer to the proposal to bring corporate action to demand director liability (acción social de responsabilidad) against all directors in office (8) and to the proposal of dismissal and removal of the following directors: Ms Ana Botín-Sanz de Sautuola y O'Shea (9), Mr Héctor Blas Grisi Checa (10), Mr Bruce Carnegie-Brown (11), Mr José Antonio Álvarez Álvarez (12), Ms Homaira Akbari (13), Mr Javier Botín-Sanz de Sautuola y O'Shea (14), Mr Henrique de Castro (15), Ms Sol Daurella Comadrán (16), Ms Gina Lorenza Díez Barroso (17), Mr Germán de la Fuente Escamilla (18), Mr Glenn Hogan Hutchins (19), Mr Luis Isasi Fernández de Bobadilla (20), Mr Ramiro Mato García-Ansorena (21), Ms Belén Romana García (22) and Mrs Pamela Walkden (23). The full texts of the resolutions passed can be found on our corporate website and on the CNMV’s website, as they were filed as other relevant information on 31 March 2023. 197     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3.5 Our next AGM in 2024 The board of directors agreed to call the 2024 AGM on 21 March on first call or on 22 March on second call, proposing the following 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 2023. For more details, see 'Consolidated financial statements'. → The consolidated non-financial statement for the financial year ended on 31 December 2023, which is part of the consolidated directors' report. See the 'Responsible banking' chapter. → The corporate management for financial year 2023. Application of results of financial year 2023 → To approve the application of results obtained by Banco Santander during financial year 2023. See note 4.a) to the consolidated financial statements. Board of directors: appointment and re-election → To set the number of directors at 15, within the maximum and minimum limits stated in the Bylaws. → To appoint Carlos Barrabés and Antonio Weiss as independent directors. See section 1.1 'Board skills and diversity'. → To re-elect Javier Botín, Germán de la Fuente, Henrique de Castro, José Antonio Álvarez and Belén Romana for a three-year period. See section 4.1 'Our directors'. External auditor → To re-elect the firm PricewaterhouseCoopers Auditores, S.L. (PwC) as external auditor of Banco Santander and its consolidated group for financial year 2024. Share capital and convertible securities → To authorize the increase of the share capital. Delegation for the exclusion of the preferential subscription right. → To reduce the share capital of Banco Santander with the following purposes: • Cancelling a maximum of 1,566,857,857 treasury shares purchased under the Second 2023 Buyback Programme. • Cancelling a maximum of 1,582,557,857 treasury shares acquired through one or more share buyback programmes or by other legally permitted means, authorizing the board of directors 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 sections 2.1 'Share capital' and 2.5 'Treasury shares'. Remuneration. See section 6. 'Remuneration' → To approve the director's remuneration policy for 2024, 2025 and 2026. → To set the maximum amount of annual remuneration to be paid to all the directors in their capacity as such. → 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. → To approve the Deferred Multiyear Objectives Variable Remuneration Plan. → To approve the Group's buy-out regulations. → To hold a non-binding vote on the annual directors’ remuneration report. The related documents and information are available for consultation on our corporate website from the date the meeting notice is published. We will also broadcast our 2024 AGM live, as it was done for the 2023 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. 198   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4. Board of directors A balanced and diverse board → 15 directors: 13 non-executive and 2 executive → Majority of independent directors (66.67%) → Balanced presence of women and men (40%-60%) Effective corporate governance → Specialized committees advising the board → The responsible banking, sustainability and culture committee shows the board's commitment to these areas → Complementary functions and effective controls: Executive Chair, CEO and Lead Independent Director 1 Germán 2 Pamela 3 Héctor Grisi de la Fuente Member Non-executive director (independent) òp Walkden Member Non-executive director (independent) òCp CEO Executive director òp 4 Ana Botín Executive Chair Executive director òCpC 5 Glenn Hutchins Vice Chair and Lead Independent Director Non-executive director (independent) ¢¢Cp 6 Ramiro Mato 7 Belén Romana Member Non-executive director (independent) òòpŸC Member Non-executive director (independent) òò¢pCŸp 8 Sol Daurella Member Non-executive director (independent) ¢¢Ÿ 9 Javier Botín Member Non-executive director 10 Henrique de Castro Member Non-executive director (independent) ò¢p 11 Gina Díez Barroso Member Non-executive director (independent) ¢Ÿ 12 Bruce Carnegie- Brown Member Non-executive director (independent) ¢C¢ 13 José Antonio Álvarez Vice Chair Non-executive director òp 14 Luis Isasi Member Non-executive director ò¢p 15 Homaira Akbari Member Non-executive director (independent) òŸp 16 Jaime Pérez Renovales General Counsel and secretary of the board ò Executive committee ò Audit committee ¢ Nomination committee ¢ Remuneration committee p Risk supervision, regulation and compliance committee Ÿ Responsible banking, sustainability and culture committee p Innovation and technology committee C Chair of the committee 199             2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.1 Our directors Ana Botín-Sanz de Sautuola y O’Shea EXECUTIVE CHAIR Executive director Board member since 1989. Nationality: Spanish. Born in 1960 in Santander, Spain. Education: Degree in Economics from Bryn Mawr College of Pennsylvania. 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 CEO of Santander UK PLC and was a non-executive director until April 2021. In 2014 she was Héctor Grisi Checa CHIEF EXECUTIVE OFFICER Executive director Board member since 2023. Nationality: Mexican. Born in 1966 in Mexico City, Mexico. Education: Degree in Finance from Universidad Iberoamericana (Mexico City). Experience: Mr Grisi joined the Group in 2015 as Executive Chair and CEO of Santander México and Grupo Financiero Santander México. In 2019, he was named Regional Head for North America. Before joining Santander he worked in Mexico and the US. Mr Grisi spent 18 years in several leadership 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 non-executive Chair of Open Bank, S.A., Santander Consumer Finance, S.A., Open Digital Services, S.L., PagoNxt, S.L., Universia España Red de Universidades, S.A. and Universia Holding, S.L.; and is a non- executive director of Santander Holdings USA, Inc. and Santander Bank, N.A. Membership of board committees: Executive committee (Chair) and innovation and technology committee (Chair). Skills and competencies: Ms Botín 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. roles at Crédit Suisse, including Head of investment banking for Mexico, Central America and the Caribbean, and Chair and CEO of Crédit Suisse México. He also held several roles in 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 ("Bank Association of Mexico"). Other positions of note: Mr Grisi is 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 a 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 such key markets as Mexico and the US. He brings to the board diversity and a strong, international track record of management, leadership, business transformation and connectivity between the Group’s markets. 200   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Glenn Hogan Hutchins VICE CHAIR AND LEAD INDEPENDENT DIRECTOR Non-executive director (independent) Board member since 2022. Nationality: American. Born in 1955 in Virginia, US. Education: Graduated with a AB, MBA and JD from Harvard University. 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 committees of the Federal Reserve Bank of New York from 2011 to 2021. Additionally, he served on the board of the José Antonio Álvarez Álvarez VICE CHAIR Non-executive director Board member since 2015. Nationality: Spanish. Born in 1960 in León, Spain. Education: Degree in Economics and Business Administration. MBA from the University of Chicago. Experience: Mr Álvarez joined Santander in 2002. He was appointed Senior Executive Vice President of the Financial Management and Investor Relations division in 2004 (Group Chief Financial Officer) and was Group CEO from 2015 to 2022. Harvard Management Company, which manages Harvard University’s endowment. Mr Hutchins worked with President Clinton in his transition to 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, director of not-for-profit organization 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 (Chair), and innovation and technology committee. Skills and competencies: As a long-time investor in technology and fintech companies, Mr Hutchins 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. He served as director at SAM Investments Holdings Limited, Santander Consumer Finance, S.A. and Santander Holdings USA, Inc. He sat on the supervisory boards of Santander Consumer Bank AG, Santander Consumer Holding GmbH and Santander Bank Polska, S.A. He was also a board member of Bolsas y Mercados Españoles, S.A. Other positions of note: Mr Álvarez is an independent director of Aon PLC and a member of the advisory committee of Grupo GED. Positions in other Group companies: Mr Álvarez is non- executive Vice Chair of Banco Santander (Brasil) S.A. and a non- executive director of 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, and has vast knowledge of the Group from his tenure as CEO. He has extensive experience and an established reputation with such key stakeholders as regulators and investors. 201     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Homaira Akbari Non-executive director (independent) Board member since 2016. Nationality: American and French. Born in 1961 in Tehran, Iran. 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 also held various roles at Microsoft Corporation and Thales Group, was non-executive Chair of WorkFusion, Inc., and an independent director of Temenos, AG. Javier Botín-Sanz de Sautuola y O’Shea Non-executive director Board member since 2004. 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, S.V., 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 (1998-1999). Other positions of note: Ms Akbari is CEO of AKnowledge Partners, LLC, a global consultancy firm on the Internet of Things, cyber security and artificial intelligence. She is an independent director of Landstar System, Inc. and a member of the security advisory board of Telefónica Soluciones de Criptografía, S.A.U. 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, responsible banking, sustainability and culture committee, and innovation and technology committee. Skills and competencies: Ms Akbari brings significant experience of technology companies. Her knowledge of digital transformation challenges and cyber security 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. 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. 202 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Bruce Carnegie-Brown Non-executive director (independent) Board member since 2015. Nationality: British. Born in 1959 in Freetown, Sierra Leone. Education: Master of Arts in English Language and Literature from the University of Oxford. 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 Sol Daurella Comadrán Non-executive director (independent) Board member since 2015. Nationality: Spanish. Born in 1966 in Barcelona, Spain. Education: Degree in Business and MBA from ESADE. Experience: Ms Daurella sat on the board of Círculo de Economía de Barcelona and was an independent director of Banco Sabadell, S.A., Ebro Foods, S.A. and Acciona, S.A. She was also honorary consul general of Iceland in Barcelona (1992-2021). 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. He was Vice Chair and Lead Independent Director of Banco Santander from 2015 to 2023. 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, and member of the professional game committee of England and Wales Cricket Board. Membership of board committees: Nomination committee (Chair) and remuneration 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 the financial community. Other positions of note: Ms Daurella is Chair of Coca-Cola Europacific Partners PLC, Executive Chair of Olive Partners, S.A., and holds several roles in Grupo Cobega companies. She is also Vice Chair of the board of trustees of the FERO Oncology Research Foundation and 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 experience of corporate governance as the former Chair of several boards and having served on several audit committees. As a trustee of various health, education and environmental foundations, she provides responsible business and sustainability insight to the board. 203 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 was also 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: Mr de Castro brings to the board valuable international experience in technological and digital strategy due to his executive roles in the world´s top technology companies. Experience: Mr de la Fuente has spent his professional career at Deloitte, where he has been Head of the audit business for the financial services industry (2002–2007), managing partner of Audit & Assurance (2007-2021) in Spain, and Chair and CEO of Deloitte, S.L. (2017-2022). 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 financial groups 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, and the banking sector, all of which uphold his recognition as a financial expert. Henrique de Castro Non-executive director (independent) Board member since 2019. Nationality: Portuguese. Born in 1965 in Lisbon, Portugal. Education: Degree in Business Administration from the Lisbon School of Economics & Management and MBA from the University of Lausanne. Germán de la Fuente Escamilla Non-executive director (independent) Board member since 2022. Nationality: Spanish. Born in 1964 in Madrid, Spain. Education: Degree in Economics and Business Administration with a diploma in auditing from the Complutense University of Madrid. 204 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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). She is also a non-executive director of Bolsa Mexicana de Valores (BMV) and Dalia Women, S.A.P.I de C.V. (Dalia Empower), a member of Comité de 200 (C200) and represents Mexico at the W20, the G20 women's initiative to promote gender diversity. 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, and an ever-lasting commitment to, sustainability, inclusion and responsible business, having been a founder and trustee of foundations that focus on education, gender diversity and social support. In 1987, he joined Morgan Stanley where he was managing director of investment banking for Europe and Chair and Country Head for Spain (1997-2020) and senior advisor (2020-2023). 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 non-executive Chair of Santander España and of Logista Integral, 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. Gina Díez Barroso Azcárraga Non-executive director (independent) Board member since 2020. Nationality: Mexican. Born in 1955 in Mexico City, Mexico. Education: Degree in Design from Centro de Diseño of Mexico City. Experience: Ms Díez Barroso was an independent director of Santander México and other Grupo Santander companies in Mexico until April 2020. 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. Luis Isasi Fernández de Bobadilla Non-executive director (*) Board member since 2020. Nationality: Spanish. Born in 1956 in Jerez de la Frontera, Spain. 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 the opinion of the nomination committee and the 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 details, see subsection 'Other external directors', in section 4.2. 205 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Ramiro Mato García-Ansorena Non-executive director (independent) Board member since 2017. Nationality: Spanish. Born in 1952 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 Belén Romana García Non-executive director (independent) Board member since 2015. Nationality: Spanish. Born in 1965 in Madrid, Spain. Education: Degree in Economics and Business Administration from Universidad Autónoma de Madrid. She is also State Economist for Spain. Experience: Ms Romana was formerly director general of Economic Policy, director general of the Treasury of the Spanish Ministry of Economy, and director at Banco de España and the CNMV. She was also a director at the Instituto de Crédito Oficial and other entities on behalf of the 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. the Spanish Banking Association (AEB) as representative of Banque BNP Paribas, and of Bolsas y Mercados Españoles, S.A. He has also been a member of the board of trustees of the 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 the 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. 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, nomination committee, risk supervision, regulation and compliance committee (Chair), responsible banking, sustainability and culture committee, and innovation and technology 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 recognized 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. 206 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Treasurer, Group Head of Asset and Liability Management and Regional Markets, Group Head of Internal Audit, Group Head of Corporate Affairs and Group Manager of Investor Relations. In addition, she served as an independent member of the UK Prudential Regulation Authority (PRA) Regulatory Reform Panel, as member of the European Banking Authority Stakeholder Group, and 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 a non- executive director of Santander UK PLC and Santander UK Group Holdings PLC. Membership of board committees: Audit committee (Chair) and risk supervision, regulation and compliance committee. Skills and competencies: Mrs Walkden qualifies as a financial expert in light of her broad, international experience in banking and auditing. committee for Government Reform. Previously, he had been Vice General Counsel, vice secretary of the board and 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, member of the board of trustees of the Fundación Universitaria Comillas-I.C.A.I. and professor of Constitutional Law in the Faculty of Law at Universidad Pontificia Comillas (ICADE). Jaime Pérez Renovales is the secretary of every board committee. Pamela Walkden Non-executive director (independent) Board member since 2019. Nationality: British. Born in 1960 in Worcester, England. Education: Master's Degree in Economics from Cambridge University. 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 Jaime Pérez Renovales General Counsel and secretary of the board Joined the Group in 2003. Nationality: Spanish. Born in 1968 in Valladolid, Spain. Education: Degree in Law and Business Administration from Universidad Pontificia Comillas (ICADE E-3) and State Attorney for Spain. 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 207     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.2 Board composition Size As at 31 December 2023, the board of directors comprised 15 members, whose profile and background are described in section 4.1 'Our directors'. The Bylaws dictate that the board must be composed of not less than 12 and no more than 17 members. Composition by type of director 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. Our board composition Executive directors • Ana Botín, Group Executive Chair • 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'. independence and other pertinent circumstances. This analysis is described further in section 4.6 'Nomination committee activities in 2023' 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 Rules and regulations of the board, which require that the board be predominantly made up of non- executive directors with at least 50% independent directors. Other external directors • José Antonio Álvarez • Javier Botín • Luis Isasi These directors cannot be classified as independent directors for the following reasons: • Mr Álvarez, because he was the former CEO of Banco Santander until 31 December 2022. • Mr Botín, because he has been a director for over 12 years. • Mr Isasi, because it is considered preferable to classify him as an external director under prudent criteria, in view of his remuneration as non-executive chair of Santander España in addition to his remuneration 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, despite the nomination committee and the board believing that he meets the requirements to be classed as an independent director. Independent directors • Glenn Hutchins (Lead Independent Director) Board tenure • Homaira Akbari • Bruce Carnegie-Brown • Sol Daurella • Henrique de Castro • Germán de la Fuente • Gina Díez Barroso • Ramiro Mato • Belén Romana • Pamela Walkden Every year, the nomination committee verifies the independence of the board members. It considers potentially significant business relations that could affect their At the end of 2023, the average term of directors was 8.17 years and the average term of independent directors was 5.33 years. See 'Board skills and diversity matrix' and 'Tenure and equity ownership' in this section 4.2. 208 Independent directors66.67%Executive directors13.33%Other external directors20.00%0 to 3 years33.33%4 to 11 years53.33%12 years or more13.33%     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management A Tenure and equity ownership Board of directors Ana Botín Executive Chair Chief Executive Officer Vice Chair and Lead Independent Director Glenn Hutchins Vice Chair Héctor Grisi José Antonio Álvarez Homaira Akbari Javier Botín Members Bruce Carnegie-Brown Sol Daurella Henrique de Castro Germán de la Fuente Gina Díez 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 31/03/2023 C End date 31/03/2026 Direct 1,463,276 Indirect 31,161,724 Shares represented 20/12/2022 31/03/2023 31/03/2026 1,693,710 20/12/2022 31/03/2023 31/03/2026 524,027 25/11/2014 27/09/2016 25/07/2004 01/04/2022 31/03/2023 26/03/2021 01/04/2025 31/03/2026 26/03/2024 2,497,881 67,826 5,502,083 100,913 25,598,851 156.529.169 E 25/11/2014 26/03/2021 26/03/2024 59,940 Total 32,625,000 % of share capital 0.202% 1,693,710 0,010% 524,027 0.003% 2,497,881 168,739 0.015% 0.001% 187,630,103 1.159% 59,940 0.000% 25/11/2014 12/04/2019 01/04/2022 22/12/2020 03/04/2020 28/11/2017 22/12/2015 29/10/2019 31/03/2023 01/04/2022 01/04/2022 31/03/2023 01/04/2022 26/03/2021 01/04/2022 31/03/2023 31/03/2026 01/04/2025 01/04/2025 31/03/2026 01/04/2025 26/03/2024 01/04/2025 31/03/2026 476,837 626,320 2,982 10,000 27,000 149,483 2,982 10,000 27,000 0.004% 0.000% 0.000% 0.000% 0.000% 0.003% 0.000% 0.001% 12,587,884 57,338,329 156,529,169 193,830,382 1.198% 506,860 208 82,608 506,860 212 82,608 4 A. Figures as at 31 December 2023. B. The date of first appointment referred herein may not match with the date of acceptance of the position. C. The date provided does 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. For more details, see 'Election, appointment, re-election and succession of directors' in section 4.2. 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. 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, including shares corresponding to Ana Botín that are also included within her direct or indirect shareholdings above, but excluding those corresponding to Javier Botín. 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. For more details, see section 9.2 'Statistical information on corporate governance required by the CNMV'. Diversity A diverse board of directors is essential to its effectiveness. Mixed skills, experiences and points of view create an environment that promotes independent opinion and constructive debate, and ensures proper decision-making. Thus, we seek to achieve a sound balance of technical expertise, experience and broad diversity. Our policy on the selection, suitability assessment and succession of directors helps make our board more diverse, not only in terms of gender, but also from an age, geographical provenance, experience and knowledge standpoint, without implicit bias that could lead to any form of discrimination, based for instance on disability, race or ethnic origin. The policy follows the European Banking Authority (EBA) and the European Securities and Markets Authority's (ESMA) joint guidelines on the suitability assessment of board members and key functions holders, as well as the ECB´s Guide to fit and proper assessments. Since 2019, when we added a gender equality target to our policy set by the nomination committee, our board of directors has had a balanced composition of women and men each accounting for between 40% and 60% of its members. In fact, since 2019, 40% of our board members are women. In 2020, the policy was amended to include age as additional diversity criteria to consider in the qualitative composition of the board amid a review of the succession process for directors and other executive positions following the last amendment of the CNMV's Corporate Governance Code. Our selection policy aims to diversify the board of directors based on different points of view, in particular: • Country of origin/international education. Selection considers cultural diversity, geographical provenance, and international education and experience, especially in the Group's core markets. • Gender. The nomination committee and the board of directors understand the importance of fostering equal opportunity between men and women as well as the need for women board members who possess the necessary skills, suitability and commitment to the role. Our policy promotes selection that maintains a balanced presence of women and men on the board, with a representation of both genders between 40% and 60%. 209 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Women represent 40% of Banco Santander´s board members, which is above the average for large listed companies in Spain and Europe. According to figures published by the CNMV in September 2023, the boards of IBEX 35 companies in Spain in 2022 had an average of 37.6% women members. Moreover, according to the European Commission's report on gender equality in the EU dated March 2023, the boards of large listed companies across the European Union had an average of 32.2% women members. • Age: Our policy also considers that selection must promote age diversity. There are no age limits for becoming a director nor for the roles of chair and chief executive officer. • Education and career: Selection considers candidates´ academic training and career history to ensure they are qualified to understand our Group’s businesses, structure and markets, and that they fit within the Santander culture and other aspects deemed material to the Group. Board skills and diversity matrix The nomination committee updates a board skills and diversity matrix that reflects the balance of the knowledge, skills, qualifications, diversity and experience required to pursue our long-term strategy in an ever-changing market. It considers EBA and ESMA guidelines on the suitability assessment of board members and key functions holders, as well as the ECB´s Guide to fit and proper assessments. The matrix follows the structure below: • We distinguish between thematic (technical) and horizontal skills. • We include a separate diversity section that details gender, country of origin/ international education, and age. • We show each member´s tenure. The matrix discloses each board member's particular expertise and skills, some of which are further detailed in section 4.1 'Our directors'), and is a sign of our commitment to transparency. We continuously review the suitability of skills and diversity to ensure a diverse board that can meet Banco Santander's strategy needs. The matrix enables us to pinpoint areas we need to strengthen in succession and election of new board members. Last, the 'Committees skills and diversity matrix' shows the diverse composition of each committee and members´ knowledge and expertise relevant to their committee's remit. 210 2023 Annual report Board skills and diversity matrix Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Ana Botín Executive Chair Héctor Grisi CEO Glenn Hutchins Vice Chair Lead Independent Director José Antonio Álvarez Vice Chair Non- executive Homaira Akbari Independent Javier Botín Non- executive Bruce Carnegie- Brown Independent Sol Daurella Independent Henrique de Castro Independent Germán de la Fuente Independent Gina Díez Barroso 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 (93.3%) DIVERSITY Female (40%) Male (60%) Continental Europe (60%) US/UK (66.7%) Latam (13.3%) Others (6.7%) Under 55 (6.7%) 55 to 65 (66.7%) Over 65 (26.7%) Gender Country of origin/ international education Age BOARD TENURE 0 to 3 years (33.3%) 4 to 11 years (53.3%) 12 years or more (13.3%) • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 211 2023 Annual report 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 Female Male Continental Europe US/UK Latam Others Under 55 55 to 65 Over 65 International experience HORIZONTAL SKILLS Top management Government, regulatory and public policy Academia and education Significant directorship tenure DIVERSITY Gender Country of origin/international education Age BOARD TENURE 0 to 3 years 4 to 11 years 12 years or more Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Executive committee Audit committee Nomination committee Remuneration committee Risk supervision, regulation and compliance committee Responsible banking, sustainability and culture committee Innovation and technology committee 100% 100% 100% 100% 83.3% 100% 100% 83.3% 100% 16.7% 100% 83.3% 100% 83.3% 16.7% 100% 16.7% 33.3% 100% 33.3% 66.7% 83.3% 83.3% 16.7% – – 66.7% 33.3% 33.3% 50% 16.7% 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% 83.3% 50% 50% 66.7% 66.7% – 16.7% – 83.3% 16.7% 16.7% 83.3% – 100% 80% 100% 60% 60% 80% 100% 100% 100% 40% 80% 60% 80% 20% 40% 100% 40% 60% 100% 60% 40% 40% 80% 20% – – 60% 40% 40% 60% – 80% 80% 100% 80% 60% 80% 100% 60% 100% 20% 80% 80% 100% 40% 60% 100% 20% 40% 100% 20% 80% 60% 60% – – – 60% 40% 40% 60% – 100% 80% 100% 80% 40% 100% 100% 40% 100% 20% 100% 80% 100% 60% 60% 100% 20% 20% 80% 40% 60% 80% 80% – – – 60% 40% 40% 60% – 100% 80% 100% 80% 60% 80% 100% 100% 100% 20% 80% 80% 80% 60% 40% 100% 20% 80% 100% 80% 20% 60% 80% 20% 20% – 60% 40% 20% 80% – 85.7% 100% 100% 85.7% 100% 85.7% 100% 85.7% 100% 28.6% 85.7% 71.4% 100% 71.4% 14.3% 100% 28.6% 28.6% 100% 42.9% 57.1% 57.1% 71.4% 14.3% 14.3% – 85.7% 14.3% 28.6% 57.1% 14.3% 212 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Election, appointment, re-election and succession of directors Election Our internal policy for the selection, suitability assessment and succession of directors dictates standards for the board’s composition, how it is revised and how new candidates are identified, selected and appointed. 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. 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. Appointment and re-election 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 shareholders at the general meeting confirm the appointment at the earliest subsequent meeting. Each appointment, re-election and ratification of directors is submitted to a separate vote at the general 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 submitted to the general 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 the minutes of the meeting. Term and cessation 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. 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 they report them at a meeting of the board and this is recorded in the minutes. When appropriate, the resignation shall be publicly disclosed, 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, without prejudice to the honourability requirements for directors and the consequences deriving from subsequent failure to meet those requirements, set out in Royal Decree 84/2015, that implements Act 10/2014. 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 Banco Santander's credit or reputation, especially if under criminal investigation, and of the developments of any such 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 identify candidates with the necessary talent for each function and who contribute to the board's proper diversity and balance of skills. Banco Santander director succession plan focuses on diversity standards and targets and the suitability assessment policy, as well as the regular review of the composition of the board and its committees, and the identification of potential board member candidates. 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 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). 213       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Board functions 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 functions it cannot delegate by law, the Bylaws or the Rules and regulations of the board, including: • General policies and strategies (including capital and liquidity; tax; new products, operations and services; corporate culture and values, including policies on responsible business and sustainability and, in particular, on environmental and social matters; crisis management and resolution planning; risk (including tax risk) control and management; remuneration policy; and compliance). • Financial and non-financial reporting, and - more generally - 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. • Internal audit plan. • 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 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 only be amended by shareholders at 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. On 25 July, the board of directors resolved to amend the Rules and regulations of the board of directors with the purpose of: • adapting them to the new provisions of Act 2/2023 of 20 February on the protection of persons who report violations of the law and the fight against corruption, bringing the responsibility of the board for implementing an internal system (Canal Abierto) and of the audit and risk supervision, regulation and compliance committees for overseeing it; • aligning them with the EBA guidelines on improving resolvability for institutions and resolution authorities, which apply from January 2024, to outline the board's oversight of crisis management planning, with support from the risk supervision, regulation and compliance committee; and • introducing technical improvements to increase the board effectiveness in the performance of its duties. 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. Group Executive Chair and Chief Executive Officer Our Executive Chair is Ana Botín and our Chief Executive Officer is Héctor Grisi. They 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. 214 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The roles of our Executive Chair and Chief Executive Officer 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. This reflects the Chair's ultimate accountability for Transformation. • 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. • 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, Payments and Retail & Commercial Banking (including A )), encompassing the relevant support and Transformation control functions. Whilst the Chair is accountable for Digital Consumer Bank, given that it is a global business, the Group CEO remains fully accountable for the Countries through which Digital Consumer Bank operates. • As responsible for day-to-day management, the CFO and head of Investment Platforms & Corporate Investments also report to the Chief Executive Officer. • 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. A. Whilst Retail & Commercial Banking reports directly to the Chief Executive Officer (with no functional line to the Executive Chair), ultimate accountability for Transformation remains with the Executive Chair. The duties of the Executive Chair, the Chief Executive Officer, the board, and its committees are clearly separated. Various checks and balances give Grupo 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. Both the Executive Chair and Chief Executive Officer report to the board of directors. • The board 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 in coordination with the nomination committee. • 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 audit; nomination; responsible banking, sustainability and culture; remuneration; and risk supervision, regulation and compliance committees are chaired by, and have a majority of, independent directors. The first three committees are composed entirely of independent directors. • 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. 215 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Lead Independent Director Our Lead Independent Director is Glenn Hutchins as of 1 October 2023. He replaced Bruce Carnegie-Brown, who had been in the role for almost nine years. The Lead Independent Director, who is key to our governance, coordinates the non-executive directors effectively and makes sure they serve as an appropriate counter-balance to the executive directors. The following chart shows the Lead Independent Director's functions and activities in 2023. Before stepping down, Bruce Carnegie- Brown provided a detailed report to the nomination committee and board of directors on his activities and the discharge of his duties. Duties of the Lead Independent Director and activities during 2023 Duties Facilitate discussion and open dialogue among independent directors, coordinating private meetings of non-executive directors without the executive directors 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 plans. Engage with shareholders and other investors to learn of their concerns, especially 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. Structure of board committees The board committee supports the board in: • Managing the Group by exercising decision-making powers through the executive committee. • Formulating strategy for core areas through the responsible banking, sustainability and culture committee, and the innovation and technology committee. Activities in 2023 Held five meetings with non-executive directors where they were able to voice their views and opinions. These meetings provided a valuable opportunity to reflect on the overall board and committee cycle throughout the year, to discuss board training topics, strategy execution, executive director and top management performance and objectives, succession planning and reflections on areas of continuous improvement. Given the appointment of a new Chief Executive Officer, the non- executive directors invited him to one session to gain his views after three months in office. In addition, the Lead Independent Director included in the agenda for these sessions the performance assessment of the CEO, in recognition of his reporting line to the board. Bruce Carnegie-Brown led the Executive Chair's annual performance review in order to determine her variable pay. Furthermore, he led her 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 Executive Chair at any board meeting, he remained committed to ensure the proper functioning of board meetings. While the Lead Independent Director did not need to request additional board meetings to be called, he remained fully engaged in, and informed of, board meeting agendas to make proposals of items. • Supervising and making important decisions through the audit committee, nomination committee, remuneration committee and risk supervision, regulation and compliance committee. 216 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The board has seven committees with the following structure: Mandatory A committees Voluntary committees Executive committee Audit committee Nomination committee Remuneration committee Risk supervision, regulation and compliance committee Decision-making powers Supervision, information, advice and recommendations regarding functions in risk, financial reporting and audit, nomination and remuneration matters Responsible banking, sustainability and culture committee Innovation and technology committee Support and proposal in strategic areas A. Required by law, the Bylaws or the Rules and regulations of the board. 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 Counsel 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 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 secretary does not need to be a director. 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 Counsel 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 15 meetings (12 ordinary and three extraordinary) in 2023. 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 approved annually and a provisional agenda of items to discuss among the matters that fall under its remit, 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. 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 appropriately detailed and received in good time. The Rules and regulations of the board of directors also expressly acknowledge directors’ rights to request and obtain information on anything related to Banco Santander and its domestic and foreign subsidiaries. They also acknowledge 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, either physically or virtually, 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 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. 217 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The board may meet in various rooms at the same time, provided that members can interact in real time ensuring interactivity and intercommunication via audio-visual means or telephone. The following chart shows the board’s approximate time allocation to each function in 2023. Approximate allocation of the board’s time in 2023 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. Comparison of number of meetings heldA Spain average 11.3 8.6 8.5 Banco Santander 15 23 15 Board Executive committee Audit committee Nomination committee Remuneration committee Risk supervision, regulation and compliance committee 13 12 17 US average 7.6 UK average 8.9 — 8.2 4.6 5.8 — 5.4 4.2 5.4 6.8 6.8 NA NA NA A. Source: Spencer Stuart Board Index 2023 (Spain, United States and United Kingdom). NA: Not available. 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, as 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 adequate meeting preparation and therefore promote 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 respective chair. Furthermore, committees may also submit a request to the General Counsel 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 Counsel 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. 218 Internal and external audit and review of the financial information7%Business performance27%Risk management14%General policies, governance and regulation13%Capital & liquidity10%Strategy29% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Board and committee preparation and attendance The following table shows the attendance rate of board and committee meetings in 2023. Committees Directors Average attendance Individual attendance Ana Botín Héctor Grisi Glenn Hutchins José Antonio Álvarez Homaira Akbari Javier Botín Bruce Carnegie-BrownA Sol Daurella Henrique de Castro Germán de la Fuente Gina Díez Barroso Luis Isasi Ramiro Mato Belén Romana Pamela Walkden Board 100% Executive 95% Audit 99% Nomination Remuneration 94% 95% Risk supervision, regulation and compliance 98% Responsible banking, sustainability and culture 93% Innovation and technology 98% 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 15/15 23/23 22/23 _ 23/23 _ _ 12/16 _ _ _ _ 22/23 22/23 22/23 _ _ _ _ _ 15/15 _ _ _ 14/15 15/15 _ _ 15/15 15/15 15/15 _ _ 13/13 _ _ _ 13/13 10/13 _ _ 13/13 _ _ _ _ _ _ 12/12 _ _ _ 12/12 10/12 12/12 _ _ 11/12 _ _ _ _ _ _ _ _ _ _ _ _ 17/17 _ 14/17 17/17 17/17 17/17 _ _ _ _ 5/6 _ _ 5/6 _ _ 6/6 _ 6/6 6/6 _ 4/4 3/4 4/4 4/4 4/4 _ 3/3 _ 4/4 _ _ _ _ 4/4 _ 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. Stepped down as member of the executive committee and innovation and technology committee on 1 October 2023. The following table shows the average preparation of directors in the exercise of their functions on the board and committees in 2023: 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 169 138 150 52 48 B 338 276 300 104 96 170 340 30 16 60 32 Meetings 15 23 15 13 12 17 6 4 A. Includes hours of meeting preparation and attendance. B. Not including two extraordinary sessions held in 2023 due to their short duration and low impact on the directors’ required commitment. 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 board chair and the committee chairs have a greater time commitment than the other directors because of the added functions their roles require. We also consider the commitment to attend sessions that form part of directors’ training and development programme. 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. Considering the above mentioned criteria, on average, directors dedicate approximately 57 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 perform 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 2023') enables us to update information on the estimated time directors dedicate to roles or professional activities outside the Group and demonstrates their ability to exercise good governance. 219   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 their experience and expertise. The board chooses contents based on feedback from its members and supervisory and regulatory requirements, among others. In 2023, programme workshops were delivered collectively to all board members and covered the following topics: • Behavioural economics, with the spotlight on impactful decision-making. • Regulatory compliance and compliance risk review. • Cloud, including an overview of the market and its implications for the financial industry. • ESG, with a focus on regulatory and supervision requirements and greenwashing risk. • Financial crime compliance, bribery and corruption risks, sanctions and anti-money laundering regulation. • Risk appetite statement and associated methodology review. • Decentralised Finance (DeFi), blockchain and smart contracts. • Capital and Provisions Models. Moreover, the audit committee requested training on the Sarbanes-Oxley Act (SOx) to stay abreast of its core principles; the differences between accounting rules and standards in Europe and the US; and forthcoming SEC regulations and their implications. Though this session was initially designed for the audit committee, board members were also able to attend. Directors can also request one to one and ad-hoc training on specific topics tailored to their own needs, 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. Banco Santander shares its training, induction and development methodology with subsidiaries to promote best practices and drive consistency of approach across our footprint. Some executives facilitated special sessions for subsidiary directors throughout the year to keep them up to speed with relevant Group matters such as cybersecurity, ESG, financial crime, governance, talent management, culture and others. Every board member receives the directors' manual. It is a support guide that provides both new and existing directors with a complete reference of information relevant to their role. In addition, the board has robust induction programmes so new directors can deeply understand the industry and Grupo Santander’s business model and structure, risk profile and governance arrangements, taking into account their existing skills, competencies and knowledge. They 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 and training sessions with senior managers of the Group. In June 2023, Glenn Hutchins completed his induction programme, which was tailored to his experience and particular needs. Board effectiveness review in 2023 The board undergoes a yearly assessment of its performance and effectiveness, composition, quality of its work and individual performance of its members. The review includes its committees. Every three years, it is conducted by an external consultant, whose independence is verified by the nomination committee. In 2023, the review was conducted by an external independent expert. External consultant independence A robust selection process was undertaken to identify an external independent consultant with an in-depth understanding of Spanish and banking markets, and of truly effective boards. As a result, Spencer Stuart was appointed. Spencer Stuart, a leader in its field, advised the Group in 2023 - occasionally and never exclusively - on identifying, selecting and reviewing managers' skills and potential. The amounts paid to Spencer Stuart in 2023 for these services were: Entity Santander Asset Management Banco Santander TOTAL Amount (EUR) 360,995 349,272 710,267 The nomination committee did not consider the referred amounts material in the context of the overall budget for such services, nor that they represented a significant proportion of Spencer Stuart’s total fees. Methodology and scope of the assessment The Executive Chair and the Chair of the nomination committee led the assessment, which aimed to identify areas of continuous improvement and maximise the board's effectiveness going forward. The review methodology agreed with Spencer Stuart and endorsed by the nomination committee comprised: • an anonymous questionnaire completed by all board members; • structured, detailed and confidential interviews with individual board members and select members of the executive team, covering their qualitative and quantitative assessment of key areas; and • attendance to board and committee meetings as an observer to assess the quality of debate and challenge, dynamics and internal culture. The review focused on board and committee structure, composition, diversity of board membership and competences, and behaviours, including: • the quality of their functioning; 220 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • their size, composition and diversity; • the effectiveness of the executive chair model; • the performance of the Executive Chair, the CEO, the Lead Independent Director and the secretary of the board, together with the contribution of the remaining individual directors, with particular attention to the Chairs of each committee; • the frequency and duration of meetings; content of the agenda and time dedicated to each item; quality of the information received; and decision-making processes including appropriate level of challenge; and • the overall effectiveness of measures introduced in 2022 on the back of a comprehensive review of our governance model. Findings and action plan In January 2024, the nomination committee and the board of directors discussed the findings and specific actions to address those findings resulting from the 2023 review, with a consensus view that the results were positive and that the board and its committees operate effectively. Specifically, the review concluded that our governance model is both robust and comprehensive and is continuously monitored and adjusted to meet the highest standards. The review also acknowledged the strong commitment to, and delivery of, continuous improvement, as evidenced by the review findings, which highlighted the following: • The board remains appropriately composed, with a depth and variety of board skills and expertise, high degree of independence, diversity and appropriate directors’ tenure average. • The board culture is strong, with a collaborative and respectful collective mindset, which facilitates healthy debate and challenge, and rigorous decision-making processes, leveraging the skills and diversity of the board. • The executive chair model is working effectively and there is a universal understanding of the division of responsibilities between the Executive Chair and the CEO, which is clearly documented. As part of that, the role of the Lead Independent Director is considered critical in providing additional checks and balances. • 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. The key aspects of the action plan can be summarized as follows: • Structure of the board: as part of any future board refreshment, a continued focus will be placed on maintaining an appropriate international diversity, in recognition of our geographical footprint; and on technology and innovation skills, in accordance with our strategic direction. • Effectiveness of the executive chair model: keep the split of the roles and responsibilities between the Executive Chair and the Group CEO under continuous review and refinement, as appropriate, to ensure its ongoing effectiveness and robustness. • Lead Independent Director: consolidate the orderly transition of the Lead Independent Director’s responsibilities in favour of Glenn Hutchins, enabling him to be truly effective in role. • Organization and internal culture: continue to ensure that paper volume and content is sufficient and concise in order to facilitate its understanding and corresponding debate. Furthermore, continue to leverage informal time between board members, acknowledging the value that this brings to board culture. • Committees: keep committee composition under review, ensuring optimal performance and effectiveness. In addition, further develop the role and functioning of the responsible banking, sustainability and culture committee given its important ESG agenda, whilst leveraging on the work of other committees, to ensure that it remains effective. The review findings and resulting actions are a sign of our ongoing commitment to effective governance. See 'Board effectiveness review and actions to continuously improve' in section 1.2 for further detail. 4.4 Executive committee activities in 2023 COMPOSITION Position Chair Ana Botín Héctor Grisi José Antonio Álvarez Members Luis Isasi Ramiro Mato Belén Romana Jaime Pérez Renovales Secretary Appointed on A Category Executive 11/12/1989 Executive 01/01/2023 Other external 13/01/2015 Other external 20/05/2020 28/11/2017 Independent 01/07/2018 Independent • The committee structure, composition and overall functioning A. Committee Chair since 10 September 2014. is considered to be both effective and efficient and in particular, the support provided to the board is highly appreciated and rated positively. As a result of the review, the board of directors discussed potential areas for improvement and approved an associated action plan in February 2024. Each committee will be engaged on specific actions applicable to their remit to ensure their ongoing effectiveness and efficient functioning. 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 law or under the Bylaws and Rules and regulations of the board. Its meeting frequency and the 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. 221 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 two 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. The committee frequency ensures the discharge of its duties and it is generally convened every two weeks, although it can meet as many times as required by the Chair. Main activities in 2023 In 2023, 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 the following matters: • Results: Regularly reviewed the Group's results and stakeholder reaction to them. • Business performance: Regularly received management reports on the performance of the Group’s business areas and other related matters. • Information reported by the Executive Chair: The Executive Chair regularly reported on the Group´s management, strategy and institutional issues. • Information reported by the CEO: The CEO reported on the Group´s performance and on the budget and execution of plans for all the units and the global businesses reporting to him. • Corporate transactions: Analysed and approved, where appropriate, corporate transactions on investments and divestments, joint ventures and capital transactions. • Risks: 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 review due to their materiality. It paid specific attention to monitor the credit risk impact relating to the war in Ukraine and the conflict in the Middle East, as well as to the global macroeconomic situation. • Global businesses and subsidiaries: Received updates on global businesses, subsidiaries and other business lines' performance against agreed plans. This helped the committee support the board with the oversight and control of its global business and subsidiary operations, and with the fulfillment of the targets announced at the 2023 Investor Day. • Capital and liquidity: 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: Reviewed regulatory developments, the yearly supervisory agenda and projects to ensure compliance with supervisory recommendations and regulatory reforms. • Governance matters: Approved specific internal regulation under its remit. In particular, the committee reviewed and approved the key governance changes associated with the new organizational model based on five global businesses, respecting the split of responsibilities established between the Chair and the CEO. In 2023, the executive committee held 23 meetings. 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. 2024 priorities The committee set the following priorities for 2024: • Monitor the performance of the Group's global businesses and subsidiaries, including progress in the execution of their strategic plans. • Oversee the deployment and embeddedness of the new organizational model based on five global businesses within the Group as primary reporting segments, with a specific focus on Retail & Commercial Banking and Digital Consumer Bank. • Continue to assess proposed corporate transactions relating to investments and divestments, joint ventures and capital transactions. • Continue to oversee the execution and achievement of specific public targets, including those disclosed at the 2023 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 the committee’s effectiveness and efficient coordination with the board, its committees and the executive first level committees. 222 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.5 Audit committee activities in 2023 We have maintained a close communication with our subsidiary audit committee chairs throughout the year, as it allowed us to share our priorities, concerns and thoughts with them. In addition, the committee continued to benefit from our members’ mix of experience and skills, leveraging their collective insights to ensure best possible outcomes. In the coming year, we will continue to supervise the Group’s units and global businesses and especially those more relevant to One Transformation, to ensure that appropriate controls remain in place. In addition, we will review the new primary reporting segments as part of our fundamental responsibility to provide oversight of the integrity of the financial statements. As part of that, we will progress how all the Group’s activities across all markets are consolidated under the five global businesses, in which we will continue to strike the right balance of supporting management and ensuring an appropriate level of control for a Group of our size. The committee, in coordination with the responsible banking, sustainability and culture committee, will monitor compliance with new ESG regulatory initiatives and non- financial reporting standards across the world and particularly, in the European Union. I have been delighted to chair this committee over the last four years and will ensure a smooth transition with my successor so that the committee continues to be effective in the exercise of its duties." Pamela Walkden Chair of the audit committee "In 2023, we have remained focused on the effective oversight of the financial information process and internal controls, the effectiveness of our Internal Audit function, while maintaining a professional and open relationship with the external auditors. The enhancements of our ESG reporting were high on our agenda last year. In particular, significant time was devoted to ensuring its consistency and our preparedness for the greater independent assurance required, closely monitoring the progress in all the units. In addition, we continued to focus on the oversight of the internal audit plan execution, ensuring appropriate amendments to facilitate an ongoing focus on fundamental risks, such as credit risk, and new risks and, in particular, a key focus was given to cyber risk and Internal Audit’s approach to it. COMPOSITION TIME ALLOCATION 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 In 2023, the committee held 15 meetings, including four 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 2023: The board of directors appointed the committee’s members based on their expertise, skills and experience in the matters the committee 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). 223 Internal Audit50%Financial and non-financial information and external auditor37%Internal Control Systems9%Others4%  2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties and activities in 2023 This section summarizes the audit committee's activities in 2023. Actions taken Duties Financial and non-financial information Review the financial statements and other financial information • Reviewed the individual and consolidated financial statements and directors' report for 2023 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 2022, 31 March, 30 June and 30 September 2023, respectively), before being approved by the board and subsequently released to the market and supervisory bodies. • Reviewed such other financial information included in the annual report; Universal 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. • Reviewed, prior to their submission to the board for approval, the adaptation of the 2022 and 2023 financial information by segments, in line with the agreed change of reporting to the five global businesses as primary segments. • Oversaw and assessed the preparation and reporting processes of non-financial reporting, in coordination with the responsible banking, sustainability and culture committee, and informed the board accordingly. • Received regular updates on ESG reporting evolution and progress within the Group, including the associated scope of metrics and action plans. • Reviewed the Climate Finance Report and the Green Bond Report in coordination with the responsible banking, sustainability and culture committee, prior to its submission to the board for approval, assessing the integrity of such disclosures and the review conducted by the external auditor. • Was informed by the Head of Tax on applied tax policies based on the Code of Good Tax Practices, as well as the annual review of the tax strategy and policy on control and management of risk, including tax risk, prior to their submission to the board for approval. • Was informed on the filing of the 2022 Tax transparency report with the Spanish tax agency (Agencia Estatal de Administración Tributaria). Review the non-financial information Information on applied tax policies Relations with the external auditor Information on the external audit plan • Received updates on the planning, progress and execution of the audit plan. • Was informed on the impact of new legal and regulatory requirements in connection with financial Interaction with the external auditor Assessment of the external auditor’s performance information. • 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 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 effective communication between the external auditor and the board. • Conducted the final evaluation of the external auditor's performance and how it has contributed to the integrity of the financial information based on its knowledge of the business, the frequency and quality of its communications; its independence; and opinions of the main local audit committee Chairs and controllers of the main local units or relevant subgroups on it, among others. • Received PwC's 2023 Transparency report from the lead audit partner, who also informed about the public outcomes of quality controls conducted by the ICAC or other supervisors and any other relevant investigations. 224 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Actions taken Duties External auditor independence PwC’s remuneration for audit and non-audit services • EUR million Monitored PwC’s remuneration, including the following fees for audit and non-audit services provided to the Group: Audit Audit-related services Tax advisory services Other services Total 2023 116.8 8.6 1.6 5.9 132.9 2022 115.4 6.4 0.5 4.8 127.1 2021 106.0 6.0 0.7 2.4 115.1 The audit services and main non-audit services included for each item in the above breakdown are detailed as follows: • Audit services: audit of 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); audit of the interim consolidated financial statements of Banco Santander; audit of the integrated audits prepared in order to file Form 20-F for the annual report with the SEC in the US and the internal control audit (SOx) for required Grupo Santander's entities; the limited review of the financial statements; and the regulatory auditor’s reports on Grupo Santander’s entities. • Audit-related services: comfort letters; verification of the financial and non-financial information (as required by regulators); and other reviews of documents that, due to their nature, the external auditor provides for submission to domestic or foreign authorities. • Tax services: tax compliance and advisory services provided to Group companies outside Spain, which have no direct effect on the audited financial statements and are permitted in accordance with independence regulations. • Other services: agreed-upon procedure reports, assurance reports and special reports performed under the accepted profession's standards; as well as other reports required by the regulator. 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 reference to when the audit committee approved them. • Verified that the ratio of PwC's total fees paid for all services for Banco Santander and the Group to its annual revenue in Spain and worldwide did not exceed 15% for three consecutive years. In 2023 the ratio stood at 0.27% of PwC's worldwide total revenues. • Verified every quarter, according to Regulation (EU) No 537/2014 of the European Parliament and of the Council, that the fees approved in 2023 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). In 2023, the ratio stood at 31.12%; and it would be 21.05% if services approved for PwC and other firms in its network and provided to Grupo Santander in and outside Spain were included. See subsection C.1.32 of section 9.1 'Reconciliation with the CNMV’s corporate governance report model' for the reconciled amounts of the above mentioned 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 2023, Grupo Santander contracted for services by audit firms other than PwC in the amount of EUR 174.1 million (EUR 185.5 and 263.8 million in 2022 and 2021, respectively). Non-audit services • Approved, on a monthly basis, all non-audit services rendered by the Group's external auditor verifying that all of them met the independence requirements in line with applicable Spanish and European regulation, SEC and Public Company Accounting Oversight Board (PCAOB) rules. 225 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Personal and financial relations External auditor independence report Actions taken • Received confirmation from PwC that the designated audit team, PwC as the auditor firm, everyone else that forms part of PwC or of other firms in its network, including all applicable extended relations to them complied with requirements on external auditor independence, analysing possible threats and taking appropriate safeguarding measures in line with their internal policies and procedures. • Received information about the results of the internal review carried out every six months of possible financial ties between the Group and PwC and its related parties, which concluded that no existing ties compromised the independence of PwC as external auditor. • Verified the external auditor's independence prior to the issuance of the 2023 auditor’s report on the financial statements, considering: • the remuneration it has received for audit and non-audit services; • all non-audit services rendered by the external auditor; and • the personal circumstances and financial dealings, that the external auditor or persons performing the audit may have with the Group. • Received written confirmation from PwC of its independence from Grupo Santander in accordance with applicable European and Spanish law, the SEC and the PCAOB rules. • Concluded that, by its judgement, it had no objective reason to question the external auditor's independence. Re-election of the external auditor Re-election of the external auditor • Recommended to the board, for subsequent submission to the 2024 AGM, the re-election of PwC as the external auditor of Banco Santander and its consolidated Group for 2024. As from 2021, the lead audit partner is Julián González, PwC's banking sector audit leader who 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. • Was informed on the changes introduced by the Law on Auditing in connection with the external auditor's mandate, as well as the associated calendar and selection process milestones for a nomination in 2026. Internal audit Oversight of the Internal Audit function Monitoring of internal audit activities • Supervised the Internal Audit function and ensured its independence and effectiveness in 2023. • Reviewed the external quality assessment performed by the Institute of Internal Auditors in Spain to further ensure the effectiveness of the function and its alignment with best practice. • Held meetings with the Group Chief Audit Executive (CAE) and internal audit officers, and one private meeting with the CAE without other executives or the external auditor present. • Proposed a 2023 Internal Audit function budget, ensuring that the function had the resources needed to discharge its duties effectively. • Was kept apprised of the hubs created to improve the efficiency of the internal audit works and the internal audit digital initiatives, including artificial intelligence capabilities. • Assessed the preparedness and effectiveness of the Internal Audit function to fulfil its duties. • Reviewed and reported to the board on the CAE's 2023 objectives and performance in 2023 and reported to the remuneration committee and board of directors to set his variable remuneration. • Verified the suitability of the subsidiary CAEs, in coordination with the nomination committee. • 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 2023. • Reviewed the strategic audit plan for 2023-2026 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 2023, monitoring the progress in audit ratings, and further promoting a continued focus on a stronger control environment; and conducted an additional review of issued audit reports, requiring that relevant areas to 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 cybersecurity, IT risks, financial crime, ESG, model risk, capital and solvency, operational risk, access control and vendor management, amongst other topics, to ensure proper oversight, with first and second line of defence representatives invited to provide additional feedback, as appropriate. 226 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Internal control systems Monitoring the assessment of internal control systems Coordination with Risk and with Compliance and Conduct Actions taken • 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 2022 internal control system (ICS) and assessed its effectiveness in compliance with CNMV (SCIIF) and the SEC (SOx). • Received specific training on SOx to further enhance committee members' knowledge on this matter. See 'Director training and induction programmes' in section 4.3. • Held four joint meetings with the risk supervision, regulation and compliance committee to review risk, compliance and internal audit aspects of the different regions and global businesses, with first line of defence representatives present. • 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, be heard and report irregular practices without fear of reprisal. • Collectively discussed with the risk supervision, regulation and compliance committee additional topics of mutual interest, such as risk culture, third-party supplier risk management, SEC cybersecurity rules and received an update on internal audit matters of the Risk and Compliance and Conduct functions. • Received biannual reports on the main legal contingencies, associated provisions and applicable public information, in coordination with the risk supervision, regulation and compliance committee. • Invited the CRO to all 2023 committee meetings. • The Chairs of the audit committee and of the risk supervision, regulation and compliance committee met regularly, ensuring ongoing coordination and collaboration. 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 meetings throughout the year. • Invited subsidiary audit committee chairs to specific committee meetings throughout the year and, in turn, the committee Chair attended specific subsidiary audit committee meetings to further enhance communication between them. Related-party and corporate transactions Creation or acquisition of special-purpose vehicles and entities based in countries considered non- cooperative jurisdictions Authorization and oversight of related-party transactions • Was informed of the activities of the Group’s offshore entities by the Head of Tax. See note 3.c) in the 'Notes to the consolidated financial statements'. • Reported favourably to the board, for its approval, on proposals to create or acquire interests in special purpose entities and also received the Special Purpose Entities Annual Update. • 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. • Issued the Related-party transactions report. See section 4.12 'Related-party transactions and other conflicts of interest'. Information for general meetings and corporate documents Shareholder information • Was represented by Pamela Walkden, in her capacity as committee Chair, to report at the 2023 AGM on the committee's activities in 2022. Corporate documents for 2023 • Prepared this activities report on 13 February 2024, which includes a performance review of the committee's functions and key priorities identified for 2024. The board of directors approved it on 19 February 2024. 227   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Achievement of 2023 objectives The committee took these actions planned for 2023: 2024 priorities The committee set the following priorities for 2024: • Continue to supervise the Group's units from a control perspective and specifically, the five global businesses, with a special focus on those more relevant to One Transformation, to ensure that appropriate controls are in place. • Oversee the change of reporting of financial results to global businesses as primary segments, to better align the way we report with the manner we manage the Group. • Continue to focus on the oversight of the internal audit plan execution, allowing for the appropriate level of flexibility to face challenges and new risks ahead, including cyber and risk derived from emerging technologies such as artificial intelligence. Remain focused on the independence and effectiveness of the Internal Audit function, ensuring its preparedness to fulfil its duties, including the need for new skillsets and expertise of its workforce. • Remain focused on analysis and reporting processes for non- financial information and, in particular, to further embed climate related disclosures to meet increasing stakeholders expectations, with a key focus on the implementation of robust processes and controls in the current complex legislative framework, and monitor the greater independent assurance required going forward. • Oversee and lead proactively an external auditor selection process according to applicable regulation, which will be coordinated by the CAO, with a view to appointing Banco Santander and its consolidated group's external auditor at the 2026 AGM, after expiration of the 10-year term of office of PwC as our external auditor. • Remain focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner and oversee a smooth transition of committee Chair, given that Pamela Walkden's four-year term of office expires in April 2024. • Continued to monitor the impact of the volatile environment on key aspects within the committee's remit. These included the macroeconomic scenarios which flow through to the key management judgements and estimates, such as provisioning, that were made in preparing the Group's financial statements, as well as the heightened risks around, for example, supply chain and cyber. • Continued to supervise, in coordination with the risk supervision, regulation and compliance committee, the Group's units and global businesses, with a special focus on those more relevant to digital transformation, to ensure that appropriate controls were in place. In particular, updates on units and global businesses were provided in joint sessions with the risk supervision, regulation and compliance committee by the relevant CRO, CCO and CAE, with the respective country CEO and/or global business head present, in readiness for their presentation to the board of directors. This facilitated a holistic view of each unit and global business' risks by the committee before a more strategic and business driven discussion was held at the board meeting. • Continued to focus on the oversight of the internal audit plan execution, ensuring appropriate amendments to address new risks and appropriateness of the internal controls to manage such risks. In particular, a key focus was given to cyber risk, the Internal Audit approach to it and the Group’s preparedness to address the challenges associated with it. • Reviewed our enhanced ESG disclosures to ensure consistency and coherence in a complex legislative framework and monitor the increased independent assurance required in the coming years, by the Corporate Sustainability Reporting Directive. As a result, the committee further reinforced its strong working relationship with the responsible banking, sustainability and culture committee. Specific updates were provided by the Chief Accounting Officer in this respect, with a special focus on the enhancements and progress made by the different units. As part of that, the subsidiary audit committee chairs were also duly apprised on these developments at specific sessions led by the committee Chair throughout the year. • Remained focused on the independence, quality and effectiveness of both the Internal Audit team and the committee itself, ensuring that their roles were discharged effectively. Specifically, the committee considered the findings and suggested areas for improvement resulting from the 2022 internal board effectiveness review concerning its remit. 228 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.6 Nomination committee activities in 2023 and structured handover process which enabled Glenn seamlessly to assume Lead Director responsibilities. We also remained focused on board composition, ensuring that its depth of skills, experience and overall make-up remained appropriate and relevant to the needs of the Group. As a result, we strengthened the board with the addition of both Carlos Barrabés and Antonio Weiss, who both bring highly relevant skills and experience. With respect to senior executive appointments, the committee has supported Héctor Grisi in his first year as the Group’s CEO and overseen the recommendations of new senior appointments for the Regional Heads of Europe and North America and for the Global Head of Retail & Commercial Banking, amongst others. The effectiveness of the board, its committees and our overall governance remained a key priority in the year. We tested our progress on our overall effectiveness through commissioning an external evaluation of the board and its committees. The review, conducted by Spencer Stuart, considered our board to be highly effective. Recommendations resulting from this review have been incorporated into each committee’s priorities for 2024. The committee continued to benefit from a great mix of experience and skills, and we have complemented this with the appointment of Belén Romana as a member with effect from 1 January 2024. It has been a privilege for me to chair this committee over the last nine years and I am confident that my committee Chair successor and colleagues will play their part in supporting the further development of the Group in the years to come." Bruce Carnegie-Brown Chair of the nomination committee "Board composition, succession planning, senior appointments, effective governance, career development and talent strategy remained top priorities in our agenda throughout 2023. The committee holds the belief that effective group-wide governance is an essential element of business success, and supported initiatives such as the subsidiary Chairs in-person convention hosted by the Group Executive Chair in Madrid, with a clear focus on the importance of effective governance across the Group, ongoing connectivity and sharing knowledge and associated best practices. We remained focused on robust governance standards aligned to our strategic goals. In this regard, a diverse workforce and an ambitious and compelling employee value proposition are key to both developing the quality of our internal pipeline and attracting the external talent required to deliver our strategic targets. In particular, significant time was devoted to the robust succession process followed for the Lead Independent Director role, which I passed to Glenn Hutchins on 1 October 2023. This work included the importance of an appropriate COMPOSITION TIME ALLOCATION In 2023, the committee held 13 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 2023: Position Chair Members Bruce Carnegie-Brown Sol Daurella Gina Díez Barroso Glenn Hutchins Belén Romana Category Independent Independent Independent Independent Independent Appointed on A 12/02/2015 23/02/2015 22/12/2021 20/12/2022 01/01/2024 Secretary Jaime Pérez Renovales A. Committee Chair since 12 February 2015. The board of directors appointed the committee’s members based on their expertise, skills and experience in the matters the committee handles. For more details, see section 4.1 'Our directors' and 'Board and committees skills and diversity matrix' in section 4.2. 229 Key roles suitability assessment 13%Board and board committees composition, succession planning24%Governance24%Senior management succession planning and effectiveness monitoring, talent and related activities 39%  2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties and activities in 2023 This section summarizes the nomination committee's activities in 2023. Actions taken Duties Board and committees composition and succession planning Selection and succession of the board and its committees • Ensured board member selection procedures guaranteed directors’ individual and collective suitability; fostered diversity in its broadest sense; and analysed the required expertise, skills and time commitment for effective board membership. • Continued to be involved, together with the Group Executive Chair, in succession planning activities for the board. • 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, ensuring that the collective board and its committees composition remains appropriate to oversee and lead the strategic direction of the Group. • Ensured that any proposed appointment had been drawn from a depth of candidate pool which recognised diversity in its broadest sense. Appointment, re-election and ratification of directors and committee members • 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 annual board effectiveness review in order to target the relevant recruitment. • Recommended the appointments of Carlos Barrabés and Antonio Weiss, as independent directors, effective from the 2024 AGM, subject to regulatory approval. • Oversaw a rigorous and comprehensive process to facilitate the orderly succession of the Lead Independent Director position, taking into account and constructively challenging all relevant factors. As a result, confirmed the suitability of Glenn Hutchins for the position and proposed his nomination to the board. • Proposed composition changes for certain committees to further enhance their performance and support to the board in their areas of authority. See section 1.1 'Board skills and diversity'. • Recommended the nominations of Carolyn Everson and Juan Ignacio Gallardo Thurlow as members of the international advisory board. • 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 2024 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 and the related time commitment. Concluded that those commitments were compliant with applicable legislation regarding the maximum number of boards to which they may belong, and did not interfere with their obligations as Banco Santander directors nor entail any conflict of interest. Annual verification of the status of directors Directors' potential conflicts of interest and other professional activities Director induction, training and development programmes • Assessed the effectiveness of the director induction, training and development programmes, guaranteeing that such programmes are designed according to each director’s circumstances and needs. • Identified areas for improvement and additional training topics for the 2024 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 monitored the effectiveness of the top management Appointment of key officers • Recommended the following nominees, later agreed by the board: succession plans. • Pedro Castro e Almeida, as Regional Head for Europe. • Christiana Riley, as Regional Head for North America. • Daniel Barriuso, as Global Head of Retail & Commercial Banking and Group Chief Transformation Officer. • José Luis de Mora, as Global Head of Digital Consumer Bank. 230 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Talent and culture Governance Board effectiveness review Actions taken • Discussed Human Resources' activities and progress and proposals regarding diversity, equity and inclusion; and reviewed the Group’s STEM (science, technology, engineering and mathematics) talent strategy. • Assessed and challenged proposals on top-leadership goals, career development plans and mobility. • Reviewed the execution of the action plan to address the areas for improvement revealed in the 2022 board effectiveness annual review. • Oversaw the 2023 board effectiveness review, which was conducted with the collaboration of an independent external consultant (Spencer Stuart), whose independence was verified by the committee upon analysing its business relations with the Group and, in particular, the services rendered and the amounts received. See 'Board effectiveness review in 2023' in section 4.3. Internal governance • Assessed the suitability of certain proposed key position appointments 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. • Endorsed Group director nominations for subsidiary boards to ensure they were suitable and correctly perform their duties. • Verified the suitability of the subsidiary CAEs, CROs and CCOs with the Group audit and risk supervision, regulation and compliance committees. • Remained apprised on new governance regulation, trends, best practices and implications for the Group. • Verified that subsidiaries followed the provisions of the GSGM relating to board and committee structure and their functions pursuant to best practices. In addition, the committee tracked subsidiary actions and progress in implementing internal regulation required by the Group. See section 7. 'Group structure and internal governance'. • Reviewed the subsidiary board and board Chairs annual effectiveness reviews. • Reviewed the key highlights of the 2023 AGM. • Reviewed the activities conducted by 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 activities conducted by the Shareholder and Investor Relations team, as well as the Lead Independent Director's engagement with investors, shareholders and proxy advisors, and their feedback on the Group's corporate governance arrangements. • Reviewed the independence of the external advisers hired by the nomination committee and the remuneration committee in 2023, analysing their services, the amounts they received and other items. • Reviewed the annual corporate governance report to verify that information contained therein conforms to the applicable law and that the corporate governance system promotes corporate interests and considers all stakeholders' expectations. • Endorsed the proposed amendments to the Rules and regulations of the board which were submitted to the board for approval. • Assessed the suitability of directors, senior management, heads of internal control functions and the 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. To this effect, it supervised, amongst others, the attendance of the directors at the meetings of the board and the committees, ensuring that it 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. Furthermore, average board attendance was verified as 100%. See 'Board and committee preparation and attendance' in section 4.3. • Confirmed the absence of circumstances that could harm the Group's credit and reputation, based on the information received from directors. Corporate governance Suitability assessment Annual suitability assessment of directors and key function holders Information for general meetings and corporate documents Shareholder information • Was represented by Bruce Carnegie-Brown, in his capacity as committee Chair, to report at the 2023 AGM on the committee's activities in 2022. Corporate documents for 2023 • Prepared this activities report on 12 February 2024, which includes a performance review of the committee's functions and key priorities identified for 2024. The board of directors approved it on 19 February 2024. 231 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Achievement of 2023 objectives The committee took these actions planned for 2023: 2024 priorities The committee set the following priorities for 2024: • Continue to apply and supervise succession arrangements for the board as a whole, playing an important role in ensuring that succession planning more generally is discharged in an effective manner. Continue to take its proactive approach to board refreshment and associated succession planning. • Keep a proactive focus on senior executive succession planning based on the Group’s strategic needs and the potential challenges the business may face, maintaining our key focus on the continued development of our internal succession pipeline. • Continue to place a great focus on diversity in its broadest sense as part of our talent strategy and, in particular, in gender diversity, to ensure a balanced representation of both genders. Further promote international mobility to ensure we leverage on the possibilities that being a group of our size represents for talent development purposes. • Monitor the effective implementation of the action plan derived from the 2023 board effectiveness review, in line with our commitment to continuous governance improvements. • Remain focused on the overall effectiveness of the board and its committees, ensuring that their role is discharged in the most tangible and effective manner. This will be particularly important to ensure our continued positive business performance and success. In addition, oversee a smooth transition of committee Chair, given that Bruce Carnegie- Brown has expressed his intention not to stand for re-election at the 2024 AGM, stepping down with effect from that same date. • Continued to review the board member and senior executive succession plans based on the strategic direction of the Group and ensuring that the collective board composition remained commensurate with the required skills, experience and diversity required to oversee and drive such strategy, including understanding of the operating context of the Group. The committee approach to succession planning also ensured the continued development of a robust internal succession pipeline. • Continued to promote internal mobility within the Group and diversity in its broadest sense in our succession policy and talent strategy, acknowledging that building a more diverse and inclusive workforce is critical to business sustainability and success. • Continued to monitor board members’ expertise and training needs, as well as the board’s development, to continuously improve the knowledge of the most important topics of the organisation and industry. • Led the process for the appointment of a successor to the Lead Independent Director, which resulted in the appointment of Glenn Hutchins. He was also appointed as Vice Chair of the board with effect from 1 October 2023. As part of that, the committee received updated information throughout the year to ensure the robustness of the process followed, which included, amongst others, the suitability of the candidates considered, the associated timeline, the transition process and the associated impact to committee composition. • Kept corporate governance arrangements under constant review, ensuring that the expectations of all stakeholders with strategic relevance for the Group were considered. In particular, the committee closely monitored shareholder engagement and considered their feedback and insights together with the Lead Independent Director. • Continued to ensure the ongoing application of the GSGM and related internal regulation across the Group, and as a consequence, robust oversight and control of the Group´s subsidiaries, with a key focus on the effectiveness of local boards and their annual board effectiveness assessment disciplines and associated action plans. • Remained focused on the overall effectiveness of the committee, ensuring that its role was discharged with appropriate rigour. As part of that, the committee considered the findings and suggested areas for improvement resulting from the 2022 internal board effectiveness review. In addition, the committee oversaw the selection process of the external review firm and coordinated the 2023 board effectiveness review. See 'Board effectiveness review in 2023' in section 4.3. 232 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.7 Remuneration committee activities in 2023 balance key objectives such as fair pay, effective risk management, sustainability, meritocracy, and cross- collaboration - all the while taking stakeholder feedback into account. The committee continued to benefit from a good mix of experience and skills of our members, each providing valuable advice and challenge to management. As in previous years, we received the confirmation from an external provider that the Group's policies, procedures and practices fully comply with applicable legislation. I would like especially to thank Bruce Carnegie-Brown for his service over the last years as Chair of the committee until I took over in October 2023, and his continued membership until the 2024 AGM. He has been an effective steward of the interest of our stakeholder community." Glenn Hutchins Chair of the remuneration committee "Our role, in coordination with the nomination committee, is to attract and retain key talent to support the Group’s transformation agenda and strategic ambitions in order to increase shareholder value. Our remuneration philosophy involves enhancing our employee value proposition while simultaneously meeting supervisory expectations and serving all of our stakeholders' best interests. This requires us to COMPOSITION TIME ALLOCATION Position Chair Members Glenn Hutchins Bruce Carnegie- Brown Sol Daurella Henrique de Castro Luis Isasi Category Independent Appointed on 20/12/2022 Independent 12/02/2015 Independent Independent Other external 23/02/2015 29/10/2019 19/05/2020 Secretary Jaime Pérez Renovales A. Committee Chair since 1 October 2023. The board of directors appointed the committee’s members based on their expertise, skills and experience in the matters the committee handles. For more details, see section 4.1 'Our directors' and 'Board and committees skills and diversity matrix' in section 4.2. In 2023, the committee held 12 meetings, including one joint session 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 2023: 233 Governance 9%Remuneration of directors4%Remuneration of senior management and other key executives35%Remuneration schemes and policies52%     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties and activities in 2023 This section summarizes the remuneration committee's activities in 2023. 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 senior management remuneration, shaping remuneration schemes consistent with Banco Santander's Simple, Personal and Fair values, and updated the long-term ESG-related metrics in coordination with the responsible banking, sustainability and culture committee. • Recommended the 2022 individual variable remuneration of members of senior management, based on annual performance targets and their weightings as set by the board. • Proposed to the board the global annual variable remuneration for 2023 (payable immediately and deferred executive remuneration), based on achievement of previously set quantitative and qualitative targets. • Recommended to the board the annual performance indicators to calculate variable remuneration for 2024 with limited variations versus previous years in order to maintain focus on customer centricity, risk, capital, profitable sustainable growth and cost discipline. • Set the achievement scales for the annual and multi-year performance targets and weightings for submission to the board. • Endorsed specific enhancements in the performance management process for senior management to further promote the latter as corporate culture representatives and supporters of the effective transformation of the business. • 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 their alignment with the Group remuneration policy. • Reported to the board that an external advisor assessment on the remuneration policy found that the Group's policies, procedures and practices comply with the regulatory requirements for credit institutions. • Endorsed proposed changes to the remuneration policy to adapt it to the SEC Remuneration Recoupment ('clawback') rules, amongst others. • 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 Diversity, equity and inclusion • Reviewed 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 unit. • 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 Performance assessments • Reviewed the calibration of executives’ performance reviews for the senior management and, in Fixed remuneration for executive directors and senior management Variable remuneration for executive directors and senior management Share plans particular, for the Executive Chair, the CEO and the main executives in coordination with non-executive directors; for the CRO and CCO with the risk supervision, regulation and compliance committee; and for the CAE with the audit committee. • Checked that executive directors' fixed remuneration remained appropriate to their duties based on market rates. • Made sure remuneration for senior management remained fair and competitive, recommending adjustments where appropriate to the board, based on a benchmark analysis and specific pay principles. • Proposed to the board variable remuneration for the preceding year payable either immediately or in deferred amounts. • Submitted a proposal to the board for approval and subsequently for vote at the 2023 AGM on remuneration plans that involve the delivery to executive directors of shares or share options (deferred multiyear target variable remuneration plan; deferred and conditional variable remuneration plan; application of the Group buy-out policy). • Analysed and submitted to the board tailored incentive schemes for different units to drive talent retention and alignment with the Group’s strategic priorities. 234 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Remuneration of directors Individual remuneration of directors in their capacity as such Actions taken • 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 • Reviewed the volume of the Identified Staff (Material Risk Takers) in 2023, trends versus previous years and checked that fixed and variable remuneration ratios for control functions remained consistent with regulation and targets. Governance Coordination with subsidiaries Director remuneration policy report • Set key remuneration components for Identified Staff in coordination with the risk supervision, regulation and compliance committee. • Submitted a proposal to the board, for subsequent submission to the 2023 AGM, regarding the approval of maximum variable remuneration of up to 200% of the fixed component for certain e Identified Staff, including executive directors and senior management. • Checked that remuneration schemes supported attraction and retention of key talent to help drive the Group's strategy, the application of the incentives implemented in the Group, and the level of achievement of long-term deferred remuneration metrics. • Received information on 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. • 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 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 2023 AGM. • Assisted the board in overseeing compliance with the director remuneration policy. • Positively recommended the proposal for the directors' remuneration policy for 2024, 2025 and 2026 that will be submitted by the board of directors at the 2024 AGM as a separate item on the agenda pursuant to Article 529 novodecies of the Spanish Companies Act and is an integral part of this report. See sections 6.4 Directors' remuneration policy for 2024, 2025 and 2026' and 6.5 'Preparatory work and decision-making for the remuneration policy; remuneration committee involvement'. As part of that, the committee considered the inputs from shareholder and stakeholder engagement during the year. It also considered any recommendations from regulators, legal requirements or applicable regulation concerning remuneration matters and verified that the policy is consistent with the Group's culture and Simple, Personal and Fair values. • Confirmed that the directors' remuneration policy for 2024, 2025 and 2026 is consistent with the Group's remuneration policy and with the remuneration scheme outlined in the Bylaws. The main changes included are as follows: the simplification of the short-term bonus pool scorecard, moving the multiplier approved in 2023 to the qualitative adjustment going forward, with an associated weight of +/-10%. In addition, we reinforced the focus on our solid cost discipline as a measure to succeed in transformation. We also eliminated the stock options for the executive directors. Information for general meetings and corporate documents Shareholders information • Was represented by Bruce Carnegie-Brown, in his capacity as committee Chair, to report at the 2023 AGM on the committee's activities in 2022. Corporate documents for 2023 • Prepared this report on 12 February 2024, which includes a performance review of the committee's functions and key priorities identified for 2024. The board of directors approved it on 19 February 2024. 235 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Achievement of 2023 objectives The committee took these actions planned for 2023: 2024 priorities The committee set the following priorities for 2024: • Keep incentive measures under continuous review to ensure that they continue to align with our organization based on segments and global businesses, and shareholder value creation ambition. This will include a continued focus on customers and sustainable profitability and an assessment on how they drive our corporate culture and behaviours, balancing the needs of our different stakeholders. • Continue to monitor trends and best practices in executive remuneration to further enhance our employee value proposition, promoting effective attraction and retention of key talent to deliver the Group's strategy while maintaining the strong shareholder support received and appreciation from investors and proxy advisors. • Ensure that remuneration schemes support attraction and retention of key talent to help us deliver against our agreed strategy and associated targets, including our transformation agenda. • Continue focusing on diversity, equity and inclusion across the Group, ensuring the avoidance of pay gaps in this regard. As part of that, review the implementation of new regulation regarding remuneration and salary equity information to be included in our non-financial disclosures. • Remain focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. • Kept incentive measures under continuous review to ensure that they continue to align with our strategic aims. In particular, this included a continued focus on customers and sustainable profitability, carefully considering our corporate culture and behaviours, balancing the needs of our different stakeholders. As part of that, the committee established the annual performance indicators to calculate variable remuneration for 2024 with limited variations versus the previous year in order to maintain focus on customer centricity, risk, capital, profitable sustainable growth and cost discipline. In addition, it recommended to the board for approval specific changes in the performance management process for our top management to ensure they lead by example. • Continued to monitor external developments in executive remuneration best practices in the financial industry and broader market within regulation to enhance our employee value proposition. The committee continued to focus on ensuring that our remuneration schemes remain effective for attracting and retaining key talent for the Group’s strategic ambitions, and that they promote meritocracy and effective risk management. In particular, it received specific deep-dives on remuneration matters for key segments, such as STEM talent, or certain countries. • Continued to focus on accelerating pay equality in the Group to support our commitment to diversity, equity and inclusion. Checked that the methodology to calculate diversity metrics was accurate and action plans effectively promote a more diverse composition of our employee population. • Remained focused on the overall effectiveness of the committee, ensuring that its role is discharged with appropriate rigour. Specifically, the committee considered the findings and suggested areas for improvement resulting from the internal board effectiveness review conducted in 2022 concerning its remit. 236 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.8 Risk supervision, regulation and compliance committee activities in 2023 strong commitment to compliance and conduct risk to safeguard our reputation and integrity, with an ongoing focus on financial crime compliance. We have also reflected and acknowledged how critical it is, in the current environment, to enhance cross-country collaboration. As a result, we have shared our concerns, best practices and views by organising a convention with the Chairs of the subsidiary risk supervision, regulation and compliance committees. In addition, the committee has maintained a key focus on identifying emerging and non- traditional risks in order to anticipate potential impacts on our business model; as in previous years, this featured the committee’s strategy meeting agenda. The committee continues to benefit from a good mix of experience and skills, and I am confident that this would help us to successfully navigate the challenges ahead. In the coming year, the committee will remain vigilant on the main risks of the Group, including credit, operational, financial crime compliance and model risks and also the risks related to the transformation of the Group, amongst others." Belén Romana Chair of the risk supervision, regulation and compliance committee "In 2023, we navigated a complex and dynamic risk landscape, characterised by macroeconomic and industry- specific challenges, primarily driven by rising inflation and interest rates, as well as a volatile geopolitical landscape. As part of this, the committee has closely monitored the actions taken by management to address these circumstances. During the year, the committee has ensured that we maintained prudent lending practices to achieve adequate credit quality of our loan portfolio and that the exposure remained within acceptable limits. The committee has kept its COMPOSITION TIME ALLOCATION 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 the committee handles. For more details, see section 4.1 'Our directors' and 'Board and committees skills and diversity matrix' in section 4.2. In 2023, the committee held 17 meetings, including one strategy session, four 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 2023: 237 Capital & Liquidity 5%Compliance and Conduct27%Additional oversight activities3%Risk65%      2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties and activities in 2023 This section summarizes the risk supervision, regulation and compliance committee's activities in 2023. Duties Actions taken Risk Assist the board in (i) defining the Group's risks policies, (ii) determining the risk appetite strategy and culture, and (iii) supervising their alignment with the Group’s corporate values Risk management and control Supervise the Risk function Collaboration to establish rational remuneration policies and practices Regulatory and supervisory relations • Reviewed and proposed to the board for approval the annual risk appetite statement proposal, and the analysis of proposed new metrics and limits. • Reviewed risk appetite metrics, compliance with the limits and any breaches in the year on a quarterly basis. • Reviewed the internal capital adequacy assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP), the Strategic Plan, the three-year strategic financial plan, the annual budget and 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 alignment to the Group' risk appetite. • Reviewed the Group's main risks by unit and risk type, with a special focus on credit risk, operational risk and financial crime. • Analysed the subsidiaries and businesses risk management and control periodically, in coordination with the audit committee. • Reviewed the risks of strategic projects before their submission to the board of directors, and their mitigation measures, with a special focus on the new global businesses and strategic initiatives. • Checked that the Group's risk control management, most notably the risk profile assessment (RPA) and the risk control self-assessment (RCSA), remained robust. • 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. • Received and analysed specific information on credit risk, with a special focus on non-performing assets; market risk, structural and counterparty risk; operational risk, specially the risks derived from the cybersecurity and technological obsolescence, with a key focus on legal, reputational, social and environmental risks. The analysis on each matter was conducted in coordination with the audit and innovation and technology committees. The committee reviewed the business continuity and contingency plans with the latter. • Supervised, together with the responsible banking, sustainability and culture committee, (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. • Supported the board in the supervision of crisis management and resolution planning. • 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 the sufficiency and appropriateness of its resourcing. • Reported to the board on the CRO's 2023 objectives and reviewed his performance against those, and reported to the remuneration committee and board of directors to set his variable remuneration. • Verified the suitability of the subsidiary CROs, in coordination with the nomination committee of the Group. • 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. • 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 2023 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). • Reviewed relevant developments regarding regulatory and supervisory relations and maintained focus on the most relevant developments related to the Single Supervisory Mechanism (SSM), the Single Resolution Board (SRB), the supervisors of all the Group’s subsidiaries and the Supervisory Review and Evaluation Process (SREP) and specific on-site inspections related to risk and compliance matters, as appropriate. 238 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Compliance and conduct Supervise the Compliance and Conduct function Regulatory compliance including Canal Abierto Actions taken • Supervised the Compliance and Conduct function's activities, strategy, strength and potential areas of improvement, as well as the development of the 2023 compliance programme. • 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, amongst others. • 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 session, in addition to other informal meetings) to discuss strategic compliance topics as well as to discuss independently and directly any potential material issue relating to the Compliance and Conduct function. • Reported to the board on the CCO's 2023 objectives and reviewed her performance against those, and reported to the remuneration committee and board to set her variable remuneration. • Verified the suitability of the subsidiary CCOs, in coordination with the nomination committee of the Group. • Reviewed the situation of compliance with data protection regulation across Grupo Santander and received the data protection officer's annual report. • Endorsed, prior to presentation to the board, the changes to the general code of conduct. • Received information, in a joint meeting with the audit 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, be heard and report irregular practices without fear of reprisal. Financial crime compliance (FCC) • Oversaw the Group's observance of FCC regulations as well as the activities carried out by the function: • Was provided with quarterly updates on progress on the One FCC implementation and reviewed the Product governance and consumer protection Capital and liquidity Assist the board in reviewing and approving capital and liquidity strategies and supervising their implementation sanctions screening activity. • 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). • Reviewed reports on customer complaints, their causes and action plans launched to reduce and mitigate the identified deficiencies, in coordination with the responsible banking, sustainability and culture committee. • Reviewed risk management and the main risks identified, as well as the concerns, priorities and actions taken by the Product Governance and Consumer Protection area regarding conduct risk with retail and vulnerable customers. • 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 2023 securitizations plan and the analysis of the portfolio profitability versus the risk undertaken. Additional oversight activities Additional oversight activities • Held four joint meetings with the audit committee to review risk, compliance and internal audit aspects of the different regions and global businesses, with first line of defence representatives present. • Collectively discussed with the audit committee additional topics of mutual interest, such as risk culture, third-party supplier risk management and SEC cybersecurity rules, and received an update on internal audit matters of the Risk and Compliance and Conduct functions. • Received reports from the Santander España risk committee on the main items covered at its meetings throughout the year. • The committee Chair attended specific subsidiary risk supervision, regulation and compliance committee to further enhance communication between them. • Received updates on the matters discussed at the responsible banking, sustainability and culture committee by the Chair of that committee. • Received monthly updates from the CRO and CCO on the work conducted by both the risk control and the compliance and conduct committees in their capacity as Chairs, respectively. • The Chairs of the audit committee and of the risk supervision, regulation and compliance committee met regularly, ensuring ongoing coordination and collaboration. 239 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Information for general meetings and corporate documents Shareholder information Actions taken • Was represented by Belén Romana, in her capacity as committee Chair, to report at the 2023 AGM committee's activities in 2022. Corporate documents for 2023 • Prepared this activities report on 14 February 2024, which includes a performance review of the committee's functions and key priorities identified for 2024. The board of directors approved it on 19 February 2024. • Remained focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. Specifically, the committee considered the findings and suggested areas for improvement resulting from the 2022 internal board effectiveness review concerning its remit. 2024 Priorities The committee set the following priorities for 2024: • Continue to supervise and monitor the macroeconomic conditions, especially interest rates, the consequences of the energy crisis, inflation and the geopolitical landscape, including armed conflicts. • Continue to monitor all risks of the Group, with specific focus on credit, operational, market, model, IT, cyber and risk derived from emerging technologies such as artificial intelligence and financial crime compliance, to ensure that those risks remain within our approved risk appetite. In addition, continue to identify the emerging and non- traditional risks in order to anticipate potential impacts on our business model. • Supervise the main risks associated with the transformation and the five global businesses, ensuring that we maintain and even strengthen risk management under the new organization, at any time. • Promote ongoing communication mechanisms between the Chair of the risk supervision, regulation and compliance committees of the Group and her counterparts in the subsidiaries to discuss areas of mutual interest, including risks that may have a greater impact at a Group level, exchange concerns and best practices. • Remain focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. Achievement of 2023 objectives The committee took these actions planned for 2023: • Monitored the macroeconomic conditions, especially the energy crisis, inflation, interest rates hikes and potential recession in certain countries, and the potential impact on the Group. In particular, the committee continued to supervise, in coordination with the audit committee, the Group's units and global businesses to ensure that there was an appropriate focus on local nuances and risks. In particular, updates on global businesses and units were provided in joint sessions with the audit committee by the relevant CRO, CCO and CAE, with the respective global business head and/or country CEO present, in readiness for their presentation to the board of directors. This facilitated a holistic view on each unit and global business' risks by the committee before a more strategic and business driven discussion was held at the board meeting. • Oversaw the risks associated with PagoNxt and Digital Consumer Bank, and reviewed specific deep dives on financial crime and money laundering prevention, IT obsolescence, climate change and model risk. As part of that, specific deep- dives were scheduled throughout the year to facilitate discussion and oversight of these risks. • Monitored the Group’s top risks, early warning indicators and mitigation actions to manage risks and the Group's risk profile effectively and within risk appetite. • Identified emerging and non-traditional risks to anticipate potential impacts on our business model. In particular, the committee held a strategy session where those items were covered, with a key focus on the geopolitical risks and regulatory and supervisory developments. • Enhanced 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. As part of that, a convention of the Chairs of the risk supervision, regulation and compliance committees of the Group was held at our headquarters to discuss global initiatives, expectations and common relevant issues for them. • Monitored and oversaw the smooth transition of the new CRO and ensured that his onboarding was robust and effective, enabling him to be truly effective in his role. He attended all the 2023 committee meetings and frequently met with the committee Chair. 240 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.9 Responsible banking, sustainability and culture committee activities in 2023 initiatives to effectively integrate green finance within risk management. Furthermore, the inevitable range of challenges faced in the countries where Santander is present (geopolitical environment, regulatory fragmentation, different governmental support, etc) were considered by the committee to ensure the right approach to achieve the best possible outcomes, including achieving our established targets. In addition, education and our communities also remained high on our agenda. We further reinforced our working relationship with the audit committee by reviewing the preparation and presentation of non-financial information according to the applicable regulations and international standards. Members’ skills and experience helped the committee to operate effectively and to provide appropriate constructive challenge to management, and to assist the board with the significant ESG challenges ahead. In addition, we shared concerns and views with our subsidiary responsible banking, sustainability and culture committees throughout the year, which enabled us to harness their vast collective expertise. Going forward, we will remain focused on progressing our climate change strategy and monitoring the development of our green and sustainable finance proposition." Ramiro Mato Chair of the responsible banking, sustainability and culture committee "As in previous years, the committee´s main focus was to assist the board in driving ESG to build a more responsible bank. As part of this, in 2023 we have remained focused on delivering our Net Zero ambition by 2050, while we continue helping customers transition to a low carbon economy, developing best-in-class sustainable propositions, and doing things in a Simple, Personal and Fair way. Specifically, the committee oversaw actions, recommendations and targets to help Santander to become a global leader in green finance and an engine of profitable growth for the Group, helping our clients in their green transition. The committee monitored progress and key COMPOSITION TIME ALLOCATION 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 In 2023, the committee held six 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 2023: The board of directors appointed the committee's members based on their expertise, skills and experience in the matters the committee handles. For more details, see section 4.1 'Our directors' and 'Board and committees skills and diversity matrix' in section 4.2. 241 Governance (G)39%Environmental (E)50%Social (S)11%     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties and activities in 2023 This section summarizes the responsible banking, sustainability and culture committee’s activities in 2023. Duties Environmental (E) Portfolio alignment with Net Zero by 2050 key enabler to achieve our ambition of net zero emissions by 2050. Actions taken • Reviewed the Group's climate change strategy, providing challenge to it to ensure that it remained a • Reviewed decarbonization targets in the thermal coal, power generation, energy (oil and gas), aviation and steel sectors and discussed and recommended to the board for approval new decarbonization targets for auto manufacturers (SCIB) and auto lending portfolio in Europe (SCF). • Reviewed the decarbonization plans of the subsidiaries, covering activity regarding mortgages, commercial real estate and agriculture to further develop our roadmap towards net zero while we address supervisory expectations. • Endorsed the Group priorities for 2023 in relation to responsible banking, including supporting our customers in their green transition and promoting a sustainable culture. • Reviewed actions proposed to align with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations and the transition plans and its communication needed in relation to the Glasgow Financial Alliance for Net Zero (GFANZ). ESG in risk management • Reviewed ESG factors introduced in the credit approval process, associated action plans and related achievements. • Reviewed the proposed risk appetite statement to support the reduction of carbon emissions relative to thermal coal, power generation, energy (oil and gas), aviation and steel sectors. Green Finance • Review the green finance strategy and its execution, including the Group´s exposure in green finance more generally. Biodiversity • Reviewed a disclosure proposal concerning Banco Santander's position on nature and biodiversity and Environmental Footprint Regulatory landscape Social (S) Social agenda Education and other support to communities submitted it to the board of directors for approval. • Reviewed Santander's participation with respect to the Febraban Protocol, which includes standards for managing the risk of illegal deforestation in Brazil and defines guidelines to be adopted by its signatories. • Reviewed our 2022-2025 Environmental Footprint Plan and carbon emissions offset criteria. • Monitored carbon footprint offsetting projects across the Group to fulfil public targets. • Reviewed the main European and international financial regulatory and supervisory initiatives and priorities related to ESG under discussion for 2023 and 2024, to maximize investment in the transition to a low carbon economy by 2050 and increase transparency on business models and operations. • Reviewed our social agenda, which includes financial inclusion; financial health; business with social output; and corporate social responsibility or philanthropic activities. • Reviewed the strategy, objectives, and performance indicators in relation to Universia's activity in the communities, in the context of the Group's social agenda, which includes our support to universities in education, employability and entrepreneurship. • Reviewed and challenged communication strategy in relation to universities. 242 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties Governance (G) Corporate governance ESG reporting Actions taken • Assisted the board in ensuring that responsible banking targets and metrics were embedded in the Group's remuneration schemes. As part of that, reviewed, in coordination with the remuneration committee, a proposal to further increase the alignment of the long-term incentive for 2023-2025 with our ESG agenda. • Monitored and assessed the Group's progress on its public targets to ensure that its KPIs remained relevant and aligned with committee expectations. • Worked with the risk supervision, regulation and compliance committee to review the progress made in embedding climate-related and environmental risks, as well as to monitor the implementation of controls and processes to mitigate ESG risks, including greenwashing. • Reviewed responsible banking progress in the regions, units, global businesses and corporate areas on a regular basis to ensure best practices globally. • Identified priority ESG areas for action based on the outcomes of a materiality assessment exercise, which the Responsible Banking team conducts every year. • Verified that the proposed responsible banking agenda and targets remain aligned with Santander´s strategy. • Reviewed ESG global ratings' assessments of Banco Santander, identifying strengths, areas for improvement and areas of focus. Reviewed any resultant action plans after engaging with investors and NGOs on ESG matters. • Reviewed reports on customer complaints, their causes and associated action plans launched to reduce and mitigate the identified deficiencies, in coordination with the risk supervision, regulation and compliance committee. • Revised the environmental, social and climate change risk management policy and the responsible banking and sustainability policy. • Supported the audit committee on the supervision and assessment of the process of preparation and presentation of non-financial information according to the applicable regulations and international standards. • Reviewed the 2023 Group statement on non-financial information and the independent expert's report. See the 'Responsible banking' chapter. • Reviewed the Climate Finance Report in coordination with the audit committee, prior to its submission to the board for approval, including new targets for the energy, metal and aviation sectors, the action plan for the power generation sector and the disclosures for nature and biodiversity. • Reviewed the Green Bond Report in coordination with the audit committee, prior to its submission to the board for approval. Others • Analysed industry practices in ESG reporting under the Pilar III framework. • The Chair of the committee periodically reported on its activities to the risk supervision, regulation and compliance committee. • Invited subsidiary responsible banking, sustainability and culture Chairs to specific committee meetings throughout the year and, in turn, the committee Chair attended specific subsidiary responsible banking, sustainability and culture committee meetings to further enhance communication between them. Information for general meetings and corporate documents Shareholder information • Was represented by Ramiro Mato, in his capacity as committee Chair, to report at the 2023 AGM committee's activities in 2022. Corporate documents for 2023 • Prepared this activities report on 13 February 2024, which includes a performance review of the committee's functions and key priorities identified for 2024. The board of directors approved it on 19 February 2024. 243 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Achievement of 2023 objectives The committee took these actions planned for 2023: 2024 Priorities The committee set the following priorities for 2024: • Continued 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. 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 plans. As part of that, the committee considered the challenges that the overall economic and geopolitical context entail in this respect. • 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 finance proposition and how the global businesses support our 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 and support the delivery of our public targets. • Continued to monitor financial health and financial inclusion by reviewing the progress made on specific social metrics and KPIs, such as people financially included in the year and microcredits provided to microentrepreneurs. • Reviewed the Group's performance assessed by ESG analysts, and supervised the actions for improvement in this respect. • Continue to focus on our sustainable finance proposition to continue promoting customer welfare. • Analyse the heterogeneity in public policies and actions of authorities and institutions in the countries across our footprint, as well as their associated risks, and the potential impact on our ESG strategy. • Monitored the implementation of enablers to further embed ESG in the business and business-as-usual, including Banco Santander's performance of our responsible banking targets and KPIs. • Continue to enhance data quality and monitor ESG disclosures and associated strategy in coordination with the audit committee, in order to meet increasing expectations from stakeholders in the current complex legislative framework. • Remain focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. • Provided support to the board in analysing and providing feedback on ESG information for reporting, disclosure, and management purposes, in coordination with the audit committee. Specific updates were provided by the Group's CAO in this respect, with a special focus on the enhancements and progress made by the different units. • Remained focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. Specifically, it considered the findings and suggested areas for improvement resulting from the 2022 internal board effectiveness review concerning its remit. 244 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.10 Innovation and technology committee activities in 2023 Cybersecurity and data strategy remained a top priority of our agenda during the year, recognising the importance of having adequate defences and security controls in place against increasing threats; and how data contributes to improve business growth and customer experience. In addition, we addressed the challenges and opportunities that artificial intelligence poses to the Group, ensuring that its use promotes effective risk management. In the coming year, we will continue to focus on how innovation and technology can help us deliver on our strategic ambitions, particularly linked to our newly created Retail & Commercial Banking and Digital Consumer Bank global businesses. An appropriate mix of members’ skills ensured that the committee remained well positioned to fulfil its responsibilities and operate effectively. I would like to thank Bruce Carnegie-Brown, who left the committee in October 2023, for his hard work, contribution, and commitment." Ana Botín Chair of the innovation and technology committee "We aim to be the best open financial services platform by acting responsibly. We continued our work on enhancing our technology capabilities to drive the improvement of our customer’s experience when banking with us, while delivering significant efficiencies through cutting-edge technologies and end-to-end automation. In this regard, we remained focused on overseeing the execution and progress of One Transformation and its overall alignment with the 2023 Investor Day targets and the Group’s strategy. COMPOSITION TIME ALLOCATION Position Chair Members Secretary Ana Botín Homaira Akbari José Antonio Álvarez Henrique de Castro Héctor Grisi Glenn Hutchins Belén Romana Jaime Pérez Renovales A. Committee Chair since 19 April 2022. Category Appointed on A 23/04/2007 Executive Independent 27/09/2016 Other external 23/02/2015 23/07/2019 Independent 01/01/2023 20/12/2022 19/12/2017 Executive Independent Independent The board of directors appointed the committee’s members based on their expertise, skills and experience in the matters the committee handles. For more details, see section 4.1 'Our directors' and 'Board and committees skills and diversity matrix' in section 4.2. In 2023, the committee held four 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 2023: 245 Digital & innovation30%Cybersecurity12%Technology and operations39%Data Management13%Others6% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Duties and activities in 2023 This section summarizes the innovation and technology committee’s activities in 2023. Duties Digital & innovation Digital Actions taken • Monitored metrics in connection with the digital evolution and associated transformation, with a special focus on customer experience, simplification and efficiency. • Reviewed core digital strategies to transform the business and accelerate new businesses growth. • Reviewed strategic technological tools developed internally to further increase value creation across the Group, improving efficiency and driving appropriate synergies. • Reviewed the execution and progress of One Transformation and its overall alignment with our strategy and targets disclosed at the 2023 Investor Day. Cloud • Reviewed the cloud strategy focused on improving innovation, time–to-market and efficiency with a business-based approach. Innovation framework • Reviewed the implementation of the technological and strategic plan and Group's innovation agenda, leveraging on our digital and data management capabilities. • Identified the challenges and capabilities in terms of innovation in order 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 (T&O) • Assisted the board in supervising technological risks in coordination with the risk supervision, regulation and compliance and audit committees. • 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, supervising its execution progress through defined top-level strategic KPIs, including those specific to the execution of One Transformation. • 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. • Continued to oversee the implementation of a new operating model and a common architecture. • Analysed the priorities of the T&O function and specifically, their alignment with the Group’s ambition to become a 'digital bank with branches', with a special focus on the contact centres’ contribution for such purposes and alternatives for further optimization, simplification and improvement of processes. • Reviewed the cybersecurity strategy and the progress made on its main action lines: protecting the Group, bolstering its defences, and generating trust among stakeholders, customers, and society in general. • Monitored the status and progress made on the fraud prevention plan, including its associated impacts and the actions underway to further harmonize fraud prevention capabilities across the Group. • Assisted the board in the supervision of cybersecurity risks in coordination with the risk supervision, regulation and compliance and audit committees. • Supervised defences against increasing threats and reviewed security controls and automated security processes. • Analysed cyber incidents and specific incidents outside the Group according to their relevance and impact, as appropriate. • Monitored closely the global cybersecurity threat landscape and continued to monitor the associated impacts of the Ukraine war and the conflict in the Middle East. • Received quarterly updates on cybersecurity risks, with a special focus on crisis simulation exercises and internal data leakage protection. • Reviewed external threats such as ransomware and analysed the strategy designed to shorten data recovery time and reduce its potential impact. • Reviewed data management strategy and the Models & Data unit's priorities for the year, focusing on the business model and how data contributes to improve the business growth and customer experience. • Reviewed the Group approach to artificial intelligence usage based on a specific governance and risk management framework. Cybersecurity Strategy Risk management oversight Data management Data management 246 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Actions taken Duties Information for general meetings and corporate documents Corporate documents for 2023 • Prepared this activities report on 25 January 2024, which includes a performance review of the committee's functions and key priorities identified for 2024. The board of directors approved it on 19 February 2024. Achievement of 2023 objectives The committee took these actions planned for 2023: 4.11 International advisory board • Reviewed the Group innovation strategy, driving support and coordination to the global businesses and to the development of a global technologic platform. Composition Position Chair Larry Summers • Continued to review the effectiveness of data management and analytics as enablers for the Group to fulfil strategic priorities, focusing on the main business use cases and the use of the artificial intelligence considering the international advisory board´s feedback, amongst others, to ensure appropriate support to the Group´s strategy. • Continued to strengthen the Group’s cybersecurity and fraud ecosystems, proposing strategies to respond to a constantly changing threat environment, while creating additional commercial value and a safe environment for clients. • Continued to assess and provide suggestions on initiatives, targets, commitments, KPIs and proposed metrics on cross- cutting projects that conformed with the Group's digital strategy, reviewing them to ensure full alignment with the operating model of the Group. • Remained focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. Specifically, the committee considered the findings and suggested areas for improvement resulting from the 2022 internal board effectiveness review concerning its remit. 2024 Priorities The committee set the following priorities for 2024: • Continue to support the Group’s innovation strategy, aligned with our global businesses, to develop our five technological pillars, supported by our operating model, common architecture and global platforms. • Continue to drive a culture of innovation that positions data and analytics at the core of our business strategy while meeting regulatory expectations on data management and taking advantage of the benefits of using artificial intelligence. • Continue to evolve our cyber security defences, with a special focus on emerging threats, as well as to continue to monitor the implementation of the technology and operations transformation model. • Remain focused on the overall effectiveness of the committee, ensuring that its role is discharged in the most tangible and effective manner. Members 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 James Whitehurst Senior Advisor at IBM and former CEO George Kurtz Nadia Schadlow 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 Bundesbank, of Supervisory Board of the ECB and of Bank International Settlements and former Vice Chair of Bank of America in Europe Director at The Coca-Cola Company and The Walt Disney Company. Former chair of Instacart and former vice-president of Global Business Group at Facebook (Meta) Chair of Organización Cultiba, Grupo Juan Ignacio Gallardo Thurlow Azucarero México and Grupo GEPP Carolyn Everson (PepsiCo bottling company in Mexico) 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 2023, it met in May and October. It addressed key strategic trending topics for the near future within the overall context of our transformation agenda and our global-local organization with five global businesses. In particular, it covered specific topics such as the advantages and repercussion of the use of 247 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management artificial intelligence in the financial sector; our brand and its strategic implications; digital assets, crypto trends and business opportunities; the overall global business structure and the cyber threat landscape, amongst others. 4.12 Related-party transactions and other conflicts of interest Related-party transactions This section contains the related-party transactions report referred to in recommendation six of the CNMV´s Corporate Governance Code, the audit committee prepared on 13 February 2024. 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, our 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 approved at the general meeting. The board approved an internal reporting and monitoring procedure in which the audit committee confirms twice a year that such 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 2023, 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 2023 had been performed correctly after conducting a bi-annual review on their conformity to 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 under market conditions (see the audit committee activities report under section 4.5 'Audit committee activities in 2023'). 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 applies to financing transactions carried out by Banco Santander, or any of its subsidiaries, and sets out general maximum borrowing rules, interest rates and other conditions that apply to related-party transactions, which 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. • 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 at 31 December 2023. 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 seat 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. The rules and approval bodies and procedures that apply to intragroup transactions are the same as for 248 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management transactions with customers to make sure they are conducted at market prices and conditions. 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 the conflict may affect the long- term interests of the Group. Subsidiaries should also consider the interests of Grupo Santander when making decisions within their competence. 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'). Note 53 '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 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 potential conflicts of interest in other roles held by directors. In 2023, no director reported a conflict of interest with Santander. Nonetheless, there were 52 abstentions in votes on matters deliberated at board and committee meetings, including 28 instances where directors did not vote on resolutions on nominations, re-elections or board committee assignments; 10 instances concerning remuneration; four instances relating to a transaction between Banco Santander and a director or a close relative of a director; and 10 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 249 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 5. Senior management team The table below shows the profiles of Banco Santander’s Senior Executive Vice Presidents. It does not include executive directors, whose profiles are described in section 4.1 'Our directors'). Name Mahesh Aditya Position GROUP CHIEF RISK OFFICER Daniel Barriuso GLOBAL HEAD OF RETAIL & COMMERCIAL BANKING AND GROUP CHIEF TRANSFORMATION OFFICER Alexandra Brandão GROUP HEAD OF HUMAN RESOURCES Juan Manuel Cendoya GROUP HEAD OF COMMUNICATIONS, CORPORATE MARKETING AND RESEARCH José Doncel GROUP CHIEF ACCOUNTING OFFICER José Antonio García Cantera GROUP CHIEF FINANCIAL OFFICER Juan Guitard GROUP CHIEF AUDIT EXECUTIVE Profile 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 (2017-2019) and Chief Risk Officer of Retail & Mortgage Banking at JP Morgan, Capital One and Citibank. He was appointed Group Chief Risk Officer in 2023. Born in 1973, Daniel Barriuso joined Grupo Santander in 2017 as Global Head of Cyber Security (CISO) and Fraud Prevention. In 2023, he was named Senior Executive Vice President, Chief Transformation Officer, and Global Head of Retail and Commercial Banking. Previously, he had held several executive roles at BP, Credit Suisse and ABN AMRO. 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 (2012-2016); Head of Human Resources (2016-2018); and Head of Commercial Management and Segments at Santander Portugal (2019-2020). She was appointed Group Head of Human Resources in 2021. Born in 1967, Juan Manuel Cendoya joined Grupo Santander in 2001 as Senior Executive Vice President and Group 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 for Spain. 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 1966, José Antonio García joined Grupo Santander in 2003 as Senior Executive Vice President of Global Wholesale Banking of Banesto and was appointed CEO in 2006. Previously, he had served on the executive committee of Citigroup EMEA, as well as on the board of directors of Citigroup Capital Markets, Ltd and Citigroup Capital Markets UK. He was appointed Senior Executive Vice President of Global Corporate Banking in 2012 and 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 was also 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 General Counsel 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 for Spain. 250 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management José María Linares GLOBAL HEAD OF CORPORATE & INVESTMENT BANKING Mónica López-Monís GROUP HEAD OF SUPERVISORY AND REGULATORY RELATIONS Dirk Marzluf GROUP CHIEF OPERATING & TECHNOLOGY OFFICER Víctor Matarranz GLOBAL HEAD OF WEALTH MANAGEMENT & INSURANCE José Luis de Mora GLOBAL HEAD OF DIGITAL CONSUMER BANK AND GROUP HEAD OF CORPORATE DEVELOPMENT AND FINANCIAL PLANNING Jaime Pérez Renovales GROUP GENERAL COUNSEL Marjolein van GROUP CHIEF COMPLIANCE Hellemondt-Gerdingh OFFICER 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). Born in 1969, Mónica López-Monís joined Grupo Santander in 2009 as 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 for Spain. Born in 1970, Dirk Marzluf joined Grupo Santander in 2018 as Senior Executive Vice President and Head of IT and Operations. Previously, he had held several roles at AXA Group, where he became CIO, 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 Senior Executive Vice President and Group Head of Financial Planning and Corporate Development. In 2020, he was named Head of Consumer Finance (now Digital Consumer Bank). He was also Head of Strategy (2019-2023). See profile in section 4.1 'Our directors'. Born in 1964, Marjolein van Hellemondt-Gerdingh joined Grupo Santander in 2019 as Senior Executive Vice President and Group 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. 251 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6. Remuneration Sections 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 9.4 and 9.5 comprise the annual report on directors’ remuneration that must be prepared and submitted to the consultative vote of the general shareholders' meeting. In addition, sections 6.4 and 6.5 sets out the directors' remuneration policy for 2024, 2025 and 2026, 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 2024, 2025 and 2026 were approved by our board of directors on 19 February 2024. All directors were present at the time of vote casting and voted in favour. The remuneration policy for directors in force as of the date of this report is available on our corporate website. 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 and customers' interests, conducive to creating long-term value and compatible with our rigorous risk management, long-term strategy and values, as well as with maintaining a sound capital base. proportion of total compensation. 2 Fixed remuneration must make up a significant 3 Variable remuneration must reward performance for achieving individual, local company and, as the case may be, Group targets. 4 The global remuneration package and its structure must be competitive in order to attract and retain talent. 5 Remuneration decisions must be free of conflicts of interest and discrimination of any kind different from that based on the performance assessment of objectives and corporate behaviours. Remuneration must be free of gender-based bias and help eliminate inequalities that could result from it. The remuneration elements the policy lays down include necessary mechanisms to ensure remuneration will be conducive to achieving strategic and long-term sustainability objectives of the Bank. Accordingly, it bases executive directors and senior managers’ variable pay on pre-determined, specific and quantifiable financial, sustainability-based and value-creation targets that are consistent with Banco Santander’s interests, including in regard to environmental, social and governance matters. For more details, see section 6.3 about the policy's application in 2023 and section 6.4 about the remuneration policy for 2024 and subsequent years. Lastly, the remuneration committee and the board enlisted the assistance of Willis Towers Watson to: • Compare markets and entities similar to the Group in size, characteristics and operations using relevant data for setting remuneration. • Analyse and confirm compliance with certain quantitative metrics required to evaluate accomplishment of objectives. • Estimate the fair value of variable remuneration linked to long-term objectives. 6.2 Remuneration of directors for supervisory and collective decision-making duties: policy applied in 2023 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 2023 was set at EUR 6 million, which included (a) annual allotment and (b) attendance fees. Santander has taken out a civil liability insurance policy for directors and other executives of the Group, subject to usual terms proportionate to its circumstances. 252         2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Directors can receive shares, share options or other forms of share-based compensation, subject to prior approval at the general meeting. Directors can also receive other compensation following a proposal made by the remuneration committee and upon resolution by the board of directors, as may be deemed appropriate, in consideration for the performance of other duties in Banco Santander, whether they are executives duties or not, in addition to their oversight and collective decision- making as board members. Non-executive directors do not have the right to receive any benefit on the occasion of their removal from office. In 2023, we worked alongside an independent expert to conduct a comparative market analysis on the remuneration of non- executive board members at 20 banks across the world, including Santander’s nine official peers. This analysis concludes that the high dedication of Santander’s board members significantly exceeds the average time commitment of directors at the peer banks analysed, with the hourly rate thus standing between the 25th and the 50th percentile of the sample. 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 2022 and 2023. In accordance with the remuneration policy approved at the general shareholders' meeting on 31 March 2023, the annual allotment for board and committee membership (except for the executive committee) increased EUR 3,000 compared to the amounts for 2022. 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 2023 98,000 170,000 43,000 28,000 28,000 43,000 18,000 28,000 70,000 50,000 50,000 70,000 50,000 70,000 110,000 30,000 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 A. Since 2015, Bruce Carnegie-Brown has been allocated EUR 700,000 (including annual allowances and attendance fees) in minimum total annual pay set for the lead independent director, for his services to the board and its committees, particularly as Chair of the nomination and remuneration committees and also as lead independent director; and for the required time and dedication to perform these roles. Bruce Carnegie-Brown has stepped down from his role of Lead Independent Director on 1 October 2023, when he has been succeeded in this position by Glenn Hutchins. 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. The fees have not been modified since 2016. And for 2023, the board voted to keep the same amounts set out in the 2022 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) 2023 2,600 1,700 1,500 2022 2,600 1,700 1,500 253 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management D. Breakdown of Bylaw-stipulated emoluments Total director Bylaw-stipulated emoluments and attendance fees received in 2023 amounted to EUR 5.3 million (EUR 4.7 million in 2022). This is 11% less than the amount approved at the general meeting. The increase compared to the previous year is mainly due to the fact that the executive committee has incorporated Hector Grisi as CEO of the Bank, and the higher number of board meetings and commissions held in 2023 (15 board meetings in 2023 versus 14 in 2022 and 67 board committee meetings in 2023 versus 62 in 2022, excluding executive committee meetings). Each director earned the following amounts for these items: Category Executive BoardG 98,000 EC 170,000 Executive 98,000 170,000 Other external 128,000 170,000 AC — — — Independent 203,000 127,500 — 78,000 65,500 Independent 98,000 — 43,000 Amount in euros 2023 Annual allotment NC — RC — RSRCC — RBSCC ITC — 98,000 Total 366,000 Total By-law stipulated emoluments and attendance fees 411,000 Board and committee attendance fees 45,000 2022 379,900 — — — — — — — — — — — — 28,000 296,000 43,500 339,500 — — 28,000 326,000 45,000 371,000 329,400 — 21,000 495,000 81,000 576,000 700,000 — 18,000 28,000 187,000 78,000 265,000 243,800 Other external Independent 98,000 98,000 Independent 98,000 Independent Other external — — — — — — — — 28,000 28,000 — 18,000 — — 98,000 39,000 137,000 128,800 172,000 76,500 248,500 229,800 43,000 — 28,000 — — 28,000 197,000 86,800 283,800 261,100 98,000 — 28,000 — — 16,550 98,000 170,000 — — 28,000 43,000 — — — 142,550 67,500 210,050 171,800 339,000 77,800 416,800 411,600 Independent 98,000 170,000 43,000 Independent 98,000 170,000 43,000 Independent 98,000 — 113,000 Independent 98,000 — 43,000 — — — — — 43,000 68,000 — 422,000 95,600 517,600 499,800 — 113,000 18,000 28,000 470,000 101,600 571,600 549,300 — 43,000 — 43,000 — — — 254,000 86,600 340,600 323,000 — 184,000 86,600 270,600 136,683 Independent 192,600 Independent Independent Other external — — — — — — — — 28,000 40,500 — — — — — — — — — — — — — — 28,000 289,100 82,500 371,600 9,689 — — — — — — — — — — — — — — — 38,601 146,447 131,400 1,699,600 1,147,500 328,000 162,000 190,000 285,000 138,550 287,000 4,237,650 1,093,000 5,330,650 4,691,121 Directors Ana Botín Héctor Grisi José Antonio Álvarez A Bruce Carnegie- Brown Homaira Akbari Javier BotínB Sol Daurella Henrique de Castro Gina Díez Luis Isasi Ramiro Mato Belén Romana Pamela Walkden Germán de la Fuente Glenn HutchinsC Álvaro CardosoD R. Martín ChavezE F Sergio Rial A. Member of board of directors since 1 January 2023. B. All amounts received were reimbursed to Fundación Botín. C.From 1 October 2023 the Lead Independent Director, non-executive Vice Chair and Chair of remuneration committee is Mr. Glenn Hutchins, succeeding Mr. Carnegie-Brown. D. Stepped down as director on 1 April 2022. E. Stepped down as director on 1 July 2022. F. Stepped down as director on 1 January 2023. G. Also includes emoluments for other roles in the board. 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. 254       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6.3 Remuneration of directors for executive duties The policy on directors’ remuneration for executive duties in 2023 was approved by the board of directors and put to a binding vote at the 2023 general shareholders' meeting, with 90.78% votes in favour. The table below summarizes the remuneration policy of Ana Botín and Héctor Grisi. Component Gross annual salary Variable remuneration Type Fixed Variable Pension scheme Other remuneration Fixed Variable Fixed Shareholding policy N/A Policy → Paid in cash on a monthly basis. → Individual benchmark reference → Calculated against annual quantitative metrics, a multiplier and a qualitative assessment, and taking into account individual performance. → 50% of each payment is instruments, consisting of Banco Santander, S.A instruments, and restricted stock units (RSUs) of PagoNxt, S.A., split as: ◦ the amount of PagoNxt RSUs set for each executive director; and. ◦ the rest, all in shares of Banco Santander, S.A. → The number of instruments is set at the time of the award. → 40% paid in 2024. → 60% deferred in five years. ◦ 24% paid in equal parts in 2025 and 2026. ◦ 36% paid in equal parts in 2027, 2028 and 2029, provided certain long-term objectives are met (2023-2025). → 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 for the Executive Chair 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. Effective in 2023 Ana Botin: EUR 3,271 thousand. Héctor Grisi: EUR 3,000 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. • No changes. • See section 6.3 C for details on annual contributions and pension balance. • Regarding fixed remuneration supplement, no change for Ana Botín since 2018. • Héctor Grisi will not receive supplement in his fixed remuneration. No changes. • Policy updated during 2020 to assure compliance with recommendation 62 to the Good Governance Code for Listed Companies of the CNMV. • Both Ana Botín and Héctor Grisi maintain an amount in shares higher than 200% of their fixed pay. 255     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management A. Gross annual salary After five years with no review of gross annual salary, the board resolved that Ana Botín’s gross annual salary would increase a 3% in respect of 2022. In turn, the board approved for Héctor Grisi (new CEO with effect from 1 January 2023), a gross annual salary of EUR 3 million, which means he will maintain a similar total fixed remuneration amount as his predecessor. It also maintained the fixed pension contribution of 22% of gross annual salary it had agreed in 2022 for 2023. Executive directors’ gross annual salary and fixed annual contribution to pensions for 2023 and 2022 were as follows: EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total 2023 Fixed annual pension contribution 720 660 — 1,380 Gross annual salary 3,271 3,000 — 6,271 A Total 3,991 3,660 — 7,651 Gross annual salary 3,176 — 2,541 5,717 2022 Fixed annual pension contribution 699 — 559 1,258 A Total 3,875 — 3,100 6,975 A. Additionally, Ana Botín received in 2023 and 2022 EUR 525 thousand as a fixed remuneration supplement, as disclosed in section B) i) b) of 6.4, Director's remuneration for 2024. José Antonio Alvarez received in 2022 EUR 710 thousand for this concept. Héctor Grisi did not receive fixed remuneration supplement. B. Variable remuneration i) General policy for 2023 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 2023 should amount to less than 200% of fixed components, as established by resolution of the general shareholders' meeting on 31 March 2023. • At the beginning of 2024, on the remuneration committee’s recommendation, the board approved the final amount of the 2023 incentive, based on the set bonus pool in accordance with the directors' remuneration policy approved at the general shareholders' meeting on 31 March 2023, in consideration of: • Short-term quantitative metrics measured against annual objectives. • A relative performance multiplier versus market which would multiply by 0.7 to 1.3 the result of the quantitative metrics above. • The final figure is adjusted to executive directors’ individual target variable remuneration 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 the CIB, Wealth and Commercial businesses); 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, a multiplier 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: • A qualitative assessment that cannot adjust the result above by more than 25 percentage points upwards or downwards. • EUR 500,000 and EUR 420,000 in PagoNxt, S.L. RSUs for Ana Botín and Héctor Grisi, respectively. • Any exceptional adjustment that must be supported by evidence. • The rest, all in instruments of Banco Santander. The executive director must decide between receiving such amount all in shares, or receiving in equal parts shares and share options of Banco Santander. In 2023, both executive directors chose to receive them all in shares. • 40% is paid in 2024, 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: 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. 256 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • 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 deferred amount payable in 2025 and 2026 (24% of the total), will be paid if none of the malus clauses described below are triggered. • The deferred amount payable in 2027, 2028 and 2029 (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. The payment schedule of the incentive is illustrated below. Immediately following performance year Deferred not subject to long-term metrics Long-term performance deferral Cash Instruments Total 40% 24% 36% 2024 2025 2026 2027 2028 2029 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 2023 Executive directors’ variable remuneration for 2023 has been based on the corporate centre executives' common bonus pool, which calculation comes from the quantitative metrics, a relative performance multiplier versus market and qualitative assessment approved by the board at the beginning of 2023 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 results for the bonus pool (shown in the chart below) resulting from the process above and reviewed and approved by the board, upon recommendation from the remuneration committee, are shown in the chart below. 257   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Category and (weight) Targets A. Quantitative metrics A Achievement over target Transformation: (45%) Total customers (growth) (10%) Active customers (growth) (10%) Revenue per active customer (10%) Operative cost per active customer (15%) Target: EUR 251.10. Achievement: EUR 264. Target: 8.83 million. Achievement: 11.05 million. Target: 5.43 million. Achievement: 5.43 million. Target: EUR 572. Achievement: EUR 597. Capital (30%) CET1 ratio Target: 12.45%. Achievement: 12.54% Profitability (25%) TOTAL metrics RoTE (Return on tangible equity) Target: 15.72%. Achievement: 15.39%. Assessment 125.17% 100.03% 104.46% 94.82% 125.19% 97.92% 109.22% 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 extraordinary impacts of macroeconomic environment, impairments, restructuring procedures or regulatory changes) 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. MULTIPLIER (relative performance vs. market) Net interest margin (NIM), cost to income, CoR, NPLs, net promoter score (NPS) and Net Margin after provisions as references. Santander registered record results in 2023, which enabled us to climb to second in the ranking for net margin after provisions. Moreover, the Group outperformed its peers in terms of capitalization, with an increase of 45% in the measuring period, which is well above our major competitors’ 21% average. Regarding subsidiaries, Spain (NIM and NPS) and Portugal (practically all metrics) were among the top performers, as well as Digital Consumer Bank (NIM and cost to income). Indicators Risk (+/- 5%) Compliance (+/- 5%) Network Collaboration (+/- 10%) ESG targets (+/- 5%) TOTAL qualitative assessment C. Qualitative assessment Level of achievement Strengthened the control environment and escalation, especially for non-financial risks (fraud, budgeting), market risk and structural risk (management of the US banking crisis). Significant progress with strategic and transformation initiatives, and further integration of advanced risk management techniques (automated decision- making, machine learning, and artificial intelligence). General enhancement of the control environment, most notably in relation to regulatory compliance. Progress with the implementation of strategic and transformation initiatives (vulnerable customer strategy and branch conduct rating, among others). In 2023, our strategic focus involved the commitment by the global businesses, regions and subsidiaries and cross- cutting functions to work together. Thanks to our unique combination of a global scale with local leadership and a network that creates value for the Group, we nurtured relationships between subsidiaries and regions by sharing expertise and ways of working. In 2023 we monitored performance indicators that showed an increase in cooperation between the global businesses, subsidiaries and support functions, who worked together to create synergy and share best practice in pursuit of our goal to become ONE Santander. (i) We made headway with our target on the percentage of women in senior executive positions — up from 29.3% in 2022 to 31.4% in 2023; (ii) we financially included 1.8 million people through our access and finance programmes; (iii) we raised or facilitated over EUR 22,000 million in green finance and reached EUR 67,700 million in socially-responsible assets under management; (iv) we set new targets for our auto manufacturing and auto lending portfolios, as well as decarbonization plans for key retail portfolios; and (v) we continued to enhance the quality control of our sustainability disclosures. D. Exceptional adjustment approved by board of directors upon recommendation of remuneration committee Following the same rationale applied to the discretionary decreases of 14.5% of the bonus pools of 2019 and 2021 due to worse total shareholder returns, and taking into account the record attributable profit obtained (11,076 million euros, +15% compared to 2022) and the very high shareholders return (+40.5%, beating the average of our peer group by 5%), the board of directors, upon the recommendation of the remuneration committee, agreed to set the same bonus pool (138.91%) as in 2022, thus making an exceptional upward adjustment of +15.57% 1.02 Assessment +3.20% +2.60% +2.73% +3.40% +11.93% +15.57% 138.91% Final bonus pool 2023 To the total result obtained in the year by the quantitative metrics (109.22%), the result of the multiplier is applied (1.02) and the ones relative to the qualitative evaluation (+11.93%) and the adjustment (+15.57%) are added: (A X B) + C +D = Final bonus pool result in 2023 The following section details the individual variable remuneration approved by the board. iii) Determination of the individual variable remuneration for executive directors set in 2023 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 2023 was not more than 50% less than for 2022. Otherwise, variable remuneration would not have been greater than 50% of the benchmark incentive. 2 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. 258   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • 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 in 2023 as in 2022 and established a variable remuneration target for Hector Grisi of EUR 4,200 thousand (aligned with that of his predecessor José Antonio Álvarez). Variable contributions to pensions were not modified in 2023, so the amounts are the 22% of the 30% of the last three assigned bonus' average. This means complying with Circular 2/2016 of the Bank of Spain, standard 41, on pension benefits, by which a part of not less than 15% must be based on variable components. Breakdown of immediately payable and deferred remuneration In 2023, Santander’s strong performance and excellent execution of our strategy enabled us to deliver record attributable profit of EUR 11,076 million (+15,3% compared to 2022 results) and a capital ratio of 12.3% (achieving our public target). We also achieved a very high total shareholder return of +40.5% (5% above the average of our official group of nine peers 3 in relative terms). Because of the double digit growth in net profit coupled with the highest TSR in the last 14 years, the board approved to maintain the same bonus pool as in 2022, at 138.91%, for which an extraordinary adjustment of +15.57% was made, in the same manner as the 2021 and 2019 pools were both reduced by extraordinary adjustments (due to worse shareholders return), with a combined impact of -30%. As a result, and considering the exceptional contribution made by the Chairman and the CEO to the achievement of these exceptional results, on the basis of the pool detailed above, and taking into consideration the fulfillment of their individual objectives, the board of directors, upon recommendation of the remuneration committee, approved the variable remuneration disclosed below, which means an increase of 5% of the Executive Chair's total compensation vs 2022, and a reduction of 9% in the case of Héctor Grisi (compared to his predecessor). Furthermore, the ratio of executive directors’ total remuneration to underlying attributable profit fell from 0.23% in 2022 to 0.19% in 2023, as shown in section 6.3.I. 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 2023 EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total In cash 2,848 1,952 — 4,800 A In shares 2,648 1,784 — 4,432 A In RSUs 200 168 — 368 Total 5,696 3,904 — 9,600 In cash 2,702 — 1,823 4,525 B In shares 1,229 — 830 2,059 2022 In share B options 1,229 — 830 2,059 B In RSUs 243 — 164 407 Total 5,403 — 3,647 9,050 A. The amounts in the foregoing table correspond to a total of 1,168 thousand shares of Banco Santander and 6 thousand RSUs of PagoNxt, S.L. B. 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 in 2022 for Ana Botín and José Antonio Álvarez . The following chart states deferred variable remuneration at fair value, which will only be received in 2027, 2028 and 2029 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 4 : 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) 2023 EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total In cash 1,121 769 — 1,890 A In shares 911 592 — 1,504 A In RSUs 210 176 — 386 Total 2,243 1,537 — 3,780 2022 B In shares 404 — 273 677 In cash 1,064 — 718 1,782 In share B options 404 — 273 677 B In RSUs 255 — 172 428 Total 2,128 — 1,436 3,564 A. The number of shares in the table total 396 thousand shares of Banco Santander and 6 thousand RSUs of PagoNxt S.L. B.219 thousand shares, 590 thousand share options and 9 thousand RSUs of PagoNxt S.L in 2022. 3 4 Peer group: BBVA, BNP Paribas, Citi, Crédit Agricole, HSBC, ING, Itaú, Scotia Bank and Unicredit. 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. 259   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 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. The maximum amount of shares to be delivered under the plan is within the maximum amount of the award to be delivered in shares (EUR 11.5 million) approved by 2023 general shareholders’ meeting for executive directors. This number of shares has been calculated with the weighted average daily volume of weighted average listing prices of Banco Santander shares in the 50 trading sessions prior to the Friday (not inclusive) before 30 January 2024 (the date on which the board approved the 2023 bonus for executive directors), which was EUR 3.793 per share. According to an independent experts' valuation, the price per PagoNxt, S.L. RSU equals EUR 60.34. 260 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management iv) Multi-year targets linked to the payment of deferred amounts in 2027, 2028 and 2029 The multi-year targets linked to the payment of the deferred amounts payable in 2027, 2028 and 2029 are: Metrics Weight Target and compliance scales (metrics ratios) A B Banco Santander’s consolidated Return on tangible equity (RoTE) target in 2025 Relative Total Shareholder Return (TSR)A 2023-2025 within a peer group in 40% 40% 1) 2) Four ESG (environmental, social and governance) metrics with same weighting C (1/4 x Coefficient 1 + 1/4 x Coefficient 2 + 1/4 x Coefficient 3 +1/4 x Coefficient 4) 20% 3) a. On which: Coefficient 3: (0.7 x Subcoefficient 3.a) + (0.3 x Subcoefficient 3.b) 3) b. 4) If RoTE in 2025 is ≥ 17%, then metric ratio is 1.5 B If RoTE in 2025 is ≥ 14% but <17%, then metric ratio is 0 – 1.5 If RoTe in 2025 is < 14%, then metric is 0 C D D D between 2023 and 2025 (in million) is ≥ 5 between 2023 and 2025 (in million) is ≥ 6, between 2023 and 2025 (in million) is ≥ 3 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 1 – 1.5 If ranking Santander between percentiles 40 and 75 (not inclusive), then metric ratio is 0.5 – 1C If ranking Santander below percentile 40, then metric ratio is 0 If % women in senior executive positions in 2025 is ≥ 36%, then metric ratio is 1.25 If % women in senior executive positions in 2025 is ≥ 35% but <36%, then metric ratio is 1 – 1.25D If % women in senior executive positions in 2025 is ≥ 29.3% but <35%, then metric ratio is 0 – 1 If % women in senior executive positions in 2025 is < 29.3%, then metric ratio is 0 E If number of banking proposals or tailored finance then metric ratio is 1.25 E If number of banking proposals or tailored finance but <6, then metric ratio is 1 – 1.25 E If number of banking proposals or tailored finance but <5, then metric ratio is 0 – 1 E If number of banking proposals or tailored finance then metric ratio is 0 If green finance raised and facilitatedF then metric ratio is 1.25 F If green finance raised and facilitated target between 2019 and 2025 (in euro billions) is ≥ 220 D but < 240, then metric ratio is 1 –1.25 F If green finance raised and facilitated D but < 220, then metric ratio is 0 –1 F If green finance raised and facilitated then metric ratio is 0 If socially responsible investmentsG G If socially responsible investments ratio is 1 –1.25 If socially responsible investments ratio is 0 – 1 If socially responsible investments If credit risk exposure with customers affected by the thermal coal ≤ 3.8, then metric ratio is 1.25 If credit risk exposure with customers affected by the thermal coal < 5.8 but > 3.8, then metric ratio is 1 –1.25 If credit risk exposure with customers affected by the thermal coal = 5.8, then metric ratio is 1 If credit risk exposure with customers affected by the thermal coal > 5.8, then metric ratio is 0 (in euro billions) in 2025 is ≥ 102, then metric ratio is 1.25 (in euro billions) in 2025 is ≥ 100 but < 102, then metric target between 2019 and 2025 (in euro billions) is ≥ 160 (in euro billions) in 2025 is ≥ 53 but < 100, then metric (in euro billions) in 2025 is < 53, then metric ratio is 0 between 2023 and 2025 (in million) is < 3, target between 2019 and 2025 (in euro billions) is < 160, target between 2019 and 2025 (in euro billions) is ≥ 240, (in euro billions) in 2025 is (in euro billions) in 2025 is (in euro billions) in 2025 is (in euro billions) in 2025 is H H H H D D D G G 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 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). 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 2025 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. 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). F. Grupo Santander's contribution to green business: SCIB, Retail & Commercial banking and Digital Consumer Bank. It is measured with cumulative data since 2019. G.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. H. 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. 261     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • 'A' is the RoTE coefficient according to the scale in the table above, based on RoTE at year-end 2025. Regulation and internal codes To determine the annual amount of the deferred portion linked to objectives corresponding to each board member in 2027, 2028 and 2029, 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 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 2023- 2025. • 'C' is the coefficient resulting from the sum of weighted coefficients for each of the four Responsible Banking targets for 2025 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 5 the Group , and none of the circumstances triggering malus clauses 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 2023 can be clawed back until the beginning of 2030. 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 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. In addition to the existing policy on malus and clawback clauses of our remuneration policy, the board of directors of Banco Santander at its meeting held on 28 November 2023, following the proposal from the remuneration committee on 27 November 2023, approved an addendum to our remuneration policy to comply with the new SEC (US Securities and Exchange Commission) regulations relating to the recoupment of compensation erroneously received by the executive directors of Banco Santander, S.A., and senior management, in the event of a financial restatement (according to the regulation) resulting from material noncompliance with financial reporting requirements under federal securities laws. The new addendum to our remuneration policy, entitled "Financial Statement Restatement Compensation", is included as an exhibit to our Annual Report on Form 20-F report filed with the SEC. 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 2030. 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. 5 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 Grupo Santander, 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. 262   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Ana Botín 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 replaced their previous right to receive a pension supplement in the event of retirement. The initial amount Ana Botín 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 other members of the executive team in proportion to their pensionable bases until their departure from the Group, retirement, death or disability. In general terms, 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. For Héctor Grisi, CEO from 1 January 2023, since he has not been in the position for three years, the calculation of the variable portion was done using his gross variable remuneration in that financial year. Pursuant to remuneration regulations, contributions calculated on the basis of variable remuneration are subject to the discretionary pension benefits scheme. Therefore, under the policy, malus and clawback clauses can be enforced on them in place at any given time and during the same period in which variable remuneration is deferred. Furthermore, these contributions must be invested in shares in Banco Santander for five years from the date of the executive director's retirement, or from the date on which executive directors leave the group. Once that period has elapsed, the amount invested in shares will be paid to them or their beneficiaries if some contingency covered by the pension scheme was happened or will be added to the remainder of their cumulative balance until their retirement age when the total amount will be paid. The benefit plan is outsourced to Santander Seguros y Reaseguros, Compañía Aseguradora, S.A. The economic rights of the directors previously mentioned belong to them even if they are not active at Banco Santander at the time of their retirement, death or disability. Their contracts do not stipulate any severance payment outside the extent of the law for termination of contract. The provisions recognised in 2023 for retirement pensions amounted to EUR 2,110 thousand (EUR 1,892 thousand in 2022), as broken down below. EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total 2023 1,144 966 — 2,110 2022 1,081 — 811 1,892 The amounts corresponding to each director as of 31 December 2023 and 2022 in the pension scheme are: EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total 2023 49,257 585 19,495 69,338 2022 46,725 — 18,958 65,683 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 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. 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 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. The following table show the ratio, with a share price of EUR 3.793: Gross annual salary (thousand) 3,271 3,000 2023 Number of shares (thousand) 32,625 1,694 X 37.8 2.1 Ana Botín Héctor Grisi 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. 263 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management F. Remuneration of board members as representatives of Banco Santander The executive committee has resolved that the remuneration received by executive 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 2023. The following table includes the remuneration received by non- executive directors on a personal basis in other Group entities: Director Homaira Akbari Henrique de Castro José Antonio Álvarez Pamela Walkden Position Member of the board of Santander Consumer USA Holdings, Inc. Member of the Board of PagoNxt, S.L. Member of the Board of PagoNxt, S.L. Member of the Board of PagoNxt, S.L. Member of the Board of Banco Santander (Brasil) S.A. Member of the Santander UK, plc and Santander UK Group Holdings Limited Remuneration USD 120 thousand (EUR 111 thousand) EUR 200 thousand EUR 200 thousand EUR 200 thousand BRL 755 thousand (EUR 141 thousand) GBP 132 thousand (EUR 152 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). And finally, José Antonio Álvarez received a fixed remuneration of EUR 1,750 thousand as strategic adviser of Grupo Santander, as well as the life and health insurance contributions and the supplement for having waived the death and disability policy disclosed in the table in section G below. G. Individual remuneration of directors for all items in 2023 Below is a breakdown of each director’s short-term salary (payable immediately) and deferred remuneration not based on long-term performance for 2023 and 2022. 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 2023 under the deferred remuneration schemes of previous years where conditions for their delivery were met in the related years. Bylaw-stipulated emoluments Salary and bonus of executive directors EUR thousand 2023 Directors Ana Botín A Héctor Grisi José Antonio Álvarez Bruce Carnegie-Brown Homaira Akbari B Javier Botín Sol Daurella Henrique de Castro Gina Díez Luis Isasi Ramiro Mato Belén Romana Pamela Walkden Germán de la Fuente Glenn Hutchins C Álvaro Cardoso D R. Martín Chavez E Sergio Rial Total 2023 Total 2022 Board and board committees annual allotment 366 296 326 495 187 98 172 197 143 339 422 470 254 184 289 — — — 4,238 3,762 Board and committee attendance fees 45 44 45 81 78 39 77 87 68 78 96 102 87 87 83 — — — 1,097 931 Immediate payment bonus (50% in instruments) 3,560 2,440 — — Deferred payment bonus (50% in instruments) 2,136 1,464 — — Fixed Salary 3,271 3,000 — — Total 8,967 6,904 — — Pension Contribution 1,144 966 — — — — — — — — — — — — — — — — 6,271 5,717 — — — — — — — — — — — — — — 6,000 5,656 — — — — — — — — — — — — — — 3,600 — — — — — — — — — — — — — — 15,871 3,394 14,767 2022 Total 11,001 — 9,086 700 244 129 230 261 172 1,412 500 549 323 137 10 39 147 131 Total 11,544 8,257 3,553 576 265 137 249 284 211 1,417 518 572 341 271 372 — — — Other F remuneration 1,022 47 3,182 — — — — — — 1,000 — — — — — — — — — — — — — — — — — — — — — — 2,110 1,892 5,251 3,719 28,567 — — 25,071 A.Member of board of directors since 1 January 2023. B. All amounts received were reimbursed to Fundación Botín. C. Stepped down as director on 1 April 2022. D. Stepped down as director on 1 July 2022. E. Stepped down as director on 1 January 2023. 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. For José Antonio Álvarez, this amount includes remuneration as strategic advisor of Grupo Santander, life and health insurance contributions (EUR 722 thousand) and the supplement for having waived the death and disability policy (EUR 710 thousand). 264   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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, excluding pension contributions) 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 Héctor Grisi José Antonio Álvarez Total A EUR thousand 2023 2022 2,243 1,537 — 3,780 2,128 — 1,436 3,564 A. Fair value of the maximum amount receivable over a total of 3 years (2027, 2028 and 2029), 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 2023 At the 2023 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 2023. This ratio increased slightly from 2022 by 3 pp for Ana Botín. For these purposes: 2022 2023 • 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. 265 169%172%Ana Botín158%Héctor Grisi   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 (other than directors and in a full time equivalent basis) in the last 5 years: (EUR thousand) 1 Directors' remuneration • Executive Directors Ana Botín A Héctor Grisi 2 • Non-Executive Directors José Antonio Álvarez Bruce Carnegie-Brown B Javier Botín Sol Daurella Belén Romana Homaira Akbari Ramiro Mato Henrique de Castro Pamela Walkden Luis Isasi Gina Díez Barroso C Germán de la Fuente Glenn Hutchins Company’s performance Underlying profit attributable to the Group (EUR mn) 3 Consolidated results of the Group Ordinary RoTE 4 (EUR thousand) Employees' average remuneration 5 Employees' average remuneration in Spain thousand) (EUR mn) (EUR D 2023 % var. 23/22 2022 % var. 22/21 2021 % var. 21/20 2020 % var. 20/19 2019 11,544 8,257 5% — 11,001 (4)% 11,435 68% 6,818 (32)% 9,954 3,553 576 137 249 572 265 518 284 341 E 1,417 211 271 372 11,076 16,459 15.06% 58 (61%) (18%) 6% 8% 4% 9% 4% 9% 6% — 23% — — 15% 8% 13% 3% 9,086 700 129 230 549 244 500 261 323 E 1,412 172 137 10 9,605 15,250 13.37% 56 (1%) — — (4%) 3% (2%) — (2%) 7% — 32% — — 11% 5% 5% 1% 9,160 700 129 239 533 248 499 267 303 E 1,406 130 — — 8,654 14,547 12.73% 56 52% 18% 6% 12% 28% 23% 16% 23% 42% 49% — — — 70% — 71% 18% 6,018 595 122 214 417 202 430 217 214 943 4 — — (27%) (15%) (11%) (11%) (21%) (11%) (14%) 152% 529% — — — — 8,270 700 137 240 525 226 500 86 34 — — — — 5,081 (2,076) 7.44% 47 (38%) — (37%) (12%) 8,252 12,543 11.79% 54 73 6% 68 10% 62 (2%) 63 — n.a. 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. Normally the increases or decreases in remuneration are greater for the executive directors, depending on the results of the entity, because 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. 5.Total employees in Spain geography. Fixed remuneration + effective bonus received in the year. Not included all concepts. Not impacted by exchange rates. A. Member of board of directors since 1 January 2023. B. All amounts received were reimbursed to Fundación Botín. C. Director since 1 April 2022. D. Director since 20 December 2022. E. Includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España board and committees meetings. 266   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management J. Summary of link between risk, performance and remuneration Banco Santander's remuneration policy and its application in 2023 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 2023 were as follows: Key words Aspect aligning risk, performance and remuneration Metrics balance 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. Financial thresholds 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. Long-term objectives 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. Individual performance The discretion of the board to consider the performance of each executive director in the award of their individual variable remuneration. Variable remuneration cap 200% of fixed remuneration. Control functions involvement The work undertaken by the human resources committee aided by senior managers leading Control functions in relation to the analysis of quantitative metrics information and undertaking qualitative analysis. Malus and clawback 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. Payment in shares 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 2024, 2025 and 2026 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 2024, 2025 and 2026, no changes to the principles and composition of directors’ remuneration for supervisory and collective decision-making duties are planned with respect of those in 2023. 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 2024, 2025 and 2026 (sections 6.1 and 6.3), changes to the corporate bonus scheme are being proposed as detailed below. With the aim of simplifying the system, the number of steps for setting the yearly variable remuneration is reduced by converting the relative performance multiplier against the market into one of the elements of the qualitative assessment, instead of being an intermediate step between the result of quantitative metrics and the qualitative assessment. However, to ensure that the multiplier is sufficiently relevant, its weight will be +/-10%, higher than the rest of the elements in the qualitative assessment (which will have a weight of +/-5%), after reducing the Network Collaboration item from +/-10% to +/-5% and merging compliance and risk into one. Second, variable remuneration in 2024 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 shares of Banco Santander. For the rest of the identified staff, variable remuneration will be paid 50% in cash and 50% in shares of Banco Santander. 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: 267   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Relative performance of Banco Santander's total shareholder return (TSR) compared to our peer group. Its weight will be 40% of the total. Furthermore, our remuneration framework rewards Santander employees for their contribution based on such common principles as: • Return on tangible equity (RoTE), as an indication of long-term • Meritocracy: Non-discrimination based on sex, age, culture, value creation. Its weight will be 40% of the total. religion or ethnicity. • Four ESG (environmental, social and governance) metrics • Consistency: Remuneration consistent with the level of 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. responsibility, leadership and performance within the Group, to promote retention of key professionals and attract the best talent. 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. • 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 1,152 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. 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 2024, 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. Also, Banco Santander conducts an annual comparative review of executive directors’ and top management remuneration. In 2024, the peers that comprise the review are BBVA, BNP Paribas, Citi, Crédit Agricole, HSBC, ING, Itaú, Scotiabank and Unicredit, based on their market capitalization, global scale, brand recognition, geographical diversification, business model and regulatory framework. The incorporation of US and Brazilian banks is justified by the strong presence of Banco Santander in those countries, where Santander is listed (in the New York Stock Exchange and Brazilian Stock Exchange of São Paulo). Our findings show that Banco Santander does not award its executive directors any remunerative components outside of common market practice. 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. 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 included 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 2024 A. Directors' remuneration in their capacity as such In 2024, 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 2023 AGM (which will again be put to a vote at the 2024 AGM). It consists of: • annual allocation, and • attendance fees. The board of directors, upon recommendation of the remuneration committee, approved to maintain the same amounts for annual allotments as those initially established for 2023 disclosed in section 6.2.B and C above, except for the responsible banking, sustainability and culture committee 268   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management (RBSCC), which will be updated to EUR 28 thousand, thus equalizing its remuneration to other committees of mandatory existence, considering the importance and complexity of the matters addressed in it, such as the supervision of non-financial information, which the RBSCC carries out in coordination with the audit committee. Also, since the attendance fees have not been reviewed since 2016, the board of directors, upon recommendation of the remuneration committee, approved an increase of 4% in respect of 2023. This increase is applied to compensate for the higher time commitment (as indicated at the beginning of section 6.2 above) of board members, compared to those of other comparable banking groups. Both updates would mean an effective total rise in total director Bylaw-stipulated emoluments and attendance fees received of less than 2%. 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 2024 on the remuneration committee's recommendation, based on the remuneration policy principles described under section 6.3. 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. 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: Additionally, as indicated in the description of the director remuneration system, Banco Santander will pay its directors’ the corresponding civil liability insurance premium in 2024. The related policy is common to all executives and was taken out under usual market condition, proportionate to Banco Santander's situation. B. Executive directors' remuneration for the performance of executive duties i) Fixed remuneration components A) Gross annual salary On the remuneration committee’s recommendation, and due to the excellent business results and total shareholder return in 2023, in order to ensure a competitive remuneration compared to other peer groups, the board resolved to increase 5% the annual salary for Ana Botín and Héctor Grisi in 2024. The average remuneration of the Group’s staff in Spain has increased by 6% from 2022 to 2023 (+5% on a like for like basis). Likewise, 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 6 . section 'Benefit schemes' • Supplement to fixed salary: Ana Botín will receive EUR 525,000 as a supplement to her fixed pay in 2023. This was approved in 2018 when the supplementary death and disability pension schemes were eliminated. Héctor Grisi will not receive any supplement of this kind. • 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 • The final amount of variable remuneration will be set at the start of the following year (2025) 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 2026 and 2027 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 2028, 2029 and 2030, 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 clawback 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 2024 cannot exceed the limit of 200% of fixed components submitted for approval to the 2024 AGM. However, under EU regulations on remuneration, certain variable components can be excluded. The proportion of fixed and variable remuneration elements of Banco Santander executive directors is due to the European regulation set out in the CRD V directive. In this sense, the setting of higher fixed amounts than other executive directors of non-EU banks within our peer group is due precisely to the non- requirement of this limit 2:1 of variable/fixed components for non-EU banks. 6 As indicated in the next section, executive directors contribution to the benefit systems includes both fixed and variable components 269 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management A. Variable remuneration benchmark Variable remuneration for executive directors in 2024 will be set based on a standard benchmark contingent upon the full achievement of their set individual targets, which for 2024 among others include, both for the Executive Chair and the CEO, pushing capital contribution 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. Specifically for 2024, the board of directors, upon recommendation of the remuneration committee, has resolved to increase in 5% their target bonuses. The average remuneration of the Group’s staff in Spain has increased by 6% from 2022 to 2023 (+5% on a like for like basis). B. Setting of final variable remuneration based on yearly results Based on that standard benchmark, 2024 variable remuneration for executive directors will be based on this updated corporate bonus scheme proposal: • Three categories of quantitative metrics (business transformation, profitability and capital) to increase alignment with shareholder value creation and capital generation. • A qualitative assessment with four components, which includes the regulatory requirements and the needs and concerns of our stakeholders: risk, compliance, network collaboration and ESG matters and, as a new feature this year, a relative performance assessment against the market in the main financial metrics, which comes from the multiplier applied in 2023 as an intermediate step between the quantitative metrics and the qualitative assessment but which is now integrated into the qualitative assessment to simplify the process. This relative performance assessment will have a greater weight than the other elements of the qualitative assessment, to highlight the importance of beating the market. 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. Capital generation will continue to be 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. A specific metric on costs (instead of operative cost per active customer) is also included to highlight the relevance of appropriate management of costs to succeed in transformation. Accordingly, the proposed quantitative metrics and weightings are: Category Quantitative metrics A Total and active customers (growth) (Weight: 20%) Transformation: Weight: 45% Costs (Weight: 15%) Revenue per active customer (Weight: 10%) CET1 ratio RoTE (Return on tangible equity) Capital Weight: 30% 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, extraordinary impacts of macroeconomic environment, regulatory 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. And finally, to the result obtained above, we add or subtract the qualitative assessment according to this table: Qualitative assessment Performance vs. Market Compliance and Risk Network collaboration ESG targets Weight '+/-10% +/-5% '+/-5% +/-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 2024 were 50% less than in 2023, variable pay would in no case exceed 50% of the benchmark incentive for 2024. • 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 shares of Banco Santander. One portion will be paid in 2025 and the other will be deferred for five years and contingent on long-term metrics: a) 40% of variable remuneration is paid in 2025 net of tax, with 50% in cash and 50% in instruments. b) 60% paid, if applicable, in five equal parts in 2026, 2027, 2028, 2029 and 2030 (net of tax), with 50% in cash, 50% in instruments, under the conditions stipulated in section E). 270 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. Additionally, 2023 AGM approved 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. Under the Remuneration policy for 2023 and beyond, the maximum number of shares 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 2028, 2029 and 2030 will be paid on the condition that the group achieves its long-term targets for 2024-2026, 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: b. Relative performance of Banco Santander's total shareholder return (TSR) in 2024-2026 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. 7 measures the return on shareholders’ investment. It is the TSR sum of the change in share price plus dividends and other similar items 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 8 : (described below) a. Banco Santander’s consolidated Return on tangible equity 1. Women in senior executive positions by 2026: (RoTE) target in 2026. The RoTE ratio for this target is obtained as follows: RoTE in 2026 (%) ≥ 18% ≥ 15% but <18% < 15% ‘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 2026 within this bracket of the scale. To verify compliance with this objective, the board, following a proposal from the remuneration committee, may adjust it to remove the effects of any regulatory change to its calculation rules or any extraordinary circumstances (such as impairments, corporate transactions, share buybacks or restructuring procedures) that have occurred which affect the suitability of the metric and achievement scale established in each case and resulting in an impact not related to the performance of the executive directors and executives being evaluated. B (%) Women in senior executive positions ≥ 37% ≥ 36% but < 37% ≥ 34% but < 36% < 34% 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 2024 and 2026: (millions of people) B Financial inclusion ≥ 6.3 ≥ 5.3 but < 6.3 ≥ 3.5 but < 5.3 < 3.5 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. Number of people unbanked, underbanked, in financial distress or with difficulty to access credit to whom we provide tailored access and finance solutions, aiming to meet local financial inclusion needs in a recurrent, comprehensive, affordable and effective way. 7 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 2024 (exclusive) is considered (to calculate the initial value) and the fifteen trading sessions prior to 1 January 2027 (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. 8 271 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3. Socially responsible investment in 2026 as a percentage of • ‘C’ is the coefficient resulting from the sum of weighted total assets under management. (%) B Socially responsible investment ≥ 21% ≥ 18% but < 21% ≥ 15% but < 18% < 15% 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. Assets under management that meet the criteria of Santander’s Sustainable Finance and Investment Classification System (SFICS). 4. Supporting transition. This goal includes how we support our customers' transition, and the fulfilment of a transition plan: between 2024 B Business raised and facilitated and 2026 (EUR bn) ≥ 180 ≥ 150 but < 180 ≥ 110 but < 150 < 110 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. Grupo Santander's contribution to our customers’ transition (2024-2026): CIB green finance raised and facilitated (public target), Retail & Commercial banking green finance and sustainable linked-loans, and Digital Consumer Bank green finance.. To achieve beyond 100% of this goal, it is necessary to deliver on a comprehensive and credible transition plan (it will work as an underpin). This plan will include improving climate data, progressing on actions to decarbonize portfolios, enhancing sustainable product offering to address market needs, further embedding climate and environmental risk, and active engaging to support policy action and market developments. Each ESG goal has a different weighting: 1. Women in senior executive positions: 20% 2. Financial inclusion: 20% 3. Socially responsible Investment: 10% 4. Supporting transition: 50% C = (20% Goal 1 +20% Goal 2 +10% Goal 3 +50% Goal 4) Finally, the following formula will be used to set the annual amount of performance-based deferred variable remuneration in 2028, 2029 and 2030 ('final annuity'), without prejudice to any adjustment deriving from the application of the malus policy (see section 6.3 B v): Final annuity = Amt. x (2/5 x A + 2/5 x B + 1/5 x C) 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 2025). • ‘A' is the RoTE coefficient according to the scale in the table above, based on RoTE at year-end 2026. • '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 2024-2026. coefficients for each of the four Responsible banking targets for 2026 (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 2023 (detailed in section 6.3 B v)), policy expanded in 2023 to adapt it to the new regulation of US Securities Exchange Commission. 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 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. Directors’ remuneration for 2025 and 2026 A. Directors’ remuneration in their capacity as such For 2025 and 2026, no changes to directors’ remuneration are planned in respect of what is foreseen herein for 2024. However, shareholders at the 2025 or 2026 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; membership and attendance at committee meetings; and other objective circumstances). 272   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management B. Directors' remuneration for the performance of executive duties Executive directors’ remuneration will conform to principles similar to those applied in 2024, 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 2025 and 2026, the maximum increase of gross annual salary will be 5% in respect of the previous year for each executive director. Likewise, the gross annual salary may be increased above that threshold as a result of adjustments to the mix of fixed components, provided that such modification does not entail an increase in costs for the Group. The 5% increase mentioned above may also 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 2024. ii) Variable remuneration components The policy on executive directors’ variable remuneration for 2025 and 2026 will be based on the same principles as in 2024, 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 2025 and 2026 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 qualitative assessment that cannot raise or lower the result of the quantitative metrics by more than 25%. It will be conducted for the same categories as the quantitative metrics, including relative performance against market, risk management, 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, 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 2025 and 2026, 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, all shares of Banco Santander, S.A. It is also envisaged that for 2025 and 2026 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, reduce or increase payment amounts and the number of deferred instruments. 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 273       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2024 described in section 6.4.B.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 2025 and 2026, 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 2024 apply for 2025 and 2026. 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. B. Code of Conduct Executive directors are obliged to adhere strictly to the group’s General Code and the Code of Conduct in Securities Markets, especially in terms of confidentiality, professional ethics and conflicts of interest. C. Termination The length of executive directors' contract is indefinite. Contracts do not provide for any severance payment upon termination apart from what the law provides. If Ana Botín’s contract is terminated by Banco Santander, she must remain available to the group for four months in order to ensure proper transition. 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 retirement within the Group, their death or disability. 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 2024, 2025 and 2026 in the same amount and continue to be paid until they reach retirement age (even if they are still active). The Group has life and health insurance policies taken out for directors. Insurance premiums for 2024 include standard life insurance and the life insurance cover with the supplement to their fixed remuneration mentioned above. In 2025 and 2026, 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 274        2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 has a contract (effective from 1 January 2023) to assist in the handover to the new CEO and to attend executive risk committee meetings and engaging supervisors, international bodies, sector organizations and others in institutional matters as necessary, for which he receives a fixed remuneration of EUR 1,750 thousand. This is an annual contract which has been renewed for the year 2024. 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 Grupo Santander 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. 6.5 Preparatory work and decision-making for the remuneration policy; remuneration committee involvement Section 4.7 'Remuneration committee activities for 2023', (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 2023, including joint sessions with the risk, compliance and regulation supervision committee. 275 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • The date of the meeting in which the report was approved. The 2022 annual report on directors’ remuneration was approved by the board of directors and put to a binding vote at the 2023 AGM, with 89.22% of the votes in favour. The tally of the votes was: supervision of the remuneration policy, the remuneration committee believes the director remuneration policy for 2024, 2025 and 2026 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. Votes B Votes for B Votes against C Blank C Abstentions Number 11,087,900,806 A %  of  total 99.74% Number 9,886,665,679 1,194,192,063 7,043,064 29,058,164 % 89.22% 10.78% 0.06% 0.26% 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 2024, 2025 and 2026 herein. The board of directors then submits it to the 2024 AGM as a separate item on the agenda and an integral part of this text. See section 6.4 'Directors' remuneration policy for 2024, 2025 and 2026'. 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 2023 annual remuneration report elaboration and its continued The policy aims, among other aspects, (i) to maintain a simple executive remuneration scheme, with three categories of quantitative metrics (business transformation, 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 2023, no deviations from, or temporary exceptions to, the application of the remuneration policy occurred. 6.6 Remuneration of non-director members of senior management 2023 variable remuneration was approved by the board of directors on 30 January 2024 in view of the recommendation from the 29 January 2024 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 2023 and 2022, excluding those of executive directors. This amount has been reduced by 38% compared to that reported in 2014 (EUR 80,792 thousand): EUR thousand Short-term and deferred salary remuneration Year 2023 2022 Number of people 14 14 Fixed 17,109 18,178 Immediately receivable variable remuneration A (50% in instruments) Deferred variable remuneration B (50% in instruments) 14,711 15,466 6,439 6,797 Pension contributions 4,775 5,339 Other C remuneration 7,135 6,956 Total 50,169 52,736 A. The amount immediately payable in 2023 was 1,568 thousand Santander shares and 1,386 thousand Santander share options (2,504 thousand Santander shares in 2022). B. The deferred amount for 2023 will be 700 thousand Santander shares and 555 thousand Santander share options (1,010 thousand Santander shares in 2022). 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 . 276           2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The share price for 2023 variable remuneration is EUR 3.793. With this price set, the share options are worth EUR 1.016. This table breaks down remuneration linked to multi-year targets for senior management (excluding executive directors) at 31 December 2023 and 2022, which they will only receive if they meet the terms of continued service; non-applicability of malus clauses; and long-term goals are met during deferral periods. Thousands of euros Year 2023 2022 Number of people 14 14 Deferred variable remuneration subject to long-term B (50% in instruments) metricsA 6,761 7,137 A. In 2023, this corresponds to the fair value of maximum annual payments for 2027, 2028 and 2029 in the eighth cycle of the plan for deferred variable remuneration linked to multi-year targets. In 2022, this corresponds to the estimated fair value of maximum annual payments for 2026, 2027 and 2028 in the seventh 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 2023 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 735 thousand shares in 2023 and 582 Santander share options (1,156 thousand shares in Santander in 2022). The long-term goals are the same as those for executive directors. They are described in section 6.3 B iv). Additionally, members of senior management who stepped down from their roles in 2023 consolidated salary remuneration and other remuneration for a total amount of EUR 3,560 thousand (EUR 3,691 thousand in 2022). In 2023 they did not generate any right regarding variable pay subject to long-term objectives (this right has been generated in 2022 for a total amount of EUR 447 thousand). The board of directors approved the 2023 Digital Transformation Incentive which is a variable remuneration scheme split in two different blocks 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 200 thousand under it. See note 46 to the 2023 Group's consolidated financial statements for further information on the Digital Transformation Incentive. In 2023, 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. See note 5 of the Group’s 2023 consolidated financial statements for further details. 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 2023 Pillar III disclosures of Banco Santander, S.A. explains the criteria and report regulations followed to identify such staff. 9 At the end of 2023, 1,152 Group executives (including executive directors and non-director senior managers) were considered identified staff (1,029 in 2022), which accounts for 0.54% of the total final workforce (0.50% in 2022). 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 2023 of certain less senior manager categories of only having deferred variable pay subject to malus and clawback clauses (and not to long-term targets). • The portion of variable remuneration paid or deferred as shares for Group executives in Brazil, Chile and Poland that can be delivered in shares or similar instruments of their own listed entities (as in previous years). In 2024, 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 2023, 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 2023. 9 The 2023 Pillar III disclosures report can be found on our corporate website. 277         2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. The GSGM also applies to the Group´s global businesses, namely: Corporate & Investment Banking (CIB), Retail & Commercial Banking (Retail), Wealth Management & Insurance (Wealth), Digital Consumer Bank (Consumer) and Payments (Payments). CEOs/Country Heads remain ultimately responsible for the budget, execution of the customer and commercial strategy, and financial delivery. 7.1 Corporate Centre The GSGM is supported by a corporate centre, which brings control and support units together with such functions as strategy, risk, compliance, audit, 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 The GSGM outlines a set of principles that regulate three types of relationships between the Group and 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. The guidelines regarding subsidiary board composition are aligned with best international practices and ensure appropriate Group presence on the subsidiary boards with at least two Group nominated directors on each board. The subsidiaries are also subject to 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 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 and Legal Services, Marketing, Communications, Strategy, as well as the five global businesses: CIB, Retail, Wealth, Consumer and Payments). 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. Grupo Santander has corporate frameworks for matters considered to have a material impact on its risk profile, such as risk, capital, liquidity, compliance, financial crime, technology, auditing, accounting, finance, strategy, human resources, outsourcing, cybersecurity, special situations management communications and brand and responsible banking. These frameworks, which are mandatory, also specify: • how the Group should supervise and exert control over subsidiaries; and 278     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • 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 applicable 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 GSGM 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. Global businesses each have specific governance arrangements which ensures a robust Group-wide oversight of such businesses as set out in the GSGM. Each global business is responsible for defining the common business and operating model, setting the global ambition and identifying and managing the global tech platforms and product factories. 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, as well as Group global D businesses Control management and business functions, as well as local global businesses Interaction between the Group's and subsidiaries' control, management and business functions. A. First executive. B. Second executive, who reports directly to the board of directors. C. Europe, North America and South America, reporting to the Group CEO. D. Audit, Risk, Compliance, Finance, Financial Accounting & Control, IT & Operations, Human Resources, General Secretariat, Marketing, Communications, Strategy as well as the five global businesses (CIB, Retail, Wealth, Consumer and Payments). 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. 279 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8. Internal control over financial reporting (ICFR) This section describes the key features of Grupo Santander's ICFR. 8.1 Control environment Governance and control bodies These bodies are responsible for implementing and overseeing our ICFR: • Board of directors. It approves the financial reports Banco Santander must disclose as a listed company. The board also oversees and guarantees the integrity of the Group’s internal information, control, accounting and reporting systems. • Audit committee. It assists the board in overseeing the Internal Control System (ICS) and in preparing and presenting financial information. The audit committee also works with the external auditor to address matters that have been considered in audits to have a significant impact on our ICFR. It also makes sure the external auditor issues a report on the Group’s ICFR. See section 4.5 'Audit committee activities in 2023'. • Risk control committee. It assists the audit committee in reviewing and overseeing the annual ICS assessment. • Corporate accounting and financial management information committee. It is responsible for governing and supervising accounting, financial management and control matters. • Internal control steering meeting. It is chaired by the CRO and CAO and its role is to continuously monitors the Group’s control environment, as well as the ICS strategy and performance. Lead functions The structure of the Group enables us to manage risk effectively and ensure that internal control functions (risk, compliance and internal audit) are independent of business functions and can perform their duties efficiently. The key functions that prepare financial information are: • Costs. It draws up and documents the corporate model for managing structures and templates, which is used as a reference across the Group. • Business and support functions. They are the first line of defence and responsible for identifying and documenting the risks, tasks and controls that make up our ICFR, based on their operations. • Risk and Compliance & Conduct. They are the second line of defence. They make sure that we implement ICFR in accordance with the SOx Act. In particular, the corporate Non-financial risk control area is responsible for: • setting and circulating the methodology for documenting, assessing and certifying the ICS, which covers ICFR and other legal and regulatory requirements; • keeping documents up to date to adapt them to organizational and regulatory changes and, along with the Financial Accounting and Control division and representatives of the divisions and Group companies involved, to present the ICS assessment findings to the audit committee; and • similar functions in each country unit and global business also report to the corporate Non-financial risk control area. • Internal Audit. It is the third line of defence in overseeing and reporting on our ICFR. It recommends corrective action and areas of improvement for the first and second lines to consider and implement. Internal Audit is an 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. • Financial Accounting and Control: Regarding the production of financial information, the local controllers are responsible for: • embedding 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 assigned tasks, as well as a suitable hierarchical-functional structure; • using Group tools and methodologies to oversee the set up and monitoring of the internal control systems that ensure that the financial information we report remains reliable; and • implementing the corporate accounting and management information systems and adapting them to the specific needs of each unit. In order to preserve their independence, each local controller reports hierarchically to the head of the entity or country in which they exercise their responsibilities (CEO) and functionally to the head of the Group's Financial Accounting and Control division. 280 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Moreover, the CAO presents the financial information to the audit committee at least quarterly, giving explanations of the main criteria used to make estimates, assessments and significant judgements. General Code of Conduct, Canal Abierto and training General Code of Conduct (GCC) The Group’s GCC sets out board approved guidelines on employees’ conduct. Moreover, it dictates guidelines in relation to accounting standards and financial reporting. All of the Group’s employees, including directors, sign up to the GCC when they join Santander, though some are also bound to the Code of Conduct in Securities Markets and other codes of conduct specific to their area or business. All Santander employees have access to e-learning courses on the GCC. The Compliance and Conduct function also answers employees’ queries on ethics and rules in the GCC. If anyone violates the code, the Human Resources function adopts disciplinary measures and recommends corrective action (including work sanctions), irrespective of any related civil or criminal sanctions. For more details, see section 7.1 'Conduct standards' in the 'Responsible Banking' chapter. Canal Abierto Banco Santander’s ethical channel is called Canal Abierto, where anyone linked to Grupo Santander can confidentially and, if desired, anonymously, report crimes, internal rule violations, financial and accounting misdemeanours (according to the SOx Act), and regulatory infringements. It can also be used to report breaches of our GCC and corporate behaviours. The board of directors is responsible for implementing Canal Abierto, while the audit committee and the risk supervision, regulation and compliance committee jointly supervise the channel depending on the subject of the complaint. The SOx act gives authority to the audit committee to supervise whistleblowing channels in matters that fall under its remit (financial and accounting, including those related to auditing), while the supervision of reports of breaches of regulatory requirements, corporate behaviours and the internal governance system falls on the risk, regulation and compliance committee. For more details on the number and type of complaints filed on Canal Abierto, see section 7.2 'Ethical channels' 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 functions that prepare our ICFR promote, design and oversee these programmes and courses, with support from the Human Resources function. Training takes the form of both e-learning and on-site sessions that the Human Resources function monitors and oversees to guarantee that employees duly complete them and understand their contents. Training programmes and refresher courses on financial reporting in 2023 focused on: (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. 31,900 employees from several units and markets where Grupo Santander operates undertook the mentioned training programmes. Over 434,000 training hours were spent at the corporate centre in Spain and remotely via e-learning. Moreover, each subsidiary has its own training plan, based on Banco Santander’s. 8.2 Risk assessment in financial reporting Grupo Santander 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 is measured using the equity method. Entities with the greatest impact on the preparation of the Group's financial information, must use a common ICS methodology to make sure that 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) under its last published framework in 2013, which covers control targets for effective and efficient operations, reliable financial reporting and regulatory compliance. Risk identification considers all the Group's activities, not just the risks directly related to the preparation of the Group's financial information. Identifying potential risks that must be covered by the ICS is based on top management's knowledge and understanding of the business and its operations in relative to the importance and qualitative criteria associated with the type, complexity or structure of the business. Banco Santander ensures that controls are in place to cover risks of errors and fraud in financial reporting, such as (i) the existence of assets, liabilities and transactions at the relevant date; (ii) timely and correct recording and proper valuation of 281   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management assets, liabilities and transactions; and (iii) 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 under a direct set of individual responsibilities. • Management of the documents is decentralized to the various units, while coordination and monitoring falls to the Non- financial risk control area, which sets 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 Group 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 or fraud. • It is a dynamic model that is under constant development 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 for the Group’s companies can be found on a corporate app that enables us to check risk assessment procedures and the effectiveness of controls. 8.3 Control activities Revision and approval of financial information The audit committee and the board of directors oversee the preparation, submission and integrity of the financial information required of Banco Santander and the Group. They also review compliance with regulatory requirements, the scope of consolidation and the correct application of accounting standards, ensuring that financial information remains permanently updated on our corporate website. The audit committee is responsible for reporting to the board on the financial information that the Group must publish, ensuring that it is prepared in accordance with the same principles and practices as the financial statements and is as equally reliable so the board can adopt the corresponding resolutions. The most significant aspects we consider when closing accounts 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. Moreover, the Non-financial risk control area put in place continuous monitoring mechanisms to verify that the ICS is functioning correctly and to pinpoint and manage potential changes in the Group's control environment. In particular, the Non-financial risk control area prepares detailed information on the Group's control environment and the progress of the main mitigation plans in place every quarter, which it makes available to the internal control forums. The Non-financial risk control area presents the conclusions annually of its assessments to the audit committee alongside the Financial Accounting and Control division and, where applicable, the representatives of the divisions and companies in question, prior to submission to the risk supervision, regulation and compliance committee. Moreover, once it completes its assessment, the Non-financial risk control area provides the audit committee with at least one update on the ICS’s status. As additional information, the audit committee receives a report that includes the main conclusions from the units' ICS assessments and the main deficiencies identified, indicating whether they have been appropriately resolved or what plans are in place for their satisfactory resolution, as well as supporting evidence for the CEO, CFO and CAO to verify the ICS’s effectiveness. Internal control policies and procedures for financial IT systems The Technology and Operations division draws up the Group’s corporate policies on IT systems that are used directly or indirectly to prepare financial statements. These systems follow special internal controls to prepare and publish financial information correctly. The internal control policies on the following aspects are of particular importance: • Updated and divulged internal policies and procedures for system security and access to applications and computer systems according to the duties assigned to a role, to make sure access to information is appropriate and to protect the confidentiality, availability and integrity of financial information from cyber attacks. • The methodology we use when creating, modifying and maintaining apps follows a cycle of definition, development and testing that ensures we process financial information correctly. We have special development and security controls that include coding, data access, testing, vulnerability management, and other mechanisms. For more details on cybersecurity, see section 5 ‘Research, development and innovation (R+D+I)’ in the Economic and Financial Review chapter. • 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. 282   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • 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 before the apps become available to end users. • The Group’s business 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 has an action framework and specific policies and procedures to cover outsourcing risks properly. The Group 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; and • other material support services that are not directly related to financial reporting, such as vendor management, property management, HR management and others. Key control procedures include: • documenting relations between Group companies with comprehensive service agreements. • documenting and validating by the Group’s service providers of processes and controls for the services that the Group´s vendors perform; and • 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 the services of 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. Moreover, specific controls make sure information for external suppliers of services that could affect the financial statements is accurately and comprehensively detailed in service level agreements. 8.4 Information and communication Group 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 made available to management bodies, supervisors and the market provide accurate and reliable information for decision-making in relation to the Group; and (ii) for all Group entities (due to their accounting ties to Banco Santander) to meet their legal requirements in a timely manner. The Accounting regulation area of the Financial Accounting and Control division is responsible for: • setting the general framework for the treatment of the transactions that constitute Banco Santander's activity, in accordance with their economic nature and the regulations governing the financial system. • drawing up and keeping up to date the Group’s accounting policies and resolving any queries or conflicts arising from their interpretation; and • enhancing and standardizing the Group’s accounting practices. The corporate accounting and financial reporting and management framework sets out the principles and guidelines to prepare accounting, financial and management information that must apply to all Grupo Santander entities as a key element of their good governance. The Group's structure makes it necessary for these principles and standard guidelines to be common for their application across our footprint, and for each of the Group entities to have effective consolidation methods and employ homogeneous accounting policies. The framework's principles are adequately reflected in the Group’s accounting policies. Accounting policies are revised at least once a year and on the back of key regulatory amendments. Moreover, 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 Accounting regulation area and the rest of the Financial Accounting and Control division, as well as other divisions when appropriate. Mechanisms for the preparation of financial information The production, revision and approval of financial information and a description of our ICFR are 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. These documents cover recurrent banking operations and one-off transactions and aspects related to judgements and estimates to correctly record, analyse, present and breakdown financial information. 283   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Regarding financial statement consolidation, to minimize operational risk and maximize the quality of information, the Group developed IT tools to channel the flow of information between the units and the Financial Accounting and Control division and carries out consolidation based on the information provided. This process is automated end to end, with controls that enable us to detect incidents during consolidation. Moreover, the Financial Accounting and Control division exercises further supervisory and analytical control, which is set out in formal documents and carried out and reviewed under set time frames. 8.5 Monitoring of system functioning 2023 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. The Internal Audit function reports to the audit committee and periodically, at least twice a year, to the board of directors. As an independent unit, it also has direct access to the board when required. Internal Audit assesses: • the efficiency and effectiveness of the ICFR; • compliance with applicable regulations and supervisory requirements; • the reliability and integrity of financial and operational information; and • asset integrity. 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; and • 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, our activities, businesses and processes (performed internally or through outsourcing), the organization and, where applicable, branch networks. Internal Audit may also conduct audits for other investees that are not included in the preceding points when the Group has reserved this right as a shareholder, as well as on outsourced activities in accordance with the established agreements. The audit committee supervises the Group's Internal Audit function. See section 4.5 'Audit committee activities in 2023'. As at 2023 year-end, Internal Audit had 1,227 employees, all exclusively dedicated to this service. Of these, 274 were based at the Corporate Centre and 953 in the local units located in the Group´s core markets, all with exclusive dedication. Every year, Internal Audit prepares an audit plan based on a risk self-assessment and is solely responsible for executing the plan. Reviews may lead to recommendations, which are prioritized in accordance with their relative importance and are continuously monitored until full implementation. At its meeting on 17 February 2023, the audit committee reviewed the 2023 audit plan, which was reported to, and approved by, the board at its meeting on 23 February 2023. The internal audit report on the ICFR review aimed to: • verify compliance with the provisions contained in sections 302, 404, 406, 407 and 806 of the SOx Act; • check corporate governance with regard to information relating to the internal control system for financial reporting, including risk culture; • review the functions 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 documentation relating to the SOx Act is 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 with respect to the observations and recommendations made by Internal Audit, the external auditors of the annual accounts and supervisors; and • ratify the implementation of recommendations made in the audit plan. In 2023, the audit committee and the board of directors were informed of the Internal Audit function's work in accordance with its annual plan, as well as and of other related matters. See section 4.5 'Audit committee activities in 2023'. 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 any significant weaknesses detected in the audit with the external auditor. The audit committee also assesses the results of the work of the Internal audit unit and may take the necessary measures to correct any deficiencies identified in the financial information, that may impact on the reliability and accuracy of the financial statements. It may ask other areas of the Group involved in the process for vital information and clarification. The committee also assesses the potential impact of any errors detected in the financial information. In 2023, the audit committee was informed of the ICS assessment and certification for the 2022 financial year. See section 4.5 'Audit committee activities in 2023'. 8.6 External auditor report The external auditor issued an independent reasonable assurance report on the design and effectiveness of our ICFR . The report is included on the following pages. 284     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 285 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 286 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 'References on compliance with recommendations of Spanish Corporate Governance Code', 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 required by the CNMV'. See section 2.3 'Significant shareholders' and 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Tenure and equity ownership' in section 4.2 and section 9.2 'Statistical information on corporate governance required by the CNMV'. See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their own account so this section does not apply. See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their own account so this section does not apply. See section 2.3 'Significant shareholders' where we explain there are no significant shareholders on their own account so this section does not apply. See sections 2.4 'Shareholders' agreements' and 9.2 'Statistical information on corporate governance required by the CNMV'. Not applicable. See section 9.2 'Statistical information on corporate governance required by the CNMV'. See section 2.5 'Treasury shares' and 9.2 'Statistical information on corporate governance required by the CNMV'. See sections 2.2 'Authority to increase capital' and 2.5 'Treasury shares'. See section 9.2 'Statistical information on corporate governance as required by the CNMV'. See section 'Voting rights and unrestricted share transfers' in section 3.2. See section 3.2 'Shareholder rights'. See sections 2.6 'Stock market information' and 9.2 'Statistical information on corporate governance as required by the CNMV'. 287     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Section in the CNMV Included in statistical report model 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 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 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 2023, and section 9.2 'Statistical information on corporate governance required by the CNMV', in relation to the financial 2021, 2022 and 2023 year. See 'Approved resolutions and voting results' in section 3.4. See 'Participation at general meetings' in section 3.2 and section 9.2 'Statistical information on corporate governance 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 sections 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 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 2023' in section 4.6 and section 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Diversity' and 'Board skills and diversity matrix' in section 4.2, in relation to financial year 2023, and section 9.2 'Statistical information on corporate governance required by the CNMV', in relation to the remaining financial years. See 'Diversity' in section 4.2 and 'Duties and activities in 2023' in section 4.6. See 'Diversity' in section 4.2 and 'Duties and activities in 2023' in section 4.6 and, regarding top executive positions, see 4 'Acting responsibility towards employees' in 'Responsible banking' chapter. See 'Duties and activities in 2023' in section 4.6. Not applicable, since there are no proprietary directors. See 'Composition by type of director' in section 4.2. See '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 required by the CNMV'. See 'Board and committee preparation and attendance' in section 4.3. See sections 6. 'Remuneration' and 9.2 'Statistical information on corporate governance required by the CNMV'. Additionally, see Note 5) in the 'Notes to the consolidated financial statements'. See sections 5. 'Senior management team' and 9.2 'Statistical information on corporate governance required by the CNMV'. Additionally, see note 5) in the 'Notes to the consolidated financial statements'. See 'Board regulation' in section 4.3. See 'Election, appointment, re-election and succession of directors' in section 4.2. See 'Board effectiveness review and actions to continuously improve' in section 1.2 and 'Board effectiveness review in 2023' in section 4.3. See 'External consultant independence' in section 4.3. See 'Election, appointment, re-election 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 section 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Diversity' in section 4.2. See 'Election, appointment, re-election and succession of directors' in section 4.2 and section 9.2 'Statistical information on corporate governance 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 2023' 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 required by the CNMV'. See 'Board and committee preparation and attendance' in section 4.3, section 4.6 'Nomination committee activities in 2023' and section 9.2 'Statistical information on corporate governance required by the CNMV'. See section 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Duties and activities in 2023' in section 4.5. 288 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Section in the CNMV model C.1.29 Included in statistical report Yes C.1.30 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 C.2 Board committees C.2.1 C.2.2 C.2.3 No Yes Yes Yes Yes Yes No No No Yes Yes Yes No Comments See section 4.1 'Our directors', 'Secretary of the board' in section 4.3 and section 9.2 'Statistical information on corporate governance as required by the CNMV'. See section 3.1 'Shareholder communication and engagement'and 'External auditor independence' in section 4.5. See 'Re-election of the external auditor' in section 4.5. In accordance with the CNMV’s instructions, see 'External auditor independence' 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 2023': (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 required by the CNMV'. See section 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Board operation' and 'Committee operation' in section 4.3. See 'Election, appointment, re-election and succession of directors' in section 4.2. Not applicable. See 'Duties and activities in 2023' in section 4.6. Not applicable. See sections 6.4 'Directors' remuneration policy for 2024, 2025 and 2026', 6.7 'Prudentially significant disclosures document' and 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Structure of board committees' and 'Committee operation' in section 4.3, sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10 and 9.2 'Statistical information on corporate governance required by the CNMV'. See section 9.2 'Statistical information on corporate governance required by the CNMV'. See 'Board regulation' and 'Structure of board committees', 'Committee operation' in section 4.3 and 'Duties and activities in 2023' in sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10. No Yes Yes D. RELATED PARTY AND INTRAGROUP TRANSACTIONS D.1 D.2 D.3 D.4 D.5 D.6 D.7 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 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, compliance & conduct management', in particular section 2.'Risk management and control model' and sections 1.2 'Impacts, risks and opportunities', 2.3 'Risk management' and 7.1.4 'Principles of action in tax matters' in the 'Responsible banking' chapter. See note 54 to the consolidated financial statements, section 2.3 'Risk and compliance governance' in the 'Risk, compliance & conduct management' chapter. See also sections 1.2 'Impacts, risks and opportunities', 2.2 'Governance' and 7.1.4 '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', 9. 'Strategic risk' and 10. 'ESG risk factors' in the 'Risk, compliance & conduct management' 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, compliance & compliance management' chapter and sections 1.2 'Impacts, risks and opportunities', 2.3 'Risk management' and 7.1.4 '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.'ESG risk factors' the 'Risk, compliance & conduct management' chapter. Additionally, see note 25e) in the 'Notes 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.'ESG risk factors' in the 'Risk, compliance & conduct management' chapter. See also sections 2.2 'Governance' and 2.3 'Risk management' in the in the 'Responsible banking' chapter. 289 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Section in the CNMV model 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 of system functioning'. Not applicable. See section 8.6 'External auditor report'. G. DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS G Yes See 'Degree of compliance with the corporate governance recommendations' in section 9.2 and section 9.3 'References on compliance with recommendations of Spanish Corporate Governance Code'. H. OTHER INFORMATION OF INTEREST H No See 'Board 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 7. 'Business conduct' and 9.2 'Main internal regulations and governance', in particular, 9.1 '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 2023. 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 30/06/2023 Share capital (euros) 8,092,073,029.50 Number of shares 16,184,146,059 Number of voting rights 16,184,146,059 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 Details of the indirect shares: % of voting rights attributed to shares Direct 0 0 Indirect 5.08 3.04 % of voting rights through financial instruments Direct 0 0 Indirect 0.346 0 Total % of voting rights 5.43 3.04 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 3.04 290                                                             2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 A.2 above: Name or corporate name of director Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa Glenn Hutchins José Antonio Álvarez Álvarez Homaira Akbari Javier Botín-Sanz de Sautuola y O’Shea Bruce Carnegie-Brown 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 0.02 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Indirect 0.19 0.00 0.00 0.00 0.00 0.16 0.00 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 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 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 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 0.00 0.00 Total % of voting rights 0.20 0.01 0.00 0.02 0.00 0.19 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.43 0.77 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 0.67 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 291                                                                     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 0.67 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 286,842,316 Number of shares held indirectly (*) 10,973,357 % of total share capital 1.84% (*) 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 9,000,000 629,222 1,344,135 10,973,357 % 88.49 A.14 Indicate whether the company has issued securities not traded in a regulated market of the European Union. Yes þ No o 292                                           2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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: 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 Date of General Meeting 31/03/2023 Of which free float: % attending in person % by proxy 0.72 0.06 64.20 63.73 Electronic means 2.22 2.22 Attendance data % remote voting Other 0.55 0.55 Other 0.57 0.57 Other 0.42 0.42 Total 67.67 66.63 Total 68.77 67.72 Total 67.56 66.43 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 293                                                       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Héctor Grisi Checa Glenn Hutchins José Antonio Álvarez Álvarez Homaira Akbari Javier Botín-Sanz de Sautuola y O’Shea Bruce Carnegie-Brown Sol Daurella Comadrán Henrique de Castro Germán de la Fuente Gina Díez Barroso N/A 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 Other external 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 Belén Romana García Pamela Walkden N/A N/A Independent Director Independent Director 17 12 15 Date of first Date of last appointment appointment Election procedure 04/02/1989 31/03/2023 Vote in general shareholders’ meeting 20/12/2022 31/03/2023 Vote in general shareholders’ meeting 20/12/2022 31/03/2023 Vote in general shareholders’ meeting 25/11/2014 01/04/2022 Vote in general shareholders’ meeting 27/09/2016 31/03/2023 Vote in general shareholders’ meeting 25/07/2004 26/03/2021 Vote in general shareholders’ meeting 25/11/2014 26/03/2021 Vote in general shareholders’ meeting 25/11/2014 31/03/2023 Vote in general shareholders’ meeting 12/04/2019 01/04/2022 Vote in general shareholders’ meeting 01/04/2022 01/04/2022 Vote in general shareholders’ meeting 22/12/2020 31/03/2023 Vote in general shareholders’ meeting 03/04/2020 01/04/2022 Vote in general shareholders' meeting 28/11/2017 26/03/2021 Vote in general shareholders´ meeting 22/12/2015 01/04/2022 Vote in general shareholders’ meeting 29/10/2019 31/03/2023 Vote in general shareholders’ meeting Total number of directors 15 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 Sergio Rial Category of director at the time he/her left Other external Date of last appointment 03/04/2020 Date of leave 01/01/2023 Board committees he or she was a member of – Indicate whether he or she has left before the expiry of his or her term YES 294                         2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Héctor Grisi Checa 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 Glenn Hutchins Homaira Akbari Bruce Carnegie-Brown Sol Daurella Comadrán Henrique de Castro Germán de la Fuente 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 66.67 295             2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 of director Sol Daurella Description  of  the  rela tionship 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 and the funding Grupo Santander granted to companies in which Sol Daurella was a principal shareholder or director in 2023 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 2023 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 2023 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 2023 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 2023 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. 296 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 José Antonio Álvarez Álvarez Javier Botín-Sanz de Sautuola y O’Shea Luis Isasi Fernández de Bobadilla Reasons Given that Mr Álvarez was the former CEO of Banco Santander until 31 December 2022, pursuant to sub- section 4.a) of article 529 duodecies of the Spanish Companies Act. 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. Company, manager or shareholder to which or to whom the director is related Banco Santander, S.A. Banco Santander, S.A. Under prudent criteria given his remuneration as non- Banco Santander, S.A. 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. Total number of other external directors % of the Board Profile See section 4.1 'Our directors' in the Corporate governance chapter in the annual report. See section 4.1 'Our directors' in the Corporate governance chapter in the annual report. See section 4.1 'Our directors' in the Corporate governance chapter in the annual report. 3 20.00 List any changes in the category of a director which have occurred during the period covered in this report. Name or corporate name of director José Antonio Álvarez Álvarez Date of change 01/01/2023 Previous category Executive Current category Other external C.1.4 Complete the following table on the number of female directors at the end of each the past four years and their category: Number of female directors Executive Proprietary Independent Other external Total: FY 2023 1 — 5 — 6 FY 2022 1 — 5 — 6 FY 2021 1 — 5 — 6 FY 2020 1 — 5 — 6 % of total directors of each category FY 2023 50.00 0.00 50.00 0.00 40.00 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 40.00 297                       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Héctor Grisi Checa 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 Belén Romana García Company name of the listed or non-listed entity Position Remunerated YES/NO The Coca-Cola Company Director Cogrimex, S.A. de C.V. Lloyd's of London Cuvva Limited JB Capital Markets, S. V., S.A.U. Inversiones Zulú, S.L. Agropecuaria El Castaño, S.L.E Inversiones Peña Cabarga, S.L. Landstar System, Inc. AKnowledge Partners, LLC 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. Werfen, S.A. Six Group AG SIX Digital Exchange AG SDX Trading AG Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. Chair Chair Chair Chair Chair-chief executive officer Joint administrator Joint and several administrator Director Chief executive officer Chair Representative of director Director Joint administrator Representative of director Joint and several administrator Director Director Chair Director Chair Director Director Chair Chair Vice Chair Sole administrator Director Chair Director Director Chair Chair Director YES NO YES YES YES NO NO NO 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 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 Investment 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 Academic director of the IE Leadership & Foresight Hub Programme Member of the advisory board of JD Haspel Limited 298   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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) 28,567 69,338 0 46,200 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 Mahesh Aditya Daniel Barriuso Alexandra Brandão Juan Manuel Cendoya Méndez de Vigo José Francisco Doncel Razola 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 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) Group Chief Risk Officer Global Head of Retail & Commercial Banking and Group Chief Transformation Officer Group Head of Human Resources Group Head of Communications, Corporate Marketing and Research Group Chief Accounting Officer Group Chief Financial Officer Group Chief Audit Executive Global Head of Corporate & Investment Banking Group Head of Supervisory and Regulatory Relations Group Chief Operating & Technology Officer Global Head of Wealth Management & Insurance Group Head of Digital Consumer Bank and Group Head of Corporate Development and Financial Planning Group General Counsel Group Chief Compliance Officer 3 21.43 50,369 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 15 0 5 299               2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 15 6 4 13 12 17 23 15 100 15 100 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 Chief Accounting Officer 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 9,372 35.08 Group companies 10,192 13.12 Total 19,564 18.74 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 300       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 8 Company 19.05 8 Group 19.51 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 22 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 301 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Héctor Grisi Checa José Antonio Álvarez Álvarez 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 Other external 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 33.33 33.33 0 0 100 0 0 0 100 0 302     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Remuneration committee Name Glenn Hogan Hutchins Bruce Carnegie-Brown Sol Daurella Comadrán Henrique de Castro Luis Isasi Fernández de Bobadilla % of executive directors % of proprietary directors % of independent directors % of other external directors Position Chair Member Member Member Member Type Independent director Independent director Independent director Independent director Other external director Risk supervision, regulation and compliance committee Name Belén Romana García Germán de la Fuente Luis Isasi Fernández de Bobadilla Ramiro Mato García-Ansorena Pamela Walkden Position Chair Member Member Member Member Type Independent director Independent director Other external director Independent director Independent director % of executive directors % of proprietary directors % of independent directors % of other external directors Responsible banking, sustainability and culture committee Name Ramiro Mato García-Ansorena Homaira Akbari Sol Daurella Comadrán Gina Díez Barroso Position Chair Member Member Member Member Belén Romana García % 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 Homaira Akbari José Antonio Álvarez Álvarez Henrique de Castro Héctor Grisi Checa Glenn Hogan 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 Independent director Independent director Independent director Independent director Independent director Type Executive director Independent director Other external director Independent director Executive director Independent director Independent director 0 0 80.00 20.00 0 0 80.00 20.00 0 0 100 0 28.57 0.00 57.14 14.29 303 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management C.2.2 Complete the following table on the number of female directors on the various board committees over the past four years. Audit committee Responsible banking, sustainability and culture committee Innovation and technology committee Nomination committee Remuneration committee Risk supervision, regulation and compliance committee Executive committee FY 2023 FY 2022 FY 2021 FY 2020 Number of female directors Number 3 % 50.00 Number 3 % 50.00 Number 3 4 3 2 1 2 2 80.00 42.86 50.00 20.00 40.00 33.33 3 3 2 1 2 2 75.00 42.86 50.00 20.00 50.00 33.33 3 3 2 1 2 2 % 60.00 60.00 42.86 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 D. RELATED-PARTY AND INTRAGROUP TRANSACTIONS D.2 Give individual details of operations that are significant due to their amount or of importance due to their subject matter carried out between the company or its subsidiaries and shareholders holding 10% or more of the voting rights or who are represented on the board of directors of the company, indicating which has been the competent body for its approval and if any affected shareholder or director has abstained. In the event that the board of directors has responsibility, indicate if the proposed resolution has been approved by the board without a vote against the majority of the independents: Not applicable. D.3 Give individual details of the operations that are significant due to their amount or relevant due to their subject matter carried out by the company or its subsidiaries with the administrators or managers of the company, including those operations carried out with entities that the administrator or manager controls or controls jointly, indicating the competent body for its approval and if any affected shareholder or director has abstained. In the event that the board of directors has responsibility, indicate if the proposed resolution has been approved by the board without a vote against the majority of the independents: Not applicable. D.4 Report individually on intra-group transactions that are significant due to their amount or relevant due to their subject matter that have been undertaken by the company with its parent company or with other entities belonging to the parent's group, including subsidiaries of the listed company, except where no other related party of the listed company has interests in these subsidiaries or that they are fully owned, directly or indirectly, by the listed company. In any case, report any intragroup transactions carried out with entities in countries or territories considered to be tax havens. Corporate name of the group company Brief description of the transaction and any other information necessary for its evaluation The information included in this chart shows the transactions and the results obtained by the Bank in Spain and its foreign branches as of 31 December 2023 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). Amount (EUR thousand) These results, and the balances indicated below, were eliminated in the consolidation process. See note 3 to the 2023 consolidated financial statements for more information on offshore entities. Banco Santander (Brasil) S.A. (Cayman Islands Branch) The amount shown on the right corresponds to negative results (including results due to exchange differences) relating to contracting of derivatives. The referred derivatives had a net negative market value of EUR 697 million and covered the following transactions: - 142 Non Delivery Forwards. - 175 Swaps. - 55 Cross Currency Swaps. - 24 Options. - 26 Forex. The amount shown on the right corresponds to negative results relating to demand deposits (liability). These deposits had a nominal value of EUR 2,311 million as of 31 December 2023. The amount shown on the right corresponds to positive results relating to demand deposits (asset). These deposits had a nominal value of EUR 19 million as of 31 December 2023. 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 with maturity 2028, but with a full and early redemption option exercised in November 2023). Tier I Notes had an amortised cost of EUR 1,146 million as of 31 December 2023. The amount shown on the right corresponds to negative results relating to interests and commissions concerning correspondent accounts (liability). This relates to correspondent accounts with a credit balance of EUR 22 million as of 31 December 2023. The amount shown on the right corresponds to positive results relating to commissions received. 416,850 61,906 22 148,680 412 139 304                  2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management D.5 Give individual details of the operations that are significant due to their amount or relevant due to their subject matter carried out by the company or its subsidiaries with other related parties pursuant to the international accounting standards adopted by the EU, which have not been reported in previous sections. Not applicable. G. DEGREE OF COMPLIANCE WITH THE CORPORATE GOVERNANCE RECOMMENDATIONS Indicate the degree of the company’s compliance with the recommendations of the good governance code for listed companies. Should the company not comply with any of the recommendations or comply only in part, include a detailed explanation of the reasons so that shareholders, investors and the market in general have enough information to assess the company’s behaviour. General explanations are not acceptable. 1. The bylaws of listed companies should not place an upper limit on the votes that can be cast by a single shareholder, or impose other obstacles to the takeover of the company by means of share purchases on the market. Complies þ Explain o 2. When the listed company is controlled, pursuant to the meaning established in Article 42 of the Commercial Code, by another listed or non-listed entity, and has, directly or through its subsidiaries, business relationships with that entity or any of its subsidiaries (other than those of the listed company) or carries out activities related to the activities of any of them, this is reported publicly, with specific information about: a) The respective areas of activity and possible business relationships between, on the one hand, the listed company or its subsidiaries and, on the other, the parent company or its subsidiaries. b) The mechanisms established to resolve any conflicts of interest that may arise. Complies o Partially complies o Explain o Not applicable þ 3. During the AGM the chair of the board should verbally inform shareholders in sufficient detail of the most relevant aspects of the company’s corporate governance, supplementing the written information circulated in the annual corporate governance report. In particular: a) Changes taking place since the previous annual general meeting. b) The specific reasons for the company not following a given Good Governance Code recommendation, and any alternative procedures followed in its stead. Complies þ Partially complies o Explain o 4. The company should define and promote a policy for communication and contact with shareholders and institutional investors within the framework of their involvement in the company, as well as with proxy advisors, that complies in full with the rules on market abuse and gives equal treatment to shareholders who are in the same position. The company should make said policy public through its website, including information regarding the way in which it has been implemented and the parties involved or those responsible its implementation. Further, without prejudice to the legal obligations of disclosure of inside information and other regulated information, the company should also have a general policy for the communication of economic-financial, non-financial and corporate information through the channels it considers appropriate (media, social media or other channels) that helps maximise the dissemination and quality of the information available to the market, investors and other stakeholders. Complies þ Partially complies o Explain o 5. The board of directors should not make a proposal to the general meeting for the delegation of powers to issue shares or convertible securities without pre-emptive subscription rights for an amount exceeding 20% of capital at the time of such delegation. And that whenever the board of directors approves an issuance of shares or convertible securities without pre-emptive rights the company immediately publishes reports on its web page regarding said exclusions as referenced in applicable mercantile law. Complies þ Partially complies o Explain o 6. Listed companies drawing up the following reports on a voluntary or compulsory basis should publish them on their website well in advance of the AGM, even if their distribution is not obligatory: a) Report on auditor independence. b) Reviews of the operation of the audit committee and the nomination and remuneration committees. c) Audit committee report on third-party transactions. Complies þ Partially complies o Explain o 7. The company should broadcast its general meetings live on the corporate website. The company should have mechanisms that allow the delegation and exercise of votes by electronic means and even, in the case of large-cap companies and, to the extent that it is proportionate, attendance and active participation in the general shareholders’ meeting. Complies þ Explain o 8. The audit committee should strive to ensure that the financial statements that the board of directors presents to the general shareholders’ meeting are drawn up in accordance to accounting legislation. And in those cases where the auditors includes any qualification in its report, the chair of the audit committee should give a clear explanation at the general meeting of their opinion regarding the scope and content, making a summary of that opinion available to the shareholders at the time of the publication of the notice of the meeting, along with the rest of proposals and reports of the board. Complies þ Partially complies o Explain o 305 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. In pursuing the corporate interest, it should not only abide by laws and regulations and conduct itself according to principles of good faith, ethics and respect for commonly accepted customs and good practices, but also strive to reconcile its own interests with the legitimate interests of its employees, suppliers, clients and other stakeholders, as well as with the impact of its activities on the broader community and the natural environment. Complies þ Partially complies o Explain o 13. The board of directors should have an optimal size to promote its efficient functioning and maximise participation. The recommended range is accordingly between five and fifteen members. Complies þ Explain o 14. The board of directors should approve a policy aimed at promoting an appro­priate composition of the board that: a) is concrete and verifiable; b) ensures that appointment or re-election proposals are based on a prior analysis of the competences required by the board; and c) favours diversity of knowledge, experience, age and gender. Therefore, measures that encourage the company to have a significant number of female senior managers are considered to favour gender diversity. The results of the prior analysis of competences required by the board should be written up in the nomination committee’s explanatory report, to be pub­lished when the general shareholders’ meeting is convened that will ratify the appointment and re-election of each director. The nomination committee should run an annual check on compliance with this policy and set out its findings in the annual corporate governance report. Complies þ Partially complies o Explain o 15. Proprietary and independent directors should constitute an ample majority on the board of directors, while the number of executive directors should be the minimum practical bearing in mind the complexity of the corporate group and the ownership interests they control. Further, the number of female directors should account for at least 40% of the members of the board of directors before the end of 2022 and thereafter, and not less than 30% previous to that. Complies þ Partially complies o Explain o 16. The percentage of proprietary directors out of all non- executive directors should be no greater than the proportion between the ownership stake of the shareholders they represent and the remainder of the company’s capital. This criterion can be relaxed: 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 18. Companies should disclose the following director particulars on their websites and keep them regularly updated: a) Background and professional experience. b) Directorships held in other companies, listed or otherwise, and other paid activities they engage in, of whatever nature. c) Statement of the director class to which they belong, in the case of proprietary directors indicating the shareholder they represent or have links with. d) Dates of their first appointment as a board member and subsequent re-elections. e) Shares held in the company, and any options on the same. Complies þ Partially complies o Explain o 19. Following verification by the nomination committee, the annual corporate governance report should disclose the reasons for the appointment of proprietary directors at the urging of shareholders controlling less than 3 percent of capital; and explain any rejection of a formal request for a board place from shareholders whose equity stake is equal to or greater than that of others applying successfully for a proprietary directorship. Complies o Partially complies o Explain o Not applicable þ 306 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 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 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. Complies þ Partially complies o Explain o 23. Directors should express their clear opposition when they feel a proposal submitted for the board’s approval might damage the corporate interest. In particular, independents and other directors not subject to potential conflicts of interest should strenuously challenge any decision that could harm the interests of shareholders lacking board representation. When the board makes material or reiterated decisions about which a director has expressed serious reservations, then he or she must draw the pertinent conclusions. Directors resigning for such causes should set out their reasons in the letter referred to in the next recommendation. The terms of this recommendation also apply to the secretary of the board, even if he or she is not a director. 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 31. The agendas of board meetings should clearly indicate on which points directors must arrive at a decision, so they can study the matter beforehand or obtain the information they consider appropriate. For reasons of urgency, the chair may wish to present decisions or resolutions for board approval that were not on the meeting agenda. In such exceptional circumstances, their inclusion will require the express prior consent, duly minuted, of the majority of directors present. Complies þ Partially complies o Explain o 32. Directors should be regularly informed of movements in share ownership and of the views of major shareholders, investors and rating agencies on the company and its group. Complies þ Partially complies o Explain o Not applicable o Complies þ Partially complies o Explain 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. 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; 307 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 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 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. 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. 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 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) In general, ensure that the internal control policies and systems established are applied effectively in practice. 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. 308 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. b) Participate actively in the preparation of risk strategies and in key decisions about their management. c) Ensure that risk control and management systems are mitigating risks effectively in the frame of the policy drawn up by the board of directors. Complies þ Partially complies o Explain o 47. Members of the nomination and remuneration committee-or of the nomination committee and remuneration committee, if separately constituted - should be chosen procuring they have the right balance of knowledge, skills and experience for the functions they are called on to discharge. The majority of their members should be independent directors. Complies þ Partially complies o Explain o 48. Large cap companies should have formed separate nomination and remuneration committees. Complies þ Explain o Not applicable o 49. The nomination committee should consult with the company’s chair and chief executive, especially on matters relating to executive directors. When there are vacancies on the board, any director may approach the nomination committee to propose candidates that it might consider suitable. Complies þ Partially complies o Explain o 50. The remuneration committee should operate independently and have the following functions in addition to those assigned by law: a) Propose to the board the standard conditions for senior officer contracts. b) Monitor compliance with the remuneration policy set by the company. c) Periodically review the remuneration policy for directors and senior officers, including share-based remuneration systems and their application, and ensure that their individual compensation is proportionate to the amounts paid to other directors and senior officers in the company. d) Ensure that conflicts of interest do not undermine the independence of any external advice the committee engages. e) Verify the information on director and senior officers’ pay contained in corporate documents, including the annual directors’ remuneration statement. Complies þ Partially complies o Explain o 51. The remuneration committee should consult with the company’s chair and chief executive, especially on matters relating to executive directors and senior officers. Complies þ Partially complies o Explain o 52. The rules regarding composition and functioning of supervision and control committees should be set out in the regulations of the board of directors and aligned with those governing legally mandatory board committees as specified in the preceding sets of recommendations. They should include at least the following terms: a) Committees should be formed exclusively by non-executive directors, with a majority of independents. b) They should be chaired by independent directors. c) The board should appoint the members of such committees with regard to the knowledge, skills and experience of its directors and each committee’s terms of reference; discuss their proposals and reports; and provide report-backs on their activities and work at the first board plenary following each committee meeting. d) They may engage external advice, when they feel it necessary for the discharge of their functions. 309 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management e) Meeting proceedings should be minuted and a copy made available to all board members. Complies þ Partially complies o Explain o Not applicable o 53. The task of supervising compliance with the policies and rules of the company in the environmental, social and corporate governance areas, and internal rules of conduct, should be assigned to one board committee or split between several, which could be the audit committee, the nomination committee, a committee specialised in sustainability or corporate social responsibility, or a dedicated committee established by the board under its powers of self-organisation. Such a committee should be made up solely of non-executive directors, the majority being independent and specifically assigned the following minimum functions. Complies þ Partially complies o Explain o 54. The minimum functions referred to in the previous recommendation are as follows: a) Monitor compliance with the company’s internal codes of conduct and corporate governance rules, and ensure that the corporate culture is aligned with its purpose and values. b) Monitor the implementation of the general policy regarding the disclosure of economic-financial, non-financial and corporate information, as well as communication with shareholders and investors, proxy advisors and other stakeholders. Similarly, the way in which the entity communicates and relates with small and medium-sized shareholders should be monitored. c) Periodically evaluate the effectiveness of the company’s corporate governance system and environmental and social policy, to confirm that it is fulfilling its mission to promote the corporate interest and catering, as appropriate, to the legitimate interests of remaining stakeholders. d) Ensure the company’s environmental and social practices are in accordance with the established strategy and policy. e) Monitor and evaluate the company’s interaction with its stakeholder groups. Complies þ Partially complies o Explain o 55. Environmental and social sustainability policies should identify and include at least: a) The principles, commitments, objectives and strategy regarding shareholders, employees, clients, suppliers, social welfare issues, the environment, diversity, fiscal responsibility, respect for human rights and the prevention of corruption and other illegal conducts. b) The methods or systems for monitoring compliance with policies, associated risks and their management. c) The mechanisms for supervising non-financial risk, including that related to ethical aspects and business conduct. d) Channels for stakeholder communication, participation and dialogue. e) Responsible communication practices that prevent the manipulation of information and protect the company’s honour and integrity. Complies þ Partially complies o Explain o 56. Director remuneration should be sufficient to attract and retain directors with the desired profile and compensate the commitment, abilities and responsibility that the post demands, but not so high as to compromise the independent judgement of non-executive directors. Complies þ Explain o 57. Variable remuneration linked to the company and the director’s performance, the award of shares, options or any other right to acquire shares or to be remunerated on the basis of share price movements, and membership of long-term savings schemes such as pension plans, retirement accounts or any other retirement plan should be confined to executive directors. The company may consider the share-based remuneration of non-executive directors provided they retain such shares until the end of their mandate. The above condition will not apply to any shares that the director must dispose of to defray costs related to their acquisition. Complies þ Partially complies o Explain o 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 310 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 311 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9.3 References on compliance with recommendations of Spanish Corporate Governance Code 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 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 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 2023', 4.6 'Nomination committee activities in 2023', 4.7 'Remuneration committee activities in 2023', 4.8 'Risk supervision, regulation and compliance committee activities in 2023', 4.9 'Responsible banking, sustainability and culture committee activities in 2023', 4.10 'Innovation and technology committee activities in 2023' and 4.12 'Related-party transactions and conflicts of interest'. See 'Engagement with shareholders in 2023' in section 3.1, 'Participation at general meetings' in section 3.2 and section 3.5 'Our next AGM in 2024'. See 'Board regulation' in section 4.3 and section 4.5 'Audit committee activities in 2023'. See 'Participation at general meetings' in section 3.2. See 'Supplement to the notice and proposals resolutions' in section 3.2. See section 3.5 'Our next AGM in 2024'. See section 4.3 'Board functioning and effectiveness'. See 'Size' in section 4.2. See 'Diversity' and 'Election, appointment, re-election and succession of directors' in section 4.2, 'Board regulation' in section 4.3, 'Duties and activities in 2023' in section 4.6, section 5. 'Senior management team' and 'Responsible banking' chapter. See section 4.2 'Board composition'. See 'Composition by type of director' in section 4.2. See 'Composition by type of director' and 'Election, appointment, re-election 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 type of director' in section 4.2. See 'Election, appointment, re-election and succession of directors' in section 4.2. See 'Election, appointment, re-election and succession of directors' in section 4.2. See 'Election, appointment, re-election and succession of directors' in section 4.2, 'Board regulation' in section 4.3 and 'Duties and activities in 2023' in section 4.6. See 'Election, appointment, re-election and succession of directors' in section 4.2. See 'Election, appointment, re-election and succession of directors' in section 4.2, 'Board's regulation' in section 4.3 and 'Duties and activities in 2023' in section 4.6. See 'Board and committee preparation and attendance' in section 4.3 and 'Duties and activities in 2023' in section 4.6. See 'Board operation' and 'Board and committee preparation and attendance' in section 4.3. See 'Board operation', 'Committee 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 2023' 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 2023' in section 4.3. See 'Board 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 2023'. See 'Board regulation' in section 4.3 and 'Composition' in section 4.5. See 'Duties and activities in 2023' in section 4.5 and section 8.5 'Monitoring of system functioning'. See 'Board regulation' in section 4.3 and 'Duties and activities in 2023' in section 4.5. See 'Board regulation' in section 4.3 and 'Duties and activities in 2023' in section 4.5. 312   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Recommendation Comply / Explain 43 44 45 Comply Comply 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 'Committee operation' in section 4.3. See 'Duties and activities in 2023' in section 4.5. See 'Board regulation' in section 4.3, 'Duties and activities in 2023' in section 4.5, 'Duties and activities in 2023' in section 4.8 and the 'Risk management and compliance' chapter. See 'Duties and activities in 2023' in section 4.5,'Duties and activities in 2023' in section 4.8 and the 'Risk, compliance & conduct management'' chapter. See 'Composition' in section 4.6 and 'Composition' in section 4.7. See 'Structure of board committees' in section 4.3. See 'Duties and activities in 2023' in section 4.6. See 'Duties and activities in 2023' in section 4.7. See 'Duties and activities in 2023' in section 4.7. See 'Board regulation' and 'Committee operation' in section 4.3 and sections 4.8 'Risk supervision, regulation and compliance committee activities in 2023' and 4.9 'Responsible banking, sustainability and culture committee activities in 2023'. See 'Board regulation' in section 4.3, 'Duties and activities in 2023' in section 4.6, 'Duties and activities in 2023' in section 4.8 and 'Duties and activities in 2023' in section 4.9. See 'Board's regulation' in section 4.3, 'Duties and activities in 2023' in section 4.6, 'Duties and activities in 2023' in section 4.8 and 'Duties and activities in 2023' in section 4.9. See 'Duties and activities in 2023' 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 2023', 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for 2024, 2025 and 2026'. See sections 6.2 'Remuneration of directors for supervisory and collective decision-making duties: policy applied in 2023', 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for 2024, 2025 and 2026'. See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for 2024, 2025 and 2026'. 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 2024, 2025 and 2026'. See 'Duties and activities in 2023' in section 4.7, section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for 2024, 2025 and 2026'. See section 6.3 'Remuneration of directors for executive duties' and 6.4 'Directors' remuneration policy for 2024, 2025 and 2026'. 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 2024, 2025 and 2026'. 313 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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) No C.1 b) iii) No C.1 b) iv) Yes C.1 c) C.2 Yes D. Other information of interest No D See section 9.5. See section 9.5. See section 9.5. See section 9.5. See section 9.5. See section 9.5. No remuneration for this component. No remuneration for this component. No remuneration for this component. See section 9.5. See section 9.5. See section 4.7 314 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 11,116,958,970 % of total 100.00 % Votes in favour Votes against Blank Abstentions Number 9,886,665,679 1,194,192,063 7,043,064 29,058,164 % of votes cast 88.93 % 10.74 % 0.06 % 0.26 % C. ITEMISED INDIVIDUAL REMUNERATION ACCRUED BY EACH DIRECTOR Directors Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa José Antonio Álvarez Álvarez Bruce Carnegie-Brown Homaira Akbari Javier Botín-Sanz de Sautuola y O’Shea Sol Daurella Comadrán Henrique de Castro Gina Díez Barroso Luis Isasi Fernández de Bobadilla Ramiro Mato García-Ansorena Belén Romana García Pamela Walkden Germán de la Fuente Glenn Hutchins Type Executive Chair CEO Vice-Chair Independent Independent Other external Independent Independent Independent Other External Independent Independent Independent Independent Lead independent director Period of accrual in year 2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 From 01/01/2023 to 31/12/2023 Comments (Not included in the electronic submission to the CNMV) Glenn Hutchins was appointed as Vice Chair and Lead Independent Director with effect from 1 October 2023 replacing Bruce Carnegie-Brown in the role. 315 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 98 98 128 203 98 98 98 98 98 98 98 98 98 98 193 45 44 45 81 78 39 77 87 68 78 96 102 87 87 83 268 198 198 292 89 — 74 99 45 241 324 372 156 86 96 3,271 3,000 — — — — — — — — — — — — — 2,838 1,220 714 — — — — — — — — — — — — 361 — 231 — — — — — — — — — — — — — — — — — — — — — — — — — — — Other grounds Total year 2023 Total year 2022 525 7,406 7,227 — — 4,560 2,460 3,776 5,700 — — 576 265 700 244 — 137 129 — — — 249 284 211 230 261 172 1,000 1,417 1,412 — 518 500 — — — — 572 341 271 372 549 323 137 10 Name Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa José Antonio Álvarez Álvarez Bruce Carnegie- Brown Homaira Akbari Javier Botín-Sanz de Sautuola y O’Shea Sol Daurella Comadrán Henrique de Castro Gina Díez Barroso Luis Isasi Fernández de Bobadilla Ramiro Mato García-Ansorena Belén Romana García Pamela Walkden Germán de la Fuente Glenn Hutchins Comments (Not included in the electronic submission to the CNMV) 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. The variable remuneration only includes amounts related to the position of executive director of Banco Santander S.A. 316     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments Financial instruments at start of year 2023 Financial instruments granted during 2023 year Financial instruments consolidated during 2023 Instruments matured but not exercised Financial instruments at end of year 2023 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 103,303 103,303 212,927 212,927 111,821 111,821 710,698 710,698 311,669 311,669 839,174 311,669 — — — — — — — — — — — — 34,400 34,400 3.793 35,452 35,452 31,049 31,049 177,675 177,675 62,334 62,334 3.793 3.793 3.793 3.793 167,835 62,334 3.793 Gross profit from shares handed over or consolidated financial instruments (EUR thousand) 130 134 118 674 236 118 — — 1,041,392 1,041,392 469,286 469,286 3.793 1,780 No. of instruments No. of instruments No. of equivalent shares 68,903 — — 71,011 106,464 106,464 6,225 74,547 74,547 — — — — 533,023 533,023 249,335 249,335 671,339 249,335 572,107 572,107 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 shares options. 8th cycle of deferred variable remuneration plan linked to multi-year targets (2023) in shares Financial instruments at start of year 2023 Financial instruments granted during 2023 year Financial instruments consolidated during 2023 Instruments matured but not exercised Financial instruments at end of year 2023 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 Gross profit from shares handed over or consolidated financial instruments (EUR thousand) No. of instruments No. of instruments No. of equivalent shares — — 693,383 693,383 321,645 321,645 3.793 1,220 — 371,737 371,737 Name Héctor Grisi Checa Name of Plan 8th cycle of deferred variable remuneration plan linked to multi-year targets (2023) in shares 317   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Financial instruments at start of year 2023 Financial instruments granted during 2023 year Financial instruments consolidated during 2023 Instruments matured but not exercised Financial instruments at end of year 2023 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 Gross profit from shares handed over or consolidated financial instruments (EUR thousand) 69,033 69,033 142,299 142,299 60,737 60,737 479,644 479,644 210,395 210,395 566,492 210,395 — — — — — — — — — — — — 22,988 22,988 3.793 23,693 23,693 16,865 16,865 119,911 119,911 42,079 42,079 3.793 3.793 3.793 3.793 113,298 42,079 3.793 87 90 64 455 160 80 No. of instruments No. of instruments No. of equivalent shares 46,045 — — 47,457 71,149 71,149 3,381 40,491 40,491 — — — 359,733 359,733 168,316 168,316 453,194 168,316 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 shares options. 318 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Comments (Not included in the electronic submission to the CNMV) n The variable remuneration only includes the amounts related to the position of executive director of Banco Santander S.A. The figures are impacted by the adaptation for 2023 and successive financial years of the information on "short-term variable remuneration" and "long-term variable remuneration" to the consolidation criteria of CNMV, the latter understood as the fulfillment at the end of the accrual period of the different objectives or conditions to which the variable remuneration was linked, including the verification of whether or not the application of malus clauses is appropriate (instead of including amounts accrued to the executive director under short- and long-term results that are put to the vote of the annual general meeting each year). In 2023 there was no application of malus clauses. n The variable remuneration consolidated as of the date of this report corresponds to the following plans: 1) Short-term variable remuneration: a. 40% immediate payment of variable remuneration of the eight cycle of the deferred multi-year objectives variable remuneration plan (2023). b. First fifth deferred (12%) of variable remuneration of the seventh cycle of the deferred multi-year objectives variable remuneration plan (2022). c. Second fifth deferred (12%) of variable remuneration of the sixth cycle of the deferred multi-year objectives variable remuneration plan (2021). 2) Long-term variable remuneration: a. Third deferred (first fifth subject to multi-year metrics) of variable remuneration of the fifth cycle of the deferred multi-year objectives variable remuneration plan (2020). b. Fourth deferred (second fifth subject to multiyear metrics) of variable remuneration of the fourth cycle of the deferred multi-year objectives variable remuneration plan (2019). c. Fifth deferred (third fifth subject to multiyear metrics) of variable remuneration of the third cycle of the deferred multi-year objectives variable remuneration plan (2018). For the purpose of calculating the hypothetical current cash value of Gross profit from shares handed over or consolidated financial instruments, the same share price used for VR 2023 has been taken, calculated with the weighted average daily volume of weighted average listing prices of Santander shares in the 50 trading sessions prior to the Friday (not inclusive) before 30 January 2024 (the date on which the board approved the 2023 bonus for executive directors), which was EUR 3.793 per share. In the case of the 2022 VR share options, the gross profit of the consolidated instruments has been calculated as the difference between the EUR 3.793 and the exercise price of the option in that remuneration plan (EUR 3.088). n And below are the levels of achievement of the multi-year metrics of the long-term variable remuneration plans: 1) Fifth cycle of the deferred multi-year objectives variable remuneration plan (2020): 83.3% of achievement for the period 2020-2022. a. CET1 metric at 100% of achievement for 2022 year-end period (target 12.00%). Weight of 33.3%. b. Underlying BPA growth at 150% of achievement (target growth of 10%). Weight of 33.3%. c. TSR metric at 0% of achievement (minimum target of 33% not reached). Weight of 33.3%. 2) Fourth cycle of the deferred multi-year objectives variable remuneration plan (2019): 33.3% of achievement for the period 2019-2021. a. CET1 metric at 100% of achievement for 2021 year-end period (target 12.00%). Weight of 33.3%. b. Underlying BPA growth at 0% of achievement (target growth of 15%). Weight of 33.3%. c. TSR metric at 0% of achievement (minimum target of 33% not reached). Weight of 33.3%. 3) Third cycle of the deferred multi-year objectives variable remuneration plan (2018): 33.3% of achievement for the period 2018-2020. a. CET1 metric at 100% of achievement for 2020 year-end period (target 11.30%). Weight of 33.3%. b. Underlying BPA growth at 0% of achievement (target growth of 25%). Weight of 33.3%. c. TSR metric at 0% of achievement (minimum target of 33% not reached). Weight of 33.3%. 319 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management iii) Long-term saving systems (thousand EUR) Name Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa Remuneration from consolidation of rights to savings system 1,144 966 Contribution over the year from the company (EUR thousand) Savings systems with consolidated economic rights Savings systems with unconsolidated economic rights Name Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa José Antonio Álvarez 2023 1,144 966 — 2022 1,081 — 811 — iv) Details of other items (thousands of EUR) Amount of accumulated funds (EUR thousand) 2023 2022 Systems with consolidated economic rights Systems with unconsolidate d economic rights Systems with consolidated economic rights Systems with unconsolidate d economic rights 2023 2022 — — — — — 49,257 585 19,495 — — — — 46,725 — 18,958 — — — Name Ana Botín-Sanz de Sautuola y O’Shea Item Life insurance and complement Other remuneration Name Héctor Grisi Checa Item Life insurance and complement Other remuneration Name José Antonio Álvarez Álvarez Item Life insurance and complement Other remuneration Amount remunerated 470 28 Amount remunerated 1 46 Amount remunerated 716 6 320   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Henrique de Castro Pamela Walkden José Antonio Álvarez Álvarez Fixed remuneration 311 Per diem allowances — 200 152 200 — — — Remuneration for membership of Board's committees — — — 141 Short-term variable remuneration — Long-term variable remuneration — — — — — — — Salary — — — — Severance pay — Other grounds — — — — — — — Total year 2023 311 200 152 341 Total year 2022 361 200 147 — Comments (Not included in the electronic submission to the CNMV) The variable remuneration only includes the amounts accrued since the appointment of executive director of Banco Santander S.A. ii) Table of changes in share/based remunerations schemes and gross profit from consolidated shares of financial instruments Not applicable iii) Long term saving systems (thousand EUR) Not applicable iv) Detail of other items (thousands of EUR) Not applicable 321 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 shares or financial instruments Total cash remuneration Contribution s to the long-term savings plan Remuneratio n for other items Total 2023 Total cash remuneration Gross profit on consolidated shares or financial instruments Contribution s to the long-term savings plan Remuneratio n for other items Total 2023 Total 2023 Company + group companies 7,406 4,560 3,776 576 265 137 249 284 211 1,417 518 572 341 271 372 20,955 3,190 1,220 1,144 966 936 — — — — — — — — — — — — 5,346 — — — — — — — — — — — — — 2,110 498 12,239 6,793 47 722 — — 5,434 576 265 — — — — 137 249 284 211 — 1,417 — — — — — 518 572 341 271 372 1,267 29,679 — — 341 — 311 — — 200 — — — — 152 — — 1,004 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 12,239 6,793 341 — 311 — — 200 — 5,775 576 576 137 249 484 211 — 1,417 — — 152 — — 1,004 518 572 493 271 372 30,683 Name Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa José Antonio Álvarez Álvarez Bruce Carnegie-Brown Homaira Akbari Javier Botín-Sanz de Sautuola y O’Shea Sol Daurella Comadrán Henrique de Castro Gina Díez Barroso Luis Isasi Fernández de Bobadilla Ramiro Mato García- Ansorena Belén Romana García Pamela Walkden Germán de la Fuente Glenn Hutchins Total Comments (Not included in the electronic submission to the CNMV) 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. 322 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management C.2 Indicate the evolution in the last five years of the amount and percentage variation of the remuneration accrued by each of the directors of the listed company who have held this position during the year, the consolidated results the company and the average remuneration on an equivalent basis with regard to full-time employees of the company and its subsidiaries that are not directors of the listed company. Directors' remuneration (EUR thousand) • Executive Directors Ana Botín-Sanz de Sautuola y O’Shea Héctor Grisi Checa 1 • External Directors José Antonio Álvarez Álvarez Bruce Carnegie-Brown Javier Botín-Sanz de Sautuola y O’Shea Sol Daurella Comadrán Belén Romana García Homaira Akbari Ramiro Mato García Ansorena Henrique de Castro Pamela Walkden 2 Luis Isasi Fernández de Bobadilla Gina Díez Barroso Germán de la Fuente Glenn Hutchins Company’s performance Underlying profit attributable to the Group (EUR mn) Consolidated results of the Group3 (EUR mn) Ordinary RoTE 4 (EUR thousand) Employees' average remuneration 5 Employees' average remuneration in Spain thousand) (EUR 2023 % var. 23/22 2022 % var. 22/21 2021 % var. 21/20 2020 % var. 20/19 2019 12,239 6,793 4% — 11,735 — (5)% — 12,288 — 52% — 8,090 — (19)% — 9,954 — 5,775 576 137 249 572 576 518 484 493 1,417 211 271 372 11,076 16,459 15.06% 58 (40)% (18)% 6% 8% 4% (5)% 4% 5% 5% — 23% — — 15% 8% 13% 3% 9,575 700 129 230 549 605 500 461 470 1,412 172 137 10 9,605 15,250 13.37% 56 (2)% — —% (4)% 3% 31% — 45% 38% — 32% — — 11% 5% 5% 1% 9,728 700 129 239 533 461 499 319 339 1,406 130 — — 8,654 14,547 12.73% 56 41% 18% 6% 12% 28% 19% 16% 36% 59% 49% 622% — — 70% — 71% 18% 6,877 595 122 214 417 386 430 234 214 943 18 — — (17)% (15)% (11)% (11)% (21)% 71% (14)% 172% 529% — — — — 8,270 700 137 240 525 226 500 86 34 — — — — 5,081 (2,076) 7.44% 47 (38)% — (37)% (12%) 8,252 12,543 11.79% 54 73 6% 68 10% 62 (2%) 63 — n.a. 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. Variable remuneration data accrued in the current year. 5. Total employees in Spain geography. Fixed remuneration + effective bonus received in the year. Not included rest of concepts. Not impacted by exchange rates. Comments (Not included in the electronic submission to the CNMV) n The variable remuneration only includes the amounts related to the position of executive director of Banco Santander S.A. The figures are impacted by the adaptation for 2023 and successive financial years of the information on "short-term variable remuneration" and "long-term variable remuneration" to the consolidation criteria of CNMV, the latter understood as the fulfillment at the end of the accrual period of the different objectives or conditions to which the variable remuneration was linked, including the verification of whether or not the application of malus clauses is appropriate (instead of including amounts accrued to the executive director under short- and long-term results that are put to the vote of the annual general meeting each year). In 2023 there was no application of malus clauses. n Total remuneration of executive directors is impacted by the excellent evolution of Santander share price. In 2023, the revaluation of the share price used to set the 2023 variable remuneration (EUR 3.793) was +23%, so the Gross profit from shares handed over or consolidated financial instruments (Price x Volume) increased due to such revaluation. If it had remained stable in EUR 3.088 (share price of VR 2022), the increase in the total remuneration of the Executive Chair would have been only +1% compared to the figure released in 2022 report (EUR 11,735 thousand). n And regarding the average remuneration of employees (EUR 58 thousand), to highlight the following ideas: a. Normally the increases or decreases in remuneration are greater for the executive directors, depending on the results of the entity, because the percentage of variable remuneration over fixed remuneration is lower in the average employee than in the executive directors. b. Our local presence and global scale, based on three regions and ten core markets, and our vast branch network (c.8,500), have a direct impact on this figure: more than a half of our employees are based in Mexico and South America (mainly in Brazil). The salaries of these employees are adapted to the local cost of living. Therefore, the comparison with the remuneration of executive directors (which remuneration was set for living in a mature country) is also distorted by the difference between both costs of living. Developing countries have a lower cost of living than the country where both directors carried out their functions (Spain). c. The different annual exchange rates have also an impact on this calculation where all local wages and salaries are translated into euros at the average year-end exchange rate. d. Finally, the average remuneration figure of Banco Santander is impacted by the different departures (retirements and early retirements) and annual new hires, with the average cost of the former (a more senior profile) being higher than the latter (a more junior profile). This annual report on remuneration has been approved by the board of directors of the company, at its meeting on 19 February 2024. State if any directors have voted against or abstained from approving this report. Yes o No þ 323   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management [THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] 324 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Economic and financial review 325 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 Highlights We delivered record profit... → Record results with 5mn new customers YoY contributing to double-digit revenue growth → First year of ONE Transformation driving profitable growth and structural efficiency improvement → Strong balance sheet, with solid credit quality metrics and a higher capital ratio → Delivering double-digit value creation and higher shareholder remuneration FY’23 Attributable Profit €11.1bn +15% FY’23 Revenue €58bn +11% - Cost to income - 44.1% –173bps CoR 1.18% +0.19pp RoTE 15.1% +169bps FL CET1 12.3% +0.2pp TNAVps + DPS EPS +15% Cash DPS +c.50% +21.5% Note: based on underlying P&L. YoY changes in euros. In constant euros: attributable profit +18% and revenue +13%. TNAVps + dividend per share (DPS) includes the €5.95 cent cash dividend paid in May 2023 and the €8.10 cent cash dividend paid in November 2023. Implementation of 2023 shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals. For more details, see section 3.3 ‘Dividends and shareholder remuneration’ in the ‘Corporate Governance’ chapter. … and achieved all our 2023 financial targets Revenue A Efficiency ratio CoR FL CET1 RoTE A. YoY change in constant euros. 2023 targets 2023 achievement Double-digit growth 44-45% <1.2% >12% >15% +13% 44.1% 1.18% 12.3% 15.1% ü ü ü ü ü 326     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. Economy, regulation and competition 2. Group selected data 3. Group financial performance 3.1 Overview 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 during 2023 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 4.7 New reporting structure from 1 January 2024 5. Research, development and innovation (R&D&I) 6. Significant events since year end 7. Trend information 2024 8. Alternative performance measures (APMs) 328 332 334 334 337 350 354 362 374 377 377 379 381 399 401 411 420 427 430 431 441 327 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. Economy, regulation and competition Economy In 2023, Santander operated in an environment dominated by geopolitical tensions and higher interest rates as central banks looked to contain inflation, which gradually eased during the year. The world's major economies withstood monetary policy tightening well, although there was a gradual slowdown in activity. Labour markets were also resilient, with unemployment rates at or close to full employment in two thirds of Santander's footprint. Our core regions' economies performed as follows: • Eurozone (GDP: +0.5% estimated in 2023). The positive start to the year, supported by the normalization of global supply chains and reduced uncertainty around energy supply, lost momentum in the second half of the year as interest rates rose, industry struggled to adjust to higher energy costs and households remained cautious about consumption. Inflation eased (2.9% in December) after the ECB raised its interest rates by 450 basis points in this monetary cycle (the deposit facility rate rose from -0.5% to 4%). • Spain (GDP: +2.5% estimated in 2023). GDP growth was driven by private consumption (fall in inflation improved households' purchasing power) and external sector, with tourism at record levels. Investment was lower than expected, especially in investment in equipment. The labour market remained solid, with a record number of people in employment. Inflation closed the year at 3.1% (3.6% on average) with a decline in all components and a greater-than- expected moderation in core inflation (3.8% in December vs 7.6% in February). • United Kingdom (GDP: +0.5% estimated in 2023). Economic growth remained practically flat. The labour market remained tight, putting pressure on inflation. However, inflation eased during the year and stood at 4% in December, far from the 11.1% peak in October 2022. The Bank of England paused rate increases at 5.25%, unchanged since August. • Portugal (GDP: +2.3% in 2023). Growth decelerated throughout the year as demand in the rest of the European Union continued to cool. Despite this, the labour market remained at full employment (6.1% in Q3'23) and inflation moderated rapidly (1.4% in December). Moody's upgraded the sovereign's rating to A3, supported by economic and fiscal reforms, private sector deleveraging and the continued strengthening of the banking sector. • Poland (GDP: +0.2% in 2023). The economy barely grew in 2023 (+5.3% in 2022) due to weak private consumption. However, investment increased strongly and external sector contributed positively to the economy. The strong labour market was reflected in full employment and a marked increase in real household income. In addition, inflation fell significantly to 6.2% in December (18.4% in February). In response, the central bank paused its monetary easing, leaving the official interest rate at 5.75%. • United States (GDP: +2.5% estimated in 2023). The economy grew more than expected, particularly in private consumption. Labour market tensions eased slightly but the market remains very solid. Inflation fell significantly (3.4% in December down from 6.5% in December 2022) and the Fed suggested there would be no more rate rises (the federal funds target range was 5.25%-5.50% at year end). • Mexico (GDP: +3.5% estimated in 2023). Economic growth was surprisingly robust, driven by construction, linked to both nearshoring and infrastructure projects and the resilience of services. Inflation fell significantly to 4.7% (7.8% in the previous year). The central bank has left official interest rates unchanged at 11.25% since the first quarter of the year and suggested a possible first cut in early 2024. • Brazil (GDP: +2.8% estimated in 2023). The economy grew well, driven by agricultural, mining and services, but showed signs of a slowdown in the second half of the year. Inflation continued to fall (4.6% in December, 5.8% average in the year), allowing the central bank to begin to cut official interest rates in August, from 13.75% in December 2022 to 11.75% at year end. • Chile (GDP: -0.2% estimated in 2023). In the first half of the year, the economy completed the adjustment process initiated at the end of 2022. The second half of the year showed signs of recovery, supported by household consumption and exports. Inflation fell back sharply (3.9% vs. 12.8% in 2022), which enabled the central bank to begin to reduce interest rates in July, with a total reduction of 200 bps, ending the year at 8.25%. • Argentina (GDP: -1.5% estimated in 2023). The economy contracted due to the severe droughts, which reduced agricultural production and soybean exports (which have a large weight in GDP). Inflation accelerated, fuelled by the depreciation of the Argentine peso. On 10 December, a new government took office and presented an International Monetary Fund (IMF) backed stabilization plan focused on correcting macro imbalances. 328 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The exchange rates of our main currencies against the euro in 2023 and 2022 were: Exchange rates: 1 euro/currency parity US dollar Pound sterling Brazilian real Mexican peso Chilean peso Argentine peso Polish zloty Average 2023 1.081 0.870 5.397 19.158 2022 1.051 0.853 5.421 21.131 906.417 916.688 282.765 134.786 4.683 4.538 Period-end 2023 1.105 0.868 5.365 18.691 2022 1.068 0.887 5.650 20.805 965.192 909.200 893.635 189.116 4.684 4.343 Inflation performance, the extent of the economic slowdown and the central banks' reaction were the main issues for financial markets in 2023. In mature markets, stickier inflation and expectations of a higher-for-longer interest rate environment impacted sovereign bond markets. In the US, this was reinforced by activity data showing that the economy remained resilient, and put significant upward pressure on long-term bond yields. The 10- year treasury reached 5% for the first time in several years. In the euro area, where moderation of the cycle became evident earlier, government bond yields rebounded, but to a lesser extent. Towards the end of the year, disinflation gained momentum, which, together with the US economy starting to lose traction, fuelled expectations of interest rate cuts by the Fed and ECB beginning in the first half of 2024. Consequently, long-term sovereign bond yields declined. In the foreign exchange market, the Fed's stronger tone and weaker economic data in the euro area weighed on the euro during most of the year. 2023 was a good year in equities, although with some ups and downs, first with volatility in the banking sector in the US and later with the tightening of long-term yields. The view that monetary tightening has peaked increased appetite towards the end of the year. Latin American markets performed well as a result of early action by their central banks. They were the first countries to initiate interest rate hikes and consequently were the first to either start the cycle of interest rate cuts (as was the case in Chile and Brazil during the second half of the 2023) or suggest they would start cutting interest rates (e.g. Mexico) as inflation falls back. This benefited fixed income. In general, Latin American currencies remained strong, supported by healthier external positions (low current account deficits and solid international reserve buffers), and were able to quickly overcome the occasional waves of volatility that arose during the year. Since the covid-19 pandemic and the war in Ukraine, the banking sector has had to cope with the collapse of three American regional banks and one Swiss bank in the first quarter of the year. Although caused by management failures in all four cases, the market's perception of the stability of bank deposits and the convertible debt market was affected. Monitoring of banks' unrealized losses increased due to the sudden rise in interest rates and potential liquidity problems in the non-bank sector, especially associated with the commercial real estate market. Even so, the banking system once again proved resilient to financial turmoil and ended the year with generalized improvements in valuations, especially in Europe. Global banks benefited from monetary policy tightening, although the impact differed depending on institutions' business models. Moreover, the strength of labour markets and savings accumulated during the covid-19 pandemic helped the private sector cope with the higher cost of debt while maintaining portfolio quality. As a result, the banking sector continued to strengthen its balance sheets, improving its solvency in an environment of slower growth in business volumes due to lower credit demand. As shown through the different stress tests published by supervisors, banks are generally prepared to face a much more severe economic scenario than the one expected in 2024. 2024 is expected to be marked by a lower contribution from interest rates to net interest income, the potential deterioration of the credit portfolio due to the economic slowdown and the gradual withdrawal of excess liquidity. However, we do not expect abrupt changes in any of these three variables. The medium-term challenges that banks face remain unchanged. Digital transformation accelerated during the covid-19 pandemic, forcing entities to offer customers a better digital experience in the wake of a surge of 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 relating to climate change in the coming years. Regulatory and competitive environment In 2023, regulatory discussions were focused on four main areas: capital requirements and resolution framework, sustainability, digitalization (with a special focus on payments) and retail. Main regulatory actions in these four areas were: 1. Prudential and resolution: Most of the discussions continued to focus on the legislative proposal to implement the Basel III prudential framework in Europe (CRR3-CRD6). This reform aims to reduce the variability of risk-weighted assets and enhance comparability across institutions. It introduces other issues such as the prudential treatment of exposures to crypto-assets and provisions relating to environmental, social and governance (ESG) risks. Regarding the latter, the European Banking Authority (EBA) is carrying out an analysis of potential prudential treatment of ESG risks. The Basel Committee published a first report on lessons learned from the Silicon Valley Bank and Credit Suisse crisis, highlighting the need to strengthen the supervisory framework, and announced that it will continue to analyse the need to reform the current framework on liquidity, interest rate risk and AT1 instruments. The European Commission published its proposal for the revision of the crisis management framework (resolution and recovery directive - BRRD, and 329 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management requires authorization and registration for all lenders. It also allows countries the possibility to set limits on interest rates. As expected, the European Commission presented its Retail Investment Strategy (RIS), which stands out for the changes relating to incentives paid to sell products and the introduction of the concept of value for money. The latter is similar to what exists in other countries such as the UK with the aim of demonstrating that the investment provides value to the investor over time. Finally, the impact of the war in Ukraine continues in the background, justifying measures in some countries regarding mortgage payments for vulnerable groups and for the population with financial difficulties in meeting their obligations in general. Additionally, measures such as the definition of specific taxes on banks continue to be adopted in some countries. For more details, see note 1.e to the consolidated financial statements. 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. A framework that supports the much needed economic growth, while protecting financial stability. A framework that also allows for innovation, making use of the opportunities offered by new technology and the use of data to better serve our customers while being more efficient. We are committed to constructive and transparent engagement with regulators on the objectives, design and implementation of banking sector rules and frameworks that affect our business and therefore the interests of our customers. Our participation in the regulatory policy debate is geared towards transparently and honestly providing regulators and legislators our banking sector knowledge and data, mainly through official consultations, supporting the competitiveness of the financial sector and of the economies in which we operate to help our customers prosper. deposit guarantee scheme directive - DGSD), while other countries, such as Chile and Brazil, continue to develop proposals. 2. Sustainability: The European Commission made progress on the green taxonomy, particularly in defining the four pending environmental objectives: i) protection of water and marine resources, ii) transition to a circular economy, iii) pollution control and protection of ecosystems, and iv) biodiversity. It presented new proposals, such as the proposal on regulations for ESG ratings activity and the directive on the energy efficiency of buildings, and progressed on other initiatives. For example, the corporate sustainability due diligence and the development of requirements for the transparency of sustainability information, such as those entrusted to the European Financial Reporting Advisory Group (EFRAG). Internationally, the work of the International Sustainability Standards Board (ISSB) was endorsed by the Financial Stability Board (FSB) and the International Organisation of Securities Commissions (IOSCO) as international standards. The Basel Committee published its proposal to complement the Pillar 3 requirements with environmental risk management information. 3. Digitalization: There were important proposals relating to payments in 2023. The proposal for instant payments was approved and a proposal to revise the payments directive (PSD3) was also presented. A new proposal for regulation of the various players in the payments world (Payment Services Regulation: PSR) was presented. Europe made progress on the Digital Euro as the ECB announced the end of the research phase in October and the start of the preparation phase. Moreover, in June, the European Commission published a proposal to regulate the essential elements of the Digital Euro and to give legitimacy to the ECB's design. The ECB is responsible for determining whether the Digital Euro should be issued but we do not expect a decision before 2026. Discussions continue in several other jurisdictions on the possible issuance of Central Bank Digital Currencies (CBCDs). In the data world, the Open Finance proposal, known as Financial Information Data Access (FiDA), was published in Europe. The proposal increases the level of data disaggregation which banks are subject to, extending requirements to other financial institutions (e.g. payment institutions, scoring agencies, etc.), which will have to share information relating to loans, deposits, investment funds, pensions, among others. This proposal backs the general trend of building a data economy, putting customers at the centre, as we have seen in proposals in other jurisdictions (US, Chile, UK). 4. Retail banking: In 2023, the directive revising the rules for granting consumer credit was approved in Europe. The directive introduces concepts such as buy now, pay later and 330 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Santander and public policy Capital and bank resilience Although we believe that reforms in the last decade have made financial institutions more robust in terms of capital, helping banks grow in stress situations such as the covid-19 pandemic or the war in Ukraine, we continue to advocate for: • The correction of the current regulatory bias that favours risk aversion over growth and competitiveness. 1 • The need for a stable and predictable framework to facilitate institutions' management and investors' • The building of a genuine single financial services market in Europe, which we believe is key to competitiveness. understanding of this agenda. • Banking regulation that takes into account the realities of banks with a global footprint, does not penalize expansion to other countries and includes the recognition of the Multiple Point of Entry (MPE) resolution framework. • A common deposit insurance scheme for EU banks that breaks the bank/sovereign loop. Furthermore, the alignment of the different rules and the revitalization of the securitization market are essential for the construction of a Capital Markets Union. Sustainability and sustainable finance We believe that decarbonization is a top 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: 2 • In this new political cycle in Europe, a carefully carried out impact assessment of related legislation adopted to date to assess whether it is contributing to the ultimate goal of a stable and fair transition. • Avoiding regulation and supervision that restrict banks from supporting their customers' transition. It is not only important to finance companies that are already green, but it is also important to help those in carbon-intensive sectors to transition. • International coordination as sustainability knows no borders. • Regulation that supports governments with their responsibility to define transition paths for different economic sectors, along with implementation tools and policies, with banks as a major player in supporting individuals and companies in their transitions. 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 and experience. 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 true data economy that puts the consumer at the centre of decision making, with an appropriate framework of incentives and accountability in the use of data. In addition, data sharing across sectors (financial and non- financial) that would make a real difference in providing better services and products for consumers and customers. • A framework that allows banks to continue to offer the solutions that customers demand, including innovative and novel capabilities. The debate around the issuance of digital currencies by central banks should consider the role that the financial system plays in financing the economy. • Customer protection rules that facilitate access to different products with conditions that favour a smooth and user-friendly experience, without being detrimental to customer protection. 331 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 C EPS, PROFITABILITY AND EFFICIENCY (%) EPS (euro) RoE RoTE RoA RoRWA Efficiency ratio D (EUR million) UNDERLYING INCOME STATEMENT D Net interest income Total income Net operating income Profit before tax Attributable profit to the parent (%) UNDERLYING EPS AND PROFITABILITY D Underlying EPS (euro) Underlying RoE Underlying RoTE Underlying RoA Underlying RoRWA 2023 1,797,062 1,036,349 1,047,169 1,306,942 104,241 2022 1,734,659 1,036,004 1,009,722 1,239,981 97,585 % 2023 vs. 2022 3.6 0.0 3.7 5.4 6.8 2021 1,595,835 972,682 900,554 1,135,866 97,053 2023 43,261 57,423 31,998 16,459 11,076 2023 0.654 11.91 15.06 0.69 1.96 44.1 2023 43,261 57,647 32,222 16,698 11,076 2023 0.654 11.91 15.06 0.69 1.96 % 2023 vs. 2022 B 12.0 10.2 13.4 7.9 15.3 % 2023 vs. 2022 21.5 E % 2023 vs. 2022 12.0 10.5 14.1 9.5 15.3 % 2023 vs. 2022 21.5 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 33,370 46,404 24,989 14,547 8,124 2021 0.438 9.66 11.96 0.62 1.69 46.2 2021 33,370 46,404 24,989 15,260 8,654 2021 0.468 10.29 12.73 0.65 1.78 332 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management SOLVENCY (%) Fully-loaded CET1 capital ratio Fully-loaded total capital ratio C CREDIT QUALITY (%) Cost of risk NPL ratio Total coverage ratio 2023 12.3 16.3 2023 1.18 3.14 66 2022 12.0 15.8 2022 0.99 3.08 68 2021 12.1 16.4 2021 0.77 3.16 71 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) 2023 3,662,377 16,184 3.780 61,168 4.76 0.79 2022 3,915,388 16,794 2.803 47,066 4.26 0.66 % 2023 vs. 2022 (6.5) (3.6) 34.9 30.0 2021 3,936,922 17,341 2.941 50,990 4.12 0.71 CUSTOMERS (thousands) Total customers Active customers F Loyal customers G Digital customers H Digital sales / Total sales (%) OPERATING DATA Number of employees Number of branches 2023 164,542 99,503 29,286 54,161 56.3 % 2023 vs. 2022 2.9 0.3 6.7 5.2 2022 159,844 99,190 27,456 51,471 55.1 2021 152,943 96,887 25,548 47,489 54.4 2023 212,764 8,518 2022 % 2023 vs. 2022 3.1 (5.6) 206,462 9,019 2021 199,177 9,229 A. Includes customer deposits, mutual funds, pension funds and managed portfolios. B. In constant euros: Net interest income: +15.8%; Total income: +12.8%; Net operating income: +15.4%; Profit before tax: +9.7%; Attributable profit: +17.7%. C. For more information, see section 8. 'Alternative Performance Measures' of this chapter. D. 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. E. In constant euros: Net interest income: +15.8%; Total income: +13.1%; Net operating income: +16.1%; Profit before tax: +11.3%; Attributable profit: +17.7%. F. Those customers who comply with the minimum balance, income and/or transactionality requirements as defined according to the business area. G. 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. H. Every physical or legal person, that, being part of a commercial bank, has logged in its personal area of internet banking or mobile phone or both in the last 30 days. 333 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 52.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 52.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 Overview of Santander Santander is one of the largest banks in the eurozone. At 2023 year-end, we had EUR 1,797,062 million in assets and EUR 1,306,942 million in total customer funds. Santander was the second largest bank by market capitalization in the eurozone (EUR 61,168 million as of 29 December 2023). The Santander Way Our Purpose 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 stakeholders by being Simple, Personal and Fair in all we do. Over the years, we have demonstrated the strength and resilience of our unique strategy and business model, despite the challenges that have arisen. We engage in all types of typical banking activities, operations and services. We do not merely meet our legal and regulatory obligations but we also aim to exceed the expectations of our stakeholders: employees, customers, communities and shareholders. In detail: • We had 212,764 employees at 2023 year end. We continue to work towards being an employer of choice in all of our markets. Our strategic priorities centre around ensuring our employees are the heart of all we do through our Santander Way culture and by fostering diversity, equity & inclusion (DE&I) as well as wellbeing. We are attracting the best talent and promoting learning to ensure we have the right people in place. In 2023, we continued to listen to employees through our “Your Voice” listening tool and our employee Net Promoter Scores (eNPS) increased to 62, in the top 10% of the Finance Sector and top 5% of all sectors (+22 and +26 above respective benchmarks) backed by several improvements in employee experience. We also implemented a potential assessment model that has helped us learn more about the skills, capabilities and career aspirations of our employees. We took great strides in our DE&I efforts as we continued to address the importance of gender equality and pay gaps. Our DE&I strategy includes addressing the pay gap, with the aim of reducing it to near 0% (already close to 0%). The number of women in senior executive positions has increased, progressing towards our 2025 target, which we increased at the beginning of 2023 up to 35% (from 30%), reaching 31.4% at the end of the year. This represents a 7.7pp increase over last three years. 334 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Customer focus is an essential part our strategy. Through our multichannel offering, we provide our 165 million customers the best products and services to meet their financial needs and make us their global, trusted and responsive partner. Our investments in customer growth are centred around three fundamentals that customers look for: competitive prices, a frictionless digital experience, so we can be our customers’ trusted financial partner. We continued to improve our distribution model through constant innovation. We are building a digital bank with branches to make our customers' lives easier, giving them the power to decide how they want to interact with us. Each year, we have further enhanced our customer experience and satisfaction, reflected in our customer growth rates and Net Promoter Score (NPS) improvement where we are one of the top three banks in seven markets (including topping the ranking in Chile and Argentina). At year end, we had 8,518 branches across a wide footprint, including WorkCafés, Smart Red branches and other specialized centres for businesses, private banking, universities and other customer segments. These physical spaces also incorporate new digital facilities and some have collaborative spaces. Customer interactions continued to shift to digital and remote services. The number of digital customers and digital activity continued to increase. We now have more than 54 million digital customers (+5% year-on-year) and digital sales accounted for 56% of total sales (55% in 2022). At Santander, we appreciate the value of the human connection our branch network provides and are mindful of our most vulnerable customers' needs, responding with offers to deliver growth through customer loyalty and customer experience. We are committed to creating products and services catered to our customers' needs. 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 basic financial services to customers in these rural areas that might otherwise have been left unattended. Santander is joining efforts with the Asociación Española de Banca (AEB) members to ensure and promote financial inclusion in remote areas and vulnerable population. In 2023, we helped customers in financial difficulties in Spain through different initiatives such as waiving fees to vulnerable customers or specific programmes to refinance debt to customers affected by the higher cost of living. As another example, we have a cross-functional team that has been working on enhancing services for our elderly customers including measures such as extending the hours of counter/ teller services and creating senior ambassadors to make sure senior citizens receive the best possible service. Additionally, we promote financial education with specific content for seniors through Finanzas para Mortales (our financial education programme). Our commitment in Spain to financial education through this programme directly impacted to senior citizens, people with disabilities, people in vulnerable situations and school children, among others. • We support our communities by embedding ESG factors in all our businesses, ensuring we do things the right way. We have a competitive advantage to help our customers on their green transitions. In 2023: • In Corporate & Investment Banking, we raised and facilitated EUR 20.2 billion in green finance, reaching EUR 114.6 billion since 2019. Santander remains among the top banks in number of deals and deal value globally in renewable energy financing, with over 85 deals and EUR 6.7 billion globally. • To help fulfil our ambition of being net zero by 2050, we set two new decarbonization targets for 2030 for corporate auto manufacturing and auto lending portfolio in Europe. We now have seven targets in five of our high-emitting sectors. • In Retail and Commercial Banking, we strengthened our green proposition with new solutions for all customers, such as financing of solar panel installations and green mortgages. • In Digital Consumer Bank, we financed more than 200,000 new electric vehicles (EVs), with volumes over EUR 6.5 billion, representing a >10% market share in Europe EV sales. • In Wealth Management & Insurance, we held EUR 67.7 billion of the EUR 100 billion we have pledged to hold in Socially Responsible Investment (SRI) assets under management by 2025. In terms of financial inclusion, we revised our target of financial inclusion to reach 5 million people by 2025. In addition, we committed to invest EUR 400 million between 2023-2026 to foster education, employability and entrepreneurship. As a result of all these initiatives, we were: • named the World’s Best Bank for Financial Inclusion (for the third year in a row), the World’s Best Bank for SMEs and World’s Best Bank for Emerging Markets by Euromoney (in the Euromoney Awards for Excellence); and • the highest ranking bank on Fortune's list of 50 companies that are changing the world, owing to Santander Universities support for education, entrepreneurship and employability over the past 27 years. • For our shareholders, we delivered solid financial results in 2023. We achieved an all-time high attributable profit of EUR 11,076 million boosted by revenue and efficiency improvement, with profitability growing strongly. These results allowed us to build up capital with double-digit value creation, while increasing our payout ratio to 50%. As a result, the total shareholder remuneration paid against 2023 results is estimated to be 44% higher than that paid against of the 2022 results. The cash dividend per share is estimated to increase by approximately 50%. 335 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Once again, we delivered on the targets we set at the beginning of 2023: double-digit revenue growth in constant euros (+13% achieved), efficiency ratio of 44-45% (44.1% full-year 2023), cost of risk below 1.2% (1.18%), fully-loaded CET1 ratio over 12% (12.3%) and RoTE over 15% (15.1%). Looking ahead In 2023, we entered into a new phase of profitability and sustainable and higher shareholder value creation. This new phase is underpinned by three tenets: • Think Value: delivering double-digit value creation, on average through-the- cycle. • Think Customer: building a digital bank with branches with well targeted products and services to grow our customer base. • Think Global: best customer experience leveraging global and in-market scale, network and technological capabilities to accelerate profitable growth. Over the last 9 years, we have made structural changes in the business and operating model, building global businesses and global platforms. We launched ONE Transformation, which involves implementing a common operating model and technology for our retail and commercial business across all our footprint. This will support improved customer service, efficiency and profitability. • Corporate & Investment Banking: our global platform to support corporates and institutions. Our priorities for 2024 are to deliver profitable growth by: deepening client relationships, with a particular focus on the US; sophisticate our centres of expertise and further digitalize our business; and actively managing capital. • Wealth Management & Insurance: common service models for our private banking, asset management and insurance businesses. Our priorities for 2024 are to: improve our customer experience and expand our presence into new countries and businesses; create operational leverage through our global operations and factories and continue to build our global platforms. • Payments: single infrastructures for our payment solutions: PagoNxt and Cards. PagoNxt continues to scale up our global platform of innovative payments and integrated value-added solutions. Also, we aim to expand our global payment platform to all our regions and the open market, and our Cards business while improving customer experience. Our regions' strategic priorities are: • Europe: remain focused on customer experience and service quality, and on making the structural changes needed to develop a common operating model for Europe. • North America: leverage the strength of our global businesses to accelerate the transformation of our businesses in the US and Mexico. We recently completed our last step towards ONE Santander through the creation of five global businesses with the following strategic priorities for 2024: • South America: increase the value we bring to the Group and on working to become the most profitable bank in each of the countries where we operate in the region. • Retail & Commercial Banking: a new global business integrating our retail and commercial banking activity. Our priorities for 2024 are to: implement a common operating model; spread transformation efforts across Retail & Commercial Banking's footprint; and further strengthen profitability. • Digital Consumer Bank: a single model across our markets for our consumer and auto finance business and for Openbank. Our priorities for 2024 are to: expand our leadership in consumer lending across our footprint; converge towards a global operating model, a more digital one; and continue to build flex-term solutions (leasing, subscription) off common platforms. • DCB Europe: continue to reinforce our auto leadership through strategic alliances, leasing and subscription. In non- auto, keep upscaling our buy now, pay later business. Transformation for future growth deploying a simpler organizational structure to deliver through best-in-class digital platforms, launching new channels and products. To conclude, we believe Grupo Santander is well positioned to continue driving additional profitable growth in 2024, supported by our consistent track record and the implementation of ONE Santander. Note: the implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals. For definitions of ESG-related metrics, see section in 9.8 Alternative performance measures (APMs). 336 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3.2 Results Executive summary Attributable profit Record profit, reaching all targets for the year EUR 11,076 mn +15% in euros +18% in constant euros Performance (2023 vs. 2022) Double-digit revenue growth, increasing more than operating expenses, and controlled cost of risk Total income +11% +13% Costs +6% +10% Provisions +19% +19% in euros in constant euros Efficiency The Group's efficiency ratio improved driven by Europe Profitability Profitability continued to improve Europe 42.1% -5.2 pp RoTE 15.1% +1.7 pp RoRWA 1.96% +0.19 pp Group 44.1% -1.7 pp Changes 2023 vs. 2022 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 2023 43,261 12,057 2,633 571 613 (1,712) 57,423 (25,425) (22,241) (13,726) (8,515) (3,184) (2,678) 2022 Absolute 4,642 267 980 83 (89) (577) 5,306 (1,522) (1,323) (1,179) (144) (199) (797) 38,619 11,790 1,653 488 702 (1,135) 52,117 (23,903) (20,918) (12,547) (8,371) (2,985) (1,881) (12,956) (237) 313 39 (10,863) (239) 12 — (2,093) 2 301 39 (20) 16,459 (4,276) 12,183 — 12,183 (1,107) 11,076 7 15,250 (4,486) 10,764 — 10,764 (1,159) 9,605 (27) 1,209 210 1,419 — 1,419 52 1,471 Change % 12.0 2.3 59.3 17.0 (12.7) 50.8 10.2 6.4 6.3 9.4 1.7 6.7 42.4 19.3 (0.8) — — — 7.9 (4.7) 13.2 — 13.2 (4.5) 15.3 % excl. FX 15.8 5.0 77.1 17.4 (13.3) 177.9 12.8 9.6 9.4 12.2 5.2 11.2 55.2 19.6 33.1 — — — 9.7 (3.3) 15.1 — 15.1 (5.5) 17.7 2021 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) 8,124 337 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Main income statement items Total income Total income amounted to EUR 57,423 million, a double-digit increase year-on-year. In constant euros, total income increased 13% year-on-year. Net interest income and net fee income accounted for 96% of total income. By line: Net interest income Net interest income amounted to EUR 43,261 million, 12% higher than 2022. 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. The tables also include average balances and interest rates in 2023 and 2022, 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). Average balance sheet - assets and interest income EUR million Assets Cash balances at central banks and other deposits on demand and loans and advances to central banks and credit institutions A 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 2023 2022 Average balance Interest Average rate Average balance Interest Average rate 5.30% 4.00% 4.50% 8.93% 304,935 111,697 139,105 54,133 8.54% 5.50% 5.74% 11.85% 39,572 19,072 4,713 15,787 6.81% 1,031,226 272,826 3.99% 552,674 5.26% 205,726 13.92% 7.77% 2.99% 8.78% 11.88% 6.46% 3.50% 2.81% 10.40% 43,505 9,509 33,068 928 183,013 45,932 43,877 93,204 310,887 117,332 124,570 68,985 55,570 24,292 4,845 26,433 1,036,547 265,322 546,641 224,584 46,382 8,725 36,546 1,111 224,304 71,507 51,327 101,470 16,467 4,694 5,611 6,162 4,745 1,336 278 3,131 70,619 10,581 28,771 31,267 3,603 261 3,210 132 14,501 2,503 1,444 10,554 3,561 (45) 2,955 651 104 (47) 63 88 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% 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 1,571,738 454,161 722,538 395,039 201,365 — 1,773,103 105,252 17,686 38,844 48,722 6.70% 1,519,174 430,455 3.89% 735,656 5.38% 353,063 12.33% 71,430 7,799 23,115 40,516 4.70% 1.81% 3.14% 11.48% 105,252 201,099 — 1,720,273 71,430 A. In 2022, interest includes income from liabilities reported in 'Deposits from central banks and credit institutions' related to funding from the European Central Bank. 338 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The average balance of interest-earning assets in 2023 was 3% higher than in 2022. The activity of our entities in the domestic market grew by 6%, in the international mature markets it decreased 2% and international developing markets were up 12%. The average balance of interest-bearing liabilities in 2023 was 3% higher year-on-year, with growth in domestic (+2%) and international developing (+13%) markets, and a reduction in international mature markets (-1%). 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 200 bps from 4.70% in 2022 to 6.70% in 2023, with general rises across our markets (domestic +208 bps, international developing +224 bps, international mature +85 bps). Moreover, returns across all balance sheet items increased. The average cost of interest-bearing liabilities rose 189 bps to 4.14%, with increases in all markets. Domestic liabilities increased 154 bps while international mature markets and international developing markets increased 229 bps and 110 bps, respectively. All balance sheet lines increased. 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. • 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 expense increased in 2023, mainly due to higher interest rates and, to a lesser extent, greater volumes. Net interest income increased 12%, as shown in the graph shown below. In constant euros, growth was 16%, mainly due to greater volumes in some countries, higher interest rates and margin management. By region and in constant euros: • Net interest income in Europe grew 27%, due to the strong positive sensitivity to interest rate rises in our balance sheet in euros. By country: +46% in Spain, +5% in the UK, +96% in Portugal and +25% in Poland. • In North America it increased 3%, driven mainly by Mexico (+12%) while it decreased 4% in the US. • Net interest income in South America rose 12%, despite the impact from negative sensitivity to interest rate rises during most of the year in Chile (-23%) and Brazil (+2%). • In Digital Consumer Bank (DCB), net interest income increased 6%, supported by actively repricing loans and customer deposit growth. • Corporate Centre recorded lower losses due to higher liquidity buffer remuneration as a result of higher interest rates. 339 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 C 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 175,164 62,366 63,456 49,342 55,619 34,123 6,542 14,954 1,011,471 302,379 468,602 240,490 73,193 4,602 46,992 21,599 288,345 134,045 108,912 45,388 29,195 21,509 5,641 2,045 23,139 16,109 4,830 2,200 2023 Interest Average rate 5.34% 4.37% 4.71% 7.37% 6.72% 4.94% 5.93% 11.12% 3.29% 1.08% 2.64% 7.31% 9.68% 5.71% 8.78% 12.48% 4.42% 3.12% 3.87% 9.58% 4.55% 4.13% 4.31% 9.68% 2.76% 2.91% 0.02% 7.64% 9,350 2,723 2,989 3,638 3,737 1,686 388 1,663 33,238 3,269 12,386 17,583 7,084 263 4,125 2,696 12,751 4,184 4,219 4,348 1,329 888 243 198 638 469 1 168 4,436 1,045 1,756 1,635 1,578 567 304 707 Average balance 214,879 92,373 78,230 44,276 34,298 17,321 2,743 14,234 963,359 286,233 460,386 216,740 57,646 2,327 37,380 17,939 255,721 111,682 107,374 36,665 17,907 12,377 4,280 1,250 23,861 16,616 5,416 1,829 2022 Interest Average rate 1.69% 0.61% 1.24% 4.75% 3.93% 1.07% 1.82% 7.82% 1.76% 0.24% 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% 0.91% 0.56% 0.02% 6.67% 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 1,498,119 514,899 645,800 337,420 173,299 8,650 93,035 — 1,773,103 61,991 12,257 21,655 28,079 4.14% 1,457,820 506,904 2.38% 651,406 3.35% 299,510 8.32% 32,811 4,266 6,907 21,638 2.25% 0.84% 1.06% 7.22% 163,832 8,635 89,986 — 1,720,273 32,811 61,991 A. In 2022, 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'. C. Includes 'Liabilities under insurance or reinsurance contracts', reflecting the retrospective application of the new accounting standard IFRS 17 from 1 January 2023 which meant the reclassification of a portfolio of products for approximately EUR 16 billion registered as of 31 December 2022 in 'Customer deposits' to 'Liabilities under insurance or reinsurance contracts' (see note 1.b to our consolidated financial statements). The 2022 average balance information has been updated for comparative purposes but not the Interest information, following the approach adopted by the Group in the financial statements. 340   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 vs. 2022 Increase (decrease) due to changes in Volume 1,064 62 (226) 1,228 1,291 50 2 1,239 2,237 (167) (219) 2,623 117 (4) 106 15 1,583 611 154 818 3,797 (61) 2,475 1,383 103 74 23 6 8,784 519 2,207 6,058 Rate 8,264 3,466 3,866 932 1,592 1,140 221 231 14,272 4,819 9,169 284 2,460 223 2,185 52 2,502 1,083 487 932 — — — — — — — — Net change 9,328 3,528 3,640 2,160 2,883 1,190 223 1,470 16,509 4,652 8,950 2,907 2,577 219 2,291 67 4,085 1,694 641 1,750 3,797 (61) 2,475 1,383 103 74 23 6 25,038 9,368 13,522 2,148 33,822 9,887 15,729 8,206 341 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 vs. 2022 Increase (decrease) due to changes in Volume (190) (238) (216) 264 Rate 5,904 2,401 2,233 1,270 Net change 5,714 2,163 2,017 1,534 506 318 129 59 1,632 42 60 1,530 837 42 347 448 1,420 519 33 868 336 241 24 71 24 (3) 0 27 2,381 827 1,549 5 132 132 118 (118) 5,399 1,279 1,544 2,576 1,882 1,182 209 491 14,612 2,529 9,047 3,036 3,048 197 2,679 172 2,867 1,403 1,924 (460) 618 425 159 34 398 379 0 19 — — — — — — — — 23,781 6,712 13,204 3,865 2,388 1,500 338 550 16,244 2,571 9,107 4,566 3,885 239 3,026 620 4,287 1,922 1,957 408 954 666 183 105 422 376 0 46 2,381 827 1,549 5 132 132 118 (118) 29,180 7,991 14,748 6,441 342 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 vs. 2022 Increase (decrease) due to changes in Volume 8,784 519 2,207 6,058 5,399 1,279 1,544 2,576 3,385 (760) 663 3,482 Rate 25,038 9,368 13,522 2,148 23,781 6,712 13,204 3,865 1,257 2,656 318 (1,717) Net change 33,822 9,887 15,729 8,206 29,180 7,991 14,748 6,441 4,642 1,896 981 1,765 Net fee income EUR million +12% A 2023 vs. 2022 +2% A 2023 vs. 2022 A. In constant euros: +16%. A. In constant euros: +5%. 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 2023 3,967 2,386 1,086 2,005 826 797 297 208 484 12,057 (65) 247 100 2022 Absolute 4,032 2,139 986 2,032 797 788 277 227 512 11,790 (27) 29 9 20 (28) 267 (19) Change (1.6) 11.6 10.1 (1.3) 3.6 1.1 7.3 % % excl. FX 6.4 19.2 17.4 22.3 45.6 2.9 12.8 1.7 (26.6) 5.0 (5.4) 2.3 (8.3) 2021 3,649 1,782 1,035 1,850 642 522 266 199 557 10,502 343 33,37038,61943,26120212022202310,50211,79012,057202120222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Net fee income Net fee income increased 2% compared to 2022, reaching EUR 12,057 million. In constant euros, it was 5% higher. By region, net fee income rose 7% in North America and 14% in South America. It decreased 2% in Europe due to lower credit volumes and customer attraction campaigns. Our scale and global businesses generated greater activity for our country units and the Group, which was reflected in net fee income growth, particularly in Santander Corporate & Investment Banking (SCIB) and PagoNxt. In SCIB, net fee income increased double digits, with widespread growth across its core businesses. Net fee income growth was also strong in PagoNxt with double- digit growth year-on-year in total payments volumes. Gains or losses on financial assets and liabilities and exchange differences (net) Gains on financial transactions and liabilities and exchange differences (net) stood at EUR 2,633 million (EUR 1,653 million in 2022), driven mainly by customer activity in SCIB and lower losses in the Corporate Centre (driven by higher negative results from the foreign exchange (FX) hedge in 2022). Gains and losses on financial assets and liabilities stem from mark-to-market valuations of the trading portfolio and 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. Given Santander manages currency exposures with derivative instruments, the changes in this line 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 571 million (EUR 488 million in 2022). Income from companies accounted for by the equity method The income from companies accounted for by the equity method reached EUR 613 million compared to EUR 702 million in 2022. Other operating income/expenses Other operating income recorded a loss of EUR 1,712 million (compared to a EUR 1,135 million loss in 2022), owing to the hyperinflation adjustment in Argentina and lower leasing income in the US. This line was also affected by the EUR 224 million charge related to the temporary levy on revenue in Spain and DCB recorded in the first quarter of 2023. For more details, see note 45 to the consolidated financial statement. In summary, total income increased in all regions, DCB and global businesses. The Corporate Centre also increased, due to the higher liquidity buffer remuneration and the lower negative impact from the FX hedge. 344 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2022 Absolute 1,179 144 (2) Change % 9.4 1.7 (0.1) 1.0 7.9 1.8 1.0 2.0 2.0 6.3 6.7 6.4 % excl. FX 12.2 5.2 7.3 17.5 16.9 7.8 9.9 35.4 11.6 9.4 11.2 9.6 2021 11,216 7,443 2,182 401 510 699 90 558 3,003 18,659 2,756 21,415 4 44 13 1 11 73 1,323 199 1,522 2023 13,726 8,515 2,471 414 603 721 97 570 3,639 22,241 3,184 12,547 8,371 2,473 410 559 708 96 559 3,566 20,918 2,985 25,425 23,903 Operating expenses Operating expenses amounted to EUR 25,425 million, 6% higher than 2022 (+10% in constant euros), due to higher inflation. In real terms (excluding the impact of average inflation), operating expenses increased 0.4%. Our cost management continued to focus on improving our efficiency and, as a result, we remained among the most efficient global banks in the world. The efficiency ratio stood at 44.1% in 2023, 1.7 pp better than 2022. Our business transformation plan, ONE Transformation, continued to progress across our footprint, reflected in greater operating productivity and better business dynamics. Efficiency ratio (cost to income) % -1.7 pp 2023 vs. 2022 • In North America, operating expenses increased 8%. In real terms, they were up 3%, due to investments in digitalization, technology and other transformation initiatives underway. The efficiency ratio stood at 49.1%. • In South America, operating expenses rose 17%. In real terms, they were down 3%, despite the salary increases directly linked to inflation. The efficiency ratio stood at 38.5%. • DCB's operating expenses increased 8%, +3% in real terms, due to strategic and transformation investments in leasing and BNPL platforms and business growth. The efficiency ratio stood at 47.6%. Provisions or reversal of provisions Provisions (net of provisions reversals) amounted to EUR 2,678 million (EUR 1,881 million in 2022) mainly driven by Spain and Brazil. 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 12,956 million (EUR 10,863 million in 2022). This comparison was mainly affected by the provisions resulting from the charges in Poland for Swiss franc mortgages, the increase in the US and Mexico (due to normalization) and higher provisions recorded in Brazil, in line with credit portfolio growth. In constant euros, operating expenses by region and market performed as follows: For more details, see section 3 'Credit risk' in the 'Risk management and compliance' chapter. • In Europe, operating expenses were up 6%. In real terms, they rose 1%, due to increases in Spain, Poland and Portugal, which were partially offset by the decrease in the UK (-3%). The region's efficiency ratio stood at 42.1%, improving 5.2 pp year- on-year. 345 46.245.844.1202120222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Impairment of other assets (net) The impairment on other assets (net) was EUR 237 million, compared to an impairment of EUR 239 million in 2022. Gains or losses on non-financial assets and investments (net) Net gains on non-financial assets and investments were EUR 313 million in 2023 (gain of EUR 12 million in 2022). 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 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) 2023 44 12,912 2022 7 10,856 12,956 10,863 2023 2022 — 237 136 73 28 237 — 239 140 75 24 239 2021 19 7,388 7,407 2021 — 231 150 71 10 231 Negative goodwill recognized in results Negative goodwill of EUR 39 million was recorded in 2023. No negative goodwill was recorded in 2022. Gains or losses on non-current assets held for sale not classified as discontinued operations This item, which mainly includes impairment of foreclosed assets recorded and the sale of properties acquired upon foreclosure, recorded a EUR 20 million loss in 2023 (EUR 7 million gain in 2022). For more details, see note 49 to the consolidated financial statements. Profit or loss before tax from continuing operations Profit before tax was EUR 16,459 million in 2023, +8% year-on- year and +10% in constant euros. Good top line performance (double-digit growth in total income minus costs) was partially offset by higher loan-loss provisions and impairments and the temporary levy on revenue earned in Spain. Tax expense or income from continuing operations Total income tax was EUR 4,276 million (EUR 4,486 million in 2022). Profit attributable to the parent EUR million A. In constant euros: +18%. +15% A 2023 vs. 2022 346 8,1249,60511,076202120222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Profit attributable to non-controlling interests Profit attributable to non-controlling interests amounted to EUR 1,107 million, down 4% year-on-year (-6% in constant euros), due to lower profit in Brazil and DCB as well as the Group's increased shareholding in Banco Santander México in 2023. For more details, see note 28 to the consolidated financial statements. Profit attributable to the parent Profit attributable to the parent amounted to EUR 11,076 million in 2023, compared to EUR 9,605 million in 2022. These results do not fully reflect profit performance due to the temporary levy on revenue earned in Spain in 2023. RoTE stood at 15.1% (13.4% in 2022), RoRWA at 1.96% (1.77% in 2022) and earnings per share stood at EUR 0.65 (EUR 0.54 in 2022). Earnings per share EUR RoTE % +21% 2023 vs. 2022 RoRWA % 347 0.4380.5390.65420212022202311.9613.3715.062021202220231.691.771.96202120222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Below is the condensed income statement adjusted for items beyond the ordinary course of business and reclassification of certain items under some headings of the underlying income statement, as described in note 52.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 2023 (EUR 11,076 million), as profit was not affected by results that fell outside the ordinary course of our business, but there was a reclassification of certain items under some headings of the underlying income statement to better understand the business trends. These items are: • The temporary levy on revenue in Spain in the first quarter of 2023, totalling EUR 224 million, which was moved from total income to other gains (losses) and provisions. • Provisions to strengthen the balance sheet in Brazil in the first quarter of 2023, totalling EUR 235 million, net of tax and minority interests. In 2022, profit attributable to the parent and underlying profit were also the same (EUR 9,605 million), as profit was not affected by results that fell outside the ordinary course of our business, but there was also a reclassification of certain items under some headings of the underlying income statement. 2023 2022 Absolute % Change 43,261 12,057 2,633 (304) 57,647 (25,425) 32,222 (12,458) (3,066) 16,698 (4,489) 12,209 — 12,209 (1,133) — 11,076 11,076 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 4,642 267 980 (396) 5,493 (1,522) 3,971 (1,949) (574) 1,448 (3) 1,445 — 1,445 26 — 1,471 1,471 12.0 2.3 59.3 — 10.5 6.4 14.1 18.5 23.0 9.5 0.1 13.4 — 13.4 (2.2) — 15.3 15.3 % excl. FX 15.8 5.0 77.1 — 13.1 9.6 16.1 19.1 33.5 11.3 1.5 15.4 — 15.4 (3.4) — 17.7 17.7 2021 33,370 10,501 1,564 968 46,404 (21,415) 24,988 (7,436) (2,292) 15,260 (5,076) 10,184 — 10,184 (1,530) (530) 8,124 8,654 As a result, both attributable profit and underlying profit increased 15% in euros and 18% in constant euros compared to 2022. For more details, see note 52.c to the consolidated financial statements. This growth was mainly boosted by solid revenue performance, which increased 11% in euros and 13% in constant euros compared to 2022, and the better efficiency improvement, which improved to 44.1%. 1 Santander's net operating income higher year-on-year. In constant euros, it rose 16% as follows: was EUR 32,222 million, 14% 1. As described in note 52.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. 348 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Net loan-loss provisions EUR million Cost of risk % +19% A 2023 vs. 2022 +0.19 pp 2023 vs. 2022 A. In constant euros: +19%. A Underlying profit attributable to the parent EUR million A Underlying earnings per share EUR +15% B 2023 vs. 2022 +21% 2023 vs. 2022 A. Excluding net capital gains and provisions. B. In constant euros: +18%. A. Excluding net capital gains and provisions. • In Europe, net operating income increased 31% with strong improvements in all markets, boosted by 19% growth in total income (mainly net interest income in a context of higher interest rates) and administrative expenses and amortizations increasing in line with inflation, resulting in efficiency gains. • In DCB, net operating income increased 4%, driven by higher net interest income, leasing income and gains on financial transactions. Administrative expenses and amortizations rose due to strategic transformation investments and business growth, as already mentioned. • In North America, net operating income rose 2%. In Mexico, it was up 18%, supported by strong total income growth, which more than offset higher transformation costs. In the US, it decreased 10%, affected by higher funding costs and investments in building up our CIB and Wealth Management businesses. • In South America, net operating income increased 3%, driven by total income. • In the Corporate Centre, net operating income improved EUR 1,029 million, driven by the improvement of net interest income (higher liquidity buffer remuneration) and gains on financial transactions higher (FX hedge costs in 2022). Net loan-loss provisions rose 19% (+19% also in constant euros) mainly due to normalization in the US and Mexico, Swiss franc mortgage provisions in Poland and portfolio growth in Brazil. This growth was reflected in an increase in the cost of risk to 1.18%, delivering on Group's target for the year. 349 7,43610,50912,4582021202220238,6549,60511,0762021202220230.770.991.182021202220230.4680.5390.654202120222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 5,297 2023 220,342 176,921 5,910 9,773 83,308 2022 223,073 156,118 5,713 8,989 85,239 1,191,403 1,147,044 8,069 (3,749) 7,615 308 34,073 18,645 29,987 10,082 3,453 1,797,062 1,734,659 237 33,882 19,871 31,390 8,856 3,014 (788) 7,646 122,270 40,367 115,185 40,268 1,468,703 1,423,858 9,228 7,656 55 17,799 8,441 9,932 17,598 (117) 16,426 8,149 9,468 14,609 — 1,692,821 1,637,074 124,732 (35,628) 8,481 97,585 1,797,062 1,734,659 130,443 (35,020) 8,818 104,241 — Change Absolute (2,731) 20,803 197 784 (1,931) 44,359 (2,772) 2,961 31 (71) (191) 1,226 1,403 (1,226) (439) 62,403 7,085 99 44,845 (1,572) 172 1,373 292 464 2,989 — 55,747 5,711 608 337 6,656 62,403 (34.4) (79.0) 0.4 % (1.2) 13.3 3.4 8.7 2021 210,689 116,953 5,536 15,957 108,038 (2.3) 3.9 1,037,898 4,761 410 7,525 283 33,321 16,584 25,196 8,595 4,089 3.6 1,595,835 (0.6) 6.6 4.7 (12.7) (23.1) (12.2) 79,469 6.2 0.2 14,943 3.1 1,349,169 5,463 (17.0) 248 — 18,560 8.4 9,583 3.6 8,649 4.9 12,698 20.5 — — 3.4 1,498,782 119,649 4.6 (32,719) (1.7) 10,123 4.0 97,053 6.8 3.6 1,595,835 350 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Executive summary A Loans and advances to customers (minus reverse repos) Customer funds (deposits minus repos + mutual funds) Credit performance reflects the impact of macroeconomic environment and rising interest rates on customer behaviour Customer funds continued to grow year-on-year EUR 1,015 billion -1% EUR 1,177 billion +4% è By segment: è By product: Year-on-year decline in corporates, while loans to individuals remained stable Increase in time deposits and mutual funds on the back of demand deposits Individuals 0% SMEs and corporates -1% A. 2023 vs. 2022 changes in constant euros. CIB -6% Demand -7% Time +30% Mutual funds +13% Loans and advances to customers Loans and advances to customers totalled EUR 1,036,349 million in December 2023, remaining stable year-on-year. For the purpose of analysing traditional commercial banking loans, the Group uses gross loans and advances to customers minus reverse repurchase agreements which amounted to EUR 1,014,953 million, which also remained stable year-on-year. To facilitate the analysis of 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, declined 1%, as follows: • In Europe, volumes decreased 6%, with falls in almost all markets impacted by higher interest rates. Volumes fell 8% in Spain, 6% in Portugal and 6% in UK. On the other hand, volumes in Poland increased 5%, mainly due to double-digit growth in CIB. 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 • In North America, growth was 3%. In the US, lending grew 1% propelled by CIB and Multifamily, while lending in Mexico was up 6% with widespread rises across segments (except CIB). • Growth in South America was 7%. In Argentina, lending increased 217% driven by SMEs, corporates and individuals. In Brazil, it climbed 6% owing to positive performance in SMEs and individuals. In Chile, loans increased 4% backed by individuals, CIB and consumer finance. In Uruguay, they rose 12% mainly driven by consumer and corporates. • At DCB, volumes increased 8%, with generalized growth across countries (except the UK). Openbank's loans grew 16%. 2023 55,628 554,375 295,485 38,723 12,277 24,371 34,094 2022 56,688 565,609 290,031 39,833 11,435 22,704 32,888 1,014,953 1,019,188 39,500 1,059,137 1,058,688 22,684 1,036,349 1,036,004 44,184 22,788 Change Absolute (1,060) (11,234) 5,454 (1,110) 842 1,667 1,206 (4,235) 4,684 449 104 345 % (1.9) (2.0) 1.9 (2.8) 7.4 7.3 3.7 (0.4) 11.9 0.0 0.5 0.0 2021 49,603 542,404 269,526 38,503 10,304 20,397 31,645 962,382 33,264 995,646 22,964 972,682 351 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Gross loans and advances to customers (minus reverse repos) EUR billion Gross loans and advances to customers (minus reverse repos) % of operating areas. December 2023 0% A 2023 vs. 2022 A. In constant euros: -1%. As of December 2023, gross loans and advances to customers minus reverse repurchase agreements maintained a balanced structure: individuals (63%), SMEs and corporates (24%) and CIB (13%). At the end of 2023, 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 rate and 50% were floating rate. • Outside Spain, 66% of loans and advances to customers were fixed rate and 34% 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 33,882 million in December 2023, down EUR 191 million compared to December 2022. Intangible assets stood at EUR 19,871 million, of which EUR 14,017 million corresponds to goodwill (which increased EUR 276 million) and EUR 5,854 million to other intangible assets, mostly IT developments (up EUR 950 million). Loans and advances to customers with maturities exceeding one year at 2023 year end EUR million Fixed Floating TOTAL Domestic International TOTAL Amount 78,163 77,650 155,813 Weight as % of the total 50% 50% 100 % Amount 376,339 197,240 573,579 Weight as % of the total 66% 34% 100 % Amount 454,502 274,890 729,392 Weight as % of the total 62% 38% 100 % 352 9621,0191,015202120222023Europe: 55%North America: 16%South America: 16%Digital Consumer Bank: 13% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Total customer funds EUR million Demand deposits Time deposits Mutual funds A Customer funds Pension funds A Managed portfolios A Repurchase agreements Total funds A. Including managed and marketed funds. Customer deposits grew 4% year-on-year to EUR 1,047,169 million at 31 of December 2023. Santander uses customer funds (customer deposits, minus repurchase agreements, plus mutual funds) to analyse traditional retail banking funds, which stood at EUR 1,176,875 million and grew 4% year-on-year. To facilitate the analysis of Santander's management, as usual the comments below do not consider the exchange rate impact. Compared to December 2022, customer funds in constant euros rose 4%, as follows: • By product, customer deposits minus repurchase agreements rose 2%, as higher interest rates resulted in a notable increase in time deposits (+30%), which grew significantly in all markets, to the detriment of demand deposits, which fell 7%. Mutual funds increased (+13%) in all markets (except the US). Customer funds (minus repos) EUR billion +4% A +13% +2% • Total • Mutual B funds • Deposits minus repos 2023 vs. 2022 A. In constant euros: +4%. B. Including managed and marketed funds. 2023 661,262 307,085 208,528 2022 710,232 236,099 184,054 1,176,875 1,130,385 14,021 32,184 63,391 1,306,942 1,239,981 14,831 36,414 78,822 Change Absolute (48,970) 70,986 24,474 46,490 810 4,230 15,431 66,961 % 2021 717,728 (6.9) 146,469 30.1 188,096 13.3 4.1 1,052,293 16,078 5.8 31,138 13.1 36,357 24.3 1,135,866 5.4 • Customer funds increased 17% in South America with growth in all markets (Argentina: +235%; Brazil: +14%; and Chile: +12%), increased 3% in North America (the US: -1% and Mexico: +10%), and fell 1% in Europe due to the decreases in Portugal (-4%), Spain (-2%), and the UK (-1%), offset by the increase in Poland (+8%). • Positive performance in DCB, as customer funds increased 19%. • By secondary segment, there was a solid performance across businesses, particularly Retail Banking and Wealth Management and Insurance. The weight of demand deposits was 56% of total customer funds, while time deposits accounted for 26% and mutual funds 18%. In addition to capturing customer deposits, the Group, for strategic reasons, has a selective policy on issuing securities in international fixed income markets and strives to adapt the frequency and volume of its market operations to the structural liquidity needs of each unit, as well as to the receptiveness of each market. For more details on debt issuances and maturities, see section 3.4 'Liquidity and funding management' in this chapter. Customer funds (minus repos) % of operating areas. December 2023 353 8649469681881842091,0531,1301,177202120222023Europe: 62%North America: 15%South America: 17%Digital Consumer Bank: 6% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Banco Santander, S.A.'s 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 Debt issuances in 2023 We issued more than EUR 62 bn in debt in 2023, diversified by product, currency, country and maturity EUR 44.5 bn Medium- and long-term debt EUR 19.9 bn Securitizations Comfortable and stable funding structure High contribution from customer deposits 99% LTD ratio and controls to ensure liquidity levels cover short- and long- term needs with stable funding sources, and optimize funding costs. Each subsidiary has a conservative risk appetite framework (based on 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 prepare 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 its 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 demonstrates 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. 354 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We produce frequent, detailed liquidity monitoring reports for management, control and reporting purposes. We also regularly send the most relevant information to senior managers, the pertinent ALCOs 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. For more details, see the '3.6 Special situations and resolution' section Funding strategy and liquidity in 2023 Funding strategy and structure Our funding strategy is focused on extending our management model to all subsidiaries. • Customer deposits are our main funding source. They are highly stable because they mainly arise from retail customer activity. At the end of December 2023, they represented just over two thirds of net liabilities (i.e. of the liquidity balance sheet) and more than 100% 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 section Liquidity in 2023. Group's liquidity balance sheet %. December 2023 n ST funding n Equity and other 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. Financial assets Fixed assets & other Loans and advances to customers n M/LT debt issuance n Securitizations n Customer and others deposits We have had to adapt funding strategies to business trends, market conditions and new regulations. In 2023, we improved specific aspects, without significant changes in liquidity management or funding policies and practices. We believe this will enable us to start 2024 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. We believe these developments provide Santander with a very strong funding structure with the following characteristics: 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 (including M/LT issuances and securitizations) accounted for nearly 18% of net liabilities at the end of 2023 (similar to 2022). The outstanding balance of M/LT debt issued (to third parties) at the end of 2023 was EUR 206,190 million. Our maturity profile is comfortable and well balanced by instruments and markets with a weighted average maturity of 4.1 years (slightly below average maturity of 4.3 years at the end of 2022). These tables show our funding by instrument over the past three years and by maturity profile: 355 68%69%6%4%26%14%11%3%AssetsLiabilities 2023 Annual report Contents Group. Stock of medium- and long-term debt issuances A EUR million Preferred Subordinated Senior debt Covered bonds Total Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 9,892 20,708 125,951 49,639 206,190 2022 8,693 17,573 116,350 44,073 186,689 2021 10,238 16,953 104,553 41,908 173,652 A. Placed in markets. Does not include securitizations, agribusiness notes and real estate credit notes. Group. Distribution by contractual maturity. December 2023 EUR million Preferred Subordinated Senior debt Covered bonds Total 0-1 month — — 524 100 624 1-3 months — — 2,193 1,105 3,298 3-6 months 6-9 months 9-12 months 12-24 months — — 12,327 2,310 14,637 — — 2,529 540 3,068 — — 2,842 3,654 6,496 — 3,370 25,471 4,613 33,454 Note: There are no additional guarantees for any of the debt issued by the Group’s subsidiaries. years 2-5 more than 5 years 9,892 11,660 26,691 12,506 60,750 — 5,678 53,375 24,810 83,863 Total 9,892 20,708 125,951 49,639 206,190 In addition to M/LT wholesale debt issuances, we have securitizations placed in the market as well as collateralized and other specialist funding totalling EUR 59,450 million (including EUR 14,400 million in debt instruments placed with private banking clients in Brazil). The average maturity was around 1.7 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 very similar to 2022. Loans and advances to customers and M/LT wholesale funding %. December 2023 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 2023 was EUR 47,281 million, of which 52% was in European Commercial Paper, US Commercial Paper and domestic programmes issued by Banco Santander, S.A.; 10% in certificates of deposit and commercial paper programmes in the UK; 28% in Santander Consumer Finance (SCF) commercial paper programmes; and 10% in issuance programmes in other subsidiaries. Liquidity in 2023 The key liquidity takeaways from 2023 were: • basic liquidity ratios remained at comfortable levels; • regulatory liquidity ratios were well above minimum requirements; and • our asset encumbrance from funding operations was moderate. In order to tackle high inflation and return it to more normalized levels, central banks continued to withdraw stimulus measures and raise rate in 2023. However, at the end of 2023, the central banks in Poland, Brazil and Chile began to cut official interest rates. Santander continued to repay ECB TLTRO-III funding while strengthening balance sheets through a combination of customer deposit growth, 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. In the weeks following the regional banks crisis in the US and the Credit Suisse intervention, the Group strengthened its 356       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management supervision and coordination and monitored the liquidity situation and presented it to senior executives daily, under the special situations framework. During this time, liquidity remained solid in all the Group's units, including the UK and the US (followed more closely), and there were no significant impacts from the crisis. During 2023, our liquidity position remained solid and commercial activity was not a significant drain on liquidity. i. Basic liquidity ratios at comfortable levels At the end of 2023, Santander recorded: • A credit to net assets ratio (i.e. total assets minus trading derivatives and inter-bank balances) of 68%, 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 99%, a very comfortable level (well below 120%) and lower than 2022 year-end. As a result of the tightening of financial conditions due to inflation- fighting monetary policies, credit fell in constant euros across most of our European footprint (except in Poland and DCB) as households and companies repaid debt early. Credit in the US remained relatively stable while there was growth in Mexico and South America. Deposits showed similar trends. • A customer deposit plus M/LT funding to net loans and advances ratio of 127%, slightly above the 121% in 2022. • Limited recourse to short-term wholesale funding (around 3% of total funding), in line with previous years. • 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 308,315 million in the year. The consolidated structural surplus stood at EUR 346,174 million at year-end. Fixed-income assets (EUR 217,334 million), equities (EUR 17,076 million) and net interbank and central bank deposits (EUR 159,045 million) were partly offset by short-term wholesale funding (-EUR 47,281 million). This totalled around 23% of our net liabilities (slightly up from the end of 2022). This table shows Santander’s basic liquidity monitoring metrics in recent years: Group’s liquidity monitoring metrics % Loans A / Net assets Loan A -to-deposit ratio (LTD) Customer deposits and medium-and long-term funding / Loans A Short-term wholesale funding / Net liabilities Structural liquidity surplus (% of net liabilities) A. Net loans and advances to customers. 2023 68% 99% 2022 72% 103% 2021 75% 108% 127% 121% 115% 3% 3% 2% 23% 19% 16% The table below shows the principal liquidity ratios of our main subsidiaries at the end of 2023: Main subsidiaries' liquidity metrics %. December 2023 Spain United Kingdom Portugal Poland United States Mexico Brazil Chile Argentina Digital Consumer Bank Group LTD ratio Deposits + M/ (loans A LT funding / / Loans A deposits) 147% 110% 112% 137% 122% 121% 138% 92% 172% 76% 74% 105% 101% 76% 104% 89% 88% 144% 58% 191% 99% 127% A. Net loans and advances to customers. In 2023, the key drivers of Santander's and its subsidiaries' liquidity (in constant euros, i.e. excluding exchange rate impact) were: • Minimal impact from the retail funding gap on liquidity. • Issuance activity remained high and, overall, was in line with our funding plan for the year. We issued less in South America than originally planned as deposits grew more than credit while we were more active in capital markets in Europe and DCB. In 2023, Santander issued EUR 64,419 million in M/LT funding (at year-average exchange rates). By instrument, issuances of M/LT fixed income debt (i.e. covered bonds, senior debt, subordinated debt and capital hybrid instruments) increased by around 12% to EUR 44,478 million in the year. Greater activity in hybrid instruments somewhat offset lower senior debt issuances (mainly TLAC eligible) compared to 2022. The volume of covered bond issuances in 2023 was similar to the previous year. Securitizations and structured finance totalled EUR 19,942 million in 2023, a 13% increase year-on-year. Spain issued by far the most M/LT fixed income debt (excluding securitizations), followed by DCB and the UK. Spain and DCB Bank registered the highest absolute increases in the year. The main year-on-year decrease occurred in the UK. SC USA and SCF were the main issuers of securitizations. 357 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The charts below show issuances in the year by instrument and region: Distribution by instrument and region %. December 2023 ii. Compliance with regulatory liquidity ratios Within the liquidity management model, Santander manages implementation, monitoring and compliance with the liquidity requirements established under international financial regulations. 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 maintain compliance levels well above 100% (both at the Group and subsidiary level) throughout the year. Our LCR in December 2023 was 166%, well above the regulatory requirement. This table shows that all our subsidiaries substantially exceeded the required minimum in 2023 and the comparison versus 2022. 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 The issuance of eligible hybrid instruments, such as AT1 or subordinated debt, depends on risk-weighted asset growth. We had to issue these instruments in 2023, contributing to a lower overall weight of senior debt in the year. In 2023, senior debt accounted for 45% of total issuances compared to 53% in 2022. The weight of bonds and securitizations remained similar to 2022. In 2023, at average exchange rates, the Group issued EUR 13,987 million in TLAC eligible instruments, including EUR 7,217 million in senior non-preferred debt from Banco Santander, S.A. and Poland and senior preferred from the holdings in the UK and the US; EUR 4,458 million in subordinated debt issued from Banco Santander, S.A. and Brazil; and EUR 2,313 million of AT1 eligible hybrid instruments were issued from Banco Santander, S.A. We retained comfortable access to all our markets having issued and securitized debt in 15 currencies, involving 25 major issuers from 14 countries and an average maturity of 4.8 years (slightly above the 4.1 years in 2022). December 2023 December 2022 147% 157% 132% 178% 125% 197% 127% 189% 235% 241% 159% 159% 150% 221% 138% 171% 154% 207% 226% 357% 166% 152% 358 Senior debt: 45%Securitization and other: 31%Covered bonds: 14%Preferred: 4%Subordinated: 7%Europe: 56%North America: 17%South America: 6%DCB: 21% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management NSFR (Net Stable Funding Ratio) 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 measure 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. The risk appetite limit for the NSFR is set at 103% 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 2023. The following table provides details by entity as well as a comparison with 2022. 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. 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 2023. On-balance-sheet encumbered assets amounted to EUR 306.3 billion, of which 61% were loans and advances (e.g. mortgages and corporate loans). Off-balance-sheet encumbrance stood at EUR 138.8 billion and mainly related to debt securities received as collateral in reverse repurchase agreements and reused ('rehypothecated'). In total, encumbered assets amounted to EUR 445.2 billion, giving rise to associated liabilities of EUR 330.6 billion. At the end of 2023, total asset encumbrance in funding operations was 22.4% of the Group's extended balance sheet under EBA criteria (total assets plus guarantees received: EUR 1,987.1 billion), similar to 2022. Net Stable Funding Ratio % Parent bank United Kingdom Portugal Poland United States Mexico Brazil Chile Argentina Santander Consumer Finance Group December 2023 December 2022 116% 137% 116% 146% 109% 120% 112% 117% 195% 109% 117% 138% 117% 157% 117% 129% 113% 115% 202% 111% 123% 121% 359 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Group. Disclosure on asset encumbrance as at December 2023 EUR billion Assets Loans and advances Equity instruments Debt instruments Other assets Carrying amount of encumbered assets 306.3 186.4 9.4 86.8 23.7 Fair value of encumbered assets — — 9.4 87.6 — Carrying amount of unencumbered assets 1,490.7 1,172.2 11.5 156.4 150.6 Fair value of unencumbered assets — — 11.5 156.1 — Group. Collateral received as at December 2023 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 51.3 — 8.7 42.5 0.1 138.8 1.1 5.5 132.2 — Own debt securities issued other than own covered bonds or ABSs — 1.9 Group. Encumbered assets/collateral received and associated liabilities as at December 2023 EUR billion Total sources of encumbrance (carrying amount) Rating agencies Rating agencies influence Santander’s access to wholesale funding markets and the cost of its issuances. The agencies listed below regularly review our ratings. Debt ratings depend on several internal factors (business model, strategy, capital, income generation capacity, liquidity, 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 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 2023, the ratings from the main agencies were: Matching liabilities, contingent liabilities or securities lent 330.6 Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered 445.2 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 In March 2022, S&P Global ratings confirmed the Kingdom of Spain's A rating and upgraded its outlook to stable. At the same time, it confirmed Banco Santander S.A.'s rating and upgraded its outlook to stable. In 2023, all the rating agencies left their ratings and outlooks for Santander unchanged. Going forward, improvements to Santander's ratings from S&P and Moody's will heavily depend on the Kingdom of Spain's rating. 360                           2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Funding outlook for 2024 Santander has begun 2024 with a strong liquidity position, having already repaid more than 85% of ECB funding. 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 active medium- and long-term issuance dynamic. 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 2024. Banco Santander, S.A. pre-funded EUR 9.2 billion in 2023. In January 2024, the main issuers in the Group (Banco Santander, S.A., Santander UK, Santander Consumer Finance and Santander Holdings USA) had already issued EUR 10.6 billion, which, together with the pre-funding amounts to EUR 19.8 billion, over half of their total funding plan for the year. 361 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 % Capital management and adequacy at Santander aims to guarantee solvency and maximize profitability, while complying with regulatory requirements and internal capital targets. Capital management is a key strategic tool for decision-making at both the subsidiary and corporate levels. We have a common framework that covers capital management actions, criteria, policies, functions, metrics and processes. We have a team in charge of our capital analysis, adequacy and management that coordinates with subsidiaries on all matters related to capital and monitors and measures shareholder returns. Our most notable capital management activities are: • establishing capital adequacy and capital contribution targets that align with minimum regulatory requirements, internal policies and the budget, to guarantee robust capital levels consistent with our risk profile and efficient use of capital; • drawing up a capital plan to meet our strategic plan objectives; Santander's capital function comprises three levels: Regulatory capital Fully-loaded CET1 Strong organic generation driven by higher profit Organic generation +119 bps TNAV per share The TNAV per share was EUR 4.76, +15% year-on-year including cash dividends paid in 2023 • monitoring the capital ratio in both regulatory and economic terms and the efficient capital allocation to units. Assessing capital adequacy to ensure the capital plan is consistent with our risk profile and risk appetite framework in baseline and stress scenarios; • integrating capital metrics into businesses' management ensuring alignment with the Group’s objectives. Continuously monitoring stock and new business profitability as well as new business pricing at the unit, segment and customer levels. Tracking portfolios and customers with profitability below the minimum target. Coordinating and promoting the bank’s asset mobilization plan (e.g. securitizations, guarantees, sales); • preparing internal capital reports, and reports for the supervisory authorities and the market (ICAAP, Pillar 3 reports and stress tests); and • planning and managing other loss-absorbing instruments (MREL and TLAC). The first step in managing regulatory capital is to analyse the capital base, the capital adequacy ratios under the current regulatory criteria and the scenarios used in capital planning to make the capital structure as efficient as possible, both in terms of costs and compliance with regulatory requirements and out internal capital targets. 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). Economic capital 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. 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. 362 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Strengthening our active capital management culture We continue to focus on disciplined capital allocation and shareholder remuneration and on achieving our 2024 fully- loaded CET1 target of remaining above 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 country and business unit has drawn up individual capital plans that focus on maximizing the return on equity. Santander places 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' 2023 variable remuneration: • Metrics include return on tangible equity (RoTE) and other relevant capital metrics (capital generation or CET1). • Qualitative adjustments considered included efficient management of solvency metrics, operational risk management, risk appetite, sustainability and strength of results and effective cost management. The main measures we took in 2023 were: Issuances of capital hybrid and other loss-absorbing instruments In 2023, Banco Santander, S.A. issued EUR 5.7 billion in hybrid instruments including EUR 3.4 billion in Tier 2 subordinated debt and EUR 2.3 billion in contingently convertible preferred shares (CoCos). The CoCo issuances aim to replace a EUR 1.0 billion AT1 issuance that was amortized early in December 2023 and a EUR 1.1 billion AT1 issuance amortized early in February 2024. Additionally, Banco Santander, S.A. issued EUR 3.2 billion in senior non-preferred debt. Dividends and shareholder remuneration With regard to the 2023 results, the board followed a policy of allocating 50% of the Group reported profit (excluding non- cash, non-capital ratios impact items) to shareholder remuneration, distributed as approximately 50% in cash dividends and 50% in share buybacks. • Interim remuneration. On 26 September 2023, the board resolved to: • Pay an interim cash dividend against the 2023 results of EUR 8.10 cents per share entitled to the dividend (equivalent to approximately 25% of said Group's reported profit in H1’23); it was paid from 2 November 2023. • Execute the First 2023 Buyback Programme worth up to EUR 1,310 million (equivalent to approximately 25% of said Group reported profit in H1’23). See 'First 2023 Buyback Programme' in the 'Corporate Governance' chapter. • Final remuneration. Under the 2023 shareholder remuneration policy, on 19 February 2024 the board of directors resolved to: • Submit a resolution at the 2024 AGM to approve a final cash dividend in the gross amount of EUR 9.50 cents per share entitled to dividends. If approved at the AGM, the dividend would be payable from 2 May 2024. • Implement the Second 2023 Buyback Programme worth EUR 1,459 million, for which the appropriate regulatory authorization has been obtained, the execution of which will begin from 20 February 2024. For more details, see 'Second 2023 Buyback Programme' in the 'Corporate Governance' chapter. Once the above-mentioned actions are completed, total shareholder remuneration for 2023 will total EUR 5,538 million (approximately 50% of the Group reported profit -excluding non-cash, non-capital ratios impact items- in 2023), distributed as approximately 50% in cash dividends (EUR 2,769 million) and 50% in share buybacks (EUR 2,769 million). For more details, see section 3.3 'Dividends and shareholder remuneration' in the 'Corporate Governance' chapter. 363 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management A 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 2023 Phased-in B 2023 2022 76,448 73,390 85,450 82,221 2022 76,741 74,202 85,742 83,033 101,747 96,373 102,240 97,392 623,652 609,702 623,731 609,266 12.2% 13.6% 16.0% 4.74% 12.3% 13.7% 16.4% 4.69% 12.3% 13.7% 16.3% 4.68% 12.0% 13.5% 15.8% 4.70% Regulatory phased-in CET1 ratio % B 12.5 12.2 12.3 A. The 2021 fully-loaded CET1 ratio includes a charge related to corporate transactions that were pending approval at year end (-0.16 pp). B. 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 2023 The fully-loaded CET1 ratio was 12.3% if we do not apply the transitory IFRS 9 provisions or the subsequent amendments introduced by Regulation 2020/873 of the European Union. In the year, we organically generated 119 bps of capital, supported by profit growth. We recorded an impact of 44 bps related to cash dividend accrual and another 36 bps for the First 2023 Share Buyback Programme, representing a net generation of 39 bps in 2023. Additionally, there was a 9 bp positive impact, mainly relating to regulatory and FX movements. However, this was partially offset by a -26 bp charge relating to the second 2023 share buyback programme in accordance with the EBA's Q&A 2023_6887 on the deduction of share buybacks included in distribution policies. The fully-loaded leverage ratio stood at 4.68%. Fully-loaded CET1 ratio in 2023 % 1. The implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals. 364 12.012.012.320212022202312.0+1.19-0.80+0.0912.5-0.2612.3Dec-22Organic generationCash dividend and first SBB¹Regulatory &othersDec-23pre-SBB EBA Q&ANew SBB EBA Q&ADec-23 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 in 2023 were 9.26% for the CET1 ratio and 13.45% for the total capital ratio. Our capital requirements increased in 2023, mainly due to the continued increase of countercyclical buffer requirements by the competent authorities in the countries in which we operate (+0.19 pp). At year-end, the phased-in CET1 ratio was 12.30%, resulting in a CET1 management buffer of 305 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 16.39%. Taking into account the shortfall in AT1, Santander exceeded the 2023 minimum regulatory requirements (i.e. distance to the maximum distributable amount - MDA) by 269 bps. The phased-in leverage ratio stood at 4.69%. Regulatory capital (phased-in). Flow statement EUR million Capital Core Tier 1 (CET 1) Starting amount (31/12/2022) 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 (31/12/2023) Additional Capital Tier 1 (AT1) Starting amount (31/12/2022) AT1 eligible instruments AT1 excesses - subsidiaries Residual value of intangible assets Deductions Ending amount (31/12/2023) Capital Tier 2 (T2) Starting amount (31/12/2022) T2 eligible instruments Generic funds and surplus loan-loss provisions-IRB T2 excesses - subsidiaries Deductions Ending amount (31/12/2023) Deductions from total capital Total capital ending amount (31/12/2023) 2023 74,202 (2,205) (2,787) (1,209) 8,307 2,400 (518) (38) (1,412) 76,741 8,831 117 54 — — 9,002 14,359 2,331 76 (269) — 16,497 — 102,240 A. Countercyclical buffer. B. Global systemically important banks (G-SIB) buffer. C. Capital conservation buffer. With effect from 1 January 2024, the ECB revised Banco Santander, S.A.'s P2R requirement, establishing a minimum of 1.74% on a consolidated basis. This is a 0.16 pp increase compared to the 2023 requirements (of which, 0.15 pp are due to a methodological change). 0.98 percentage points of the P2R requirement must be covered with CET1 and the rest between AT1 and tier 2. Institutions must hold capital at the consolidated level for the higher of the G-SIB and D-SIB requirements. In 2023, they were both set at 1%, however Banco de España informed the Group that its D-SIB buffer would increase from 1.00% to 1.25% from 1 January 2024. 365 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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) A Of which: standardized approach (SA) Of which: the foundation IRB (FIRB) approach Of which: slotting approach B Of which: equities under the simple risk-weighted approach Of which: the advanced IRB (AIRB) approach Counterparty credit risk (CCR) Of which: standardized approach Of which: internal model method (IMM) Of which: exposures to a CCP Of which: credit valuation adjustment (CVA) Of which: other CCR Settlement risk Securitization exposure in the banking book (after the cap) Of which: SEC-IRBA approach Of which: SEC-ERBA approach Of which: SEC-SA approach B Of which: 1250% deduction C 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 RWAs 2023 515,238 285,728 56,913 14,123 3,603 138,204 13,593 10,150 — 324 680 2,439 4 11,419 4,275 2,257 4,887 — 16,454 9,166 7,288 — 67,022 — 67,022 — 28,732 623,731 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 Minimum capital requirements 2023 41,219 22,858 4,553 1,130 288 11,056 1,087 812 — 26 54 195 0 914 342 181 391 — 1,316 733 583 — 5,362 — 5,362 — 2,299 49,898 Includes equities under the PD/LGD approach. A. B. For more detail see Pillar 3 report. C. Information prepared following the recent update of the EBA (24.05.22,"ITS on institutions’ Pillar 3 public disclosures"). Banco Santander S.A. deducts from capital those securitisations that meet the deduction requirements, and therefore does not apply a 1,250% weighting to these exposures. This row does not include the EUR 5,475 million that would result from applying this weighting to these exposures. 366 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management RWAs by geographical distribution (phased-in CRR, phased-in IFRS 9) EUR billion Credit risk (excluding CRR) of which, standardised approach (SA) of which, internal rating-based (IRB) approach of which, equity and DTAs of which, securitizations A of which, rest Market risk Operational risk Total TOTAL EUROPE 540 290 218 19 11 1 16 67 323 122 172 19 9 1 12 35 o/w: Spain 132 36 74 19 2 0 11 14 624 369 157 o/w: United NORTH Kingdom AMERICA o/w: US SOUTH AMERICA Brazil o/w: 69 19 46 — 3 — 0 7 77 94 74 18 — 2 0 2 16 112 67 56 9 — 2 — 1 11 80 123 94 28 — 0 — 3 16 142 89 65 23 — 0 — 1 10 100 Note: Breakdown according to debtor’s residency, except operational risk (management criteria). Counterparty RWAs are included in the IRB/STD approaches. A. It does not include 1250% deductions. 367 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management This table presents the main changes to capital requirements by credit risk: Credit risk capital movements A EUR million Starting amount (31/12/2022) Asset size Asset quality Model updates Regulatory Acquisitions and disposals Foreign exchange movements Other Ending amount (31/12/2023) RWAs 529,401 14,247 (2,091) (13) — — (2,297) — 539,247 Capital requirements 42,352 1,140 (167) (1) — — (184) — 43,140 A. Includes capital requirements from equity, securitizations and counterparty risk (excluding CVA and CCP). Credit risk RWAs increased EUR 9,846 million in 2023. If we isolate the exchange rate effect (due to the depreciation of the Argentine peso, the US dollar and the Chilean peso partially offset by the appreciation of the Brazilian real and the Mexican peso), RWAs increased EUR 12,143 million. This is mainly due to asset size (EUR 14,247 million), driven by greater business volumes particularly in DCB and South America which were partially offset by securitizations during the year (EUR 15,371 million). Additionally, there was a decrease in RWAs related to credit quality performance (-EUR 2,091 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 (ALM), 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. 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. 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 baseline 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 2023 amounted to EUR 74,721 million. Compared to the available economic capital base of EUR 94,228 million, this implies a capital surplus of EUR 19,507 million. 368 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Reconciliation of economic and regulatory capital EUR million 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 Base economic capital available Economic capital required B Capital surplus 2023 49,618 76,841 (34,484) 6,908 (669) (3,986) 94,228 (18,867) (14,161) (3,059) (1,648) 1,088 2022 54,610 67,978 (35,068) 7,426 (708) (2,522) 91,716 (18,603) (14,484) (2,698) (1,421) 237 76,448 73,350 94,228 74,721 19,507 91,716 70,900 20,816 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. RoRAC and Economic Value Added One of the Group's primary priorities is to manage capital by ensuring that we make a cost-effective allocation of capital in all our activities. Our strategy includes investing capital in markets and portfolios with the highest returns on capital, ensuring strong and sustainable shareholder value creation. Metrics such as RoTE, RoRWA and RoRAC are part of approvals and monitoring policies. These metrics help 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). We regularly assess the level and progression of EVA across the Group, both from a regulatory and economic capital point of view. EVA is the profit generated above the cost of capital employed. 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 2023 was 11.2% (in line with 2022). 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 value on a standalone basis. This table shows economic value added and RoRAC of the Group’s main geographical segments at the end of December 2023. Economic Value Added EUR million A and RoRAC Main segments Europe North America South America Digital Consumer Bank 2023 2022 RoRAC 24.1% 18.8% 19.0% 23.2% EVA RoRAC 3,169 15.5% 886 (45) 788 23.4% 23.4% 26.5% EVA 1,082 1,418 966 974 Total Group 15.3% 3,285 14.0% 2,146 Note: The 2022 economic capital requirements in this table have been recalculated based on the 2023 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. Additionally, we also internally use a Shareholder Value Added (SVA) view which adjusts components that affect shareholder value creation but are not reflected in results. Identifying and managing businesses with low profitability is part of the Group's capital optimization process. We dynamically target and actively monitor customers, portfolios and markets with attractive returns on capital. To ensure improved profitability and maximize capital productivity, we must focus on capital efficiency from origination. Pricing is an objective process based on the characteristics of the transaction, product, borrower, segment and market. Furthermore, it should ensure that the price exceeds a minimum threshold covering at least funding, operating, credit and capital costs, as well as an additional spread that takes into account demand sensitivity to prices and value generation. Therefore, pricing should aim to maximize profitability, with positive EVA for every transaction, customer and/or portfolio, and ensure compliance with minimum return on capital targets. 369 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Santander has granular approvals tools for the CIB and corporate segments which it uses to calculate the return on both regulatory and economic capital (RoRWA and RoRAC) and determine appropriate pricing. For retail segments, tools are locally developed by the units, tailoring them to the individual characteristics of each market. We also employ a granular tool to track returns on capital on a like-for-like basis between units. 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. Our approvals tools enable us to identify and justify any new loans with a pricing below the minimum threshold and our monitoring tools enable us to identify operations with profitability below the cost of capital, thereby recurrently destroying value. To try to ensure that all customer relationships add value, we regularly monitor and actively manage low performing customers through specific action plans. Both approvals and profitability monitoring have a robust approval and review governance which i) ensures the consideration of minimum pricing thresholds are properly integrated into capital processes, ii) establishes a timely scaling/ authorizing process and iii) that detailed follow-ups are carried out for operations approved below the minimum threshold. 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. This chart describes the structure in place: 1 2 3 4 5 Macroeconomic scenario Balance sheet and income statement forecasts Capital requirements forecasts Solvency analysis • 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 • Consistent with projected balance sheet • Regulatory and economic risk parameters (PD, LGD and EAD) • Available capital base. Profits and dividends • Regulatory and legislative impacts • Capital and solvency ratios • Compliance with capital objectives • Regulatory and economic view Action plan • In the event of failure to comply with internal objectives or regulatory requirements 370 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management This structure supports the ultimate objective of capital planning, by making it an important strategic component that: • ensures current and future solvency, even in adverse economic scenarios; • facilitates communication with the market and supervisors; • ensures comprehensive capital management, analyses specific effects and integrates them into strategic planning; • enables a more efficient use of capital; and • helps formulate our capital management strategy. Senior managers are fully involved in and closely oversee capital planning under a framework that ensures proper governance and is subject to the robust challenge, review and analysis. In capital planning and stress analysis exercises, calculating the required provisions under stress scenarios is key, especially to cover losses on credit portfolios. It is particularly important for income statement forecasts under adverse scenarios. To calculate loan-loss provisions of the credit portfolio, we use a methodology that ensures provisions cover loan losses projected by internal expected loss models, based on exposure at default (EAD), probability of default (PD) and loss given default (LGD parameters), at all times. In 2018, we adapted this methodology to incorporate changes brought in by the new IFRS 9 regulations, with models to calculate balances by stages (S1, S2, S3) as well as the movements between them and the loan-loss provisions in accordance with the new standards. Our capital planning and stress analysis culminate in an analysis of solvency under various scenarios over a set period to measure capital adequacy and ensure we meet all internal capital and regulatory requirements. Should we fail to meet our capital objectives, we would draw up an action plan with the measures needed to attain the minimum capital desired. We analyse and quantify those measures as part of internal exercises even if we don't need to use them as we exceed the minimum capital thresholds. Santander carries out its internal stress and capital planning transversally throughout the Group, at the consolidated and local level. Our subsidiaries use it as an internal management tool, particularly to respond to local regulatory requirements. We have undergone nine external stress tests since the beginning of the economic crisis in 2008. Every test 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. 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. 371 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 EBA stress test In late July, the European Banking Authority (EBA) published the results of its 2023 EU-wide stress test, which involved the main banks from the EU. This exercise assesses the resilience of these banks' main balance sheet and income statement items under two different macroeconomic scenarios (baseline and adverse). Balance sheets at the end of 2022 were used as a starting point and the expected behaviour of business models was compared in order to gauge the expected losses and the ability of the balance sheet to withstand such losses without requiring external support. Gross Domestic Product (GDP) Change (%) As with previous exercises, there was no minimum capital threshold to meet. However, the results were taken into account when determining the SREP requirements. The baseline scenario assumes the most likely economic performance according to the models used by the supervisor. On the other hand, the very unlikely adverse scenario assumes a severe deterioration in both macroeconomic and global financial market conditions. This year, the scenarios used to project the evolution of the Group's main businesses were as follows: Spain UK US Mexico Brazil Chile 2023 2023-25 2023 2023-25 2023 2023-25 2023 2023-25 2023 2023-25 2023 2023-25 Baseline scenario Adverse scenario 1.3 -2.6 6.1 -5.4 0.3 -4.8 3.2 -8.5 1.0 -5.7 4.0 -4.5 1.2 -4.6 5.1 -6.8 1.0 -4.0 4.9 -5.5 -1.0 -7.0 3.3 -7.9 According to the results obtained in this stress test, under the adverse scenario Santander would destroy 170 bps of fully- loaded CET1 capital, the best result among peers who destroyed on average 418 bps. The average of European banking system was 459 bps. Even in the adverse scenario, the cumulative projections of the Group's income statement show a profit of EUR 6,582 million, well above our peers and the system, which, on average, resulted in losses of EUR 3,129 million and EUR 1,404 million, respectively. This implies that, in absolute terms, the Group at the end of the stressed horizon, would have a fully-loaded CET1 ratio 30 bps better than the average of its European peers. Fully-loaded CET1 ratio 2025 vs 2022 Adverse scenario. Basis points Profit after tax (accumulated 3 years) Adverse scenario. EUR million Peer average System 372 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 public funds or financial stability. From 1 January 2022, 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 and 6.75% of the Basel III Tier 1 leverage ratio exposure. 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 maximum of 3.5%, with the resolution authority's authorization). As of 31 December 2023, the TLAC of the resolution group headed by Banco Santander, S.A. stood at 26.7% of risk- weighted assets and 9.2% 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 2023, 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 2024. It was set at the highest of 29.81% of the 1 Resolution Group’s RWAs Group’s leverage ratio exposure, based on 31 December 2021 data. and 11.51% of the Resolution As of 31 December 2023, Banco Santander, S.A. met its MREL requirements, having issued eligible instruments during the year, specifically 38.0% of RWAs and 16.3% of the leverage ratio exposure. Of the total MREL requirement, a minimum subordination level was fixed as the highest of 10.27% of RWAs and 6.13% of the leverage ratio exposure. However, the Resolution Group headed by Banco Santander, S.A.'s minimum subordination is determined by TLAC, not by MREL, as the TLAC subordination requirement is greater. In December 2023, the MREL subordinated figures of the Resolution Group headed by Banco Santander, S.A. were 32.2% and 13.8%, respectively. TLAC 2023 % MREL 2023 % A. CBR: Combined Buffer Requirement, comprising a capital conservation buffer (2.5%), a G-SII buffer (1%) and a countercyclical capital buffer (0.31%). 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. 373 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 preparing and strengthening mechanisms for a potential crisis, recovery plans and 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. Two of Santander's key processes are the recovery plan and the bail-in playbook, which describes the resolution tool's execution. Crisis management Apart from the management of more local incidents, several events were closely monitored in 2023: the regional banking crisis in the US, the Credit Suisse intervention, several geopolitical and macroeconomic episodes (such as the war in Ukraine, elections in Argentina, armed conflict in the Middle East, monetary policy in Poland, etc.), natural disasters (e.g. Hurricane Otis in Mexico, earthquakes in Morocco and Turkey, etc.) and various cyber-security related incidents (e.g. ICBC cyber-attack). We believe these events are idiosyncratic, particularly in the case of the regional banking crisis in the US or the Credit Suisse intervention, and conclusions should not be extrapolated to the rest of the financial system. However, the banking industry and the competent authorities highlighted certain general lessons. These include: (i) the comprehensive, forward-looking and early warning view of possible threats, (ii) the importance of crisis communication, (iii) the need for implementing crisis management governance while ensuring proper supervision/ coordination mechanisms in international groups, and (iv) the need for maintaining proper crisis recovery strategies and measures, particularly with regards to liquidity. Despite these conditions, Grupo Santander's crisis management model once again proved its robustness, highlighting two fundamental aspects for a group such as ours: • Coordination with subsidiaries, as cooperation between the Group's different units proved to be a strength in times of crisis, through crisis governance bodies (e.g. global Silver Forum), the regular issuance of corporate guidelines and the Group's participation in the preparation and execution of simulation exercises. • Early incident management, given the Bronze teams were able to provide a rapid and proactive response to very different critical events. To further strengthen our crisis management model, we implemented several initiatives. In particular, we: • introduced greater flexibility into the decision-making process (e.g. quorums of crisis management bodies); • simplified escalation processes for both financial and non- financial events; and • strengthened response operationalization to crisis events (e.g. development of playbooks); particularly in communication with customers and regulators. Despite the challenges faced in 2023, we have shown that we have the right tools to appropriately respond to a wide range of potential crises. However, given the complexity of the current environment and the potential threats facing the banking industry, we remain committed to further strengthening our crisis management mechanisms and instruments. Recovery plans Context. Santander drew up its fourteenth corporate recovery plan in 2023. 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. 374 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Progress in 2023. In December 2022, the EBA published a consultation on its new "Guidelines on total resilience in recovery plans" draft. The most important changes include incorporating more severe scenarios that reach the near-default point and dynamically calculating resilience starting from the moment an indicator breach activates the plan. In May 2023, the ECB requested we apply these guidelines in the annual plan, even though the final version was not published until July and, therefore, not yet in force at the end of 2023 (as three months had not passed since its publication in all official EU languages). Volatility in the markets in the first quarter of 2023 (banking crisis in the US and the collapse of Credit Suisse) required special attention to liquidity resilience and the need for institutions to ensure that they have sufficient measures in place that can be implemented in a short period of time. The ECB also requested simulations to ensure the operational feasibility of various recovery options. Like every year, the document fully covered all of the ECB’s recommendations, including: • new forward-looking 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 all scenarios reach a near- default point according to new guidelines; • greater detail regarding execution of all measures; • calculations of total recovery capabilities for LCR and NSFR indicators in liquidity scenarios and for capital indicators (CET1, Total Capital Ratio and Leverage Ratio); and • new recovery measures. The key takeaways from our review of the 2023 corporate plan were: • no material interdependencies between main subsidiaries; • ample recovery capacity in all scenarios through available measures. Our geographically diversified model is a great asset 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 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 2023; the EBA has six months to make formal considerations. Santander's recovery plan 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 Santander Bank Polska S.A. and Santander Consumer Bank S.A. -Poland- (as required). All subsidiaries (except Santander Chile) 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 The relevant authorities prepare the resolution plans and Santander cooperates with them, providing all information they 1 . The members of the Crisis Management Group (CMG) request upheld their decision on our Multiple Point of Entry (MPE) strategy to be used in a hypothetical resolution. This strategy is consistent with our legal and business structure, 2 which is organized into 11 resolution resolved independently without involving other parts of the organization, given the low level of interconnection. groups that can be 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, achieving the target set for December 2023 by the SRB. This was communicated through a high-level meeting with the CEO in October, where a heat map was presented showing that we meet all resolvability dimensions. Despite this, the SRB highlighted the need to continue to work on resolvability and meet the targets set for the new resolution planning cycle starting in 2024, which focus on the operationalization of the resolution tool. The resolution group headed by Banco Santander, S.A. underwent a deep-dive on the potential separability of one of its subsidiaries. The preliminary conclusion of this analysis was positive. In 2023, we prepared the multi-annual work plan to continue to meet the resolution planning requirements. Banco Santander, S.A.’s board of directors approved it in January 2024, prior to its definitive submission to the SRB and in which the following actions, among others, were defined: 1. With the exception of the US, where individual entities draw up their own resolution plans. 2. In 2023, the SRB approved the integration of the Santander Totta (Portugal) resolution group into the resolution group headed by Banco Santander, S.A. creating a new resolution group called Banking Union, hence going from 12 resolution groups to 11. 375 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 5) Continue the work on Management Information Systems We expect to complete all reporting manuals by 2024, including those required for the timely provision of accurate information for internal recapitalization and valuation datasets. In the update, we will incorporate lessons learned from the tests and comments from the SRB. 6) Guarantee operational continuity in resolution situations. As in 2022, in 2023 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 will continue this work stream in 2024. 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. 1) Conduct initial tests to measure capability to provide high quality data for resolution valuations In previous years, Banco Santander, S.A. conducted a self- assessment of the capabilities of its information systems to provide valuation data to the SRB. The SRB asked us to carry out a real-time test in 2024 and share with them the resulting data for each of the relevant subsidiaries of Banco Santander, S.A. within the resolution group known as Banking Union. 2) Conduct a liquidity exercise based on the joint SRB-ECB liquidity report developed in October 2023 In October 2023, we presented a new liquidity report jointly required by the SRB and the ECB. In 2024, we will conduct a liquidity exercise aiming to strengthen our liquidity reporting capabilities during and after resolution. We will also need to take into account the SRB's comments on the 2023 liquidity exercise. 3) Demonstrate the separability of relevant subsidiaries in the resolution group headed by Banco Santander, S.A. We will continue the work on separability, an area that was established as a priority for Santander in the last resolution planning cycle, and improve Santander's ability to implement transfer tools in the event of resolution by developing an advanced separability analysis report. This analysis will identify potential obstacles and mitigating factors to ensure the subsidiaries' operational and business continuity if separated from the Group. 4) Test the internal recapitalization resolution tool and the internal loss transfer and recapitalization mechanism, together with information system capabilities Given the results of the internal recapitalization testing exercises in previous years, Banco Santander is expected to continue to test its internal recapitalization preparation through a test focused on its information systems' capabilities, internal and external execution and communication, as described in the Bail-in Playbook. Testing should also include the internal loss transfer and recapitalization mechanism (ILTRM) in place. We expect the next version of the recapitalization manual, to be completed in 2024, will meet all the requirements specified by the SRB based on the lessons learned from the tests. The subsidiaries required by the SRB are also expected to continue to develop and complete the ILTRM manuals. 376 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4. Financial information by segment For comparison purposes, the 2022 data have been restated to include these changes. In terms of the operating segment structure, the Group maintained the two levels of segmentation applied in 2022. Primary segments This primary level of segmentation, which was based on the Group’s management structure in 2023, comprised five reportable segments: four operating areas plus the Corporate Centre. The operating areas in 2023 were: Europe: comprised 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: comprised 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, the New York branch and Santander US Capital Markets (SanCap). South America: included all the financial activities carried out by Grupo Santander through its banks and subsidiary banks in the region. Detailed information is provided on Brazil, Chile, Argentina, Uruguay, Peru and Colombia. Digital Consumer Bank: included Santander Consumer Finance, which incorporates the entire consumer finance business in Europe, Openbank and Open Digital Services (ODS). 4.1 Description of segments during 2023 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 52.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. During 2023, the segments were split by geographic area in which profits were earned or by type of business. We prepared 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 were applied. In 2023, Santander maintained the criteria applied in 2022, with two exceptions: • In the secondary segments: usual annual customer perimeter adjustment between Retail Banking and Santander Corporate & Investment Banking and between Retail Banking and Wealth Management & Insurance. • In the Group's financial statements: as a result of the implementation from 1 January 2023 of the amendments to IFRS 17 (new general accounting standard for insurance contracts), the Group retrospectively performed a reclassification in the balance sheet to 'Liabilities under insurance or reinsurance contracts', related to the different treatment established by this new standard for the components of an insurance contract. This reclassification was made in the corresponding segments. 377 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Secondary segments At this secondary level in 2023, Grupo Santander was structured into Retail Banking, Santander Corporate & Investment Banking (SCIB), Wealth Management & Insurance (WM&I) and PagoNxt. PagoNxt: this included digital payment solutions, providing global technology solutions for our banks and new customers in the open market. It was structured into four businesses: Merchant, International Trade, Payments and Consumer. Retail Banking: this segment covered all customer banking businesses, including consumer finance, except those of corporate banking which were managed through Santander Corporate & Investment Banking and asset management, private banking and insurance, which are managed by Wealth Management & Insurance. The results of the hedging positions in each country were also included, conducted within the sphere of their respective assets and liabilities committees. Santander Corporate & Investment Banking: this segment included global corporate banking, investment banking and markets worldwide including treasuries managed globally, as well as equity business. Wealth Management & Insurance: included 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). In addition to these operating units, both primary and secondary segments, the Group maintained the Corporate Centre, which included 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 shareholders’ equity via issuances. As the Group’s holding entity, this area managed all capital and reserves and allocations of capital and liquidity with the other businesses. It did not incorporate 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). 378 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.2 Summary of the Group's main business areas' income statements 2023 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 15,910 6,641 5,152 1,465 2,543 109 10,159 5,742 4,408 8 13,040 9,116 1,383 1,879 662 4,193 (41) 43,261 37,985 3,485 1,739 93 (41) 43,261 Net fee income 4,399 2,699 338 464 589 309 2,192 766 1,374 52 4,684 3,462 572 396 254 796 (13) 12,057 7,661 2,190 1,265 954 (13) 12,057 Total income 21,439 10,132 5,525 1,982 3,182 618 13,174 7,209 5,899 66 17,971 13,104 2,285 1,544 1,038 5,502 (439) 57,647 45,254 8,296 3,396 1,140 (439) 57,647 Net operating income 12,409 5,905 2,779 1,440 2,320 (35) 6,708 3,531 3,311 (133) 11,050 8,574 1,265 769 441 2,884 (829) 32,222 Profit before tax 8,195 3,399 2,107 1,314 1,392 (17) 2,837 863 2,119 (145) 4,608 2,911 951 505 241 2,019 (961) 16,698 Profit attributable to the parent 5,482 2,371 1,545 896 674 (3) 2,354 932 1,560 (138) 3,038 1,921 582 386 150 1,199 (998) 11,076 25,858 4,905 2,240 49 (829) 32,222 10,872 4,570 2,235 (17) (961) 16,698 7,436 3,078 1,637 (77) (998) 11,076 Profit attributable to the parent distribution Distribution A by primary segment. 2023 Profit attributable to the parent. 2023 EUR million. % change YoY A. As a % of operating areas. Excluding the Corporate Centre. Europe North America South America Digital Consumer Bank DCB Global businesses B. Changes in constant euros. Var. Var. B +52% +52% +11% +13% +68% +68% +85% +80% -48% -46% +29% +17% -25% -25% -14% -15% +19% +462% -8% -7% +9% +20% +46% +48% -64% -63% 379 2,3711,5458966749321,5601,9215823861,1993,0781,637-77Europe: 45%North America: 20%South America: 25%Digital Consumer Bank: 10% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 — 12,979 8,901 1,772 1,778 527 4,022 (652) 38,619 34,855 3,548 847 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 7,654 1,981 1,293 881 (19) 11,790 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 42,674 7,378 2,635 953 (1,487) 52,154 Net operating income 9,507 4,236 2,733 793 1,782 Profit before tax 5,482 2,079 1,900 775 789 Profit attributable to the parent 3,810 1,560 1,395 534 364 (38) 6,445 4,025 2,547 (126) 11,350 8,730 1,468 846 306 2,807 (1,858) 28,251 24,123 4,476 1,581 (71) (1,858) 28,251 (61) 3,790 2,261 1,665 (137) 5,764 4,055 1,062 443 205 2,237 (2,022) 15,250 11,785 4,097 1,531 (141) (2,022) 15,250 (42) 2,878 1,784 1,213 (119) 3,658 2,544 677 324 112 1,308 (2,049) 9,605 7,933 2,817 1,119 (215) (2,049) 9,605 380 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Underlying attributable profit EUR 5,482 mn 4.3 Primary segments EUROPE EXECUTIVE SUMMARY 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 Our customer base grew 2% year-on-year. Loans decreased 6%, affected by higher interest rates. In customer funds, change of mix from demand to time deposits with double-digit growth in mutual funds Underlying attributable profit rose 45% 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: • Improve our customer experience by making headway with our omnichannel strategy and adding value to our customer interactions, towards our vision of becoming a digital bank with branches. • Grow our business, supported by the best Group assets and leveraging our unique position, as a result of our scale and geographical diversification. In 2023, we consolidated our transformation by providing more than 16 million customers with access to our common app (full migration in Poland and available in the UK), by making the shared services operating model more robust and, by increasing our ambition to work together with the launch of a new digital value proposition for sole traders. As a result of these actions, we achieved: • sustainable business growth, increasing customer loyalty; • efficient price and balance sheet management in a higher interest rate environment; • Increase efficiency by implementing a common operating • strong cost discipline, which led to a better efficiency ratio, model based on simplification, exploiting the Group's global scale through common platforms and services and becoming a more agile organization. • Maximize business value and sustainable growth focused on capital-efficient opportunities and risk management. We expect to improve performance, profitability and efficiency, while strengthening customer experience. Europe. Customers despite the inflationary environment; • solid risk management which enabled us to keep the cost of risk under control; and • greater shareholder value, with an RoTE of 14.5% (up from 9.3% in 2022). Total customers Active customers Thousands 46,293 15,023 22,481 YoY +2% +5% 0% Thousands 28,538 8,367 13,864 YoY +1% +7% -1% 2,908 -1% 1,838 +3% 5,877 +3% 4,465 +3% 381   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Strategy by country in 2023: Spain Portugal In 2023, we maintained our customer-centric strategy: attracting more customers, increasing their loyalty and creating more profitable relationships that enable us to generate sustainable value for shareholders and society. In this regard: During 2023, we continued to execute our commercial and digital transformation strategy, focused on selective growth, service quality and profitability, which enabled us to grow in loyal and digital customers. • We increased our customer base (+700 thousand), both in individuals and businesses. We doubled the growth rate in loyal customers compared to 2022, leading the market in capturing transactionality with relevant market share gains in both payroll and PoS. • We continued to improve our customer experience, shifting towards simple, end-to-end digital and omni-channel processes, with a data-driven commercial strategy, increasing hyper-personalization, so that we can improve services efficiently. • We maintained our active and forward-looking risk management by reducing provisions in a complex macroeconomic environment, keeping the cost of risk stable. As a result of our work during the year, we achieved record results with 64% growth year-on-year in profit before tax, driven by the growth in the customer base and good price and balance sheet management, making the most of higher interest rates. We were named Bank of the Year 2023 in Spain by The Banker, an award that recognizes our #ObsesionXElCliente strategy and the transformation process underway. United Kingdom We continued to help and support our customers face the pressures of the current economic environment, offering the right products and services as well as supporting them with their finances when they need it. Our strategy delivers strong liquidity, funding and capital with a prudent approach to risk. In 2023: • we provided competitive products for savers, including an easy access savings account, and helped home owners struggling with higher interest rates; • customer loans and deposits decreased in line with the market and we maintained pricing discipline; and • our clear strategy and prudent approach to risk enabled us to continue to support our customers through current and future economic challenges. • Activity reflected a higher interest rate environment, with household and corporate deleveraging and lower loan demand. • We continued to deliver great customer experience, both for individuals and businesses, remaining in the top 3 for NPS in both segments. • Santander was named Best Bank in Portugal 2023 by Euromoney and Global Finance, and Best Retail Bank by World Finance, in recognition of our top customer service, innovation and dynamism in the market. Poland In 2023, we continued to work primarily on improving employee and customer experience. We also worked to increase the digital accessibility of our products and services, and improve our sales and aftersales processes: • We met our NPS target by achieving a significantly higher score. • We were the first bank in Poland to receive the prestigious Great Place to Work certification. • We were among the top 3 banks in the Polish market in terms of NPS. • We won the Golden Bank award and were third in the best multichannel service quality category. We were also awarded for our personal account, cash loans and payment card. Additionally, Santander was named Best Bank in Poland in the Awards for Excellence category, and Best Bank for SMEs in Poland by Euromoney. 382 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Business performance In 2023, we focused on continuing to grow our customer base, both total and active, as well as improving revenue per customer. We also continued to develop our digitalization and customer loyalty programmes to ensure sustainable future growth. As a result of our active credit risk management and capital allocation, loans and advances to customers declined 4% year- on-year. Minus reverse repurchase agreements and in constant euros, they decreased 6% year-on-year, across all segments, particularly in mortgages due to prepayments as customers increasingly look to reduce indebtedness given the interest rate environment. Customer deposits remained flat compared to 2022. Minus repurchase agreements and in constant euros, they fell 2%, with a notable change in product mix towards time deposits. Also, mutual funds increased 12%, driven by the improvement in business dynamics and market recovery. Results Attributable profit was EUR 5,482 million (45% of the Group's total operating areas), up 44% year-on-year. In constant euros, profit rose 45%, as follows: • Total income increased 19% mainly driven by net interest income, which increased 27% due to the good price and balance sheet management in a context of higher interest rates. Gains on financial transactions increased 26% driven by greater activity and growth in CIB. • Net operating income rose 31%, driven by strict control in administrative expenses and amortizations, keeping growth below inflation even as we continued to invest in transformation to improve efficiency in the future, • Net loan-loss provisions increased 5% mainly driven by Swiss franc mortgage charges in Poland, but were partially offset by the positive performance in Spain and the UK. • Other gains (losses) and provisions remained flat, despite the temporary levy on revenue earned in Spain and other charges related to operational risk and portfolio sales. Europe. 2023 business performance EUR billion and YoY % change in constant euros Europe. Underlying income statement EUR million and % change 552 -6% 725 -1% Gross loans and advances to customers minus reverse repos Customer deposits minus repos + mutual funds Revenue Expenses 2023 2022 21,439 18,030 (9,030) (8,523) Net operating income 12,409 9,507 LLPs PBT (2,533) (2,396) 8,195 5,482 Attributable profit 5,482 3,810 Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX +19 +6 +31 +6 +50 +44 +19 +6 +31 +5 +50 +45 383 -8%-6%-6%+5%-2%-1%-4%+8% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Spain Underlying attributable profit EUR 2,371 mn United Kingdom Underlying attributable profit EUR 1,545 mn Business performance 2023 was marked by a complex and highly uncertain environment that accelerated the deleveraging of the economy. In this context, our priority was to remain close to our customers, reflected in 28 consecutive months of net growth in active customers. In Retail Banking, we continued to grow in short-term funding, while demand for long-term funding decreased in the year, impacted by the environment of rising interest rates and inflation. However, in the fourth quarter, new business rebounded, mainly in corporates and mortgages. We continued to gain market share in payrolls and PoS and in CIB, we consolidated our leadership in the main league tables. Loans and advances to customers fell 7% year-on-year. In gross terms and excluding reverse repurchase agreements, they decreased 8%. Customer deposits fell 2% year-on-year. Minus repurchase agreements, they decreased 4%, with a change of mix towards time deposits. In addition, we led the market in mutual funds, with 8% growth year-on-year. Results Attributable profit for the year totalled EUR 2,371 million (20% of the Group's total operating areas), 52% higher than in 2022. By line: • Total income was up 23% propelled by net interest income, as a result of higher interest rates and customer base growth. Net fee income decreased in asset management due to a change of mix towards fixed income products and lower average volumes. • Administrative expenses and amortizations increased 6%, affected by inflation. However, our efficiency ratio improved 7 pp to 41.7%. • Net loan-loss provisions decreased 6% and the NPL ratio improved 21 bps to 3.06%. • The other gains (losses) and provisions line recorded a loss of EUR 984 million, impacted by the temporary levy on revenue (EUR 202 million) and other losses associated with portfolio sales and operational risk. Business performance Our transformation programme continues to deliver efficiency improvements through the simplification and digitalization of key processes. We are promoting the use of digital channels with 77% of refinanced mortgage loans processed online and 92% of new current accounts opened through digital channels. The launch of our competitive Edge Up current account and broadening of our savings proposition demonstrated our continued commitment to providing value for individuals. Loans and advances to customers were 2% lower year-on-year. In gross terms, minus reverse repurchase agreements and in constant euros, they decreased 6% impacted by cost-of-living pressures and higher customer rates, which resulted in lower new business volumes as we carefully manage our net interest margin. Customer deposits grew 1% year-on-year. Minus repurchase agreements and in constant euros, both customer deposits and total customer funds decreased 1%. We saw lower balances in current accounts offset by higher in savings accounts. Mutual funds remained flat. Results Attributable profit was EUR 1,545 million (13% of the Group’s total operating areas), 11% up on 2022. In constant euros, profit grew 13%. By line: • Total income was up 4%, driven by strong net interest income, in an environment of higher interest rates and despite greater funding costs. • Administrative expenses and amortizations rose 4% impacted by inflation, though costs decreased in real terms. The efficiency ratio remained stable. • Net loan-loss provisions decreased 20%. Cost of risk was 10 basis points, slightly better than in 2022. • The negative impact from other gains (losses) and provisions decreased 16% year-on-year, as in 2022 we recorded the settlement agreed with the FCA regarding AML controls prior to 2017. Spain. Underlying income statement EUR million and % change United Kingdom. Underlying income statement EUR million and % change Revenue Expenses Net operating income LLPs PBT 2023 2022 10,132 8,233 (4,227) (3,998) 5,905 4,236 (1,522) (1,618) 3,399 2,079 / 2022 % +23 +6 +39 (6) +64 Revenue Expenses 2023 2022 5,525 5,418 (2,745) (2,685) Net operating income 2,779 2,733 LLPs PBT (247) (316) 2,107 1,900 Attributable profit 2,371 1,560 +52 Attributable profit 1,545 1,395 Detailed financial information in section 4.6 'Appendix'. Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX +2 +2 +2 (22) +11 +11 +4 +4 +4 (20) +13 +13 384 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Portugal Underlying attributable profit EUR 896 mn Poland Underlying attributable profit EUR 674 mn Business performance We executed our growth strategy supported by commercial and digital transformation processes, focused on improving service quality and profitability based on selective growth and greater customer loyalty. Higher interest rates caused households and corporates to deleverage, which influenced both new business and the stock of mortgages, as a large number of prepayments were made at the beginning of the year. As a result, loans and advances to customers fell 6% year-on-year, both in net terms and in gross terms minus reverse repurchase agreements. Customer deposits (with and without repurchase agreements) fell 6%, as customers took advantage of their liquidity to prepay their loans. Mutual funds continued to perform positively, up 17% year-on-year, supported by our growth strategy in higher value-added segments. Results Attributable profit reached EUR 896 million (7% of the Group's total operating areas), 68% higher than in 2022: • Total income increased 53%, reflecting recovery in net interest income (+96%) supported by higher interest rates and good liability cost management. Net fee income fell slightly, impacted by lower volumes and regulatory changes affecting certain mortgage-related transactions. • Administrative expenses and amortizations rose 8%, affected by inflation. However, the efficiency ratio improved 11 pp to 27.3%. • Net loan-loss provisions rose from the low levels registered in 2022, bringing cost of risk to 20 bps. Credit quality remained solid as the NPL ratio fell 39 bps to 2.59%. • The other gains (losses) and provisions line recorded losses of EUR 49 million associated with the tax contribution of the banking sector. Business performance In 2023, we advanced significantly with our strategy. We improved service quality and regained our top 3 NPS position. We accelerated our digitalization programme, implementing our new mobile app, as we successfully migrated our customers to OneApp and simplified several processes and products. Loans and advances to customers were 14% up in the year. In gross terms, minus reverse repurchase agreements and in constant euros they rose 5%. We saw growth in all our products, but mainly in the corporate segment, with double- digit growth in CIB. Lending to individuals increased in both mortgages and consumer. Customer deposits increased 13%, +5% minus repurchase agreements and in constant euros, with strong growth in time deposits. Mutual funds increased by 48%, gaining market share, based on improved customer satisfaction. Results Attributable profit was EUR 674 million (6% of the Group’s total operating areas). Year-on-year, profit rose 85%. In constant euros, it increased 80% as follows: • Total revenue was 25% higher driven by net interest income on the back of higher average interest rates and strict control of the cost of funding. Net fee income also performed well. • Administrative expenses and amortizations increased 21%, mainly driven by a tight labour market as well as some lagged effects from high inflation in 2022. The efficiency ratio improved to 27.1%. • Net loan-loss provisions grew 48%, reflecting the increased coverage of the Swiss franc mortgage portfolio. • Other gains (losses) and provisions were less negative, mainly due to the losses related to the mortgage payment holiday recorded in 2022. Portugal. Underlying income statement EUR million and % change Poland. Underlying income statement EUR million and % change Revenue Expenses Net operating income LLPs PBT Attributable profit 2023 2022 1,982 (542) 1,440 (77) 1,314 896 1,295 (502) 793 (17) 775 534 / 2022 % +53 +8 +82 +354 +69 +68 2023 2022 % % excl. FX / 2022 Revenue Expenses 3,182 2,474 (862) (692) Net operating income 2,320 1,782 LLPs PBT Attributable profit (674) (440) 1,392 674 789 364 +29 +25 +30 +53 +76 +85 Detailed financial information in section 4.6 'Appendix'. Detailed financial information in section 4.6 'Appendix'. +25 +21 +26 +48 +71 +80 385 2023 Annual report Contents NORTH AMERICA EXECUTIVE SUMMARY Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Underlying attributable profit EUR 2,354 mn Strategy 1 Business performance Results We are leveraging the strength of our global businesses to accelerate the transformation of our businesses in the US and Mexico Loans and advances to customers increased 3% year- on-year driven by business growth in both Mexico and the US. Customer funds also rose 3%, boosted by time deposits Attributable profit amounted to EUR 2,354 million, down 18% year-on-year (-20% in constant euros) 1. In constant euros. Strategy We continued to pursue business transformation across the US and Mexico leveraging our global and regional scale. We: • Accelerated the transformation of our Retail Banking and Consumer businesses in both countries by simplifying our product portfolio, streamlining our operations to increase efficiency and adopting global technology platforms to deliver an excellent digital experience. • Continued to develop our profitable CIB and Wealth Management businesses, with targeted investments to further complete our global businesses' capabilities and strengthen growth levers. • Strengthened our regional operating model in Technology & Operations to consolidate know-how, digitalization, digital hubs, front-office and back-office automation to drive more effective and efficient operations. In line with our strategy to allocate capital to the most profitable businesses, in 2023: • The Group increased its shareholding in Banco Santander México to 99.9% and subsequently delisted it from the Mexican and New York Stock Exchanges. • The Federal Deposit Insurance Corporation (FDIC) selected Santander US to partner it in a joint venture that will manage USD 9 billion of Signature Bank’s Multifamily portfolio. We acquired a 20% equity stake and will service 100% of the assets. • Santander US distributed dividends totalling USD 3 billion. In line with our global responsible banking agenda and public commitments, we focused on expanding and implementing sustainable finance opportunities within our businesses in 2023. In the US, we: • Launched our Community Plan, a USD 13.6 billion, three-year commitment to invest in communities. This plan builds upon SBNA's successful Inclusive Communities Plan and includes commitments for community development lending and investments, small businesses, sustainable finance, philanthropy and supplier diversity. • Executed a USD 250 million asset-based revolving credit facility on behalf of Wind Turbine & Energy Cables Corp. In Mexico: • We announced our initiative with Mastercard to replace all our debit cards and LikeU credit cards with sustainable models (made from recycled PVC and the first to be made accessible for the visually impaired). • Tuiio, Santander México’s financial inclusion initiative, signed several important agreements, including with the Secretary of Security from the State of Mexico, to provide basic financial education for inmates, and with the Ministry of Economy and Labour of Chiapas to provide access to financial services and education to women, native groups and artisans that generate social impact and wellbeing. • We partnered with the International Finance Corporation (IFC) to promote sustainable construction practices. This enables us to offer customers free advice from the IFC’s experts to obtain sustainable construction certifications for which we offer our Green Mortgage, the first-of-its-kind in Mexico providing financing at attractive pricing levels. 386 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Strategy by country in 2023: United States Santander operates in the competitive US market focusing on our four core segments (Consumer, Commercial, CIB and Wealth Management). This reflects the prioritization of businesses that benefit from the Group’s connectivity or competitive advantages that allow us to achieve the scale necessary to ensure attractive returns. In 2023, the transformation of our business in the US was anchored on three key principles: • Simplification: Rationalize businesses and products with limited scale and profitability and exit non-core portfolios. In 2023, we further streamlined processes and enhanced efficiency by combining the Commercial Real Estate and Corporate & Institutions businesses under one umbrella within Commercial banking. We reduced retail products on offer by 52% and our branch network by 14% vs 2022. • Transformation and Network contributions: Leverage Group digital and data capabilities to advance our journey towards becoming a digital bank with branches in the US. A fully- digital consumer banking solution will modernize our business, drive scalability and lower the cost to serve of our stable retail US dollar funding base. We set in motion the necessary steps to launch our new digital nation-wide deposit platform in the third quarter of 2024. • Profitable growth: Drive growth across target businesses while maintaining disciplined capital management. We progressed with our initiative to increase the percentage of our auto portfolio funded with retail deposits. We also expanded our partnership with Mitsubishi and signed new preferred auto lending relationships with INEOS and Lotus, among others, which support our strategy to forge deep, multi-geographic relationships with OEMs while catering to customers across the credit spectrum. Key accomplishments in 2023 include: • Consumer: Supported by SBNA's high percentage of FDIC insured deposits (c.66%), our retail deposit base remained stable through 2023 bank volatility. North America. Customers • Commercial: SBNA remains a top 10 multifamily real estate bank lender in the US market and acquired a 20% stake in the aforementioned joint venture that will manage multifamily real estate assets retained by the FDIC following the failure of Signature Bank. • Corporate & Investment Banking: We continued to build up our CIB business with the development of additional product and segment capabilities anchored around the creation of Santander Capital Markets (SanCap), through the merger of Amherst Pierpont Securities (APS) and Santander Investment Securities. The combined broker-dealer now offers our corporate and institutional clients significantly enhanced infrastructure, capabilities, products and services. • Wealth Management: Assets under management and revenue continue to rise, supported by strong commercial activity and the higher rate environment. Mexico Santander México is a leading universal bank in the Mexican market with scaled operations across all of Santander’s global businesses. In 2023, we launched a transformation plan with the aim to become the best bank in terms of customer experience, double our revenue and triple profit in the coming years focused on: • Customer acquisition: During the year we significantly improved our app to offer the best customer experience (active customers grew 6% year-on-year), by incorporating several new functionalities, including: sending and receiving money with a mobile number, blocking and requesting replacement cards and transferring funds to new bank accounts with no wait time. • Simplification and automation: We began to implement our new branch model, opening the first multi-segment branch that enhances synergies among the different businesses and offers a comprehensive service to our customers. We also opened our fourth Work Café. • Continuous innovation: Our culture of innovation can be seen across the business. For example, in cards, we created our 100% digital offerings (LikeU and Samsung cards), our differentiated value proposition continued to take shape Total customers Thousands 25,027 4,510 20,517 YoY 0% 0% +1% Active customers Thousands 14,486 YoY +3% 4,223 +2% 10,263 +6% 387 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management through innovations in Cashback, exclusive pre-sales with high profile artists and our Unique Rewards loyalty programme for the high-income segment. In auto, we reached new alliances with BYD, a leading global new energy vehicle company, to provide accessible financing for sustainable vehicles and GAC Motor. We increased our financing participation with our main partners (Mazda, Suzuki and Honda). We also increased personalized attention, sped up formalization times through digital specialists and launched plans with preferred conditions for groups such as universities, payroll or high income. • Enhanced digital offerings: In consumer, we continued to increase customer loyalty, as well as promote early customer engagement through digital payroll loans and faster customer processes with pre-approved loan campaigns. In mortgages, all products, launches and offers are now digitally processed. We were the first bank to cut mortgage rates for certain segments. Also, we launched the first green mortgage in the country. In deposits, we launched Cuenta Digital Lite, a digital checking account that can be opened in five minutes. Business performance Loans and advances to customers rose 2% year-on-year. In gross terms, minus reverse repurchase agreements and in constant euros, they were 3% higher driven by mortgages, credit cards, auto and payroll loans in Mexico and by Corporate & Investment Banking and Multifamily in the US. Customer deposits grew 4% compared to 2022. Minus repurchase agreements and in constant euros, they also rose 4% driven by flows into time deposits that were incentivized by competitive interest rates to attract new customers and volumes and foster customer loyalty. Mutual funds were flat in constant euros, as growth in Mexico was offset by a decline in the US. North America. 2023 Business performance EUR billion and YoY % change in constant euros 161 +3% 171 +3% Results Attributable profit in 2023 was EUR 2,354 million (20% of the Group's total operating areas). Year-on-year, attributable profit decreased 18%. In constant euros, profit fell 20%, by line: • Total income increased 5% year-on-year. Net interest income growth (+3%) was mainly driven by Mexico, supported by the higher interest rate environment and greater loan volumes. Net fee income rose 7% driven mainly by credit cards and insurance in Mexico and CIB in the US. Gains on financial transactions more than doubled, driven by excellent results in CIB in both countries. • Other operating income declined due to leasing in the US where there was an increased proportion of repurchases at dealerships and growth in electric vehicle leases which obtain a fiscal benefit (recorded upfront in the tax line) that was partially passed through to customer rates. • Administrative expenses and amortizations were 8% higher impacted by inflation and investments in technology, digitalization and transformation initiatives. • Net loan-loss provisions rose 45% reflecting the normalization in retail portfolios in both countries, performing in line with expectations at the beginning of the year. • We recorded a EUR 138 million loss in the other gains (losses) and provisions line, more negative than a year ago due to strategic restructuring costs in the US. North America. Underlying income statement EUR million and % change / 2022 2023 2022 % % excl. FX Revenue Expenses 13,174 12,316 +7 (6,465) (5,871) +10 Net operating income 6,708 6,445 +4 LLPs PBT (3,733) (2,538) +47 2,837 3,790 (25) Attributable profit 2,354 2,878 (18) Gross loans and advances to customers minus reverse repos Customer deposits minus repos + mutual funds Detailed financial information in section 4.6 'Appendix'. +5 +8 +2 +45 (27) (20) 388 +1%+6%-1%+10% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management United States Underlying attributable profit EUR 932 mn Mexico Underlying attributable profit EUR 1,560 mn Business performance Loans and advances to customers were 3% lower than in December 2022. In gross terms, minus reverse repurchase agreements and in constant euros, they were 1% up year-on- year driven by CIB and Multifamily. Customer deposits fell 2% year-on-year. Minus repurchase agreements and in constant euros, they grew 1%. Our retail deposit base at SBNA remained stable year-on-year and we saw inflows into corporate deposits. Mutual funds declined 12% as Wealth Management customers moved funds into higher yielding investment portfolios. Results Attributable profit in the year was EUR 932 million (8% of the Group's total operating areas), a 48% decline year-on-year. In constant euros, profit fell 46%: • Total income decreased 3%. Higher funding costs drove down net interest income (partially mitigated by loan growth and disciplined pricing actions) and leasing income declined due to higher dealer repurchases and increased electric vehicle mix. Also, there was a one-time special assessment impacting all FDIC insured banks. On the other hand, both net fee income and gains on financial transactions performed well, supported by higher activity in CIB and the APS acquisition. • Administrative expenses and amortizations were 5% higher as investments to build-up our CIB franchise and Wealth Management were partially offset by savings from transformation initiatives. • Net loan-loss provisions continued to normalize in line with expectations. However, late-stage delinquency payments remain favourable and the cost of risk remained below 2%. • Other gains (losses) and provisions recorded a EUR 74 million loss compared to a EUR 20 million loss in 2022. • Tax on profit was positive in the year due to tax incentives relating to electric vehicle leasing. Business performance In individuals, we maintained a solid performance with double- digit growth year-on-year. We increased our market share in payroll loans (+61 bps) while we consolidated our third position in credit cards and auto (14% and 17% market shares, respectively). Loans and advances to customers increased 17% year-on-year. In gross terms, minus reverse repurchase agreements and in constant euros, loans rose 6% driven by loans to individuals (mortgages +7%, credit cards +18% and consumer +14%). In corporates, loans increased 7% along with a 2% increase in SMEs. CIB loans fell 18%, in line with our profitability focus and risk appetite. Customer deposits grew 21% year-on-year. Minus repurchase agreements and in constant euros, they rose 10% driven by time deposit growth (+24%) on the back of successful customer acquisition campaigns. Mutual funds increased 10% following a decline in the fourth quarter of 2022 as funds were channelled into time deposits. Results Attributable profit in 2023 was EUR 1,560 million (13% of the Group’s total operating areas), 29% higher year-on-year. In constant euros, it increased 17%. By line: • Total income rose 16%, boosted by net interest income (+12%), supported by the expansion of the retail business and interest rates, net fee income (+9%) and higher gains on financial transactions. • Administrative expenses and amortizations increased 13%, reflecting investments in technology and digitalization related to our transformation plan and talent attraction and retention. However, the efficiency ratio improved by 104 bps to 43.9%. • Net loan-loss provisions were up 31%, due to the normalization of provisions and solid growth in loans to individuals. Asset quality remains healthy and with manageable credit risk. • Other gains (losses) and provisions recorded a EUR 57 million loss compared to a EUR 94 million loss in 2022. United States. Underlying income statement EUR million and % change Mexico. Underlying income statement EUR million and % change Revenue Expenses 2023 2022 7,209 7,623 (3,679) (3,599) Net operating income 3,531 4,025 LLPs PBT Attributable profit (2,593) (1,744) 863 932 2,261 1,784 / 2022 % % excl. FX (5) +2 (12) +49 (62) (48) (3) +5 (10) +53 (61) (46) Revenue Expenses 2023 2022 5,899 4,623 (2,588) (2,076) Net operating income 3,311 2,547 LLPs PBT (1,135) (788) 2,119 1,665 Attributable profit 1,560 1,213 Detailed financial information in section 4.6 'Appendix'. Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX +28 +25 +30 +44 +27 +29 +16 +13 +18 +31 +15 +17 389 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Underlying attributable profit EUR 3,038 mn SOUTH AMERICA EXECUTIVE SUMMARY Strategy 1 Business performance Results 1 We are focused on increasing the value we bring to the Group and on working to become the most profitable bank in each of the countries where we operate in the region Year-on-year growth in both loans and deposits, as we aim to become the leading bank in inclusive and sustainable businesses through differential value propositions Attributable profit reached EUR 3,038 million, 11% lower year- on-year as the strong revenue performance failed to offset higher costs and provisions 1. In constant euros. Strategy South America offers great growth potential, with opportunities to increase banking penetration and financial inclusion. To consolidate our leadership position in the region, we continue to focus on increasing the value we bring to the Group and on working to become the most profitable bank in each of the countries where we operate. We continue to transform our business model, by building a digital bank with branches focused on improving customer experience, while also driving synergies across our global and regional businesses. Initiatives during the year include: • In consumer finance, we strengthened our leadership position, reinforcing partnerships with OEMs and developing new agreements by leveraging existing ones globally. In Peru, for example, we signed nine agreements with manufacturers. In Uruguay, we launched the Mi Auto offer, which enabled us to nearly triple the number of vehicles financed. We continued to develop models in the region that speed up the approval of transactions, in addition to improving user experience. In Colombia, we adopted the Fast Track tool, which boosted originations and consolidated our position in new and used car loans, increasing our portfolio by 45% year-on-year. • In payments, we aim to increase our market share through One Trade and Getnet, which continued to grow. In Argentina, we expanded our offering, focusing on e-commerce and host- to-host solutions for large merchants. We also increased our trade finance activity through new international solutions, such as the expansion of Ebury's services in Brazil. In addition, we are building a unique global platform which has been launched in Brazil. • In CIB and corporates, we continued to work on the development and implementation of joint initiatives to deepen relationships with multinational clients. Our goal is to become the leading wholesale banking operator in most countries and products. To consolidate the offering in all regions, we are launching a regional Markets hub. For corporates, we are reinforcing the differential value offering through Multi-Latins and working with other countries in the Group to increase synergies in multinational companies. • In ESG, our aim is to become the leading bank in South America in inclusive and sustainable businesses. In 2023, we developed business plans in relevant sectors such as Agro, Green Energy and Electromobility. We continued to support our microcredit business, through our Prospera and Surgir programmes, with 50% portfolio growth year-on-year. This business already provides service to more than 1.2 million customers throughout the region. In addition, to support the Group's goal of zero net emissions by 2050, we focused on supporting our customers in the transition to a low-carbon economy, providing them the advice and solutions needed, through initiatives such as WayCarbon. Our efforts to improve customer service and satisfaction have resulted in a top 3 NPS position in three markets and substantial customer base growth in the region. 390 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Main initiatives by country in 2023: Brazil During the year, we focused on: • Growing our strategic businesses to broaden business diversification, improve our service quality and increase profitability. In WM&I, we continued our retail investment plan and we completed the full acquisition of Toro. In CIB, we remained leaders in trade finance. In SMEs, we are redesigning our service model. We also had a great performance in other products such as Cards, Auto, Agro and Payrolls. • Continuing to foster a technological culture to drive growth and generate operational efficiencies. Our technology teams are integrated with the business and we have a digital system that allows data flows and processing to improve customer experience. • Increasing customer focus to become our customers' main bank, which enabled us to improve customer satisfaction in our channels and increase loyalty. In Select, we surpassed our 1 million customer goal at the end of 2023, reaching 1.2 million (+51% year-on-year). Chile We remained focused on digitalization and improving customer satisfaction, which enabled us to maintain our top NPS position. During the year, we: • Launched several innovative initiatives, such as: i) Más Lucas, a no-cost, interest-bearing demand account for the mass segment; ii) Work Café Expresso, a new branch format; and iii) a new service model for specialized businesses, with a particular focus on the agricultural, automotive and Multi- Latins. • Continued to develop e-commerce and the domestic and international transfers business in payments and continued to offer integrated financing, cash management and treasury solutions to our corporate customers. South America. Customers Argentina In Argentina, we are the leading privately-owned bank in banking business, payments, transactional services and foreign trade. During the year, these initiatives stood out: • Santander Asset Management acquired BNP Paribas's Asset Management business in Argentina, consolidating our leadership position in the market. • We launched our acquiring business, with Getnet third in terms of market share in this segment. • We acquired an unregulated consumer finance company with more than 30 points of sale in the Buenos Aires metropolitan area. All this enabled us to maintain and widen our leadership in NPS for individuals and to obtain 9% year-on-year growth in total customers. Uruguay We consolidated our position as the country's leading privately- owned bank, with a business model that allows us to continue growing our customer base and expanding our loan portfolio. • During the year, we carried out several initiatives, such as launching Getnet and creating Mi Auto, an innovative solution to finance vehicle purchases, which, in just one year, has become a leader in auto consumer financing. • We continued to improve digitalization, offering more products online, reinforcing the SOY Santander offer for individuals and Getnet for corporates, to achieve greater customer loyalty. • Additionally, we launched F1RST, a solution focused on innovation, security and the development of new digital assets. Total customers Active customers Thousands 73,028 62,804 YoY +5% +4% Thousands 37,517 30,460 YoY -2% -4% 4,052 +13% 2,399 +9% Other South America 1,400 -5% 1,096 -5% 4,771 +9% 3,562 +11% 391 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Business performance Loans and advances to customers climbed 6% year-on-year. Minus reverse repurchase agreements and in constant euros, gross loans were 7% higher, with increases in all countries, except Colombia. Customer deposits rose 13% year-on-year. Minus repurchase agreements and in constant euros, they rose 15%, backed by time deposits (+18% year-on-year). Mutual funds were up 21% in constant euros. Results Attributable profit was EUR 3,038 million (25% of the Group’s total operating areas), 17% less than in 2022. In constant euros, profit declined 11% as follows: • Total income rose 8% with double-digit growth in net interest income (+12%), net fee income (+14%) and gains on financial transactions (+14%). Other operating income was affected by the hyperinflation adjustment in Argentina. • Administrative expenses and amortizations increased 17%, heavily impacted by inflation. In real terms, costs decreased 3% due to management efforts and cost discipline. • Net loan-loss provisions rose by 9%, partially explained by lending growth. The cost of risk was practically unchanged at 3.36% (3.32% in December 2022). • Greater loss in other gains (losses) and provisions, mainly due to Brazil. Peru Our strategy is focused on leadership in specialized services and supporting global companies and corporates. Our model for corporate clients is highly specialized in sectors such as mining, agriculture, fishing, institutions and Multi-Latins. Our global and regional experience has enabled us to develop new businesses such as joint initiatives between CIB and corporates, as well as launch new products. • In Wholesale Banking, we have ranked among the top three investment banks for the last three years, specifically in mergers and acquisitions, Debt Capital Markets, syndicated loans and leveraged buyouts. We are also pioneers in Global Transaction Banking solutions. • We remain leaders in vehicle financing through our digital NeoAuto platform and our large sales force, with a market share above 30%. • We stand out as one of the main financial inclusion entities, through our microfinance business Surgir, supporting more than 100,000 entrepreneurs since 2021. Colombia We continue to offer sustainable and inclusive financial solutions and participate in the most important transactions for the country's development, with joint initiatives between CIB and Corporates, where we also continue to strengthen the Multi-Latins business. • In consumer finance, we further strengthened our position in new and used vehicle loans, with a 47% year-on-year increase in our portfolio and an offer focused on Simple Finance for our customers. In addition, we continued to grow through our global alliances throughout the country. • In our microcredit business, we increased our presence to 644 municipalities though Prospera, a fully-digital programme that processes payments in up to 24 hours. We also continue to promote the granting of loans to entrepreneurs, with a significant percentage granted to women, agricultural activities and charities. South America. 2023 business performance EUR billion and YoY % change in constant euros. South America. Underlying income statement EUR million and % change 161 +7% 206 +17% Revenue Expenses 2023 2022 17,971 18,025 (6,920) (6,675) Net operating income 11,050 11,350 LLPs PBT (5,401) (5,041) 4,608 5,764 (20) Gross loans and advances to customers minus reverse repos Customer deposits minus repos + mutual funds Attributable profit 3,038 3,658 (17) Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX 0 +4 (3) +7 +8 +17 +3 +9 (15) (11) 392 +6%+4%+217%+4%+14%+12%+235%+12% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Brazil Underlying attributable profit EUR 1,921 mn Chile Underlying attributable profit EUR 582 mn Business performance We are expanding our strategic businesses: in WM&I, we continued our retail investment plan and completed the full acquisition of Toro in 2023. In wholesale banking, we are leaders in trade finance, FX and commodities. We remained market leaders in auto lending to individuals and continued to strengthen our strategic alliances. We saw strong growth in our agro portfolio and growth picked back up in cards in the second half of the year. Loans and advances to customers increased 12% year-on-year. In gross terms, minus reverse repurchase agreements and in constant euros, they rose 6%, underscored by SMEs, corporates and individuals. Customer deposits increased 22% year-on-year. Minus repurchase agreements and in constant euros, they grew 13% driven by time deposits (+16%). As mutual funds increased 15%, customer funds rose 14% in constant euros. Results Attributable profit in 2023 was EUR 1,921 million (16% of the Group's total operating areas), 25% lower year-on-year. In constant euros, it also decreased 25%, as follows: • Total income rose 1%, as the good performance in fee income (+5%) and the recovery of net interest income (+2%), which was affected by the negative sensitivity to higher interest rates in the first half of the year, offset lower gains on financial transactions. • Administrative expenses and amortizations increased 8% (+3% in real terms), impacted by salary agreements, expenses related to higher business growth and technology investments. The efficiency ratio was 34.6%. • Net loan-loss provisions rose 6%, in line with loan growth. Both 2022 and 2023 provisions were impacted by single names in CIB. The cost of risk stood at 4.77% (4.79% in 2022). • The negative impact of other gains (losses) and provisions increased due to higher labour provisions in 2023. Business performance We remained focused on digitalization, improving customer service and developing Santander Life and Más Lucas. In payments, we continued to expand Getnet and launched a new way to make international transfers, including nine more European countries. In corporates, we launched a new commercial service model, focused especially on agricultural, auto and Multi-Latin businesses. Loans and advances to customers decreased 2% year-on-year. Minus reverse repurchase agreements and in constant euros, gross loans and advances to customers rose 4% driven by individuals (+7%), consumer (+6%) and CIB (+6%), which more than offset the fall in corporates. Customer deposits increased 2% year-on-year. Minus repurchase agreements and in constant euros they rose 8%, underpinned by time deposits (+23%). Demand deposits fell 5%, while mutual funds grew 25% in constant euros. Total customer funds increased 12% in constant euros. Results Attributable profit in 2023 was EUR 582 million (5% of the Group’s total operating areas), down 14% year-on-year. In constant euros it fell 15%. By line: • Total income decreased 8% driven by the drop in net interest income (-23%) linked to the negative sensitivity to higher interest rates. This decline was partially offset by the excellent performance of net fee income, which rose 21% mainly driven by transactional and insurance fees, and gains on financial transactions (+31%). • Administrative expenses and amortizations rose 3% (well below inflation) and the efficiency ratio was 44.6%. • Net loan-loss provisions decreased 9% and the cost of risk improved to 0.80% (-13 bps year-on-year). The NPL ratio stood at 5.01%. • Other gains (losses) and provisions totalled EUR 51 million (loss of EUR 8 million in 2022). Brazil. Underlying income statement EUR million and % change Chile. Underlying income statement EUR million and % change Revenue Expenses 2023 2022 13,104 12,910 (4,529) (4,180) Net operating income 8,574 8,730 LLPs PBT Attributable profit (4,701) (4,417) 2,911 4,055 1,921 2,544 / 2022 % % excl. FX +1 +8 (2) +6 (28) (25) +1 +8 (2) +6 (29) (25) Revenue Expenses 2023 2022 2,285 2,449 (1,020) (981) Net operating income 1,265 1,468 LLPs PBT Attributable profit (365) (399) 951 1,062 582 677 / 2022 % % excl. FX (7) +4 (14) (8) (10) (14) (8) +3 (15) (9) (11) (15) Detailed financial information in section 4.6 'Appendix'. Detailed financial information in section 4.6 'Appendix'. 393 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Argentina Underlying attributable profit EUR 386 mn Uruguay Underlying attributable profit EUR 187 mn Business performance We continued to focus on improving customer experience, with a growth strategy to consolidate our leadership position in the transactional business and increase our customer base and our loan portfolio. Loans and advances to customers decreased 33% year-on-year. Minus reverse repurchase agreements and in constant euros, gross loans and advances to customers were 217% higher driven by SMEs, corporates and individuals. Customer deposits decreased 39% year-on-year. Minus repurchase agreements and in constant euros, deposits grew 190%, mainly driven by demand deposits, and mutual funds rose 355%. Customer funds rose 235% in constant euros. Growth rates (of both volumes and results) in euros were heavily impacted by the devaluation of the Argentine peso. Additionally, growth in constant euros was strongly affected by the high inflation in the country. Results Attributable profit in 2023 was EUR 386 million (3% of the Group’s total operating areas), 19% higher year-on-year. In constant euros, it rose 462%: • Total income grew 298%, well above inflation, underpinned by the good performance in net interest income, net fee income and gains on financial transactions. All of these more than offset the greater negative effect from the hyperinflation adjustment in other operating income. • Administrative expenses and amortizations increased below total income growth. The efficiency ratio stood at 50.2%, improving 3.7 pp year-on-year and net operating income rose 330%. • Net loan-loss provisions rose from low levels in 2022 and cost of risk stood at 6.64%, 3.7 pp higher than in December 2022. • Other gains (losses) and provisions increased their loss due to charges relating to downsizing. Business performance During the year, we consolidated our position as the country's leading privately-owned bank. We are top 2 in NPS and continued to expand our presence in the market. Additionally, we integrated our consumer finance companies into our bank to strength our position in the country. As a result, we were recognized as the Best Bank in the Country by Euromoney and achieved the best position among banks in the Great Place to Work (GPTW) ranking. Loans and advances to customers increased 10% year-on-year. In gross terms, minus reverse repurchase agreements and in constant euros, they rose 12%, with growth in all segments. Customer deposits remained flat year-on-year. In constant euros and minus repurchase agreements, they rose 2% driven by time deposits (+85%). Growth in mutual funds (+2%) led to a 2% increase in customer funds in constant euros. Results Attributable profit in 2023 was EUR 187 million (2% of the Group's total operating areas), up 36% year-on-year. In constant euros, it increased 32% as follows: • Total income increased 27% boosted by net interest income, net fee income and gains on financial transactions. • Administrative expenses and amortizations rose 14% (impacted by inflation), but grew less than total income. The efficiency ratio stood at 38.5% (-4.4 pp year-on-year) and net operating income rose 37%. • Net loan-loss provisions increased, following the low levels recorded in 2022. Cost of risk stood at 2.70% and the NPL ratio at 2.50%. Argentina. Underlying income statement EUR million and % change Uruguay. Underlying income statement EUR million and % change Revenue Expenses 2023 2022 1,544 1,833 (775) (987) Net operating income 769 846 LLPs PBT Attributable profit (150) (132) 505 386 443 324 / 2022 % % excl. FX (16) (21) (9) +14 +14 +19 +298 +271 +330 +437 +438 +462 2023 2022 / 2022 % % excl. FX Revenue Expenses Net operating income LLPs PBT Attributable profit 593 (228) 365 (114) 242 187 453 (194) 259 (56) 201 138 +31 +17 +41 +104 +20 +36 Detailed financial information in section 4.6 'Appendix'. Detailed financial information in section 4.6 'Appendix'. +27 +14 +37 +99 +17 +32 394 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Peru Underlying attributable profit EUR 84 mn Colombia Underlying attributable profit EUR 28 mn Business performance Loans and advances to customers rose 2% year-on-year (+3% in gross terms, minus reverse repurchase agreements and in constant euros). Business performance Loans and advances to customers rose 13% year-on-year. In gross terms, minus reverse repurchase agreements and in constant euros they fell 5%. Customer deposits increased 35% (+36% minus repurchase agreements and in constant euros), mainly driven by demand deposits. Results Attributable profit of EUR 84 million in 2023 was 14% higher year-on-year. In constant euros, it also rose 14%. By line: • Total income was up 20%, boosted by net interest income, net fee income and gains on financial transactions. • Administrative expenses and amortizations were 23% higher, mainly driven by inflation and the launch of new businesses. The efficiency ratio stood at 36.6% and net operating income increased 19%. Customer deposits were up 41%, +18% minus repurchase agreements and in constant euros, driven by the good performance in both demand and time deposits (+21% and +13%, respectively). Results Attributable profit of EUR 28 million in 2023 was 5% higher year-on-year. In constant euros, it increased 10% as follows: • Total income grew 32% driven by the good performance in net fee income and gains on financial transactions. • Administrative expenses and amortizations were 23% higher. The efficiency ratio stood at 52.5%, improving 3.8 pp, and net operating income was 43% higher. • Net loan-loss provisions increased but cost of risk remained • Net loan-loss provisions rose but cost of risk remained low at low, at 1.15%. 1.07%. Other South America. Underlying income statement EUR million and % change Net operating income 2023 2022 / 2022 % % excl. FX Peru Colombia 155 67 131 49 +18 +37 +19 +43 Attributable profit 2023 2022 / 2022 % % excl. FX 84 28 73 27 +14 +5 +14 +10 395 2023 Annual report Contents DIGITAL CONSUMER BANK Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Underlying attributable profit EUR 1,199 mn EXECUTIVE SUMMARY Strategy Continue to reinforce our auto leadership through strategic alliances, leasing and subscription. In non-auto, keep upscaling our buy now, pay later business. Transformation for future growth deploying a simpler organizational structure to deliver through best- in-class digital platforms, launching new channels and products 1. In constant euros. 1 Business performance Results 1 Although the operating environment remains complex as inflation and high rates are denting consumer appetite, new lending rose 3% year-on-year, +6% in auto, and deposits grew 19%. In this environment we were focused on profitability, asset quality and providing the best customer service Underlying attributable profit stood at EUR 1,199 million (-7% year-on-year), despite total income growth (+6% year-on- year), affected by net loan-loss provisions Strategy Digital Consumer Bank (DCB) is the leading consumer finance bank in Europe in scale and profitability as it leverages Santander Consumer Finance's (SCF) auto and non-auto consumer finance footprint in Europe and Openbank’s technology stack. SCF is Europe's consumer finance leader, present in 18 countries (16 in Europe plus China and Canada) and works through more than 130,000 associated points of sale. It provides its customers and partners with a value proposition to enhance their sales capabilities by financing products and developing advanced technologies to grant them a competitive edge. SCF aims to become the best-in-class auto financing and digital mobility service provider in Europe. Openbank is Europe's largest 100% 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 we are working on expanding it across Europe and the Americas. DCB’s vision is to offer competitive financing solutions to expand our European leadership in profitability and scale in auto and consumer lending by leveraging the advantages of our proprietary platforms in mobility, consumer and checkout loans and buy now, pay later (BNPL). In 2023, DCB focused on accelerating transformation to drive future growth. Management's main priorities were to: • secure leadership positions in global digital consumer lending, both auto and non-auto (consumer); • continue with the transformation of our operating model in Europe, to defend our best-in-class efficiency through: i) single IT platforms, ii) a simpler operational structure, and iii) automation and processes redesign; • grow by progressing in transformational projects in Europe, with new OEM partnerships and leasing platform in auto and through the full transition to Zinia's tech stack in consumer; and • reduce sensitivity to interest rate rises by increasing deposit acquisition (deposits are already our primary funding source) with focus on profitability. Also, promote an originate-to- distribute model to increase balance sheet mobilization and build a more capital-light business. Loans and advances to customers by geographic area December 2023 396 30%14%13%12%12%8%3%8%GermanyFranceNordicsSpainItalyUKPolandOther (inc. OB) 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management In 2023, we continued to expand our business reach in Europe, with new products, services and platforms and by signing new agreements with retail distributors and manufacturers. In the year, we strengthened our leadership in global digital consumer lending, focusing on growth and transformation in these areas: 1. Auto: progress with strategic initiatives to build a world-class digital offering in mobility. Aid OEMs' transformation journeys with online lending, leasing (both financial and operational), subscription offerings, and providing our partners with innovative finance and sale solutions on dealer websites and auto marketplaces. Our transformational initiatives are: a. In leasing, we continued developing our proprietary digital leasing platform for Europe with the ambition of disrupting the market. We see it as an entire “new” business to be run, building customer loyalty by our direct relationships, providing innovative features across the value chain (key control of the asset and user from first proposal to hand back), enabling us to create a consolidated mobility-related customer view and cross- border proposition. b. In subscription, where we are already a European leader, we continued to expand Wabi, our consumer subscription platform and Ulity, our new platform for vehicle subscription-based solutions for companies. Our auto subscription service offers flexible subscriptions across two models: i) Wabi, our direct-to-consumer own brand, is already live in Spain, Norway and Germany and will expand to other countries in the coming years, and ii) Ulity, a white label solution for OEMs and Service Car companies launched in June 2022. Through Ulity we have already entered into important agreements with pan-European ride-hailing services and OEMs. c. In mobility, we created one digital front that connects all of our partners to enhance their experience: OEMs, digital dealers and third party marketplaces. Moreover, we further expanded transformational OEM relationships with strong electric vehicle (EV) propositions and other sizeable ongoing negotiations. d. We are also developing our own digital channel with leading proprietary marketplaces and car advising value- added services. e. We continued our pursuit of future market share gains while also addressing new segments and accelerating growth in high potential markets. In 2023, we renewed our partnership with Stellantis in Europe, which will enable us to consolidate our position as their main financing partner while continue to work with the strongest OEMs in the world. We had an auto loan book of EUR 103.5 billion in December 2023. 2. Consumer (Non-Auto): gain market share through specialization and the development of tech platforms that build our leadership in Europe, leveraging Zinia (BNPL), checkout lending, credit cards and direct loans. In BNPL, Zinia continues to achieve outstanding results serving our medium/large partners. By year end, the new stack had reached 1.15 million total requests while developing functionalities to serve our tech partners. The joint venture with TIMFin, the leading Italian telecommunications company, had more than 2.2 million contracts since launch as well as 5,884 active points of sale and more than 2,600 connected merchants as of end 2023. Our loan book was EUR 21.7 billion at the end of 2023. 3. Digital Bank: • Expand loyalty among our 3.9 million Digital Bank customers within Openbank and SC Germany Retail while boosting digitalization and promoting digital banking activity. • Increase profit by leveraging strategic operations (e.g. Stellantis), leasing and subscription launch (in auto) and BNPL development (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. Moreover, we continue supporting the European mobility green transformation, financing more than 200,000 new electric vehicles in 2023 with a market share in the region's EV sales of more than 10%, and developing new initiatives in other fields such as electric chargers, solar panels, green heating systems and e-bikes. We were also recognized as a Top Employer or Great Place to Work (GPTW) in four countries. 397 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Business performance After a difficult environment in 2022, 2023 was also a complex year due to rising interest rates that affected new business profitability, cost of risk and customers' credit appetite. Some of the headwinds were: i) the change of TLTRO contractual conditions, ii) rising interest rates that put pressure on consumer finance monoliners' margins, compressing them while loan books reprice, added to a time when the Auto and Consumer industries are transforming towards more sustainable businesses (from a mobility and consumption perspective), iii) provisioning for the Swiss franc mortgage portfolio in Poland, and iv) normalization from a very low cost of risk towards the average across the cycle. In this context, we managed to increase our new lending 3% year-on-year in constant euros. After a 2022 where new market registrations in Europe fell 4% vs. 2021 and -29% vs. 2019, in 2023 grew 14% vs. 2022. Our new business volumes were up 16% in new cars but fell 5% in used cars year-on-year in constant euros, slightly below market transactions in our footprint as we prioritized profitability over volume. We are also actively repricing our new business to offset higher funding costs from higher interest rates in the year. 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 also rose 8% year-on- year to EUR 135 billion. We continue to proactively monitor our portfolios to prevent the impact of any deterioration in our activity. Customer deposits increased 18%, +19% minus repurchase agreements and in constant euros to EUR 69 billion. Mutual funds increased 18% 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. Results Attributable profit in 2023 was EUR 1,199 million (10% of the Group’s total operating areas), 8% down. In constant euros, profit fell 7% (-5% excluding the impact of the temporary levy in Spain): • Total income was up 6%. To neutralize the negative sensitivity to interest rate rises, we are actively repricing loans, focusing on the most profitable segments and increasing customer deposits which are structurally our primary funding source. As a result, net interest income rose 6%. • Net fee income declined 5%, impacted by the insurance regulation in Germany capping achievable fees. Gains on financial transactions considerably increased along with other operating income, supported by leasing income. • Administrative expenses and amortizations increased 8%, mainly affected by strategic transformation investments, business growth and inflation. In real terms, costs grew 3%. Net operating income increased 4% and the efficiency ratio stood at 47.6%. • Net loan-loss provisions increased 48% due to the normalization of provisions, but remained at comfortable levels coming from a low base in 2022. Cost of risk remains low, at 0.62% but is also normalizing, and the NPL ratio stood at 2.12%. • Negative contribution in other gains (losses) and provisions due to the temporary levy on revenue in Spain and regulatory charges in Poland, among others. • By country, the largest contribution to attributable profit came from the Nordic countries (EUR 241 million), Germany (EUR 235 million), the UK (EUR 177 million), France (EUR 145 million) and Spain (EUR 119 million). Digital Consumer Bank. 2023 activity EUR billion and % change in constant euros Digital Consumer Bank. Underlying income statement EUR million and % change +8% YoY 135 Revenue Expenses 2023 2022 5,502 5,269 (2,618) (2,462) Net operating income 2,884 2,807 73 +19% YoY LLPs PBT (792) (544) 2,019 2,237 Gross loans and advances to customers minus reverse repos Customer deposits minus repos + mutual funds Attributable profit 1,199 1,308 Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX +4 +6 +3 +46 (10) (8) +6 +8 +4 +48 (9) (7) 398 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.4 CORPORATE CENTRE CORPORATE CENTRE Underlying attributable profit -EUR 998 mn EXECUTIVE SUMMARY 2023 HIGHLIGHTS: The Corporate Centre continued to support the Group. The Corporate Centre’s objective is to define, develop 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. Lower underlying attributable loss compared to 2022 due to higher liquidity buffer remuneration and lower negative impact from foreign currency (FX) hedging. Strategy and functions The Corporate Centre contributes value to the Group, through the following functions, among others: • Implementing global control frameworks and supervision. • Fostering the exchange of best practices in cost management, which enables us to be one of the most efficient banks. • Collaborating in the definition and execution of the global strategy, competitive development operations and projects that ensure we meet the business plan. • Contributing to the launch of projects that will be developed by our global businesses aimed at leveraging our worldwide presence to generate economies of scale. • Ensuring open and constructive communication with shareholders, analysts, investors, bondholders, rating agencies and other market players. • Adding value to countries and divisions by encouraging the exchange of best practices, driving and managing innovative global initiatives and defining corporate policies, all in the communication, marketing and sustainability fields. It also coordinates the relationship with European regulators and supervisors and develops functions related to financial and capital management, as follows: • Financial Management functions: • Structural management of liquidity risk associated with funding the Group’s recurring activity and stakes of a financial nature. At the end of 2023, the liquidity buffer exceeded EUR 348 billion. This activity is carried out by the diversification of funding sources (issuances and other), 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 concepts (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 management of the FX hedge countervalue related to the units’ next twelve months results in euros. The net investments in equity currently hedged totalled EUR 12,396 million (mainly in the UK and Mexico) with different FX instruments (spot or forwards). • Management of capital and reserves: team responsible for the Group's capital analysis, adequacy and management. Its functions include: coordination with subsidiaries, monitoring profitability to maximize shareholder returns, setting solvency targets and capital contributions, and monitoring the capital ratio (in both regulatory and economic terms), and efficient capital allocation to the units. 399 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Results The attributable loss of EUR 998 million was 51% lower than in 2022 (loss of EUR 2,049 million): • Net interest income improved by EUR 612 million, due to higher liquidity buffer remuneration as a result of higher interest rates. • Higher gains on financial transactions (EUR 422 million better), due to lower negative FX hedging impacts. • Administrative expenses and amortizations increased 5% year-on-year, due to the general upturn in inflation in 2023. Excluding this impact, they increased 2%. • Net loan-loss provisions recorded releases in both 2022 and 2023 (EUR 9 million and EUR 2 million, respectively). • 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 a loss of EUR 173 million in 2022 to a EUR 134 million loss in 2023. 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 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. 2023 2022 % (41) (13) (652) (93.8) (19) (30.8) (302) (83) (439) (391) (829) 2 (134) (961) (36) (998) — (998) — (998) (724) (58.3) (92) (1,487) (9.0) (70.5) (372) (1,858) 9 (173) (2,022) (27) (2,049) 5.2 (55.4) (77.3) (22.7) (52.5) 36.9 (51.3) — (2,049) — (2,049) — (51.3) — (51.3) 5,565 5,785 (3.8) 7,726 808 119,279 123,230 8,588 (3.2) (10.0) 273 196.6 (2.4) (2.9) 68.5 (33.0) 11.6 6.1 (5.4) (6.6) 5.2 121,327 124,343 254,705 262,217 895 71,226 98,733 308 7,489 166,809 178,650 83,567 1,508 47,747 110,144 326 7,084 87,896 5,640 1,508 1,508 — 5,779 (2.4) 895 895 — 68.5 68.5 — 1,922 1,899 1.2 400 2023 Annual report Contents 4.5 Secondary segments RETAIL BANKING EXECUTIVE SUMMARY Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Underlying attributable profit EUR 7,436 mn Strategy 1 Business performance Results We continued improving digitization and simplification of our products and services through our ONE Transformation programme Lending remained stable during the year, with growth in South America and North America offsetting the decline in Europe. Deposits grew driven by term deposits Underlying attributable profit of EUR 7,436 million, down 6% in euros (-7% in constant euros) due to higher provisions, partly offset by the good revenue performance 1. In constant euros. Strategy In recent years, one of the Group's main priorities has been to intensify our transformation strategy, focusing on the simplification and the digitalization of products, services and processes. • We made progress in our digital self-service model, which enabled us, for example, to reduce the use of our contact centres by 16%. In Mexico, we digitalized the entire onboarding process. As part of this strategy, in 2022 we launched ONE Transformation, the programme that aims to accelerate structural changes in our model, in three countries (Spain, Mexico and the US) to simplify, automate and improve our retail service. During 2023, we made great progress: • In terms of simplification, we reduced the number of products by 16% year-on-year. • We continued to roll out a common operating model and technology for the segment in all countries. Additionally, and as a final step in our ONE Santander strategy, in September, we announced the consolidation of commercial banking activities into a new global area, Retail & Commercial Banking, which, as of January 2024, will be reported as a primary segment together with four other global businesses. • We increased the digitalization and automation of processes, which enabled us to reduce the transactions carried out in branches, focusing more on value-added tasks that require advice and personalized attention. We will focus on expanding ONE Transformation to the rest of our banks, which will allow us to continue improving efficiency and quality of our service, as well as increasing our customer base and profitability. Total customers Millions +3% Active customers Millions 0% Digital customers Millions +5% 401 1601652022202399.299.52022202351.554.220222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management In addition to the efforts made in terms of transformation, digitalization and process automation, during the year we carried out numerous commercial actions and initiatives such as: • In the retail segment: in an environment of higher interest rates, we offered savers competitive prices in the UK through an easy-access savings account. In Spain, we increased our market share in payrolls. In Mexico, we increased our market share in credit cards and payroll loans, while consolidating our third position in terms of market share in the auto market. In Argentina, we acquired an unregulated consumer finance company, with more than 30 points of sale in the Buenos Aires metropolitan area. In Uruguay, we strengthened the SOY Santander offer. • In the SME and Corporate segment: in the US, we remain one of the top 10 Multifamily Real Estate lenders and acquired a 20% stake in a joint venture that will manage the multifamily real estate assets retained by the FDIC following Signature Bank's bankruptcy. In Brazil, we are redesigning our service model for SMEs. In Chile, we expanded our offering of integrated financing, cash management and treasury solutions for companies. In Poland, we were recognized as the Best Bank for SMEs by Euromoney. All this has enabled us to grow the Group's total customer base by 3% to 165 million and digital customers by 5%. We also achieved a top 3 NPS ranking in seven of our countries, a clear recognition of our efforts to improve customer service and attention. Business performance Loans and advances to customers increased by 1% compared with 2022. In gross terms, minus reverse repurchase agreements and in constant euros, they remained stable, as growth in North and South America offset lower demand in Europe, affected by the prepayments of mortgages. Customer deposits rose 4% year-on-year. Minus repurchase agreements and in constant euros, they were up 3%, driven by time deposits (+38%), as demand deposits declined 5% year- on-year. Results Attributable profit in 2023 was EUR 7,436 million (62% of the Group's total operating areas), down 6% compared to 2022. In constant euros, it decreased 7%, with the following detail: • Total income grew 8% driven by higher net interest income (+12%), mainly in Europe and Mexico. • Administrative expenses and amortizations increased 8%, affected by inflation. Net operating income also grew 8% and efficiency improved to 42.9%. • Net loan-loss provisions rose 21%, mainly driven by the increase in North America, in line with expectations, and higher provisions in South America. • The other gains (losses) and provisions line was slightly more negative than in 2022, mainly due to South America and the temporary levy on revenue earned in Spain. Retail Banking. Underlying income statement EUR million and % change Revenue Expenses 2023 2022 45,254 42,674 (19,396) (18,552) Net operating income 25,858 24,123 / 2022 % % excl. FX +6 +5 +7 +8 +8 +8 LLPs PBT (12,295) (10,212) +20 +21 10,872 11,785 Attributable profit 7,436 7,933 Detailed financial information in section 4.6 'Appendix'. (8) (6) (8) (7) 402 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Santander Corporate & Investment Banking Underlying attributable profit EUR 3,078 mn EXECUTIVE SUMMARY Strategy Business performance Results Become a world-class CIB business leveraging our strengths, positioning ourselves as a strategic advisor to our clients and delivering profitable growth Activity in 2023 delivered growth and profitability in a challenging macroeconomic environment that affected the entire industry. We maintained business levels similar to 2022 Underlying attributable profit reached EUR 3,078 million due to an increase in total income. Efficiency remains among the best in the sector Strategy At SCIB, we continue advancing in the execution of our strategy to transform the business and position ourselves as our clients' strategic advisor, by offering specialized products and services, focusing on the energy and digital transition. The goal of this transformation is to continue to grow sustainably and profitably, with the aim of becoming one of the leading investment banks in our areas of expertise. In the year, we: • Took the SCIB US franchise to the next level, focusing on accelerating advisory capabilities, maximizing the value of synergies with Santander Capital Markets and selectively expanding our client base and product capabilities, primarily in sectors with the highest growth potential. • Continued the globalization of the Markets business to increase activity focusing on corporate clients and institutional investors, enhancing our global FX and Over-the-Counter (OTC) derivatives platform in the main commodity markets. • Accelerated asset rotation to optimize profitability and increase new assets origination capacity. • Increased collaboration with the Group's other global businesses to capture more business opportunities, leveraging our extensive commercial network. Some of the key highlights in 2023 include: • The merger of Amherst Pierpont Securities (APS) and Santander Investment Securities (SIS) to create Santander US Capital Markets (SanCap), a key element in the reorganization and globalization of the Markets business and the growth of the US franchise. • Continued investment in talent, highlighting the acceleration in building our US advisory capabilities, complementing existing capabilities to carry out new business opportunities. • Focusing on digital transformation, SCIB formed a partnership with the insurance firm Allianz Trade and the fintech Two (B2B e-commerce payments platform) to offer a new receivables solution that replicates the buy now, pay later (BNPL) model available in the retail segment. • In ESG, Santander acquired a stake in InnoEnergy's capital acting as a joint advisor in the capital increase, which confirms our commitment to sustainable development objectives and our leadership position in climate tech. In terms of positioning, we maintained our leadership position in the rankings of different products: • In Export & Agency Finance, we maintained our global and European leadership, whilst in Structured Finance we reached second position, standing out as leaders in Renewables globally as well as in Europe and Latin America. • In Debt Capital Markets (DCM), we remained among the top 3 in the bond issuance market in Latin America and continued to be leaders in Spain. In Equity Capital Markets (ECM), we are leaders in Spain and Poland, and in the top 5 in Latin America. • In M&A, we are leaders in Spain and top 3 in Latin America and Poland. During 2023, SCIB won several awards in different categories: 403 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 Ranking Award/ranking Europe Bank of the Year Source Proximo Corporate Bond House of the Year / Best Investment Bank in Brazil Bonds, Loans LatAm Awards Eurobond of the Year North America Financial Bond of the Year Infrastructure Bank of the Year IFR IFR LatinFinance Deal of the Year - Infrastructure and Project Finance for DigitalBridge and Brookfield's majority stake in GD Towers The Banker Most Impressive Bank for ESG Capital Markets in Latin America LatAm's Best Foreign Exchange Bank Deal of the Year - Equities for Porsche's €9.4bn IPO Best Iberian Broker Best Bank for Export Finance Best Bank for Cash Management in Latin America Best Trade Finance Bank / Best Receivables Finance Provider Best Supply Chain Finance Bank Business performance In a challenging macroeconomic and geopolitical environment, our priority has been to support our clients with our advisory and high value-added solutions. In this context, total income reached EUR 8,296 million, growing 12% year-on-year. In constant euros, total income rose 18%, backed by relevant growth across core businesses: • Markets showed solid growth of 22% year-on-year, as a result of managing market volatility well. In Europe, sales revenue continued to increase, both from corporate and institutional clients, achieving another year of strong growth, especially in the UK. By product, there were good results in Securities Financing, Equity Derivatives and Credit. In Latin America, we saw good year-on-year growth, particularly in Mexico, Chile, Colombia and Uruguay, and especially Commodities, Cash Equity, FI Rates and FX products. In Brazil, the Electricity and Commodities desks stood out. In the US, activity increased 30% year-on-year. Despite the macroeconomic challenges faced by some businesses, we continued to capture the synergies and efficiencies related to the creation of SanCap. Securities Financing, Exchange Traded Derivatives and Rates products stood out. There was good activity with corporate clients, including closing several important transactions in FX and Rates whilst flows with institutional clients remained stable compared to 2022. • Global Transaction Banking (GTB) increased total income by 20% year-on-year. Cash Management experienced another year of significant growth, both in terms of activity, with a greater number of clients and operations, and in terms of liability income, due to higher volumes and the benefits from high interest rates in the markets where we operate. The team continued to support our clients by creating solutions to optimize their treasury and commercial processes. A clear example was the Area Global Global GDF GDF GDF GDF Markets Markets CF CF GTB GTB GTB GTB Global Capital Euromoney The Banker Institutional Investor Global Finance Global Finance TFG GTR development of our Nexus Global Collections platform for collection tools, helping to simplify and automate the reconciliation process. Trade & Working Capital Solutions continued to strengthen its global and distribution capabilities, consolidating its leadership in the market. Santander was chosen as agent bank for major international transactions, such as a EUR 5 billion confirming programme covering Europe, Asia and the Americas. We acquired a stake in Komgo's capital, and the recent partnership with SAP enabled us to integrate our solutions into our clients' own ERP, already providing good results in confirming and invoice discounting. Export Finance maintained its leadership in the ECA financing market, participating in important transactions globally. Highlights include the mandate for the largest transaction in the history of Export Finance, the renewable energy development programme in Mexico, in which Santander acted as global coordinator and ECA Agent, as well as participating in the first offshore wind farm in Poland. • Global Debt Financing (GDF) closed the year with significant growth in total income (+11%). The growth in non-financial fees was particularly strong (+23% year-on-year), as was the efficient use of capital. For Debt Capital Markets (DCM), 2023 was a year of recovery in the global debt and loan markets as inflation fell back and interest rate rises slowed. Santander remained top 3 in bond issuances in Latin America and achieved a significant increase in market share globally, with total income growing 27% year-on-year. Good examples were the debt issuances in dollars for the Brazilian Treasury, for AstraZeneca in euros and dollars, and an issuance for the European Union in euros. In Structured Finance, Santander ended the year in second place worldwide and as a leader in Renewables, contributing to total income exceeding the EUR 900 million mark for the first time, growing at 16% year-on-year. Our high value- added services, such as debt advisory or underwritings, 404 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Collaboration revenue and income from multinational clients outside their local market increased by 9% year-on-year to around EUR 2.5 billion. Results Attributable profit increased 9% year-on-year to EUR 3,078 million (25% of the Group's total operating areas). In constant euros, profit increased by 20%. By line: • Total income rose 18% to EUR 8,296 million, with strong increases in all regions, especially North America which rose 27%. • Administrative expenses and amortizations increased 20% year-on-year as a result of the investment in products and development of new capabilities in the US. Despite this, the efficiency ratio stood at 40.9% and remained at lower levels than the rest of the sector. • Lower net loan-loss provisions, which decreased by 34% compared to the previous year, together with adequate capital management, contributed to an RoTE of 25%. SCIB. Underlying income statement EUR million and % change Revenue Expenses 2023 2022 8,296 7,378 (3,391) (2,902) Net operating income 4,905 4,476 LLPs PBT (162) (249) 4,570 4,097 Attributable profit 3,078 2,817 Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX +12 +17 +10 (35) +12 +9 +18 +20 +17 (34) +20 +20 contributed to the improvement in profitability. The area is making good progress in positioning towards new energy transition assets (electric vehicle charging, gigafactories, green hydrogen, etc.) with several mandates executed or underway. We continued developing our investment funds financing activity (Fund Finance). In the Securitizations business, we continued to rapidly expand our capabilities. Total income grew by 31% year-on- year, allowing us to lead the European ranking. Total income breakdown Constant EUR million TOTAL Other +18% +11% Global Debt Financing +11% Global Transactional Banking +20% Markets +22% • In Corporate Finance (CF), despite the general stagnation of the market, there were some signs of recovery in the last quarter 2023. There were major Mergers and Acquisitions (M&A) transactions in Energy, advising on the divestment of wind farms. In addition, Santander demonstrated its global leadership in environmental transactions related to waste treatment, through the advisory to the Canadian pension fund CPPIB on the acquisition of a stake in FCC Medioambiente and the sale of Sacyr's environmental division. In the Telecommunications, Media, Technology (TMT) industry, there was significant activity in telecommunications towers and fibre, highlighting the advisory to GIP on the purchase of Vantage Towers and Telefónica on the sale of a majority stake in its fibre network in Latin America to KKR. In the technology area, Santander acted as joint bookrunner in Arm's IPO, one of the year's most important transactions. In Consumer Retail & Healthcare (CRH), we advised on the spin-off of Grupo Éxito, which was followed by others in Brazil (Viveo, Via Varejo), where capital markets have reopened. Interest rate hikes during the year had a negative impact on IPOs. However, takeover bids increased significantly in the Spanish market, where Santander maintained a leading position. Santander also participated in large international transactions such as the aforementioned Arm transaction, secondary placements by London Stock Exchange Group and Coty's listing on Euronext Paris. 405 7,0128,2963,0702,9371,87941020222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Wealth Management & Insurance Underlying attributable profit EUR 1,637 mn EXECUTIVE SUMMARY Strategy 1 Business performance Results 1 We aim to become the best Wealth and Insurance Manager in Europe and the Americas by leveraging Group's scale and capabilities 1. In constant euros. Total assets under management grew by 14% year-on-year to EUR 460 billion, as a result of strong commercial dynamics Total contribution to profit in 2023 grew 21% year-on-year to EUR 3,296 million, driven by higher net interest income and commercial activity Strategy In 2023, we continued to work to become the best Wealth and Insurance Manager in Europe and the Americas. WM&I was one of the Group's growth drivers with a record year of 21% growth in contribution to Group profit. During the year, Euromoney named us Latin America's Best Bank for Wealth Management. • In Private Banking, we continued to leverage our global platform so our clients can benefit from our scale and international presence, making it easy for them to move from one region of the Group to another. In terms of collaboration, we remained leaders in investment flows between Latin America, Europe and the US, managing network business volumes (cross-border business between markets) of EUR 53.9 billion (+15% year-on-year). Our collaboration business with SCIB continued to increase, especially in Brazil, Chile and BPI. In 2023, total income reached EUR 189 million, 8% higher year-on-year. During 2023, we continued to widen our value proposition and to innovate across our product range, seeking the best opportunities for our clients. We had a particular focus on alternatives, structured products, secured lending and socially responsible products (ESG). In alternatives, we had almost EUR 3 billion in total capital commitments at the end of the year. In collaboration with Santander Alternative Investments, we launched Santander Innoenergy, a venture capital fund that invests in innovative startups in the field of energy transition. Aiming to select the best managers and the most appropriate strategies, we launched a new fund of funds in our Irish ICAV, Laurion Secondaries, offering a diversified Private Equity portfolio with secondary transactions. Our offering in discretionary portfolio management and advisory mandates exceeded EUR 48 billion of total assets in 2023. Consistent performance and customized service has resulted in steady growth in this service in recent years. Our real estate investment service, which is capturing a large part of investment flows between Latin America, Europe and the US, reached a total volume of EUR 240 million in transactions in 2023. During 2023, Euromoney named us the Best Private Bank in Latin America, as well as the Best International Private Bank in Mexico, Argentina, Brazil, Peru, Uruguay, Poland and Portugal. Additionally, we received the prize for the Best Global Private Bank in Cybersecurity and Digital Portfolio Management in Europe by the Professional Wealth Management magazine, a Financial Times publication. • In Santander Asset Management (SAM), we had a record year in net sales (EUR 9.0 billion) driven by the adaptation of our value proposition to current market conditions. We are gaining market share in almost all our markets, and we continued to be the global product platform of choice for our retail banks, with EUR 1,128 million in total fees generated, in line with those of the previous year. In Spain, we are developing the discretionary portfolio management model and launched two new funds whose advisory services are delegated to top managers such as BlackRock (US equities) and Fidelity (Asia). We continue to complement with our GO range in Luxembourg with two new strategies launched (Global Equity ESG and Asian Equity). Santander Pensiones was also one of the five entities awarded the contract to participate in the Publicly Promoted Employment Pension Fund in Spain (FPEPP), created to promote collective savings. 406 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We also adapted our value proposition for institutional clients and implemented a new coverage model expanding our business beyond our existing footprint. Total net inflows for institutional clients in 2023 surpassed EUR 3 billion. The range of alternative products is becoming increasingly robust, with 22 vehicles globally and EUR 2.5 billion in total commitments. Our main strategies include Private Debt, Infrastructure, Trade Finance and Real Estate, with the notable launch of Santander Global Real Assets Fund of Funds, for Private Banking clients. We made further headway in terms of our ESG strategy, with assets under management of around EUR 48 billion. Together with RED, we launched the Santander Prosperity fund in seven countries and won the Best Product Innovation in The Global Private Banker Innovation Awards 2023. Our efforts to continue offering the best investment solutions were recognized through several awards in the year, both globally (Most Innovative Investment Manager in Europe by Pan Finance magazine) and at a local level (Best Fixed Income Manager in Spain, Best Multi-Asset Manager in the UK, Best Money Market Manager in Brazil and Most Awarded Asset Manager in Chile, just to name a few). • In Insurance, we continued delivering growth in gross premiums (+12% year-on-year), mainly driven by non-related and savings businesses. The credit-related business was slightly affected by the lower demand for credit in general. In Europe, non-credit related insurance sales were particularly strong, as a result of new products and the transformation plans deployed across countries to improve customer experience and loyalty. During 2023, we reinforced our value proposition for SMEs and Health, launching a leasing insurance product in Portugal and a new partnership with BUPA in the UK. More recently in the fourth quarter, we reinforced our Savings value offer in Portugal with a new five- year product, offering yields until maturity. In Spain, we also started the commercialization of reverse mortgages with Mapfre. In the Americas, new sales in non-credit related insurance business continued with strong growth, especially in savings. In 2023, we completed our Savings offer in Mexico by launching a USD unit linked for Private Banking and Plan Futuro funds for the Select segment. In Chile, we launched a new Health product in alliance with UC Christus, one of the best hospitals in the country. We also reinforced our value offer for SMEs with new products (e.g., Cyber in Mexico, a cyber threat insurance for SMEs). Smart use of data was implemented in all countries to reduce claim processing times by 90% compared to traditional processes. The motor vehicle insurance business grew 10% year-on-year. Our Autocompara platform, with presence in Argentina, Brazil, Chile, Mexico and Uruguay, reached 1.4 million active policies and we added new companies in Brazil such as Porto Seguro (market leader in Auto segment) and Azul to further strengthen our competitive position. Our digital strategy continued to drive growth in new sales through digital channels, now representing 20% of total sales. Business performance Total assets under management amounted to EUR 460.3 billion, 14% higher year-on-year, driven by intense commercial activity. Business performance: SAM and Private Banking EUR billion and % change in constant euros. December 2023 / 2022 +14% +10% +15% +10% +31% +4% +2% Note: Total assets marketed and/or managed in 2023 and 2022. (*) Total adjusted private banking customer funds managed by SAM. • In Private Banking, the volume of customer assets and liabilities (CAL) reached EUR 300.4 billion, 15% higher than in 2022. Net new money amounted to EUR 13.7 billion (4.6% of total volume). Profit after tax reached EUR 1,191 million, 75% higher than the contribution in 2022 in constant euros, primarily backed by net interest income and improved commercial activity. Clients increased 9% to 260,000. • In SAM, total assets under management increased 15% year- on-year to EUR 217.1 billion. We had a record year in net sales of more than EUR 9 billion (4.2% of total AuMs) with almost all countries gaining market share. SAM’s total contribution to the Group's profit (including fees ceded to the commercial network) was EUR 609 million, +5% year-on-year. • In Insurance, gross written premiums amounted to EUR 13.1 billion (up 12% year-on-year) and fee income rose 2%. Total contribution to profit reached EUR 1,496 million, +2% year- on-year. 407 460266217841256922Total AuMsFunds andinvestment*SAMPrivate BankingCustody of customer fundsCustomer depositsCustomer loans 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Results Attributable profit was EUR 1,637 million in 2023, up 46% year- on-year. In constant euros, it was 48% higher: • Total income increased 31% mainly driven by higher net interest income supported by strong trading activity and rising interest rates. • Total fee income generated, including those ceded to the commercial network, amounted to EUR 3,725 million, +1% year-on-year, representing 31% of the Group's total fee income. • Administrative expenses and amortizations were 12% higher year-on-year, due to investments and higher costs related to increased commercial activity. • As a result, net operating income increased 44% year-on-year and the efficiency ratio improved 5.9 pp in the year to 34.0%. Total contribution to profit EUR million and % change in constant euros 3,296 〉 +21% / 2022 The total contribution to the Group's profit (profit after tax plus and total fees generated net of tax) was EUR 3,296 million, 20% higher than in 2022 (+21% in constant euros). WM&I. Underlying income statement EUR million and % change Revenue Expenses 2023 2022 3,396 2,635 (1,156) (1,054) Net operating income 2,240 1,581 LLPs PBT 21 (14) 2,235 1,531 Attributable profit 1,637 1,119 Detailed financial information in section 4.6 'Appendix'. / 2022 % % excl. FX +29 +10 +42 — +46 +46 +31 +12 +44 — +48 +48 408 2023 Annual report Contents PagoNxt EXECUTIVE SUMMARY Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Underlying attributable profit -EUR 77 mn Strategy 1 Business performance Results 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 1. In constant euros. PagoNxt continued to expand in 2023. Getnet's Total Payments Volume reached EUR 206 billion globally, a 22% increase versus 2022 Continued momentum in total income in 2023, reaching EUR 1,140 million, up 20% year-on-year (+17% in constant euros) Strategy PagoNxt aims to be a 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 solutions. Since 2020, PagoNxt has been built through the combination of several strategic and high-growth business segments (e.g. Merchant Acquiring, International Trade and Payments Hub). Already existing businesses, like Merchant Acquiring in core Santander countries like Brazil, Mexico and Spain, have been combined with newly internally developed global technology platforms (i.e. Merchant Solutions, OneTrade and Account-To- Account Payments) and a limited number of inorganic acquisitions (e.g. Ebury). PagoNxt's technology platforms and specialist teams serve the payments needs of Grupo Santander's customers and cater to open market opportunities beyond Santander's footprint 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 for the next few years is anchored on 3 key pillars: • Scaling up our global, cloud-native, secure and efficient platform, which is interconnected and API-based to ensure customer access 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. • accelerating commercial growth by further strengthening our commerce and trade ecosystem and our distribution through Santander commercial platforms with a focus on SMEs. • maximizing the open market opportunity through direct commercialization and distribution partnerships (with integrated software vendors (ISVs), financial institutions (FI), non-banking financial institutions (NBFI)), increasing our market penetration in Europe, South America and North America and extending our footprint to additional strategic countries. This strategy is fully aligned with PagoNxt's short- and medium- term targets, namely, delivering sustained and diversified revenue growth, growing the open market business and ensuring operational leverage for improved scale-driven margins and bottom-line profitability. Business performance Getnet, our end-to-end Merchant Acquiring business with presence in Latin America (Brazil, Mexico, Argentina, Chile and Uruguay) and Europe (pan-European activity with active merchants in 15 countries), continued consolidating its franchise and market position and growing above market in most regions. Getnet improved its position in Merchant acquiring to second in Latin America and 17 to the Nilson reports based on number of transactions. th globally, according In 2023, Getnet's Total Payments Volume (TPV) reached EUR 206 billion, +25% year-on-year (+22% in constant euros). This growth was accompanied by margin expansion due to increasing scale and the roll out of innovative value-added services, global e-commerce capabilities and further developed specialized vertical solutions which it shares across countries. Highlights by market were: • Getnet Brazil's TPV increased 14%. Brazil's focus has been on profitable growth through higher penetration in SMEs, our pre-payments products, and value-added services. We are pursuing opportunities across all sales channels and enhancing open market sales through partnerships with banks and ISVs, direct sales and digital channels. • Getnet Europe, our pan-European acquirer, grew significantly in the year. TPV increased 31% year-on-year, mainly driven by the Spanish and Portuguese markets. In the UK, we are currently operating with a reduced number of customers under our UK FCA licence. We continue enhancing our platform capabilities, with new payment methods, a vertical solution for airlines and a stronger value-added proposition for SMEs, which enable us to progress on our open market strategy with merchants operating in 15 countries. 409 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Getnet Mexico's activity remained strong, with TPV increasing 23% year-on-year, driven by higher SME penetration and the strong performance of our open market distribution channels, which include several partnerships with payment’s facilitators, ISVs and payment ecosystems. We launched several innovative value-added services like tap-on-phone, DCC and dynamic working capital. • We are ramping up Getnet's commercial activity in other Latin American countries. Our acquiring businesses in Argentina and Uruguay launched in 2022 are showing strong growth as they start penetrating Santander's merchant base. Chile, with 80% year-on-year TPV growth, is accelerating its penetration in the Chilean market through Santander and open market, which already represents around 50% of new onboardings. PagoNxt OneTrade platform comprises two different activities: one which offers a range of international business services delivered to our banks and their customers as a Banking-as-a- Service proposition, and another service delivered to open market customers through an Electronic Money Institution. The Banking-as-a-Service proposition enabled Santander to replace multiple investments in local institutions with a single global one, accelerating implementation while reducing operational and maintenance costs. In 2023, we achieved significant progress and all core interconnected services are fully operational. Some of the services which have already been rolled out across core markets such as Spain, Mexico and Chile are: OneTrade FX, a digital FX service facilitating currency trading; International Payments, aimed at fostering Corporate and SMEs business; and TradeNxt, a trade finance platform supporting import/export activities. Results Attributable loss of EUR 77 million in 2023, a marked improvement versus a loss of EUR 215 million in 2022. Total income continued its upward momentum in 2023 and reached EUR 1,140 million, a 17% increase year-on-year in constant euros, backed by increased activity and volumes, especially in our Merchant and Trade businesses (Getnet and Ebury). PagoNxt. Total income performance Constant EUR million +17% In 2023, administrative expenses and amortizations grew by 6% year-on-year and reflected inflation pressures and the ongoing investment plans to develop and implement global technology. PagoNxt. Underlying income statement EUR million and % change We expect to ramp up OneTrade open market activities in the first half of 2024 by scaling up its correspondent banking offering (cross-border payments and FX services) targeted at financial institutions, non-banking financial institutions and other entities in need of cross-border payments optimization. Revenue Expenses 2023 2022 1,140 953 (1,091) (1,024) Net operating income 49 (71) LLPs PBT Attributable profit (24) (17) (77) (44) (141) (215) Detailed financial information in section 4.6 'Appendix'. PagoNxt continued to accelerate its roadmap to be Santander's wholesale payments processing provider, centralizing all types of payments (except cards). In 2023, we continued the development of our product capability around five core areas (Instant Payments, Credit Transfers, Bulk Credit Transfers, Direct Debits and International Payments) and implemented functionality across multiple countries and businesses (SCIB, Openbank, Spain, Portugal, Germany, the UK and Mexico). Significant volumes of payments have already been migrated into the new payments platform reaching an annualized volume of 700 million transactions. Ebury continued to deliver organic top-line growth, with double-digit growth in total income. The business continued to enhance its B2B offerings and recently completed the acquisition of Bexs, the Brazilian cross-border payments and FX transactions specialist. / 2022 % % excl. FX +20 +7 — (46) (88) (64) +17 +6 — (46) (87) (63) 410 9701,14020222023 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Europe 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) % % excl. FX 27.0 (2.2) 25.8 (34.2) 19.2 6.4 30.5 5.4 2.8 49.9 59.2 46.4 — 46.4 84.7 26.6 (2.1) 25.9 (35.8) 18.9 5.9 30.5 5.7 3.2 49.5 58.9 46.0 — 46.0 90.6 2023 15,910 4,399 1,033 97 21,439 (9,030) 12,409 (2,533) (1,681) 8,195 (2,371) 5,824 — 5,824 (342) Profit attributable to the parent 5,482 3,810 43.9 44.6 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. (4.8) (9.1) 49.1 (6.7) 0.5 (1.4) (1.1) (7.9) 8.7 (11.2) 8.0 (1.5) 1.2 (6.0) (0.5) (2.4) 12.2 570,067 198,451 115,428 44,538 26,860 955,344 644,921 104,164 79,095 53,361 29,633 911,173 44,171 591,280 216,310 76,319 47,737 26,564 958,209 643,875 112,254 71,731 60,010 27,300 915,169 43,040 551,722 725,417 620,299 105,118 579,476 720,910 627,630 93,280 14.47 42.1 2.32 49.3 67,457 3,083 46,293 28,538 9.28 47.3 2.37 51.8 65,581 3,148 45,564 28,124 (3.6) (8.3) 51.2 (6.7) 1.1 (0.3) 0.2 (7.2) 10.3 (11.1) 8.5 (0.4) 2.6 (4.8) 0.6 (1.2) 12.7 5.19 (5.2) (0.05) (2.5) 2.9 (2.1) 1.6 1.5 2023 6,641 2,699 688 105 10,132 (4,227) 5,905 (1,522) (984) 3,399 (1,029) 2,371 — 2,371 — 2,371 239,214 116,317 70,072 40,926 17,075 483,603 324,099 44,802 28,486 46,532 22,264 466,184 17,419 229,803 386,810 308,745 78,065 14.16 41.7 3.06 49.1 26,834 1,874 15,023 8,367 Spain 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 17,995 489,067 329,414 43,110 23,674 52,876 19,600 468,674 20,394 249,821 394,679 322,284 72,395 7.89 48.6 3.27 51.0 26,839 1,913 14,320 7,852 % 46.3 (4.2) 12.3 (60.4) 23.1 5.7 39.4 (5.9) 82.4 63.5 98.5 51.9 — 51.9 (26.2) 51.9 (6.7) (9.9) 66.8 (6.0) (5.1) (1.1) (1.6) 3.9 20.3 (12.0) 13.6 (0.5) (14.6) (8.0) (2.0) (4.2) 7.8 6.27 (6.8) (0.21) (1.9) (0.0) (2.0) 4.9 6.6 411 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 5.3 3.2 (13.3) (4.6) United Kingdom 2022 4,992 390 31 6 5,418 (2,685) 2,733 (316) (517) 1,900 (505) 1,395 — 1,395 — (7.2) 2.0 2.2 1.7 (21.7) (17.9) 10.9 11.4 10.8 — 10.8 — 2023 5,152 338 29 5 5,525 (2,745) 2,779 (247) (425) 2,107 (563) 1,545 — 1,545 — (11.5) (2.7) (5.3) 4.0 4.3 3.7 (20.1) (16.3) 13.1 13.6 13.0 — 13.0 — Profit attributable to the parent 1,545 1,395 10.8 13.0 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. (4.5) (7.5) 37.3 (53.0) 29.7 (3.9) (1.0) (25.5) (2.7) (5.3) 7.4 (4.1) 0.9 (6.0) (1.0) (1.0) 0.1 245,743 62,387 10,234 289 4,363 323,016 233,453 28,202 43,850 3,434 1,704 310,642 12,373 251,892 65,962 7,294 601 3,292 329,042 230,829 37,022 44,088 3,549 1,553 317,041 12,001 235,111 231,667 224,396 7,272 244,840 228,993 221,884 7,109 13.01 49.7 1.42 30.3 22,280 444 22,481 13,864 10.70 49.6 1.21 33.8 21,185 449 22,402 13,995 (2.4) (5.4) 40.3 (52.0) 32.5 (1.8) 1.1 (23.8) (0.5) (3.2) 9.7 (2.0) 3.1 (4.0) 1.2 1.1 2.3 2.31 0.1 0.22 (3.4) 5.2 (1.1) 0.4 (0.9) Portugal 2022 747 484 56 8 1,295 (502) 793 (17) (1) 775 (240) 536 — 536 (2) 534 2023 1,465 464 33 21 1,982 (542) 1,440 (77) (49) 1,314 (416) 898 — 898 (2) 896 36,864 8,084 10,991 1,078 1,279 58,297 36,366 9,237 4,813 319 3,725 54,460 3,837 37,658 40,618 36,366 4,252 25.92 27.3 2.59 82.7 4,945 376 2,908 1,838 39,126 9,634 7,887 1,095 1,481 59,223 38,506 9,182 3,288 448 4,467 55,890 3,333 40,066 42,129 38,506 3,623 15.03 38.7 2.99 79.3 4,952 383 2,923 1,784 % 96.2 (4.2) (41.0) 152.5 53.1 8.1 81.6 353.6 — 69.4 73.2 67.8 — 67.8 38.9 67.9 (5.8) (16.1) 39.4 (1.6) (13.7) (1.6) (5.6) 0.6 46.4 (28.8) (16.6) (2.6) 15.1 (6.0) (3.6) (5.6) 17.4 10.89 (11.4) (0.39) 3.4 (0.1) (1.8) (0.5) 3.0 412 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. Poland 2022 1,976 528 93 (123) 2,474 (692) 1,782 (440) (553) 789 (247) 542 — 542 (179) % % excl. FX 24.7 8.1 (30.4) (86.3) 24.6 20.7 26.1 48.5 (55.6) 71.0 47.9 81.5 — 81.5 85.3 28.7 11.6 (28.2) (85.8) 28.6 24.6 30.1 53.2 (54.2) 76.4 52.7 87.3 — 87.3 91.2 364 85.3 79.6 5.8 (3.2) 17.8 8.3 13.3 7.2 5.0 (13.7) 164.8 34.2 13.5 6.3 16.0 5.5 8.0 4.9 48.2 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 5,697 4,316 14.1 4.4 27.0 16.8 22.2 15.7 13.2 (7.0) 185.6 44.7 22.4 14.6 25.1 13.8 16.5 13.1 59.9 5.75 (0.9) (0.25) (0.6) 2.8 (3.5) 3.2 3.4 2023 2,543 589 67 (17) 3,182 (862) 2,320 (674) (253) 1,392 (377) 1,015 — 1,015 (342) 674 33,850 9,289 15,070 733 1,974 60,916 44,500 4,623 1,945 1,706 1,687 54,462 6,454 34,729 49,371 44,462 4,909 17.68 27.1 3.55 73.3 10,822 381 5,877 4,465 2023 109 309 217 (16) 618 (653) (35) (12) 30 (17) 13 (5) — (5) 2 (3) 14,397 2,374 9,060 1,512 2,170 29,512 6,503 17,300 — 1,369 253 25,425 4,087 14,420 16,951 6,330 10,621 Other Europe 2022 312 273 29 (5) 609 (646) (38) (6) % % excl. FX (64.4) 14.7 685.2 266.1 3.2 2.1 (14.4) 112.2 — (72.8) (31.7) (89.6) — (89.6) 103.7 (65.0) 13.2 641.1 249.6 1.6 1.1 (6.5) 112.3 — (71.5) (28.5) (89.1) — (89.1) 103.7 (18) (61) 18 (43) — (43) 1 (42) (93.7) (94.0) 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 1.3 (12.2) 24.7 (18.6) (0.5) 4.6 11.6 (3.7) — (30.1) (16.3) (2.4) 89.9 1.4 33.1 11.9 50.0 4.7 (10.3) 24.9 (16.1) 1.1 6.9 15.4 (2.1) — (28.0) (15.9) (0.3) 95.2 4.7 35.1 15.8 50.0 413 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management (3,733) (2,538) (2,593) (1,744) 48.7 Primary segments EUR million Underlying income statement Net interest income Net fee income Gains (losses) on financial transactions A Other operating income Total income Administrative expenses and amortizations Net operating income Net loan-loss provisions Other gains (losses) and provisions Profit before tax Tax on profit Profit from continuing operations Net profit from discontinued operations Consolidated profit Non-controlling interests North America 2022 9,705 1,958 204 449 12,316 (5,871) 4.7 11.9 147.3 (29.1) % % excl. FX 2.6 6.7 147.9 (24.4) 7.0 10.1 4.1 47.1 17.4 (25.1) (46.1) (18.9) — (18.9) 4.7 8.0 1.7 45.2 9.0 (27.2) (47.9) (21.1) — (21.1) 6,445 (118) 3,790 (869) 2,921 — 2,921 (43) (64.9) (68.3) 2023 10,159 2,192 505 318 13,174 (6,465) 6,708 (138) 2,837 (468) 2,369 — 2,369 (15) % % excl. FX (3.8) 2.2 84.3 (23.8) (6.5) (0.6) 79.2 (25.9) United States 2022 6,140 771 164 548 7,623 (3,599) 4,025 (5.4) 2.2 (12.3) 2023 5,742 766 294 406 7,209 (3,679) 3,531 (2.7) 5.1 (9.8) 52.9 288.9 (74) 863 69 932 — 932 — 932 (20) 278.1 2,261 (61.8) (60.7) (478) 1,784 — 1,784 — — (47.7) — (47.7) — — (46.3) — (46.3) — 1,784 (47.7) (46.3) Profit attributable to the parent 2,354 2,878 (18.2) (20.3) 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. 1.8 (1.9) 9.7 (29.6) 0.8 0.8 3.8 29.2 (14.1) (15.4) (5.0) 1.8 (9.1) 2.6 3.0 3.7 (0.3) 174,780 35,969 50,311 10,937 22,829 294,827 175,958 34,723 35,133 18,606 6,764 271,183 23,644 171,519 35,607 44,060 14,668 22,741 288,595 168,748 25,294 41,063 20,883 6,943 262,931 25,664 161,401 171,310 141,863 29,447 156,521 164,414 135,955 28,459 9.76 49.1 4.09 73.8 45,593 1,784 25,027 14,486 11.06 47.7 3.03 93.3 44,518 1,854 24,980 14,020 1.9 1.0 14.2 (25.4) 0.4 2.2 4.3 37.3 (14.4) (10.9) (2.6) 3.1 (7.9) 3.1 4.2 4.3 3.5 (1.30) 1.4 1.06 (19.4) 2.4 (3.8) 0.2 3.3 126,843 21,215 22,686 4,075 16,307 191,126 121,782 17,411 27,059 7,276 3,119 176,646 14,480 130,390 20,000 21,637 5,241 17,837 195,106 124,209 8,572 32,685 8,346 4,116 177,929 17,177 112,671 108,062 95,697 12,364 115,248 112,856 98,346 14,510 6.07 51.0 4.57 67.7 13,489 415 4,510 4,223 9.40 47.2 3.25 90.3 14,610 485 4,523 4,137 (2.7) 6.1 4.8 (22.3) (8.6) (2.0) (2.0) 103.1 (17.2) (12.8) (24.2) (0.7) (15.7) (2.2) (4.2) (2.7) (14.8) (3.33) 3.8 1.32 (22.6) (7.7) (14.4) (0.3) 2.1 0.7 9.8 8.5 (19.5) (5.4) 1.4 1.5 110.3 (14.3) (9.7) (21.6) 2.8 (12.7) 1.2 (0.9) 0.7 (11.8) 414 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Mexico 2022 3,565 1,140 39 (122) 4,623 (2,076) 2,547 (788) (94) 1,665 (407) 1,257 — 1,257 (44) % % excl. FX 12.1 9.3 385.2 (29.8) 15.7 13.0 17.9 30.6 (44.7) 15.4 20.5 13.7 — 13.7 (64.7) 23.7 20.5 435.2 (22.6) 27.6 24.7 30.0 44.1 (39.1) 27.2 32.9 25.4 — 25.4 (61.0) 2023 4,408 1,374 211 (94) 5,899 (2,588) 3,311 (1,135) (57) 2,119 (541) 1,577 — 1,577 (17) Profit attributable to the parent 1,560 1,213 28.6 16.6 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. 4.8 (17.0) 10.7 (34.8) 19.6 (0.6) 8.9 (7.7) (13.4) (18.8) 16.4 (0.4) (2.7) 6.1 9.9 9.8 10.0 47,905 14,088 27,624 6,723 6,156 102,496 53,703 17,047 8,074 11,189 3,579 93,592 8,904 48,688 62,775 45,693 17,082 17.70 43.9 2.82 100.0 30,876 1,369 20,517 10,263 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 20,239 9,711 16.6 (7.6) 23.2 (27.4) 33.2 10.6 21.2 2.7 (3.6) (9.6) 29.5 10.9 8.3 18.1 22.3 22.2 22.5 0.77 (1.0) 0.50 (6.6) 7.1 0.0 1.4 5.7 Other North America 2022 — 47 — 22 70 (196) 2023 8 52 (1) 6 66 (199) (133) (5) (7) (145) 5 (140) — (140) 2 (138) 32 666 2 139 366 1,205 473 265 — 141 66 945 259 41 473 473 — (126) (6) (5) (137) 17 (120) — (120) 1 (119) 48 354 — 170 282 853 230 130 — 163 64 587 266 55 230 230 — % % excl. FX — — 10.0 10.0 — — (71.7) (71.7) (6.1) 1.3 5.4 (15.2) 52.0 6.1 (15.2) 52.5 6.1 (6.1) 1.4 5.5 (70.6) 16.8 — 16.8 103.7 (70.6) 16.8 — 16.8 103.7 16.0 16.1 (33.3) 88.5 — (18.0) 29.8 41.2 105.9 103.1 — (13.2) 2.9 61.1 (2.6) (33.3) 88.5 — (18.0) 29.8 41.2 105.9 103.1 — (13.2) 2.9 61.1 (2.6) (24.8) 105.9 105.9 — (24.8) 105.9 105.9 — 415 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3,658 (16.9) (11.2) (24.5) (24.8) 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 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. 2023 13,040 4,684 1,280 (1,033) 17,971 (6,920) 11,050 (5,401) (1,041) 4,608 3,487 — 3,487 (449) 3,038 153,244 67,410 64,352 20,796 19,247 325,049 155,448 48,898 39,603 42,438 12,768 299,155 25,894 South America 2022 12,979 4,515 1,291 (761) 18,025 (6,675) 0.5 3.7 (0.9) 35.8 (0.3) 3.7 % % excl. FX 12.0 14.0 13.8 403.0 7.8 16.7 2.9 11,350 (5,041) (544) 5,764 4,215 — 4,215 (557) (2.6) 7.1 91.1 (20.1) (27.7) (17.3) — (17.3) (19.4) 8.9 212.9 (15.4) (23.4) (12.5) — (12.5) (19.9) (1,121) (1,549) 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 5.8 28.7 12.7 4.7 2.4 11.0 12.9 13.9 12.9 2.4 12.7 11.5 5.7 5.6 12.7 9.8 18.7 7.2 30.1 18.7 7.8 3.6 13.3 17.3 14.1 11.2 2.7 16.8 13.6 10.1 6.9 17.3 15.3 21.3 160,987 205,675 135,342 70,333 152,435 182,541 123,307 59,234 14.43 38.5 5.72 78.4 80,997 3,309 73,028 37,517 18.77 37.0 6.20 76.0 78,271 3,653 69,553 38,368 (4.33) 1.5 (0.49) 2.4 3.5 (9.4) 5.0 (2.2) Brazil 2022 8,901 3,296 736 (23) 12,910 (4,180) 8,730 2023 9,116 3,462 483 43 13,104 (4,529) 8,574 (4,701) (4,417) (963) 2,911 (259) 4,055 (776) (1,232) 2,135 — 2,135 (215) 1,921 2,822 — 2,822 (278) 2,544 2.4 5.0 (34.5) — 1.5 8.3 (1.8) 6.4 272.0 (28.2) (37.0) (24.3) — (24.3) (22.9) % % excl. FX 2.0 4.6 (34.7) — 1.1 7.9 (2.2) 6.0 270.4 (28.5) (37.3) (24.7) — (24.7) (23.2) 96,399 53,618 47,325 8,161 14,590 220,093 110,162 28,333 27,976 28,625 7,938 203,035 17,058 86,202 40,858 37,387 5,682 14,037 184,165 89,957 23,477 23,997 25,719 5,477 168,627 15,539 102,583 145,044 90,297 54,747 92,194 120,911 75,767 45,144 11.8 31.2 26.6 43.6 3.9 19.5 22.5 20.7 16.6 11.3 44.9 20.4 9.8 11.3 20.0 19.2 21.3 13.73 34.6 6.56 84.7 57,775 2,580 62,804 30,460 19.23 32.4 7.57 79.5 55,993 2,847 60,117 31,813 (5.50) 2.2 (1.00) 5.2 3.2 (9.4) 4.5 (4.3) 6.2 24.6 20.2 36.4 (1.3) 13.5 16.3 14.6 10.7 5.7 37.6 14.3 4.2 5.7 13.9 13.2 15.2 416 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 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 RoTE Efficiency ratio NPL ratio Total coverage ratio Number of employees Number of branches Number of total customers (thousands) Number of active customers (thousands) A. Includes exchange differences. B. Minus reverse repurchase agreements. C. Minus repurchase agreements. Chile 2022 1,772 468 242 (33) 2,449 (981) 1,468 (399) (8) 1,062 (105) 956 — 956 (279) % % excl. FX (22.9) 20.8 30.7 — (7.7) 2.8 (14.8) (22.0) 22.2 32.2 — (6.7) 4.0 (13.8) (8.5) — (10.4) 28.5 (14.7) — (14.7) (16.0) (9.5) — (11.4) 27.0 (15.6) — (15.6) (16.9) 677 (14.1) (15.1) 4.4 6.6 17.6 (7.1) 1.6 4.5 8.1 13.0 9.8 (8.5) (18.0) 4.2 7.5 4.3 12.0 7.8 25.2 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 3,577 2,196 (1.7) 0.5 10.8 (12.5) (4.3) (1.6) 1.8 6.5 3.5 (13.8) (22.7) (1.8) 1.2 (1.7) 5.5 1.6 17.9 (4.65) 4.6 0.02 (3.6) 1.8 (12.4) 13.3 9.2 2023 1,383 572 320 11 2,285 (1,020) 1,265 (365) 51 951 (135) 816 — 816 (234) 582 42,616 6,373 13,273 12,159 2,746 77,167 29,578 14,808 10,775 12,624 3,733 71,518 5,648 43,823 40,098 29,337 10,761 14.82 44.6 5.01 52.7 9,948 248 4,052 2,399 2023 1,879 396 341 (1,071) 1,544 (775) 769 (150) (114) 505 (117) 388 — 388 (2) 386 3,767 4,548 1,368 11 776 10,470 6,478 1,271 148 638 455 8,990 1,479 3,878 10,288 6,478 3,810 55.60 50.2 1.99 165.7 8,455 322 4,771 3,562 Argentina 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 5.7 (26.9) 56.0 51.9 (15.8) (21.5) (9.1) 13.6 (57.7) % % excl. FX 399.4 245.2 637.0 617.8 298.1 271.0 329.7 436.9 99.8 437.9 366.1 13.8 (1.4) 19.4 — 19.4 154.0 19.0 (32.6) 50.6 (74.3) (85.8) (23.7) (30.3) (38.6) 17.6 (3.4) (21.3) (11.5) (31.4) (22.6) 464.1 — 464.1 — 462.3 218.7 611.4 21.6 (32.7) 260.6 229.5 190.2 455.9 356.6 272.0 318.4 224.2 266.0 5,781 14,499 10,547 3,952 (32.9) (29.0) (38.6) (3.6) 217.0 235.3 190.2 355.5 26.23 53.9 2.08 180.4 8,251 375 4,385 3,203 29.36 (3.7) (0.10) (14.7) 2.5 (14.1) 8.8 11.2 417 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 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 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. Digital Consumer Bank 2022 2023 4,022 4,193 4.3 % % excl. FX 6.1 796 117 396 5,502 (2,618) 2,884 (792) (72) 2,019 (493) 1,526 — 1,526 (327) 1,199 843 60 344 5,269 (2,462) 2,807 (544) (27) 2,237 (549) 1,687 — 1,687 (379) 1,308 (5.6) 95.5 15.1 4.4 6.4 2.7 45.7 169.9 (9.7) (10.3) (9.5) — (9.5) (13.7) (5.3) 94.8 15.3 5.9 8.1 3.9 47.8 167.0 (8.7) (9.5) (8.4) — (8.4) (13.7) (8.4) (6.9) 132,692 18,636 5,387 135 9,945 166,796 69,334 31,965 44,605 2,218 5,233 153,355 13,441 122,608 12,311 7,644 190 8,262 151,016 58,544 39,169 33,749 1,820 4,704 137,986 13,029 8.2 51.4 (29.5) (28.8) 20.4 10.4 18.4 (18.4) 32.2 21.9 11.2 11.1 3.2 Other South America 2022 527 % % excl. FX 24.1 20.2 45.1 — 23.5 12.7 42.1 96.1 92.8 15.7 (1.9) 30.4 — 30.4 96.8 25.6 21.2 44.5 — 24.6 13.2 44.3 98.4 95.0 17.7 (0.8) 33.3 — 33.3 96.8 33.9 31.0 8.0 34.4 (1.6) 133.3 30.2 13.1 13.7 0.6 41.3 107.8 27.4 12.8 15.5 3.6 31.9 (1.2) 133.1 28.9 9.8 12.5 (6.6) 43.8 105.7 27.1 9.4 14.1 210 95 1 832 (527) 306 (94) (7) 205 (94) 111 — 111 1 112 9,689 2,135 2,425 200 872 15,320 8,116 4,457 498 265 504 13,840 1,480 2023 662 254 137 (16) 1,038 (596) 441 (186) (15) 241 (93) 148 — 148 2 150 10,463 2,870 2,386 466 1,135 17,320 9,230 4,486 703 550 641 15,611 1,709 10,703 10,246 9,230 1,016 9,872 9,117 8,105 1,011 8.4 12.4 13.9 0.5 4.1 11.5 12.6 2.5 135,202 72,963 69,334 3,629 124,976 61,625 58,544 3,081 8.2 18.4 18.4 17.8 12.33 47.6 2.12 88.0 16,795 342 20,193 13.65 46.7 2.06 92.8 16,193 364 19,746 (1.32) 0.9 0.06 (4.8) 3.7 (6.0) 2.3 8.5 52.7 (29.8) (29.0) 20.3 10.7 19.0 (18.5) 32.7 21.4 11.6 11.4 3.6 8.4 18.9 19.0 17.8 418 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 37,985 7,661 214 (606) 45,254 (19,396) 25,858 (12,295) (2,691) 10,872 (2,586) 8,286 — 8,286 (849) % % excl. FX 11.9 3.3 (54.0) — 8.1 8.1 8.1 20.9 39.3 (8.1) (11.5) (7.0) Retail Banking 2022 34,855 7,654 449 (283) 42,674 (18,552) 24,123 (10,212) (2,126) 11,785 (2,950) 8,835 — 8,835 (902) 9.0 0.1 (52.3) 114.2 6.0 4.6 7.2 20.4 26.6 (7.8) (12.3) (6.2) — (6.2) (5.8) — (7.0) (6.9) (7.0) Profit attributable to the parent 7,436 7,933 (6.3) 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 Profit attributable to the parent 1,637 A. Includes exchange differences. Wealth Management & Insurance % % excl. FX 2022 112.1 847 1,293 0.5 123 29.5 371 (39.3) 31.0 2,635 11.6 (1,054) 43.9 1,581 — (14) 105.4 (2.1) 20.8 (34.8) 28.9 9.7 41.6 — (28.6) 46.0 51.2 44.4 — 44.4 11.8 46.3 (36) 1,531 (349) 1,182 — 1,182 (63) 1,119 2023 1,739 1,265 149 242 3,396 (1,156) 2,240 21 (26) 2,235 (528) 1,707 — 1,707 (71) (28.0) 48.3 55.5 46.2 — 46.2 9.9 48.4 2023 3,485 2,190 2,581 41 8,296 (3,391) 4,905 (162) Corporate & Investment Banking % % excl. FX 2022 7.5 3,548 13.6 1,981 57.0 1,818 31 (79.5) 18.3 7,378 20.4 (2,902) 17.0 4,476 (33.7) (249) 33.9 19.6 19.7 19.6 — 19.6 15.1 (1.8) 10.5 42.0 30.8 12.5 16.8 9.6 (35.0) 34.0 11.5 16.6 9.7 — 9.7 16.3 (130) 4,097 (1,098) 2,999 — 2,999 (182) (174) 4,570 (1,280) 3,290 — 3,290 (212) 3,078 2,817 9.3 19.9 2023 93 954 (10) 102 1,140 (1,091) 49 (24) (42) (17) (59) (76) — (76) (1) (77) % % excl. FX 320.8 6.3 (32.0) 58.7 17.5 6.0 — PagoNxt 2022 22 881 (14) 64 953 (1,024) (71) (44) (26) (141) (63) (203) — (203) (12) (215) 325.2 8.3 (29.4) 59.9 19.6 6.6 — (45.6) 62.3 (88.1) (5.6) (62.7) — (62.7) (87.8) (64.0) (45.8) 66.1 (87.0) (9.8) (60.9) — (60.9) (88.2) (62.5) 419 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.7 New reporting structure from 1 January 2024 Digital Consumer Bank: comprises all business originated in the consumer finance companies, plus Openbank, Open Digital Services (ODS) and SBNA Consumer. Description of segments In addition to what has already been explained in the previous sections of this chapter of the Annual report, and in order to align the operating and management model of the retail and commercial and consumer banking areas with Grupo Santander's strategy, on 18 September 2023 we announced that we would adapt our reporting segments, as a result of these changes in the management, starting with the financial information for the first quarter of 2024. a. Main changes to the composition of Santander's segments The main changes, which apply from 1 January 2024 to the management information for all periods included in the consolidated financial statements, are as follows: 1. All of the bank's businesses across all markets have been consolidated into five global areas: Retail & Commercial Banking, Digital Consumer Bank, Corporate & Investment Banking, Wealth Management & Insurance and Payments. These become the new primary segments. 2. The changes in financial information are: a. The former Retail Banking has been split into two new segments: Retail & Commercial Banking and Digital Consumer Bank. Our cards business now forms part of the new Payments segment. b. The results of activities mainly related to financial management located in the countries are fully allocated to their global businesses based on the segment that generates the financial position. c. The local corporate centres are fully allocated to each global business. d. The revenue sharing criteria between global businesses have been revised to better reflect the contribution of each business to the Group. 3. The former primary segments (Europe, North America, South America and Digital Consumer Bank - which is renamed DCB Europe) are now our secondary segments. All 2023 and 2022 published figures for the countries, regions and the Corporate Centre remain unchanged. All the changes described above have no impact on the reported Group consolidated financial statements. b. New composition of Santander's segments Primary segments This primary level of segmentation, which is based on the Group's management structure from 1 January 2024, comprises six reportable segments: five operating areas plus the Corporate Centre. The operating areas are: Retail & Commercial Banking: new area that integrates the retail banking business (individuals) and commercial banking (SMEs and corporates), except for the consumer finance and the cards businesses. Corporate & Investment Banking (CIB): this business, which includes Markets, Investment Banking (Global Debt Finance and Corporate Finance) and Global Transactional Banking, offers products and services on a global scale to corporate and institutional customers, and collaborates with other global businesses to better serve our broad customer base. 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). Payments: digital payments solutions, providing global technology solutions for our banks and new customers in the open market. It is structured in two businesses: PagoNxt (merchant, International Trade, A2A Payments and Consumer) and Cards (cards platform and business in the countries). Secondary (or geographic) segments At this secondary level, Santander is structured into the segments that made up the primary segments in 2022 and 2023, which are Europe, North America, South America and DCB Europe: Europe: comprises all business activity carried out in the region, except that included in DCB Europe. Detailed financial information is provided on Spain, the UK, Portugal and Poland. North America: 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, the New York branch and Santander US Capital Markets (SanCap). 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. DCB Europe: includes Santander Consumer Finance, which incorporates the entire consumer finance business in Europe, Openbank in Spain and ODS. In addition to these operating units, both at the primary and secondary segment level, the Group continues to maintain the area of Corporate Centre, which 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 other 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. 420 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management To facilitate like-for-like comparisons, in this section we provide 2022 and 2023 data adjusted to reflect the aforementioned changes. Underlying results and business volumes for 2023 and 2022 are included below, together with comments on 2023 performance, all in line with the new primary and secondary segmentation. Summary of the Group's income statements by new primary segment 2023. Main items of the underlying income statement of the new primary segments EUR million Primary segments Retail & Commercial Banking Digital Consumer Bank Corporate & Investment Banking Wealth Management & Insurance Payments Corporate Centre TOTAL GROUP Net interest income 25,550 10,221 3,594 1,513 2,424 (41) 43,261 Net fee income 4,497 1,229 2,131 1,262 2,952 (13) 12,057 Total income 29,754 12,296 7,527 3,210 5,298 (439) 57,647 Net operating income 16,930 7,033 4,140 1,994 2,954 (829) 32,222 Profit before tax 7,989 2,677 3,795 1,994 1,205 (961) 16,698 Profit attributable to the parent 5,659 1,901 2,440 1,467 607 (998) 11,076 2022. Main items of the underlying income statement of the new primary segments EUR million Primary segments Retail & Commercial Banking Digital Consumer Bank Corporate & Investment Banking Wealth Management & Insurance Payments Corporate Centre TOTAL GROUP Net interest income 22,093 10,121 3,816 883 2,359 (652) 38,619 Net fee income 4,672 1,269 1,922 1,293 2,653 (19) 11,790 Total income 26,994 12,391 6,703 2,678 4,874 (1,487) 52,154 Net operating income 14,935 7,194 3,802 1,574 2,604 (1,858) 28,251 Profit before tax 7,099 3,880 3,379 1,516 1,398 (2,022) 15,250 Profit attributable to the parent 5,017 2,610 2,233 1,101 693 (2,049) 9,605 421 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management RETAIL & COMMERCIAL BANKING Underlying attributable profit EUR 5,659 mn Business performance Gross loans and advances to customers, minus reverse repurchase agreements and in constant euros declined 3% year- on-year. Customer deposits (minus repurchase agreements and in constant euros) grew 3%. Mutual funds decreased 1%. As a result, total customer funds increased 2% in constant euros. Results Attributable profit in the year was EUR 5,659 million, 13% higher year-on-year. In constant euros, profit rose 12%. By line: • Total income increased 12% due to higher net interest income (+19%). On the other hand, net fee income remained stable, gains on financial transactions decreased 27%, while other operating income was 61% more negative. • Administrative expenses and amortizations were 10% higher but below total income growth. The efficiency ratio improved to 43.1%. • Net loan-loss provisions rose 11%. • Other gains (losses) and provisions recorded a EUR 2,401 million loss compared to a EUR 1,950 million loss in 2022. Retail & Commercial Banking 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 Profit attributable to the parent Business volumes Gross loans and advances to B customers Customer funds Customer deposits C Mutual funds A. Includes exchange differences. B. Excluding reverse repos. C. Excluding repos. 2023 25,550 4,497 2022 22,093 4,672 % excl. FX 18.9 % 15.6 (3.8) (0.1) 854 (1,146) 29,754 1,141 (913) 26,994 (25.2) 25.6 10.2 (27.0) 61.2 12.5 (12,825) (12,059) 14,935 (5,887) 16,930 (6,540) (2,401) 7,989 (1,950) 7,099 (1,927) (1,676) 6.3 13.4 11.1 23.1 12.5 15.0 10.3 14.2 11.1 33.6 11.8 15.6 6,062 5,423 11.8 10.6 — 6,062 (403) — — 5,423 (406) 11.8 (0.9) — 10.6 (2.9) 5,659 5,017 12.8 11.7 618,773 629,478 712,433 689,330 621,598 598,110 91,220 90,835 (1.7) 3.4 3.9 (0.4) (3.0) 2.3 2.8 (1.0) 422 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management DIGITAL CONSUMER BANK Underlying attributable profit EUR 1,901 mn Business performance Gross loans and advances to customers, minus reverse repurchase agreements and in constant euros rose 6% year-on- year. Customer deposits minus repurchase agreements and in constant euros increased 13%. Mutual funds rose 18% in constant euros and, consequently, total customer funds increased 13%. Results Attributable profit in 2023 was EUR 1,901 million, 27% less than in 2022. In constant euros, profit declined 26% as follows: • Total income grew 1% supported by net interest income (+3%). On the other hand, net fee income and gains on financial transactions decreased 2% and 20%, respectively, and other operating income fell 17%. • Administrative expenses and amortizations increased 3%, which together with total income growth, resulted in a 0.9pp increase in the efficiency ratio to 42.8%. • Net loan-loss provisions increased 30%. • Other gains (losses) and provisions recorded a EUR 250 million loss compared to a EUR 91 million loss in 2022. Digital Consumer Bank 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 Profit attributable to the parent Business volumes Gross loans and advances to B customers Customer funds Customer deposits C Mutual funds A. Includes exchange differences. B. Excluding reverse repos. C. Excluding repos. 2023 2022 10,221 10,121 1,269 1,229 % excl. FX 3.5 (2.5) % 1.0 (3.1) 116 730 144 856 12,296 12,391 (19.9) (14.7) (0.8) (20.0) (17.0) 1.1 (5,263) 7,033 (4,106) (5,197) 7,194 (3,222) 1.3 (2.2) 27.4 3.5 (0.6) 29.8 (250) 2,677 (426) (91) 173.0 187.0 3,880 (31.0) (30.0) (50.5) (51.6) (881) 2,251 3,000 (25.0) (24.0) — 2,251 (350) 1,901 — — — 3,000 (25.0) (24.0) (10.2) (10.2) (389) 2,610 (27.2) (26.1) 206,649 196,878 117,963 106,027 114,334 102,946 3,081 3,629 5.0 11.3 11.1 17.8 5.8 13.1 13.0 17.8 423 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management CORPORATE & INVESTMENT BANKING EUR 2,440 mn Underlying attributable profit Business performance Gross loans and advances to customers, minus reverse repurchase agreements and in constant euros decreased 3% year-on-year. Customer deposits minus repurchase agreements and in constant euros decreased 7% while mutual funds rose 72% in constant euros. As a result, total customer funds declined 3%. Results Attributable profit in 2023 was EUR 2,440 million, 9% more than in 2022. In constant euros profit was 16% higher as follows: • Total income grew 17% supported by net fee income (+14%). Gains on financial transactions increased 126% while net interest income remained stable. • Administrative expenses and amortizations increased 20% and the efficiency ratio rose 1.7 pp to 45.0%. • Net loan-loss provisions decreased 35%. • Other gains (losses) and provisions recorded a EUR 181 million loss compared to a EUR 166 million loss in 2022. Corporate & Investment Banking 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 Profit attributable to the parent Business volumes Gross loans and advances to B customers Customer funds Customer deposits C Mutual funds A. Includes exchange differences. B. Excluding reverse repos. C. Excluding repos. 2022 3,816 1,922 % (5.8) 10.8 % excl. FX (0.3) 14.1 962 86.6 125.6 3 122.7 (95.9) 16.9 12.3 6,703 20.3 16.7 (2,901) 3,802 14.3 8.9 (257) (35.8) (34.5) (166) 3,379 (955) 8.9 12.3 19.0 25.8 17.6 21.4 2023 3,594 2,131 1,795 7 7,527 (3,387) 4,140 (165) (181) 3,795 (1,137) 2,658 2,424 9.6 16.0 — 2,658 (219) 2,440 — — — 2,424 (191) 2,233 9.6 14.3 16.0 13.0 9.2 16.2 137,578 142,646 186,410 196,021 171,845 186,678 9,343 14,565 (3.6) (3.2) (4.9) (7.9) 55.9 (3.3) (6.8) 72.0 424 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management WEALTH MANAGEMENT & INSURANCE EUR 1,467 mn Underlying attributable profit Business performance Gross loans and advances to customers, minus reverse repurchase agreements and in constant euros increased 2% year-on-year. Customer deposits minus repurchase agreements and in constant euros rose 1%. Mutual funds were up 23%, resulting in a 14% increase in total customer funds. Results Attributable profit in the year was EUR 1,467 million, 33% increase year-on-year. In constant euros, it rose 35%. By line: • Total income increased 22%, due to net interest income growth (+76%). Net fee income remained stable and gains on financial transactions increased (+69%), while other operating income decreased 37%. • Administrative expenses and amortizations rose 12%, which, together with total income growth, resulted in a 3.3 pp improvement in the efficiency ratio to 37.9%. • Net loan-loss provisions were positive in the year with net releases of EUR 17 million (EUR 21 million net provisions in 2022). • Other gains (losses) and provisions recorded an EUR 18 million loss compared to a EUR 37 million loss in 2022. Wealth Management & Insurance EUR million 2022 883 1,293 % 71.4 (2.4) % excl. FX 76.0 0.2 108 394 2,678 56.7 (32.4) 19.9 69.4 (36.9) 21.6 2023 1,513 1,262 170 266 3,210 (1,216) 1,994 17 (1,104) 1,574 (21) 10.2 26.7 — 11.8 28.4 — (18) 1,994 (454) (37) 1,516 (346) (52.5) 31.5 31.2 (51.0) 33.2 34.5 1,540 1,170 31.6 32.8 — 1,540 (73) — 1,170 (69) — 31.6 5.1 — 32.8 3.1 1,467 1,101 33.3 34.8 22,603 22,247 157,142 137,423 57,643 57,014 99,499 80,409 1.6 14.3 1.1 23.7 2.2 14.0 1.4 22.9 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 Profit attributable to the parent Business volumes Gross loans and advances to B customers Customer funds Customer deposits C Mutual funds A. Includes exchange differences. B. Excluding reverse repos. C. Excluding repos. 425 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management PAYMENTS Underlying attributable profit EUR 607 mn Business performance Gross loans and advances to customers, minus reverse repurchase agreements and in constant euros rose 9%. Payments EUR million Results Attributable profit in the year was EUR 607 million, a 12% decrease year-on-year. In constant euros, profit declined 4% year-on-year, by line: • Total income increased 12%, driven by growth in net fee income (+13%) and net interest income (+11%) . • Administrative expenses and amortizations rose 6%, below revenue growth, resulting in a 2.3 pp improvement in the efficiency ratio to 44.2%. • Net loan-loss provisions increased 45%. • Other gains (losses) and provisions recorded an EUR 84 million loss compared to a EUR 74 million loss in 2022. 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 Profit attributable to the parent Business volumes Gross loans and advances to B customers Customer funds Customer deposits C Mutual funds A. Includes exchange differences. B. Excluding reverse repos. C. Excluding repos. % excl. FX 10.8 13.0 — 45.5 11.6 6.1 16.5 44.8 41.3 2022 2,359 2,653 % 2.8 11.3 20 (97.1) (158) (50.1) 8.7 4,874 (2,271) 2,604 3.2 13.5 47.2 13.5 1,398 (13.8) (1,132) (74) (9.2) (15.6) (14.2) (603) 795 (12.5) (5.2) — — — 795 (12.5) (5.2) (12.9) (14.4) (103) 693 (12.4) (3.6) 2023 2,424 2,952 1 (79) 5,298 (2,344) 2,954 (1,666) (84) 1,205 (509) 696 — 696 (89) 607 23,709 22,161 9.1 7.0 688 105.9 105.9 688 105.9 105.9 1,418 1,418 — — — — 426 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 digital transformation. 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 through new technology platforms helps us to 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 2023 EU Industrial R&D Investment Scoreboard (based on 2022 data) recognized our technological effort. We were the top Spanish bank and the second bank globally in R&D investment, with EUR 1,748 million. The equivalent investment in R&D&I to that considered in the ranking was EUR 2,197 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 platform model. It is consistent with the Group's strategic initiatives and global business and operating models. As a result, and mainly because of the successful implementation of Gravity in September 2023, Santander was named the World's Most Innovative Bank by The Banker magazine. Implementing Gravity laid the foundations for digitalization with its own core banking software. To ensure the commitment of all Group units to the IT strategy, the active players in the key decisions of the platform model meet monthly in the Global Platform Governance (GPG) formed by the global, regional and global business technology heads. These principles, combined with the global businesses, guide 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. We constantly develop our Technology and Operations (T&O) model as we adapt to business demands. We created Santander Digital Services (SDS) in January 2023, bringing together Santander Global Technology & Operations and Santander Technology and Operations Spain. The company, with 9,000 employees in Spain, Poland, Portugal, the UK, Mexico, the US, Brazil and Chile, is a key element in Santander's technology and operations strategy, offering its services and know-how to the different Group entities and banks. Innovation is at the core of Santander's activity, with a commitment to the latest technologies that enable more robust, efficient and secure systems and processes, in which SDS teams play a key role. 427 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Finally, like the rest of the Group, SDS is committed to improving its positive impact on society with plans to attract diverse tech talent (BeTech) to help us gain the internal knowledge necessary for our transformation, enhancing internal volunteering initiatives, and implementing specific plans to offset our carbon footprint. Technological infrastructure Santander has a network of high-quality data processing 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 95% of its technology infrastructure to the cloud and has already started to deploy next generation infrastructure in the on-premise private cloud with a technology architecture that provides greater resilience and efficiency while reducing energy consumption. 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 crucial to support our purpose of helping people and businesses prosper and to offer customers excellent digital services. The growing cyber threat combined with the increasing reliance on digital systems make cybersecurity one of Santander’s main priorities. In 2023, Santander continued evolving our cyber defences in line with the Cybersecurity Vision and key strategic initiatives. New controls were implemented following a cyber threat-led approach, covering current areas of risk and new attack methods. In addition to the evolution of our Ransomware readiness and Data Leakage Prevention frameworks developed in 2022, we designed a new Distributed Denial of Service framework, responding to the increased threat derived from the geopolitical backdrop. New controls have been developed, notably around supply chain, backup and recovery and fraud prevention measures reinforced by leveraging behavioural biometric solutions and machine learning technology. To strengthen our response, streamline operations and maximize resources, we inaugurated the Santander Fusion Centre in 2023, enabling closer collaboration between Cyber and IT Monitoring teams. The Fusion Centre operates 24 hours a day, 7 days per week, providing services to all Group entities, detecting, monitoring and responding to operational failures and cybersecurity events. In parallel, Santander is preparing for the new requirements of upcoming regulations on cybersecurity matters, whilst decoding the pros and cons derived from emerging technologies, such as Quantum and Generative AI. For example, the collaboration with the World Economic Forum to publish "Quantum Readiness Toolkit: Building a Quantum-Secure Economy“, and the implementation of new use cases leveraging AI to improve detection capabilities and automation in cybersecurity operations. Santander continues boosting public-private collaboration, going beyond information sharing. In 2023, Santander was formally associated with the Cybercrime Atlas initiative of the World Economic Forum as a member of the Steering Co. and co- led the first cyber meeting of the European Financial Services Roundtable and Chairs the European FS-ISAC Board. Santander Institute of International Finance (IIF) Cyber also hosted the 11 Roundtable. th Santander proactively identifies IT assets, systems and information and assesses their risk and protection levels to detect and remediate any potential weaknesses by using vulnerability scanning, penetration testing and red team simulations of real cyberattacks. Internal and external auditors periodically review our information systems. In addition to regular testing and reviews, independent third- party certification authorities review and certify our critical cybersecurity processes. Certifications, including the International Organization for Standardization (ISO) 27001:2022 and 27017, and the Statement on Standards for Attestation Engagements (SSAE) 18, are periodically reviewed and updated, certifying new processes and controls annually. For more details on the cybersecurity initiatives we ran in 2023, see the 'Acting responsibly towards customers' section in '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' in 'Risk management and compliance' chapter. Fintech ecosystem Santander is an active participant in the fintech ecosystem in all the regions where we operate. As part of our efforts to foster and channel innovation into Santander while providing better customer experience and improving our efficiency, we work with fintech companies as partners. Through our Fintech Station programme, we work with startups and scaleups on pilot programmes and either implement or co-create new products and services with them. In 2023, Santander Fintech Station worked on 15 proof of concepts (POCs) and put six initiatives into production. Santander also provides banking services to these fintech companies, including growth financing, transactional banking, FX and advisory services among others. As an example of collaboration with a fintech, in 2023 SCIB partnered with Komgo to digitalize trade finance and made an equity investment in the company. Santander is an active investor in the fintech sector, sometimes directly (like with Komgo) and through funds sponsored by the Group, such as Mouro Capital (global fintech venture capital fund). To date, Mouro has invested in 47 companies throughout Europe, North America and South America, and continues to be a key tool to spark innovation within the Group. Santander partners with many companies in Mouro's portfolio, for example with ThetaRay for AML/Sanctions screening globally and Autofi for PoS auto financing in the US. Atempo Growth, a pan-European venture debt fund also sponsored by Santander, solidified its market position in 2023, having funded 26 companies, many of them in the fintech space (e.g. Form3, Acin, Clarity.ai). Finally, in 2023, Santander launched a venture debt fund alongside Inveready to provide financing to high growth startups in Spain. 428 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 'Responsible banking' chapter. 429 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6. Significant events since year end In accordance with the agreement reached by the March 2023 general shareholders’ meeting, on 30 January 2024 the board of directors approved a capital reduction of EUR 179,283,743.50 through the redemption of 358,567,487 shares (representing approximately 2.22% of the share capital), acquired in the First 2023 Share Buyback Programme, with which the share capital has been set at EUR 7,912,789,286, represented by 15,825,578,572 shares. 430 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7. Trend information 2024 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 54 of the consolidated financial statements. UK Economic growth is forecasted to be practically flat, with 0.4% GDP growth, with weak consumption due to real income restraints (due to higher interest rates, no price subsidies and unchanged tax thresholds, among other reasons). We expect a soft landing in the labour market from full employment to an unemployment rate below 5%. Inflation should be close to 3% by the end of 2024, paving the way for possible Bank of England base rate cuts in the second quarter. We expect rates to end the year at 4.5%. à Macroeconomic environment We expect a moderate economic slowdown in 2024, in an environment of continued uncertainty due to global geopolitical tensions. We expect inflation will continue to decelerate gradually towards the central banks' targets, which should allow regions such as Latin America to continue to cut rates and others, such as the US and Europe, to slowly start reducing them, particularly in the second half of 2024. We do not expect this slowdown to cause a marked pick up in unemployment, given the tight labour supply in most markets. Our macroeconomic forecasts for 2024 by country/region are as follows: Eurozone Following the economic stagnation in 2023, we expect the weaker tone to continue in 2024 (forecast GDP growth of 0.6%). However, the eurozone may avoid a recession as we expect private consumption and foreign demand to pick up. We believe inflation will continue to fall, though not linearly, as the withdrawal of fiscal measures causes temporary upturns. We expect a slight rise in the unemployment rate while remaining close to historic lows. Fiscal policy is expected to adopt a restrictive tone as the Stability Pact is reactivated. The reduction in inflation could pave the way for interest rate cuts in the second half of 2024. Spain We expect GDP growth to slow down in 2024 to 1.6%. Private consumption will likely be the main driver of growth as household disposable income remains high (lower inflation, expected rate cuts in 2024 and a stable labour market). Tourism is expected to grow above GDP, but decelerating. We expect inflation (headline and core) will end the year around 3%. Energy should no longer detract from inflation and the withdrawal of the measures introduced to combat the energy crisis may drive a step up in inflation. Despite this, underlying pressures should moderate and we do not expect second round effects. Portugal Economic growth is expected to moderate in 2024 (forecast GDP growth of 0.6%), driven by subdued domestic demand, as households and businesses face higher interest rates and weaker purchasing power. In the first half of 2024, external demand will likely be affected by the weak recovery in the eurozone but is expected to reverse in the second half of the year, benefiting Portuguese exports. We project the unemployment rate will rise to 8% (near its natural rate) in 2024, due to the lagged effects from lower economic activity. We believe inflation will remain around 2% throughout the year. Poland The economy started to recover in the third quarter of 2023 and we expect higher GDP growth around 3% in 2024, driven by private consumption. The strong labour market and rising real incomes are expected to support domestic demand while the external sector is expected to contribute less to this economic recovery. Our projections show a further decline in inflation to 3% year-on-year in the first quarter and then a pick up to around 7%, dependent on the new government's measures. We assume that the central bank's benchmark interest rate will remain unchanged at 5.75% until the fourth quarter of 2024. US After a more dynamic 2023 than expected, in 2024, we believe economic growth will moderate, affected by cumulative interest rate hikes, post-pandemic savings running out and a less expansionary fiscal policy. We are forecasting a soft landing accompanied by a further rebalancing of the labour market contributing to a gradual decline in inflation. The Fed is waiting to make sure that inflation is converging towards the target before lowering rates and will slow down its balance sheet reduction. Mexico We expect economic growth to remain robust, driven by investments linked to nearshoring and related infrastructure investment projects. We believe the central bank will begin to cut the official rate, albeit gradually, depending on inflation and whether expectations are anchored at its 3% target. 431 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Brazil We expect a deceleration due to lower global economic growth partially explained by the strong agricultural growth in 2023, which will be difficult to repeat. Additionally, there will be uncertainty about commodity prices in an environment of lower demand growth in major developed and developing economies. On the other hand, further rate cuts as monetary policy continues to normalize (assuming inflation nears target) will support GDP growth. Chile After completing its adjustment process in 2023 and correcting the macro imbalances that were generated in the previous expansionary phase, the economy is well positioned to return to growth rates of around 2.5%. We expect inflation will be very close to the 3% target, allowing the monetary policy to get closer to the neutral rate, accelerating rate cuts. Argentina The economy could experience its second year of negative growth, but this time with an intense adjustment programme that aims to balance fiscal accounts and moderate inflation. The extension of the financial agreement with the IMF and an exchange rate more in line with fundamentals, following the devaluation at the end of 2023, should ease external pressures and enable the country to rebuild international reserves. à Financial markets Financial markets ended 2023 pricing in optimism regarding upcoming monetary policy changes in advanced countries. Historically, as monetary policy eases (especially at the beginning of the cycle) there have been downward corrections in long-term bond yields. We expect this to occur again in 2024, with a greater impact on US debt than German. We also expect a gradual normalization of yield curve slopes in the sovereign bond market once official rates start to decline. Narrower interest rate differentials and the cyclical gap between the US and eurozone economies closing suggest the US dollar will depreciate gradually. We believe a soft landing will support equity markets. The global environment suggests positive but low absolute returns for equities in 2024. Lower activity, higher interest burdens and less ability to pass through costs to prices imply more pressure on profit margins. In emerging markets, the Chinese economy and the measures it will take to solve its real estate problems remain a major source of uncertainty. In Latin America, we believe markets will benefit from the progressive containment of inflation, the rate cuts by Latin American central banks and a more benign global monetary environment in which central banks in advanced countries may also start cutting rates. The risk in this central scenario is that central banks in advanced economies delay the start of their cuts, or that the Chinese economy slows further, negatively affecting investor appetite. The banking environment will be shaped by monetary policy, the gradual withdrawal of excess liquidity and a lower economic growth, which are expected to slightly impact net interest income and credit quality. Risks are slightly skewed to the downside. They may come from non-bank financial players and include potentially disorderly asset price adjustments and liquidity market disruptions. However, most entities should have enough capital to cope. Aside from the economic environment, banks must digitalize faster while identifying and managing climate change risks. à Financial regulation In 2024, we expect greater emphasis on sustainability, digital and retail banking agendas. European Parliament elections in June 2024 (every five years) could slow down the adoption and presentation of new proposals. Prudential and resolution Following the 2023 agreement in Europe on Basel III reform, we expect the final framework to be published in early 2024 and to be implemented from 1 January 2025. The US and the UK will continue to discuss their respective proposals to implement Basel III. The Basel Committee will continue to work on the lessons learned from the collapse of Silicon Valley Bank and Credit Suisse, and on further developments of the prudential framework for cryptoasset exposures. In addition, we expect discussion on specific issues such as the capital buffer framework in Europe as well as on the securitization framework at international level. We do not expect much progress on the crisis management framework review in Europe, given the lack of agreement on highly political and sensitive issues. Sustainability We expect agreements on the corporate sustainability due diligence directive, energy efficiency directive and the proposal on regulations for ESG ratings activity in Europe. During 2024, the Commission will work on its commitment to reduce the reporting burden by 20%. The EBA, EIOPA and ESMA are expected to publish their definition of greenwashing in the European financial sector. The EBA plans to analyse the need to review the Pillar 1 framework to ensure that climate and environmental risks are adequately integrated. We also expect it to start work on guidelines on transition plan content for banks. We expect the Basel Committee will reach an agreement to complement the Pillar 3 transparency requirements with environmental risk management information. 432 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Digital We believe discussions around artificial intelligence (AI) will intensify, given the opportunities and risks of using generative AI. These ongoing discussions prevented adoption of AI regulation in Europe in 2023, and it is now expected in 2024. G7 principles were recently approved and we expect development of more international principles from different platforms. Discussions in the world of data, payments and CBDCs will continue to be very intense. The Financial Stability Board (FSB) approved several framework recommendations for the regulation of cryptoassets and stablecoins during 2023 that are expected to be implemented by some jurisdictions in 2024. Retail banking The debate will be very much focused on the European Commission's Retail Investment Strategy and on specific issues in certain jurisdictions linked to the consumer protection debate and the rising cost of living. 433 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management These are the main management priorities for 2024 in our Global Business segments and regions: Retail & Commercial Banking's priorities for 2024 are to: → Implement a common operating model, leveraging the scale of Group and our Retail & Commercial Banking local presence. A new global business integrating our retail and commercial banking activities → Spread transformation efforts across our footprint to foster simplification, process automation and deployment of our best-in-class tech platform. → Further increase profitability supported by customer base growth and cost-to- serve efficiencies. • With the aim of better serving our customers, improving efficiency and driving value creation, our focus in 2024 will be on converging our retail and commercial customers to a common operating model. This business and operating model has been designed to deliver our vision of becoming a digital bank with branches, powered by the Santander network, making all our products and services available to our customers through our websites and applications, with the branch network serving as a powerful sales and advisory channel. The global model will be implemented across our footprint and will leverage the Group's scale and local presence. • In 2024, we will extend our One Transformation efforts to all our countries, having concentrated on Spain, Mexico and the US in 2023 (where we achieved 112 bps in efficiency improvements). Our transformation will continue to rest on three strategic transformation pillars: i) customer experience; ii) operational leverage; and iii) global technology platform. • We will further simplify our product offering and make it digitally available to enhance customer experience. By offering a minimum set of products that are highly standardized across markets, we will be able to simplify our operations and improve quality and user experience. • We will streamline additional processes by promoting the reduction of operational activities, use of automation tools and lean organizational structures. This should enable us to improve our efficiency, accuracy and speed, as well as reduce risks. • Our global technological platform, based on our award- winning back-end technology (Gravity( and our cloud based front-end technology (ODS), will be a key element in our transformation. The first technical integration of Gravity and ODS has already been completed in the US, where a new fully-digital offering will be launched nationwide in 2024. All other local units will adopt and/or converge towards the global technological platform in 2024. Executing these three pillars across all our RCB footprint will help the Group progress towards achieving on the targets set out at the 2023 Investor Day. • Customer growth, cost-to-serve efficiencies and a disciplined approach to capital, will contribute to increased profitability in 2024. Customer satisfaction across all segments will remain at the core of our agenda in 2024 as a driver for growth. Execution towards our common operating model will contribute to delivering an exceptional user experience which, with advanced data analytics and in-market presence (digital bank with branches), will promote customer growth. The streamlining of processes and the deployment of a global tech platform will pave the way towards a lower cost to serve. Customer experience Operational leverage Global platform Product simplification and digital first Common operating model, globally leveraging process automation Proprietary back-end (Gravity) and our cloud based front-end (ODS) technologies 434 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Digital Consumer Bank A single model across our markets for our consumer and auto finance business and for Openbank Our priorities for 2024 are to: → Expand our leadership in consumer lending across our footprint (e.g. #1 finance company in Europe and LatAm, top 5 in the US and top 10 in China in auto finance) by providing the best customer experience and enhancing our global relationships. → Converge towards a more digital global operating model, building a world-class digital offering in mobility, supporting our partners' transformation journeys. → Continue to build flex-term solutions (leasing, subscription) based on common platforms. Our focus is to address our customers' needs, as they evolve both in mobility and consumer financing, by providing them with best-in-class point of sale solutions, available through their channel of choice. We are a growth arm of Santander, by bringing mobility, consumer financing and digital banking capabilities at the same time to any market: • Mobility: we are the largest global franchise in a growing market. DCB's competitive advantages include our global reach, our strong relationships with all players in the value chain and our service quality. We focus on improving digital solutions for our end customers and partners and investing in our leasing and subscription global digital platforms. • Consumer financing (non-auto): we are a strong player in Europe and Latin America for checkout lending, buy now, pay later, credit cards and direct loans. We have specialized know- how and tech platforms, with the aim of capturing multi- product customers. • Digital Banking: through Openbank and its advanced data, tech and product capabilities, we can quickly expand into other markets with excellent and enhanced deposit gathering possibilities. In 2024, our strategic projects include: • Mobility: deploy our common leasing platform in a few European markets, continue to develop digital capabilities for OEMs, dealers and new digital players. Expand existing partner relationships across the US and Latin America. • Consumer financing: execute signed flagship deals with major global tech companies and continue to develop solutions in Zinia's new tech stack. • Openbank: further grow customers in Spain and recently entered European markets by continuing to provide a great, fully-digital customer experience. Moreover, we will continue increasing our deposit based funding and the originate to distribute model by expanding our securitization programme. Customer experience Operational leverage Global platform Global relationship management (OEMs, importers and retailers) Operational & commercial benchmark to maximize profitability and growth From multiple country- specific platforms to global platforms (e.g. leasing, BNPL) 435 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our aim is to become a focused, world-class Corporate & Investment Banking business, positioning ourselves as a trusted advisor to our clients whilst delivering profitable growth. Our priorities for 2024 are to: Corporate & Investment Banking → Deepen our client relationships with a particular focus on the US. Our global platform to support corporates and institutions → Make our centres of expertise more sophisticated and further digitalize our business. → Manage capital actively. In order to deliver on our 2024 priorities, we will focus on the following levers: • Deepen client relationships: • Operational leverage: • Boost strategic dialogue, accelerating advisory/value-added products and services to continue growing our fee business. • Focus on executing the plan to take our US CIB franchise to the next level, selectively expanding our client base and product capabilities in areas adjacent to our strengths. • Deliver CIB products and services to the Group's customer base, fostering collaboration with other Santander businesses. • Global platforms: • Active capital management to optimize returns, deepening the Originate-to-Share model to accelerate asset rotation and increase global origination. • Reinforce our global centres of expertise. • Continue building Global Markets business to increase activity with our corporate and institutional clients. • Further leverage technology and invest in AI to digitalize the business and automate end-to-end processes. • Attract, develop and retain top talent. Customer experience Operational leverage Global platform Trusted advisor for our customers, leveraging our global and local products Continue growing fee and transactional business through our global centres of expertise and tech Optimize capital returns on the back of global origination and distribution capabilities 436 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Wealth Management & Insurance Common service models for private banking, asset management and insurance businesses Our ambition in 2024 is continue building the best Wealth and Insurance Manager in Europe and the Americas through 3 strategic pillars: → Improve our customer experience and expand our presence to new countries and businesses. → Boost operational leverage through our global operations and factories. → Continue to build our global platforms. With the aim of maintaining double-digit growth, better serving our customers and remaining one of the most important growth engines of the Group, we will continue to work to become the best Wealth and Insurance Manager in Europe and the Americas. To deliver on this ambition, our priorities for 2024 are organized around three pillars: • Customer experience and growth through the development of new businesses and expanding our presence to new countries. We are entering new markets that are key for our business such as the domestic side of the US or the Middle East. On the Asset Management side, we plan to significantly grow our Alternatives and Institutional businesses. In Insurance, we are focusing on businesses with greater growth potential such as Health, Savings or SMEs, while streamlining our processes to deliver a better customer experience. • Boost operational leverage through our global operations and factories. We are reinforcing the collaboration among our businesses and also with Retail & Commercial Banking and Corporate & Investment Banking to offer the best of our factories and footprint to our customers. We are using our global factories to implement our complete Private Banking model across our footprint and to create a systematic approach to investment advice across countries and simplify and streamline our insurance products and services. • Continue building our global platform across the three businesses. Through a new global investments platform, we are digitalizing the way we distribute investments and provide advice in our markets. We are also completing our Private Banking platform with a focus on digital and we are building new global business platforms in Insurance. Customer experience Operational leverage Global platform Providing our customers with a specialized product & service proposition in all countries Leverage our global operations and factories to connect countries and increase collaboration with CIB and Retail Global platforms and infrastructure to improve efficiency and time-to-market 437 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our priorities for 2024 are to: → Scale up our global platform of innovative payments and integrated value-added Payments solutions Single infrastructures for payments solutions: PagoNxt and Cards → Roll out our global payment platform to all our regions and the open market → Expand our cards business while improving customer experience PagoNxt • Merchant • Strategic management of market share and profitable growth, investing in commercial capabilities to further expand business across Santander's banks and capture opportunities in the open market. • Focus on product globalization and delivery of strategic value-added services. • Investment in globalizing technology to improve efficiency and lower cost per transaction, and scale up our platform. • OneTrade • Complete the deployment of PagoNxt solutions for international business across Santander markets. Scale up open market activities. • Leverage our scale to deliver a market leading proposition. Cards We aim to provide exceptional payments experience, fostering customer loyalty and leveraging transactional data to enhance profitability. To implement this vision we are focusing on three pillars: • Expand our business to increase our revenue. • Drive profitable growth in lending through debit and credit cards through the use of data, improving admission process and limits approval. • Exploit the commercial cards business by leveraging Santander's presence in the Corporate and SME segments. • Connect card issuing and Merchant acquiring platforms, developing new business opportunities between Cards and Getnet. • Improve customer experience: • Consolidate the OneTrade platform to sustain business • Expand, develop and adopt common digital services that growth and capture synergies with the Group. improve customer experience. • Invisible payments to offer our customers the most seamless and convenient card payment experience. • Become a best-in-class global card issuing tech platform: • In 2024, we aim to roll out our global Cards platform, Plard, in six countries. • Payments Hub • Continue expansion of the global payments platform reaching seven different markets. • Migrate a significant volume of transactions so more than 2 billion are processed through the payments platform in the year. • Continue driving a lower cost per transaction through an overall efficiency plan. • Ebury • Consolidate customer franchise through product development, enhanced commercial capabilities and geographical expansion. • Drive operational leverage and significantly improve profitability. Customer experience Operational leverage Global platform Deliver best-in-class payment solutions leveraging our global and local scale Reduce cost per transaction through capex optimization and operational efficiency Migrate volumes to common global platforms to gain scale and offer competitive pricing in the open market 438 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Secondary segments Europe Our strategy in Europe is to remain focused on customer experience, service quality and delivering a common operating model. Our top priorities for 2024 are to: → Improve our customer experience as we progress in our omni-channel strategy, simplifying and adding value to our interactions, moving towards our shared vision of being a digital bank with branches. → Expand our franchise, leveraging our unique position of geographic diversification and scale. → Increase efficiency, maintaining strong cost discipline and increasing productivity by implementing a common operating model based on simplification, scale and agility. → Maximize our business value through agile pricing and active capital management focused on sustainable asset rotation and greater emphasis on high-value origination. Spain Portugal • Accelerate business transformation, in particular • Continue our commercial and digital transformation, with the organizational, process and product simplification, leveraging global platforms and new technologies such as generative AI, which allow us to structurally reduce our cost to serve. • Grow in all business segments focused on further increasing the customer base and loyalty, leveraging our global and regional scale. aim of providing the best customer experience. • Remain best-in-class in terms of efficiency and profitability, providing an adequate return on capital. United Kingdom Poland • Grow based on customer loyalty and exceptional customer experience. • Simplify and digitalize the business to improve efficiency and performance. • Improve our customers' and employees' experience. • Focus on business digitalization increasing services and products offered in all channels. North America In 2024, we expect to begin to see the impact of our platform development programme as we build on our local strengths and increasingly take advantage of our global businesses capabilities to: → Launch new capabilities in each of our North American markets, particularly in digital consumer banking. → Develop our Corporate & Investment Banking platforms in both countries and Wealth Management offshore and in Mexico, to accelerate revenue growth in capital-light businesses. → Continue to simplify our regional operating model to reduce overlaps and increase efficiency. → Increase cross-border coordination to leverage our differentiated footprint across Europe and the Americas. United States Mexico • Digital Consumer Bank: support profitable growth and our digital bank with branches vision by bringing together our consumer finance capabilities with stable sources of USD funding, including the launch our national digital deposit gathering platform. • Corporate & Investment Banking: continue growing focusing on client relationships, leveraging the enhanced advisory and investment banking capabilities both locally and globally. • Wealth Management: accelerate growth through initiatives to expand the offshore customer segments that bank with us. • Advance our technological transformation to improve digital channels, drive digital adoption and further improve customer experience by building on technology and data. • Grow our customer base and increase loyalty, supported by digital products and offerings, new service models and continued product simplification. • Increase synergies with global businesses to drive new and innovative solutions. • Support our customers' green transitions while fostering inclusive and sustainable growth. 439 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management South America The Group's priorities in the region are to: → Strengthen connectivity between our countries and with the Group, through the development of our global and regional businesses, fostering inclusive and sustainable businesses. → Accelerate revenue growth by focusing on more transactional businesses that generate higher fees. → Increase liabilities business, improve specialized value propositions for corporate customers and strengthen our payment services business through our global platforms. Brazil Uruguay • Consolidate our strategy by focusing on value creation and profitability improvement, while keeping credit quality under control. • Increase business volumes, maintaining good levels of efficiency and high profitability. • Simplify our retail product offering and accelerate digital • Continue making progress in business diversification and transformation. customer loyalty. • Simplify products and processes, improving operational efficiency and customer experience. Peru • Become our customers' main bank in the Corporate and CIB segments, continue leading the auto finance market, expand the microfinance business and take advantage of global platforms and digitalization. Colombia • Continue to focus on profitable products for Corporates and CIB, and promote our auto and microcredit businesses (Prospera), with a differentiated value proposition, leveraging regional offerings. We will also analyse additional funding sources to reduce funding costs. Chile • Transform our bank digitally to capture new customers, maintain our NPS leadership and consolidate our position in the mass segment with new product offerings such as Getnet. • Strengthen our corporate and private banking franchise, with specialized value propositions and leadership in FX and Wealth Management transactional products. Argentina • Continue to develop our financial platform, strengthening connectivity between businesses and consolidating recent inorganic acquisitions. • Generate productivity gains and synergies between businesses, focusing on cost management and simplification. DCB Europe Our priorities for 2024 are to: → Expand our European leadership in profitability and scale in auto and consumer lending with competitive, innovative financing solutions. → Accelerate transformation of our operating model towards single platforms, building off Group solutions to improve both end customers' and partners' customer experience, providing the best service while maintaining best-in-class efficiency. → Reduce sensitivity to interest rates by increasing deposit acquisition. → Continue supporting the green transformation of mobility in Europe. 440 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 are susceptible to being fully audited. 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. Additional APMs to those included in this section are presented in section 9.8 of the chapter 'Responsible banking'. 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 and which we refer to as underlying measures. These measures allow in our view a better year-on-year comparability given that they exclude items outside the ordinary performance of our business (e.g. capital gains, write-downs, impairment of goodwill) or certain line items have been reclassified in the underlying ("adjusted") income statement, as their impact on profit is zero, to better understand the trends in the business. Further information is included at the end of section 3.2 'Results'. 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 52.c to our consolidated financial statements. 441 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. 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 Profit attributable to the parent Average stockholders’ equity A interests) (excl. minority This ratio measures the return that shareholders obtain on the funds invested in the bank and as such measures the bank’s ability to pay shareholders. Underlying profit attributable to the parent Average stockholders’ equity A (excl. minority interests) Profit attributable to the parent B Average stockholders’ equity A (excl. minority interests) - intangible assets 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. Underlying profit attributable to the parent B Average stockholders’ equity A (excl. minority interests) - 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. Consolidated profit Average total assets Underlying consolidated profit Average total assets This metric measures the profitability of a company as a percentage of its total assets. It is an indicator that reflects the efficiency of the bank’s total assets in generating profit over a given period. This metric measures the profitability of a company as a percentage of its total assets excluding results from operations outside the ordinary course of business. It is an indicator that reflects the efficiency of the bank’s total assets in generating underlying profit over a given period. Consolidated profit Average risk-weighted assets The return adjusted for risk is a derivative of the RoA metric. The difference is that RoRWA measures profit in relation to the Group’s risk-weighted assets. RoE (Return on Equity) Underlying RoE RoTE (Return on Tangible Equity) Underlying RoTE RoA (Return on Assets) Underlying RoA RoRWA (Return on Risk-Weighted Assets) Underlying RoRWA RoRAC (Return on Risk-Adjusted Capital) Underlying consolidated profit Average risk-weighted assets Underlying consolidated profit Average economic capital Economic Value Added Underlying consolidated profit – (average economic capital x cost of capital) Efficiency (Cost-to-income) Operating expenses C Total income This relates the underlying consolidated profit (excluding results from operations outside the ordinary course of business) to the Group’s risk-weighted assets. This is the return on economic capital required internally (necessary to support all risks inherent in our activity). Economic value added is the profit generated in excess of the cost of economic capital employed. This measures risk- adjusted returns in absolute terms, complementing the RoRAC approach. One of the most commonly used indicators when comparing productivity of different financial entities. It measures the amount of resources used to generate the bank’s operating income. A. Stockholders’ equity = Capital and Reserves + Accumulated other comprehensive income + Profit attributable to the parent + Dividends. B. Excluding the adjustment to the valuation of goodwill. C. Operating expenses = Administrative expenses + amortizations. 442 2023 Annual report Contents 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 (-) Goodwill impairment Profit attributable to the parent (excluding goodwill impairment) (-) Net capital gains and provisions Underlying profit attributable to the parent (excluding goodwill impairment) 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 Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 11.91% 11,076 93,035 11.91% 11,076 — 11,076 93,035 15.06% 11,076 -20 11,096 93,035 19,361 73,675 15.06% 11,076 -20 11,096 — 11,096 73,675 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 — 9,605 71,822 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 — 8,124 -530 8,654 67,964 0.69% 12,209 1,773,103 0.69% 12,209 — 12,209 1,773,103 0.63% 10,764 1,720,273 0.63% 10,764 — 10,764 1,720,273 0.62% 9,653 1,563,899 0.65% 9,653 -530 10,183 1,563,899 1.96% 12,209 624,031 1.96% 12,209 — 12,209 624,031 15.34% 12,209 — 12,209 79,605 3,285 12,209 -8,924 79,605 11.21% 44.1% 25,425 25,425 — 57,647 57,423 224 1.77% 10,764 606,952 1.77% 10,764 — 10,764 606,952 14.00% 10,764 — 10,764 76,872 2,146 10,764 -8,617 76,872 11.21% 45.8% 23,903 23,903 — 52,154 52,117 37 1.69% 9,653 572,136 1.78% 9,653 -530 10,183 572,136 13.73% 9,653 -530 10,183 74,166 2,707 10,183 -7,476 74,166 10.08% 46.1% 21,415 21,415 — 46,404 46,404 — A. Averages included in the RoE, RoTE, RoA and RoRWA denominators are calculated using the monthly average over the period, which we believe should not differ materially from using daily balances. 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 2022 and 2021 economic capital requirements have been recalculated based on the 2023 methodology to facilitate their comparison. D. Following the adjustments in note 52.c to the consolidated financial statements. 443 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Efficiency ratio by business area (EUR million and %) Europe Spain United Kingdom Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank RoTE by business area (EUR million and %) Europe Spain United Kingdom Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank 2023 Operating expenses 9,030 4,227 2,745 542 862 6,465 3,679 2,588 6,920 4,529 1,020 775 2,618 Total income 21,439 10,132 5,525 1,982 3,182 13,174 7,209 5,899 17,971 13,104 2,285 1,544 5,502 % 42.1 41.7 49.7 27.3 27.1 49.1 51.0 43.9 38.5 34.6 44.6 50.2 47.6 2022 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 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 2023 Profit attributable to the parent (excluding goodwill impairment) 5,489 2,371 1,545 896 674 2,360 932 1,560 3,045 1,921 582 386 1,199 Average stockholders' equity (excl. minority interests) - intangible assets 37,931 16,742 11,874 3,458 3,810 24,183 15,355 8,814 21,097 13,987 3,925 694 9,721 % 14.47 14.16 13.01 25.92 17.68 9.76 6.07 17.70 14.43 13.73 14.82 55.60 12.33 2022 Profit attributable to the parent (excluding goodwill impairment) 3,810 1,560 1,395 534 364 2,878 1,784 1,213 3,658 2,544 677 324 1,308 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 % 9.28 7.89 10.70 15.03 11.93 11.06 9.40 16.92 18.77 19.23 19.47 26.23 13.65 444 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 3.14% 2022 3.08% 2021 3.16% 35,620 34,673 33,234 33,821 273 1,517 32,617 271 1,776 31,288 358 1,578 9 9 10 1,133,898 1,124,121 1,051,115 1,059,135 1,058,688 74,763 65,433 995,646 55,469 445 2023 Annual report Contents Credit risk (II) (EUR million and %) Total coverage ratio Total allowances to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted Total allowances to cover impairment losses on loans and advances to customers measured at amortised cost and designated at fair value through OCI Total allowances to cover impairment losses on customer guarantees and customer commitments granted Credit impaired loans and advances to customers, customer guarantees and customer commitments granted Gross loans and advances to customers registered under the headings 'financial assets measured at amortized cost' and 'financial assets designated at fair value through profit or loss' classified in stage 3 (OCI), excluding POCI (Purchased or Originated Credit Impaired) that is currently impaired POCI exposure (Purchased or Originated Credit Impaired) that is currently impaired Customer guarantees and customer commitments granted classified in stage 3 Doubtful exposure of loans and advances to customers at fair value through profit or loss Cost of 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 Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2023 66% 2022 68% 2021 71% 23,490 23,418 23,698 22,788 22,684 22,964 702 734 734 35,620 34,673 33,234 33,821 273 1,517 9 1.18% 12,458 12,932 -474 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 — Average loans and advances to customers over the last 12 months 1,059,566 1,059,972 968,931 NPL ratio by business area (EUR million and %) 2023 Credit impaired loans and advances to customers, customer guarantees and customer commitments granted 14,495 8,529 3,518 1,024 1,397 7,805 6,303 1,489 10,142 7,479 2,332 78 2,877 % 2.32 3.06 1.42 2.59 3.55 4.09 4.57 2.82 5.72 6.56 5.01 1.99 2.12 Total risk 624,696 278,569 247,360 39,503 39,329 190,720 137,893 52,785 177,380 113,937 46,565 3,903 135,608 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 Europe Spain United Kingdom Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank Total risk 639,996 293,197 253,455 41,755 33,350 185,614 140,452 45,107 167,348 101,801 47,811 5,844 125,339 446 2023 Annual report Contents Total coverage ratio by business area (EUR million and %) 2023 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 7,147 4,185 1,066 847 1,024 5,763 4,265 1,489 7,948 6,338 1,230 128 2,532 14,495 8,529 3,518 1,024 1,397 7,805 6,303 1,489 10,142 7,479 2,332 78 2,877 % 49.3 49.1 30.3 82.7 73.3 73.8 67.7 100.0 78.4 84.7 52.7 165.7 88.0 Europe Spain United Kingdom Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 Cost of risk by business area (EUR million and %) 2023 2022 Europe Spain United Kingdom Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank % 0.44 0.62 0.10 0.20 2.08 2.05 1.92 2.43 3.36 4.77 0.80 6.64 0.62 Underlying allowances for provisions over the last 12 months 2,533 1,522 247 Average loans loan-loss and advances to customers over the last 12 months 582,256 246,660 251,362 38,546 32,385 182,037 135,190 46,729 3,733 2,593 1,135 674 77 5,401 4,701 365 150 792 160,644 98,555 45,637 2,262 128,583 % 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 Average loans loan-loss and advances to customers over the last 12 months 612,142 265,051 262,973 40,286 30,721 2,396 1,618 316 440 17 2,538 1,744 788 5,041 4,417 399 132 544 169,980 128,834 40,348 151,705 92,188 42,953 4,541 119,524 447 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 4.76 75,552 15,886 0.79 3.780 4.76 2022 4.26 70,459 16,551 0.66 2.803 4.26 99% 1,036,349 1,047,169 103% 1,036,004 1,009,722 3,296 1,707 1,589 2,730 1,167 1,563 2021 4.12 70,346 17,063 0.71 2.941 4.12 108% 972,682 900,554 448 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 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 2023 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 2023 1.081 0.870 5.397 19.158 2022 1.051 0.853 5.421 21.131 906.417 916.688 282.765 134.786 4.683 4.538 Period-end 2023 1.105 0.868 5.365 18.691 2022 1.068 0.887 5.650 20.805 965.192 909.200 893.635 189.116 4.684 4.343 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 2023. 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 2023 % Europe Spain United Kingdom Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank Total Group 5.7 3.6 7.4 4.4 11.6 4.7 4.2 5.6 19.5 4.6 7.7 127.9 5.5 9.3 449 2023 Annual report Contents Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Profitability and efficiency ratios of new primary segments from 1 January 2024 Ratio Formula Relevance of the metric Global Business RoTE Profit attributable to the parent (excluding goodwill impairment) Average stockholders’ equity (excl. minority A interests) - intangible assets 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. A. Allocated according to RWA consumption. Efficiency ratio by new primary segment (EUR million and %) Retail & Commercial Banking Digital Consumer Bank Corporate & Investment Banking Wealth Management & Insurance Payments RoTE by new primary segment (EUR million and %) Retail & Commercial Banking Digital Consumer Bank Corporate & Investment Banking Wealth Management & Insurance Payments 2023 Operating expenses 12,825 5,263 3,387 1,216 2,344 Total income 29,754 12,296 7,527 3,210 5,298 % 43.1 42.8 45.0 37.9 44.2 2022 Operating expenses 12,059 5,197 2,901 1,104 2,271 Total income 26,994 12,391 6,703 2,678 4,874 % 44.7 41.9 43.3 41.2 46.6 2023 Profit attributable to the parent (excluding goodwill impairment) Average stockholders' equity (excl. minority interests) - intangible assets 5,659 1,901 2,440 1,467 627 37,362 16,502 13,922 2,033 2,512 % 15.15 11.52 17.52 72.16 24.94 2022 Profit attributable to the parent (excluding goodwill impairment) Average stockholders' equity (excl. minority interests) - intangible assets 5,017 2,610 2,233 1,101 693 35,462 16,869 14,085 2,100 2,309 % 14.15 15.47 15.85 52.42 30.01 450 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Risk, compliance & conduct management 451 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Our risk, compliance & conduct management is an essential lever to help people and businesses prosper. → Our risk management and control model together with our risk culture and robust governance contribute to maintaining a medium-low risk profile. → Risk, compliance & conduct continue to support our customers and all our stakeholders to face a challenging environment. → We keep embedding ESG factors across the different risks, both from a regulatory and management perspective. Santander’s risk culture is part of the Santander Way. It represents how we manage risks on a day-to-day basis. 9.0 (over 10) Average rating by employees agreeing to the statement: "Group leaders frequently highlight the importance of managing risks on our day-to-day" 8.3 (over 10) Employees rating of Santander’s performance. Development and reward frameworks motivate people to effectively manage risks 452 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. Risk, compliance & conduct management 1.1 Executive summary and 2023 highlights 1.2 Emerging risks 2. Risk management and control model 2.1 Risk principles and culture 2.2 Key risk types 2.3 Risk, compliance & conduct governance 2.4 Risk management processes and tools Risk appetite and structure of limits Risk Profile Assessment (RPA) Scenario analysis Risk reporting structure 3. Credit risk 3.1 Introduction 3.2 Credit risk management 3.3 Key metrics 3.4 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 454 454 457 459 459 459 460 462 465 465 465 466 472 477 477 477 480 484 485 487 487 488 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 & conduct risk 7.1 Introduction 7.2 Compliance and conduct risk management 8. Model risk 8.1 Introduction 8.2 Model risk management 9. Strategic risk 9.1 Introduction 9.2 Strategic risk management 10. ESG risk factors 10.1 Introduction 10.2 ESG factors risk management 489 489 489 490 491 491 491 496 497 497 497 503 503 503 505 505 505 507 507 510 453     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1. Risk, compliance & conduct management 1.1 Executive summary and 2023 highlights This section outlines Santander’s risk management and risk profile in 2023 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 Credit quality indicators remain in line with expected levels, given the current challenging macroeconomic and geopolitical environment. NPL ratio Cost of risk 3.14% ▲ 6bp s/2022 1.18% ▲ 19bp s/2022 This year's NPL rate performance is explained by the lower increase in impaired loans, thanks to proactive management and NPL portfolio sales, and the lower relative growth of the credit risk with customers. The cost of risk has remained slightly below 120 bp, mainly due to the good performance in the year of loan-loss provisions in Spain, the UK and Chile. The 2023 credit risk strategy focused on: → A customers-related proposal that improves time to market and simplifies the product offer. → Managing the effects of increased cost of living (monitoring most affected sectors/customers, playbooks, local customer support measures, among others). → Strengthening the balance sheet by divesting less profitable assets (portfolio sales). → Driving digital transformation to improve profitability and support subsidiaries in the transition to global business management. Market, structural and liquidity risk > Section 4 Our risk profile remained stable, despite some Value at Risk (VaR) spikes due to high market volatility in some periods. Average VaR A LCR € 11.7 Mn ▼ 2.4 Mn s/2022 166% ▲ 14 pp s/2022 A. LCR: Liquidity coverage ratio VaR remained generally stable throughout the year averaging EUR 11.7 million, rebounding at times of high volatility in the markets (max. EUR 19.3 million) due to events related to the regional banks and the negotiation of the debt ceiling in the United States or the increase in tension in the Middle East. Robust and diversified liquidity buffer by customers, business and geographies, with ratios well above regulatory requirements. A summary of our 2023 highlights is described below: → Highly liquid balance sheet & well-diversified deposit base, composed mainly by retail deposits with stable structure (approximately 75% are transactional). → Reduced exposure to Interest Rate Risk in the Banking Book (IRRBB) with conservative risk appetite limits. → Our exposure to unrealized losses on the held-to-collect bond portfolio (HtC) compared to CET1 is among the lowest in the banking system. → Trading business focused on customer service. 454   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Capital risk > Section 5 Operational risk > Section 6 The latest EBA stress test has once again demonstrated the strength of our business model and, consequently, that our solvency levels would be sufficient to cope with the most severe macroeconomic scenarios. Credit risk stands out in the distribution of risk-weighted assets (RWA) as it is our core business. → Stable risk profile despite the challenging environment. → Adaptation to regulatory changes focused on operational resilience and Basel principles related to operational risk, environmental, social and governance (ESG) requirements and capital calculation models. CET 1 Fully Loaded 12.3% ▲ 22 bp s/2022 RWA → Widening of the European cyber risk hub, to other geographies outside Europe. 624 bn ▲ 15Mn s/2022 Capital optimization with enhanced models and several initiatives. In addition, our new global business model will allow us to improve capital allocation. Compliance and conduct risk > Section 7 Model risk > Section 8 → Reinforcement of the binding role of internal validation to comply with growing regulatory requirements. → Definition of the IV Next project to evolve the internal validation function, prioritizing key actions through global management. → Optimizing model risk management data exploitation. → Continuous improvement of regulatory models (Internal Rating Based Approach —IRB— e Internal Model Approach — IMA—) to meet supervisory expectations. → Reinforcement of the Group's General Code of Conduct and Canal Abierto. → Development of compliance and conduct frameworks and regulations for CIB. → Progress in the development of a global control room to prevent illicit conduct and identify potential conflictive transactions. → One FCC: improved accountability of the first line of defence, strengthened supervision methodology and support for international anti-money laundering initiatives. → Continuous progress in conduct risk management, especially those derived from sustainability factors in new products, digital channels, financial inclusion and customer vulnerability. → Progress in reputational risk management derived from climate risk factors (materiality assessment and greenwashing). Strategic risk > Section 9 ESG risk factors > Section 10 → Focus on monitoring the consequences of inflationary → Advances in risk appetite with new metrics and limits to pressure, monetary and fiscal policy. support our decarbonization strategy. → We continue to focus on our transformation initiatives. → Progress in our materiality assessment methodology, → Improved challenge of strategic plans, identification and monitoring of emerging risks and analysis of the business model evolution. including a more holistic view and advances in biodiversity. → Progress in the implementation of the climate risk management model through 'The Climate Race' initiative to integrate ESCC factors into the credit granting process. → Participation in the EBA regulatory exercise 'One-off Fit- for-55 Climate Risk Scenario Analysis', which will be extended to 2024. 455 87%10%3%CreditOperationalMarket 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Proactive and efficient risk management in a challenging macroeconomic and geopolitical environment by strengthening how we monitor all risks, key indicators and the most affected customers and sectors. Our business model and solvency levels have demonstrated, once again, their resilience to the most severe macroeconomic scenarios, according to the latest EBA stress exercise. The transition to a low- carbon economy represents a great business opportunity for financial entities that are committed to sustainability, which is why we embed ESG factors in our risk management model. We base segment reporting on financial information presented to the chief operating decision maker, which exclude certain statutory results items that distort year-on-year comparisons and are not considered for management reporting. Grupo Santander has aligned the information in this chapter consistently with the information used internally for management reports and with the information presented in other public documents of the Group. During 2023, the segments were split by geographic area in which profits were earned or by type of business. We prepared 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 were applied. For more details on segments, see section '4.1 Description of segments' of the 'Economic and financial review' chapter. 456 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 1.2 Emerging risks Through our emerging risks exercise, we try to identify key threats to our strategic plan under theoretical stress scenarios with low likelihood of occurrence. We aim to detect, assess and monitor risks that may have a significant impact on our business model, profitability and solvency. Proactive risk management is essential to avoid potentially negative impacts on, and deviations from, targets which could be mitigated through action plans drawn up in advance. Emerging risk identification involves both the first and second line of defence in our subsidiaries and at the corporate centre. We also embed identified risks in 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 2023, potential threats stemmed from, among others, tighter financial conditions, high inflation, tension in the Middle East, and the continuing war in Ukraine. Some core emerging risks and their associated action plans are: Macroeconomic and geopolitical environment Some of the many macroeconomic and geopolitical factors posing risk to our strategy include persistent restrictive monetary policy, intensification of armed conflicts in the Middle East and Ukraine, and rising energy and commodity prices. We analyse situations that we do not include in our base scenario because of their low likelihood (per our emerging risk methodology); however, they can become global risk scenarios that may affect the markets where we operate. For example: • Higher interest rates for longer. Future rises in inflation or delays in the disinflation roadmap could mean restrictive monetary policy remains in place for longer, which would mainly impact on our subsidiaries in Europe and the US — economies in Latin America are at a different stage of monetary policy. This could trigger a worse than expected economic slowdown, with higher unemployment and a drop in house prices that could jeopardize credit quality and liquidity conditions. • Escalation of the conflicts in Ukraine and the Middle East, leading to tighter monetary policy as energy prices and inflation soar. • High increase in public debt levels, triggering a rise in risk premiums, mainly in the eurozone, financial fragmentation, and possible spillover to financial institutions. Macroeconomic and geopolitical uncertainty can potentially hinder our growth and profitability and diminish asset quality due to a slowdown in one or many of our markets. In addition, our clients' income or the value of their financial assets could also be affected, which would likely impact the recoverability of loans and increase our losses or additional provisioning needs. Economic volatility might make our estimates seem inaccurate, our processes seem unreliable and our loan-loss provisions seem insufficient. Grupo Santander has robust risk policies and procedures and manages risk proactively to keep our risk profile within the limits set in our risk appetite statement. This, coupled with our geographical and business diversification, makes us more resilient to macroeconomic and geopolitical risk. In addition, the constant reinforcement of mitigating measures helped reduce the potential severity of these risks. Throughout 2023, we have developed the following actions: • frequent monitoring meetings, including special situation forums (where necessary) to review risk profile and business, market and macroeconomic trends, with the spotlight on key indicators related to the potential escalation of the armed conflicts mentioned above; • playbooks designed and implemented to pursue a quick, forward-looking and proactive response to challenging circumstances; • a large and diverse base of customer deposits that enables us to address challenges from a strong liquidity position; • the means to proactively detect credit impairment (especially in the most affected sectors) and get customers the help they need through specific solutions; • support for our customers in developing sustainable, energy- efficient alternatives to offset the impact of economic cycles and potential energy shocks and adopt the measures implemented by governments to protect the most vulnerable customers; and • asset-liability committee (ALCO) and market committee meetings to monitor structural, interest rate and FX risk, including the coverage of our capital ratios in all major currencies and, where necessary, adjusting our limits and exposure so that we remain within our risk appetite. Growing legislative and regulatory pressure With a business model based on a broad international presence through subsidiaries that maintain relevant market shares in our core geographies in which we operate, Grupo Santander is subject to different regulations. Our status as a global systemically important bank (G-SIB), implies higher capital requirements that could intensify due to new regulations or if supervisors revise current requirements (e.g. on the back of the recent crisis of some regional banks in the US). New laws or extension of existing legislative measures, an increase in minimum capital requirements following supervisor review and assessment, or levies on credit institutions that impact on our business and relations with customer, could stymie profitability and return on equity, increase funding costs and undermine our resilience to economic disruption and ability to extend credit. Any law or regulation could lead to new or stricter prudential requirements, especially in terms of capital and liquidity. This could have a direct impact on the Group's or our subsidiaries’ solvency and/or liquidity levels. The key mitigation measures for this risk are: • monitoring of initiatives included in the capital plan, in line with the continuous improvement of our regulatory models, as well as the mitigation of the possible impacts of Basel standards; and 457 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • creation of multidisciplinary working groups in cooperation with banking associations, regulators and other stakeholders to anticipate possible outcomes of these measures. Risk of suffering a severe cyber attack International conflicts such as the Ukraine and Israel crises produced a worsening threat landscape. The growing cyber threat combined with the increasing reliance on digital systems, make cybersecurity one of Santander’s main priorities. Therefore, we aim to become a cyber resilient organization that can resist, detect and rapidly respond to cyberattacks, while constantly enhancing our defences. To achieve this, we have a cyber risk oversight and control framework to measure the control environment and our risk profile. For more details on the main cybersecurity risks, see 'Cyber risk' in section 6.2 ‘Operational risk management’. To counter these threats, Santander counts with different initiatives described in section '5. Research, development and innovation (R&D&I)' on the 'Economic and financial review' chapter. Risks related to Artificial Intelligence (AI) Artificial Intelligence (AI) is the creation of intelligent systems through machines. These machines are able to operate with a certain degree of autonomy to generate predictions, recommendations, decisions and other outcomes that can impact on physical and virtual environments. Machine learning, deep learning and other AI analytical techniques have different levels of autonomy and complexity. Banks have been using AI for several years to boost operational efficiency and strengthen risk management. In fact, they have been relying on AI to identify early warnings against money laundering, enhance customer experience, provide new insights for more rounded analysis, automate processes to reduce operational risk, and for other means. The use of AI will become more widespread in the coming years, especially as new components like generative AI come to light. We must weigh up the benefits of AI and the oversight and control of using it, which also entails potential risks (complexity and explainability of results, biases, identification of accountability, data privacy, among others) that financial institutions will need to manage and mitigate to remain financially stable. We are firmly committed to promoting the transformation of the financial sector through the responsible use of AI that prioritizes transparency and customer protection. Central bank digital currencies (CBDC) and disintermediation risk The possible launch of digital versions of fiduciary currencies issued by central banks (central bank digital currency — CBDC) could impact on financial stability if they replace traditional accounts, which in turn could affect commercial banks’ volume, structure and cost of lending. An increasing number of central banks are exploring the possibility of issuing CBDC. Some are already running pilot projects to be prepared in case they consider at some point that its issuance is necessary. The focus of the political debate is above all on the versions aimed at the retail market that offer citizens a digital, central bank liability for payments. In the Eurozone, the ECB is making significant headway with the digital euro, which is in what is called the 'preparatory phase' since October 2023. Depending on their design, CBDC could become the new standard of payments and bank deposits, which could lead to a disintermediation of the financial system. This could exacerbate financial instability in time of economic stress, if customers decide to convert euros in their bank deposits into digital euros, which may be perceived as more secure. A massive and disorderly adoption could also impact the financing of financial entities, which could have an impact on the financing of the economy. In addition, CBDC could replace other payment methods, which could have an impact on other business lines. It is not clear what services and what business model banks and other payment providers will be able to provide based on these instruments. The final impact of CBDC will depend on their final design, in terms of the introduction of restrictions on remuneration and maximum holding amounts for citizens, as well as the use cases, infrastructure used and compensation model for intermediaries that they envisage. services. The benefits of CBDC, which are also unclear, will depend on each country or region’s particularities. To mitigate CBDC risk, the Group: • actively participates in the debate on CBDC with national and international authorities in order to explain the risks to financial stability and banks, and propose solutions to mitigate them; • monitors central banks’ CBDC projects to analyse their impact on the business or the possibility of developing new services for our clients. 458 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2. Risk management and control model Our risk management and control model is underpinned by common principles, a solid risk culture, a clear governance structure and advanced management processes on risk types 2.1 Risk principles and culture Grupo Santander's risk management and control are based on these mandatory principles, which consider regulatory requirements and best market practices: 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 be involved to make sure we keep our risk profile within risk appetite, with consistent risk conduct, action, communications, and oversight of our risk culture. 3. Independence of risk management and control functions, according to our three lines of defence model (described in detail under section 2.3 'Risk and compliance governance'). 4. We take a forward-looking, comprehensive approach for all businesses and risk types. 5. Effective information management to identify, assess, manage and disclose risks at appropriate levels. 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. Risk Pro is each employee’s accountability for the risks taken in their day to day and their individual contribution to identifying, assessing and managing risks properly and responsibly. Risk Pro is part of all stages of the employee life cycle, so we ran training in the behaviors of our risk culture. Our performance review system, MyContribution, assigns all Santander employees a common risk objective. In 2023, we continued rolling out our risk culture target operating model, which is based on the best practices identified in the different subsidiaries where we operate. Its main target is to consolidate the risk culture across the Group. We measure how risk cultures is embedded within the organization through YourVoice and other KPIs. Throughout the year, with the aim of promoting our risk culture, we’ve celebrated our global Risk Pro Week to raise employees’ awareness of why they must manage risk in their day-to-day. For more details about Group's risk culture, see the section '1. Our culture' of the 'Responsible Banking' chapter. 2.2 Key risk types Grupo Santander's risk classification is based on our corporate risk framework. It includes the following, which you can find out more about by clicking on the links provided: Credit risk Operational risk Market risk Financial crime risk Liquidity risk Model risk Structural risk Reputational risk Strategic risk ESG risk factors At Grupo Santander we consider that ESG (environmental, social and governance) risk factors can impact the types of risks that exist in different time horizons. Consequently, they must be identified, evaluated, managed and mitigated in accordance with regulatory requirements and market best practices. 459     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2.3 Risk, compliance & conduct governance Our risk, compliance & conduct governance structure pursues an effective oversight of every risk according to our risk appetite. It stands on three lines of defence, a clear committee structure and strong group-subsidiary relations guided by our risk culture, Risk Pro. Lines of defence Our model of three lines of defence effectively manages and controls risks: st 1 The business and support areas that take or originate risks are primarily responsible for managing them. The first line detects, measures, controls, monitors and reports on the risks it originates according to internal risk management policies, models and procedures. Risk management must be consistent with the approved risk appetite and related limits. 2 nd The second line of defence, comprising the risk, compliance & conduct areas, independently oversees and challenges risk management at the first line of defence. Its duties include promoting that risks will be managed according to the risk appetite approved by senior management and strengthening our risk culture across the Group. rd 3 The third line of defence, which is the Internal Audit area, is fully independent to give the board and senior management assurance of high-quality and efficient internal control, governance and risk management to preserve our value, solvency and reputation. Risk, compliance & conduct, and internal audit functions are sufficiently separate and independent from each other. Each function has direct access to the board and its committees. The risk, compliance and conduct functions report to the risk supervision, regulation and compliance committee and the internal audit function reports to the audit committee. Risk, compliance & conduct committees' structure Our risk and compliance & conduct governance aims to: • facilitate effective and efficient decision-making on risks; • oversee risk control; and • check that we manage risks according to the risk appetite set by the Group and subsidiary boards of directors. To achieve these aims, our risk, compliance & conduct governance keeps risk control and risk-taking separate. 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 • Model approval forum • Risk proposal forum Fora: Group CRO Monthly Group CCO Monthly • Market, structural, liquidity and • Corporate product governance capital risk control forum • Credit risk control forum • Provisions forum forum • Financial crime compliance forum • Reputational risk forum 460       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The board of directors has final oversight of risk, compliance & conduct management and control to promote a sound risk culture and to review and approve risk appetite and policy, with support from its risk, regulation and compliance committee and its executive committee. For more details, see section 4.8 ‘Risk supervision, regulation and compliance committee activities in 2023’ 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) leads the application and execution of the compliance & conduct risk strategy and is in charge of overseeing the risks within their purview and reporting on them to the Group CRO. 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 committee, the risk control committee and the compliance & conduct committee are executive committees with powers delegated from the board of directors. Executive risk committee (ERC) The ERC manages risk with board-given authority to accept, modify or escalate important models as well as 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 the CEO and other senior managers from the Risk, Finance and Compliance & Conduct areas. The Group CRO can veto the committee’s resolutions. Risk control committee (RCC) The RCC controls and provides a holistic overview of risks. It makes sure business lines are managed according to the board- approved risk appetite. It also determines and checks the impact of existing and emerging risks on Grupo Santander's risk profile. It is formed of senior officers from the Risk, Compliance & Conduct, Finance and Management control, and other areas. From time to time, subsidiary-level CROs to report to the committee on risk profile. Compliance & conduct committee The committee monitors and reviews compliance & conduct risk management. It also oversees corrective measures for new risks and risks detected among management-related deficiencies. It is formed of senior officers from the compliance & conduct, risk, accounting and management control, and other areas. 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 chart above) that: • inform the Group CRO, the Group CCO, the risk control committee, and the compliance and control 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 establish additional governance measures for special situations, as it has done with the covid crisis, the war in Ukraine, the uncertainty caused by the collapse of several regional banks in the US and Credit Suisse, and the current geopolitical situation. We have upgraded the monitoring of all risks, with special attention to the main macroeconomic indicators, liquidity, vulnerable sectors and clients, cybersecurity reinforcement, among other areas. The special situations forums we have activated are enabling us to cope with the geopolitical and macroeconomic environment in a resilient manner. The Group’s relationship with its subsidiaries Grupo Santander subsidiaries’ risk, compliance & conduct management and control model is consistent with the frameworks approved by the Group board of directors. Subsidiaries adhere to the frameworks through their own boards and can only adapt to higher standards according to local law and regulation. As part of our aggregate risk oversight, we challenge and ratify subsidiaries’ internal regulation and transactions to create a common risk management and control model across the Group. The risk, compliance & conduct functions will continue to support the businesses and oversee risk control both globally and locally. We continued to build on our group-subsidiary relations model by leveraging our global scale to uncover synergy under a common operating model and platform. The model promotes process simplification and more enhanced control to help grow the 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 country control meetings. Local and global risk, compliance & conduct functions also hold meetings to address specific matters. Our subsidiaries cooperate to effectively strengthen group- subsidiary relations through these common initiatives: • evolution of organizational structures based on subsidiary benchmarks and strategic vision to promote more 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. 461 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2.4 Risk management processes and tools In the following section, we describe Grupo Santander's 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. The risk appetite is expressed through qualitative statements and quantitative limits and metrics representative of the bank’s risk profile. Those metrics cover all key risk types 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 risk Operat. risk Financial Crime Risk Model risk Reputat. risk Strategic risk P&L volatility Control of P&L volatility associated with business plan under baseline and stressed conditions 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 concentration levels in customers, sectors and portfolios Non financial risks Solid controls on non financial risks aimed to minimize financial, operative, technological losses, as well as legal and regulatory breaches, and conduct events or reputational damage Our risk appetite and business model rests on: • a medium-low, predictable target risk profile, centred on retail & commercial banking, internationally diversified operations and a significant market share; • 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. • 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 safeguard their risk profiles against compromising 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. Risk appetite is governed throughout the Group by the following principles: • 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. 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, in the different counties, and are inherent to our activities (emerging 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 '1.2 Emerging risks'. • 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 facilitates 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. 462   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • 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. 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 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. • control through the three lines of defence model that the risk appetite limits are subject to periodic oversight and that the specialized control functions report on risk profile and compliance with limits to the board and its committees every month. Risk profile assessment (RPA) Identification and assessment are crucial to managing, controlling and reporting on risks properly. Our risk profile assessment (RPA) covers the Group’s internal and external risks and vulnerabilities and measures their quantitative and qualitative materiality. Our risk framework outlines all material risk types that stem from the Group’s core risk assessments. We systematically evaluate the risk profile of the Group and its subsidiaries using a single RPA methodology based on the core principles of our risk identification and assessment model: area- level accountability, efficiency, common methodology, comprehensive risk coverage, materiality, and guidance on corrective action and mitigation. Under the RPA methodology, we calculate risk profiles based on a points system of 'low', 'medium-low', 'medium-high' and 'high' to make sure the board-approved risk appetite remains within a medium-low, predictable risk profile. In addition, it allows a holistic view of all risks at a given moment in time, pinpointing weaknesses in our risk management and deviations from our business plan to take corrective action. It showcases our prudent risk management that translates to solid solvency ratios and comfortable levels of liquidity. Our risk profile considers these factors: • Risk type, where we measure exposure under base and stressed scenarios through risk appetite and 'top of the house' metrics and internationally recognized, internal and best practice indicators. • Group/Subsidiaries, which gives an aggregated view of risks to the Group and its subsidiaries, as well as threats that may impact on business planning and strategic objectives. The Group's target is to maintain a medium-low risk profile, despite market volatility, a gradual drop in inflation (which remains high) and ongoing geopolitical tension. Our cautious and proactive management led to strong profitability and credit quality indicators, and a robust liquidity risk profile. Scenario analysis Scenario analyses enable us to measure the resilience of our balance sheet and our capital adequacy under stressful conditions. The findings of these analyses are used to review our 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 comprehend 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 other factors that can affect our risk profile in our markets. 463       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 strategic planning when implementing a new risk approval policy, in evaluating the risk profile or when monitoring specific portfolios and business lines; • our annual recovery plan, which specifies which tools Grupo 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/or systemic events; and • risk appetite, with stressed metrics to determine how much risk we want to expose ourselves to. • Recurrent risk management also uses scenario analyses for: • provisions estimates: involve a value correction of credit operations for those existing or prospective risk factors that have not been considered in the initial approval and rating process, both for individual customers and for total portfolio; • regular credit and market risk stress tests 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 section 'Expected loss estimation' in Note 54 to the consolidated financial statement. • climate change scenario analysis, with the Network for Greening the Financial System (NGFS) & Representative Concentration Pathways (RCP) scenarios and others that we’ve created to calculate the impact of climate change. To make stress testing more consistent and robust: • Our three lines of defence and senior management are involved in scenario analysis governance and oversight. • The models we develop estimate future metric values (e.g. credit losses). • Our backtesting and reverse stress exercises challenge model outcomes regularly. • Our teams contribute expert opinions and a vast understanding of portfolios. • And we thoroughly monitor models, scenarios, assumptions, results and mitigating management measures. Against a backdrop of high inflation, record interest rate hikes by central banks, banking sector volatility, armed conflict in Ukraine and the Middle East, initial signs of weak demand for credit, and uncertainty and mistrust in the financial system due to several events in early 2023, scenario analyses were key to pinpointing and managing potential impacts of those events on our portfolios. We boosted our foresight by drawing up action points, adapting our strategy to maintain solvency levels and considering our more vulnerable customers due to the macroeconomic landscape. We continued to build up our analysis of potential losses to the highest level of granularity by enhancing our sector-level methodology and projection tool based on the resilience of each company’s financial statements to different macroeconomic scenarios. We considered their pledge to meet energy commitments through possible transition plans by quantifying impacts under the assumptions of an orderly, disorderly or non- existent transition to be able to keep our management of the portfolio one step ahead. Moreover, we conducted sensitivity analysis on retail customers’ creditworthiness, with special focus on our mortgage portfolio. The analysis considered several interest rate hike scenarios to propose relief and mitigation measures for the most vulnerable customers. Risk reporting structure Senior management gets regular reporting from the Enterprise- wide risk management team on current and future risks so it can remain abreast of our risk profile and exercise sound decision-making. Reporting is dynamic, such that all significant risks are prioritized in a timely and appropriate manner. Our reports cover every risk included in our corporate risk framework, with all necessary considerations for their proper risk assessment. They also provide a consolidated view of all risks, maintaining the information quality and consistency according to our corporate data framework. Our risk reporting structure continues to strike a balance between data, analysis and qualitative commentary, incorporating forward-looking measures, risk appetite information and limits, and emerging risks. We continue to enhance our reporting with simpler, automated processes and tighter controls that adapt to new needs. In 2023, we reported and monitored all the impacts of ongoing armed conflicts; escalated cases of risk from macroeconomic and geopolitical volatility; and paid close attention to every emerging risk that could have a direct or indirect impact on the Group. 464   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 3. Credit risk 3.1 Introduction Credit risk is the risk of financial loss when a customer or counterparty whom Santander has financed or has a contractual obligation with defaults or loses creditworthiness. It includes counterparty risk, country risk and sovereign risk and generates the most 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 to identify, analyse and make decisions about 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. Strategic commercial plans (SCPs) are a risk management and control tool the business and risk areas prepare for our credit portfolios. They determine commercial strategies, risk policies, resources and infrastructure, to have a holistic view of 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 the credit rating engines for each of our segments, which we monitor to calibrate and adjust the decisions and ratings they assign. Collections and recoveries The Collections & Recoveries area draws up a strategy based on local economic conditions, business models and other recovery-related particulars. For effective and efficient recoveries management, the area segments customers based on certain aspects, using new digital channels that help create sustainable value. Scenario analysis Scenario analyses determine potential risks in credit portfolios; give us a better understanding of their performance under various macroeconomic conditions; and enable us to employ management strategies that will avoid future deviations from set plans and targets. 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. 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 a system that helps us determine monitoring levels, policies and special measures for each customer. For more details see section 'Credit risk management', in Note 54 to the consolidated financial statement 465 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management ATOMiC: Advanced Target Operating Model in Collaboration Since its launch, the ATOMiC has transformed credit risk management as we continue to work on daily business operations as part of our credit risk strategy. It enables us to continue strengthening our control environment and our ability to anticipate and handle uncertainty caused by complex, unforeseen events like geopolitical conflict and social and economic instability, and adapt to new regulation from recent years. In 2023, we bolstered our credit risk strategy to help us achieve sustainable and profitable growth. We continued to make headway in digitalization and innovation with the goal of achieving prudent growth. We focused on monitoring portfolio profitability and capital targets with a forward-looking approach in view of the macroeconomic landscape. We also supported the development of the Group’s new global businesses, and embedded environmental, social and climate change (ESCC) risk in credit risk management. Everything we do is consistent with the Group’s strategic principles: • Think Value: Adding value by simplifying credit risk procedures through enhanced automation and digitalization, which enables us to continue refining our customer response times, Net Promoter Score (NPS) and other KPIs. • Think Customer: Keeping the customer at the core of our credit risk strategy by promoting flexible limits and quick response, improving decision-making, maintaining focus on the quality of collections and recoveries, and supporting business areas’ growth. • Think Global: Working as a global team to adapt better and faster to change, as well as sharing knowledge and best practice among internal talent and networks of Group experts and harnessing the benefits of being a multinational organization. As a 'living' strategy, it is reviewed and updated annually. In 2023, the Group drew up initiatives in subsidiaries that helped (and will continue to help) drive faster transformation and innovation and tackle new challenges with ATOMiC Pro. We based these initiatives on four levers we consider vital to their success: i. advanced target operating models (updated TOMs); ii. business success case studies (SCS) that help us understand best practices implemented in the Group; iii. KPIs: metrics that help measure the contribution and impacts of ATOMiC on credit portfolios (including the percentage of automated decisions, time-to-yes, percentage of customers with pre-approved limits); and iv. local transformational initiatives that promote faster implementation of the strategic lines of credit risk in the Group and are subject to specific KPIs. 1 'Others' not included make up the remaining 0.4% (Corporate Centre). Local credit risk strategies are defined based on the starting situation of each country, its budgetary needs and readjusting global objectives to their own reality and particularities. These local strategies therefore jointly build the Group's ambition and credit strategy. ATOMIC enables us to be better prepared for unexpected events, as we constantly strengthen our control framework in terms of: • risk appetite limits and risk profile; • credit risk management based on analytical models and automation; • 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 customers in view of the environment (playbooks); • specific measures for each segment, from individuals to large corporates, such as sectoral exercises with new macroeconomic scenarios, and review of admission cut-off scores; and • enhanced forecasting, proactive monitoring and recovery management by the Collections and Recoveries area. 3.3 Key metrics 2023 overview In 2023, the global macroeconomic landscape continued to be affected by inflation — which did, however, begin to gradually decline due to monetary policy. Grupo Santander’s performance was largely affected by official interest rate hikes in our markets. We had to make credit risk control processes more forward-looking to be ready for future shifts. Though lending margins benefited from interest rate hikes, the financial industry is facing increasing headwinds related to lower loan demand, which is cooling rapidly; lower credit quality with higher credit risk in portfolios; and a potential increase in credit losses due to customers having less disposable income. Our geographical diversification also enables us to tackle the challenging landscape as our markets are at different stages of the economic cycle. Our credit risk maintained a strong, 1 diversified balance of mature and emerging markets: Europe (55%), North America (17%), South America (16%) and DCB (12%). As at December 2023, credit risk with customers climbed 1% from 2022 (0.8% in constant euros). Increases in Brazil and Mexico (backed by appreciating currency) and in DCB drove the Group’s credit risk upwards; however, this was partially offset by a drop in the credit portfolio in our core units in Europe due to early repayment of mortgages. Lower credit portfolio growth, coupled with an increase in impaired credit assets to 35,620 million euros (up 2.7% on 2022), caused the NPL ratio to rise to 3.14% (+6 bps from 2022). The main increases in impaired credit assets were in 466 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management North America, the United Kingdom, Poland and DCB, offset by decreases in the rest of Europe and South America. The Group recognized loan-loss provisions of EUR 12,458 million (up 19% compared to 2022) in compliance with IFRS 9, driven by the provisions made in the US (normalization of the Auto portfolio), DCB (due to portfolio growth), Mexico (driven by loan loss provision normalization and growth in loans to individuals) and Poland (related to Swiss Franc mortgages). Our credit profile in the different markets remained good. Loan-loss reserves totalled EUR 23,490 million. Our NPL coverage ratio decrease to 65.9% (down 1.6 pp on 2022). To understand this coverage ratio, we must consider that mortgages to individuals made up approximately 30% of net customer loans as at December 2023. By and large, these mortgages are found in Spain and the UK and consist of low-risk home mortgages, with low NPL ratios and fewer losses. Grupo Santander has adopted the measures proposed by the governments of Spain, the UK, Portugal and Poland to ease the burden that interest rate hikes place on vulnerable customers with mortgages. Such measures include extending mortgage terms to bring down payments to levels that customers can afford, in addition to the measures we had in place already. The Group continuously monitors the government liquidity programs that were launched during the pandemic, where Spain constitutes the majority. 99% of the grace periods have expired, showing positive behaviour with no signs of deterioration. 467 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management The tables below show key customer credit risk metrics: 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) 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 2023 624,696 278,569 247,360 39,503 39,329 190,720 137,893 52,785 177,380 113,937 46,565 3,903 135,608 5,494 1,133,898 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 1,051,114 Impaired loans (EUR million) 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 2023 14,495 8,529 3,518 1,024 1,397 7,805 6,303 1,489 10,142 7,479 2,332 78 2,877 301 35,620 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 NPL coverage ratio (%) 2023 49.3 49.1 30.3 82.7 73.3 73.8 67.7 100.0 78.4 84.7 52.7 165.7 88.0 32.8 65.9 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 Loan-loss provisions C (EUR million) 2022 2,396 1,618 316 17 440 2,538 1,744 788 5,041 4,417 399 132 544 -10 10,509 2023 2,533 1,522 247 77 674 3,733 2,593 1,135 5,401 4,701 365 150 792 (2) 12,458 2021 2,293 2,320 -245 38 200 1,210 419 791 3,251 2,715 341 140 527 155 7,436 NPL ratio (%) 2022 2021 2023 2.32 3.06 1.42 2.59 3.55 4.09 4.57 2.82 5.72 6.56 5.01 1.99 2.12 5.48 3.14 2023 0.44 0.62 0.10 0.20 2.08 2.05 1.92 2.43 3.36 4.77 0.80 6.64 0.62 (0.04) 1.18 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 Cost of risk D (%/risk) 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 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 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 1,592 million). D. Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months. For more details on the main subsidiaries see section 'Detail of the main geographical areas' in Note 54 of the consolidated accounts. From 1Q'24 (inclusive), Grupo Santander's financial information will reflect changes in the segments we report on, as a result of its new structure/business model. Risk disclosures will also follow these new criteria. 468               2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Reconciliation of key figures Santander’s 2023 consolidated financial statements disclose loans and advances to customers before and after loan-loss reserves. Credit risk with customers also includes off-balance sheet risk or contingent liabilities. This table shows the relationship between those concepts: Gross credit risk with customers 1,133,898 Loans and advances to customers(Gross) 1,059,137 Loan-loss reserves -22,788 Net loans and advances to customers 1,036,349 = = = = Gross credit risk with customers 1,133,898 A Gross loans and advances to customers & others 1,059,137 + Contingent liabilities 74,761 Financial assets measured at amortised cost (Gross) 1,032,511 B Loan-loss reserves -22,666 Financial assets held B for trading + + Financial assets at B fair value (Gross) 11,634 + 14,992 Loan-loss reserves -122 Net financial assets measured at amortised cost 1,009,845 + Financial assets held for trading Net financial assets at fair value + 11,634 14,870 Net loans and advances to customers 1,036,349 Section 3. Credit risk Balance sheet item from consolidated financial statement A. Includes gross loans and advances to customers, guarantees and documentary credits. B. Before loan-loss allowances. The graph below breaks down credit risk (including gross loans and advances to customers, guarantees and letters of credit): Credit risk distribution Distribution by market and segment Santander organizes its credit risk function around three customer groups: • Individuals: All natural persons that are not self-employed individuals, subdivided by income level to manage risk properly by customer type. • SMEs, corporates and institutions: Companies and self- employed individuals, state-owned entities and private not- for-profit organizations. • Large corporates: Corporate customers, financial institutions and sovereigns, which make up a closed list that is revised annually. This list is determined through a complete analysis of the customer (business type, geographic diversification, product types used, volume of income it represents for Santander, among others). 469 Individuals56%Companies24%Large corporates20%   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Below is a breakdown of performing loans and credit impaired by region and segment: Total Total Eur Mn 1,133,898 Segments Individuals Eur Mn 634,455 SME, Commercial Banking and Institutions Eur Mn 277,234 Large Corporates Eur Mn 222,209 'Others' include Corporate Centre. • Europe: The NPL ratio fell 5 bps to 2.32% from 2022, due to a significant reduction in impaired loans in Spain and Portugal on the back of portfolio sales. • South America: The NPL ratio fell 48 bps to 5.72% from 2022, due to the portfolio growth in Brazil and the performance of the Chilean portfolio. • North America: The NPL ratio climbed 106 bps to 4.09% from 2022, mainly because the increase in SC USA (normalisation of the portfolio) and in Mexico (portfolio growth in higher return- risk segment). • Digital Consumer Bank: The NPL ratio climbed 6 bps to 2.12% due to a slight increase in impaired loans, not offset by portfolio growth. 470 Europe55%South America16%North America17%DCB 12%1,098,2781,089,4481,017,88135,62034,67333,234PerformingCredit impaired202320222021Europe52%South America14%North America13%DCB21%613,740610,642577,10720,71518,54315,138PerformingCredit impaired202320222021Europe62%SouthAmerica19%North America17%Others 2%265,219260,481263,33412,01513,34815,568PerformingCredit impaired202320222021Europe55%South America17%North America28%219,319218,326177,4392,8902,7822,528PerformingCredit impaired202320222021 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 measured at fair value. The portfolio of IFRS 9 financial instruments is split according to three credit risk stages: Observed credit risk impairment 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 12 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 from defaults over the financial instrument’s residual life. In this stage, the calculation considers that loss events have already occurred and, therefore, the only possible scenario is that they will materialize in losses. Impairment provisions include expected credit risk losses over the expected residual life of purchased or originated credit impaired (POCI) financial instruments. Stage 3 financial instruments (showing impairment) performed as follows: The following table shows credit risk exposure by stage and geography: 2021 - 2023 Impaired credit assets EUR million A Exposure by stage and geography EUR million. Dec.23 Europe Spain UK Portugal Poland North America US Mexico South America Brazil Chile Argentina Digital Consumer Bank Corporate Centre Total Group Stage 1 531,686 235,757 205,707 34,489 35,906 152,026 103,811 48,191 152,964 96,799 40,198 3,469 Stage 2 48,215 16,141 26,118 3,990 1,907 11,861 9,377 2,484 13,726 9,130 4,033 357 Stage 3 14,495 8,529 3,518 1,024 1,397 7,805 6,303 1,489 10,142 7,479 2,332 78 Total 594,396 260,426 235,344 39,503 39,209 171,692 119,490 52,164 176,832 113,408 46,562 3,903 128,145 4,569 2,877 135,591 3,930 968,751 934 79,305 301 35,620 5,165 1,083,676 A. Does not include EUR 31,396 million in temporary purchases of stage 1 assets, nor EUR 18.826 million in unimpaired risk. Start of period Net entries Perimeter FX and others Write-off End of period 2023 34,673 14,658 (59) 195 (13,847) 35,620 2022 33,234 13,257 — 417 (12,235) 34,673 2021 - 2023 loan loss reserves EUR million 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 End of period Stage 1 and 2 Stage 3 2023 23,418 9,272 14,146 13,524 526 (132) (13,847) 23,490 9,026 14,464 2022 23,698 9,983 13,714 11,665 305 (14) (12,235) 23,418 9,272 14,146 2021 31,767 10,027 — 529 (9,089) 33,234 2021 24,271 10,491 13,780 8,824 (6) (303) (9,089) 23,698 9,983 13,714 471       2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We quantify expected losses from credit events using an unbiased, weighted consideration of up to five future scenarios that could affect our ability to collect contractual cash flows. They consider the time-value of money, information from past events, and current conditions and projections of GDP, house pricing, unemployment and other important macroeconomic factors. We calculated impairment losses using parameters (mainly 4 3 2 and discount rate) based on internal models , LGD , PD EAD and regulatory and management expertise. As they are far from 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 54 to the consolidated financial statement. Forbearance Grupo Santander's internal forbearance policy is a standard for our subsidiaries 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 allows for the strictest possible care and diligence in recoveries. Forbearance must aim to recover outstanding debt, with payment obligations adapted to customers' circumstances. Forborne debt should remain classified as 'doubtful' or put on a watch-list for sufficient time in order to determine both associated risk and reasonable certainty about recovery of ability to pay. Forbearance may never be used to delay the immediate recognition of losses or hinder the appropriate recognition of risk of default. In 2023, forbearance stock fell again (6% in the year), and stood at EUR 31,963 million, due to the good payment behaviour in the main geographies. In terms of credit quality, 47% are classified as credit impaired with average coverage of 44%. Key forbearance figures EUR million Performing Credit impaired Total forborne A % Total coverage 2023 16,919 15,044 31,963 25% 2022 18,988 15,185 34,173 24% 2021 20,504 15,539 36,042 23% A. Total forbearance portfolio loan-loss allowances/total forborne portfolio. 3.4 Other credit risk details Credit risk from financial markets activities This section covers the credit risk generated from treasury activity with customers (especially credit institutions) through money market financing 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 cover includes derivatives contracts, repurchase agreements, securities and commodities lending, long settlements and margin lending. An infrastructure that can measure current and potential exposure quickly and dynamically with various degrees of aggregation and granularity to generate detailed reports is key to decision-making. We measure exposure using 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. We control risk by using a real-time, integrated system that shows the exposure limit with a counterparty for any product and term, and for 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. Santander has specific models to measure this risk. Settlement risk occurs when a transaction is settled through an exchange of flows or assets between two counterparties. For instance, when a counterparty exchanges dollars for euros, settlement implies that one party gives euros and receives an equivalent amount of dollars from the other. Settlement risk is the possibility that one of the parties will default on their settlement commitments. We use a global infrastructure and specific models to measure this risk. 2 3 4 Exposure at Default Probability of Default Loss Given Default 472 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Counterparty risk exposures: over-the-counter (OTC) transactions and organized markets (OM) As at December 2023, the positive market value of total exposure (under management criteria) with netting and collateral agreements for counterparty risk was 13,428 million euros (net credit risk equivalent of 48,372 million euros). In 2023, despite the geopolitical and macroeconomic uncertainty, there was no significant increase in market value or exposure. 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 2023 2022 2021 13,428 48,372 13,249 45,157 5,491 31,444 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. 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 2023 Nominal 24,528 20,326 4,793 1,256,997 6,775,004 20,061 7,909,027 192,682 421,937 61,374 8,585,020 2022 Nominal 14,765 26,177 13,320 1,069,870 5,538,173 13,496 6,479,325 196,476 259,946 52,269 6,988,017 2021 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 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.23 data 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 Up to 1 year 14% 63% Up to 5 Up to 10 More than 10 years years 3% 25% —% 2% years 58% 35% 97% 3% —% 56% 40% 71% 42% 65% 94% 98% 46% 27% 38% 27% 36% 23% 6% 2% 34% 11% 14% 2% 14% 10% —% —% 13% —% 6% 8% —% 8% 2% —% —% 7% 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. Even if the credit quality of some counterparties declines, most counterparty credit risk is with customers with high credit quality (88% rated A or higher), especially financial institutions (23%) and clearing houses (71%). A Counterparty risk: Notional values by customer rating Dec.23 data Rating AAA AA A BBB BB B Other % 0.81% 2.38% 84.36% 11.32% 1.03% 0.08% 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, which we also seek to use 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. 473 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Counterparty risk: Notional values by customer segment Dec. 23 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). Our processes to manage collateral properly and more often have proved effective amid high volatility. 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. At the end of December 2023, CVA adjustments of EUR 293 million and DVA adjustments of EUR 330 million were recorded, down 16.5% and 9.3% respectively, compared to 2022. These declines are mainly due to movements in the credit markets whose spread levels have been moderately reduced compared to December 2022, partly offset by the upward movement in interest rates. 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 internal use of electronic execution systems. 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) and the Capital Requirements Regulation (CRR), transposing the Basel principles on capital calculation. The table below shows the weight of contracts settled by CCP versus total counterparty risk as of December 2023: 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 14,388 14,980 4,793 1,186,033 786,925 2,477 228,551 61,374 2,299,521 % 58.7% 73.7% 100.0% 94.4% 11.6% 12.3% 54.2% 100.0% Nominal 10,140 559 — 44,152 5,844,580 — 193,386 — 6,092,817 % 41.3% 2.8% —% 3.5% 86.3% —% 45.8% —% Organised marketsC Nominal — 4,786 — 26,812 143,500 17,584 — — 192,682 % —% 23.5% —% 2.1% 2.1% 87.7% —% —% Total 24,528 20,326 4,793 1,256,997 6,775,004 20,061 421,937 61,374 8,585,020 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. 474 72%3%1%23%1%Clearing housesCorporates/Project FinanceCommercial banking/IndividualsFinancial InstitutionsSovereign/supranational     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management industry. The chart below shows credit risk by industry as at December 2023: A Diversification by economic sector 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 2022 4,848 758 15 24,349 2023 10,140 559 — 44,152 2021 6,714 — — 38,755 5,844,580 4,555,519 4,054,711 — 35,284 — 6,092,817 4,694,737 4,135,464 — 109,248 — — 193,386 — 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: 0.4% 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 to our management. We continuously monitor credit risk concentration by region and country, economic sector, customer type and other criteria. The board sets concentration limits according to risk appetite. Accordingly, the executive risk committee develops risk policies and reviews the appropriate exposure levels so we can effectively manage credit risk concentration. Because Santander is subject to the CRR stipulations on large risks, exposure with a customer or group of associated customers will be considered 'large exposure' if its value is equal to, or greater than, 10% of eligible capital. No large exposure should exceed 25% of the entity’s eligible capital, including the credit risk reduction effect set out in the regulation. The use of risk mitigation techniques resulted in no groups triggering those thresholds as at the end of December. 5.6% of total credit risk (including loans to customers and off-balance- sheet risk) is with the 20 'large exposure' groups, according to regulation on credit exposure. While 8.5% of total credit risk is with the 40 'large exposure' groups. Our Risk division works closely with the Finance division on actively managing credit portfolios with credit derivatives, securitizations and other techniques to reduce exposure concentration and optimize risk-reward. As indicated in the key metrics section of this chapter, our credit risk is diversified among our core markets (Spain 25%, the UK 22%, the US 12%, Brazil 10%, etc.). Grupo Santander is enhancing these markets with global businesses that will help boost local performance to add value. In terms of sector diversification, 56% of our credit risk is with individuals, who are inherently highly diverse. It is also well distributed, with no significant concentration in a particular A. Excluding individuals and reverse repos. Sectors identification and management Grupo Santander conducts a quarterly review of exposure to customers operating in sectors that could be more affected by macroeconomic conditions (energy consumption, commodity prices, and key macroeconomic variables). It considers: • 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. Country risk In credit risk, country risk involves transactions with customers residing in a particular country with unusual business 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. 475 2%2%13%4%4%19%4%3%4%12%11%4%3%7%2%6%Agriculture, livestock and fishingExtractive industriesManufacturing industryElectricity, gas and water supplyConstructionTrade and repairsTransport and storageHotels and restaurantsInformation and communicationsFinancial and insurance activitiesReal estate activitiesProfessional, scientific and technical activitiesAdministrative activitiesGovernment agenciesOther social servicesOther services 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 5 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 Our exposure to local sovereign risk not in the issuer country’s currency at the end of December was minor (EUR 4,404 million or 1.1% of total sovereign risk), based on our management criteria. Exposure to non-local sovereign issuers with cross- border risk was also minor6 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 11,085 million or 2.7% of total In recent years, total sovereign risk exposure has remained within regulatory requirements and strategy defined for its management. 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 7 by rating : AAA AA A BBB Lower than BBB 2023 18% 19% 41% 12% 10% 2022 27% 19% 34% 11% 9% 2021 15% 32% 26% 11% 16% Sovereign exposure at the end of December 2023 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 4,996 462 (2,187) — — 2,899 1,261 194 16 2,049 11,715 3,311 97 277 229 25,319 2023 Portfolio Financial assets at fair value through other comprehensive income 97 1,247 415 — — 604 607 6,340 2,467 5,253 10,273 12,075 1,040 543 2,843 43,804 Financial assets at amortised cost 34,534 5,150 7,366 — — 4,621 1,919 4,733 310 14,002 5,745 5,439 5,148 1,430 1,455 91,852 Non-trading financial assets mandatory at fair value through profit or loss — — — — — — — — — — — — — — — — Total net direct exposure 39,627 6,859 5,594 — — 8,124 3,787 11,267 2,793 21,304 27,733 20,825 6,285 2,250 4,527 160,975 Spain Portugal Italy Greece Ireland Rest Eurozone UK Poland Rest of Europe US Brazil Mexico Chile Rest of America Rest of the World Total 5 6 7 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. Internal ratings are applied. 2022 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 3,542 134,893 476               2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4. Market, structural and liquidity risk 4.1 Introduction This section is about Grupo Santander’s management and control of market risk in 2023, including trading risk, liquidity risk and structural risk. It provides a brief description of our methodologies and metrics. Market risk comes from movements in interest rates, inflation, foreign exchange, equity prices, credit spread, commodity prices, volatility, liquidity risk from products and the balance sheet, and other market variables that can affect transaction performance. It also includes trading and structural risk. ◦ strengthened the control environment over metrics, static risks and technical procedures through an overhaul of data architecture to reduce calculation times and enable us to run simulations; and ◦ built up the exploitation layer of capital data under FRTB SA. • We enhanced the procedures related to positions measured at fair value to meet regulatory requirements. • We developed and implemented new valuation adjustment methodologies using corporate tools and common standards. Options, futures, forwards, swaps and other derivatives can mitigate some or all of these risks. • We broadened the content and analysis of market risk reporting to top management. Market risk factors that require more complex hedging are correlation, market liquidity, pre-payment and underwriting risk. On-balance sheet liquidity risk, where the bank is unable to meet payment obligations promptly or would do so at a high price, is also key. Losses may result from a forced asset disposal and a cash flow imbalance. Pension and actuarial risk also depend on market variables (for more details, see the end of this section). For further detail on market factors see section 'Activities subject to market risk and types of market risk', in Note 54 to the consolidated financial statement. In 2023, we heightened our focus on climate and environmental factors, 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; 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 the EU’s Capital Requirements Regulation (CRR II) and the EBA’s guidelines on market risks. In 2023, we ran several projects to give control teams the best tools to manage market risk and capital consumption. They included: • We ran numerous initiatives to enhance the calculation of market risk-related capital requirements under the Fundamental Review of the Trading Book - Standard Approach (FRTB- SA) methodology. In particular: ◦ rounded off the scope of calculation for entities and risk factors subject to market risk-related capital; ◦ made necessary amendments to adapt the calculation to the most recent regulation; • We enhanced the governance framework for the approval and use of market risk models. 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 subsidiaries’ risk profiles and gain a holistic view of risk for global analysis and control. Limits management and control system The market risk area runs a daily checks so that market risk positions remain within approved limits and assesses the performance of, and 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 establish that these 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 position 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 year ('Loss trigger' and 'Stop loss'); 477   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • credit limits (limits for total exposure and jump-to-default by Methodologies and key aspects issuer); and • origination limits. Those general limits have sub-limits that make the structure granular enough to control market risks from trading. We monitor subsidiaries’ positions every day. 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. The day a limit breach occurs, subsidiary business managers must provide a written explanation with an action plan to correct it. a) Value at Risk (VaR) Value at risk (VaR), our standard methodology for managing and controlling market risk, measures maximum expected loss with a certain confidence level over a given time. For standard historical simulation, the confidence level is 99% and the time 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 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 within a certain confidence level and time horizon. Market risk-related capital requirements We use internal and standard models to determine market risk- related capital requirements. 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. Still, it does have its limitations: We also use internal models to calculate regulatory capital for the trading books of our subsidiaries in Chile, Mexico and Spain (Santander España’s trading book includes Santander London Branch, which helps diversify its positions). We launched the Market risk advanced platform (MRAP), a global initiative to strengthen market risk infrastructure according to the new Fundamental Review of the Trading Book (FRTB); and to adapt internal market risk models to the latest Targeted Review of Internal Models (TRIM) and to supervisory demands. This initiative includes all subsidiaries that generate market risk; the market risk, T&O, front office, finance and regulatory affairs areas. In 2023, the MRAP programme continued to work on enhancing our processes to measure ‘fair value’. We developed new valuation adjustment methodologies; set corporate standards for valuation adjustment procedures to use them consistently in all the Group’s units; built on control and reporting of positions measured at fair value; and drew up new standards and methodologies to classify financial instruments into levels of fair value. We rolled out all these enhancements in our core markets through corporate tools, enabling us to automate processes and reduce the use of expert judgement significantly. 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 set out in the CRR. • VaR is calibrated to a certain confidence level, above which it does not reveal potential losses. • The liquidity horizon of products in a portfolio is longer than the VaR model’s. • VaR is not a dynamic measure of risk even if it is subject every day to significant, albeit unlikely, changes. • High sensitivity to time windows. • Inability to show plausible high-impact events outside the time window. • No market inputs (e.g. correlations, dividends or recovery rates) for measurement parameters. • 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 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 above VaR at a 99% confidence level. 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. 478 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management According to the Basel Committee, 97.5% ES is a risk level similar to 99% VaR. (P&L) observed on D: Economic P&L, actual P&L, hypothetical P&L, and theoretical P&L. 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 enables us to recognize unexpected outcomes and estimate how much capital could be needed to absorb losses stemming from those outcomes. We regularly calculate and review stress test scenarios for all the trading books of the Group and our subsidiaries, such as: Historical scenarios Historical scenarios consider trading portfolio performance during a crisis or significant past market events to estimate maximum losses if such events reoccur (e.g. the subprime crisis of 2007-2008 and the Covid-19 pandemic). Hypothetical scenarios We use extreme scenarios based on market risk shocks that do not relate to past events (e.g. abrupt crisis with strong movements in all risk factors, worst-case scenarios, scenarios based on regulatory stress exercises, and forward-looking scenarios). Unlike generally ex post historical scenarios, hypothetical scenarios are ex ante. 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. Other stress test scenarios In addition to the above scenarios, other stress tests are calculated on a quarterly basis to identify potential losses or significant impacts on capital arising from extreme market movements (e.g. IRC scenarios, proxy stress scenarios in the VaR calculation, liquidity and concentration scenarios). 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 profit or loss is higher than VaR or VaE) that will influence the calculation of regulatory capital requirements for market risk. Through backtesting, we assess the quality and general effectiveness of our risk measurement model. Our backtesting compares daily VaR/VaE observed on D-1 to profit and loss We run daily backtesting for our subsidiaries, as well as daily, weekly and monthly internal (non-regulatory) backtesting 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 8 the regulatory K 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 correct any incidents we find immediately. Sensitivity to market risk is the estimated impact of change in a risk factor on the market value of an instrument or portfolio. We measure it with partial derivatives or a full portfolio revaluation to get an analytical approximation. The Market risk area’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 9 ) and over time (Theta). On the other hand, we (Vega 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 IRC, an additional metric for credit risk in the trading book. The IRC covers default risk and rating migration risk (which VaR does not show adequately) by taking credit spread changes into account. In general, we apply it to government and corporate bonds; to forwards, options and other bond derivatives; and to credit default swaps, asset-backed securities and other credit derivatives. To calculate it, we take direct measurements of loss distribution tails at the right percentile (99.9%) over a one-year horizon and follow the Monte Carlo method with one million simulations. g) Credit valuation adjustment (CVA) and debit valuation adjustment (DVA) The Group calculates trading book results through CVA and DVA. For further detail on CVA and DVA see 'Credit risk from financial markets activities' in section 3.4 'Other credit risk aspect' 8 9 K: Parameter to calculate regulatory capital consumption for market risk. Vega represents the sensitivity of the value of a portfolio to changes in the price of market volatility. 479 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 4.3 Market risk key metrics In 2023, trading risk levels stayed low amid the high volatility caused by consistently high inflation and pressures on central banks' monetary policies. Additionally, political issues such as debt ceiling talks in the US, elections in certain countries, continuing war in Ukraine or the Middle East conflict, along with the collapse of some regional banks in the US and Credit Suisse case, compounded market volatility. Risks continued to originate from trading non-complex instruments with customers. Most were hedges for interest rate and FX risk. 2023 saw generally low consumption of trading limits, which are based on the Group's market risk appetite. VaR analysis As the VaR of CIB’s trading book shows, market risk strategy focuses on trading with customers to minimize net directional exposure and keep risk diversified by geography and risk factor. Market volatility throughout the year (especially in terms of interest rates) caused VaR to stay mostly above its three-year average — it ended 2023 at EUR 13.5 million. In 2023, VaR fluctuated between EUR 19.3 and EUR 7.5 million. Average VaR in 2023 was EUR 11.7 million, lower than 2022 which was marked by high volatility driven by the impact of the Ukraine conflict on energy prices and its effect on inflation, and slightly higher than 2021 (EUR 14.1 million and EUR 10.5 million, respectively). VaR 2021-2023 EUR million. VaR at 99% over a one day horizon 480 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 2023 and 97.5% expected shortfall (ES) at the end of December 2023: 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 2023 VaR (99%) ES (97.5%) 2022 VaR Min 7.5 (8.5) 8.9 1.4 2.3 2.7 0.7 6.6 (5.3) 5.6 1.5 2.1 2.7 — 1.8 (0.3) 1.8 — 0.3 4.2 (1.3) 4.3 — 0.5 0.7 Average 11.7 (14.9) 12.2 3.2 5.3 4.3 1.6 9.4 (10.5) 9.1 2.8 3.5 4.3 0.2 4.0 (0.7) 3.7 0.2 0.8 7.3 (6.2) 7.3 1.4 3.2 1.6 Max 19.3 (27.3) 20.3 7.3 9.4 6.4 3.2 14.7 (21.6) 16.5 7.1 5.7 6.4 0.6 6.4 (2.6) 6.3 0.5 2.2 13.3 (14.2) 12.6 3.7 8.0 3.2 Latest 13.5 (17.1) 11.1 6.0 4.8 6.1 2.6 11.8 (13.8) 8.2 5.8 5.2 6.1 0.3 5.0 (0.5) 5.0 — 0.5 7.0 (6.6) 5.6 2.4 3.0 2.6 Latest 12.5 (18.9) 11.5 6.1 4.9 5.9 3.0 11.1 (14.9) 9.3 5.3 5.2 5.9 0.3 5.0 (0.5) 5.0 — 0.5 6.2 (7.6) 5.4 2.5 2.9 3.0 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 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 2021 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 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' commodity VaR are negligible and, thus, not shown. VaR at the end of December was slightly higher (EUR 1.9 million difference) compared to the end of 2022, reflecting the spike in market volatility after the latest meetings of the main Central Banks, albeit generally less volatile this year than previous one. Average VaR was lower for all risk factors except exchange rate, which was slightly higher. Temporary VaR increases owe more to short-term price volatility than to significant changes in positions. By region, average VaR fell mainly in Europe (in almost every risk factor), while the slight increase in North America was due to interest rates. 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 0.7 481   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Backtesting Actual losses can differ from predicted losses because of VaR’s limitations. Santander measures the accuracy of our VaR calculation model to make sure it is reliable (see ‘Methodologies’ in section 4.2 ‘Market risk management’). The most important tests we run involve backtesting: on the back of market volatility triggered by the collapse of some regional banks in the US. Regarding VaE at 99%, an exception (daily profit higher than VaE) was observed on 13 December as a result of the devaluation of the Argentine peso. • These results are consistent with assumptions in the VaR • Backtesting of hypothetical P&L and of the entire trading book showed an exception on 13 March (higher daily loss than VaR) calculation model. Backtesting of trading portfolios: daily results vs. VaR for previous day EUR million Change in risk over time (VaR) of structure derivatives EUR million. VaR Vega at a 99% over a one day horizon Derivatives risk management Our operations with derivatives consist mainly in selling investment products and hedging risks for customers. We aim to keep open net risk as low as possible. Trading includes equity, fixed-income and FX options, chiefly in Spain, Brazil, the UK and Mexico. The graph shows the VaR vega of structural derivatives over the last three years. On average, it has increased some EUR 2.8 million. In general, high VaR values stem from sudden spikes in 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 mainly on interest rates, followed by equities and FX rates. In 2023, average risk (EUR 2.4 million) was slightly lower than in 2021 and 2022, considering the high volatility in interest rates throughout the year (see table below): 482 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 1.7 (0.8) 1.0 1.0 0.5 — 2023 Average Maximum 3.7 (8.6) 8.6 2.0 1.7 — 2.4 (1.9) 2.0 1.4 0.9 — 2022 2021 Latest 2.1 (1.2) 1.5 1.2 0.6 — — Average 3.2 (1.1) 2.0 1.4 0.9 — 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 — Thanks to our risk culture and prudent risk management, exposure to complex structured instruments and vehicles is minor. At the end of December 2023, we had exposure to: • hedge funds (as the counterparty in derivative contracts): EUR 57 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; and • monolines: no exposure at 2023 year end. Our policy on approving new derivatives transactions has always been extremely prudent and conservative. It is reviewed by senior management. Scenario analysis The table below shows worst case (i.e. maximum volatility) scenario results from late December 2023: Stress scenario: maximum volatility (worst case) EUR million. Dec. 2023 Total trading Europe North America South America Interest rate (37.5) (10.1) (0.6) (26.8) Equities (10.4) (4.9) (0.1) (5.4) Exchange rate (32.3) (21.4) (1.0) (9.9) Credit spread (0.5) (0.5) — — Commodities — — — — Total (80.7) (36.9) (1.7) (42.1) Our analysis found that Santander's trading books would lose EUR 81 million in market value in the worst-case scenario of market stress. Losses would mainly affect South America (especially if interest rates fall) and Europe (if the euro were to appreciate). 483 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Connection with balance sheet items Below are items on Santander’s consolidated balance sheet that generate market risk. The table distinguishes positions whose main risk metric is VaR from other positions that are monitored with other risk metrics. Risk metric values on the consolidated balance sheet EUR million. Dec. 2023 Assets subject to market risk Cash, cash balances at central banks and other deposits on demand Financial assets held for trading Non-trading financial assets mandatorily at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets measured at amortised cost Hedging derivatives Changes in the fair value of hedged items in portfolio hedges of interest risk Other assets Total assets Liabilities subject to market risk Financial liabilities held for trading Financial liabilities designated at fair value through profit or loss Financial liabilities at amortised cost Hedging derivatives Changes in the fair value hedged items in portfolio hedges of interest rate risk Other liabilities Total liabilities Total equity Balance sheet amount 220,342 176,921 5,910 9,773 83,308 1,191,403 5,297 (788) 104,896 1,797,062 122,270 40,367 1,468,703 7,656 55 53,770 1,692,821 104,241 Main market risk metrics VaR Main risk factors for Other 'Other' balance 220,342 Interest rate 176,921 4,068 1,360 1,761 122,270 450 1,842 Interest rate, spread 8,413 Interest rate, spread 81,547 Interest rate, spread 1,191,403 Interest rate, spread 5,297 Interest rate, exchange rate (788) Interest rate 39,917 Interest rate, spread 1,468,703 Interest rate, spread 7,656 Interest rate, exchange rate 55 Interest rate 4.4 Structural balance sheet risk management Structural risk is the 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 mechanisms consider sub-types of structural risk and their implications, contingencies and interrelations. The Structural risk area’s role in the second line of defence is to oversee that structural risks are understood, controlled and reported to senior management according to established governance: • It sets interest rate risk metrics and reviews and challenges the 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 the Group’s businesses and operations. • It develops and revises models and policy. And it checks that structural risk procedures are fit and proper. 484 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 shareholder equity based on their accounting entry (fair value through shareholder equity). • Structural FX risk: c) 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 in subsidiaries where contractual rates are below market rates and customers have the incentive to pay off all or part of their mortgage early. d) Structural exchange rate risk/hedging of results We measure FX positions, VaR and P&L every day. • Limit on the net permanent position of the core capital ratio. • Limit on the individual hedge required for each currency. e) Structural equity risk We measure equity positions, VaR and P&L. 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 EVE and 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 Group’s risk profile target. Metrics for checking IRRBB include NII and EVE sensitivity to interest rate movements. • Net interest income (NII) and sensitivity: NII is the difference between interest income from assets and the interest cost of liabilities in the banking book over a typical one- to three-year horizon (one year being standard in Santander). It enables us to see short-term risks and supplement economic value of equity (EVE) sensitivity. • Economic value of equity (EVE) and sensitivity: EVE is the difference between the present value of all assets minus the present value of all liabilities in the banking book. It does not include shareholder equity and non-interest-bearing instruments. It enables us to see long-term risks and supplement NII sensitivity. b) Credit spread risk The metrics we use to monitor credit spread risk in the banking book (CSRBB) includes NII and EVE sensitivity to changes in spread curves as well as the impact of stress scenarios on positions that have been identified as affecting CSRBB. 4.5 Structural balance sheet risk key metrics In line with previous years, the market risk profile of the Group’s balance sheet remained moderate in 2023. 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 our footprint was moderate in relation to annual budget and capital levels in 2023. The NII and EVE sensitivities below are based on scenarios of parallel interest rate movements between -100 and 100 bps. Structural interest rate risk Europe At the end of December, sensitivity of NII on our core balance sheets to interest rate hikes was positive, while EVE sensitivity was negative in the case of UK and positive sensitivity in Spain considering the same scenario. Under the scenarios described above, at the end of December, the most significant risk of NII sensitivity to the euro amounted to EUR 886 million; to the pound sterling, EUR 246 million; to the US dollar, EUR 99 million; and to the Polish zloty, EUR 24 million, all with the risk of rate cuts. 485     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Net interest income (NII) sensitivity % of total Net interest income (NII) sensitivity % of total 68.1% 19.7% 3.9% 8.3% 75.0% 19.1% 5.9% * Other: Portugal and SCF. * Other: Argentina, Peru and Uruguay. Significant risk of EVE sensitivity to yield curves of the euro was EUR 391.9 million; of the pound sterling, EUR 392.1 million; of the US dollar, EUR 364 million; and of the Polish zloty, EUR 176 million, mostly with the risk of rate rises. Economic value of equity (EVE) sensitivity % of total 55.2% 28.8% 16.0% The most significant risks to EVE were recorded in Chile (EUR 255 million) and Brazil (EUR 360 million). Economic value of equity (EVE) % of total 53.1% 37.6% 9.3% * 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. At the end of December, the most significant risk to NII was mainly in the US and amounted to EUR 117 million. Net interest income (NII) sensitivity % of total 87.8% 12.2% The most significant risk to EVE was in the US and amounted to EUR 786 million. Economic value of equity (EVE) sensitivity % of total 92.6% 7.4% South America The EVE and NII of our main South American balance sheets are positioned for interest rate cuts. At the end of December, the most significant risks to NII were mainly in Chile (EUR 36 million) and Brazil (EUR 141 million). * Other: Argentina, Peru and Uruguay. Structural foreign exchange rate risk/results hedging Our structural FX risk exposure mainly stems from the performance of, and 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 2023, we hedged nearly all currencies that have an impact on our core capital ratio. In December 2023, our permanent exposures (with potential impact on shareholder equity) were, from largest to smallest, in US dollars, British pounds sterling, Brazilian reais, Mexican pesos, Chilean pesos and Polish złoty. We use FX derivatives to hedge part of those permanent positions. The Finance division manages FX risk and hedging for the expected profits and dividends of subsidiaries whose base currency is not the euro. Structural equity risk Santander holds equity positions in its banking and trading books. They are either equity instruments or stock, depending on the share of ownership or control. Equities in the banking book at the end of December 2023 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 December 2023, VaR at a 99% confidence level over a one-day horizon was EUR 171 million (EUR 195 million in 2022 and EUR 309 million in 2021). 486 ParentUKPolandOthersBrazilChileOthers*ParentUKOthers*USMexicoUSMexicoBrazilChileOthers* 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Structural VaR Homogenous metrics like VaR make it possible to monitor all market risk in the banking book (minus CIB 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. 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 552.7 (368.7) 273.3 477.0 171.1 2023 Average Maximum 914.5 (422.2) 478.0 661.1 197.6 705.0 (416.6) 348.4 580.4 192.8 2022 2021 Latest 749.5 (444.1) 380.2 642.9 171.1 Average 664.0 (417.1) 350.8 493.4 236.9 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 4.6 Liquidity risk management The second line of defence oversees that liquidity risk is understood, controlled and reported to senior management and across the Group according to established governance. For this purpose: • It defines liquidity risk and provides detailed measurements of current and emerging liquidity risks. • It sets liquidity risk metrics, and reviews and challenges risk appetite and limits proposed by the first line of defence. • It assesses and challenges commercial and business proposals, and gives senior management and business units the information they need to understand Santander’s liquidity risk. • It oversees the first line of defence’s liquidity risk management and measures how long business will remain within risk appetite limits. • It reports to governing bodies on compliance with risk appetite limits and any exceptions. • It provides a comprehensive overview of our liquidity risk exposure and profile. • It makes sure that liquidity risk procedures are appropriate to manage the business within risk appetite limits. In 2023, high inflation and the collapse of several regional banks in the US and Credit Suisse in Europe caused considerable uncertainty in the markets. Nonetheless, these events had no impact on Grupo Santander due to our highly diversified sources of financing and assets across markets and businesses. Additionally, 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. 4.7 Main liquidity risk metrics Our solid liquidity position stands on a decentralized model under which each subsidiary manages its own liquidity autonomously. To measure liquidity risk, we use tools and metrics for the right risk factors. We follow the guidelines set out in the Capital Requirements Regulation (CRR II) and the Capital Requirements Directive (CRD IV) to draw up liquidity risk metrics. We determine liquidity scenarios for internal metrics based on the behaviour of other banks in liquidity crises, regulatory assumptions, and expert opinion. These are our core monitoring metrics in the Group: A) Regulatory metrics: a. Liquidity coverage ratio (LCR) assesses the short-term resilience of our liquidity profile by making sure we have enough high-quality liquid assets to withstand a considerable market stress scenario for 30 calendar days. In 2023, the LCR remained stable and well above the regulatory threshold. b. Net stable funding ratio (NSFR) measures long-term liquidity risk. It is the ratio of available stable funding to required stable funding. In 2023, the NSFR of our core subsidiaries and the Group remained above the regulatory requirement of 100% and the internal risk appetite of 101.5%. B) Internal metrics: a. Liquidity buffer assesses whether liquid assets are enough for the bank to survive for set time horizons under several liquidity stress scenarios. b. Wholesale liquidity metric measures the number of days the Group would survive if it used liquid assets to cover lost liquidity from a wholesale deposit run-off (without possible renewal) over a set time horizon. We also use it as an internal short-term liquidity metric to reduce risk from dependence on wholesale funding. 487 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management c. Structural asset encumbrance metrics. We calculate two metrics to measure asset encumbrance risk. One the one hand, the asset encumbrance ratio is encumbered assets to total assets; on the other hand, 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). d. Other liquidity metrics. Grupo Santander has a set of additional liquidity indicators to complement those listed above and to measure other non-covered liquidity risk factors. These include concentration metrics, such as the main and the five largest funding counterparties, and the distribution of funding by maturity. e. Liquidity risk scenario analysis. Grupo Santander has five standard scenarios: i. An idiosyncratic scenario of events that are detrimental only to Santander. ii. A local market scenario of events that are highly detrimental to Grupo Santander’s base country’s financial system or real economy. iii. A global market scenario of events that are highly detrimental to the global financial system. iv. A combined scenario of more severe idiosyncratic and local and global market events, occurring simultaneously in an interconnected manner. v. Climate scenarios, with various stress situations based on the potential economic effects of climate change. We use these stress test outcomes as tools to determine risk appetite and support business decision-making. f. Early-warning liquidity indicators. The system of early warning indicators 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. g. Intraday liquidity metrics. Santander follows Basel regulation and calculates several metrics and stress scenarios for intraday liquidity risk to maintain a high level of control. For more details on liquidity metrics, see section 3.4 ‘Liquidity and funding management’ of 'Economic and financial review' chapter. 4.8 Pension and actuarial risk management Pension risk Grupo Santander runs several defined benefit pension schemes that generate financial, market, credit and liquidity risks from assets and investments, as well as market and actuarial risks from pension obligations. Our pension risk management and control involves identifying, measuring, mitigating and reporting on sources of pension risk to reduce long-term exposure. Grupo Santander uses a VaR methodology to measure pension risk, set pension risk appetite limits and calculate economic capital. Moreover, 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. The majority of our defined benefit pension schemes are in Brazil, Germany, Portugal, Spain and the UK. In 2023, the markets’ effect on pension risk was negative, mainly due to the decrease in discount rates in our main subsidiaries during the last quarter, after increasing expectation in the markets about the possibility that the main Central Banks ended their cycles of interest rates increases. Throughout the year, we took measures to reduce our exposure to pension and actuarial risk by taking advantage of current interest rate levels. Actuarial risk Actuarial risk stems from biometric changes in defined benefit recipients’ and life insurance policyholders’ life expectancy; and from suddenly higher non-life insurance payments. These are the actuarial risks we distinguish: • Life liability risk: Risk of loss on liabilities due to changing risk factors that affect pension obligations, split into mortality/ longevity risk, morbidity risk, withdrawal/surrender risk, expense risk, and catastrophe risk. • Non-life liability risk: Risk of loss on liabilities due to changing risk factors that increase Santander's non-life payment obligations towards employees, split into premium risk, reserve risk, and catastrophe risk. 488 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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. We oversee first-line capital management and check that our capital adequacy and coverage match our risk profile through our Capital Risk area, which is part of our second line of defence. We also oversee transactions that could be considered significant risk transfers (SRT). Capital management falls under the Group’s capital framework and model. It brings together capital planning and adequacy, budget execution and tracking, and the ongoing measurement, reporting and disclosure of capital data. 5.2 Capital risk management The Capital Risk function independently oversees the capital activities carried out by the first line of defence. These activities are split into four workflows to promote an appropriate level and efficient use of capital, meet internal solvency targets and regulatory requirements, and match our risk profile: 1. Capital planning We draw up a capital plan (consistent with the strategic plan) that sets out our solvency targets and the actions required to execute it. The control area reviews the plan to assess the risks that may impact on fulfilling it. 2. Capital adequacy We measure capital levels against the risk assumed, based on a risk profile assessment and our risk appetite framework, and under stress scenarios. Oversight of this process aims to: • cover all significant risks in the course of our operations; • confirm that results are reasonable and consistent with business strategy, the macroeconomic environment and system variables; and • check that planning methodologies and assumptions are appropriate. 3. Capital risk assessment 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 Continuous monitoring of our regulatory capital measurement is an additional control function to count with the right capital risk profile. It involves a review of capital metrics and set thresholds, as well as oversight of compliance with capital risk appetite to keep capital levels above regulatory requirements and market expectations. 4. Origination Assessment of our portfolios' capital efficiency for securitization, risk mitigation, asset sales and other capital optimization initiatives. We oversee securitizations that might be significant risk transfers originated by Santander, in accordance with articles 243 and 245 of Regulations (EU) 2017/2401 and 2017/2402. Oversight is an essential prerequisite for synthetic and traditional securitizations, especially if they can reduce risk- weighted assets (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 meets the requirements of an effective risk transfer; • if it complies with all prudential regulation requirements; • if its risk parameters follow our methodology; and • if its economic rationale meets Group-wide standards. In today’s macroeconomic landscape of high inflation, geopolitical tension, market volatility and other events, we focused on protecting the Group’s solvency and meet the internal objectives. We pinpointed and assessed the risks that could affect solvency and continuously monitored key metrics. The Capital Risk function regularly assesses potential deviations in capital forecasts to set budget uncertainty levels. We oversee progress with the organic capital plan, securitization plan and other initiatives that impact on capital, as well as IRB model reviews. In 2023, we continued to enhance monitoring of the achievement of subsidiaries’ capital contribution targets to spot risk and opportunity relating to our capital targets for the year. We also checked the impact of market variables on capital levels. Moreover, we continued to implement hedging policies to mitigate exchange rate volatility on our CET1 ratio. According to the results obtained in the EBA's stress test, published in July 2023, under the adverse scenario Santander would destroy 170 bps of fully loaded CET1 capital compared to the peer average of 418 bps and to the average of European banking system of nearly 500 bps. This implies that, in absolute terms, the Group at the end of the stressed horizon, would have a fully-loaded CET 1 ratio 30 bps better than the average of its European peers. The Capital Risk function and first line of defence set the solvency appetite limits, which were consistent with the Group’s medium-low risk profile and resilient to stress conditions. 489 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management At the end of December, our fully-loaded CET1 was 12.3%, above our 11-12% target. The fully-loaded CET1 ratio rose 22 bp. We achieved a gross organic generation of 119 bp and recognized a 106 bp charge for shareholder remuneration, of which 44 bp owed to the shareholder remuneration against the results of 2023 (consistent with the target payout of 50%) and 62 bp to the share buyback programme. Under IFRS 9 transitional arrangements, the CET1 phased-in ratio at the end of December was 12.3% and the total phased-in capital ratio was 16.4%, comfortably meeting the Basel Committee's 9.3% and 13.5% minimum levels, respectively. The fully-loaded leverage ratio was 4.69% and the phased-in ratio was 4.71%, which also met the Basel Committee’s 3.5% minimum comfortably. We kept all the Group’s risk appetite metrics above the set solvency limits throughout the whole year. For more details, see section 3.5 ‘Capital management and adequacy. Solvency ratios' in the 'Economic and financial review' chapter. We updated this exercise and added a new distance to maximum distributable amount (MDA) metric for the Group to make our risk appetite framework more robust. Regarding planning, in 2023 we performed a more detailed review of our Group and subsidiary recovery plans to enhance measures and hypotheses. We introduced stricter standards to enhance reporting and governance of SRT securitization oversight during origination. To make monitoring more robust, subsidiaries became more involved in exercises and we drove further 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 enables us to mitigate risk. Our capital metrics are stable, with ratios that remain comfortably above regulatory requirements. The distribution of risk-weighted assets (RWA) by risk factor and by region at year end reflects the Group's core business in credit risk and geographic diversification: RWA by risk type Dec. 23 data A B RWA by region Dec. 23 data A. Credit risk included counterparty credit risk, securitizations and amounts below the thresholds for deduction. B. Others, not included, represent 3% (Corporate centre) 490 10%3%87%OperationalMarketCredit40%19%24%14%EuropeNorth AmericaSouth AmericaDCB   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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, third party supplier risk, and conduct risk. technology risk, cyber risk, legal risk 10 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. Throughout the application of this process, 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 core components needed to manage and control operational risk properly according to advanced regulatory standards and best practices. Its phases are: • strategic planning: covers the activities necessary to define the Group's objective operational risk profile, including setting the risk appetite, estimating annual losses and reviewing the management perimeter. • identification and assessment of risks and internal controls: this process aims to identify the risks and factors that may cause operational risk in the organization and assess their potential impact quantitatively or qualitatively. • ongoing monitoring of the operational risk profile, to regularly analyse available information on the nature and extent of the risks incurred in the development of the Group's activities through an adequate alerts system, based on tools, such as indicators and escalation procedures. • risk response decisions including risk mitigation and risk transfer measures: once the operational risk assessment has been carried out, it is important to identify risk mitigation measures to prevent risks from occurring and, if necessary, to minimize the impact of the risks that have occurred. 10 Legal proceedings stemming from operational risk. • disclosure and reporting, including obtaining, disseminating and making available the information necessary for decision- making to the relevant persons. The main operational risk tools used by the Group throughout the management cycle are the following: • 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; ◦ facilitates regulatory reporting; and ◦ facilitates the development of the economic capital model within the internal capital adequacy assessment process (ICAAP). • Our Operational risk control self-assessment (RCSA) integrates specific reviews that allow for the identification of cyber, technology, fraud, third party supplier risk as well as others risk drivers that could lead to operational risk, as well as the failure to meet regulatory expectations. In addition, the RCSA incorporates reviews related to regulatory compliance, conduct and financial crime risk (for more details, see section 7.2 'Compliance and conduct risk management'). 491 InternaleventsRCSA Key Operational IndicatorsExternal eventsScenarioanalysisKey risk indicatorsRisk appetiteEconomic capital model     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Key Operational Risks (KORs): top – down operational risk assessment, that promotes an open communication from Senior Management about their operational risk concerns so that they are properly evaluated by the rest of the organization and included in the RCSA. • 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 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 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 the 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, cyber risk, cloud, fraud, financial crime compliance, product sales, regulatory compliance, model risk, data management, and supplier risk management, and their own forward-looking monitoring metrics. • Economic capital model: a loss distribution approach (LDA) 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 reporting simplification. Through Heracles, we aim 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. 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 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); • 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. 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 promoting the provision of services to our customers as well as systemic stability. A major pillar of our operational resilience is our business continuity management system (BCMS), which promotes 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. In 2023, we continued to enhance and revise our BCMS to adapt it to the new Operational Resilience regulatory requirements, with particular emphasis on the following aspects: • critical services identification, establishing the impact tolerance for disruption for each of them, according to the bank’s risk appetite, risk capacity and risk profile; • the bank’s operational resilience approach approved by the board of directors, considering the bank’s risk appetite and the tolerance for disruption to its critical services; • internal continuity strategies to minimize the impact on business activities derived from the potential disruptions in the services provided by critical suppliers; 492   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • mandatory risk assessments and cost-benefit analyses in order to select the necessary continuity strategies for each contingency scenario identified; • strengthening the HQ contingency sites with the goal of having 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 • enhancing the methodology to manage and monitor the maturity level of subsidiary business continuity programmes. 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. The main sources of operational risk and their respective mitigation measures are described below: Fraud The transformation and digitalization of the business has given rise to new risks and threats, such as more payment scams and identity fraud. To mitigate these risks, we enhanced control mechanisms and implemented new solutions. 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. Our greater reliance on digital systems also makes cybersecurity one of the main non-financial risks of the business. Our goal is to make Grupo Santander a cyber-resilient organization that can quickly prevent, detect, and respond to cyberattacks, with constantly improving our defences. In the reporting period, an increase in cybersecurity events has been observed, primarily related to Distributed Denial of Service (DDoS) attacks derived from the geopolitical situation, and isolated events involving third-party service providers, which were promptly addressed and resolved. None of these events materially affected our operations. Our team remains vigilant and committed to enhancing our cybersecurity measures to protect against evolving digital threats. In that sense, we continue to improve our risk management and develop controls in line with the Group's global cybersecurity framework and international best practices. From a second line of defence perspective, there is a framework to measure and monitor the cyber risk profile and its control environment. The main areas of focus for this year have been: • Consolidation of a Global second line of defence Center of Excellence for cyber risk providing an opportunity to strengthen control risk activities while achieving efficiencies, simplification, and harmonization. • Establishing homogeneous criteria for regulatory requirements (mostly in SOx and new SEC cyber security requirements). Examples of the controls that we are implementing to mitigate the risk of fraud in Cards include: • Deep dive reviews of BAU processes; and metric assurance processes. → transaction monitoring using advanced fraud prevention models; • Automation and comprehensive, predictive dashboards for enabling detailed cyber risk information. → e-Commerce fraud mitigation with 3D Secure and; → use of biometric authentication in ATMs and branches. Additional examples of controls that we are implementing for online banking fraud include: → Strong customer authentication and signature to approve transactions; → behavioural biometrics and anti-malware protection and; → identification and secure registration of customer devices. Cyber risk International conflicts in Ukraine and Middle East and the professionalization of cybercriminals produced a worsening threat landscape increasing 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 heightened our activity in terms of cybersecurity initiatives to mitigate emerging threats. 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 are quickly adapting our business model and our technology to meet the new needs of our customers as well as new regulatory requirements. In this regard, we are transforming our business and operating model through our global technology initiatives to build a digital bank with branches that provides access to financial services for our customers through several channels. For 2023, the key aspects of our IT Risk Management programme are summarized below: • The adoption of a risk-based approach to prioritize the necessary resources and corrective actions taking into consideration the criticality of our IT assets. 493 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • The thresholds of our risk appetite metrics that are used to monitor the different channels availability have been stressed. We made significant progress on reducing the level of obsolescence in key IT assets that is also measured as part of our risk appetite. • 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. • A specific tool has been developed to help risk practitioners in the analysis and forecasting of potential obsolescence problems in IT assets and thus helping with the strategic budget planning. • Monitoring and reporting of IT relevant incidents. 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. • Detailed deep dive analyses of relevant IT risks as identified in our RCSA to gain an in-depth understanding of these risks, controls and appropriate mitigation plans. • Oversight and challenge of the main IT transformation initiatives. • Regular review of KRI’s and related thresholds to reinforce a consistent oversight of our most relevant IT Risks. 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 2023, in light of an increase in cyber and environmental related risks, as well as regulatory requirements (in particular DORA), 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 with the goal that: • they present an appropriate control environment in accordance with established Group policies and that mitigate the risk level of the service provided; • business continuity plans are in place to allow the delivery of the service even in the event of a disruption; • the proper controls are in place to protect the information processed during the provision of services; • 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. In addition, a deep dive analysis and reinforced monitoring has been performed in order to assess the situation of our suppliers potentially impacted by the Middle East conflict. The main risks and the required controls have been identified, as well as the potential alternatives for the service provided. 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 implemented to revise 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 an important 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 promote 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, cybersecurity, legal, among others). These procedures pursue the proper management of insurance throughout the entire process of identification, assessment, transfer, and retention of risk. 494 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Constant monitoring of incidents and risks is maintained to resolve them promptly for more effective operational risk mitigation measures. • Continuous improvement of the control model related to regulatory requirements such as MiFID11 Act, EMIR , Margin and other regulations. 12 II, the Dodd-Frank • The vendor risk management function continues to be strengthened through tasks such as watch lists and targeted reviews of critical third-party process, improving the risk profile and promoting the compliance with internal and regulatory requirements. • With respect to cyber controls, we have continued to enhance the controls related to data leakage, vulnerability management (focus on vulnerabilities identified in the global platform applications) and control over user access to systems (Zero trust). In addition, monitoring and challenge exercises have been maintained to correct the execution of controls. For more details on regulatory compliance in markets, see section 'CIB Compliance' in 7.2 'Compliance and conduct risk management' • 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 cybersecurity breaches, and third-party claims against directors and officers of the Group (D&O insurance). These global policies are complemented by local insurance policies that adapt to the characteristics of each subsidiary and are purchased according to the Corporate Insurance risk management model implemented in each geography. Analysis and oversight of controls in Corporate & Investment Banking (CIB) Given the nature, specificity, and complexity of financial markets, CIB improves operational risk management and control on a continuous basis. The following enhancements were implemented in 2023: • Continuous review of processes to improve and drive automation and operational excellence in the services provided to our clients, reinforcing a culture of quality and promoting the best CIB standards in all geographies. • The control framework has undergone continuous improvement through regular review of controls and reporting tools that facilitate holistic supervision and monitoring of market activity. The risk of unauthorized trading continues to be monitored on a priority basis, using a specific risk appetite metric that measures the evolution of key risk mitigation controls. 11 12 Markets in Financial Instruments Directive. European Market Infrastructure Regulation. 495 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 6.3 Key metrics Net losses (including incurred losses and net provisions) as per Basel risk categories in the last three years were: 13 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 are stable, compared to the previous year. However, those due to execution, delivery and process management as well as external fraud losses have decreased. 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 2023, 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). A. Does not include employees litigations in Brazil. 13 The Basel categories incorporate risks which are detailed in section 7 'Compliance and conduct risk'. 496 2.4%21.4%1.3%63.4%0.6%0.0%10.9%202120222023I - 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 managementBrazil29%UK16%Spain22%Poland11%US7%Others15% 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 7. Compliance & conduct risk 7.1 Introduction The compliance and conduct activity takes into consideration supervisory requirements, ethical principles and good conduct, for the benefit of employees, customers, shareholders and the community in general, and also covers the risks described below: • Regulatory compliance risk: Risk of non-compliance with legal and regulatory requirements, as well as supervisors’ expectations, which may result in legal or regulatory sanctions, including fines or other economic consequences. • Conduct risk with customers (product governance and customer protection): Risk arising by inadequate practices in the Group's relationship with customers, including the way they are treated, as well as the products and services offered and their suitability for each customer. • Financial crime risk: Risk arising from actions or the use of the Group's means, products and services in criminal or illegal activities. These activities include, among others, money laundering, terrorist financing, violation of international sanctions programs, corruption, bribery and tax evasion. • Reputational risk: the risk of current or potential negative economic impact to the bank due to damage to the perception of the bank on the part of employees, customers, shareholders/investors and the wider community. 7.2 Compliance and conduct risk management 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 and its committees through the Group Chief Compliance Officer (Group CCO). It facilitates critical, independent debate, overseeing and control in terms of regulatory compliance, product governance, consumer protection, financial crime and reputation risk. 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. Regulatory compliance The Regulatory Compliance function oversees and controls regulatory risk from employees, those related to the securities markets (market abuse), regulatory disclosures to the CNMV and other regulatory bodies where Santander is a publicly traded company, and personal data processing. In 2023, we strengthened the two compliance risk oversight functions we created last year through pinpointing, monitoring and reporting on the major risks on investment platforms , and in restructuring area; and through the monitoring of the use and contribution of benchmarks. 14 The main parts of regulatory compliance are: A. Employees We promote a culture of ethics and compliance among our employees, with standards for preventing crime risk, conflicts of interest and anti-competitive practices according to the General Code of Conduct (GCC). On the other hand, we manage the Canal Abierto, Grupo Santander whistleblowing channel, through which employees and other stakeholders can communicate anonymously and confidentially report financial and accounting irregularities of potential significance, as well as violations of internal and external regulation and our corporate behaviours. In 2023, we reviewed the internal regulation that governs Canal Abierto in Spain to make it consistent with Ley 2/2023, de 20 de febrero, de Protección al Informante (Spain’s whistleblower protection law). We updated the Grupo Santander Canal Abierto policy and the related Usage and Operation procedure, which the board of directors had approved in June. Both documents are available on our corporate website and the Canal Abierto platform. In addition, the Group Chief Compliance Officer has been appointed as the person responsible for this channel for Banco Santander S.A. 15 We enhanced communications with core vendors to share Santander’s conduct guidelines and standards regarding ethics behaviour according to our culture and the GCC. For the third year running, we ran initiatives in the compliance and conduct area to promote diversity, equity and inclusion and to spread awareness with Fundación Universia about including professionals from different backgrounds. 14 15 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. Includes Corporate Centre and Santander España. 497   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 defense and employee' compliance. → Issue messages about ethics to the entire Group to build relationships based on trust. → Train the Group’s board members. Disciplinary proceedings Policies and procedures → Investigate conduct that is misaligned with our ethics and compliance principles. → Promote compliance with the GCC and enact special policies and procedures to enforce it. → Assess disciplinary measures. → Report to governing bodies regularly. Appointments Queries about ethics → Assess the suitability of the Group’s board and senior management nominations.* Anti-trust → Manage the anti-trust compliance programme. → Manage queries from employees and members of governing bodies about ethics and internal regulation. → Provide advice on ethics amid controversies. (*) Run by the Corporate Centre Regulatory Compliance, Legal and Internal Governance areas. For more details on Canal Abierto, see section '7.2 Ethical channels' of the Responsible Banking chapter. B. Market abuse Control room team is responsible for applying the Code of conduct in securities markets (CCSM) to prevent unlawful conduct and uncover transactions that could lead to a conflict of interest. In 2023, we continued to build on the initiative to create a Global Control Room to review current policies and procedures and enhance reporting systems. Also regulatory compliance function reviews treasury shares and Group buyback programmes. C. Regulatory communications The Regulatory communications team’s core functions are: • disclosing relevant information as well as key inside information on the Group to the markets, which can be found on both our website and the Comisión Nacional del Mercado Valores (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 executive directors and senior managers to CNMV and other regulatory bodies where Santander is a publicly traded company. 16 17 Foreign Account Tax Compliance Act Common Reporting Standards D. Personal data processing The regulatory compliance function also oversees Grupo Santander’s personal data management risks through: Personal data protection At Santander, we have a specialist area that enforces our corporate policy on personal data protection, which sets out guidelines for all subsidiaries. We strengthened our governance model overseen by each subsidiary’s data protection officer to check compliance with corporate policy. We continued to roll out a comprehensive compliance programme to over 90 Group subsidiaries to manage personal data protection risks effectively. It is supported by a robust control framework based on regular KPIs and each subsidiary’s annual self-assessment. We have adapted this programme to the diverse regulation — in nature and maturity — that applies to our subsidiaries and businesses. Automatic exchange of tax information between countries The data management function oversees automatic tax disclosure between subsidiaries (pursuant to FATCA CRS of local action plans. ) by checking regular reporting obligations and execution and 16 17 498 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management E. Market regulation The SCIB compliance function also oversees the risks from core international market regulations applicable to Banco Santander, such as: • EU Regulation: It has continued to monitor compliance with EU Regulations (mainly MiFID II and EMIR), paying close attention to Reporting, Inducements and requirements related with Algorithmic Trading. The bank has been working also to implement the modifications arising from EMIR Refit. 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; • US Regulation: From a Dodd-Frank perspective, Swap Dealer and Security Based Swap Dealer’s compliance frameworks monitoring has been focused on the swap/security-based swap data reporting. Ongoing work streams are constantly analysing potential enhancements to ensure trade reporting accuracy and completeness. From a Volcker Rule perspective every new activity is monitored and assessed to identify any proprietary trading activities and investment in Covered Funds, under the implemented Moderate Compliance Program across the Group. In addition, there is a specialist team in place focused on the prevention, control and mitigation of risks related to market abuse and different conduct regulatory requirements through a robust Surveillance program on the transactions and communications mainly of markets activity, ALCO and other investment banking business areas. This team works to have global visibility of the group's businesses, carrying out an oversight function over the group’s core subsidiaries and standardizing the controls of Banco Santander S.A. and its international branches. Conduct risk with customers: product governance and customer 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 on customer service in the conduct risk management model, 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. 2. Oversight of key procedures to check that: → our products and services are designed to meet customer's needs with the right balance of risk, cost and profitability; → sales are carried out 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- → 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. Product and service governance We have a two-pronged governance approach to product approval. Each subsidiary has its own approval body that manages conduct risk from marketing new products and services to meet the needs of the target market and check that they 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 (CFGP, 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 2023, products and services design included the following new features: 1. Making products, services and business models sustainable: → Investment services: (i) products and services transformation towards ESG classification; and (ii) modification of the convenience and suitability tests to comply with the European Securities and Markets Authority (ESMA) guidelines, through the incorporation of aspects related to the customers’ sustainability preferences. → Sustainable development: Running innovation and sustainable development initiatives to promote user awareness and responsible consumption (e.g. carbon footprint service). → Financial inclusion: Undertaking initiatives to enable access to financial products and services (e.g. salary advances through SuperMóvil). 499     2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 2. Digital strategy: → Digital channels: Enhancing coverage, quality and user experience of online products and services (e.g. launch in Mexico of DiMo, a service for intermediary payments between accounts via mobile phone number). → Transformation project: Customer impact assessment, offer simplification and special attention to process automation. → Digital assets and Blockchain: (i) development of internal regulations; (ii) review of proposals in the subsidiaries' pipeline; and (iii) participation of Banco Santander, S.A. in the Fnality pilot, which is under the supervision of the Bank of England and is aimed at making payments between financial institutions via a platform based on blockchain technology. Key conduct risk lines of action in 2023 Objectives Lines of action Continue to Adapting internal rules and enhance conduct management models to the risk management shifting landscape and with customers customers’ needs. Raising awareness of conduct risk Awareness and accountability of management and prevention in the first line of defence business and support areas. Sustainable products and services Supporting projects relating to the Group’s transition towards a more sustainable economy. Vulnerable customers and special cases Treating vulnerable customers fairly and appropriately, and making sure we consider their circumstances as part of our services. → Keeping retail customer conduct guidelines consistent with regulation and industry best practice. → Embedding lessons learned from customer conduct risks detected, measured and mitigated by our risk management, especially through first-line self-assessments that boost awareness and accountability. → Exploring advanced analysis and machine learning techniques through the development of algorithms that correlate customer voice data with business indicators to monitor customer’s conduct, embracing innovation and technology for an effective process of corrective measures. → Regularly training our local first- and second-line defence teams on conduct risk. In 2023, we updated mandatory conduct training for all Group employees. → Linking first-line teams’ remuneration to conduct and quality, with a holistic view of branches, online channels, remote customer assistance, and services. → Transparent reporting on investment products and services for retail customers. → Embedding ESG risks in our management through measurement tools and methodologies that enable us to categorize products appropriately, measure ESG risk and meet customers’ sustainability needs. → Developing our global vulnerable customer strategy and helping units implement it. → Monitoring collection and recovery indicators every month. → Performing special monitoring of practices for customers who are affected by the rising cost of living, have disabilities, and are senior citizens. 500 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 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 cross-border economic activity, and thus their detection, deterrence and disruption call for a coordinated global response by the international community and the financial sector. 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 and seek continuous improvement in our control framework. Our FCC function continues to identify and develop new approaches, both internally and via public-private partnership, on responding to existing and emerging threats. Our business functions maintain the primary responsibility for identifying, managing and reporting financial crime risk. We monitor and oversee financial crime risks and promote adequate policies and procedures have been implemented to manage effectively the business within the Group's established risk appetite and supporting the organisation’s risk culture. 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. Our board of directors and senior management continue to see and reinforce the importance of the FCC Strategic Transformation Programme in order to build the Group’s functional and technical control framework for the future. Key achievements over 2023 include: • The publication and transposition of a revised AML/CFT policy, which crystalizes the accountability of the business in managing financial crime risk; • An enhanced methodology for compliance monitoring to check that all subsidiaries subject to FCC policies and procedures follow a consistent approach to supervising and assessing financial crime risk; • Restructuring reporting lines and job profiles across the FCC function, under the Group’s target operating model; • Supporting the Group-wide Anti-Bribery and Corruption Policy (ABC), which aligns to international and supranational guidance such as the Organization for Economic Cooperation and Development Anti-Bribery Convention, with extensive training sessions to target stakeholders across the bank in areas exposed to greater ABC risk; 18 Non-governmental organization Trygg Mat Tracking • Continuing to hub FCC-related activities in newly established operational centres of excellence; and • Moving into production in various jurisdictions with the Group’s strategic platform for sanctions screening and transaction monitoring, with results indicating strong advancement on screening effectiveness. In 2023, we continued to focus heavily on the intersection of financial crime compliance and financial inclusion to ensure both objectives can mutually reinforce one another. We provided subject matter expert support to a UN initiative aimed at building a self-assessment diagnostic tool to evaluate a financial institution's 'awareness of modern slavery and human trafficking risks'. And we continue to pursue public-private partnerships focused on disrupting human trafficking and modern-day slavery, for instance in Europol’s Financial Intelligence Public Private Partnership. These initiatives are all part of the Group’s larger commitment to Sustainable Development Goal 8 (SDG 8), Decent Work and Economic Growth, which includes ending modern slavery, trafficking and child labour. Our capacity building initiatives continue, leveraging in our face- to-face training sessions external guests from law enforcement, regional and international governmental organizations, and key stakeholders from civil society, covering topics like correspondent banking risk, advanced transaction monitoring using artificial intelligence, virtual currencies, data analytics, and human trafficking. Specialist training sessions were also held for stakeholders in the bank with elevated exposure to key risks, such as sanctions and bribery and corruption (for more information see section '2.4 Financial crime compliance and relations with political parties' in Responsible banking chapter), and in-person training to the board of directors focused on emphasizing the interconnectedness between the Group’s focus on an effective FCC framework and advancing on the UN SDG through real examples across our subsidiaries. We also implemented a FCC MLRO (Money Laundering Reporting Officer) Training Academy in 2023, where the inaugural academy focused on promoting collaboration with other functions within the Group on anti-bribery and corruption compliance, environmental and social risk management, and cyber-security. The financial sector’s role in supporting national and supra- national diplomacy continued to be a priority for Santander in 2023. Sanctions programmes such as the Global Magnitsky Sanctions, aimed at fighting human rights abuses and corruption, are applied Group wide, and with the on-going war in Ukraine, we continue to enforce sanctions compliance across the Group’s international operations. Santander FCC function 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, now expanded to cover all types of environmental crime. It brings together actors from the public and private sector, as well as civil society, to coordinate on disrupting the financial networks behind environmental crimes. Highlights over 2023 included case studies from the NGO TMT18 on unregulated and illegal fishing, a presentation from the Ukrainian Financial Intelligence Unit on illegal logging and corruption networks supplying 501 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Europe, and a demonstration by Santander Brazil on the use of satellite imagery in the due diligence process for assessing illegal deforestation risk in the Amazon. 2023 highlights: We continued to enhance management and control, updating guidelines for certain areas. In particular, we: The FCC function also played a key role in opening the Latin America Chapter of United for Wildlife in July 2023, and collaborates regularly with other initiatives focused on environmental crime, like the recently launched Nature Crime Alliance. Advances on disrupting environmental crime are part of the Group’s larger commitment to SDG 13, Climate Action. 19 Highlights over 2023 in our key activities include: • 240,542 disclosures to authorities • 396,482 investigations conducted • 177,298 employees trained • 34 specialised training sessions for experienced FCC staff Reputational risk Reputational risk can arise from multiple sources: from business or business support activities, as a consequence of other risks, from the economic, social and political environment or from events related to our competitors. Our reputation could also suffer if we are the subject of negative coverage in the media, whether it has merit or not. Our reputational risk model takes a preventive management and control approach, with effective handling of early warnings as well as procedures to identify, manage and monitor risk events. It also includes elements for identification, analysis and monitoring of key stakeholders’ perception of Grupo Santander and the financial sector, and how that perception may change. Our model is also aligned with the risk management and control processes (risk profile, risk appetite, ICAAP, emerging risks, among others). • reviewed policies and criteria for action in the financing of sensitive sectors and donations, as well as procedures that develop them; • collaboration with other areas to prepare greenwashing management and control guidelines in order to determine key processes, duties and governance to identify, assess and manage greenwashing risk and meet regulatory requirements; • worked with other areas to prepare humanitarian crisis management guidelines in order to set crisis assessment criteria and the Group’s actions; • analysed the impact and defined preventative and mitigation actions of reputational risks related to climate (e.g. deforestation, fossil fuels, nuclear energy), the cost of living, humanitarian crises, and others; • enhanced our risk materiality assessment methodology, with the spotlight on climate risk and a more detailed description of the reputational impact assessment for internal capital procedures; • enhanced event database and reputational risk standardization procedures according to a new identification, assessment, reporting and escalation methodology; • ran initiatives to share best practices with subsidiaries, including enhancements of collaborative tools and 'Best Practice' workshops; • updated the corporation’s and subsidiaries’ global reputational risk assessment procedure, including new risks and further developing ESG aspects; • built on the reputational risk tool that measures stakeholders’ perception of the Group 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 and challenge, and updated subsidiaries' oversight guidelines. 19 Sustainable Development Goals 502 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 8. Model risk 8.1 Introduction A model is a system, approach or a quantitative method that applies statistical, economic, financial or mathematical theories, techniques and assumptions to transform data into quantitative estimates. We use models mainly for credit scoring/rating, performance, capital and provisioning, market and structural risk, operational, compliance and liquidity risk, and financial accounting and control, among others. The use of models entails certain risks, such as the potential negative consequences of decisions based on poorly developed, poorly implemented or incorrectly used models. Model risk can lead to financial losses, inappropriate business or strategic decisions or damage to the Group's operations. 8.2 Model risk management The model risk function in Grupo Santander has evolved and matured in recent years, enabling robust management both in the corporation and in the main subsidiaries. For the proper management of model risk, we have clear internal regulations that establish the principles, responsibilities and processes of the model´s life cycle, and describe their inventory, governance, management and validation. The intensity of model risk management is relative to the importance of each model. The concept of tiering is the main attribute used to summarise the level of importance of non-regulatory models. The regulatory models, given their particular relevance for the Group, follow the most intense control and management standards. At Grupo Santander we define the following phases of the model's life cycle: 1. Identification The identified models must be included in the scope of model risk control. For sound management, a complete inventory of all models in use is key. There is a Group centralized inventory, a single platform based on an uniform taxonomy for all models used in the business units. The inventory contains all relevant information of each model, enabling to closely monitor them according to their relevance and the tiering criteria. 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 developed, reviewed or implemented during the year. 3. Development In this phase, the Model unit contributes to strengthening risk management by developing models and using data in accordance with existing regulatory requirements. This unit leads the development of models for all types of risks with the spotlight on complying with regulatory expectations (Internal Rating Based Approach -IRB-, IFRS9 and Internal Model Approach -IMA models, among others). To develop models, we have specialized local and global teams. The experts in each geography are responsible for the development of local models, since they know the particularities and needs of each unit, while the global experts define the modelling standards, develop global models and support the geographies in the application of these standards and/or in the development of their own modes if required. Moreover, we use a boxification methodology that enables us to automate, standardize and maintain the quality of model development. Throughout the year, the development function has focused mainly on the completion of the IRB repair program, the delivery of stress test models and the development of models for climate change risk management, among others. At Santander, we believe in the innovation by using machine learning/generative artificial intelligence in a responsible way to develop models. We cooperate with Banco de España on issues related to explainability and control of bias in machine learning models, promoting the use of these new techniques for risks management. 503   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Main activities in 2023 The MRM Next strategic plan (2022-2025) was launched in 2022 with the aim of strengthening the Group's model risk culture and positioning Santander as a benchmark in this area in the industry. During 2023, the strategy focused on: • strengthening the binding role of internal validation to meet increasing regulatory requirements; • definition of the IV Next project to evolve the validation function, prioritising key actions through a global management of validation recommendations and including mitigation elements to focus on the most material risks; • optimising the exploitation of model risk management data; • and continuous improvement of regulatory models (IRB and IMA) to ensure that they are fully aligned with supervisory expectations. 4. Internal validation Independent model validation is a regulatory requirement and key feature of our model risk management and control. A specialist unit that is totally independent from developers and users issues technical assessments of internal model suitability. These assessments are expressed through a rating that summarizes the model risk associated to it. Validation intensity and frequency are well-defined and risk-driven. We have an unique validation approach led by the Single Validation Office, which strengthen the second line of defence promoting a consistent and standardized model risk management across the Group. It has allowed a greater decentralised organizational structure. 5. Approval Before the model´s implementation and use, internal governing bodies must approve it through a governance circuit in place for our model inventory, based on its level of importance. 6. Implementation and use In this phase, we add new models to our IT systems. Because this is another source of model risk, technical teams and model owners test proper model integration based on methodology and expectations. 7. Monitoring and control We regularly review models to check they are working correctly and that they are suitable for their purpose. Otherwise, the must be adapted and redesigned. Control teams must pursue that models are managed according to the general model risk framework and other related internal rules. 504 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 9. Strategic risk 9.1 Introduction Strategic risk is the risk of loss or damage arising from strategic decisions or their poor implementation, or from an inability to adapt to external developments, that may impact the long-term interests of our key stakeholders. Grupo Santander’s business model is a key element of strategic risk, it must be viable, sustainable and capable of generating results in line with the annual objectives and for at least the following three years, in a manner consistent with the Group's long-term vision. Strategic risk has three components: Business model risk, which includes the risk of the 1 model being out of date, becoming irrelevant and/or losing its capacity to continue generating the desired results. Strategy design risk, which relates to the strategy 2 and assumptions set out in Grupo’s long-term plan, considering that this plan may be unsuitable in its nature or because of its assumptions, which could result in the Group not achieving the expected results. Strategy execution risk, which involves the three- 3 year strategic plan and potential deviations from it due to internal and external factors, the lack of capacity to respond to changes in the business environment and the risks associated with corporate development transactions. 9.2 Strategic risk management Our strategy and business model pillars are customer focus, our global scale with local presence, and geographical, business and product diversification. Our global businesses are key to driving more value creation, profitability and shareholder remuneration. Santander views strategic risk as a transversal risk. Subsidiaries refer to our operating model that covers the 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 team engages with key areas of the first- and second-line of defence to pursue that measures are defined and implemented when necessary. In 2023, strategic risk centred around macroeconomic uncertainty, with inflation remaining high and a possible overreaction regarding monetary policy; geopolitical risk related to the potential escalation of military conflicts and deterioration of ties between the US and China; cyber attacks; and execution risk stemming from our transformation initiatives. Our strategic risk model is based on: • Challenging strategic plans: With the support of other specialized areas within the Risk division, the Strategic Risk team 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 2023, we focused on analysing the plans of our new five global businesses as a driver of value creation in our local markets and globally. • Emerging risks: Santander proactively identifies, measures, monitors and manages risks that, under stressed scenarios, could have a significant impact on profitability, liquidity and solvency. In 2023, we worked with our local units to enhance our emerging risks identification and assessment. For more details, see section '1.2 Emerging risks' in this chapter. • Analysis of the business model performance: To identify and assess the main threats to the bank’s business plan and strategic objectives in four areas: • Strategy execution: Assessing the risk of deviation from plans, targets, and strategic and transformation initiatives. • Viability and sustainability: Assessing our position against competitors and the risk of failing to create shareholder value. • Business plan volatility: Assessing 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 our three-year financial plan goals. • In 2023, we continued developing our business model assessment methodology to consider the peculiarities of our local markets more profoundly. • New products commercialization: Assessing new product and service proposals before Santander launches them, to check that they are consistent with the Group’s strategy. • Corporate development transactions: Contributing that transactions of this nature are subject to an assessment of their impact on the risk profile and risk appetite of the Group. 505 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management • Monitoring strategic projects: The Strategic Risk team works with other areas on drawing up and monitoring strategic projects. Progress with these projects is reviewed twice a year, including an independent challenge from the second line of defence, which is key to assessing strategic risk. In 2023, we delved deeper into the execution risk of our transformation initiatives, including the Retail & Commercial Transformation initiative that brings together our consumer and commercial customers under a common operating model to deliver profitable and sustainable growth. As the second line of defence, our Corporate Centre and subsidiaries' Strategic Risk teams provide a consolidated view of our exposure to this risk as well as an independent opinion and challenge of first-line of defence activities. The Strategic Risk Report is regularly submitted to senior management, which includes an update on strategy execution, threats and emerging risks, business model performance, corporate development transactions, products commercialization, and strategic projects. 506 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10. ESG risk factors 10.1 Introduction Environmental Social Governance Managing climate and environmental risk factors is crucial to implementing our strategy, aiding the transition to a low carbon economy, and fulfilling our ambition to be net zero by 2050. - Our social risk management is supported by the definition of several policies and internal frameworks that are leveraged on best practices, conventions, international protocols and codes of conduct in each matter. The management of risks derived from governance is a relevant aspect in two facets: on the one hand, in the internal governance of the Grupo Santander, and on the other, in the evaluation we make of the governance of our customers. Transition risk (TR): effects of the transition to a low-carbon economy, including changes in regulation, technology and market trends: Due to the climate emergency, the data availability and methodology, the environmental aspects within ESG are a focus of attention in the banking industry, among others. For this reason, the following section is more targeted on climate and environmental risks factors, which are considered transversal and likely to have an impact on existing risk typologies such as credit, market, liquidity, operational, reputational and strategic, mainly. These risk factors include the physical effects of climate change and the transition to a low-carbon economy. Market sentiment Physical risk (PR): effects of climate change on economic activity, labour supply, communities, markets, assets and investors. It comprises: Policy action Acute Chronic More intense extreme weather events, such as droughts, hurricanes or floods. Changes in rainfall patterns, extreme weather variability, average temperature rises, severe heatwaves and rising sea levels. Technology Changes in the supply and demand of certain commodities, products and services as they consider climate risk and opportunity, which could lead to reputational and other issues. Implementing carbon pricing mechanisms to reduce greenhouse gas emissions; using energy sources with lower emissions; adopting energy efficient solutions; and promoting water efficiency measures and more sustainable land use practices. The need to build and innovate to support the transition to an energy efficient financial system with lower CO2 emissions. This can have a significant impact on companies as new technology displaces obsolete systems and disrupts some components of the financial system as we know it. In addition, these factors pose a risk and an opportunity for Grupo Santander and our customers. On the one hand, they can impact on customers’ financial solvency across different time horizons and on banks’ reputations. On the other hand, the urgent transition to a low-carbon economy presents a considerable business opportunity for banks like Santander that are committed to offering increasingly sustainable products and services, supporting our customers in their transition. 507   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management We measure the impact of the climate and environmental factors of each risk type across several time horizons. This table shows pre-mitigation impact, our progress with climate matters in 2023, and next steps: Key climate 1 drivers Risk type Credit Main time horizon 2 Potential impact on climate risk factors What we’re doing to manage climate risk Next steps Medium- long term → Extreme weather can lead to higher retail and corporate loan default and lower collateral value. It can also cause income to fall, harm agriculture, and increase insurance coverage and premiums. Moreover, changes in wind patterns that reduce energy production can lead to higher operating costs and hamper productivity. This may increase asset depreciation and early disposal due to property damage in 'high risk' locations. → A failure by borrowers to adapt their business models to a low-carbon economy could heighten credit risk and, therefore, the risk of a reduction in income or activity that may increase default or cause the business to lose value. → Adverse weather conditions can cause significant financial loss, endanger communities, harm the environment and affect the value of guarantees. → Market sentiment that influences demand; obsolete technology; customer preferences. → Higher operating costs for carbon- intensive customers; information requirements (data gathering), especially on emissions (e.g. Scope 3) and green taxonomy disclosures; and new EU financial information directives stemming from government measures. → Conducting materiality assessments to spot physical and transition risk in our portfolios. → Analysing short-, medium- and long- term risk concentration by sector and region. → Creating heatmaps that follow orderly, disorderly and Hot House World scenarios up to 2050. → Implementing mitigation measures such as policies, thresholds and insurance to combat risks and their impact. → Conducting scenario analyses and measuring sensitivities to forecast changes in ratings, PD and LGD in view of physical and transition risk. → Drawing up credit risk metrics to 3 monitor and control E&CC in BAU processes. risk factors → Measuring E&CC factors in customer and transaction analysis and ratings. → Setting risk appetite limits and alerts to manage climate-related sectors. → Run the second phase of 'Climate Race', our credit risk target operating model for climate and environmental factors and embedding of E&CC factors in the entire credit cycle to pinpoint and mitigate physical and transition risk. → Include climate factors in internal physical and transition risk models and embed scenario analysis techniques in risk management through a forward-looking approach by sector and geography. → Develop tools to monitor E&CC factors that consider physical and transition risk in the property sector. → Enhancing analysis of material climate impact on trading portfolios to help with future sector- based stress testing. → Enriching stress testing and reviewing new scenarios to be included. → Adapting stress testing to best market practices. Market Short- Medium term → Higher volatility in market factors under stress scenarios. → Changes in market perception leading to wider credit spreads for business in impacted sectors. → Regular reviews of climate stress scenarios and subsidiaries that apply them. → Stress testing using physical and transition risk scenarios. → Portfolio analysis of current exposure to climate-sensitive business activities. Liquidity Short- Medium term → Market impacts on the value of high quality liquid assets in Santander's liquidity buffer. → More frequent extreme weather stifling economic growth in countries susceptible to climate change, causing sovereign debt to rise and limiting access to capital markets. → Cash outflows from companies trying to boost their reputation in the market or solve problems with climate scenarios. → Qualitative and quantitative climate scenario analyses of impacts on highly liquid assets (HQLAs) and financing of exposed companies. → Analysis of higher outflows due to changes in market perception of corporations in climate-sensitive business activities. → Enhancing stress testing and reviewing new scenarios to be included. → Adapting stress testing to best market practices, including new liquidity scenarios to measure their impact. 508 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Key climate 1 drivers Risk type Operational Main time horizon 2 Potential impact on climate risk factors What we’re doing to manage climate risk Next steps Medium- long term → Severe climate events can cause damage to our assets, including branches, offices and data centres. They can also affect business continuity, processes and staff. → Climate-related factors can also lead to operational risk losses from litigation (e.g., if a bank is perceived to misrepresent sustainability-related practices). Reputational Short- medium- long term → Customers, investors and other stakeholders who believe banks aren't doing enough to meet low-carbon targets, act against their policies or that their public commitments can pose reputational risk. → Misleading customers, investors and stakeholders with statements, actions, announcements, policies and the sustainability features of products or 'greenwashing' practices. Strategic Short- medium- long term → A failure to achieve our climate and environmental targets, including those relating to our own and our customers’ operations, could affect our strategy. → Conducting operational risk and control self-assessments that include ESG- related risks to evaluate our exposure. → Conducting mandatory operational risk scenario analysis that covers physical and transition risk. → Adding ESG flag to the operational risk events database to classify incidents and environmental- and climate-related losses. → Including an assessment of climate threats in business continuity scenarios. → Updating climate and environmental risk policies and procedures. → Addressing reputational risk through corporate credit committees that assess sensitive transactions that involve climate and environmental risk. → Holding formal meetings to review reputational issues (including climate matters), involving the legal, responsible banking, investor relations, risk and other teams. → Implementing proactive measures to support companies’ green transition and decarbonization. → Checking that ESG targets are embedded in the Group’s strategic planning. → Monitoring the Group’s strategic 'Climate change' project, including net zero KPIs. → Identifying emerging risks, which includes an ESG risk event and analysis of how low-probability stress scenarios might impact on the Group’s strategic targets to draw up suitable action plans. → Monitoring ESG initiatives presented at the corporate product governance forum (CGPF) and investors’ forum. → Reviewing ESG factors and KPIs in the business model. 1. Though all climate drivers impact on risk factors, we have only included the key ones in this table. 2. Short term: up to one year. Medium term: up to three years. Long term: five years and beyond. 3. E&CC: environmental and climate change. Acute Chronic Market sentiment Policy action Technology → Enhance operational risk reporting on climate- related factors. → Update documentation and provide training on the embedding of ESG factors in operational risk management. → Continue driving cooperation between the reputational risk area and other teams to address reputational impact. → Conduct a materiality assessment to measure climate-related and environmental reputational risk. → Implement a methodology to quantify the reputational impact of climate and environmental risk. → Continue monitoring climate and environmental threats as part of emerging risk identification. → Revise ESG KPIs regularly so that they remain consistent with the Group’s strategy. → Continue reviewing ESG factors in relation to business model performance. 509 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management 10.2 ESG factors risk management As part of our climate and environmental risk factors management, we are gradually introducing decarbonization targets in sectors that are considered 'highly polluting', as well as embedding climate and environmental factors in our risk management and cross-cutting enterprise risk management processes, such as our risk appetite and in the emerging risks identification exercise. One of the elements that has contributed to integrating these factors into our strategy is their inclusion in the credit granting and monitoring process. For more information regarding climate and environmental risks factors, see our 'Climate Finance Report' on our corporate website. We identify and assess the factors that are most material to each risk type. Assessment We use materiality assessments, quantitative and qualitative heatmaps, scenario analyses and other tools and techniques to analyse the potential impact of climate and environmental factors on our portfolios. For instance, we run a quarterly materiality assessment to pinpoint the loan portfolios with the highest physical and transition risk. Our automated corporate tool 'Klima' enables us to monitor the Group’s loan portfolios. This tool includes forward-looking analysis of companies’ performance by sector and geography, using orderly, disorderly and hot house world scenario analyses to calculate physical and transition risk impact across several time horizons. In 2023, we added a physical risk assessment module for collateral and customer portfolios, which we break down by economic activity. Our physical and transition risk assessments rate each sector on a 5-point scale from 'Low' to 'Very high'. The following chart describes how we are integrating climate and environmental factors into the risk management cycle. The following table shows the latest materiality analysis prepared by the Group with data at the end of Q3 2023. Identification Through the exercise of emerging risks related to climate change (which have a climate subcategory and a biodiversity subcategory), we evaluate internal and external threats that could affect our profitability, solvency or strategy. Our emerging risks exercise focuses on ESG risks, such as greenwashing, the environment and biodiversity. Planning As part of our public sustainability commitments, we included decarbonization targets in strategic planning, with separate time horizons: short-term budget (one year); medium-term financial plan (three years); long-term strategic plan (five years); and ad hoc analysis. Materiality assessment - Climate risk analysis and portfolio heatmap September 2023 (pre-mitigation) - EUR billion TR PR CIB Other segments Power (conventional) Power (renewables) Oil & Gas Mining y metals Transport Auto Consumer Real Estate Agriculture Construction Manufacturing Water & Waste Other climate- related sectors Climate sectors Other sectors Total portfolio 28 12 23 14 28 0 8 2 17 49 3 184 58 242 2 0 1 8 12 159 388 9 14 26 1 620 230 850 ¢ Low ¢ Moderately Low ¢ Medium ¢ High ¢ Very High TR: transition risk. PR: physical risk. CIB: REC (on and off-balance sheet lending + guarantees + derivatives PFE: Potential Future Exposure). Other segments: Drawn amount; includes individuals, SCF, Auto US, Corporates and Institutions, and SMEs. Other sectors: considered as low risk; include: CIB, Corporate and SMEs outside the risk taxonomy perimeter // Individuals and SCF: cards and other consumer credit // Private Banking (excl. mortgages). Exposure 0 represents exposure below EUR 500 million. Finally, we highlight the methodological progress made in our materiality assessment, with improvements to the scope of the existing methodology, including a more holistic view of how climate and environmental factors can impact the main types of risks set out in our framework.t For more information regarding our materiality assessment, see our 'Climate Finance Report' on our corporate website. 510 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Monitoring At Grupo Santander, we constantly monitor the risk profile and our compliance with risk appetite limits through control functions that report to the board. From 2021, we have been enhancing our risk appetite statement with a quantitative metric for thermal coal counterparties, energy and mining related customers. Moreover, we have a decarbonization roadmap to set risk appetite limits that are consistent with our commitments for 2030. In 2023, we approved new quantitative metrics — adding to the ones we set for thermal coal and power — for oil and gas, steel, and aviation, which we will implement and monitor in 2024. For the automotive sector, we are making progress in designing a metric for approval in 2024. We are in permanent contact with our customers to monitor and support their transition planning. Specifically, we continue to embed environmental, social and climate change (ESCC) risk factors into the credit risk granting and monitoring process, through our operating model, 'The Climate Race'. This model is underpinned by the following pillars: strategic planning, risk management, loan approval and tracking, models and systems, and culture and governance. The timeline to implement it ends in late 2024, when we expect to have met supervisory expectations and to have rolled out a common strategy for the whole Group. Mitigation Policies are key to mitigating climate and environmental risk factors. Our ESCC policy sets out our public commitments and aims to support our strategy for sensitive and prohibited activities in the oil and gas, power generation and transmission, mining and metals sectors, and those derived from businesses dedicated to soft commodities. We also have internal policies and frameworks that include climate and environmental factors in risk management. Our credit granting policies consider climate and environmental factors through our internal taxonomy (SFICS), credit committees, CIB rating and Corporate clients, collateral management, and other means. Moreover, we continue to use insurance and compensation funds to mitigate climate risks. Our approach to nature and biodiversity At Grupo Santander we know some of our customers’ endeavours may have bad consequences for the environment. That’s why it’s crucial we assess and mitigate whatever negative role our lending may play in harming nature. We run two simultaneous exercises under an internal risk assessment methodology to assess environmental impact and dependency. We take a qualitative score to measure each sector's sensitivity to ecosystem services. Our findings enable us to decide on the key parameters of risk assessments for customers whose activity may be affected by the degradation of ecosystem services and the destruction of the environmental and biodiversity-related assets in the coming years. Throughout 2023, Grupo Santander has promoted a wide range of specific training on ESG matters, with the aim of raising employee awareness, both through internal continuous training and through international certifications for those professionals directly involved in this subject. In addition, we have best case studies, to establish the best practices regarding the integration of climate and environmental factors in the credit cycle. Finally, another mitigation element is the multidisciplinary working group on ESG controversies, coordinated by the reputational risk function and where any matter that may have a reputational impact derived from said controversies is escalated. Reporting Transparent and regular reports to senior managers and stakeholders help us manage climate and environmental factors and comply with the law and supervisors’ expectations. Our reporting on climate and environmental risk management includes our Annual Report, the Climate Finance Report, the ICAAP exercise, and our Pillar III disclosures report. In 2023, we followed the TNFD (Taskforce on Nature-related Financial Disclosures) recommendations on environmental risk assessments to analyse our corporate portfolio. We focused on a heatmap to determine and compare the portfolio’s physical and transition risks and the level of threat of potential environmental and biodiversity events that may have a negative impact on Santander’s customers. These events can come from physical risks such as the organization’s dependency on the environment; or from transition risks related to government measures, advances in technology, market shifts, litigation, and changes in customer preferences. 511 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Main activities in 2023 → In 2023 we began our participation in the Fit-for-55 Climate Risk Scenario Analysis regulatory exercise, established by the EBA to verify the resilience of Financial Institutions to meet the climate objectives of the European Green Deal defined by the Commission. The exercise will also be extended to 2024. → Advances in risk appetite, establishing new metrics and limits to support the bank's decarbonization strategy. → Progress in our materiality assessment' methodology, with improvements in the scope of the existent methodology, including a more holistic view of how climate and environmental factors can impact the main risk types established in our corporate framework. → Advances in the analysis of materiality in terms of biodiversity, through an internal assessment methodology of both impacts related to nature and its dependencies. → Improvements in the identification, prevention and control of potential sources of greenwashing allegations. → Progress in the implementation of the climate risk management model through the 'Climate Race' initiative to integrate ESCC factors into the credit risk granting process. → Advances in the identification and management of physical risks, including improvements in data sources and their granularity, as well as their implementation in our monitoring tool (Klima). 512 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management Glossary of terms, acronyms and abbreviations 2023 AGM 2024 AGM ABC Act 10/2014 Active customer ADR ADS AEOI AI ALCO ALM AML API APM APS AuM Banesto BCMS BCP bn BNPL BoE bps BRRD Bylaws CAE CAGR CAO CARF CBDC CCCA CCO CCPS CCR CCSM CDI CEO CFO CFT Annual general shareholders’ meeting of Banco Santander held on 31 March 2023 at second call Annual general shareholders’ meeting of Banco Santander called for 21 or 22 March 2024 at first or second call, respectively Anti-bribery and corruption Act 10/2014, of 26 June, on the organization, supervision and solvency of credit institutions Those customers who comply with the minimum balance, income and/or transactionality requirements as defined according to the business area American depositary receipts American depositary shares Automatic Exchange of Information standard Artificial intelligence Assets and liabilities committee Asset and liability management Anti-money laundering Application programming interface Alternative performance measure Amherst Pierpont Securities Assets under management Banco Español de Crédito, S.A. Business continuity management system Business continuity plan Billion Buy-now-pay-later. Short-term financing that allows consumers to make purchases and pay for them at a future date Bank of England Basis points Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, as amended from time to time Bylaws of Banco Santander, S.A. Chief Audit Executive Compounded annual growth rate Chief Accounting Officer Conselho Administrativo de Recursos Fiscais (Administrative Council for Tax Appeals) Central bank digital currency Collective Commitment to Climate Action Chief Compliance Officer Contingent convertible preferred stock Counterparty credit risk Code of Conduct in Securities Markets CREST Depositary Interests Chief Executive Officer Chief Financial Officer Combating the financing of terrorism 513   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management CHF CIB CIO CNBV CNMV CoE COFINS Constant euros COSO Costs in real terms CPGF CRD CRE CRO CRR CRS CSA CSLL CSRBB CSRD CVA DCB Digital customer DNSH DORA DPO DTA DVA E&CC EAD EBA EBITDA ECB EIB EIOPA EMIR eNPS EOIR EPC EPS Equal pay gap ESCC ESG ESMA ESRS EU EV Swiss franc Corporate & Investment Banking Chief Information Officer Comisión Nacional Bancaria y de Valores (Mexican stock market authority) Comisión Nacional del Mercado de Valores (Spanish stock market authority) Cost of equity Contribuiçao para Financiamiento da Seguridade Social (Contribution for Social Security Financing) Excluding exchange rates impact Committee of Sponsoring Organizations of the Treadway Commission Costs excluding the effect of average inflation over the last twelve months Corporate product governance forum Capital Requirements Directive 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 Common reporting standards Credit Support Annex Contribuçao Social sobre o Lucro Liquido (Social Contribution on Net Profit) Credit spread risk in the banking book Corporate Sustainability Reporting Directive Credit valuation adjustment Digital Consumer Bank Every consumer of commercial banking services who has logged on to their personal online banking and/or mobile banking in the last 30 days Do not significant harm Digital Operational Resilience Act Data protection officer Deferred tax asset Debt valuation adjustment Environmental and climate change related Exposure at default European Banking Authority Earnings before interest, taxes, depreciation and amortization European Central Bank European Investment Bank European Insurance and Occupational Pensions Authority European Market Infrastructure Regulation Employee Net Promoter Score is a method of measuring employee satisfaction Exchange Of Information on Request standard Energy performance certificate Earnings per share The equal pay gap measures differences in remuneration between women and men in the same job at the same level Environmental, social and climate change related Environmental, social and governance European Securities and Markets Authority European Sustainability Reporting Standards European Union Electric vehicle 514 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management EVA EVP FATCA FCA FCC Fed Financial inclusion First 2023 Buyback Programme FL CET1 FRTB FSB FX G-SIB GAR GBP GCC GDP GDPR Gender pay gap GFANZ GHG GMRA GRC GRI GSGM GTB HQLA HtC ICAAP ICAC ICE ICFR ICO ICS Identified staff IEA IFRS ILAAP IMA IMF IOSCO IPO IRB Economic value added Employee value proposition Foreign Account Tax Compliance Act Financial Conduct Authority Financial crime compliance Federal Reserve Number of people who are unbanked, underbanked, in financial difficulty, with difficulties in accessing credit who, through the Group's products and services, are able to access the financial system or receive tailored finance. Financially underserved groups are defined as people who do not have a current account, or who have an account but obtained alternative (non-bank) financial services in the last 12 months. Beneficiaries of various programmes are included in the quantification process only once in the entire period. Only new empowered people are counted, taking as a base year those existing since 2019 First buyback programme carried out within the 2023 shareholder remuneration policy Fully-Loaded Common Equity Tier 1 Fundamental review of the trading book Financial Stability Board Foreign exchange Global systemically important bank Green asset ratio Sterling pound General Code of Conduct Gross Domestic Product General Data Protection Regulation The gender pay gap measures differences in remuneration between women and men in an organization, business, industry or the broader economy, irrespective of the type of work Glasgow Financial Alliance for Net Zero Greenhouse gases Global master repurchase agreement Governance, risk and compliance Global Reporting Initiative Group-Subsidiary governance model Global transactional banking High-quality liquid assets Held to collect Internal capital adequacy assessment process Instituto de Contabilidad y Auditoría de Cuentas (Institute of accounting and auditing) Internal combustion engines 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 Energy Agency International Financial Reporting Standards Internal liquidity adequacy assessment process International model approach International Monetary Fund International Organization of Securities Commissions Initial Public Offering Internal ratings-based 515 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management IRC IROs IRPJ IRRBB ISMA JPY KOR KPI KRI LCR LDA LGD LLP Loyal customer LTD LTV LUC M/LT Material Risk Taker MDA MiFID MILRO mn MRAP MREL MSS NACE NFR NGFS NGO NGO TMT NII NPL NPS NSFR NYSE NZAMi NZBA NZE OECD OEM OTC P&L PBT PCAF PCAOB PD Incremental risk charge Impacts, risks and opportunities Imposto sobre a Renda das Pessoas Jurídicas (Corporate Income Tax) Interest rate risk in the banking book International Securities Market Association Japanese yen Key operational risks Key performance indicators Key risk indicators Liquidity coverage ratio Loss distribution approach Loss given default Loan-loss provisions Active customers who receive most of their financial services from the Group according to the commercial segment to which they belong. Various loyalty customer levels have been defined taking profitability into account Loan to deposit ratio. Ratio of loans and advances to customers over customer deposits Loan to value ratio. Ratio of loans and advances to customers to the value of the asset used as collateral Land use change (cambio en el uso del terreno) Medium-and long-term Other executives whose activities could have a significant impact on the Group's risk profile Maximum distributable amount Markets in Financial Instruments Directive Money Laundering Reporting Officer Million Market risk advanced platform Minimum requirements for own funds and eligible liabilities which are required under the BRRD Minimum social safeguards Nomenclature of Economic Activities of the European Union Non-financial risk Network for greening the financial system Non-governmental organization Non-governmental organization Trygg Mat Tracking Net interest income Non-performing loans Net Promoter Score Net stable funding ratio New York Stock Exchange Net Zero Asset Managers initiative Net Zero Banking Alliance Net zero emissions Organization for Economic Cooperation and Development Original equipment manufacturer Over-the-counter Profit and loss statement Profit before taxes Partnership for Carbon Accounting Financials Public Company Accounting Oversight Board Probability of default 516   2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management PHEV PIS POCI PoS pp PRA PRB PSD2 RAS RBF RBSCC RCP RCSA Repos RoA RoE RoRWA RoTE RPA RPK RWA S&P 500 SAM SBNA SBTi SBTN SC USA SCF SCIB SDG SEC Second 2023 Buyback Programme SFDR SFICS SHUSA SME SOx Spanish Corporate Governance Code Spanish Securities Markets Act SPC SPF SRB SREP SRI SRT SSM plug-in hybrid electric vehicle Programa de Integraçao Social (Social Integration Programme) Purchased or originated credit impaired Point of sale Percentage point Prudential Regulation Authority Principles for responsible banking Payment Services Directive Two Risk appetite statement Responsible banking forum Responsible banking, sustainability and culture committee Representative concentration pathway Risk control self-assessment Repurchase agreements Return on assets Return on equity Return (net of tax) on risk weighted assets for a particular business Return on tangible equity Risk profile assessment Revenue passenger kilometers Risk-weighted assets Index maintained by S&P Dow Jones Indices LLC Santander Asset Management Santander Bank N.A. Science Based Targets initiative Science Based Targets Network Santander Consumer US Santander Consumer Finance Santander Corporate & Investment Banking Sustainable development goals Securities and Exchange Commission Second share buyback programme charged against 2023 results Sustainable Finance Disclosure Regulation Sustainable finance and investment classification system Santander Holding USA, Inc Small and medium enterprises Sarbanes-Oxley Act of 2002 CNMV's Good Governance Code for Listed Companies Act 6/2023, of 17 March, on the Securities Markets and on Investment Services Strategic commercial plans 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 517 2023 Annual report Contents Business model and strategy Responsible banking Corporate governance Economic and financial review Risk, compliance & conduct management STEM STR T&O TCFD TLAC TLTRO TNAV TNFD TOM TPV TRIM TSR UK UNEP FI US USD VaR VAT vkm WBCSD YoY Science, Technology, Engineering, Mathematics Suspicious transaction reporting Technology & operations Task Force on Climate-related Financial Disclosures Total loss-absorbing capacity requirement which is required to be met under the CRD V package Targeted longer-term refinancing operations Tangible net asset value Taskforce on Nature-related Financial Disclosure Target operating model Total payments volume Targeted review of internal models Total shareholder return United Kingdom United Nations Environmental Programme Finance Initiative United States of America United States dollar Value at risk Value added tax Vehicle-kilometer World Business Council for Sustainable Development Year-on-Year 518 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Auditor's report and consolidated financial statements 519 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Auditor's report Consolidated financial statements Consolidated balance sheets as of 31 December 2023, 2022 and 2021 Consolidated income statements for the years ended 31 December 2023, 2022 and 2021 Consolidated statements of recognised income and expense for the years ended 31 December 2023, 2022 and 2021 Consolidated statements of changes in total equity for the years ended 31 December 2023, 2022 and 2021 Consolidated statements of cash flows for the years ended 31 December 2023, 2022 and 2021 521 512 513 517 519 520 526 Notes to the consolidated financial statements 547 1. Introduction, basis of presentation of the consolidated financial statements (consolidated annual accounts) and other information 2. Accounting policies 3. Grupo Santander 4. Distribution of Banco Santander’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 securities 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 under insurance contracts 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 548 553 XXX 583 585 599 600 602 603 603 609 609 610 611 612 613 616 619 620 621 621 622 626 628 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. Fair value of financial instruments 51. Other disclosures 52. Primary and secondary segments reporting 53. Related parties 54. Risk management 55. 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 2023 Appendix V. Other information on the Group’s banks Appendix VI. Annual banking report 629 645 646 653 654 660 660 661 662 663 663 664 687 687 687 688 688 688 688 689 690 690 696 698 698 699 715 728 740 743 779 780 781 805 811 812 813 820 520     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Auditor's report 521 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 522 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 523 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 524 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 525 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 526 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 527 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 528 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 529 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 530 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Consolidated financial statements 531 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Translation of the consolidated annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 55). In the event of a discrepancy, the Spanish- version prevails. Grupo Santander CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2023, 2022 AND 2021 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 2023 220,342 176,921 56,328 15,057 62,124 43,412 17,717 14,061 11,634 5,910 4,068 860 982 — — 982 9,773 3,095 6,678 — 459 6,219 83,308 1,761 73,565 7,982 — 313 7,669 1,191,403 103,559 1,087,844 20,082 57,917 1,009,845 5,297 A 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 (788) (3,749) 410 532                   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2023, 2022 AND 2021 EUR million ASSETS INVESTMENTS Joint venture entities Associated entities ASSETS UNDER 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 16 16 17 18 27 14 19 12 2023 7,646 1,964 5,682 237 33,882 32,926 13,408 19,518 956 851 19,871 14,017 5,854 31,390 10,623 20,767 8,856 93 7 8,756 3,014 1,797,062 A 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. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated balance sheet as of 31 December 2023. 533 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2023, 2022 AND 2021 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 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 2023 122,270 50,589 26,174 45,507 7,808 17,862 19,837 — — 40,367 34,996 1,209 1,735 32,052 5,371 — — 1,468,703 1,125,308 48,782 81,246 995,280 303,208 40,187 30,912 7,656 55 17,799 8,441 2,225 880 2,715 702 1,919 9,932 3,846 6,086 17,598 — 1,692,821 A 2022 115,185 64,891 22,515 27,779 5,757 9,796 12,226 — — 40,268 34,841 1,740 1,958 31,143 5,427 — — 1,423,858 1,111,887 76,952 68,582 966,353 274,912 37,059 25,926 9,228 (117) 16,426 8,149 2,392 950 2,074 734 1,999 9,468 3,040 6,428 14,609 — 1,637,074 A 2021 79,469 53,566 12,236 13,667 1,038 6,488 6,141 — — 14,943 9,489 607 1,064 7,818 5,454 — — 1,349,169 1,078,587 139,757 52,235 886,595 240,709 29,873 26,196 5,463 248 18,560 9,583 3,185 1,242 1,996 733 2,427 8,649 2,187 6,462 12,698 — 1,498,782 534 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2023, 2022 AND 2021 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 2023 130,443 8,092 8,092 — 44,373 720 — 720 195 74,114 — (5,751) 1,762 (7,513) (1,078) 11,076 (1,298) (35,020) (5,212) (29,808) 8,818 (1,559) 10,377 104,241 1,797,062 A 2022 124,732 8,397 8,397 — 46,273 688 — 688 175 66,702 — (5,454) 1,553 (7,007) (675) 9,605 (979) (35,628) (4,635) (30,993) 8,481 (1,856) 10,337 97,585 1,734,659 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) (32,719) (4,241) (28,478) 10,123 (2,104) 12,227 97,053 1,595,835 279,589 15,435 113,273 274,075 12,856 92,672 262,737 10,758 75,733 A. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated balance sheet as of 31 December 2023. 535 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2023, 2022 AND 2021 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 insurance and reinsurance contracts Expenses from insurance and reinsurance contracts Note 38 39 40 13 41 42 43 43 43 43 43 44 45 45 A (Debit) Credit 2023 105,252 5,995 77,701 21,556 (61,991) 43,261 571 613 16,321 (4,264) 2022 71,430 5,479 59,214 6,737 (32,811) 38,619 488 702 15,867 (4,077) 96 (3) 99 2,322 — — 2,322 204 — — 204 (93) 63 41 1,104 (2,827) 460 (449) 149 34 115 842 — — 842 162 — — 162 968 74 (542) 1,510 (2,803) 2,698 (2,540) A 2021 46,463 2,582 40,471 3,410 (13,093) 33,370 513 432 13,812 (3,310) 628 89 539 1,141 — — 1,141 132 — — 132 270 (46) (562) 2,255 (2,442) 1,516 (1,305) 536 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2023, 2022 AND 2021 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 2023 57,423 (22,241) (13,726) (8,515) (3,184) (2,678) 2022 52,117 (20,918) (12,547) (8,371) (2,985) (1,881) (12,956) (44) (12,912) (10,863) (7) (10,856) — (237) (136) (73) (28) 313 39 (20) 16,459 (4,276) 12,183 — 12,183 1,107 11,076 — (239) (140) (75) (24) 12 — 7 15,250 (4,486) 10,764 — 10,764 1,159 9,605 A 2021 46,404 (18,659) (11,216) (7,443) (2,756) (2,814) (7,407) (19) (7,388) — (231) (150) (71) (10) 53 — (43) 14,547 (4,894) 9,653 — 9,653 1,529 8,124 0.654 0.651 0.539 0.537 0.438 0.436 A. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated income statement for the year ended 31 December 2023. 537 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEARS ENDED 31 DECEMBER 2023, 2022 AND 2021 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 2023 12,183 614 (964) (1,038) — A 2022 10,764 (2,660) (399) (56) — A 2021 9,653 (220) 754 1,567 — (5) 17 (1) (162) (497) (171) — (29) 29 (120) 361 1,578 (1,888) (1,888) — — 1,017 1,009 8 — 2,592 (30) 2,622 — — — — — — 858 852 6 — — — — — 19 (1,020) 12,797 1,401 11,396 — 18 — 117 (18) (117) 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 (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 A. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated statement of recognised income and expense for the year ended 31 December 2023. 538 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2023, 2022 AND 2021 EUR million Balance at 31 December 2022 Adjustments due to errors Adjustments due to changes in accounting policies A Opening balance at 1 January 2023 A 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 2023 Equity instruments issued (not capital) 688 — — Share premium 46,273 — — Other equity instruments 175 — — Accumulated retained earnings 66,702 — — 46,273 — (1,900) — — — — — (1,900) — — — — — — — — — 44,373 688 — 32 — — — — — — — — — — — — — — 32 720 175 — 20 — — — — — — — — — — — — — (60) 80 195 66,702 — 7,412 — — — — — — (963) — — — — 8,375 — — — 74,114 Capital 8,397 — — 8,397 — (305) — — — — — (305) — — — — — — — — — 8,092 A. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2023. 539 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Revaluation reserves — — — — — — — — — — — — — — — — — — — — — — Other reserves (5,454) — — (5,454) — (297) — — — — — 305 — — 13 — — (37) — — (578) (5,751) Profit attributable to shareholders of the parent 9,605 — — 9,605 11,076 (9,605) — — — — — — — — — — — (9,605) — — — 11,076 (-) Own shares (675) — — (675) — (403) — — — — — 1,900 — (3,109) 806 — — — — — — (1,078) (-) Interim dividends (979) — — (979) — (319) — — — — — — (1,298) — — — — 979 — — — (1,298) Other comprehensive income (35,628) — — (35,628) 320 288 — — — — — — — — — — — 288 — — — (35,020) Non-controlling interest Other comprehensive income Other items 10,337 (1,856) — — — — (1,856) 294 3 — — — — — — — — — — — 3 — — — (1,559) 10,337 1,107 (1,067) 1 — — — — — (748) — — — — (3) (364) — 47 10,377 Total 97,585 — — 97,585 12,797 (6,141) 1 — — — — — (3,009) (3,109) 819 — — — (364) (60) (419) 104,241 540   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2023, 2022 AND 2021 EUR million Balance at 31 December 2021 Adjustments due to errors Adjustments due to changes in accounting policies A Opening balance at 1 January 2022 A 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 A Capital Share premium Equity instruments issued (not capital) Other equity instruments Accumulated retained earnings 8,670 — — 8,670 — (273) — — — — — (273) — — — — — — — — — 8,397 47,979 — — 47,979 — (1,706) — — — — — (1,706) — — — — — — — — — 46,273 658 — — 658 — 30 — — — — — — — — — — — — — — 30 688 152 — — 152 — 23 — — — — — — — — — — — — — (49) 72 175 60,273 — — 60,273 — 6,429 — — — — — — (869) — — — — 7,298 — — — 66,702 A. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2023. 541 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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) 97,585 542   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2023, 2022 AND 2021 EUR million Balance at 31 December 2020 Adjustments due to errors Adjustments due to changes in accounting policies A Opening balance at 1 January 2021 A 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 A Capital Share premium Equity instruments issued (not capital) Other equity instruments Accumulated retained earnings 8,670 — — 8,670 — — — — — — — — — — — — — — — — — 8,670 52,013 — — 52,013 — (4,034) — — — — — — (477) — — — — (3,557) — — — 47,979 627 — — 627 — 31 — — — — — — — — — — — — — — 31 658 163 — — 163 — (11) — — — — — — — — — — — — — (62) 51 152 65,583 — — 65,583 — (5,310) — — — — — — — — — — — (5,310) — — — 60,273 A. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2023. 543 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Revaluation reserves — — — — — — — — — — — — — — — — — — — — — — Other reserves (3,596) — — (3,596) — (881) — — — — — — — — 23 — — (275) — — (629) (4,477) Profit attributable to shareholders of the parent (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) 97,053 544   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2023, 2022 AND 2021 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 2023 5,015 12,183 26,948 3,184 23,764 74,982 18,332 286 874 (4,470) 60,525 (565) 46,080 5,450 (11) 40,138 503 (5,214) (5,366) 15,056 11,446 2,197 139 1,274 — — 9,690 7,074 — 814 885 917 — (2,058) 10,187 2,261 2,931 — 3,109 1,886 8,129 7,007 — 825 297 A 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 27,705 55,595 (5,589) (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) (11,528) 79,114 (9,255) (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 — 854 225 545 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2023, 2022 AND 2021 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 2023 (322) (2,731) 223,073 220,342 8,621 199,932 11,789 — 220,342 — A 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. Presented for comparison purposes only (note 1.d). The accompanying notes 1 to 55 and appendices are an integral part of the consolidated statement of cash flows for the year ended 31 December 2023. 546 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Notes to the consolidated financial statements 547 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Banco Santander, S.A., and Companies composing Grupo Santander b) Basis of presentation of the consolidated financial statements Notes to the consolidated financial statements (consolidated annual accounts) for the year ended 31 December 2023. 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 2023, Grupo Santander consisted of 762 subsidiaries of Banco Santander, S.A. In addition, other 165 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 2021 were approved by the shareholders at the group´s annual general meeting on 1 April 2022. Grupo Santander consolidated financial statements for 2022 were approved by the shareholders at the group´s annual general meeting on 31 March 2023. The Group's 2023 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. 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 and the following regulations. Particularly, during 2023 and 2021, the Bank of Spain published Circulars 1/2023 of 24 February of 2023, and 6/2021 of 22 December of 2021, 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 2023 were authorised by the Bank's directors (at the board meeting on 19 February 2024) 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 2023, 2022 and 2021 and the consolidated results of its operations and the consolidated cash flows in 2023, 2022 and 2021. 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. 548 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix (ii) the second amendment applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendment includes the mandatory and temporary exception to the recognition and breakdown of deferred tax assets and liabilities derived from said Pillar Two model rules (applicable from the date of publication of the amendment and retrospectively) and establishes additional information requirements: - If the tax law has entered into force, the related tax expense will be disclosed separately. - If the tax law is enacted or substantially enacted but has not yet entered into force, reasonably estimable qualitative and quantitative information will be disclosed that helps users of financial information understand the entity's exposure to the rules of the Pillar two model. The Group applies the exception to the recognition and disclosure of assets and liabilities for deferred taxes in relation to Pillar two taxes, in accordance with the amendments to the IAS 12. However, since Pillar two legislation is not in force at the reporting date of these consolidated annual accounts, Grupo Santander does not have the corresponding exposure to current tax. However, at the end of fiscal year 2023, there are geographies with tax laws for the implementation of substantially enacted Pillar two model rules that have not come into force, including the information required in note 27.f. The application of the aforementioned amendments to accounting standards and interpretations did not have any material effects on Grupo Santander consolidated financial statements. Adoption of new standards and interpretations issued The following modifications came into force and were adopted by the European Union in 2023: • 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 result of the contract during the service provision period, 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. Applicable retrospectively from 1 January 2023. The Group has carried out a project to implement IFRS 17 with all affected Group entities and concluded the analysis of the effects of this new standard without having identified any material impact on its consolidated financial statements due to the effects of the first application of standard, except for a reclassification of the balance sheet to the heading 'Liabilities covered by insurance or liabilities under insurance contracts' (see note 1.d). The most significant aspects of the insurance policy established by the Group are detailed in note 2.i. • 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. 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. Applicable from 1 January 2023. • The amendments to IAS 12 Income Taxes require companies to: (i) 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. The cumulative effect of recognising these adjustments is recognised in retained earnings, or another component of equity, as appropriate. Applicable from 1 January 2023. 549 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023: • 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. • 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, an additional amendment to IAS 1 on the classification of liabilities with covenants as current or non- current has been approved, 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. Finally, at the date of approval of these consolidated annual accounts, the following standards which effectively come into force after 31 December 2023 had not yet been adopted by the European Union: • IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Additional disclosures are required for companies entering into supplier financing arrangements. The objective of the new disclosures is to provide information on Supplier Finance Arrangements (SFA) that allows investors to evaluate the effects on an entity's liabilities, cash flows and liquidity risk exposure. These modifications will be applicable from 1 January 2024. • IAS 21 Effects of changes in foreign currency exchange rates: IAS 21 established the requirements to apply when there is a temporary lack of interchangeability between two currencies, but did not give indications when this situation was not temporary. Given this scenario, IAS 21 has been modified establishing the criteria to identify these situations, specifying how entities should estimate the spot exchange rate, the methodologies and data to be considered, as well as the associated disclosure requirements. It will be applicable from 1 January 2025. 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 2023 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 54). • 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 complex geopolitical situation, the levels of inflation and interest rates, as well as the resilience of the labour market being a priority monitoring focus due to the potential uncertainty generated in the Group's estimates. For this reason, the Management of the Group has particularly evaluated the uncertainties caused by the current environment in relation to credit, liquidity and market risk, taking into account the best information available, to estimate the impact on the provisions for impairment of the credit portfolio, on the rates of interest, and in the valuation of debt instruments, developing in the notes the main estimates made during the period ended December 31, 2023 (see notes 10, 17, 50 and 54). 550 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Although these estimates have been made on the basis of the best information available at the end of the year 2023, and considering information updated at the date of preparation of these consolidated annual accounts, it is possible that events that may take place in the future may make it necessary to modify them (upwards or downwards) in the coming years, which would be done, if appropriate, in a prospective manner, recognising the effects of the change in estimate in the corresponding consolidated income statement. d) Information relating to 2022 and 2021 information contained The in the consolidated financial statements for the financial years 2022 and 2021 was prepared with the standards in force in said years, and exclusively for comparative purposes with the information relating to the year ended 31 December 2023. In accordance with the information contained in note 1.b regarding the first application of IFRS17, it has been restated the balance sheet information relating to "Liabilities under insurance contracts" corresponding to the years closed on 31 December 2022 and 2021, recorded at 1 January 2023, of a portfolio of products for an amount of approximately EUR 16 billion at 31 December 2022 (EUR 18 billion at 31 December 2021), derived from the different treatment that this new standard establishes for the components of an insurance contract. Additionally, the segment information corresponding to the year ended 31 December 2021 was restated for comparative purposes. In accordance with the Group's organizational structure, as required by IFRS 8 (see note 52). In order to interpret the changes in the balances with respect to 31 December 2023, 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 52.b) and the impact of the appreciation/depreciation of the various currencies against the euro in 2023, based on the exchange rates at the end of 2023: Mexican peso (11.31%), US dollar (-3.40%), Brazilian real (5.31%), Argentine peso (-78.84%), Sterling pound (2.19%), Chilean peso (-5.80%), and Polish zloty (7.86%); as well as the evolution of the comparable average rates: Mexican peso (10.30%), US dollar (-2.77%), Brazilian real (0.43%), Sterling pound (-1.96%), Chilean peso (1.13%) and Polish zloty (3.20%). 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). On 27 October of 2021, the European Commission published the draft of a review of European banking legislation: CRR and CRD. At 8 November 2022, the European Council's proposal was published, and at 24 January 2023, that of the European Parliament. Throughout 2023, progress was made in the discussions on the new texts that will be approved in the first months of the year and their publication is expected to occur between the months of April and May 2024. The update of the banking package pursues, on the one hand, the implementation of the final Basel III reforms and, on the other hand, strengthening the harmonization of banking supervision in the European Union (EU). The Basel III final reform, which was agreed at the end of 2017, aims to introduce greater sensitivity in standardised metrics, reduce variability in risk-weighted assets at banks using internal models when calculating requirements and facilitate comparability among banks. Specifically, they propose changes concerning, among other matters, key risk factors, standardised credit risk, internal models, the output floor and operational risk. The goal of achieving stronger supervision and protection of financial stability is expressed in a series of provisions concerning fit-and-proper requirements, extending the scope by revising certain definitions and additions on establishing third- country branches in the EU in order to achieve greater harmonisation of rules and better supervision of these type of entities. The new CRR/CRD regulations are generally expected to apply from 1 January 2025, although there will be certain provisions for which an earlier application is foreseen, such as requirements on own funds for cryptoasset exposures. In addition, during the month of December the EBA, in order to comply with the mandates given in the new banking package, published a consultation to amend some aspects of the Pillar III disclosure framework specifically, the changes include new disclosure requirements on output floor and credit valuation adjustment (CVA) risk and amendments to existing disclosure requirements on credit risk and market risk. Following this consultation, the final text proposal will be submitted to the European Commission in June 2024. On the other hand, the EBA also published the consultation on the Pillar III Data Hub, which aims to respond to one of the requirements established by the new CRR, to centralise institutions’ prudential disclosures and make prudential information readily available through a single electronic access point on the EBA website. This initiative will facilitate access, usability and comparability of prudential information by all interested users, strengthening the transparency and market discipline of the EU banking sector and further contributing to the soundness of the European financial system. 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. For this purpose, global systemically institutions 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). 551     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix On 25 October 2022, the regulation on the prudential treatment for global systemically important banks was published. This modified both the CRR and the BRRD (Bank Recovery and Resolution Directive) as regards prudential treatment of global systemically important banks (G-SIBs) with a multiple point of entry (MPE) resolution strategy, as well as the methods for indirect underwriting of eligible instruments (Daisy Chains) to meet the minimum requirement for own funds and eligible liabilities. This Regulation, known as the 'Quick Fix', covers the following two objectives: • The inclusion in BRRD and CRR of references to third countries subsidiaries to adjust the deduction for the holding of TLAC instruments issued from subsidiaries in third countries based on the excess TLAC/MREL existing in those 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 are higher than the theoretical requirements for the same group under a single point of entry (SPE) strategy. That is, the latter adjustment is based on a comparison between the two possible resolution strategies. Additionally, for those 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 institutions may adjust the deductions based on the excesses above the 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 repurchases instruments, and, as there is such a deduction, the intermediate entity is obliged to issue the same amount as it is repurchasing, transferring the internal MREL needs to the resolution entity that will cover it with external MREL. This Regulation is applicable since the 14 November 2022, except for the provisions relating to Daisy Chains, which apply since the 1 January 2024. As regards Deposit Guarantee Schemes (DGSs), these are regulated by the Deposit Guarantee Schemes Directive (DGSD), which has not undergone any significant changes since its publication in 2014. The Directive aims to harmonise the DGSs of the Member States, thus ensuring stability and balance in the various different countries. It creates an appropriate framework for depositors to have better access to DGSs through clear scope of coverage, shorter repayment periods, better information and robust funding requirements. This Directive is transposed into Spanish law by Royal Decree 2606/1996, with additional amendments set forth in Royal Decree 1041/2021. To ensure that eligible deposits are covered, the DGSs collect available financial means through contributions from their members which are performed at least once a year; being the target level of 0.8% of the covered deposits amount as of the 3 July 2024. Annual contributions are determined depending on the covered deposits and the risk profile faced by the institutions which are members of each DGS. The method for calculating contributions is set out in the EBA Guidelines (EBA/ GL/2023/02). In addition to the DGS, the Single Resolution Board (SRB) has built up the Single Resolution Fund (SRF) with annual contributions from banks and investment firms since 2016. The target level of this fund is 1% of covered deposits and the contributions to be made by members are calculated by the SRB based on euro area banks balance sheets and risk profiles. It has recently been officially announced that during 2024 the SRB will not issue a call for contributions to the SRF. Lastly, on 18 April 2023, the European Commission published its proposal to review the Crisis Management and Deposit Insurance (CMDI) framework. Specifically, several proposals have been submitted: • Early intervention measures, conditions for resolution and funding for the resolution measure; • The scope of deposit coverage, use of funds of the deposit guarantee schemes, cross-border cooperation and transparency, and • Certain aspects of the minimum requirement for own funds and eligible liabilities. These proposals imply amending regulations such as: • CRR, • BRRD, • Single Resolution Mechanism Regulation (SRMR), which establishes uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism (SRM) and a Single Resolution Fund (SRF). • Deposit Guarantee Schemes Directive (DGSD). Additionally, Regulation 241/2014, which establishes the system applicable to prior authorisation to reduce own funds and establishes requirements on eligible liability instruments, was amended in April 2023. Firstly, this amendment extends the need to request approval to be able to reduce, buy back or redeem eligible liabilities; which until April 2023 was limited to own funds. Secondly, additional amendments were made, such as the creation of a new concept of prior general approval to buy back own funds and eligible liability instruments, as well as extending the period granted to the Supervisor and/or Resolution Authority, where appropriate, from 3 months to 4 months. As regards prudential scope in the field of sustainability, the CRR mandated the EBA to evaluate whether specific prudential analysis of environmental and social risks was appropriate, prior to consulting the European Systemic Risk Board (ESRB). In the last quarter of 2023, both institutions published their respective reports on how existing micro and macroprudential tools can be used to manage environmental and social risks. In its own publication, the EBA made short-term recommendations to expedite integration of the environmental and social risks into the prudential framework, while recommending further work that could lead to a more comprehensive review of the framework. 552 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix At the international level, and particularly as regards reporting obligations on climate risks, it is important to note that the Basel Committee published a consultation paper at the end of 2023 proposing a series of qualitative and quantitative requirements that should be disclosed in entities' Pillar III reports. In this document, the Committee acknowledges that precise, consistent and quality climate data is still evolving, yet the Committee believes that the disclosure requirements will expedite the availability of said information and will facilitate banks' prospective risk assessments. In parallel with the sustainable agenda, at the Digital level, the Basel Committee that sets the standards for prudential regulation of the banking sector and which published its principles on the prudential treatment of these exposures in 2022, has opened a consultation to propose specific adjustments to its standard on the prudential treatment of banks' cryptoasset exposures with the purpose of incorporating the developments that these products have undergone in the market. In addition, Basel also published a consultation on future disclosure requirements for banks' on-balance sheet exposures to cryptoassets at the end of 2023. Market discipline, also with regard to new products such as cryptoassets, will undoubtedly continue to be a focus of dialogue between regulators and the industry. At 31 December 2023 Grupo Santander met the minimum capital requirements established by current legislation (see note 54.d). 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 54.a). g) Events after the reporting period In accordance with the agreement reached by the March 2023 general shareholders’ meeting, on 30 January 2024 the board of directors has approved a capital reduction of EUR 179,283,743.50 through the redemption of 358,567,487 shares (representing approximately 2.22% of the share capital), acquired in the first share buyback program of 2023, with which the share capital has been set at EUR 7,912,789,286, represented by 15,825,578,572 shares. 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. 553       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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: 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: - Assets and liabilities, at the closing rates. - Income and expenses, at the average exchange rates for the year. - Equity items, at the historical exchange rates. iii. Recognition of exchange differences The exchange differences arising on the translation of foreign currency balances to the functional currency are generally recognised at their net amount under 'Exchange differences, net' in the consolidated income statement, except for exchange differences arising on financial instruments at fair value through profit or loss, which are recognised in the consolidated income statement without distinguishing them from other changes in fair value, and for exchange differences arising on non- monetary items measured at fair value through equity, which are recognised under 'Other comprehensive income–Items that may be reclassified to profit or loss–Exchange differences' except for exchange differences on equity instruments, where the option to irrevocably elect to be measured at fair value through changes in accumulated other comprehensive income, which are recognised in accumulated 'Other Comprehensive Income - Items not to be reclassified to profit or loss - Changes in fair value of equity instruments measured at fair value' through other comprehensive income (see note 29). The exchange differences arising on the translation to euros of the financial statements denominated in functional currencies other than the euro are recognised in 'Other comprehensive income–Items that may be reclassified to profit or loss– Exchange differences' in the consolidated balance sheet, whereas those arising on the translation to euros of the financial statements of entities accounted for using the equity method are recognised in equity under 'Other comprehensive income–Items that may be reclassified to profit or loss and Items not reclassified to profit or loss–Other recognised income and expense' of investments in subsidiaries, joint ventures and associates (see note 29), until the related item is derecognised, at which time they are recognised in profit or loss. Exchange differences arising on actuarial gains or losses when converting to euros the financial statements denominated in the functional currencies of entities whose functional currency is different from the euro are recognised under equity 'Other comprehensive income–Items not reclassified to profit or loss– Actuarial gains or (-) losses' on defined benefit pension plans (see note 29). – Historical cost of non-monetary assets and liabilities and of the various items of equity have to be adjusted to reflect the changes in the purchasing power of the currency due to inflation from their date of acquisition or incorporation into the consolidated balance sheet. – The different items of the income statement are adjusted by the inflationary index since their generation, with a balancing entry in 'Other comprehensive income'. – The loss on the net monetary position is recorded in the income for the year against 'Accumulated Other comprehensive income'. – All components of the financial statements of the subsidiary are translated at the closing exchange rate. 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. Inflation during 2023, to the national consumer price index published by the National Statistics and Census Institute, was 211.2% for the year (94.8% at 31 December 2022). The exchange rate at 31 December 2023 has been of 893.63 Argentine pesos per euro (189.12 Argentine pesos per euro at 31 December 2022). At 31 December 2023, no other country in which the consolidated and associated entities of Grupo Santander are located is considered to have a hyperinflationary economy in accordance with the criteria established in this regard by the International Financial Reporting Standards adopted by the European Union. v. Exposure to foreign currency risk Grupo Santander hedges a portion of its long-term foreign currency positions using foreign exchange derivative financial instruments (see note 36). Also, the Group manages foreign exchange risk dynamically by hedging its short-term position (with a potential impact on profit or loss) in order to limit the impact of currency depreciations while optimising the cost of financing the hedges. The following tables show the sensitivity of the consolidated income statement and consolidated equity to percentage changes of ± 1% in the foreign exchange rate positions arising from investments in Grupo Santander companies with currencies other than the euro (with its hedges) and in their results (with its hedges), in which the Group maintains significant balances. 554     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 2021 2022 (136.9) (146.0) (133.3) (11.4) (14.8) (35.3) (79.1) (36.4) (94.7) (105.9) (23.1) (27.7) (80.8) (175.7) (100.1) (27.5) (19.8) (48.8) Effect on consolidated profit 2022 2023 2021 (3.4) (2.3) (3.1) (0.1) (6.5) — (4.4) (2.0) (1.5) (2.0) (5.9) (1.3) (8.6) (2.4) (2.3) (0.9) (15.4) (1.1) (7.5) (17.1) (10.7) (4.2) (2.1) (2.5) 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 2023 2021 2022 139.7 148.9 136.0 11.6 15.1 36.0 Effect on consolidated profit 2022 2023 4.5 3.4 2.1 2.3 2021 8.8 2.4 80.7 37.1 96.7 108.0 23.6 28.2 82.4 179.3 102.1 28.0 20.2 49.8 3.1 0.1 6.6 — 1.5 2.0 6.0 1.4 2.3 0.9 15.7 1.1 7.7 17.4 11.0 4.2 2.2 2.6 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 2023, 2022 and 2021. 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 2023, 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. 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. 555                                             2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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, with the same criteria applicable to shares in joint ventures. 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 In some cases, 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. Those entities are called 'structured entities' and they are characterized by the fact that since the voting, or similar power is not a key factor in deciding who controls the entity. The control is determined by using internal criteria and procedures and taking into consideration the applicable legislation, as described above. 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. 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. 556   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. c) Classification of financial instruments 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. 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). i. 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 entity 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, the calendar and volume of sales in previous years, as well as expectations of future sales and the reasons of the 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%. • When contractual clauses that may modify the cash flows of the financial asset exist, the structure of the cash flows before and after the activation of such clauses is analysed, regardless of the probability of occurrence of the contingent event. The evaluation of contractual flows of financial assets with characteristics associated with ESG is included in this analysis. • 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 the 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'. 557         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • Fair value with changes in other comprehensive income: financial instruments held in a business model whose objective is to collect principal and interest cash flows and the sale of these assets, where fair value is a key factor in their management. Additionally, the contractual cash flow characteristics substantially represent a 'basic financing agreement'. • Fair value with changes in profit or loss: financial instruments included in a business model whose objective is not obtained through the above mentioned models, where fair value is a key factor in managing of these assets, and financial instruments whose contractual cash flow characteristics do not substantially represent a 'basic financing agreement'. In this section it can be enclosed the portfolios classified under 'Financial assets held for trading', 'Non-trading financial assets mandatorily at fair value through profit or loss' and 'Financial assets at fair value through profit or loss'. In this regard, most of the financial assets presented in the category of 'Financial assets designated at value reasonable with change in results' are instruments financial services that, not being part of the portfolio of negotiation, are contracted jointly with other financial instruments that are recorded in the category of 'held for trading', and that by both are recorded at fair value with changes in results, so your record in any other category would produce accounting asymmetries. Equity instruments will be classified at fair value under IFRS 9, with changes in profit or loss, unless the Group decides, for non- trading assets, to classify them at fair value with changes in other comprehensive income (irrevocably) at initial recognition. ii. 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. • Repurchase agreements and reverse repurchase agreements: Purchases 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, based on the nature of the debtor, under 'Loans and advances with central banks', 'Loans and advances to credit institutions' or 'Loans and advances to customers. Differences between the purchase and sale prices are recognised as interest over the contract term. • 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. iii. 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). 558 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • 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. iv. 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. • Repurchase agreements and reverse repurchase agreements: 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 received, based on the nature of the creditor, under '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. • 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. 559 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • The preference shares contingently convertible into ordinary shares eligible as Additional Tier 1 capital (PPCC) -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 (PPCA), 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. • 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'. 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 2023, there were no significant investments in quoted financial instruments that had ceased to be recognised at their quoted price because their market could not be deemed to be active. If there is no market price for a given financial instrument, its fair value is estimated on the basis of the price established in recent transactions involving similar instruments and, in the absence thereof, of valuation techniques commonly used by the international financial community, taking into account the specific features of the instrument to be measured and, particularly, the various types of risk associated with it. All derivatives are recognised in the balance sheet at fair value from the trade date. If the fair value is positive, they are recognised as an asset and if the fair value is negative, they are recognised as a liability. The fair value on the trade date is deemed, in the absence of evidence to the contrary, to be the transaction price. The changes in the fair value of derivatives from the trade date are 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. 560 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix iii. Valuation techniques 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, described in note 50.c. 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. For fixed rate financial instruments, the effective interest rate coincides with the contractual interest rate established on the acquisition date plus, where applicable, the fees and transaction costs that, because of their nature, form part of their financial return. In the case of floating rate financial instruments, the effective interest rate coincides with the rate of return prevailing in all connections until the next benchmark interest reset date. Equity instruments and contracts related with these instruments are measured at fair value. However, in certain circumstances the Group estimates cost value as a suitable estimate of the fair value. This can happen if the recent event available information is not enough to measure the fair value or if there is a broad range of possible measures and the cost value represents the best estimates of fair value within this range. The amounts at which the financial assets are recognised represent, in all material respects, the Group’s maximum exposure to credit risk at each reporting date. Also, Grupo Santander has received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist mainly of mortgage guarantees, cash collateral, equity instruments and personal security, assets leased out under finance lease and full-service lease agreements, assets acquired under repurchase agreements, securities loans and credit derivatives. ii. Measurement of financial liabilities In general, financial liabilities are measured at amortised cost, as defined above, except for those included under 'Financial liabilities held for trading' and 'Financial liabilities designated at fair value through profit or loss' and financial liabilities designated as hedged items (or hedging instruments) in fair value hedges, which are measured at fair value. The changes in credit risk arising from financial liabilities designated at fair value through profit or loss are recognised in accumulated other comprehensive income, unless they generate or increase an accounting mismatch, in which case changes in the fair value of the financial liability in all respects are recognised in the income statement. 561 2023 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'. 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. 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). Financial derivatives that do not qualify for hedge accounting are treated for accounting purposes as trading derivatives. Additionally, certain financial assets and liabilities can be designated as hedging instruments to cover exchange rate risk. 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, as well as firm commitments, 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 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. 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. b. 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. 562 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix c. 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 covered element affects the results, 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. d. 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. e. 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. 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. 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 the 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: 563           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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.). • 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. The new financial asset will be recorded at fair value and, if applicable, the difference between the carrying amount of the asset derecognized and the fair value of the new asset will be recognized in profit or loss. • Modifications due to refinancing or restructuring, in which the payment conditions are modified to allow a customer that is experiencing financial difficulties (current or foreseeable) to meet its payment obligations and that, if such modification had not been made, it would be reasonably certain that it would not be able to meet such payment obligations. In this case, the modification does not result in the derecognition of the financial asset, but rather the original financial asset is maintained and does not require a new assessment of its classification and measurement. When assessing credit impairment, the current credit risk (considering the modified cash flows) should be compared with the credit risk at initial recognition. 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. 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. 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, assets from contracts and loan commitments and the financial guarantees issued that are not measured at fair value through profit or loss. 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. 564 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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, debt securities or equity instruments 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. 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: Quantitative Within the quantitative thresholds, two types are 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. 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 54, 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. 565 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 days on material arrears. 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 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 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. 566 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • 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, reasonable and sustainable information on past events, current conditions and forecasts of the evolution of macroeconomic scenarios that are shown to be relevant for the estimation of this amount (for example: GDP (Gross Domestic Product), housing price, unemployment rate, etc.). The estimation of expected losses requires expert judgment and the support of historical, current and future information. The probability of loss is measured considering past events, the present situation and future trends of macroeconomic scenarios. Grupo Santander uses forward-looking information in both internal risk management and prudential regulation processes, so that for the calculation of the impairment loss allowance, various scenarios are incorporated that take advantage of the experience with such information, thus ensuring consistency in obtaining the expected loss. The 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 aligned partially and voluntarily 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 was done taking into account the criteria of IFRS 9 as well as the accounting principles of unbiased presentation of financial information. Grupo Santander 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.). 567 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix IFRS 9 includes a series of practical solutions that can be implemented by entities, with the aim of facilitating its implementation. In order to achieve a complete and high-level implementation of the standard, and following the best practices of the industry, the Group applies these practical solutions adapting them to their own characteristics and circumstances: – 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. – Assets with low credit risk at the reporting date: the Group adopts this practice prioritizing its reduced and punctual use and its systematic and periodic justification through quantitative evidence. This information is provided in more detail in note 54.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: 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 complete individual valuations carried out by independent valuation experts and under generally accepted valuation standards. If this is not possible, alternative valuations are used with duly documented and approved internal valuation models. • Personal guarantees are valued individually on the basis of the guarantor´s updated information. • The rest of the guarantees are valued based on current market values. c. Adjustments to the value of guarantees and estimation of future cash flow inflows and outflows Grupo Santander applies a series of adjustments to the value of the guarantees in order to improve the reference values: • Adjustments based on the historical sales experience of local units for certain types of assets. • Individual expert adjustments based on additional • Recovery through the debtor's ordinary activities (going management information. approach). • Recovery through the execution and sale of the collateral guaranteeing the operations (gone approach). Gone approach: a. Evaluation of the effectiveness of guarantees Grupo Santander assesses the effectiveness of all the guarantees associated considering the following: • The time required to execute these guarantees. Likewise, to adjust the value of the guarantees, the time value of money is taken into account based on the historical experience of each of the units, estimating: • Period of adjudication. • Estimated time of sale of the asset. In addition, the Group takes into account all those cash inflows and outflows linked to that guarantee until it is sold: • Possible future income commitments in favour of the borrower which will available after the asset is awarded. • Grupo Santander's ability to enforce or assert these • 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. guarantees in its favour. • The existence of limitations imposed by each local unit´s regulation on the foreclosure of collateral. Under no circumstances the Group considers that a guarantee is effective if its effectiveness depends substantially on the solvency of the debtor, as could be the case: • Promises of shares or other securities of the debtor himself when their valuation may be significantly affected by a debtor's default. • Personal cross-collateralisation: when the guarantor of a transaction is, at the same time, guaranteed by the holder of that transaction. The different types of effective guarantees have been detailed in section i. Definition 568 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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) '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. '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. 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. For the purposes of its consideration in initial recognition, the Group obtains, at the time of award, the fair value of the corresponding asset by requesting an appraisal from external valuation 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 Order ECO/805/2003, of 27 March. The main appraisal companies and agencies with which the Group worked in Spain in 2023 are as follows: Tinsa Tasaciones Inmobiliarias, S.A.U., Krata Sociedad de Tasación, S.A., Sociedad de Tasación, S.A., Global Valuation, S.A.U., Gesvalt Sociedad de Tasación, S.A. y Valoraciones Mediterraneo, 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. At 31 December 2023 the fair value less costs to sell of non- current assets held for sale exceeded their carrying amount by EUR 624 million (EUR 631 million at 31 December 2022); however, in accordance with the accounting standards, this unrealised gain could not be recognised. 569       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 85% 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 2 properties, 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. 570 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 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. 571 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Another aspect considered in measuring the present value of the future cash flows of a group of insurance contracts is the discount rate applied to reflect the time value of money and the financial risks related to those cash flows. The Group has established a generally chosen methodology and guarantees that the calculation components have a homogeneous basis, previously approved by the Group, establishing the base curves provided by the Group and allowing adjustments to these curves based on the expert criteria of each local address. Likewise, measuring compliance cash flows requires a risk adjustment for non-financial risk. Risk adjustment for non- financial risk is the compensation necessary to withstand uncertainty about the amount and timing of cash flows arising from non-financial risks. If a change in the assumptions occurs, it could affect the income statement or the Other comprehensive income, depending on its nature. The risks covered by the risk adjustment for non-financial risk are insurance risk and other non-financial risks, such as interruption risk and expense risk. j) 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. i) Assets under reinsurance contracts and Liabilities under insurance contracts The Group has prepared the accounting policy that establishes the criteria for recording insurance contracts, in accordance with IFRS 17. This standard defines insurance contracts as contracts under which one party accepts a significant insurance risk from another party by agreeing to compensate the policyholder if a specific uncertain future event negatively affects the policyholder. IFRS 17 requires a level of aggregation of contracts that the Group identifies in portfolios of contracts with similar risks and that are managed jointly. The Group then divides each portfolio into a minimum of three groups: (i) contracts that are onerous on initial recognition; (ii) contracts that, upon initial recognition, have no significant possibility of subsequently becoming onerous; and (iii) any remaining contract. For contracts that are considered not to be onerous, a profit margin is recognized in the profit and loss account (referred to as 'Contractual Service Margin' or 'CSM') throughout the period in which the entity performs the service. However, if at the time of initial recognition, or during the period in which the entity performs the service, the contract is onerous, the entity recognizes the loss in the income statement. Contract limits define the term up to which compliance cash flows must be considered in order to measure an insurance contract. Fulfillment cash flows comprise an unbiased, probability-weighted estimate of future cash flows, a discount adjustment to the present value to reflect the time value of money for monetary and financial risks, and a risk adjustment for non-fulfillment risks. financial. The identification of the contractual limit under IFRS 17 is essential not only for measuring the fulfillment cash flows of a group of contracts, but also for determining the applicable measurement model, in case the contractual limits are identified in a year or more. Cash flows are within the contractual limit of an insurance contract if they arise from substantial rights and obligations that exist during the reporting period, in which the entity can obligate the insurance policyholder to pay premiums or in which the entity has a substantive obligation to provide services to the insured. The Group has carried out an analysis of the limits of insurance and reinsurance contracts under IFRS 17, separately, generally applying the General Model (Building Block Approach) to all contracts, except those eligible to be valued by the Simplified Model (Premium Allocation Approach), or the Variable Commission Approach ('VCA' or Variable Fee Approach). The general model measures a group of contracts as the sum of the fulfillment cash flows and the Contractual Service Margin. The CSM represents benefits not yet recorded that the entity will recognize as providing services under the insurance contract. Insurance contracts with direct participation apply the VCA as a modified version of the General Model. This should reduce the volatility of results due to the asymmetry between the accounting treatment of the profit and losses of the underlying items attributable to the policyholders and the accounting treatment of the liability owed to those policyholders. 572   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2.6% 10.3% 10.3% 23.8% Less than the lease term or the useful life of the underlying asset At the end of each reporting period, consolidated entities assess whether there is any indication that the carrying amount of an asset exceeds its recoverable amount, in which case they write down the carrying amount of the asset to its recoverable amount and adjust future depreciation charges in proportion to its adjusted carrying amount and to its new remaining useful life, if the useful life needs to be re-estimated. Similarly, if there is an indication of a recovery in the value of a tangible asset, the consolidated entities recognise the reversal of the impairment loss recognised in prior periods and adjust the future depreciation charges accordingly. In no circumstances may the reversal of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognised in prior years. The estimated useful lives of the items of property, plant and equipment for own use are reviewed at least at the end of the reporting period with a view to detecting significant changes therein. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation charge to be recognised in the consolidated income statement in future years on the basis of the new useful lives. Upkeep and maintenance expenses relating to property, plant and equipment for own use are recognised as an expense in the period in which they are incurred, since they do not increase the useful lives of the assets. ii. Investment property 'Investment property' reflects the net values of the land, buildings and other structures held either to earn rentals or for obtaining profits by sales due to future increase in market prices. The criteria used to recognise the acquisition cost of investment property, to calculate its depreciation and its estimated useful life and to recognise any impairment losses thereon are consistent with those described in relation to property, plant and equipment for own use. In order to evaluate the possible impairment Grupo Santander determines periodically the fair value of its investment property so that, at the end of the reporting period, the fair value reflects the market conditions of the investment property at that date. This fair value is determined annually, taking as benchmarks the valuations performed by independent experts. The methodology used to determine the fair value of investment property is selected based on the status of the asset in question; thus, for properties earmarked for lease, the valuations are performed using the sales comparison approach, whereas for leased properties the valuations are made primarily using the income capitalisation approach and, exceptionally, the sales comparison approach. In the sales comparison approach, the property market segment for comparable properties is analysed, inter alia, and, based on specific information on actual transactions and firm offers, current prices are obtained for cash sales of those properties. The valuations performed using this approach are considered as level 2 valuations. In the income capitalisation approach, the cash flows estimated to be obtained over the useful life of the property are discounted taking into account factors that may influence the amount and actual obtainment thereof, such as: (i) the payments that are normally received on comparable properties; (ii) current and probable future occupancy; (iii) the current or foreseeable default rate on payments. The valuations performed using this approach are considered as Level 3 valuations, since significant unobservable inputs are used, such as current and probable future occupancy and/or the current or foreseeable default rate on payments. iii. Assets leased out under an operating lease 'Property, plant and equipment' - Leased out under an operating lease reflects the amount of the tangible assets, other than land and buildings, leased out by the Group under an operating lease. The criteria used to recognise the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives and to recognise the impairment losses thereon are consistent with those described in relation to property, plant and equipment for own use. k) 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 liability and 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. 573     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. 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. – Lease termination penalty payments, if the term of the lease reflects the lessee's exercise of that option. Right-of-use assets are valued at cost which includes the following: Lease payments are discounted using the interest rate implicit in the lease. When this interest rate cannot be obtained, the interest rate used in these 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: – 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). – Economic and political situation (country risk). l) Intangible assets – Credit risk of the company. – Monetary policy. – Volume and seniority of the company’s debt instrument issues. 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 measured reliably and it is likely that the consolidated entities obtain future economic benefits are recognised. Intangible assets are recognised initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses. i. Goodwill Any excess of the cost of the investments in the consolidated entities and entities accounted for using the equity method over the corresponding underlying carrying amounts acquired, adjusted at the date of first-time consolidation, is allocated as follows: a. 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. 574 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b. 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. 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. c. 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 indefinite useful lives are not amortised, but rather at the end of each reporting period or whenever there is any indication of impairment the consolidated entities review the remaining useful lives of the assets in order to determine whether they continue to be indefinite and, if this is not the case, to take the appropriate steps. Intangible assets with finite useful lives are amortised over those useful lives using methods similar to those used to depreciate tangible assets. The 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. m) Other assets Other assets' in the consolidated balance sheet includes the amount of assets not recorded in other items, the breakdown being as follows: • Inventories: this item includes the amount of assets, other than financial instruments, that are held for sale in the ordinary course of business, that are in the process of production, construction or development for such purpose, or that are to be consumed in the production process or in the provision of services. Inventories include land and other property held for sale in the property development business. Inventories are measured at the lower of cost and net realisable value, which is the estimated selling price of the inventories in the ordinary course of business, less the estimated costs of completion and the estimated costs required to make the sale. Any write-downs of inventories -such as those due to damage, obsolescence or reduction of selling price- to net realisable value and other impairment losses are recognised as expenses for the year in which the impairment or loss occurs. Subsequent reversals are recognised in the consolidated income statement for the year in which they occur. The carrying amount of inventories is derecognised and recognised as an expense in the period in which the revenue from their sale is recognised. ▪ Other: this item includes the balance of all prepayments and accrued income (excluding accrued interest, fees and commissions), the net amount of the difference between pension plan obligations and the value of the plan assets with a balance in the entity’s favour, when this net amount is to be reported in the consolidated balance sheet, and the amount of any other assets not included in other items. n) Other liabilities The intangible asset amortisation charge is recognised under 'Depreciation and amortisation' in the consolidated income statement. '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. 575   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix o) 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 are classified according to the obligations covered as follows (see note 25): ▪ Provision for pensions and similar obligations: includes the amount of all the provisions made to cover post-employment benefits, including obligations to pre-retirees and similar obligations. ▪ Provisions for contingent liabilities and commitments: include the amount of the provisions made to cover contingent liabilities -defined as those transactions in which the Group guarantees the obligations of a third party, arising as a result of financial guarantees granted or contracts of another kind- and contingent commitments -defined as irrevocable commitments that may give rise to the recognition of financial assets. ▪ Provisions for taxes and other legal contingencies and Other provisions: include the amount of the provisions recognised to cover tax and legal contingencies and litigation and the other provisions recognised by the consolidated entities. Other provisions includes, inter alia, any provisions for restructuring costs and environmental measures. p) 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. q) 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. 576               2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix r) 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. s) 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. t) 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. The investment funds and pension funds managed by the consolidated companies are also not presented in the Group's consolidated balance sheet, as they are owned by third parties. The commissions generated by these activities are included in the balance of the 'Commission income' chapter of the consolidated profit and loss account. 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. u) 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). 577   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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). v) 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). w) 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. x) Income tax The expense for Spanish income tax and other similar taxes applicable to the foreign consolidated entities is recognised in the consolidated income statement, except when they arise from a transaction whose results are recognised directly in equity, in which case the related tax effect is recognised in equity. The current income tax expense is calculated as the sum of the current tax resulting from application of the appropriate tax rate to the taxable profit for the year (net of any deductions allowable for tax purposes), and of the changes in deferred tax assets and liabilities recognised in the consolidated income statement. 'Deferred tax assets' and liabilities include temporary differences, which are identified as the amounts expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their related tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled. 578         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix '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 394.6 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, in its initial recognition of (i)a business combination, (ii) an operation that does not affect either the tax result or the accounting result or (iii) on the date of the transaction, does not generate deductible and taxable temporary differences for the same amount (in which case assets and deferred tax liabilities). 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. y) Residual maturity periods In note 51 it is provided an analysis of the maturities of the balances of certain items in the consolidated balance sheet. Santander Group has recorded as 'time liabilities' those recognised financial liabilities in which the counterparty may require payments. Likewise, when Grupo Santander has committed to having amounts available at different maturity periods, these amounts have been recorded in the first year in which they may be required. Additionally, for the financial guarantee contracts issued, the Group has recorded the maximum amount of the financial guarantee issued in the first year in which the guarantee can be executed. z) 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. aa) 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. 579                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix ab) 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 or 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 2023 Grupo Santander received interest amounting to EUR 101,029 million (EUR 69,282 and EUR 48,081 in 2022 and 2021, respectively) and paid interest amounting to EUR 50,954 million (EUR 23,390 and EUR 12,738 in 2022 and 2021, 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 offers 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 (Shares) and United States (American Depositary Shares ('ADSs')) which were 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 were originally scheduled to close on 8 March 2023. On 1 March 2023, Banco Santander announced its decision to extend the expiration date of the offers so that they could be concluded on 10 April 2023. Finally, after the offers' closing, 3.6% of the capital accepted the offer, which raised the Group's stake in Santander México from 96.2% to 99.8%.will be settled on 13 March 2023. Shareholders who participated in the offerings received 24.52 Mexican pesos (approximately EUR 1.20) per Share and USD 6.6876 in cash for each ADS (i.e., the equivalent in United States dollars of 122.6 Mexican pesos in cash for each ADS at the US dollar/Mexican peso exchange rate on the expiration date of 10 April 2023),which corresponded to the book value of the Santander México share according to the quarterly report of Santander México corresponding to the fourth quarter of the year 2022 in accordance with applicable legislation, with a total disbursement by Banco Santander of approximately EUR 300 million. The operation has led to an increase of EUR 13 million in Reserves and a decrease of EUR 313 million in minority interests. Once the offers were concluded and settled, Banco Santander proceeded to: (i) withdraw the ADSs from the listing on the New York Stock Exchange (“NYSE”) and the Shares from the registry before the Securities and Exchange Commission ('SEC') in the United States and; (ii) cancel the registration of the Shares in the National Securities Registry of the National Banking and Securities Commission ('CNBV'') and withdraw the listing of the Shares in the Mexican Stock Exchange, S.A.B. de C.V. ('BMV'). 580         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Said cancellation was approved by the extraordinary general shareholders' meeting of Santander México held on 30 November 2022, with the favourable vote of the holders of the shares that represent more than 95% of the shares of Santander Mexico, as required by the Mexican Securities Market Law. Pursuant to Mexican law, on 12 May 2023, Banco Santander and Santander México established a trust (the “Repurchase Trust”), to which the holders of the Shares that remain outstanding after the conclusion of the offers, to sell said Shares to the repurchase trust, at the same cash price that would have been paid to them in the Mexican offer with respect to the same. At the end of the year, said trust has already been liquidated and the Group's effective participation amounts to 99.98%. Likewise, 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 represented 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 held 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. ii. Agreement to acquire a significant holding in Ebury Partners Limited 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 (approximately 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 (approximately EUR 135 million) and subscribed in full to a new capital increase, paying an additional GBP 60 million (approximately 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. iv. Acquisition of Amherst Pierpont Securities LLC, a US fixed-income broker dealer On 15 July 2021, Santander Holdings USA, Inc. (SHUSA), 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, Global business line. 581                                         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 1 January 2022 is also immaterial. 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, immaterial losses and no employees as of December 2023. 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 166 employees as of December 2023. 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. 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 October 2023, the EU blacklist comprises 16 jurisdictions where Santander is only present in The Bahamas. In this jurisdiction, Santander has one bank without third-party activity, Santander Bank & Trust Ltd., and one branch of the Swiss bank Banco Santander International SA. These entities have a total of 26 employees as of December 2023. In 2023, one subsidiary residing in The Bahamas moved its domicile to Spain. Additionally, the EU grey list comprises 14 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 2023. 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. The Group's presence in offshore territories at the end of 2023 is as follows: Presence of the Group in non- cooperative a jurisdictions Jersey Isle of Man Cayman Islands The Bahamas 2023 2022 c Spanish legislation Sub. Branch 1 1 1 1 1 1 3 3 Council of the EU blacklist Sub. Branch b OECD Sub. Branch 1 1 2 1 1 1 — — — — a Additionally, there is one subsidiary constituted in Guernsey and one in Bermuda, but residents for tax purposes in the UK. 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. In 2023, one subsidiary residing in The Bahamas moved its domicile to Spain. b c 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 limiting and reducing its presence in non- cooperative jurisdictions when possible. PwC (PricewaterhouseCoopers) member firms audited the financial statements of Grupo Santander’s offshore entities in 2023, 2022 and 2021. 582     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The 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, was as follows: EUR million Profit before taxes Tax expense Dividends paid in cash Distributable maximum amount Available liquidity 31 August 2023 5,109 267 — 4,842 107,067 Finally, and although it is not part of the remuneration charged to the 2023 financial year, it should be noted that pursuant to the resolution of the Bank's General Meeting of Shareholders held on 31 March 2023, on 2 May 2023 the Bank paid a complementary cash dividend of EUR 5.95 cents per share charged to the results of the 2022 financial year. Finally, also charged to the results of 2022, the Bank implemented repurchase programs. The first of them for a maximum amount of EUR 979 million, which ended on January 2023 and the second one, for a maximum amount of EUR 921 million, which ended in April 2023. 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: EUR million To dividends A Dividend paid at 31 December B Complementary dividend C To voluntary reserves Net profit for the year 2,769 1,298 1,471 6,470 9,239 A. Total amount paid as interim dividend, at the rate of EUR 8.10 fixed cents per eligible share (recorded in 'Shareholders' equity - Interim dividends'). B. Fixed complementary dividend of EUR 9.50 gross cents per eligible share, payable in cash as from 2 May 2024. The total amount has been estimated on the assumption that, as a result of the partial implementation of the buyback program announced on February 19, 2024, the number of the Bank's outstanding shares eligible for the dividend will be 15,483,617,874. Therefore, the total amount of the complementary dividend may be higher if fewer shares are acquired in the buyback program than expected, or lower in the opposite case. C. Estimated amount corresponding to a complementary dividend of EUR 1,470,943,698. To be increased or reduced by the same amount by which the total amount of the complementary dividend is respectively lower or higher than the estimate of that complementary dividend. The transcribed proposal comprises the part of the 2023 shareholder remuneration policy that is implemented through cash dividends (the interim dividend paid in November 2023 of EUR 8.10 cents per share with dividend entitlement, approved by the board of directors on 26 September 2023, and the complementary dividend expected to be paid as of 2 May 2024, of EUR 9.50 cents per share with the dividend entitlement, proposed by the board of directors on 19 February 2023, and therefore subject to approval by the General Meeting of Shareholders). In addition, the 2023 remuneration policy also includes expected shareholder remuneration through the implementation of a share buyback program to which an amount equivalent to 25% of the Group's ordinary profit. The first of these programs based on the results of 2023, for an approximate amount of EUR 1,310 million, was completed between September 2023 and January 2024. A second buyback program on account of the 2023 results is planned for an amount of EUR 1,459 million. It also submits to the general meeting of shareholders the agreement for reduction of capital that will allow the amortization of own shares acquired in the repurchase program, subject to the relevant regulatory authorization. 583       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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) 2023 2022 2021 11,076 9,605 8,124 (492) 10,584 (529) 9,076 (566) 7,558 — — — 10,584 9,076 7,558 16,172,084,714 16,848,344,667 17,272,055,430 16,172,084,714 16,848,344,667 17,272,055,430 0.654 0.539 0.438 — — — 0.654 0.539 0.438 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) 2023 2022 2021 11,076 9,605 8,124 (492) (529) (566) — 10,584 — 9,076 — 7,558 — — — 10,584 9,076 7,558 16,172,084,714 16,848,344,667 17,272,055,430 75,180,407 55,316,206 48,972,459 16,247,265,121 16,903,660,873 17,321,027,889 0.651 0.537 0.436 — — — 0.651 0.537 0.436 584       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 5. Remuneration and other benefits paid to the Bank’s directors and senior managers The following section contains qualitative and quantitative disclosures on the remuneration paid to the members of the board of directors —both executive and non-executive directors — and senior managers for 2023 and 2022: 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 2023 (EUR 6 million in 2022), 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 2023 amounted to EUR 5.3 million (EUR 4.7 million in 2022). Annual allotment In accordance with the remuneration policy approved at the general shareholders' meeting on 31 March 2023, the annual allotment for board and committee membership (except for the executive committee) increased EUR 3,000 compared to the amount approved and established for 2022. Each director received the amounts for serving on the board and its committees and positions held in them included in the chart below for 2022 and 2023: 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 2023 98,000 170,000 43,000 28,000 28,000 2022 95,000 170,000 40,000 25,000 25,000 43,000 40,000 18,000 15,000 28,000 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. Since 2015, Bruce Carnegie-Brown has been allocated EUR 700,000 (including annual allowances and attendance fees) in minimum total annual pay set for the lead independent director, for his services to the board and its committees, particularly as Chair of the nomination and remuneration committees and also as lead independent director; and for the required time and dedication to perform these roles. Bruce Carnegie-Brown has stepped down from his role of Lead Independent Director on 1 October 2023, when he has been succeeded in this position by Glenn Hutchins. Attendance fees The directors receive fees for attending board and committee meetings, excluding executive committee meetings, where no attendance fees are received. For 2023 the board voted to keep the same amounts set out in the 2022 policy. 585             2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The fees have not been modified since 2016. For 2023 and 2022 they 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) 2023 2022 2,600 2,600 1,700 1,700 1,500 1,500 Comparative of executive remuneration (Chair and CEO) The board voted to maintain the same target incentive for Ana Botín in 2023 as in 2022 and established a variable remuneration target for Hector Grisi of EUR 4,200 thousand (aligned with that of his predecessor José Antonio Álvarez). In turn, after five years with no review of gross annual salary, the board resolved that Ana Botín’s gross annual salary would increase a 3% in respect of 2022. Variable contributions to pensions were not modified in 2023, so the amounts are the 22% of the 30% of the last three assigned bonus' average. In 2023, Santander’s strong performance and excellent execution of our strategy enabled us to deliver record attributable profit of EUR 11,076 million (+15.3% vs. 2022) and a capital ratio of 12.30% (achieving our public target). We also achieved a very high total shareholder return of 40.5%( 5% above our official group of nine peers in relative terms). Because of the double digit growth in net profit coupled with the highest TSR in the last 14 years, the board approved to maintain the same bonus pool as in 2022 at 138.91% for which an extraordinary adjustment of + 15.57% was made, in the same manner as the 2021 and 2019 pools were both reduced by extraordinary adjustments (due to worse shareholders return), with a combined impact of -30%. As a result, and considering the exceptional contribution made by the Chairman and the CEO to the achievement of these exceptional figures, on the basis of the detailed pool disclosed in the Remuneration section, and due to the fulfillment of their individual objectives, the board of directors, upon recommendation of the remuneration committee, approved the variable remuneration disclosed below, which means an increase of 5% of Executive Chair's total compensation, and a reduction of 9% in the case of Héctor Grisi (compared to his predecessor). Moreover, the ratio of executive directors’ total remuneration to underlying attributable profit fell to 0.19% from 0.23% in 2022. 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 2025 and 2026) will be conditional on none of the malus clauses being triggered. – The accrual of the third, fourth, and fifth portion (payment in 2027, 2028 and 2029), is linked to objectives related to the period 2023—2025 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, 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. In 2023 both directors have chosen all in shares. 586     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix iii. Detail by director The detail, by bank director, of the short-term (immediate) and deferred (not subject to long-term goals) remuneration for 2023 and 2022 is provided below: EUR thousand Ana Botín A Héctor Grisi José Antonio Álvarez Bruce Carnegie- Brown Homaira Akbari Javier BotínB Sol Daurella Henrique de Castro Gina Díez Luis Isasi Ramiro Mato Belén Romana Pamela Walkden Germán de la Fuente 2 Glenn Hutchins C Álvaro Cardoso R. Martín Chavez E Sergio Rial Total 2023 Total 2022 D 2023 Bylaw-stipulated emoluments Annual emolument BoardF 98 98 Executive committee 170 170 Audit committee — — Appointments committee — — Remuneration committee — — Risk supervision, regulation and compliance oversight committee — — Responsible banking, sustainability and culture committee — — Innovation and technology committee 98 28 Attendance fees and commissions 45 44 128 203 98 98 98 98 98 98 98 98 98 98 193 — — — 1,700 1,561 170 127 — — — — — 170 170 170 — — — — — — 1,147 1,020 — — 43 — — 43 — — 43 43 113 43 — — — — 328 301 — 78 — — 28 — 28 — — — — — 28 — — — 162 139 — 66 — — 28 28 — 28 — — — — 41 — — — 191 159 — — — — — — — 43 43 113 43 43 — — — — 285 241 — — 18 — 18 — 17 — 68 18 — — — — — — 139 114 28 21 28 — — 28 — — — 28 — — 28 — — — 287 229 45 81 78 39 77 87 68 78 96 102 87 87 83 — — — 1,096 930 A. Director since 1 January 2023. B.All amounts received were reimbursed to Fundación Botín. C.Stepped down as director on 1 April 2022. D.Stepped down as director on 1 July 2022. E.Stepped down as director on 1 January 2023. F.Also includes emoluments for other roles in the board. 1. Includes EUR 1,000 thousand for the role as non-executive Chair of Santander España and for Santander España board and committees meetings for Luis Isasi. For José Antonio Álvarez, this amount includes remuneration as strategic advisor of Grupo Santander, life and health insurance contributions (EUR 722 thousand) and the supplement for having waived the death and disability policy (EUR 710 thousand). 2. From 1 October 2023, the Lead Independent Director, non-executive Vice Chair and Chair of remuneration committee is Mr. Glenn Hutchins, succeeding Mr. Carnegie- Brown. 587       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 2023 2022 Short-term and deferred (not subject to long-term goals) salaries of executive directors Variable - immediate payment Deferred variable Fixed 3,271 3,000 — In cash 1,780 1,220 — In instruments 1,780 In cash 1,068 In instruments 1,068 1,220 — 732 — 732 — Pension contribution 1,144 966 — Total 8,967 6,904 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Other remuneration 1 1,022 47 3,182 — — — — — — Total 11,544 8,257 3,553 Total 11,001 — 9,086 576 265 137 249 284 211 700 244 129 230 261 172 1,000 1,417 1,412 — — — — — — — 518 572 341 271 372 — — 500 549 323 137 10 39 147 — 6,271 5,717 — 3,000 2,827 — 3,000 2,829 — 1,800 1,697 — 1,800 1,697 — 15,871 14,767 — 2,110 1,892 — 5,251 3,719 — 28,567 131 — 25,071 Ana Botín A Héctor Grisi José Antonio Álvarez Bruce Carnegie- Brown Homaira Akbari B Javier Botín Sol Daurella Henrique de Castro Gina Díez Luis Isasi Ramiro Mato Belén Romana Pamela Walkden Germán de la Fuente 2 Glenn Hutchins C Álvaro Cardoso R. Martín Chavez E Sergio Rial Total 2023 Total 2022 D Footnotes in previous table. 588 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Following is the detail by executive director of the salaries linked to multi-year objectives at their fair Value, which will only be received if the conditions of permanence in the Group, non-applicability of malus clauses and achievement of the established objectives are met (or, as the case may be, of the minimum thresholds thereof, with the consequent reduction of amount agreed-upon at the end of the year) in the terms described in Note 46. EUR thousand 2023 2022 Variable subject to long- term objectives 1 Ana Botín Héctor Grisi José Antonio Álvarez Total In In cash shares 911 1,121 592 769 — — 1,890 1,504 In RSUs 210 176 — 386 Total 2,243 1,537 — 3,780 Total 2,128 — 1,436 3,564 1. Corresponds with the fair value of the maximum amount they are entitled to in a total of 3 years: 2027, 2028 and 2029, 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 2023 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 2023 and 2022 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 2023 the Bank’s directors did not receive any remuneration in respect of these representative duties. On the other hand, in their personal capacity, in 2023 Homaira Akbari was paid USD 120 thousand (EUR 111 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 José Antonio Álvarez were each paid the same EUR 200 thousand as members of the board of PagoNxt S.L. José Antonio Álvarez also received BRL 755 thousand (EUR 141 thousand) as member of Banco Santander (Brasil) S.A. Likewise, Pamela Walkden was paid GBP 132 thousand (EUR 152 thousand) as member of Santander UK plc and Santander UK Group Holdings. 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.). And finally, José Antonio Álvarez, as strategic adviser of Grupo Santander, received fixed remuneration of EUR 1,750 thousand. In addition, he received the life and health insurance contributions, and the supplement for having waived the death and disability policy. c) Post-employment and other long-term benefits In 2012, the contracts of Ana Botín 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 Ana Botín 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 other members of executive team, 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. 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. 589                         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 directors: Insured capital EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total 2023 21,054 50 11,910 33,014 2022 20,988 — 17,345 38,333 The insured capital has been modified in 2018 for Ana Botín 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 2023 and 2022, the Group has disbursed a total amount of EUR 13.2 million and EUR 48.2 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 management 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 of third parties. For this reason, it is not possible to disaggregate or individualize the amount that correspond to the directors and executives. As of 31 December 2023 and 2022, no life insurance commitments exist for the Group in respect of any other directors. 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. For Héctor Grisi, CEO from 1 January 2023, since he has not been in position for three years, the calculation of variable portion was calculated with his gross variable remuneration agreed in that year. • 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 2023 and 2022 for retirement pensions were as follows: EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total 2023 1,144 966 — 2,110 2022 1,081 — 811 1,892 Following is a detail of the balances relating to each of the directors under the welfare system as of 31 December 2023 and 2022: EUR thousand Ana Botín Héctor Grisi José Antonio Álvarez Total 2023 49,257 585 19,495 69,338 2022 46,725 — 18,958 65,683 590   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 and 2022 due to their participation in the deferred variable remuneration systems, which instrumented a portion of their variable remuneration relating to 2023 and prior years, as well as on the deliveries, in shares or in cash, made to them in 2023 and 2022 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 management 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 clawback any paid variable amounts in the scenarios and for the period dictated by the terms and conditions in the said policy. On each delivery, the beneficiaries are paid an amount in cash equal to the dividends paid for the amount deferred in shares and the interest on the amount deferred in cash. If the Santander Dividendo Elección scrip dividend scheme is applied, payment will be based on the price offered by the Bank for the bonus share rights corresponding to those shares. The maximum number of shares to be delivered is calculated taking into account the daily volume-weighted average prices for the 15 trading sessions prior to the date on which the board of directors approves the bonus for the Bank’s executive directors for each year. This plan and the Performance Shares (ILP) plan described below have been integrated for the executive directors and other senior managers in the deferred variable compensation plan linked to multiannual objectives, in the terms approved by the General Meeting of Shareholders held on March 18, 2016. 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 2023 has been approved by the board of directors and implemented through the eighth 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 2025 and 2026) is conditional on none of the malus clauses being triggered. • The accrual of the third, fourth and fifth parts (instalments in 2027, 2028 and 2029) is linked to non-concurrence of malus clauses and the fulfilment of certain objectives related to the 2022‑ 2025 period. These objectives and their respective weights are: – Banco Santander’s consolidated Return on tangible equity (RoTE) target in 2025 (weight of 40%). – 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 (weight of 40%). – Four ESG (environmental, social and governance) metrics. Each of the four 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. 591     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix iii) Shares assigned by deferred variable remuneration plans The following table shows the number of Santander shares assigned to each director already in service and pending delivery as of 1 January 2022, 31 December 2022 and 31 December 2023, as well as the gross shares that were delivered to them in 2022 and 2023, 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 2017, 2018, 2019, 2020, 2021, 2022 and 2023 were formalized. 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. In addition to the existing policy on malus and clawback clauses of our remuneration policy, the board of directors of Banco Santander at its meeting held on 28 November 2023, following the proposal from the remuneration committee on 27 November 2023, approved an addendum to our remuneration policy to comply with new SEC (US Securities and Exchange Commission) regulations relating to the recoupment of compensation erroneously received by the executive directors of Banco Santander, S.A. and senior management (according to the regulation) in the event of a financial restatement, as defined under the rule, resulting from material noncompliance with financial reporting requirements under federal securities laws. The new addendum to our remuneration policy, entitled "Financial Statement Restatement Compensation", is included as an exhibit to our Annual Report on Form 20-F report filed with the SEC. Effective from 2023 variable remuneration plan, 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 fifty 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. 592 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Share-based variable remuneration 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 2022 variable remuneration Ana Botín José Antonio Álvarez 1 2023 variable remuneration Ana Botín Héctor Grisi Maximum number of shares to be delivered at January 1,2022 Shares delivered in 2022 (immediate payment 2021 variable remuneration) Shares delivered in 2022 (deferred payment 2020 variable remuneration) Shares delivered in 2022 (deferred payment 2019 variable remuneration) Shares delivered in 2022 (deferred payment 2018 variable remuneration) Shares delivered in 2022 (deferred payment 2017 variable remuneration) Variable remuneration 2022 (Maximum number of shares to be delivered) 62,722 41,946 104,668 103,201 68,963 172,164 425,853 284,599 710,452 186,369 101,229 287,598 — — — — — — — — 1,480,622 999,259 2,479,881 (592,249) (399,704) (991,953) — — — — — — — — — — — — — — — — — — (106,463) (71,150) (177,613) (37,274) (20,246) (57,520) — — — — — — — — — — — — — — — — (31,361) (20,973) (52,334) (34,400) (22,988) (57,388) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 631,829 426,475 1,058,305 — — 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. 593 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Maximum number of shares to be delivered at December 31, 2022 Instruments matured but not consolidated at January 1, 20232 Shares delivered in 2023 (immediate payment 2022 variable remuneration) Shares delivered in 2023 (deferred payment 2021 variable remuneration) Shares delivered in 2023 (deferred payment 2020 variable remuneration) Shares delivered in 2023 (deferred payment 2019 variable remuneration) Shares delivered in 2023 (deferred payment 2018 variable remuneration) Shares delivered in 2023 (deferred payment 2017 variable remuneration) Variable remuneration 2023 (Maximum number of shares to be delivered) Maximum number of shares to be delivered at December 31, 2023 31,361 20,973 52,334 68,800 45,975 114,776 — — — — 319,390 213,449 532,839 (106,453) (71,143) (177,595) 149,095 80,983 230,078 888,373 599,555 1,487,928 631,829 426,475 1,058,305 — — — — — — — — — — — — — — — — — — — — (273,410) (184,521) (457,931) — — — — — — — — — — (177,675) (119,911) (297,586) — — — — — — — — — — — — — — (35,452) (23,693) (59,145) (37,274) (20,246) (57,520) — — — — — — — — — — — — — — — — (31,361) (20,973) (52,334) (34,400) (22,988) (57,388) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 34,400 22,988 57,388 177,485 118,614 296,099 111,821 60,737 172,558 710,698 479,644 1,190,342 358,419 241,954 600,374 1,127,208 749,143 1,876,351 1,127,208 749,143 1,876,351 2. The levels of achievement of the multi-year metrics of the long-term variable remuneration plans: 1) Fifth cycle of the deferred multi-year objectives variable remuneration plan (2020): 83.3% of achievement for the period 2020-2022. a. CET1 metric at 100% of achievement for 2022 year-end period (target 12.00%). Weight of 33.3%. b. Underlying BPA growth at 150% of achievement (target growth of 10%). Weight of 33.3%. c. TSR metric at 0% of achievement (minimum target of 33% not reached). Weight of 33.3%. 2) Fourth cycle of the deferred multi-year objectives variable remuneration plan (2019): 33.3% of achievement for the period 2019-2021. a. CET1 metric at 100% of achievement for 2021 year-end period (target 12.00%). Weight of 33.3%. b. Underlying BPA growth at 0% of achievement (target growth of 15%). Weight of 33.3%. c. TSR metric at 0% of achievement (minimum target of 33% not reached). Weight of 33.3%. 3) Third cycle of the deferred multi-year objectives variable remuneration plan (2018): 33.3% of achievement for the period 2018-2020. a. CET1 metric at 100% of achievement for 2020 year-end period (target 11.30%). Weight of 33.3%. b. Underlying BPA growth at 0% of achievement (target growth of 25%). Weight of 33.3%. c. TSR metric at 0% of achievement (minimum target of 33% not reached). Weight of 33.3%. Furthermore, the maximum number of RSUs of PagoNxt, S.L. to be delivered under the current plan is 9,529 and 8,005 units for Ana Botín and Héctor Grisi, respectively. 594 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix In addition, the table below shows the cash delivered in 2023 and 2022, 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 2023 2022 Cash paid (immediate payment 2022 variable remuneration) 1,689 1,823 1,140 4,652 Cash paid (deferred payments from 2021, 2020, 2019 and 2018 variable remuneration) 1,117 697 737 2,551 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 Ana Botín Héctor Grisi 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, 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 2023 and 2022 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 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) Deferred conditional variable remuneration plan and linked to objectives (2022) Number of shares delivered 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) Deferred conditional variable remuneration plan and linked to objectives (2022) In addition, EUR 1,417 thousand and EUR 2,759 thousand relating to the deferred portion payable in cash of the aforementioned plans were paid each in 2023 and 2022. 2023 — — 29,860 48,980 106,536 300,000 — 2023 — 6,145 29,860 24,490 42,632 75,000 — 2022 — 33,783 36,543 98,092 — — — 2022 60,251 33,783 18,272 32,698 — — 595   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix f) Loans Grupo Santander’s direct risk exposure to the bank’s directors and the guarantees provided for them are detailed below. These transactions were made on terms equivalent to those that prevail in arm’s-length transactions or the related compensation in kind was recognized: EUR thousand Ana Botín José Antonio Álvarez Bruce Carnegie-Brown Javier Botín Sol Daurella Belén Romana Ramiro Mato Homaira Akbari Henrique de Castro Pamela Walkden Luis Isasi Sergio Rial1 Héctor Grisi Gina Díez Barroso Glenn Hutchins Germán de la Fuente 2023 2022 Loans and credits Guarantees — — — — — — — — — — — — — — — — — 26 4 — 4 51 — — — — — — — 8 1 — — 94 Total 26 4 — 4 51 — — — — — — — 8 1 — — 94 Loans and credits Guarantees — — — — — — — — — — — — — — — — — 20 7 — 23 49 — 1 — — — — 5 — — — — 105 Total 20 7 — 23 49 — 1 — — — — 5 — — — — 105 1. Ceased as director of Banco Santander, S.A. on 1 January 2023 g) Senior management The table below includes the amounts relating to the short- term remuneration of the members of senior management at 31 December 2023 and those at 31 December 2022, excluding the remuneration of the executive directors, which is detailed above. This amount has been reduced by 38% compared to that reported in 2014 (EUR 80,792 thousand): EUR thousand Short-term salaries and deferred remuneration Year 2023 2022 Number of persons 14 14 Fixed 17,109 18,178 Variable remuneration (bonus) - Immediate payment In cash 7,355 7,733 In instruments2 7,356 7,733 Deferred variable remuneration In cash 3,219 3,398 In 3 instruments 3,220 3,399 Pensions 4,775 5,339 Other 1 remuneration 7,135 6,956 Total 50,169 52,736 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 for 2023 is 1,567,930 shares and 1,386,491share options (2,504,000 Santander shares in 2022). 3. The deferred amount in instruments not linked to long-term objectives for 2023 is 700,305 shares and 554,597 share options ( 1,101,000 Santander shares in 2022). The board of directors approved the 2023 Digital Transformation Incentive which is a variable remuneration scheme 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 200  thousand. See note 46 to the 2023 Group's consolidated financial statements for further information on the Digital Transformation Incentive. In 2023, 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 2023 AGM. 596     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Also, the detail of the breakdown of the remuneration linked to long-term objectives of the members of senior management at 31 December 2023 and 31 December 2022 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 Variable remuneration subject to long-term objectives 1 Year 2023 2022 Number of people 14 14 Cash payment 3,380 3,568 Instrument payment 3,381 3,569 Total 6,761 7,137 1. Relates to the fair value of the maximum annual amounts for years 2027, 2028 and 2029 of the eighth cycle of the deferred conditional variable remuneration plan (2026, 2027 and 2028 for the seventh cycle of the deferred variable compensation plan linked to annual objectives for the year 2022). Additionally, members of senior management who stepped down from their roles in 2023 consolidated salary remuneration and other remuneration for a total amount of EUR 3,560 thousand (EUR 3,691 thousand in 2022). In 2023 they did not generate any right regarding variable pay subject to long-term objectives (this right has been generated in 2022 for a total amount of EUR 447 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 2023 and 31 December 2022 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 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) Deferred conditional variable remuneration plan and linked to objectives (2022) 2023 2022 — — 18,500 76,053 72,734 155,758 176,704 949,917 728,200 1,438,437 1,824,824 2,711,926 2,320,032 — 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 2023 and 2022 to the senior management, in addition to the payment of the related cash amounts: Number of shares delivered 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) Deferred conditional variable remuneration plan and linked to objectives (2022) 2023 2022 — 114,006 11,046 107,891 72,734 79,037 88,352 288,041 292,737 360,614 456,206 2,556,117 2,070,634 — 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. 597                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The contracts of some members of senior management were modified at the beginning of 2018 with the same objective and changes indicated in section c of this note for Ana Botín. 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 1 January 2018 for some members of senior management and since 1 April 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 2023 in the pension system for those who were part of senior management at year end amounted to EUR 57 million (EUR 54 million at 31 December 2022). The net charge to income corresponding to pension amounted to EUR 4.7 million in 2023 (EUR 5.3 million in 31 December 2022). In 2023 and 2022 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 2023 of this group amounts to EUR 84.4 million (EUR 98 million at 31 December 2022). h) Post-employment benefits to former directors and former senior executive vice presidents The post-employment benefits and settlements paid in 2023 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 2022, respectively. Also, the post-employment benefits and settlements paid in 2023 to former executive vice presidents amounted to EUR 15 million and EUR 4.8 million in 2022, respectively. Contributions to insurance policies that hedge pensions to previous members of the Bank’s board of directors, amounted to EUR 0.17 million in 2023 (EUR 0.17 million in 2022). Likewise, contributions to insurance policies that hedge pensions for previous senior managers amounted to EUR 3.3 million in 2023 (EUR 3.1 million in 2022). During the 2023 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 members of senior management in 2023 and 2022. In addition, 'Provisions - Pension Fund and similar obligations' in the consolidated balance sheet as at 31 December 2023 included EUR 46 million in respect of the post-employment benefit obligations to former Directors of the Bank (EUR 48 million at 31 December 2022) and EUR 88 million corresponding to former members of senior management (EUR 99 million at 31 December 2022). i) Pre-retirement and retirement The board of directors approved an amendment to the contracts of executive directors whereby they ceased to have the right to pre-retire in case of termination of his contract. j) Contract termination The executive directors and members of senior management 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. 598                                         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 6. Loans and advances to central banks and credit institutions The detail, by classification, type and currency, of Loans and advances to central banks and credit institutions in the consolidated balance sheets is as follows: EUR million CENTRAL BANKS Classification Financial assets held for trading Non-trading financial assets mandatorily at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets designated at fair value through other comprehensive income Financial assets at amortised cost Type Time deposits Reverse repurchase agreements Impaired assets Valuation adjustments for impairment CREDIT INSTITUTIONS Classification Financial assets held for trading Non-trading financial assets mandatorily at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets designated at fair value through other comprehensive income Financial assets at amortised cost Type Time deposits Reverse repurchase agreements Non- loans advances Impaired assets Valuation adjustments for impairment CURRENCY Euro Pound sterling US dollar Brazilian real Other currencies TOTAL 2023 2022 2021 17,717 11,595 3,608 — — — 20,082 37,799 17,747 20,052 — — — — — 15,375 26,970 15,180 11,790 — — — — — 15,657 19,265 13,275 5,990 — — 37,799 26,970 19,265 14,061 16,502 10,397 — 459 313 57,917 72,750 8,560 35,846 28,353 — (9) — 673 — 46,518 63,693 8,891 27,321 27,487 — (6) — 3,152 — 39,169 52,718 10,684 18,853 23,188 1 (8) 72,750 63,693 52,718 34,229 3,539 17,602 47,151 8,028 110,549 26,024 4,474 18,468 34,863 6,834 90,663 24,286 3,228 12,639 24,011 7,819 71,983 The loans and advances to credit institutions classified under 'Financial assets at amortised' cost are mainly time accounts and deposits. Note 51 contains a detail of their residual maturity periods. This line item also includes irrevocable payment commitments to the Single Resolution Fund made in accordance with article 70.3 of Regulation 806/2014, which establishes uniform rules and a uniform procedure for the resolution of credit institutions and certain security service companies. investment within the framework of a Single Resolution Mechanism and a Single Resolution Fund, for which, in accordance with the standard, no provision has been recorded, these commitments have not been significant regarding the consolidated annual accounts. At 31 December 2023 the gross exposure by impairment stage of the assets accounted subject to impairment for amounts to EUR 78,321 million, EUR 0 million and EUR 0 million (EUR 61,898, EUR 1 million and EUR 0 million in 2022 and EUR 54,833 million, EUR 0 million and EUR 1 million in 2021), and the loan loss provision by impairment stage amounts to EUR 9 million, EUR 0 million and EUR 0 million (EUR 6 million, EUR 0 million and EUR 0 million in 2022 and EUR 8 million, EUR 0 million and EUR 0 million in 2021) in stage 1, stage 2 and stage 3, respectively. 599 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 increase in the year of the debt securities portfolio under the heading 'Financial assets at fair value with changes in other comprehensive income' is mainly due to the increase in exposure in sovereign debt portfolio. Likewise, the increase in the debt securities portfolio under the heading 'Financial assets at amortized cost' is due to the continuation of the strategy started in the previous year in which two new business models were created for the optimization of excess liquidity and the management of the maturity of the balance sheet credit and deposit portfolios. At 31 December 2023, 2022 and 2021 the gross exposure by impairment stage of the book assets amounted to EUR 176,697 million, EUR 148,384 million and EUR 133,437 million in stage 1; EUR 203 million, EUR 75 million and EUR 128 million in stage 2, and EUR 461 million, EUR 404 million and EUR 280 million in stage 3, respectively. In addition, at 31 December 2023, the Group had EUR 49 million of exposure in assets purchased with impairments, which correspond mainly to the business combinations carried out by the Group with any additional impairment signs. 2023 2022 2021 62,124 860 3,095 73,565 103,559 243,203 40,321 145,732 14,681 42,294 461 (286) 243,203 90,857 9,284 38,161 46,190 58,997 243,489 (286) 243,203 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) 163,853 600 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Breakdown The breakdown, by origin of the issuer, of debt securities at 31 December 2023, 2022 and 2021, 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 2023 2022 2021 Private fixed- income 2,525 2,816 2,826 2,968 5,632 2,937 9,797 8,959 13,551 1,969 49 Public fixed- income 40,321 4,748 4,815 12,945 11 12,482 15,495 22,992 32,342 20,738 11,995 Total % 42,846 17.62% 7,564 3.11% 7,641 3.14% 15,913 6.54% 5,643 2.32% 15,419 6.34% 25,292 10.40% 31,951 13.14% 45,893 18.87% 22,707 9.34% 12,044 4.95% 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% 2.87% 3.19% 5.31% 3.18% 6.34% 5,558 6,175 10,277 6,152 12,273 17,816 9.20% 31,268 16.14% 37,392 19.30% 9.32% 18,059 5.18% 10,037 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 2,315 806 2,546 4,623 57,150 186,053 4,861 2.00% 5,429 2.23% 243,203 100% 1,560 390 7,520 5,960 3,298 2,908 45,822 147,894 193,716 3.88% 1.70% 100% 655 77 2,783 2,128 2,496 2,419 40,239 123,614 163,853 1.70% 1.52% 100% The detail, by issuer rating, of Debt securities at 31 December 2023, 2022 and 2021 is as follows: EUR million AAA AA A BBB Below BBB Unrated 2023 2022 2021 Private fixed- income 15,152 15,142 11,175 7,749 4,654 3,278 Public fixed- income 7,887 36,704 68,112 39,173 34,177 — 3,278 57,150 186,053 243,203 % Total 23,039 9.47% 51,846 21.32% 79,287 32.60% 46,922 19.29% 38,831 15.97% 1.35% 100% 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 — Total % 18,975 9.80% 40,044 20.67% 58,399 30.15% 35,081 18.11% 36,631 18.91% 4,586 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 — 45,822 147,894 193,716 40,239 123,614 163,853 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% During 2023, 2022 and 2021, the distribution of the exposure by rating level of the previous table has not been affected by ratings reviews of the sovereign issuers. 601 2023 2022 2021 15,057 10,066 15,077 4,068 3,711 4,042 1,761 20,886 1,941 15,718 2,453 21,572 3,540 15,185 2,161 20,886 3,284 10,494 1,940 15,718 3,896 15,184 2,492 21,572 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The detail, by type of financial instrument, of private fixed- income securities at 31 December 2023, 2022 and 2021, net of impairment losses, is as follows: 8. Equity instruments a) Breakdown The detail, by classification and type, of Equity instruments in the consolidated balance sheets is as follows: EUR million Securitised mortgage bonds Other asset-backed bonds Floating rate debt Fixed rate debt Total c) Impairment losses 2023 2022 2021 9,310 10,243 15,376 22,221 57,150 9,222 7,120 12,397 17,083 45,822 5,806 6,304 8,081 20,048 40,239 The changes in the impairment losses on debt securities are summarised below: 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 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: 2023 226 24 2022 215 16 2021 284 28 Type Shares of Spanish companies Shares of foreign companies Shares of investment funds 36 30 49 (12) 36 286 (14) (5) 226 (21) (97) 215 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 22 264 26 200 25 190 EUR million A. Of the EUR 24 million corresponding to net provisions for the year ended 31 December 2023 (EUR 16 million and EUR 28 million at 31 December 2022 and 2021, respectively), EUR 23 million relates to financial assets at amortized cost (EUR 17 million and EUR 31 million at 31 December 2022 and 2021, respectively) and EUR 1 million relates to financial assets designated at fair value through other comprehensive income (EUR -1 million and EUR -3 million at 31 December 2022 and 2021, respectively). At 31 December 2023, 2022 and 2021 the loan loss provision by impairment stage of the assets accounted for under IFRS9 amounted to EUR 30 million, EUR 25 million and EUR 26 million in stage 1, EUR 8 million, EUR 2 million and EUR 8 million in stage 2, and EUR 248 million, EUR 199 million and EUR 181 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 2023 1,941 11 2022 2,453 (33) 2021 2,783 (276) (162) (497) (171) (29) 1,761 18 1,941 117 2,453 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 2023, in compliance with Article 155 of the Spanish Limited Liability Companies Law and Article 105 of Spanish Securities Market Law 24/1998, are listed in appendix IV. 602           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 9. Trading derivatives (assets and liabilities) and short positions a) Trading Derivatives The detail, by type of inherent risk, of the fair value of the trading derivatives arranged by the Group is as follows (see note 11): EUR million Interest rate risk Currency risk Price risk Other risks 2023 2022 2021 Debit Credit balance balance balance balance balance balance Credit Credit Debit Debit 31,480 26,014 38,789 37,641 31,884 30,192 22,834 23,094 26,391 26,063 19,823 21,894 891 1,279 1,347 1,498 817 904 735 589 56,328 50,589 67,002 64,891 54,292 53,566 1,087 475 577 370 b) Short positions Following is a breakdown of the short positions (liabilities): 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 2023 11,634 2022 9,550 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 8,215 Financial assets at amortized cost 1,009,845 1,011,597 6,219 7,669 5,774 982 868 2021 6,829 537 10,289 7,663 947,364 Of which: Impairment losses Loans and advances to customers disregarding impairment losses (22,788) (22,684) 1,036,349 1,036,004 (22,964) 972,682 1,059,137 1,058,688 995,646 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: 2023 2022 2021 Note 51 contains a detail of the residual maturity periods of 'Financial assets at amortized cost'. 3,263 1,979 825 Note 54 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. 1,881 1,383 546 1,362 617 993 825 — 389 Banco Santander, S.A. 312 934 318 Short sales Debt instruments Of which: Banco Santander, S.A. Banco Santander (Brasil) S.A. Santander US Capital Markets LLC 22,365 19,543 11,022 16,143 3,462 12,902 3,857 8,926 1,952 2,442 26,174 2,690 22,515 — 12,236 603     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Breakdown Following is a breakdown of the loans and advances granted to the Group's customers, which reflect the Group's exposure to credit risk in its main activity, without considering the balance of value adjustments for impairment, taking into account the type and situation of the transactions, the geographical area of their residence and the type of interest rate on the transactions: EUR million Loan type and status Commercial credit Secured loans Reverse repurchase agreements Other term loans Finance leases Receivable on demand Credit cards receivables Impaired assets Geographical area Spain European Union (excluding Spain) United States and Puerto Rico A Other OECD countries South America (non - OECD) Rest of the world Interest rate formula Fixed rate Floating rate 2023 2022 2021 55,628 44,184 49,603 56,688 554,375 565,609 542,404 33,264 39,500 295,485 290,031 269,526 38,503 39,833 10,304 11,435 20,397 22,704 31,645 32,888 1,059,137 1,058,688 995,646 38,723 12,277 24,371 34,094 203,680 212,804 216,741 211,368 202,958 190,032 126,894 125,436 102,491 374,812 385,906 374,729 94,010 120,610 112,803 17,643 18,781 1,059,137 1,058,688 995,646 21,773 647,349 642,537 593,645 411,788 416,151 402,001 1,059,137 1,058,688 995,646 A. Includes, mainly, customers from the United Kingdom. At 31 December 2023, 2022 and 2021 the Group had granted loans amounting to EUR 15,544 million, EUR 14,698 million and EUR 14,131 million to Spanish public sector agencies which had a rating at 31 December 2023 of A (ratings of A at 31 December 2022 and 31 December 2021), and EUR 11,530 million, EUR 12,467 million, and EUR 10,263 million to the public sector in other countries (at 31 December 2023, the breakdown of this amount by issuer rating was as follows: 3.2% AAA, 15.7% AA, 1% A, 69.5% BBB, 8.9% below BBB and 1.7% without rating). Without considering the public administrations, the amount of the loans and advances at 31 December 2023, 2022 and 2021 amounts to EUR 1,032,063 million, EUR 1,031,523 million and EUR 971,252 million, of which, EUR 998,010 million, EUR 998,689 million and EUR 939,645 million are classified as performing, respectively. 604 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Following is a detail, by activity, of the loans to customers at 31 December 2023, net of impairment losses: EUR million Net exposure Secured loans C Loan to value ratio Total 24,244 Without collateral 23,933 Of which Of which other property collateral collateral 126 185 Less than or equal to 40% 78 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% 111 29 68 More than 100% 25 86,908 32,499 2,307 52,102 2,101 1,030 787 49,638 853 346,211 191,266 73,311 81,634 33,074 27,279 22,263 47,483 24,846 18,156 3,125 189,654 135,276 1,887 1,898 123,353 64,128 14,452 192 24,368 34,299 1,817 1,035 41,933 36,849 5,401 112 14,610 12,951 5,326 149 7,958 13,846 1,364 191 7,504 13,204 2,954 739 24,357 19,433 1,224 36 11,872 11,714 560,457 113,611 359,020 87,826 103,277 126,351 124,879 54,229 38,110 352,181 190,457 17,819 1,017,820 1,479 108,485 3,647 361,309 350,128 2,270 6,622 434,823 574 79,702 7,550 221,688 94,426 116,017 113,764 8,586 7,968 2,529 2,366 23,951 25,124 5,154 138,530 154,728 147,958 151,461 5,411 3,440 2,544 34,883 683 63,834 23,874 10,208 8,024 5,642 3,383 1,878 2,030 4,910 1,465 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 18,529 million, bringing the total of loans and advances to EUR 1,036,349 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 2023 provided by the latest available appraisal value of the collateral. Note 54 contains information relating to the forborne loan portfolio. 605                             2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 817,906 66,104 30,318 914,328 33,051 (33,051) (6,617) (5,836) (17,796) 1,865 17,796 271 6,617 5,836 (1,865) (271) — — — — — — 62,629 — (11,629) — (719) 50,281 (9,089) (9,089) 19,766 1,825 460 22,051 878,700 67,584 31,287 977,571 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 2023, the Group had EUR 694 million (EUR 322 million at 31 December 2022 and EUR 420 million at 31 December 2021) of exposure in assets purchased with impairment of which EUR 273 million still show signs of additional 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 2023, 2022 and 2020: 2023 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 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 Stage 1 Stage 2 Stage 3 Total 942,861 66,696 32,617 1,042,174 (43,278) 43,278 (12,636) (9,915) (15,180) 2,899 15,180 488 12,636 9,915 (2,899) (488) — — — — — — 29,696 — (10,673) — (4,218) (13,847) 14,805 (13,847) (3,178) (451) 105 (3,524) 929,133 76,654 33,821 1,039,608 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 1,042,174 606 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix c) Impairment losses on loans and advances to customers at amortised cost and at fair value through other comprehensive income Following is the movement of the loan loss provision broken down by impairment stage of loans and advances to customers during 2023, 2022 and 2021: 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: 2023 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 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 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 2023 22,684 2022 22,964 2021 23,595 14,011 11,676 8,762 21,413 19,879 18,240 (7,402) (48) (8,203) — (9,478) — (13,847) (12,235) (9,089) (12) 22,788 279 22,684 (304) 22,964 14,238 8,550 13,931 8,753 13,550 9,414 2,951 19,837 2,493 20,191 2,496 20,468 In addition, provisions for debt securities amounting to EUR 24 million were recorded at 31 December 2023 (provisions amounting to EUR 16 million and EUR 28 million as of 31 December 2022 and 2021, respectively), written-off assets recoveries have been recorded in the year amounting to EUR 1,592 million at 31 December 2023 (EUR 1,459 million and EUR 1,383 million at 31 December 2022 and 2021, respectively). EUR 513 million were recorded in the account for losses on renegotiation or contractual modification at 31 December 2023 (EUR 630 and EUR 0 million at 31 December 2022 and 2021, respectively) mainly due to the impact of the adjustment of the gross amount of mortgage loans denominated and indexed to foreign currencies in Poland, and of the Moratorium law approved in July 2022 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 (IFRS 9) and, Loans and receivables (IAS 39)'; amounts EUR 12,956 million at 31 December 2023 (EUR 10,863 million and EUR 7,407 million at 31 December 2022 and 2021, respectively). Stage 1 Stage 2 Stage 3 Total 3,626 5,127 13,931 22,684 (696) (405) 149 27 875 — 20 2,954 (1,820) (905) 282 2,258 3,873 1,901 (756) (638) (157) 4,278 3,721 (920) (184) (557) — (127) 7,212 (13,847) 47 7,530 (13,847) (60) 3,596 4,954 14,238 22,788 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 (1,056) — 207 2,333 4,029 1,380 (679) (533) (152) 4,586 3,182 (933) (161) 5,940 5,298 (12,235) (12,235) 279 2 3,626 5,127 13,931 22,684 607   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Stage 1 Stage 2 Stage 3 Total Set forth below for each class of impaired asset are the gross amount, associated allowances and information relating to the collateral and/or other credit enhancements obtained at 31 December 2023: 4,265 5,672 13,658 23,595 EUR million 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 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 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 2023 32,888 14,944 (13,847) 2022 31,645 13,060 (12,235) 2021 30,815 9,390 (9,089) (59) — — 168 34,094 418 32,888 529 31,645 This amount, after deducting the related allowances, represents the Group’s best estimate of the discounted value of the flows that are expected to be recovered from the impaired assets. At 31 December 2023, the Group’s written-off assets totalled EUR 48,138 million (EUR 43,675 million and EUR 40,585 million at 31 December 2022 and 2021, respectively). Without associated real collateral With real estate collateral With other collateral Total Gross amount Allowance recognised Estimated collateral A value 14,375 10,373 9,346 34,094 8,102 2,583 3,553 14,238 — 7,682 5,213 12,895 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 that may arise which will not result in all contractual cash flows being recovered, such as a deterioration of the borrower’s financial situation, the worsening of its capacity to generate funds or difficulties experienced by it in accessing credit. e) Transferred credits 'Loans and advances to customers' includes, inter alia, the securitised loans transferred to third parties on which the Group has retained the risks and rewards, albeit partially, and which therefore, in accordance with the applicable accounting standards, cannot be derecognised. This is mainly due to mortgage loans, loans to companies and consumer loans in which the group retains subordinate financing and/or grants some kind of credit enhancement to new holders. Securitisation is used as a tool for the management of regulatory capital and as a means of diversifying the Group's liquidity sources. The breakdown of securitized loans held on the balance sheet, according to the nature of the financial instrument in which they are originated, is shown below: EUR million Retained on the balance sheet Of which Securitised mortgage assets Of which: UK assets Other securitised assets A Total 2023 75,738 2022 82,603 2021 80,600 16,994 6,096 58,744 75,738 16,265 4,144 66,338 82,603 19,523 5,295 61,077 80,600 A. Note 22 details the liabilities associated with these securitisation transactions. At 31 December 2023, Grupo Santander had loans that had been fully derecognised and for which it retained servicing amounting to EUR 13,923 million (EUR 13,711 million and EUR 14,141 million at 31 December 2022 and 2021, respectively). 608       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 11. Trading derivatives The detail of the notional amounts and the market values of the trading derivatives held by the Group in 2023, 2022 and 2021 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 2023 2022 2021 Notional amount Market value Notional amount Market value Notional amount Market value 829,913 5,381,966 398,519 3 5,514 (51) 100,579 4,844,043 495,994 22 2,387 (1,261) 147,603 3,920,945 508,723 (11) 1,931 (228) 22,462 (86) 16,185 (6) 13,571 436 Foreign currency purchases and sales Foreign currency options Currency swaps Securities and commodities derivatives and other Total 471,955 77,934 586,405 68,664 7,837,818 33 288 (581) 619 5,739 384,024 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 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 2023 2,991 2022 3,435 2021 4,089 2,773 2,138 218 23 3,014 3,101 2,596 334 18 3,453 3,651 3,120 438 — 4,089 At 31 December 2023, the provisions recognised for the total non-current assets held for sale totalled EUR 2,956 million (EUR 3,425 million and EUR 3,811 million at 31 December 2022 and 2021, respectively). The charges recorded in those years amounted to EUR 139 million, EUR 204 million and EUR 239 million, respectively, and the recoveries during these exercises are amounted to EUR 88 million, EUR 110 million and EUR 98 million, respectively. 609       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 13. Investments a) Breakdown b) Changes The changes in the investments were as follows: The detail, by company, of Investments is as follows: EUR million Balance at beginning of year Acquisitions (disposals) of companies and capital increases (reductions) Changes in the consolidation method (note 3) Of which: Ebury Partners Limited Effect of equity accounting Dividends distributed and reimbursements of share premium Of which: Zurich Santander Insurance América, S.L. - Consolidado Caceis Hyundai Capital UK Limited Santander Vida Seguros y Reaseguros, S.A.- Consolidated CNP Santander Merlin Properties, SOCIMI, S.A. Metrovacesa, S.A. Other global result Exchange differences and other changes Balance at end of year 2023 7,615 2022 7,525 2021 7,622 52 142 (43) (320) 94 — — 613 (382) 702 — 432 (565) (560) (662) (202) — (58) (52) (51) (51) (50) (24) (2) 7,646 (160) — — (40) (15) (139) (124) 70 56 7,615 (230) (144) — (31) (60) (52) (60) (13) 52 7,525 c) Impairment adjustments During the years 2023, 2022 and 2021 there was no evidence of significant impairment in the Group's associated interests. EUR million Associated entities Merlin Properties, SOCIMI, S.A. Caceis Zurich Santander Insurance America, S.L. - Consolidated Metrovacesa, S.A. CNP Santander Ebury Partners Limited (note 3) Other companies Joint Ventures entities Santander Caceis Latam Holding 1, S.L. - Consolidated (previously Santander Securities Services Latam Holding, S.L) Santander Vida Seguros y Reaseguros, S.A. U.C.I., S.A. - Consolidated Fortune Auto Finance Co., Ltd. Hyundai Capital UK Limited Banco RCI Brasil S.A. Other companies Total Associated entities and Joint ventures 2023 2022 2021 5,682 5,634 5,833 1,621 1,653 1,640 975 1,139 1,046 936 899 423 — 664 826 916 979 1,087 418 406 394 — 493 634 1,964 1,981 1,692 389 362 349 254 205 92 313 334 359 378 356 228 416 222 244 201 223 92 95 288 237 7,646 7,615 7,525 Of the entities included above, at 31 December 2023, the entities Merlin Properties, SOCIMI, S.A, and 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: 2023 1,460 2022 1,508 2021 1,723 Zurich Santander Insurance America, S.L. - Consolidated Caceis 526 337 526 337 526 337 610   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix d) Other information A summary of the financial information at the end of December 2023 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 539 11,512 12,051 951 4,252 5,203 263 80 6,505 6,848 2,106 31,026 407 85,305 2,513 116,331 382 8,979 326 102,575 708 111,554 (23) 392 — 1,828 1,805 (6) 4,391 4,777 1,595 19,252 20,847 333 19,405 19,738 465 (639) 1,283 1,109 217 2,157 2,374 25 1,907 1,932 100 (43) 385 442 Total liabilities and equity 12,051 2,513 116,331 20,847 2,374 Ordinary activities income Profit (loss) from continuing operations Profit (loss) for the year from discontinuing operations 487 41 222 524 6,459 5,097 (23) 392 — — 465 — 817 100 — A. Data as of 31 December 2022, latest accounts available. 140 584 724 136 13 149 80 (209) 704 575 724 143 80 — 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. 2023 2022 2021 93 93 104 104 149 149 Santander Vida Seguros y Reaseguros, S.A.- Consolidated (note 3) Banco RCI Brasil S.A. 88 1,702 1,790 198 1,025 1,223 109 (48) 506 567 8 2,144 2,152 73 1,842 1,915 31 (223) 429 237 270 10,302 10,572 146 9,776 9,922 (88) 150 588 650 1,885 3,099 4,984 2,465 2,107 4,572 72 (7) 347 412 186 2,034 2,220 21 1,691 1,712 50 (19) 477 508 10,572 4,984 2,220 1,790 2,152 592 1,110 219 (88) — 72 — 50 — 737 109 — 299 31 — 611 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The insurance activity is carried out mainly in the life insurance sector in its life-savings modality. Within the amount of liabilities for insurance contracts, Individual Life Annuities are the product that has the greatest weight in the consolidated balance sheet. This product consists of life annuities where the client contributes a single premium and receives a constant and periodic insured income (monthly, quarterly, semi-annual or annual) until his death where, at that time, the beneficiaries will receive the insured capital of 102% or 101% of the premium contributed. This product is valued using the General Method (BBA) methodology and its remaining coverage liability is made up of the following components: • Best Estimated Liability (BEL): estimate of incoming and outgoing cash flows weighted by their probability of occurrence and discounted to a certain curve in order to reflect the time value of money over time. weather. • Risk adjustment for non-financial risk (RA): reflects compensation for the uncertainty of cash flows by quantifying the amount necessary to compensate for unexpected losses in liability flows. • Contractual Service Margin (CSM): future benefit to be recognized during the coverage period. • The income and expenses recorded in the profit and loss account for the insurance activity, including reinsurance income and expenses, are not material in the Group's consolidated annual accounts. 15. Liabilities under insurance contracts The detail of Liabilities under insurance contracts and reinsurance assets in the consolidated balance sheets (see note 2.i) is as follows: EUR million Liabilities relating to insurance contracts Component of the present value of future cash flows (BEL) Risk adjustment (RA) Contractual service margin (CSM) Remaining coverage liability Liabilities for incurred claims (LIC) 2023 2022 2021 17,799 16,426 18,560 16,627 211 15,206 154 17,196 185 424 71 466 481 592 78 75 507 512 The balance of liabilities under insurance contracts reflected in the consolidated balance sheet includes the following elements: • Liability for Remaining Coverage (LRC): amount of obligations provisioned to meet the fulfillment of future services assigned to the group on a date for a specific coverage period . The valuation differs depending on the length of the coverage period of the contract groups. In the case of long-term contracts, valued using the General Method (BBA) or the Variable Commission Method (VFA), this amount is formed from the sum of BEL, RA and CSM; In the case of short-term contracts, this amount is calculated using the Premium Allocation Method (PAA). • Liability for Incurred Claims (LIC): amount of obligations provisioned to meet the fulfillment of past services assigned to the group on a date. 612   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 16. Tangible assets a) Changes The changes in Tangible assets in the consolidated balance sheets were as follows: EUR million Tangible assets Leased out under an operating lease For own use Investment property Total For own use Of which: For leasing Leased out under an operating lease Investment property Cost Balances at 1 January 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 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 Additions / disposals (net) due to change in the scope of consolidation Additions / disposals (net) Transfers, exchange differences and other items Balance at 31 December 2023 Accumulated depreciation Balances at 1 January 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 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 Disposals due to change in the scope of consolidation Disposals Charge for the year Transfers, exchange differences and other items Balance at 31 December 2023 24,896 24,204 1,460 50,560 3,948 66 781 (214) 25,529 14 604 423 26,570 11 1,122 (257) (1,076) 1,552 24,423 89 (822) 1,476 25,166 37 742 — (64) (191) (359) 141 1,537 1,479 51,489 — (64) 103 (282) 107 1,580 2,006 53,316 — (34) 48 1,830 (1,460) 26,243 (641) 25,304 30 1,576 (2,071) 53,123 1 A 96 384 4,429 1 A 109 153 4,692 (13) A 125 33 4,837 (11,543) (5,585) (133) (17,261) (1,217) (1) 733 (1,733) 529 (12,015) (7) 1,065 (1,821) (114) (12,892) 7 284 (1,744) 40 3,390 — (3,083) (5,238) (30) 2,882 — (3,192) (5,578) — 2,540 — — 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) — — (11) 7 2,824 (1,755) 7 160 (609) 1,708 (12,637) (2,744) (5,782) (16) (1,052) (199) (18,618) 98 (2,609) A. Includes contract extensions on operating leases and repurchases. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Total 3,948 1 96 384 4,429 1 109 153 4,692 (13) 125 33 4,837 — — — — — — — — — — — — — — (1,217) — — — — — — — — — — — — — — — — 44 (612) (4) (1,789) — 164 (636) (4) (2,265) 7 160 (609) 98 (2,609) 613                       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million Impairment losses Balances at 1 January 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 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 Impairment charge for the year Releases Disposals due to change in the scope of consolidation Disposals Exchange differences and other Balance at 31 December 2023 Tangible assets, net Balances at 31 December 2021 Balances at 31 December 2022 Balances at 31 December 2023 Tangible assets Leased out under an operating Investment property lease Of which: For leasing Leased out under an operating Investment property lease Total For own use For own use (140) (144) 10 — 61 (42) (255) (95) 12 — 34 115 (189) (115) 5 — 36 65 (198) (60) (17) 4 — — (29) (102) (33) 1 — 76 25 (33) (29) 11 — — 47 (4) (364) (8) 5 — 3 (44) (408) (29) 4 — 9 45 (379) (12) 4 — 4 (38) (421) (564) (169) 19 — 64 (115) (765) (157) 17 — 119 185 (601) (156) 20 — 40 74 (623) (9) (13) 1 — 7 (1) (15) (2) 1 — 13 (11) (14) (39) 4 — 5 (1) (45) 13,259 13,489 13,408 19,083 19,555 19,518 979 33,321 1,029 34,073 956 33,882 2,625 2,413 2,183 — — — — — — — — — — — — — — — — — — — 0 — — — — — — — — — — — — — — — — — — — — Total (9) (13) 1 — 7 (1) (15) (2) 1 — 13 (11) (14) (39) 4 — 5 (1) (45) 2,625 2,413 2,183 614                       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Tangible assets - For own use The detail, by class of asset, of 'Property, plant and equipment' which is owned by the Group in the consolidated balance sheets is as follows: EUR million Land and buildings IT equipment and fixtures Furniture and vehicles Construction in progress and other items Balances at 31 December 2021 Land and buildings IT equipment and fixtures Furniture and vehicles Construction in progress and other items Balances at 31 December 2022 Land and buildings IT equipment and fixtures Furniture and vehicles Construction in progress and other items Balances at 31 December 2023 The carrying amount at 31 December 2023 in the foregoing table includes the following approximate amounts EUR 7,119 million (EUR 7,083 million at 31 December 2022 and EUR 6,753 million at 31 December 2021) 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 (3,675) (4,335) (3,954) (51) (12,015) Impairment losses (240) — — (15) (255) (4,467) (3,984) (4,389) (52) (12,892) (5,010) (4,154) (3,424) (49) (12,637) (175) — — (14) (189) (154) — — (44) (198) Cost 13,855 5,543 5,982 149 25,529 14,623 5,285 6,445 217 26,570 14,973 5,614 5,412 244 26,243 Carrying amount 9,940 1,208 2,028 83 13,259 9,981 1,301 2,056 151 13,489 9,809 1,460 1,988 151 13,408 Of which: for leasing 2,570 42 12 — 2,624 2,349 53 11 — 2,413 2,104 60 19 — 2,183 Of the EUR 19,518 million that the Group had assigned to operating leases at 31 December 2023 (EUR 19,555 million and EUR 19,083 at 31 December 2022 and 2021, respectively), EUR 12,525 million (EUR 13,389 and EUR 13,630 at 31 December 2022 and 2021, respectively) relate to vehicles of Santander US Auto's business. The variable lease payments of various items of this business are not significant. In addition, the maturity analysis of the assets leased out under operating leases from Santander US Auto, is as follows: EUR million Maturity Analysis 2024 2025 2026 2027 2023 3,365 4,248 5,100 1,124 d) Tangible assets - Investment property The fair value of investment property at 31 December 2023, 2022, 2021 amounted to EUR 1,163, 1,153 and 1,088 million, respectively. A comparison of the fair value of investment property at 31 December 2023, 2022 and 2021 with the net book value shows gross unrealised gains of EUR 207, 124 and 109 million, respectively, attributed completely to the group. 615 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The rental income earned from investment property and the direct costs related both to investment properties that generated rental income in 2023, 2022 and 2021 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 Grupo Financiero Santander (México) Banco Santander - Chile Ebury Partners Santander Consumer Nordics Other companies Total Goodwill 2023 3,679 1,444 1,304 1,159 1,040 1,003 998 814 612 523 516 350 206 369 2022 3,503 1,444 1,304 1,075 1,040 1,039 998 844 599 469 548 298 215 365 2021 3,219 1,444 1,304 1,095 1,040 979 1,027 643 633 435 516 — 224 154 14,017 13,741 12,713 A. Includes the Santander US Capital Markets LLC's business (previously Amherst Pierpoint Securities LLC) (see note 3). The changes in goodwill were as follows: EUR million Balance at beginning of year Additions (note 3) Of which: Ebury Partners Santander Holding USA (ex. Auto) A Impairment losses Disposals or changes in scope of consolidation Exchange differences and other items Balance at end of year 2023 2022 13,741 12,713 534 56 2021 12,471 81 45 — (20) 316 158 — — — (6) — 240 — 494 14,017 13,741 — 167 12,713 A. Acquisition of Santander US Capital Markets LLC (previously Amherst Pierpoint Securities LLC) (see note 3). 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 2023 there was an increase of EUR 240 million (an increase of EUR 494 million in 2022 and EUR 167 million in 2021), due to exchange differences and other items which, pursuant to current standards, were recognised with a change to 'Other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences in other comprehensive income in the consolidated statement of recognised income and expense' (see note 29.d). At least once per year (or whenever there is any indication of impairment), Grupo Santander performs an analysis of the potential impairment of its recorded goodwill with respect to its recoverable amount. The first step that must be taken in order to perform this analysis is the identification of the cash- generating units, which are the Group's smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash flows of other assets or groups of assets. The amount to be recovered of each cash-generating unit is determined taking into consideration the carrying amount (including any fair value adjustment arising on the business combination) of all the assets and liabilities of all the independent legal entities composing the cash-generating unit, together with the related goodwill. The amount to be recovered of the cash-generating unit is compared with its recoverable amount in order to determine whether there is any impairment. Grupo Santander's directors assess the existence of any indication that might be considered to be evidence of impairment of the cash-generating unit by reviewing information including the following (i) certain macroeconomic variables that might affect its investments (population data, political situation, economic situation —including banking concentration level—, among others) and (ii) various microeconomic variables comparing the investments of the Group with the financial services industry of the country in which the cash-generating unit carries on most of its business activities (balance sheet composition, total funds under management, results, efficiency ratio, capital adequacy ratio, return on equity, among others). Regardless of whether there is any indication of impairment, every year the Group calculates the recoverable amount of each cash-generating unit to which goodwill, has been allocated and, to this end, it uses price quotations, market references (multiples), internal estimates and valuations performed by internal and external experts. Firstly, the Group determines the recoverable amount by calculating the fair value of each cash-generating unit on the basis of the quoted price of the cash-generating units, if available. 616         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix In addition, the Group performs estimates of the recoverable amounts of certain cash-generating units by calculating their value in use using discounted cash flow projections. The main assumptions used in this calculation are (i) earnings projections based on the financial budgets approved by the Group’s directors which cover between three and five year periods (unless a longer time horizon can be justified), (ii) discount rates determined as the cost of capital taking into account the risk- free rate of return plus a risk premium in line with the market and the business in which the units operate and (iii) constant growth rates used in order to extrapolate earnings in perpetuity which do not exceed the long-term average growth rate for the market in which the cash-generating unit in question operates. The cash flow projections used by Group management to obtain the values in use are based on the financial budgets approved by both local management of the related local units and the Group’s directors. The Group’s budgetary estimation process is common for all the cash-generating units. The local management teams prepare their budgets using the following key assumptions: a) Microeconomic variables of the cash-generating unit: management takes into consideration the current balance sheet structure, the product mix and the business decisions taken by local management in this regard. b) Macroeconomic variables: growth is estimated on the basis of the changing environment, taking into consideration expected GDP growth in the unit’s geographical location and forecast trends in interest and exchange rates. These data, which are based on external information sources, are provided by the Group’s economic research service. c) Past performance variables: in addition, management takes into consideration in the projection the difference (both positive and negative) between the cash-generating unit’s past performance and budgets. During 2023, the Group has recognised impairment losses of EUR 20 million euros of immaterial goodwill that has been recorded under the heading 'Impairment or reversal of the impairment of non-financial assets - Intangible assets' (EUR 0 million and EUR 6 million in 2022 and 2021, respectively). Goodwill is deducted from CET1 for regulatory purposes, so an impairment of goodwill has no impact on the Group's capital ratios. 617         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Following is a detail of the main assumptions taken into account in determining the recoverable amount, at 2023 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 Projected period 5 years 5 years 3 years 5 years 5 years 5 years 5 years 2023 Discount rateA 11.9% 13.2% 12.8% 13.4% 9.7% 11.6% 11.2% Nominal perpetual growth rate 2.5% 5.0% 3.0% 3.5% 2.3% 2.5% 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 2022 and 2021 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 Discount rate A 2022 11.1% 15.6% 12.2% 12.6% 9.4% 12.2% 11.1% 2021 9.2% 10.3% 10.6% 11.6% 8.3% 10.4% 9.7% Nominal perpetual growth rate 2022 2.5% 4.8% 2.8% 3.5% 2.3% 2.5% 2.3% 2021 2.3% 3.5% 1.5% 3.0% 1.8% 2.5% 1.8% 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 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 2023 are mainly a consequence of the current macroeconomic scenario, as well as the 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. 618     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 18. Intangible assets - Other intangible assets The detail of Intangible assets - Other intangible assets in the consolidated balance sheets and of the changes therein in 2023, 2022, and 2021 is as follows: EUR million Cost Brand names IT developments Other Accumulated amortisation Development Other Impairment losses Of which addition Liberation EUR million Cost Brand names IT developments Other Accumulated amortisation Development Other Impairment losses Of which addition Liberation Estimated useful  life 31/12/2022 12,502 33 Net   additions and disposals 2,197 — Change  in scope  of consolidation 176 8 Amortization and impairment — Application  of amortization and impairment Exchange differences and  other 128 1 (230) (2) 31/12/2023 14,773 40 3-10 years 10,721 1,748 (7,554) (6,866) (688) (44) — — 4,904 2,197 — — — — — — — 2,197 18 150 5 — 5 — — — 181 (1,429) (1,294) (135) (53) (53) — (1,482) (196) (32) 209 177 32 21 — — — 127 — (82) (95) 13 8 — — 54 12,867 1,866 (8,851) (8,078) (773) (68) — — 5,854 Estimated useful  life 31/12/2021 10,712 4 Net  additions and disposals 1,757 — Change  in scope  of consolidation 381 27 Amortization and impairment — Application  of amortization and impairment (511) — Exchange differences and  other 163 2 31/12/2022 12,502 33 3-10 years 9,189 1,519 (6,707) (6,149) (558) (134) — — 3,871 1,748 9 — — — — — — 1,757 153 201 — — — — — — 381 (1,151) (1,024) (127) (75) (75) — (1,226) (497) (14) 412 403 9 99 — — — 128 33 (108) (96) (12) 66 — — 121 10,721 1,748 (7,554) (6,866) (688) (44) — — 4,904 619   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million Cost Brand names IT developments Other Accumulated amortisation Development Other Impairment losses Of which addition Liberation Net additions and Application of Change in Amortization amortization and impairment — 3-10 years Estimated scope of useful life 31/12/2020 disposals consolidation 5 — 4 1 (2) (1) (1) — — — 3 9,376 37 7,900 1,439 (5,809) (5,307) (502) (130) — — 3,437 1,409 — 1,325 84 — — — — — — 1,409 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) In 2023, 2022 and 2021, impairment losses of EUR 53 million, EUR 75 million and EUR 65 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.m) 2023 246 2022 83 2021 157 1,001 1,345 1,990 2,911 3,003 2,610 4,598 5,536 3,683 8,756 9,967 8,440 620               2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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: Note 51 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: 2023 2022 2021 EUR million 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 7,808 5,757 1,038 1,209 48,782 57,799 1,740 607 76,952 139,757 84,449 141,402 117 43,853 13,829 57,799 — 10 72,320 134,439 12,129 6,953 84,449 141,402 17,862 9,796 6,488 1,735 81,246 100,843 1,958 68,582 80,336 1,064 52,235 59,787 5,468 54,402 40,689 284 100,843 6,808 49,221 24,245 62 80,336 6,139 37,332 16,198 118 59,787 53,921 27,697 49,447 7,997 19,580 65,133 107,908 42,451 35,357 24,012 30,924 11,297 14,195 15,521 19,176 158,642 164,785 201,189 At 31 December 2023, the balance of the conditional long-term financing of the European Central Bank (TLTRO- Targeted Long- Term Refinancing Operation-) amounts to EUR 11,583 million, which corresponds to TLRTO III (EUR 33,536 million and EUR 88,894 million at 31 December 2022 and 2021, respectively). At 31 December 2023, the expense recognized in the consolidated income statement corresponding to TLTRO III amounts to EUR 659 million (income of EUR 489 million and EUR 868 million at 31 December 2022 and 2021, respectively), as a result of the conditions of the financing program (see note 2.c.iv). 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 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 2023 2022 2021 19,837 12,226 6,141 32,052 31,143 7,818 995,280 966,353 886,595 1,047,169 1,009,722 900,554 388,736 120,540 235,698 83,555 208,713 9,927 386,826 305,775 111,930 108,361 232,364 243,734 73,814 181,782 159,381 9,489 1,047,169 1,009,722 900,554 87,497 9,323 661,262 437,972 216,077 7,213 307,085 710,232 717,728 477,739 482,649 225,445 227,318 7,761 236,099 146,469 7,048 232,619 144,382 38 302,545 33 — 4,408 99 78,822 38 — 3,296 146 63,391 3 1,906 140 36,357 1,047,169 1,009,722 900,554 Note 51 contains a detail of the residual maturity periods of financial liabilities at amortised cost. 621       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 22. Marketable debt securities a) Breakdown The detail, by classification and type, of Marketable debt securities is as follows: EUR million Classification Financial liabilities held for trading Financial liabilities designated at fair value through profit or loss Financial liabilities at amortized cost Type Bonds and debentures outstanding Subordinated Notes and other securities 2023 2022 2021 — — — 5,371 5,427 5,454 303,208 308,579 274,912 280,339 240,709 246,163 231,880 30,529 46,170 308,579 211,597 25,717 43,025 280,339 194,362 25,938 25,863 246,163 The distribution of the book value of debt securities issued by contractual maturity at 31 December 2023 is shown below: EUR million Subordinated debt Senior unsecured debt Senior secured debt Promissory notes and other securities Debt securities issued Within 3 months — 2,788 3,283 22,802 28,873 3 to 12 months — 23,351 17,845 23,368 64,564 The distribution by contractual maturity of the notional amounts of these debt securities issued at 31 December 2023 is as follows: EUR million Subordinated debt Senior unsecured debt Senior secured debt Promissory notes and other securities Debt securities issued Within 3 months — 2,741 3,290 22,788 28,819 3 to 12 months — 22,957 17,884 23,352 64,193 1 to 3 years 5,934 54,527 33,733 — 94,194 1 to 3 years 5,913 53,607 33,806 — 93,326 3 to 5 years 3,160 35,156 20,344 — 58,660 More than 5 years 21,435 28,099 12,754 — 62,288 3 to 5 years 3,135 34,563 20,388 — 58,086 More than 5 years 20,978 27,624 12,782 — 61,384 Total 30,529 143,921 87,959 46,170 308,579 Total 30,026 141,492 88,150 46,140 305,808 622                           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Bonds and debentures outstanding The detail, by currency of issue, of 'Bonds and debentures outstanding' is as follows: Currency of issue Euro US dollar Pound sterling Brazilian real Chilean peso Other currencies Balance at end of year EUR million 2023 101,657 70,229 20,520 21,861 4,921 12,692 231,880 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 2023 Outstanding issue amount in foreign currency (Million) 101,657 77,624 17,805 117,281 4,749,711 Annual interest rate (%) 2.22% 3.95% 3.86% 11.71% 3.12% 623 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The changes in 'Bonds and debentures outstanding' were as follows: EUR million Balance at beginning of year Net inclusion of entities in the Group Of which: Auto ABS UK Loans PLC PSA Bank Deutschland GmbH Issues Of which: Banco Santander, S.A. Banco Santander (Brasil) S.A. Santander Consumer USA Holdings Inc. Santander UK Group Holdings plc Santander Consumer Finance, S.A. Santander Holdings USA, Inc. Banco Santander Totta, S.A. Santander Consumer Bank S.p.A. Santander Bank, National Association Santander Consumer Bank AG Banque Stellantis France (previously PSA Banque France) Santander Bank Polska S.A. Santander International Products, Plc. Banco Santander - Chile SC Germany S.A., Compartment Consumer 2023-1 Santander Consumo 4, F.T. SC Germany S.A., Compartment Consumer 2021-1 Redemptions and repurchases Of which: Santander Consumer USA Holdings Inc. Banco Santander (Brasil) S.A. Banco Santander, S.A. Santander UK Group Holdings plc Santander Consumer Finance, S.A. Banque Stellantis France (previously PSA Banque France) Banco Santander - Chile Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México Santander Holdings USA, Inc. Exchange differences and other movements Balance at year-end 2023 211,597 (1,467) 2022 194,362 — 2021 191,577 — (841) (626) 68,568 — — 66,033 — — 59,937 19,706 12,781 7,309 6,002 2,557 1,850 1,734 1,460 1,346 1,256 1,145 1,102 1,054 814 783 — — (48,825) (14,466) (10,542) (7,889) (6,185) (1,800) (813) (575) (140) — 2,007 231,880 19,243 11,233 13,315 10,178 1,293 2,315 113 — 1,222 — 60 — 599 1,486 — — — (49,903) (15,252) (2,721) (9,297) (5,267) (3,357) (1,165) (1,452) (1,316) (3,153) 1,105 211,597 11,766 14,996 15,771 3,372 1,169 — 183 505 252 — 815 — 914 1,158 — 1,531 1,496 (61,846) (15,151) (15,182) (3,185) (14,695) (3,779) (335) (1,030) (411) (778) 4,694 194,362 624   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. Grupo Santander has a balance corresponding to mortgage bonds at 31 December 2023 of EUR 24,619 million (all of them issued in euros), which correspond to issues of Banco Santander, SA (with an outstanding face value of EUR 24,457 million). 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. During 2023, the Bank of Spain has published Circular 1/2023 of 4 February , which modifies Circular 4/2017, repealing the breakdown in the annual accounts and the information related to internal accounting development and management control. 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. 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. 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, Banque Stellantis 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 Covered bonds (non mortgage and export financing) 2023 37,717 2022 40,138 2021 40,519 3,019 49,478 24,619 1,549 43,650 22,049 1,487 41,779 23,197 764 87,959 352 84,140 630 82,928 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. 625           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 23. Subordinated liabilities a) Breakdown The detail, by currency of issue, of Subordinated liabilities, deposits and marketable debt securities, in the consolidated balance sheets is as follows: Currency of issue Euro US dollar Pound sterling Brazilian real Other currencies Balance at end of year EUR million 2022 12,940 8,438 1,358 1,127 2,063 25,926 2023 13,684 11,300 1,353 2,518 2,057 30,912 2021 13,857 8,236 1,535 879 1,689 26,196 2023 Outstanding issue amount in foreign currency (million) 13,684 12,490 1,174 13,509 Annual interest rate (%) 3.81% 6.17% 4.30% 13.72% Note 51 contains a detail of the residual maturity periods of subordinated liabilities at each year-end. b) Changes c) Other disclosures The movement in the balance of subordinated liabilities in the last three years were as follows: EUR million Balance at beginning of year Net inclusion of entities in the Group Issuances A Of which: Banco Santander, S.A. Banco Santander (Brasil) S.A. Banque Stellantis France Banco Santander - Chile A Redemptions and repurchases Of which: Banco Santander, S.A. Santander UK plc Banque Stellantis France Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México Exchange differences and other movements Balance at end of year 2022 2023 2021 25,926 26,196 21,880 — 5,340 (40) 7,007 — 119 5,610 1,112 150 — (1,781) — — — 113 (1,040) 4,469 871 — — (1,500) (1,000) (702) (78) (889) (98) — (1,500) — — — (52) — (200) 476 30,912 25,926 26,196 651 A. The balance relating to issuances, redemptions and repurchases (EUR 5,226 million), together with the interest paid in remuneration of these issuances including PPCC (EUR 1,150 million), is included in the cash flow from financing activities. This caption includes contingent convertible or redeemable preferred participations, as well as other subordinated financial instruments issued by consolidated companies, which do not qualify as equity (preferred shares). Preferred shares do not have voting rights and are non- cumulative. They have been subscribed by third parties outside the Group, and except for the issues of Santander UK plc, the rest are redeemable by decision of the issuer, according to the terms of each issue. Banco Santander's contingently convertible preferred participations are subordinated debentures and rank after common creditors and any other subordinated credit that by law and/or by their terms, to the extent permitted by Spanish law, ranks higher than the contingently convertible preferred participations. Their remuneration is conditioned to the obtainment of sufficient distributable profits, and to the limitations imposed by the regulations on shareholders' equity, and they have no voting rights. The other issues of Banco Santander, S.A. mentioned in this caption are also subordinated debentures and, for credit ranking purposes, they rank behind all the common creditors of the issuing entities and ahead of any other subordinated credit that ranks pari passu with the Bank's contingently convertible preferred participations. The main issues of subordinated debt securities issued, broken down by company, are detailed below: 626         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Issues by Banco Santander, S.A. At 29 December 2023, Banco Santander, S.A., proceeded to prepay all the Tier 1 Contingently Convertible Preferred Securities with ISIN code XS1692931121 for a total nominal amount of EUR 1,000 million and which were traded on the Irish Stock Market 'Global Exchange Market' (the 'PPCC'). At 21 November 2023, Banco Santander, S.A., carried out a placement of two series of contingently convertible preferred shares into newly issued ordinary shares of the Bank, for a total nominal amount of USD 1,150 million (EUR 1,054 million at the exchange rate on the day of issue) and USD 1,350 million (EUR 1,235 million at the exchange rate on the day of issue), respectively. The issue was carried out at par and the remuneration of the PPCC, whose payment is subject to certain conditions and is also discretionary, was set (i) for the first Series at 9.625% annually for the first five years and six months, being reviewed every five years thereafter by applying a margin of 530.6 basis points on the five-year UST rate (5-year UST), and (ii) for the second Series at 9.625% annually for the first ten years, being reviewed thereafter every five years, applying a margin of 529.8 basis points on the five-year UST rate. At 8 August 2023, Banco Santander, S.A. carried out an issue of subordinated obligations for an amount of 2,000 million dollars (1,821 million euros at the exchange rate on the day of issuance). The issue was carried out at par coupon was set at 6.921% per year, payable semiannually during the 10-year life of the operation. At 23 May 2023, Banco Santander, S.A. issued subordinated bonds for an amount of 1,500 million euros for a term of 10 years and 3 months. The issue was carried at 99.739% and the coupon of the issue was set at 5.75% annually for the first 5 years and 3 months, with the option of amortization in August 2028, revising the coupon, in case of non-amortization, at a margin of 285 points plus the Euro Swap type 5 years. At 6 July 2022 and 20 July 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. This issue has an early redemption option in the tenth year from the issue date and if the redemption is not executed in the tenth year, the coupon is repriced 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 XS1107291541 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, S.A. 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 was carried out at par and the remuneration of the PPCC, whose payment is subject to certain conditions and is also discretionary, was 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 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). 627                                                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 SOFR Spread Adjusted ICE Swap 5-year). 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. 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%. 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 beginning of October 2023, 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 6,000 million. The issue price was CDI +1.6% per annum, payable at maturity. 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. Issues by Santander Bank Polska S.A. At 20 April 2018, Santander Bank Polska S.A. carried out a ten- year subordinated debenture issue with a redemption option on the fifth anniversary of the issue date in the amount of PLN 1,000 million. The issue bears floating interest at Wibor (6M) + 160 basis points payable semi-annually. The accrued interests from the subordinated liabilities during 2023 amounted to EUR 1,049 million (EUR 992 million and EUR 648 million during 2022 and 2021, respectively). In addition, interests from the PPCC and PPCA during 2023 amounted to EUR 492 million (EUR 529 million and EUR 566 million in 2022 and 2021, respectively). 24. Other financial liabilities The detail of Other financial liabilities in the consolidated balance sheets is as follows: EUR million Trade payables Clearing houses Tax collection accounts: Public Institutions Factoring accounts payable Unsettled financial transactions Lease liabilities (note 2.k) Other financial liabilities 2023 1,783 1,269 2022 1,563 1,200 2021 1,475 650 4,986 272 6,412 2,400 5,315 5,796 275 262 3,779 5,429 2,622 2,856 23,065 20,187 15,523 40,187 37,059 29,873 Note 51 contains a detail of the residual maturity periods of other financial liabilities at each year-end. Lease liabilities The cash outflow of leases in 2023 was EUR 738 million (EUR 710 million and EUR 715 in 2022 and 2021, respectively). The analysis of the maturities of lease liabilities at 31 December 2023, 2022 and 2021 is shown below: EUR million Maturity Analysis - Discounted payments Within 1 year Between 1 and 3 years Between 3 and 5 years Later than 5 years Total discounted payments at the end of the year 2023 2022 2021 586 918 480 416 707 1,005 454 456 690 933 534 699 2,400 2,622 2,856 During 2023, 2022 and 2021 there were no significant variable lease payments not included in the valuation of lease liabilities. 628                                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 25. Provisions a) Breakdown The detail of Provisions in the consolidated balance sheets is as follows: EUR million Provision for pensions and other obligations post-employments Other long term employee benefits Provisions for taxes and other legal contingencies Contingent liabilities and commitments (note 2.o) Other provisions Provisions b) Changes 2023 2022 2021 2,225 2,392 3,185 880 950 1,242 2,715 2,074 1,996 702 1,919 8,441 734 1,999 8,149 733 2,427 9,583 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 2,392 (4) 93 60 33 — 3 (3) — 944 (182) — (750) — (268) 2,225 Long term employee benefits 950 — 244 34 9 201 204 (3) 2023 Contingent liabilities and commitments 734 — (24) — — (24) 392 (416) — — (316) — — — 2 880 — — — — — (1) (7) 702 Other provisions 4,073 — 2,501 — — 2,501 4,013 (1,512) — — — — — (2,087) 147 4,634 Total 8,149 (4) 2,814 94 42 2,678 4,612 (1,934) — 944 (498) — (750) (2,088) (126) 8,441 629   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2022 2021 Post employmen t plans 3,185 Long term employee benefits 1,242 Contingent liabilities and commitments 733 Other provisions 4,423 Post employment plans 3,976 Long term employee benefits 1,751 Contingent liabilities and commitments 700 Other provisions Total 4,425 10,852 Total 9,583 — 2,046 100 65 — 1,876 — — 1,876 3,484 (1,608) 1,881 4,217 (2,336) — 100 78 67 (45) 21 (66) — — (33) (8) 242 (1,705) — — — (592) (3) (451) (2,817) (2,817) (201) — (440) — — (27) — — (27) 618 (645) — — — — — — — 101 13 6 82 154 (72) — — (605) — — — — 29 — — — 2,748 — — — 2,978 91 73 29 473 (444) 2,748 3,065 (317) 2,814 3,713 (899) — — — — — — — (8) — (1,705) — — — (806) — (440) (2,961) (2,961) 28 734 591 4,073 174 8,149 1,463 3,185 (5) 1,242 4 733 211 4,423 1,673 9,583 — 128 73 57 (2) 10 (12) (33) 242 (229) (3) (451) — (447) 2,392 — 69 27 8 34 105 (71) — — (363) — — — 2 950 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 2023 2022 2021 770 1,245 1,709 817 805 895 884 1,188 1,176 76 29 44 1,379 1,118 1,432 63 55 54 3,105 3,097 3,342 3,335 4,427 4,419 i. Spanish entities - Post-employment plans and other similar obligations At 31 December 2023, 2022 and 2021, 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 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 provisions made to cover the commitments with 446 employees covered by early retirement and incentivized dismissals plan amounted to EUR 92 million. In 2023, the provisions made to cover the commitments with 502 employees covered by early retirements and incentivized dismissals amounted to EUR 160 million. 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. 630                   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The expenses incurred by the Spanish companies in 2023, 2022 and 2021 in respect of contributions to defined contribution plans amounted to EUR 116 million, EUR 101 million and EUR 91 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 2023 3.35% PE2020 M/F Col. Orden 1 2.00% A 1.25% 2.12% 2022 3.80% PE2020 M/F Col. Orden 1 2.00% 1.25%A 2.00% 2021 0.90% PE2020 M/F Col. Orden 1 1.00% 1.25%A 1.00% 2023 3.35% PE2020 M/F Col. Orden 1 2.00% N/A N/A 2022 3.80% PE2020 M/F Col. Orden 1 2.00% N/A N/A 2021 0.90% PE2020 M/F Col. Orden 1 1.00% N/A N/A N/A N/A N/A 0% 0% 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 2023, 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 4.15% (-50 bp) to -3.85% (+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. 631       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix These changes would be offset in part by increases or decreases in the fair value of the assets and insurance contracts linked to pensions. 3. The estimated retirement age of each employee is the first at which the employee is entitled to retire or the agreed-upon age, as appropriate. The fair value of insurance contracts was determined as the present value of the related payment obligations, taking into account the following assumptions: Expected rate of return on plan assets Expected rate of return on reimbursement rights The funding status of the defined benefit obligations in 2023 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 2023 3.35% 3.35% 2022 3.80% 3.80% 2021 0.90% 0.90% Other similar obligations 2023 3.35% N/A 2022 3.80% N/A 2021 0.90% N/A Post-employment plans 2023 2022 2021 Other similar obligations 2023 2022 2021 21 1,917 — — 49 1,987 1,235 752 677 (14) 93 (4) 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) — — 812 12 — 824 7 817 817 — — — — — 892 11 — 903 8 895 895 — — — — — 1,186 12 — 1,198 10 1,188 1,188 — — — 632               2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 'Other comprehensive income – Items not reclassified to profit or loss – Actuarial gains or (-) losses on defined benefit pension plans' has increased by EUR 10 million with respect to defined benefit obligations (decrease of EUR 295 and EUR 37 million in 2022 and 2021, respectively). The changes in the present value of the accrued defined benefit obligations were as follows: EUR million Post-employment plans 2023 2 42 (4) 2022 3 48 (4) 2021 5 24 (1) Other similar obligations 2023 1 30 — 2022 1 25 — 2021 1 11 — — 2 — (1) 41 — 2 — (8) 41 — 13 — (39) 2 7 13 160 (1) 210 (67) — 92 — 51 (15) — 139 (55) 81 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 2023 2,076 — 2 82 — (1) (210) — 2 37 (2) 39 (1) 1,987 2022 2,891 — 3 78 — (8) (258) — 2 (631) 2 (633) (1) 2,076 2021 3,419 6 5 36 — (61) (248) (166) 13 (121) 9 (130) 8 2,891 Other similar obligations 2023 903 — 1 30 160 (1) (290) — 13 7 — 7 1 824 2022 1,198 — 1 25 92 — (346) — — (68) (5) (63) 1 903 2021 1,707 — 1 11 139 (55) (589) — — (15) (8) (7) (1) 1,198 633                   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 861 — 40 — (89) 409 25 (11) 1,235 2022 1,217 — 30 — (78) 2 (303) (7) 861 2021 1,542 6 12 (22) (263) 15 (76) 3 1,217 2023 8 — — — (2) — — 1 7 2022 10 — — — (2) — (1) 1 8 2021 12 — — — (2) — — — 10 Post-employment plans Other similar obligations 2023 2022 2021 2023 2022 2021 104 — 4 (15) — — 93 149 — 4 (16) — (33) 104 174 — 1 (19) 1 (8) 149 — — — — — — — — — — — — — — — — — — — — — 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 2024 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 2023 for the next ten years: EUR million 2024 2025 2026 2027 2028 2029 to 2033 464 390 338 281 229 744 634         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 87 million in 2023 (EUR 77 million in 2022 and EUR 89 million in 2021). 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: 2023 2022 2021 4.63% The S3 Middle tables weighted at 84% of the CMI_2022 projection with an initial addition of 0.25%, smoothing 4.88% The S3 Middle tables weighted at 84% of the CMI_2021 projection with an initial addition of 0.25%, smoothing parameter 7 and parameter 7 and improving 1.25%. improving 1.25%. 1.90% The S3 Middle tables weighted at 84% of the CMI_2020 projection with an initial addition of 0.15%, smoothing parameter 7 and improving 1.25%. 3.02% 1.00% 3.11% 1.00% 3.37% 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 2023 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: 2023 9,451 2022 8,982 2021 15,392 10,208 (757) 10,152 (1,170) 17,244 (1,852) Internal provisions for pensions Net assets for pensions 76 (833) 29 (1,199) 44 (1,896) 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 2023 14 (62) 2022 30 (37) 2021 33 (6) — — (48) — — (7) 6 — 33 In addition, in 2023 'Other comprehensive income – Items not reclassified to profit or loss – Actuarial gains or (-) losses on defined benefit pension plans' increased by EUR 687 million with respect to defined benefit obligations (increase of EUR 857 million and decrease of EUR 1,475 million in 2022 and 2021, respectively). The changes in the present value of the accrued defined benefit obligations were as follows: 2.96% 2.98% 3.21% EUR million 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 2023, 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 6.89% (-50 bp) and -6.18% (+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 4.69% (+50 bp) and -4.51% (-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 Net incorporation of companies into the Group Current service cost Interest cost Benefits paid Benefits paid by 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 2023 2022 2021 8,982 15,392 15,472 (28) 14 436 (428) (9) 6 — 281 (59) 340 197 — 30 283 (487) — 9 — (5,660) (144) (5,516) — 33 219 (465) — 18 6 (933) (17) (916) (585) 1,042 9,451 8,982 15,392 635             2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Specifically, the discount rate used for the flows was determined by reference to high-quality corporate bonds, except in the case of Brazil where there is no extensive corporate bond market and, accordingly the discount rate was determined by reference to the series B bonds issued by the Brazilian National Treasury Secretariat for a term coinciding with that of the obligations. In Brazil the discount rate used was between 8.65% and 8.70%, 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 2023, 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 4.49% (-50 bp) and -4.16% (+50 bp), respectively. These changes would be offset in part by increases or decreases in the fair value of the assets. The changes in the fair value of the plan assets were as follows: EUR million Fair value of plan assets at beginning of year Net incorporation of companies into the Group 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 2023 2022 2021 10,152 17,244 15,575 — (41) 320 498 (487) (434) 225 262 (406) (6,517) 214 — 225 (463) 285 541 (670) 1,081 10,208 10,152 17,244 In 2024 the Group expects to make current contributions to fund these obligations for amounts similar to those made in 2023. The main categories of plan assets as a percentage of total plan assets are as follows: Equity instruments Debt instruments Properties Other 2023 — 62% 12% 26% 2022 — 51% 13% 36% 2021 10% 51% 10% 29% The following table shows the estimated benefits payable at 31 December 2023 for the next ten years: EUR million 2024 2025 2026 2027 2028 2029 to 2033 525 448 466 494 512 2,764 iii. Other foreign subsidiaries Certain of the consolidated foreign entities have acquired commitments to their employees similar to post-employment benefits. At 31 December 2023, 2022 and 2021, 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 107 million in 2023 (EUR 118 million at 31 December 2022 and EUR 106 million at 31 December 2021). 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. 636       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The funding status of the obligations similar to post- employment benefits and other long-term benefits in 2023 and the two preceding years is as follows: EUR million Present value of the obligations Less- Of which: with a charge to the participants Fair value of plan assets Provisions - Provisions for pensions Of which: Internal provisions for pensions Net assets for pensions Unrecognised net assets for pensions Of which business in Brazil 5,961 114 6,132 (285) 474 (63) (696) 2023 8,485 114 7,787 584 1,434 (154) (696) 2022 7,578 107 7,321 150 1,166 (122) (894) 2021 8,018 106 7,167 745 1,478 (64) (669) The amounts recognised in the consolidated income statements in relation to these obligations are as follows: The changes in the present value of the accrued obligations were as follows: EUR million EUR million Current service cost Interest cost (net) Provisions or reversion of provisions (Actuarial gains)/losses recognised in the year Past service cost Pre-retirement cost Other 2023 25 84 2022 31 64 2021 34 62 23 1 — (3) 130 8 8 — (3) 108 11 3 (24) (3) 83 In addition, in 2023 'Other comprehensive income – Items not reclassified to profit or loss – Actuarial gains or (-) losses on defined benefit pension plans' increased by EUR 247 million with respect to defined benefit obligations (decreased EUR 320 million and EUR 193 million in 2022 and 2021, respectively). Present value of the obligations at beginning of year Incorporation of Group companies, net Current service cost Interest cost Pre-retirement cost Effect of curtailment/settlement Benefits paid 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 2023 2022 2021 7,578 (20) 25 600 — (2) (730) (2) 3 1 697 40 657 335 8,018 — 31 546 — (3) (653) (179) 5 8 (876) 5 (881) 681 8,434 (5) 34 429 (24) (3) (538) — 3 3 (486) 16 (502) 171 8,485 7,578 8,018 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 2023 2022 2021 7,321 7,167 7,182 (6) — 411 570 (478) (766) 152 198 (155) (498) 61 650 7,787 7,321 7,167 (16) 588 (644) 124 110 304 In 2024 the Group expects to make contributions to fund these obligations for amounts similar to those made in 2023. 637               2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The main categories of plan assets as a percentage of total plan assets are as follows: The types of provision were determined by grouping together items of a similar nature: Equity instruments Debt instruments Properties Other 2023 11% 83% 1% 5% 2022 11% 83% 1% 5% 2021 12% 83% 1% 4% The following table shows the estimated benefits payable at 31 December 2023 for the next ten years: EUR million 2024 2025 2026 2027 2028 2029 to 2033 658 665 671 682 694 3,499 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 2023 2021 2022 1,921 1,768 1,595 328 779 2,280 1,977 2,049 433 1,618 1,243 1,339 4,634 4,073 4,423 Set forth below is the detail, by type of provision, of the balance at 31 December 2023, 2022 and 2021 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 Provision for restructuring Other 2023 745 2022 679 2021 564 611 328 301 1,359 1,094 1,104 745 349 454 749 596 641 933 869 1,009 4,634 4,073 4,423 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 provisions for restructuring include only the costs arising from restructuring processes carried out by the various Group companies. Lastly, the Other heading contains very atomized and individually insignificant provisions, such as the provisions to cover the operational risk of the different offices of the Group. Qualitative information on the main litigation is provided in Note 25 e to the consolidated financial statements. 638           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. Regarding their variations in fiscal year 2023, in provisions for labor processes and others of a legal nature, EUR 556 million and EUR 238 million were recorded in Brazil in 2023, making payments of EUR 269 million and EUR 227 million, respectively. e) Litigation and other matters i. Tax-related litigation At 31 December 2023 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 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 Federal Supreme Court also admitted the appeals related to the other Group entities both for PIS and COFINS. On June 13, 2023, the Federal Supreme Court ruled unfavorably two cases through General Repercussion (Theme 372), including Banco Santander (Brasil) S.A. case. The Bank has filed a new appeal, considering the possible loss as a contingent liability. The cases of the other Group entities are no longer susceptible of appeal and a provision has been recognized for the amount of the estimated loss. • 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. • 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. (Brasil), (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) (currently Zurich Santander Brasil Seguros e Previdência S.A.), 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. 639 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • 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 and 2019. The appeals are pending decision at the administrative level. 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 815 million, and for lawsuits that qualify as contingent liabilities is EUR 5,567 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 2023 the main non-tax-related proceedings concerning the Group were as follows: • Payment Protection Insurance (PPI):the dispute relates to the liability for PPI mis-selling complaints relating to 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). In July 2017, the Santander Entities notified Axa France that they did not accept liability for losses on PPI policies relating to the relevant period. Santander UK plc entered into a Complaints Handling Agreement (CHA) with Axa France pursuant to which it agreed to handle complaints on their behalf, and Axa France agreed to pay redress assessed to be due to relevant policyholders on a without prejudice basis. A standstill agreement was entered into between the Santander Entities and Exe France as a condition of the CHA. In July 2020, Genworth announced that it had agreed to pay Axa SA circa GBP 624 million in respect of PPI mis-selling losses in settlement of the related dispute concerning obligations under the sale and purchase agreement pursuant to which Genworth sold Axa France to Axa SA. The CHA between Santander UK plc and Axa France terminated on 26 December 2020. On 30 December 2020 Axa France provided written notice to the Santander Entities to terminate the standstill agreement. During 2021, Axa France commenced litigation in the High Court of England and Wales (Commercial Curt) against the Santander Entities seeking recovery of GBP 636 million (EUR 733.5 million) (plus interest) and any further losses relating to pre-2005 PPI. Judgment in respect of the Santander Entities application for Axa Frances’s claim to be struck out/summarily dismissed was handed down by the Commercial Court on 12 July 2022. In summary, the Commercial Court upheld a significant part of the Santander Entities’ strike-out application and required Axa France to re-plead a significant portion of its pleadings. Axa France updated the amount of losses claimed from GBP 636 million (EUR 733.5 million) to GBP 670 million (EUR 772.7 million) (plus interest) in their Re-Amended Particulars of Claim dated December 2022 (RAPOC). On 31 January 2023, the Santander Entities filed their Defence to the RAPOC and an Additional Claim. In response, Axa France conceded its claim for charges paid to Santander Entities pursuant to the CHA, reducing the overall value of its claim from GBP 670 million (EUR 772.7 million) to GBP 552 million (EUR 636.6 million) (plus interest) and has agreed to the requested rectification. Axa France filed its Re-Re-Amended Particulars of Claim on 29 June 2023. Trial has been fixed for six weeks, beginning on 3 March 2025. 640                         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Overall, there remains significant uncertainty as to how the dispute will be resolved. There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean that it is difficult to reliably predict the outcome of the matter. In addition, and in relation to PPI more generally, the PPI provision includes an amount relating to legal claims challenging the FCA's industry guidance on the treatment of the Plevin judgment and of recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There remains a risk that the number of claims issued (whether individually or on a collective basis) in the future may be higher than forecast. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and amount of any further financial impact. • Motor Finance Broker Commissions: following the FCA’s Motor Market review in 2019 which resulted in a change in rules in January 2021, Santander Consumer (UK) plc (SCUK) has received a number of county court claims and complaints in respect of its historical use of discretionary commission arrangements (DCAs) prior to the 2021 rule changes. In the context of the complaints made to the Financial Ombudsman Service relating to such commission arrangements, the FCA announced on 11 January 2024 that it intends to use its powers under s166 of the Financial Services and Markets Act 2000 to review the historical use of DCAs between lenders and credit brokers (the “FCA Review”) and whether redress should be payable. In line with the FCA's announcement, we have paused the response to customer complaints until at least 20 November 2024. A claim has been issued against SCUK, Santander UK plc and others in the Competition Appeal Tribunal (CAT), alleging that SCUK’s historical commission arrangements in respect of used car financing operated in breach of the Competition Act 1998. While it is possible that certain charges may be incurred in relation to existing or future county court claims, complaints and the CAT proceedings, it is not considered that a legal or constructive obligation has been incurred in relation to these matters that would require a provision to be recognised at this stage. The resolution of such matters is not possible to predict with any certainty and there remain significant inherent uncertainties regarding the existence, scope and timing of any possible outflow which make it impracticable to disclose the extent of any potential financial impact. • Delforca: dispute arising from equity swaps entered into by Gaesco (now Delforca 2008, S.A. (Delforca)) 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, S.A., parent of Delforca (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, Monesa and the bankruptcy administrator. On 1 June 2023, the appeal hearing took place and on 15 November 2023 the Provincial Court of Barcelona rendered a judgment dismissing the appeals filed by Delforca, Monesa and the bankruptcy administrator and confirming the first instance judgment. Delforca and Monesa (not the bankruptcy administrator) have filed an appeal in cassation before the Supreme Court against the judgment of the Provincial Court of Barcelona. Separately, Monesa, 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: class action filed by AFABESP (an association of retirees and former Banespa employees) claiming payment of a semi-annual bonus provided for in the Bank's bylaws. The final decision rendered on the merits was unfavorable to Santander. However, a favorable decision was subsequently rendered stating that each beneficiary of the decision shall file an individual lawsuit to receive the due amount. Since the judgments adopted different positions for each case, a procedure called Incident for the Resolution of Repetitive Demands (IRDR) was commenced before the Regional Labor Court (TRT) with the purpose of establishing objective criteria regarding the arguments brought by the Bank, mainly the statute of limitations and limitation of payments until December 2006 (Plan V) . Finally, due to the divergence between the interpretation of the Federal Constitution, an Action for Allegation of Non- Compliance with a Fundamental Precept (ADPF) was also filed, so that the Federal Supreme Court (STF) settles the issue and indicates the correct statute of limitations to be used in the individual cases filed. Santander Brazil's 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 2023. 641         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • 'Planos Económicos': like the rest of the banking system in Brazil, 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 proved 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 2023, the provision recorded for the economic plan proceedings amounts to EUR 196.3 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 issued by the Court of Justice of the European Union (CJEU) 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. On 31 December 2023, after having processed most of the customer requests, the potential residual loss associated with ongoing court proceedings is estimated at EUR 52.6 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 with 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 rendered five judgements in which it 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. Although four of these five judgments were initially appealed in cassation before the CJEU, in July 2023 one of the appellants withdrew his appeal. Therefore, only the appeals against three judgments are pending before the 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 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. Regarding this judgment, several courts have referred additional preliminary rulings before the CJEU: (i) in December 2022 the Supreme Court requested three preliminary rulings in respect of its applicability to the holders of subordinated obligations, preferred stocks and subordinated bonds of Banco Popular; (ii) in April 2023, the First Instance Court 3 of Santa Coloma de Farners requested three preliminary rulings to the CJEU asking about pre-emptive subscription rights and the compatibility of the principles of proportionality and legal certainty with the bringing of legal actions by former holders of pre-emptive subscription rights and shares against the entity issuing the securities or against the entity succeeding it, which have been stayed by the CJEU until the preliminary rulings raised by the Supreme Court are resolved; and (iii) in November 2023, the Supreme Court requested another two preliminary rulings which supplement the ones requested in December 2022, regarding to a holder of subordinated bonds who filed a claim against Banco Popular before the resolution. 642 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Separately, the Central Court of Instruction 4 is currently conducting preliminary proceedings 42/2017, in which, amongst other things, the following is being investigated: (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 requested confirmation of the exclusion of its subsidiary civil liability status in this criminal proceeding. On 26 July 2022, the Court rejected this request stating that it is a matter to be determined at a later procedural time. This decision was confirmed on appeal by the Chamber of the National Court by judgment of 5 October 2022. The instruction expired on 29 April 2023. The instruction expired on 29 April 2023. On 15 January 2024, the National Court notified the parties that within the first half of February 2024, they will be notified with the ruling transforming the proceedings into an abbreviated procedure. 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 2022 represented 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 upholding the existence, validity and effectiveness of such contract and its enforcement together with the payment of certain amounts. For the case that 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 that 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 of the consolidated annual accounts of the year 2022, 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 with 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 plaintiff deposited circa EUR 9.6 million. This amount was received by the Bank on 11 July 2023. On 11 April 2023, the Bank filed 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. (Upay): has filed a lawsuit against Banco Santander, S.A. for breach of the marketing alliance agreement (MAA) and claims 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 before the Provincial Court of Madrid and the Bank has filed its opposition to Upay's appeal. Considering 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. 643                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • 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 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 dispute 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. The case law of the Polish courts has not yet been fully formed, but the prevailing line of case law is based on the annulment of the loan contract. On 15 June 2023, the CJEU issued its judgment in Case C-520/21, in which it confirmed that it is national law that is relevant to determine the effect of cancellation of a contract - respecting the principles arising from Directive 93/13/EEC. According to the ruling of the CJEU in that case, the bank's claims in excess of the repayment of the nominal amount of the loan's principal and, as the case may be, the payment of default interest are contrary to the objectives of Directive 93/13/EEC if they were to lead to a profit analogous to the one it intended to make from the performance of the contract and thus eliminate the deterrent effect. At the same time, the CJEU ruled that, under European law, there is no obstacle to the consumer being able to claim compensation from the bank beyond the return of the installments paid, but at the same time stipulated that such a claim should be evaluated in light of all the circumstances of the case, so that the consumer's possible benefits from the cancellation of the contract do not exceed what is necessary to restore the factual and legal situation in which he would have been without entering into the defective contract and do not constitute an excessive sanction for the entrepreneur (principle of proportionality). The Polish Financial Supervisory Authority (KNF) on 17 February and on 15 June 2023 expressed its disagreement with the conclusions of the Attorney General that preceded the 15 June 2023 judgment and subsequently, with the judgment itself expressing, in particular, that the ruling is contrary to the principles of proportionality and balance between the protection of values protected by Directive 93/13 and superior values such as stability and security of the financial system. The case law of national courts implementing the CJEU rulings (including the ruling of 15 June 2023), and the possible position of the Supreme Court will be crucial for the final assessment of the legal risk related to this matter. 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 2023, 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 6,398.1 million (EUR 1,473.1 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 2023, the total value of adjustment to gross carrying amount in accordance with IFRS9 as well as provisions recorded under IAS37, amount to PLN 5,030.3 million (EUR 1,158.2 million) of which PLN 4,226.9 million (EUR 973.2 million) corresponds to adjustment to gross carrying amount under IFRS 9 and PLN 803.4 million (EUR 185.0 million) to provisions recognized in accordance with IAS 37. Throughout 2023, the adjustment to gross carrying amount in accordance with IFRS9 amounted to PLN 1,651.0 million (EUR 363.6 million), the additional provisions under IAS37 amounted to PLN 445.2 million (EUR 98.1 million) and other costs related to the dispute amounted to PLN 455.8 million (EUR 100.4 million). These provisions represent the best estimate as at 31 December 2023. Santander Bank Polska and Santander Consumer Bank Poland will continue to monitor and assess appropriateness of those provisions. 644 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix In December 2020, the 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 KNF continues to support the concept of offering such settlements by banks after the verdict of the CJEU on 15 June 2023. The Bank has prepared settlement proposals which consider both the key elements of conversion of home loans indexed to CHF, as proposed by the KNF Chairman, and the conditions defined internally by the Bank. The proposals are being presented to customers. This is reflected in the model which is currently used to calculate legal risk provisions... • Banco Santander Mexico: dispute regarding a testamentary trust constituted in 1994 by Mr. Roberto Garza Sada in Banca Serfin (currently Santander Mexico) in favor of his four sons in which he affected shares of Alfa, S.A.B. de C.V. (respectively, Alfa and the Trust). During 1999, Mr. Roberto Garza Sada instructed Santander México in its capacity as trustee to transfer 36,700,000 shares from the Trust's assets to his sons and daughters and himself. These instructions were ratified in 2004 by Mr. Roberto Garza Sada before a Notary Public. Mr. Roberto Garza Sada passed away on 14 August 2010 and subsequently, in 2012, his daughters filed a complaint against Santander Mexico alleging it had been negligent in its trustee role. The lawsuit was dismissed at first instance in April 2017 and on appeal in 2018. In May 2018, the plaintiffs filed an appeal (recurso de amparo) before the First Collegiate Court of the Fourth Circuit based in Nuevo León, which ruled in favor of the plaintiffs on 7 May 2021, annulling the 2018 appeal judgment and condemning Santander Mexico to the petitions claimed, consisting of the recovery of the amount of 36,700,000 Alfa shares, together with dividends, interest and damages. Santander Mexico has filed various constitutional reviews 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 was resolved in favour of Santander Mexico. Plaintiffs requested the recusal of the third Magistrate who ruled with a dissenting vote against the recurso de amparo referred above and this was resolved in favour of Plaintiffs, and consequently the matter has been referred to the Second Collegiate Court of the Fourth Circuit based in Nuevo León, for it to resolve the matter. 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, S.A. (before URO Property Holdings, SOCIMI SA): on 16 February 2022, legal proceedings were commenced in the Commercial Court of London against Uro Property Holdings S.A. (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 because 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 a counterclaim against the claimant. The trial hearing has been scheduled for November and December 2024. Furthermore, Uro filed a summary judgement application for BNP's claim to be dismissed before trial. The dismissal of this application by the Commercial Court was confirmed by the Appeal Court. It is estimated that the maximum loss associated with this possible contingency, amounts to approximately EUR 250 million. 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 2023, 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 2023 767 9,136 7,695 2021 2022 545 457 7,084 8,445 5,707 5,069 17,598 14,609 12,698 645   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 January 2024 Spanish tax authorities formalized acts with agreement, conformity and non-conformity relating to the corporate income tax financial years 2017 to 2019. The adjustments signed in conformity and with agreement had not impact on results and, in relation to the concepts signed in disconformity both for these years and for previous years (corporate income tax 2003 to 2015), 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), as well as in the acts that are still pending review by Spanish tax authorities. 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 subsequent years up to and including 2023, 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 country A Of which: Brazil United Kingdom United States Chile Poland Effect of profit or loss of associates and joint ventures USA electric vehicle leasing incentives Effect of reassessment of deferred taxes Permanent differences and other Current income tax Effective tax rate Of which: 2023 2022 2021 16,459 — 16,459 15,250 — 15,250 14,547 — 14,547 4,938 4,575 4,364 (100) 61 210 198 (51) (28) (28) (164) 472 (161) (99) (30) (101) 634 (158) (179) (34) — (184) (210) (130) (259) — — — — 9 (119) 4,276 25.98% 60 4,486 29.42% 441 4,894 33.64% Continuing operations 4,276 4,486 4,894 Of which: Current taxes Deferred taxes Income tax (receipts)/payments 5,568 (1,292) 5,214 4,272 214 5,498 3,799 1,095 4,012 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. 646 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023, 2022 and 2021: 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 2023 2022 2021 358 302 49 96 (510) (530) 20 (19) (13) 36 (26) 33 — (2) — (919) (732) 1,522 912 1,136 278 (214) 661 857 27 (561) (51) 1,571 1 626 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 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 that do not rely on future profitability arising from temporary differences (referred to hereinafter as 'monetizable deferred tax assets’) meeting certain conditions, should not be deducted from regulatory capital and should not be risk-weighted at 250% according to the thresholds set out in Article 48 of the said Regulation, but shall apply a risk weight of 100% under Article 39. 647 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The detail of deferred tax assets, by classification as monetizable or non-monetizable assets, and of deferred tax liabilities at 31 December 2023, 2022 and 2021 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 2023 A Monetizable 11,099 — 11,099 — — 8,248 2,851 — — — — — — Other 9,668 2,393 7,275 1,965 1,543 1,577 665 1,060 6,086 6,086 2,059 2,594 378 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 A. In 2023, the Spanish Economic Administrative Court ruled that in 2017 the requirements for the conversion of part of the monetizable assets of Popular Group into a credit against the Tax Administration were met, allowing the conversion to 995 million euros. This amount has been paid to Banco Santander, without impact on results. The favorable Economic Administrative Court decision has been declared harmful to the public interests and challenged at the National Appellate Court by the Tax Administration. The estimation of this appeal would imply that Grupo Santander should repay the amount refunded and would, once again, credit these monetizable assets with no impact on results except for late payment interests. However, it is considered that there are strong defense arguments in relation to this appeal. Grupo Santander only recognises deferred tax assets for temporary differences or tax loss and tax credit carryforwards where it is considered probable that 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 planning 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 planning 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 are 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. 648         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Finally, and given the degree of uncertainty of these assumptions 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 8,125 million, of which EUR 5,670 million were for monetizable temporary differences with the right to conversion into a credit against the tax administration, EUR 1,774 million for other temporary differences and EUR 681 million for tax losses and credits. Brazil The deferred tax assets recognised in Brazil total EUR 7,896 million, of which EUR 5,328 million were for monetizable temporary differences, EUR 1,507 million for other temporary differences and EUR 1,061 million for tax losses and credits. Mexico The deferred tax assets recognized in Mexico total EUR 1,456 million, which are temporary differences. United States The deferred tax assets recognised in the United States total EUR 932 million, of which EUR 423 million were for temporary differences and EUR 509 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 could be recovered in a maximum period of 15 years. 649         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The changes in Tax assets - Deferred and Tax liabilities - Deferred in the last three years were as follows: EUR million Deferred tax assets Tax losses and tax credits Temporary differences Of which monetizable Deferred tax liabilities Temporary differences EUR million Deferred tax assets Tax losses and tax credits Temporary differences Of which monetizable Deferred tax liabilities Temporary differences EUR million Deferred tax assets Tax losses and tax credits Temporary differences Of which monetizable Deferred tax liabilities Temporary differences Balances at 31 December 2022 20,787 1,778 19,009 10,660 (6,428) (6,428) 14,359 (Charge)/ Credit to income 629 392 237 1,232 663 663 1,292 Foreign currency balance translation differences and other items (130) 224 (354) (787) 3 3 (127) (Charge)/Credit to asset and liability valuation adjustments (422) — (422) — (338) (338) (760) Acquisition for the year (net) (97) (1) (96) (6) 14 14 (83) Balances at 31 December 2023 20,767 2,393 18,374 11,099 (6,086) (6,086) 14,681 Balance at 31 December 2021 19,440 1,250 18,190 10,473 (6,462) (6,462) 12,978 (Charge)/ Credit to income 273 211 62 507 (487) (487) (214) Balances 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 376 317 59 (320) (149) (149) 227 (Charge)/Credit to asset and liability valuation adjustments 697 — 697 — 684 684 1,381 Foreign currency balance translation differences and other items 193 28 165 25 (170) (170) 23 (Charge)/Credit to asset and liability valuation adjustments 209 — 209 — 528 528 737 Acquisition for the year (net) 1 — 1 — (14) (14) (13) Balance at 31 December 2022 20,787 1,778 19,009 10,660 (6,428) (6,428) 14,359 Acquisition for the year (net) 1 — 1 — (1) (1) — Balance at 31 December 2021 19,440 1,250 18,190 10,473 (6,462) (6,462) 12,978 Also, the Group did not recognise deferred tax assets amounting to approximately EUR 11,788 million of which EUR 7,228 million relate to tax losses, EUR 3,648 million to tax credits, and EUR 912 million to other concepts. 650               2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix f) Global Minimum Tax Pillar Two g) Tax reforms In the European Union, in December 2022, was adopted Council Directive 2022/2523 on ensuring an overall minimum level of taxation for multinational enterprise groups and large domestic groups in the EU, that had to be transposed by 31 December 2023, entering into force the new minimum taxation on 1 January 2024. The Directive implements at EU level the Pillar Two rules of the OECD's Inclusive Framework on base erosion and profit shifting. Pillar Two applies to multinational groups with a turnover of more than EUR 750 million and entails a minimum tax of 15% calculated on adjusted accounting profit on a jurisdiction-by-jurisdiction basis. In 2023, the OECD has completed these rules by approving administrative guidance and a report on safe harbours in order to simplify their application. In Spain, on 19 December 2023 the preliminary draft law transposing the European Directive establishing a minimum overall tax level of 15% for multinational companies and large domestic groups was published. Once approved, the law will enter into force on 1 January 2024. Pillar Two legislation has also been enacted or is in the process of being enacted in the United Kingdom and in most EU Member States. The Group is in scope of this legislation and has performed an assessment of its potential exposure to Pillar Two income taxes taking into consideration the transitory safe harbours. Once the legislation is approved in Spain, Banco Santander S.A. will be the ultimate parent entity liable to pay the additional tax due for those subsidiaries located in jurisdictions below the minimum effective tax rate of 15%. Group entities will also be subject to tax in those countries where a domestic global minimum tax is approved according to the Pillar Two rules. The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings, country-by-country reporting and financial statements for the Group entities. Based on this assessment, the Pillar Two effective tax rates in most of the jurisdictions in which the Group operates are above 15%. Consequently, the Group does not estimate a significant impact derived from this new regulation, without prejudice to the relevant administrative burdens that will entail its implementation. The following significant tax reforms were approved in 2023 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. In 2021 the General State Budget Law for 2022 established a minimum effective tax rate of 15% (18% for financial entities) on corporate income tax base. In 2022, Law 38/2022 established a new temporary levy on credit institutions and financial credit institutions for fiscal years 2023 and 2024. The levy is 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 arises on the first day of each period. Accordingly, this new levy was recorded in January 2023 for an amount of 224 million euros that has been paid during 2023. In January 2024, an estimated amount of 335 million euros has been registered for this concept. 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 has been in force only in 2023, with a 10 year deadline for the reversal of this positive adjustment. In December 2023, Royal Decree-Law 8/2023, was approved, which foresees the revision of the configuration of the temporary levy on credit institutions and financial credit institutions during the financial year 2024 for its inclusion into the tax system and its agreement with the Basque Country and Navarre. 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 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%. 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) in 2021, the applicable rate was 0,38% for credit transactions, increasing temporally to 2.04% for legal persons and to 4.08% for natural persons. Decree 10.997/2022 established the reduction to 0% lending IOF applicable to foreign financing and of the transactions, and a gradual reduction in the rates applicable to foreign exchange transactions until their reduction to 0% as from 2 January 2029. 651     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix In December 2023, Congress approved Constitutional Amendment 132/2023 on indirect taxation reform. This reform replaces the various existing indirect taxes in Brazil, (applicable at the federal, regional and municipal levels), with two taxes administered at federal level (contribution on goods and services and selective tax) and other administered at the regional and municipal levels (tax on goods and services). The reform will be implemented through Complementary Laws to be approved during 2024. The new system will be gradually implemented over a transitional period of 8 years (from 2026 to 2033). 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 was 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) was approved, which, among other measures, imposed a minimum taxation on the accounting performance of certain large companies, through the introduction of a new Alternative Minimum Tax (AMT) as of 2023, as well as relevant tax credits related with investments in clean energies. 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. h) 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 1,000 for the year 2023/24 (GBP 2,000 for the year 2022/2023). 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. On 18 January 2024, the Spanish Constitutional Court annulled the mandatory reversal of impairment losses that were deducted in previous years and the application of additional limits on the offsetting of tax losses and double taxation deductions introduced in the corporate income tax Law by Royal Decree-Law 3/2016. The application of the Court resolution to previous tax years will not have an impact on results, and the impact on the corporate income tax return that will be filled in 2024 is not expected to be relevant. 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 and Santander Portugal has adhered to the Code of Good Tax Practices in Portugal, actively participating in the cooperative compliance programs being developed by these Tax Administrations. 652     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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: 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 2023 8,481 10,123 8,481 10,123 248 (1,890) 297 40 1,107 (258) (364) 1,159 (1,811) 31 2021 9,846 9,846 (304) 581 1,529 (390) (5) (748) 303 8,818 (648) (500) (769) 95 8,481 10,123 A. B. Include the effects of the public offer for the acquisition of shares of Banco Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México that occurred in 2023, 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, S.A., Institución de Banca Múltiple, 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 at closing of fiscal year 2022. The foregoing changes are shown in the consolidated statement of changes in total equity. 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 2023 1,934 1,590 — 1,379 1,493 2022 1,603 1,728 — 1,317 1,210 2021 1,559 1,543 1,255 1,042 1,023 4 1,311 7,711 251 1,213 7,322 202 1,970 8,594 Profit/(Loss) for the year attributable to non-controlling interests 1,107 1,159 1,529 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 — 285 235 182 347 — 323 280 259 196 494 311 292 251 75 13 45 8,818 42 59 62 44 8,481 10,123 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 2023 year-end, the outstanding balance on these equity instruments amounted to GBP 500 million (EUR 576 million) (EUR 564 million and EUR 1,363 million in 2022 and 2021, respectively). c) Other information The financial information on the subsidiaries with significant non-controlling interests at 31 December 2023 is summarised below: A EUR million Total assets Total liabilities Net assets Total income Total profit Santander Bank Polska S.A. 60,916 54,462 6,454 3,182 1,015 Banco Santander (Brasil) S.A. 220,093 203,035 17,058 13,104 2,135 Banco Santander - Chile 77,167 71,518 5,648 2,285 816 Grupo Financiero Santander México, S.A.B. de C.V. 102,496 93,592 8,904 5,899 1,577 A. Information prepared in accordance with the segment reporting criteria described in note 52 and, therefore, it may not coincide with the information published separately by each entity. 653             2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. 654 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix a) Breakdown of Other comprehensive income - Items that will not be reclassified in results and Items that can be classified in results A 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 2023 (35,020) (5,212) (4,324) — 1 — 2022 (35,628) (4,635) (3,945) — 10 — 2021 (32,719) (4,241) (3,986) — (8) — (776) (672) (157) — 264 — 293 — 275 (264) (293) (275) (113) (29,808) (8,684) (19,510) (740) (555) — — (319) (28) (30,993) (6,750) (20,420) (2,437) (1,002) — — (384) (90) (28,478) (4,283) (23,887) (276) 436 — — (468) A. Net amount of taxes and minorities 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 1,038 million in the year) is shown in the consolidated statement of recognised income. The endowment against equity in 2023 amounts to EUR 944 million - see note 25.b -, with the following breakdown: • Increase of EUR 687 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 the evolution of the discount rate– reduction from 4.88% to 4.63%. • Increase of EUR 184 million in accumulated actuarial losses corresponding to the Group’s business in Brazil, mainly due to the evolution experienced by the discount rate -reduction from 9.44% to 8.65% in the main pension benefits and 9.46% to 8.70% in medical benefits. • Increase of EUR 34 million in the accumulates actuarial losses relating to the Group's entities in Germany, mainly due to the evolution experienced by the discount rate -reduction from 4.21% to 3.57%. • Increase of EUR 10 million in the accumulates actuarial losses relating to the Group´s entities in Spain, mainly due to the evolution experienced by the discount rate -reduction from 3.80% to 3.35%. • Increase of EUR 9 million in the accumulates actuarial losses relating to the Group's entities in Portugal, mainly due to the evolution experienced by the discount rate -reduction from 3.70% to 3.50%. • Increase of EUR 20 million in the accumulated actuarial losses corresponding to the Group's businesses in other geographical areas. The other modification in accumulated actuarial profit or losses is an Increase of EUR 94 million as a result of the evolution of exchange rates and other movements. 655         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix c) Other comprehensive income - Items that will not be reclassified in results - Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income Since the entry into force of IFRS 9, no impairment analysis is performed of equity instruments recognised under 'Other comprehensive income'. IFRS 9 eliminates the need to carry out the impairment estimate on this class of equity instruments and the reclassification to profit and loss on the disposal of these assets, being recognised at fair value with changes in equity. The following is a breakdown of the composition of the balance as of 31 December 2023, 2022 and 2021 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 2023 32 117 16 370 535 316 219 (1,173) (71) — (67) (1,311) (118) (1,193) 2022 (1,141) 46 16 303 (776) 198 (974) 252 267 19 1,223 1,761 1,225 536 Capital gains by valuation Capital losses by valuation Net gains/losses by valuation Fair Value 30 84 15 244 373 246 127 (926) (60) — (59) (1,045) (113) (932) (896) 24 15 185 (672) 133 (805) 500 225 29 1,187 1,941 1,200 741 656 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million Equity instruments Domestic Spain International Rest of Europe United States Latin America and rest Of which: Publicly listed Non publicly listed Capital gains by valuation Capital losses by valuation Net gains/losses by valuation Fair Value 2021 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 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 2023 reflects the positive effect of the appreciation of the Brazilian real, the pound sterling, Polish zloty and Mexican peso and the negative effect of the depreciation of the US dollar, Argentine peso and Chilean peso, whereas the change in 2022 reflected 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. 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. Of the change in the balance in these years, a profit of EUR 249 million, a profit of EUR 496 million and EUR 167 million in 2023, 2022 and 2021, respectively relate to the measurement of goodwill. The detail, by country is as follows: EUR million Net balance at end of year Of which: Brazilian real Pound sterling Mexican peso Argentine peso Chilean peso US dollar Polish zloty Other 2023 (28,194) 2022 (27,170) 2021 (28,170) (16,340) (3,964) (2,942) (2,655) (2,531) 1,819 (786) (795) (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) 657   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The breakdown of translation differences by currency is as follows: EUR million 2023 Currency Brazilian real Pound sterling Mexican peso Argentine peso Chilean peso US dollar Polish zloty Other Total Group 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 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 (14,199) (4,446) (1,132) (1,754) (1,605) 4,062 (776) (570) (20,420) of the year Movement 912 382 1,068 (904) (285) (629) 451 (85) 910 (13,287) (4,064) (64) (2,658) (1,890) 3,433 (325) (655) (19,510) From goodwill 191 20 62 (4) (32) (64) 87 (11) 249 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 11 4 41 — (34) (16) 32 (1) 37 Of which: From results A (98) (67) 18 — 5 (24) — (7) (173) From net assets 710 358 965 (900) (219) (549) 332 (73) 624 From net assets 1,436 (824) 806 355 211 1,209 (77) 28 3,144 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 (16,032) (4,602) (2,393) (2,287) (1,450) 1,253 (638) (762) (26,911) of the year Movement 119 1,098 381 178 (402) 1,522 (40) 168 3,024 (15,913) (3,504) (2,012) (2,109) (1,852) 2,775 (678) (594) (23,887) From goodwill 30 41 26 — (55) 125 (9) 9 167 Of which: A From results 19 38 29 — (43) 102 (1) 11 155 From net assets 70 1,019 326 178 (304) 1,295 (30) 148 2,702 A. Profit and loss items are translated into euros at the average exchange rate for the year as described in note 2 a) ii. 658 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023, 2022 and 2021 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 Europe 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 2023 17 333 194 98 19 6 667 — (96) (820) (9) (30) (267) (1,222) 17 237 (626) 89 (11) (261) (555) 9,867 18,258 38,169 5,129 5,018 5,106 81,547 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 83,298 659 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 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 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 2023, 2022 and 2021, 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 44 million, EUR 7 million and EUR 19 million in 2023, 2022 and 2021, 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 At 31 December 2023, the heading includes a negative amount of EUR 318 million (EUR 374 million and EUR 376 million in 2022 and 2021, respectively). Of the variation in the balance of said years, a gain of EUR 44 million and EUR 15 million has been transferred to results, and a loss of EUR 6 million in the years 2023, 2022 and 2021, respectively. 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 2020, Banco Santander's share capital 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, at 31 December 2021, Banco Santander's share capital 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. Therefore, at 31 December 2022, Banco Santander's share capital 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. On 21 March 2023, there was a capital reduction amounting EUR 170,203,286 through the redemption of 340,406,572 shares, corresponding to the share buyback program carried out in 2022 and ended in January 2023. Likewise, on 30 June 2023, there was a capital reduction of EUR 134,924,476.50 through the redemption of 269,848,953 shares, corresponding to the share buyback program during the first half of 2023. Aforementioned 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 2023 consisted of EUR 8,092 million, represented by 16,184,146,059 shares of EUR 0.50 of nominal value each and all of them of a unique class and series; including 286,842,316 shares corresponding to the first buyback program of 2023. (See note 1.g.). 660                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 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 was 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) as a consequence of the capital decreases described in note 31.a. Likewise, in accordance with applicable legislation, a reserve for redeemed capital has been allocated with a charge to the share premium in an amount equal to the nominal value of said redeemed shares (273 million euros). The decrease produced in 2023 by an amount of EUR 1,595 million has been the consequence of the difference between the purchase value of the redeemed shares (EUR 1,900 million) and the par value of said shares (EUR 305 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 305 million). Banco Santander’s shares are listed on the Spanish Stock Market Interconnection System and on the New York, London 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 Shares (ADS), each ADS representing one share. Additionally, Banco Santander's shares were listed on the traditional listing of the Mexican Stock Exchange (BMV) and since 29 December 2023, they were listed only in the International Quotation System of said stock exchange. As of 31 December 2023, no Banco Santander shareholder individually held more than 3% of its total share capital (which is the threshold generally provided for in Spanish regulations for mandatory notification of a significant participation in a listed company). Even though at 31 December 2023, 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 (14.97%),Chase Nominees Limited (6.89%), The Bank of New York Mellon Corporation (5.98%), Citibank New York (3.87%), BNP (3.09%). At 31 December 2023, 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 2023 the shares of the following companies were listed on official stock markets: Banco Santander Argentina S.A.; Banco Santander - Chile; Banco Santander (Brasil) S.A. and Santander Bank Polska S.A. At 31 December 2023 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 36 million shares, which represented 0.22% of Banco Santander’s share capital (50 and 45 million shares, representing 0.30% and 0.26% of the share capital in 2022 and 2021, respectively). In addition, the number of Banco Santander shares owned by third parties and received as security was 159 million shares (equal to 0.98% of the Bank’s share capital). At 31 December 2023 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). 661                   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 2,899 1,618 649 43 589 16,033 14,284 2022 2,798 1,734 737 43 284 7,701 7,917 2021 2,543 1,734 755 43 11 4,243 6,123 1,749 (1,880) 47,669 49,196 47,438 (216) 1,762 1,572 1,553 68,363 61,248 55,796 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. 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 2023 the Legal reserve was at the stipulated level. ii. Reserve for treasury shares According to 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 Santander Consumer Finance Group Banco Santander - Chile Banco Santander Argentina S.A. Banco Santander Totta, S.A. (Consolidated Group) Santander Bank Polska S.A. Grupo Santander Holdings USA 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 2023 2022 2021 14,512 14,663 14,325 8,558 8,358 8,700 5,684 4,344 4,112 2,813 2,626 2,535 1,893 1,215 5,437 3,858 3,875 2,527 3,297 2,140 4,324 1,316 4,753 3,502 3,194 2,318 2,940 1,990 4,913 1,307 1,044 1,050 869 346 310 277 (1,508) (1,959) (2,155) 47,669 49,196 47,438 3,392 3,614 3,870 662   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 amounted to EUR 720 million. Additionally, at 31 December 2023 the Group had other equity instruments amounting to EUR 195 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 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 Share Buyback Program started on November 22. Likewise, 546,239,718 shares were amortised (note 31) and 201,022,983 shares at an average price of EUR 2.85 per share were transferred, of which 36,700,000 shares correspond to two donations made by Banco Santander to Fundación Banco Santander with extraordinary character. At 31 December 2022, the number of treasury shares held by the Group was 243,689,025 (1.45% of the issued share capital). During 2023, 911,293,677 shares of the Bank were acquired at an average price of EUR 3.41 per share, of which 389,312,719 relate to the Share Buyback Program carried out during the first half of 2023, and 286,842,316 relate to the new Share Buyback Program started on September. Likewise, 610,255,525 shares were amortised (note 31) and 246,911,504 shares at an average price of EUR 3.34 per share have been transferred, of which 6,617,008 shares correspond to the donation made by Banco Santander to Fundación Banco Santander with extraordinary character. At 31 December 2023, the Group holds 297,815,673 shares of the Bank's issued share capital (1.84%). The effect on equity, net of tax, arising from the purchase and sale of Bank shares is of EUR 13 million profit in 2023 (EUR 7 million and EUR 23 million profit in 2022 and 2021, 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 contracts. 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 2021 2023 2022 279,589 274,075 262,737 615 10,758 188 10,715 43 75,733 781 40,158 35,575 406 15,435 578 15,400 35 113,273 542 57,363 55,910 653 12,856 521 12,813 43 92,672 608 50,508 42,164 The breakdown as at 31 December 2023 of the exposures and the provision fund out of balance sheet by impairment stage is EUR 398,243 million and EUR 302 million (EUR 370,729 million and EUR 331 million in 2022 and EUR 337,113 million and EUR 372 million in 2021) in stage 1, EUR 8,528 million and EUR 174 million (EUR 7,092 million and EUR 191 million in 2022 and EUR 10,531 million and EUR 200 million in 2021) in stage 2 and EUR 1,526 million and EUR 226 million (EUR 1,782 million and EUR 212 million in 2022 and EUR 1,584 million and EUR 161 million in 2021) 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. 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. 663                 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Memorandum items 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 Investment funds Pension funds Assets under management 2023 2022 2021 165,174 142,189 145,987 16,078 14,021 24,862 25,670 209,737 181,880 186,927 14,831 29,732 ii. Non-managed marketed funds Additionally, at 31 December 2023 there are non-managed marketed funds totalling EUR 50,036 million (EUR 48,379 million and EUR 48,385 million at 31 December 2022 and 2021, respectively). c) Third-party securities held in custody At 31 December 2023 the Group held in custody debt securities and equity instruments totalling EUR 268,338 million (EUR 231,263 million and EUR 236,153 million at 31 December 2022 and 2021, 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. 664 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The following tables contains the detail of the hedging derivatives according to the type of hedging, the hedge risk and the main products used as of 31 December 2023, 2022 and 2021: 2023 Carrying amount Assets 2,661 2,280 Liabilities 4,231 3,644 Changes in fair value used for calculating hedge ineffectiveness (1,869) (1,684) Balance sheet line items Hedging derivatives 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 Interest rate swap Call money swap Currency swap 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 Interest rate swap Currency swap Inflation risk Of which: Currency swap Equity risk Option Nominal value 241,792 225,377 92,491 122,891 4,331 1,913 2,418 12,084 1,218 1,093 9,773 157,796 97,780 3,020 37,864 53,705 34,823 11,160 20,043 12,217 2,847 9,370 12,908 12,495 68 68 1,671 344 15 15 — 366 6 3 357 2,575 913 — 403 469 1,001 502 446 484 — 484 155 153 22 22 2,236 1,226 24 24 — 563 82 97 384 2,889 1,246 — 948 266 663 241 397 74 (45) 119 906 906 — — Hedges of net investments in foreign operations Exchange rate risk FX forward 18,706 18,706 18,706 418,294 61 61 61 5,297 536 536 536 7,656 (47) (1,824) (98) (11) (87) (87) 59 (39) (107) 1,828 2,181 6 1,188 1,000 (498) 43 (537) (98) 227 (325) 234 240 9 9 (1,888) (1,888) (1,888) (1,929) Hedging derivatives Hedging derivatives Hedging derivatives Hedging derivatives Hedging derivatives Hedging derivatives Hedging derivatives 665           2023 Annual report Contents 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 FX forward Future interest rate Interest rate and exchange rate risk Of which: Currency swap Future interest rate Interest rate 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 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 9,522 8,679 905 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 — 543 266 261 4 — — 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 — 366 286 — 80 — — 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 (61) 922 (79) 1 1 (519) (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 Hedging derivatives 666           2023 Annual report Contents 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 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: 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 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           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Considering the main entities or groups within the Group by the weight of their hedging, the main types of hedging that are being carried out in Santander UK Group Holdings plc group and Banco Santander, S.A. Santander UK Group Holdings plc group enters into fair value and cash flow hedging derivatives depending on the exposure of the underlying. Only designated risks are hedged and therefore other risks, such as credit risk, are managed but not hedged. Within fair value hedges, Santander UK Group Holdings plc group has portfolios of assets and liabilities at fixed rate that are exposed to changes in fair value due to changes in market interest rates. These positions are managed by contracting mainly interest rate swaps. Effectiveness is assessed by comparing the changes in the fair value of these portfolios generated by the hedged risk with the changes in the fair value of the derivatives contracted. Santander UK Group Holdings plc group also has access to international markets to obtain financing by issuing fixed-rate debt or investing in fixed rate debt of other issuers, 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 or 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 and CHF. 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 and foreign exchange 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 and Forex Forward. On the other hand, the interest and exchange rate risk of loans granted to corporate clients at a fixed rate or variable rate is 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 and cross currency swaps. 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. 668 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 near to EUR 10,000 million. Regarding net foreign investments hedges, basically, they are allocated in Banco Santander, S.A. and Santander Consumer Finance Group. Grupo Santander assumes as a priority risk management objective to minimize -to the limit determined by the Group's Financial Management- the impact on the calculation of the capital ratio of its permanent investments included within the Group's consolidation perimeter, and whose shares or equity interests are legally denominated in a currency other than that of the Group's parent company. For this purpose, financial instruments (generally derivatives) are contracted to hedge the impact on the capital ratio of changes in forward exchange rates. Grupo Santander mainly hedges the risk for the following currencies: BRL, CLP, MXN, CAD, COP, CNY, GBP, CHF, NOK, USD, PLN, UYU and PEN. 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. 669   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The following table sets out the maturity profile of the hedging instruments used in Grupo Santander non-dynamic hedging strategies: 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 Call Money Swap Currency swap 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 31 December 2023 Up to one month 6,862 6,266 One to three months 14,535 13,749 Three months to one year 59,170 56,860 One year to five years 139,486 131,323 More than five years 21,739 17,179 2,013 4,163 566 566 — 30 — — 30 7,873 4,467 — 3,191 1,050 2,655 2,013 642 407 — 407 344 318 — — 2,104 11,421 678 678 — 108 — 21 87 16,149 6,859 — 2,876 3,553 7,087 2,344 2,209 1,547 80 1,467 656 618 — — 16,045 39,873 619 619 — 1,691 321 — 1,370 43,913 30,846 — 14,108 15,755 6,607 4,617 1,990 2,270 — 2,270 4,182 3,833 8 8 59,952 65,453 50 50 — 8,113 535 973 6,605 83,291 53,038 3,020 16,793 31,942 16,711 2,186 14,525 7,187 2,575 4,612 6,296 6,296 59 59 12,377 1,981 2,418 — 2,418 2,142 362 99 1,681 6,570 2,570 — 896 1,405 1,763 — 677 806 192 614 1,430 1,430 1 1 Total 241,792 225,377 92,491 122,891 4,331 1,913 2,418 12,084 1,218 1,093 9,773 157,796 97,780 3,020 37,864 53,705 34,823 11,160 20,043 12,217 2,847 9,370 12,908 12,495 68 68 Hedges of net investments in foreign operations: Exchange rate risk FX forward 4,303 4,303 4,303 19,038 4,940 4,940 4,940 35,624 9,463 9,463 9,463 112,546 — — — 222,777 — — — 28,309 18,706 18,706 18,706 418,294 670                   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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: Currency swap Interest rate swap Future interest rate 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 Interest rate swap Currency swap Inflation risk Of which: Currency swap Equity risk Option 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 — — 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 8,854 23,511 2,448 2,448 — 1,193 788 405 — 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 6,188 192 8,679 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 1,396 308 — — — 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 9,522 905 8,679 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                   2023 Annual report Contents 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 Future interest rate Fx forward Interest rate and exchange rate risk Of which: Interest rate swap Currency 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 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 4,964 586 5,898 1,232 4,437 120 44 17,912 4,370 2,365 2,365 — 2,528 418 2,066 — — 66,904 97,321 21,238 7,329 13,909 9,326 1,650 7,397 173 44 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               2023 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 2023 EUR million Up to one month One to three months Three months to one year One year to five years More than five years Total 4,163 2.380 1.140 2.600 — — — — — 8,230 3.190 0.180 2.460 41 1.113 — — — 37,158 3.420 0.450 4.230 — — — — — 70,075 3.890 0.210 1.360 2,172 1.156 1.318 2.770 4.830 1,050 5.060 3,553 3.050 15,756 5.380 31,941 3.840 1,068 154.135 1.092 — — 6,266 153.954 1.093 1.197 1.392 3,104 167.846 1.089 1.167 — 10,888 — 1.121 1.179 1.277 123,093 2,411 53,705 23,089 3,467 3.990 3.920 4.910 198 1.148 — 3.480 — 1,405 3.450 1,763 — 1.121 — 1.388 — — 8 58 2 68 100 1.183 — 2.570 905 — 1.663 2.540 576 1.254 — 2.960 5,614 1.198 1.383 2.420 719 1.189 1.537 4.810 7,914 673       2023 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 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     2023 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 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       2023 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 (%) USD Foreign exchange risk Exchange and interest rate instruments Nominal Average PEN/USD exchange rate Average CNY/EUR exchange rate Average AUD/EUR exchange rate Average MXN/EUR exchange rate Average COP/USD exchange rate Average MAD/EUR exchange rate Average PEN/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/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/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 MXN/EUR exchange rate Average USD/CLP exchange rate Average NZD/EUR exchange rate Average USD/MXN exchange rate Cash flow hedges Interest rate and foreign exchange rate risk Interest rate and foreign exchange rate instruments 31 December 2023 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 1,532 — 0.096 — 0.015 278 3.784 — 1.648 — 4,159 10.929 4.095 30 — — 5.130 — — — — — — — — — — — — — — 4.711 — — — — — 194 — 0.014 — 3.688 634 3.751 7.323 1.665 19.363 3,998 11.057 4.110 66 — — — — — — — — 17.980 — — — — — — — — — — — — — — 7,880 1.38 2.085 1.010 2.603 524 — 7.732 — — — — — 1,450 — — — 2.580 0.465 — — 14.250 6.152 (0.140) 3.450 — — 0.891 8.782 120.568 — — — — 0.001 — 0.058 22,714 4.48 2.422 — 3.801 50 — 7.716 — — — — — 4,321 4.800 2.000 3.967 5.270 1.298 3.441 1.243 — 13.207 — — 1.499 25.831 0.961 8.666 134.151 9.519 4.887 1.104 — — — — 8,775 2.04 3.421 — 4.446 — — — — — — — — 1,150 3.615 — — — 1.407 4.501 — — 7.149 — — 1.545 — — — 129.229 10.429 — — 19.083 — 1.666 — 41,095 1,486 7,017 676     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Nominal Average fixed interest rate (%) CHF/EUR Average fixed interest rate (%) AUD/EUR Average EUR/GBP exchange rate Average AUD/EUR exchange rate Average RON/EUR exchange rate Average CHF/EUR exchange rate Interest rate 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 Average CAD/EUR exchange rate Average CHF/EUR exchange rate Average UYU/EUR exchange rate 31 December 2023 EUR million Up to one month — — — — — — — One to three months — — — — — — — Three months to one year 414 — — 1.173 1.625 — — One year to five years 1,075 3.106 3.521 — 1.584 4.940 1.002 More than five years 86 — — — 1.562 — — 750 (0.124) 1,500 (0.889) 13 1.148 25 1.146 3,593 5.569 916.724 — 0.866 20.078 — 4.664 — — 43.235 4,870 5.505 936.166 4,526 0.867 20.589 1.129 4.752 1.461 0.940 43.521 7,750 0.016 111 1.138 8,034 5.481 987.202 — 0.876 20.210 1.081 4.580 — — 44.400 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Total 1,575 10,000 149 16,497 677     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 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 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 (%) 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 1,032 — 0.569 — — — — — 2.892 — 250 — 1.040 7.172 — — 912 4.000 — — — 0.568 — — — — — — — — 1.499 — — — — 133.840 — — — — 1,248 2.036 (0.406) — — — — 1.073 3.123 — 899 — — 7.252 1.587 21.529 38 — — 4.520 — — — — 5.170 — — — — — — — 1.162 — — — — 4.746 — — 2,348 2.036 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 1.856 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 2.036 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 6,806 678     2023 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 — — — 0 — — — — — — — — — — — — — 2,235 28,203 700 20,570 679     2023 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 CZK/EUR exchange rate Average EUR/GBP exchange rate Average EUR/USD exchange rate Average HKD/EUR exchange rate Average JPY/EUR exchange rate Average MXN/EUR exchange rate Average NOK/EUR exchange rate Average RON/EUR exchange rate Average CHF/EUR exchange rate Average USD/CLP exchange rate Average NZD/EUR exchange rate Average USD/MXN exchange rate 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 5,812 680     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Credit risk Credit risk instruments Nominal Cash flow hedges Interest rate and foreign exchange rate risk Interest rate and foreign exchange rate instruments Nominal Average 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 — 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 — 1,848 — — 0.305 1.113 0.882 1.604 4.885 120.568 — — 26.131 — — 5,191 (0.465) 1.765 — 38,314 (0.258) — 1.650 4,848 6.758 929.690 — 0.857 25.335 4.582 — 11,815 6.841 949.615 4,538.997 0.855 25.192 4.634 1.167 2,916 — — — 0.875 — — 1.233 408 — — — — — 1.562 — — 1.102 10.242 — — — — — — — — — — — — — — — 3,434 47,784 23,357 681     2023 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, CNY, PLN, CAD and CHF 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. 682     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Regarding the hedged items, 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 2023, 2022 and 2021. The products that are being hedged are mainly borrowed deposits, financial deposits, loans, government bonds as assets and financial bonds as liabilities: Carrying amount of hedged items Accumulated amount of fair value adjustments on the hedged item Assets Liabilities 26,946 19,176 1,365 134,095 130,672 637 Assets (1,798) (1,682) (1) Liabilities (1,652) (1,546) (3) 2,786 — — 6,405 — — (115) — — (103) — — 18,706 18,706 152,801 — — 26,946 (1,798) (1,652) Fair value hedges Interest rate risk Exchange rate risk Interest and Exchange rate risk Inflation risk Credit risk Cash flow hedges Interest rate risk Exchange rate risk Interest and Exchange rate risk Inflation risk Equity risk Net foreign investments hedges Exchange rate risk EUR million 31 December 2023 Balance sheet line item Change in fair value of hedged item for ineffectiveness assessment 1,928 1,757 60 111 — — (1,824) (2,182) 500 100 (233) (9) 1,888 1,888 1,992 Cash flow reserves or conversion reserves Continuing hedges — — — — — (813) (797) (80) (144) 196 12 (8,684) (8,684) (9,497) Discontinued hedges — — — — — — (173) (77) — — (96) — — — (173) 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) 683             2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 3,714 46 179 51,395 47,347 — 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) 684       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The cumulative amount of adjustments of the fair value hedging instruments that remain in the balance for hedges items that are no longer adjusted by profit and loss of coverage as at 31 December 2023 is EUR 1,006 million losses (EUR 756 million loss and EUR 460 million profit in 2022 and 2021, respectively). The net impact of the hedges are shown in the following table: EUR million 31 December 2023 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 59 72 (38) 25 2,592 2,179 7 164 233 9 (1,888) (1,888) 704 4 2 (1) 2 1 — — — 63 Earnings/ (losses) recognised in another cumulative overall result Ineffective coverage 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 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 2022 Interest margin/Gains or losses financial assets/liabilities (2,622) (1,647) (416) (431) (128) — — — (2,622) 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 1,254 (370) 2,130 587 (1,093) — — — 1,254 685       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million 31 December 2021 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) 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 Interest margin/Gains or losses financial assets/liabilities (801) 269 (262) (350) (458) — — — (801) 686 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 2022 2021 (9,187) (4,559) (2,829) 2,179 (2,458) (491) 1,647 370 (269) 532 7 (2,828) (178) (222) 155 416 (2,130) 262 (409) 1,952 (638) 164 (107) (350) 431 (587) 350 (267) 233 (51) 258 (700) (249) 128 1,093 458 105 9 (835) — (707) (3) — 9 — — — (3) Net foreign investments hedges Exchange rate risk (1,888) (2,467) (1,159) Amounts transferred to income statements Gain or loss in value CFE - recognized in equity Minorities, taxes and others Balance at end of year — — — (1,888) (2,467) (1,159) 855 367 (9,424) (9,187) (4,559) (941) 37. Discontinued operations No operations were discontinued in 2023, 2022 or 2021. 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 2023, 2022 and 2021 is as follows: EUR million Loans and advances, central banks Loans and advances, credit institutions Debt instruments Loans and advances, customers A Other interest 2023 1,959 5,361 2022 2021 1,606 476 2,186 916 5,724 14,501 10,416 70,619 54,110 38,649 12,812 698 3,112 105,252 71,430 46,463 A. Mainly include the rectification of income originating from accounting hedges as well as interest on balances in central banks and on demand credit institutions. 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 2023, 2022 and 2021 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 2023 2,178 7,172 2022 706 2,784 33,238 16,994 2021 338 1,140 5,452 12,751 11,702 1,049 94 130 6,428 4,838 8,464 4,190 7,472 648 992 91 100 125 116 3,647 1,109 61,991 32,811 13,093 Most of the interest expense and similar charges was generated by the Group’s financial liabilities that are measured at amortised cost. 687             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 2023 2022 2021 EUR million 415 366 369 68 88 571 35 87 488 32 112 513 41. Commission income Commission income comprises the amount of all fees and commissions accruing in favour of the Group in the year, except those that form an integral part of the effective interest rate on financial instruments. The detail of fee and commission income is as follows: Commissions assigned to third parties Cards By collection and return of effects Other fees assigned Other commissions paid Brokerage fees on lending and deposit transactions Sales of insurance and pension funds Other fees and commissions 2023 2,644 1,891 24 729 1,620 105 358 1,157 4,264 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 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: 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 2023 2022 2021 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 liabilities held for trading, netA Gains or losses on non-trading financial assets and liabilities mandatory at fair value through profit or loss Gains or losses on financial assets and liabilities measured at fair value through profit or loss, netA Gains or losses from hedge accounting, net 2023 2022 2021 96 (3) 99 51 149 34 115 122 628 89 539 567 2,322 842 1,141 204 162 132 (93) 968 270 63 2,592 74 2,195 (46) 2,125 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. 232 1,457 4,278 698 128 6,793 1,092 178 2,715 3,985 511 348 354 341 1,554 245 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 1,521 846 486 549 2,108 3,989 16,321 822 433 506 2,055 3,816 15,867 522 415 442 1,890 3,269 13,812 688   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix As explained in note 44, the above breakdown should be analysed in conjunction with the 'Exchange differences, net': The detail of the amount of the liability balances is as follows: EUR million Exchange differences, net 2023 41 2022 (542) 2021 (562) 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 2023 51,072 17,717 14,520 18,835 66,079 19,125 56,328 2021 2022 34,812 44,962 3,608 11,595 13,549 17,175 17,655 16,192 30,223 45,079 19,119 13,777 54,292 67,002 192,604 170,820 138,446 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 2023 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 44,567 million at 31 December 2023. Also, mortgage-backed assets totalled EUR 788 million. • Debt instruments include EUR 51,251 million of Spanish and foreign government securities. At 31 December 2023 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 2023 80,503 9,017 19,597 51,889 5,371 26,174 50,589 — 2022 62,620 7,497 11,754 43,369 5,427 22,515 64,891 — 162,637 155,453 2021 23,156 1,645 7,552 13,959 5,454 12,236 53,566 — 94,412 At 31 December 2023, 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 2023 is EUR 866 million higher than their carrying amount (EUR 1,044 million higher at 31 December 2022 and EUR 81 million lower at 31 December 2021). Within Deposits, there are repurchase agreements amounting to EUR 45,956 million at 31 December 2023. 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). 689                 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 45. Other operating income and expenses Other operating income and Other operating expenses in the consolidated income statements include: EUR million 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 2023 1,104 752 352 (2,827) (674) (2,153) 2022 1,510 770 740 (2,803) (661) (2,142) 2021 2,255 291 1,964 (2,442) (283) (2,159) (1,119) (1,723) (1,258) (1,293) (1,016) (187) 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 2023 10,351 1,637 2022 9,563 1,441 2021 8,466 1,323 42 65 73 310 1,386 286 296 1,182 1,068 13,726 12,547 11,216 b) Headcount The number of employees of Grupo Santander at 31 December 2023, 2022 and 2021 is 212,764, 206,462 and 199,177, respectively. For the years 2023, 2022 and 2021 the average number of employees of the Group is 211,514, 201,516 and 194,589, respectively, being the average number of employees of Banco Santander, S.A. 24,061, 23,410 and 24,512, of which 16, 17 and 19 are executive directors and Senior management, respectively. 690   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The functional breakdown (final employment), by gender, at 31 December 2023 is as follows: Functional breakdown by gender Europe North America South America Senior executives A Other executives Other employees Men 1,073 202 305 1,580 Women 500 82 141 723 Men 10,704 3,778 3,878 18,360 Women 7,629 2,522 2,708 12,859 Men 31,413 16,387 32,709 80,509 Women 38,062 21,111 39,560 98,733 The same information, expressed in percentage terms at 31 December 2023 is as follows: Functional breakdown by gender Europe North America South America Senior executives A Other executives Other employees Men 68% 71% 68% 69% Women 32% 29% 32% 31% Men 58% 60% 59% 59% Women 42% 40% 41% 41% Men 45% 44% 45% 45% Women 55% 56% 55% 55% A. Includes Group Senior Executive VP, Executive VP y VP. The labour relations between employees and the various Group companies are governed by the related collective agreements or similar regulations. The number of employees in the Group with disabilities, distributed by professional categories, at 31 December 2023, is as follows: Number of employees A Senior executives Other executives Other employees 2023 18 281 4,402 4,701 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 2022 and 2021, was 4,114 and 3,703, respectively. Likewise, the average number of employees of Banco Santander, S.A. with disabilities, equal to or greater than 33%, during 2023 was 428 (331 and 288 employees during 2022 and 2021). At the end of fiscal year 2023, there were 436 employees (444 and 307 employees at 31 December, 2022 and 2021, respectively). c) Share-based payments The main share-based payments granted by the Group in force at 31 December, 2023, 2022 and 2021 are described below. 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. 691                       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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, (iv) Digital Transformation Award 2022 and (v) Digital Transformation Award 2023. The characteristics of the plans are set forth below: Deferred variable remuneration systems (i) Deferred and conditional variable remuneration plan (2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023) 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 executives and employees who assume risks (fifth cycle) • In the case of the sixth, seventh, eighth, ninth, tenth, eleventh twelfth and thirteenth 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: • Poor financial performance of the Group. • Breach by the beneficiary of internal regulations, including, in particular, those relating to risks. • Material restatement of the Group's consolidated financial statements, except when it is required pursuant to a change in accounting standards. • Significant changes in the Group’s economic capital or risk profile In the case of the seventh, eighth, ninth, tenth, eleventh, twelfth and thirteenth cycles (2017 to 2022), 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-occurrence 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: i. 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. ii. iii. Regulatory sanctions or judicial sentences for iv. 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. 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 (2022) and thirteenth (2023) cycle: • 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 . 692       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Deferred variable remuneration systems (ii)Deferred Multiyear Objectives Variable Remuneration Plan (2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023) 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 management 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- occurrence of the following circumstances during the period prior to each of the deliveries in the terms set forth in each case in the plan’s regulations: i. Poor performance of the Group. 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. In the eighth cycle, and for all Identified Staff: half in cash and 25% in shares and 25% in share options, or half in cash and half in shares, according to each executive´s choice. 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 Santander’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 (2022) and eighth cycle (2023), 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 (7th cycle) and 2025 (8th cycle). • Relative Total Shareholder Return (TSR) measured against a group of 9 credit institutions for the period 2022-2024 (7th cycle) and 2023-2025 (8th cycle). • Five ESG metrics linked to our public targets of our Responsible Banking agenda. 693 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. 694 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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%. And the performance conditions were focus on key digital projects related with PagoNxt's main businesses (Trade, Merchant and Payments) in its core PagoNxt S.L. in a percentage determined by the internal category of the beneficiary. The average geographies. achievement for 2023 was 88%. This incentive is structures in restricted stock units (RSUs) and premium priced Options (PPOs) of (iv) Digital Transformation Award (2023) The board of directors approved the 2022 Digital Transformation Incentive. It is a variable remuneration scheme 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. With 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. 695 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix ii. Santander UK plc The long-term incentive plans on shares of the Bank granted by management of Santander UK plc to its employees are as follows: Plans outstanding at 01/01/2021 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 Options granted (sharesave) Options exercised Options cancelled (net) or not exercised Plans outstanding at 31/12/2023 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 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 01/11/22 01/11/25 01/11/22 01/11/27 1.69 2.59 2.78 2023 Employees 4,752 01/11/23 01/11/26 01/11/23 01/11/28 1.7 2.53 Number of shares (in thousand) 21,162 9,414 (48) (4,592) 25,936 13,068 (242) (8,774) 29,988 7,175 (5,980) (4,044) 27,139 A. At 31 December, 2023, 2022 and 2021, the euro/pound sterling exchange rate was 1.1525, 1.1277 and 1.1904 , respectively. B. Number of accounts/contracts. A single employee may have more than one account/contract. In 2008 the Group launched a voluntary savings scheme for Santander UK employees (Sharesave Scheme) whereby employees who join the scheme see deducted between GBP 5 and GBP 500 from their net monthly pay over a period of three or five years. At the end of the chosen period, the employee may choose between collecting the amount contributed, the interest accrued and a bonus (tax-exempt in the United Kingdom) or exercising options on shares of the Bank in an amount equal to the sum of such three amounts at a fixed price. The exercise price will be the result of reducing by up to 20% the average purchase and sale prices of the Bank shares in the three trading sessions prior to the approval of the scheme by the UK tax authorities (HMRC). This approval must be received within 21 to 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 2021, 2022 and 2023: 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 2021, 2022 and 2023 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 0.33 (GBP 0.23 and GBP 0.20 reported in 2022 and 2021, respectively). 696         2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Advertising Taxes other than income tax Communications Surveillance and cash courier services Per diems and travel expenses Insurance premiums Other administrative expenses 2023 2,471 2022 2,473 2021 2,182 818 809 603 570 414 337 218 95 2,180 8,515 804 785 559 559 410 336 163 108 2,174 8,371 789 689 510 558 401 306 69 109 1,830 7,443 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 from 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 2023 2021 2022 116.8 115.4 106.0 6.0 0.7 2.4 132.9 127.1 115.1 8.6 1.6 5.9 6.4 0.5 4.8 The audit services and main non-audit services included for each item in the above breakdown are detailed as follows: • Audit services: audit of 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); audit of the interim consolidated financial statements of Banco Santander; audit of the integrated audits prepared in order to file Form 20-F for the annual report with the SEC in the US and the internal control audit (SOx) for required Grupo Santander's entities; the limited review of the financial statements; and the regulatory auditor’s reports on Grupo Santander’s entities. • Audit-related services: comfort letters; verification of the financial and non-financial information (as required by regulators); and other reviews of documents that, due to their nature, the external auditor provides for submission to domestic or foreign authorities. • Tax services: tax compliance and advisory services provided to Group companies outside Spain, which have no direct effect on the audited financial statements and are permitted in accordance with independence regulations. • Other services: agreed-upon procedure reports, assurance reports and special reports performed under the accepted profession's standards; as well as other reports required by the regulator. 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 reference to when the audit committee approved them. 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 174.1 million in 2023 (EUR 185.5 million and EUR 263.8 million in 2022 and 2021, respectively). c) Number of branches The number of offices at 31 December 2023, 2022 and 2021 is as follows: Number of branches Spain Group Group 2022 1,966 7,053 9,019 2023 1,924 6,594 8,518 2021 1,998 7,231 9,229 697           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 2022 2021 53 285 338 (25) — (25) 313 56 5 61 (49) — (49) 12 87 2 89 (36) — (36) 53 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 2023 (20) (51) 31 — (20) 2022 7 (94) 101 — 7 2021 (52) (141) 89 9 (43) 698 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 50. Fair value of financial instruments a) Detail 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 2023 2022 2021 Published price Internal quotations Models in active (level 2 markets (level 1) Total and 3) 67,842 109,079 176,921 Published price Internal quotations Models in active (level 2 markets (level 1) Total and 3) 45,014 111,104 156,118 Published price quotations in active markets (level 1) 39,678 Internal Models (level 2 and 3) Total 77,275 116,953 1,765 4,145 5,910 1,800 3,913 5,713 2,398 3,138 5,536 2,746 7,027 9,773 1,976 7,013 8,989 2,113 13,844 15,957 64,631 — 83,308 18,677 5,297 5,297 20,298 101,972 122,270 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 25 — — 40,342 7,656 17,799 40,367 7,656 17,799 212 — — 40,056 9,228 16,426 40,268 9,228 16,426 3,620 — — 11,323 5,463 18,560 14,943 5,463 18,560 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 A through profit or loss Hedging derivatives (liabilities) A Liabilities under insurance contracts A. See impact of IFRS 17 at 31 December 2022 and 2021 (see Note 1.d). Grupo Santander has developed a formal process for the systematic valuation and management of financial instruments, which has been implemented worldwide across all the Group’s units. The governance scheme for this process distributes responsibilities between two independent divisions: Treasury (development, marketing and daily management of financial products and market data) and Risk (on a periodic basis, validation of pricing models and market data, computation of risk metrics, new transaction approval policies, management of market risk and implementation of fair value adjustment policies). The approval of new products follows a sequence of steps (request, development, validation, integration in corporate systems and quality assurance) before the product is brought into production. This process ensures that pricing systems have been properly reviewed and are stable before they are used. The following subsections set forth the most important products and families of derivatives, and the related valuation techniques and inputs, by asset class: Fixed income and inflation The fixed income asset class includes basic instruments such as interest rate forwards, interest rate swaps and cross currency swaps, which are valued using the net present value of the estimated future cash flows discounted taking into account basis (swap and cross currency spreads) determined on the basis of the payment frequency and currency of each leg of the derivative. Vanilla options, including caps, floors and swaptions, are priced using the Black-Scholes model, which is one of the benchmark industry models. More exotic derivatives are priced using more complex models which are generally accepted as standard across institutions. These pricing models are fed with observable market data such as deposit interest rates, futures rates, cross currency swap and constant maturity swap rates, and basis spreads, on the basis of which different yield curves, depending on the payment frequency, and discounting curves are calculated for each currency. In the case of options, implied volatilities are also used as model inputs. These volatilities are observable in the market for cap and floor options and swaptions, and interpolation and extrapolation of volatilities from the quoted ranges are carried out using generally accepted industry models. The pricing of more exotic derivatives may require the use of non-observable data or parameters, such as correlation (among interest rates and cross-asset), mean reversion rates and prepayment rates, which are usually defined from historical data or through calibration. 699   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 amounted to EUR 293 million (resulting in a decrease of 16.5% compared to 31 December 2022) and DVA amounted to EUR 330 million (resulting in a decrease of 9.3% compared to 31 December 2022). These decreases are mainly due to movements in credit markets whose spread levels have reduced moderately compared to those of December 2022, partially offset by the upward movement in interest rates. The CVA at 31 December 2022 amounted to EUR 351 million (resulting in an increase of 48% compared to 31 December 2021) and DVA amounted to EUR 364 million (resulting in an increase of 125% compared to 31 December 2021). The increase is mainly due to movements in credit markets whose spread levels have increased substantially compared to those at the end of 2021. 700               2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. 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 annual accounts as of 31 December 2023, 2022 and 2021. During fiscal year 2023 there have been relevant reclassifications of instruments as Level 3, especially during the last quarter of the year. These changes have been motivated by the implementation of improvements in the classification criteria of financial instruments within the levels of the fair value hierarchy, to comply with regulatory expectations. Thus, the use of expert judgment to determine the observability of valuation inputs has been significantly reduced and objective criteria have been established based on access to price contributors and real market transactions. On the other hand, it has been strengthened the measurement of the significance of unobservable valuation inputs considering all the inputs that impact the valuation, including both market factors and others associated with credit risk. As a consequence of these improvements, certain instruments have been classified as Level 3 as they are considered to use unobservable and significant inputs in their assessment. Among them, some long-term derivatives may be highlighted, others that incorporate optionality at unobservable terms or operations that include adjustments for credit risk in their valuation in which some of their components turn out to be unobservable and material. Likewise, some debt instruments that are not considered observable have been reclassified based on the new and stricter criteria currently used. The effects on the consolidated financial statements resulting from the implementation of this new framework have been recognized prospectively in accordance with the provisions of IAS 8. The rest of the changes in the instruments classified as Level 3 in the year have been due to movements in the volume of the positions of these instruments in the portfolio due to purchases/ sales, with no significant variations having been detected in the market observability conditions of their inputs. of valuation. Valuation adjustments due to model risk The valuation models described above do not involve a significant level of subjectivity, since they can be adjusted and recalibrated, where appropriate, through internal calculation of the fair value and subsequent comparison with the related actively traded price. However, valuation adjustments may be necessary when market quoted prices are not available for comparison purposes. The sources of risk are associated with uncertain model parameters, illiquid underlying issuers, and poor quality market data or missing risk factors (sometimes the best available option is to use limited models with controllable risk). In these situations, the Group calculates and applies valuation adjustments in accordance with common industry practice. The main sources of model risk are described below: • In the fixed income markets, the sources of model risk include bond index correlations, basis spread modelling, the risk of calibrating model parameters and the treatment of near-zero or negative interest rates. Other sources of risk arise from the estimation of market data, such as volatilities or yield curves, whether used for estimation or cash flow discounting purposes. • In the stock markets, the sources of model risk include forward skew modelling, the impact of stochastic interest rates, correlation and multi-curve modelling. Other sources of risk arise from managing hedges of digital callable and barrier option payments. Also worthy of consideration as sources of risk are the estimation of market data such as dividends and correlation for quanto and composite basket options. • For specific financial instruments relating to home mortgage loans secured by financial institutions in the UK (which are regulated and partially financed by the Government) and property asset derivatives, the main input is the Halifax House Price Index (HPI). In these cases, risk assumptions include estimations of the future growth and the volatility of the HPI, the mortality rate and the implied credit spreads. • Inflation markets are exposed to model risk resulting from uncertainty around modelling the correlation structure among various Consumer Price Index (CPI) rates. Another source of risk may arise from the bid-offer spread of inflation-linked swaps. • 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. 701     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Set forth below are the financial instruments at fair value whose measurement was based on internal models (levels 2 and 3) at 31 December 2023, 2022 and 2021: EUR million Fair values calculated using internal models at A 2023 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 133,874 106,993 17,717 14,061 11,418 8,683 55,114 44,987 836 2,210 33 126 6,922 5,297 4,665 2 630 10,351 2,086 — Present value method — Present value method 24 Present value method 915 Present value method 1,147 577 Present value method, Gaussian C Copula 9 Black-Scholes Model 153 Black's Model, multifactorial advanced models interest rate — Present value method 235 Black's Model, multifactorial advanced models interest rate 173 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 2,050 2,095 815 539 696 1,495 Present value method 313 Present value method 287 Present value method, swap asset model & CDS 6,846 181 459 6,189 198 12,688 — Present value method 31 Present value method 150 Present value method 5,989 5 492 Present value method 9,638 3,045 559 Present value method 4,938 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 702           2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Fair  values  calculated using internal models at 2023A Level  2 Level  3 Valuation  techniques Main assumptions 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 Interest rate options Other 166,542 101,103 7,808 17,862 19,837 49,380 39,395 2,207 549 466 101 6,662 6,216 7,650 6,866 1 783 Financial liabilities designated at fair value through profit or loss Liabilities under insurance contractsD 40,313 17,476 1,227 869 — Present value method — Present value method — Present value method FX market prices, Yield curves FX market prices, Yield curves FX market prices, Yield curves 869 388 Present value method, Gaussian C Copula 139 Black's Model, multifactorial advanced models interest rate 8 Black-Scholes Model 187 Black-Scholes model — Present value method 147 Present value method, Advanced stochastic volatility models — Present value method 6 6 Present value method — Black's Model — Present value method, Advanced stochastic volatility models and other 29 Present value method 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, FX market prices 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 and Liquidity Yield curves , Volatility surfaces, FX market prices, Credit, Liquidity, Other Yield curves, FX market prices 323 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. See impact of IFRS 17 at 31 December 2022 and 2021 (see Note 1.d) 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. 703 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Credit institutions CustomersC Debt securities 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 2022 A 2021 Level 2 142,832 110,721 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 2,080 643 809 628 6,586 673 5,769 144 15,376 9 11,869 3,498 Level 3 8,290 383 — — — 43 340 139 4 39 — 48 110 — — — — 1,833 1,269 325 239 427 — 5 422 5,647 700 229 4,718 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 Level 3 Valuation techniques 7,667 537 — Present value method Present Value method — Present Value method — Present Value method 24 513 224 12 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 182 — 41 54 — — Present Value method — 548 — Black’s Model Present Value method, Advanced stochastic volatility models and other 1,273 415 589 269 13,426 3,152 10,270 4 25,442 74 21,585 3,783 1,865 1,231 Present Value method 366 Present Value method Present Value method, swap asset model & CDS 268 418 — Present Value method 18 Present Value method 400 Present Value method 4,847 821 Present Value method 146 Present Value method 3,880 Present Value method 704 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Other Financial liabilities designated at fair value through profit or lossD Liabilities under insurance contracts Fair values calculated using internal models at Fair values calculated using internal models at A 2022 A 2021 Level 2 163,733 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 39,905 16,081 Level 3 925 415 — — — 415 235 19 — 42 — 119 — 14 14 — 151 345 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 Valuation techniques 629 160 — Present Value method — Present Value method — Present Value method 160 44 Present Value method, Gaussian Copula Black's Model, advanced multifactor interest rate models 7 Black-Scholes Model 26 Black's Model, advanced multifactor interest rate models 67 — Present Value method Present Value method, Advanced stochastic volatility models and other 16 — Present Value method — — Present Value method Present Value method, Advanced stochastic volatility models and other — 11,172 151 Present Value method 18,242 Present Value method with actuarial techniques 318 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. Includes mainly short-term loans/deposits and repurchase/reverse repurchase with corporate customers (mainly brokerage and investment companies). Includes, mainly, structured loans to corporate clients. C. D. Includes, mainly, short-term deposits that are managed based on their fair value. b) 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. 705 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The net amount recognised in profit and loss in 2023 arising from models whose significant inputs are unobservable market data (level 3) amounted to EUR 404 profit (EUR 90 million loss in 2022 and EUR 73 million profit in 2021, respectively). 1. Valuation techniques The table below shows the effect, at 31 December 2023, 2022 and 2021 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: 2023 Portfolio/Instrument (Level 3) Financial assets held for trading Loans and advances to customers Valuation technique Main unobservable inputs Range Weighted average Impacts (EUR million) Favourable scenario Unfavourable scenario Repos/Reverse repos Other Long-term repo spread n.a. n.a. (0.08) — Debt securities Corporate debt Government debt Derivatives CCS CDS EQ Options EQ Options FX Options Inflation Derivatives IR Options IRS IRS IRS IRS IRS Property derivatives Securitisation Swap Structured notes Financial assets designated at fair value through profit or loss Loans and advances to customers Loans Mortgage portfolio Debt securities Discounted Cash Flows Discounted Cash Flows Credit spread Discount curve 0% - 10% 0% - 8% Forward estimation Credit default models EQ option pricing model Local volatility FX option pricing model Asset Swap model IR option pricing model Others Discounted Cash Flows Discounted Cash Flows Forward estimation Prepayment modelling Option pricing model Discounted Cash Flows Price based (6)bps - 6bps Interest rate Illiquid credit default spread curves 100bps - 200bps Volatility Volatility Volatility Inflation Swap Rate Volatility Others Credit spread Swap rate Interest rate Prepayment rate Growth rate Constant prepayment rates Price 0% - 70% 10% - 90% 0% - 40% 2% - 8% 0.4% - 32.2% 5% - n.a. 2.6% - 8.3% 9.4% - 9.8% (5.2)bps - 5.2bps 2.5% - 9.0% (5)% - 5% (22.30)% - 27.20% (10)% - 10% 5.01% 3.99% 0.40bps 149.14bps 44.39% 50.00% 20.81% 4.18% 18.86% n.a. 5.60% 9.60% 0.09bps 8.92% 0.00% 2.47% 0.00% (1.90) (7.77) (0.90) (0.14) (0.51) (1.26) (0.55) (0.28) (0.29) (1.25) (1.97) (1.01) (0.03) — (3.92) (4.95) (1.53) 1.90 7.72 1.03 0.14 0.89 1.26 0.59 0.16 0.41 — 2.18 0.95 0.03 0.05 3.92 4.95 1.53 Discounted Cash Flows Black Scholes model Credit spreads Growth rate 0.1% - 3% (5)%- 5% 1.55% 0.00% (0.21) (0.23) 0.21 0.23 Other debt securities Others Inflation Swap Rate 0% - 8% 3.89% (4.48) 4.25 706 2023 Annual report Contents 2023 Portfolio/Instrument (Level 3) Valuation technique Main unobservable inputs Range Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Impacts (EUR million) Weighted average Unfavourable scenario Favourable scenario Non-trading financial assets mandatorily at fair value through profit or loss Debt securities Property securities Equity instruments Equities Financial assets at fair value through other comprehensive income Loans and advances to customers Loans Loans Loans Loans Loans Debt securities Corporate debt Government debt Equity instruments Equities Financial liabilities held for trading Derivatives Cap&Floor CMS FX Options IRS Swaptions Probability weighting Growth rate (5)% - 5% 0.00% (0.35) 0.35 Price Based Price 90% - 110% 100.00% (149.49) 149.49 Discounted Cash Flows Discounted Cash Flows Discounted Cash Flows Forward estimation Market price Credit spread Interest rate curve Margin of a reference portfolio Credit spread Market price n.a. 4.6% - 9.0% (1)bp - 1bp 167.7bps - 365.8bps (10)% - 20% Discounted Cash Flows Discounted Cash Flows Margin of a reference portfolio Interest rate (1)% - 1% 0% - 2% n.a. 6.80% 0bp 167.74bps 0.00% 0.00% 0.99% (20.8) (0.68) (20.3) (3.46) (5.02) (0.09) — — 0.68 20.30 — 2.51 0.09 — Price Based Price 90% - 110% 100.00% (49.24) 49.24 Volatility option model Discounted Cash Flows Volatility option model Discounted Cash Flows Volatility option model Volatility Volatility Volatility Inflation Swap Rate Volatility 10% - 90% 10% - 90% 10% - 90% 10% - 90% 10% - 90% 39.03% 47.66% 28.09% 39.03% 35.55% (0.45) — (0.45) (0.45) (0.21) 0.25 — 0.13 0.25 0.10 A. For each instrument, the valuation technique, the unobservable inputs are shown in the "Main observable inputs" column under probable scenarios, variation range, average value and impact resulting from valuing the position in the established maximum and minimum range. B. The breakdown of impacts is shown by type of instrument and unobservable inputs. C. The estimation of the range of variation of the unobservable inputs has been carried out taking into account plausible movements of said parameters depending on the type of instrument. D. Zero impacts from fully hedged or back-to-back transactions have not been included in this exercise. 707 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 2022 Portfolio/Instrument (Level 3) Valuation technique Main unobservable inputs Range Financial assets held for trading Debt securities Corporate debt Corporate debt Discounted Cash Flows Credit spread Price based Market price Government debt Discounted Cash Flows Discount curve Derivatives CCS CCS CDS EQ Options EQ Options FRAs Fx Swap Inflation Derivatives Inflation Derivatives IR Options IRS IRS IRS IRS IRS IRS Discounted Cash Flows Interest rate Forward estimation Interest rate Discounted Cash flows Credit Spread EQ option pricing model Local volatility Volatility Volatility Asset Swap model Interest rate Others Others Asset Swap model Inflation Swap Rate Volatility option model IR option pricing model Volatility Volatility Asset Swap model Interest rate Discounted Cash Flows Credit spread Discounted Cash Flows Swap rate Forward estimation Interest rate Others Others Prepayment modelling Prepayment rate Others Forward estimation Price Property derivatives Option pricing model Growth rate Financial assets designated at fair value through profit or loss Loans and advances to customers 0% - 20% 85% - 115% 0% - 10% (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% 1.25% - 6.29% 8.6% - 9.1% (6)bps - 6bps 5% - n.a. 2.5% - 6.2% 0% -2% (5)% - 5% Impacts (EUR million) Weighted average Unfavourable F scenario avourable scenario 10.07% 100.00% 4.92% 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 (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) n.a (11.58) 4.17% 0.62% 0.00% (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 Loans Discounted Cash Flows Credit spreads Mortgage portfolio Black Scholes model Growth rate 0.1% - 2% (5)% - 5% 1.05% 0.00% (0.18) (0.79) 0.18 0.79 Debt securities Other debt securities Others Inflation Swap Rate 0% - 10% 4.74% (4.25) 3.83 Non-trading financial assets mandatorily at fair value through profit or loss Debt securities Corporate debt Discounted Cash Flows Margin of a reference portfolio Property securities Probability weighting Growth rate (1)bp - 1bp (5)% - 5% 0.01pbs 0.00% (0.33) (0.68) 0.33 0.68 Equity instruments Equities Price Based Price 90% - 110% 100.00% (126.87) 126.87 708       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Credit spread Discounted Cash Flows Interest rate curve Discounted Cash Flows Margin of a reference portfolio Forward estimation Credit spread n.a. 0.8% - 1.0% (1)bp - 1bp 2.56% - 3.4% n.a 0.88% 0bp 2.56% (24.10) (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) — A. For each instrument, the valuation technique, the unobservable inputs are shown in the "Main observable inputs" column under probable scenarios, variation range, average value and impact resulting from valuing the position in the established maximum and minimum range. B. The breakdown of impacts is shown by type of instrument and unobservable inputs. C. The estimation of the range of variation of the unobservable inputs has been carried out taking into account plausible movements of said parameters depending on the type of instrument. D. Zero impacts from fully hedged or back-to-back transactions have not been included in this exercise. 709 2023 Annual report Contents 2021 Portfolio/Instrument (Level 3) Valuation technique Main unobservable inputs Range Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Impacts (EUR million) Weighted average Unfavourable Favourable scenario scenario Financial assets held for trading Derivatives 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 Discounted Cash Flows Interest rate Forward estimation Interest rate Forward estimation EQ option pricing model Local volatility Price Volatility Volatility Asset Swap model Interest rate FX option pricing model Volatility Asset Swap model Inflation Swap Rate Volatility option model Volatility Asset Swap model Interest rate IR option pricing model Volatility Asset Swap model Interest rate Discounted Cash Flows Credit spread Discounted Cash Flows Inflation Swap Rate Discounted Cash Flows Swap Rate Forward estimation Interest rate Forward estimation Prepayment rate Others Others Prepayment modelling Prepayment rate Property derivatives Option pricing model Growth rate IR option pricing model Volatility Swaptions Debt securities Corporate debt Financial assets designated at fair value through profit or loss Loans and advances to customers (0.7)% - 0.7% (4)bps - 4bps 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% 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% 2.50% 26.67% (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) 0.11 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 Price based Market price 85% - 115% 100% — — Loans Discounted Cash Flows Credit spreads Mortgage portfolio Black Scholes model Growth rate Debt securities Corporate debt Government debt Discounted Cash Flows Credit spread Discounted Cash Flows Discount curve Other debt securities Others 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 Non-trading financial assets mandatorily at fair value through profit or loss Debt securities Corporate debt Discounted Cash Flows Margin of a reference portfolio Property securities Probability weighting Growth rate (1)bp - 1bp 0% - 5% 1bp 2.50% (0.56) (1.19) 0.60 1.19 Equity instruments Equities Price Based Price 90% - 110% 100.00% (123.10) 123.10 710       2023 Annual report Contents 2021 Portfolio/Instrument (Level 3) Valuation technique Main unobservable inputs Range Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Impacts (EUR million) Weighted average Unfavourable Favourable scenario 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 Credit spread Discounted Cash Flows Interest rate curve n.a. (0.1)% - 1.0% Discounted Cash Flows Margin of a reference portfolio (1)bp - 1bp Forward estimation Credit spread 0.77% - 2.42% n.a. 0.12% 1bp 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% 100.00% (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) — A. For each instrument, the valuation technique, the unobservable inputs are shown in the "Main observable inputs" column under probable scenarios, variation range, average value and impact resulting from valuing the position in the established maximum and minimum range. B. The breakdown of impacts is shown by type of instrument and unobservable inputs. C. The estimation of the range of variation of the unobservable inputs has been carried out taking into account plausible movements of said parameters depending on the type of instrument. D. Zero impacts from fully hedged or back-to-back transactions have not been included in this exercise. 711       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 2. Movement of financial instruments classified as Level 3 Lastly, the changes in the financial instruments classified as Level 3 in 2023, 2022 and 2021 were as follows: EUR million Financial assets held for trading Customers 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 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 Others Hedging derivatives (Liabilities) Swaps Financial liabilities designated at fair value through profit or loss Liabilities under insurance contracts TOTAL LIABILITIES 01/01/2023 Fair value calculated using internal models (Level 3) 383 — 42 1 340 139 4 39 48 110 Changes Changes in fair value recognised in profit or loss 194 1 30 — 163 179 4 2 (20) (2) Changes in fair value recognised in equity — — — — — — — — — — Level reclassifications Other — 1,162 — — 6 773 — — (6) 389 (18) 191 — — — 112 3 76 9 10 31/12/2023 Fair value calculated using internal models (level 3) 2,086 24 914 1 1,147 577 9 153 235 173 Purchases/ Issuances 496 23 126 — 347 90 1 — 132 124 Sales/ Settlements (149) — (63) — (86) (4) — — (4) (78) 427 5 422 1,833 239 325 1,269 5,647 4,718 229 700 8,290 415 415 235 — 19 42 119 14 14 151 345 925 51 — 51 345 99 38 208 3,322 3,322 — — 4,214 276 276 53 6 4 88 125 — — 32 — 308 — — — (238) (73) (48) (117) (3,411) (3,408) — (3) (3,798) (167) (167) (83) — (5) (13) (66) — — (151) — (318) (21) 4 (25) 107 13 (5) 99 — — — — 280 (118) (118) (58) 2 (16) (15) (31) (3) (3) (3) — (124) — — — — — — — (204) 36 5 (245) (204) — — — — — — — — — — (40) (40) 22 22 — (6) — — (6) 231 160 71 — 1,409 476 476 257 — 137 82 — (5) (5) — — 471 (298) — (298) 54 9 3 42 404 110 254 40 160 (13) (13) (16) — — 3 — — — — 18 5 181 31 150 2,095 287 313 1,495 5,989 4,938 559 492 10,351 869 869 388 8 139 187 147 6 6 29 323 1,227 712   2023 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 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 Others Hedging derivatives (Liabilities) Swaps Financial liabilities designated at fair value through profit or loss Liabilities under insurance contracts 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 recognized in profit or loss (116) 15 — (131) (20) 2 (142) 29 — Changes in fair value recognized in equity — — — — — — — — — Purchases /Issuances 91 2 — 89 1 — — 27 61 Sales/ Settlements (99) (2) — (97) (47) (9) — (28) (13) 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 48 110 418 18 400 1,865 268 366 1,231 4,847 3,880 146 821 7,667 160 160 44 7 26 67 16 — — 151 318 629 — — — 521 276 51 194 8,564 8,471 91 2 9,176 328 328 32 6 56 23 211 — — 0 0 (9) (9) — (579) (280) (33) (266) (8,029) (7,988) (23) (18) (8,716) (97) (97) (16) (14) (44) (19) (4) — — (3) 0 328 (100) (31) (5) (26) 98 (25) (31) 154 — — — — (49) 35 35 189 1 (19) (32) (104) 14 14 3 (11) 41 — — — — — — — (172) 1 — (173) (172) — — — — — — — — — — — — — — — (22) — (27) 5 417 349 — 68 380 (2) (2) 9 — — (11) — — — 0 0 (2) 49 1 48 (50) — (1) (49) 20 5 15 — 4 (9) (9) (23) — — 14 — — — 0 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 14 151 345 925 713     2023 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 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 Liabilities under insurance contracts TOTAL LIABILITIES 01/01/2021 Fair value calculated using internal models (level 3) 740 7 3 730 272 22 241 94 101 Changes Changes in fair value recognised in profit or loss (181) (2) — (179) (35) 3 (27) (51) (69) Changes in fair value recognised in equity — — — — — — — — — Level reclassifications Other (19) (1) — (18) (18) — — — — (15) — — (15) 33 — — (8) (40) 31/12/2021 Fair value calculated using internal models (level 3) 537 22 2 513 224 12 182 41 54 Purchases/ Issuances 136 20 — 116 5 14 7 18 72 Sales/ Settlements (124) (2) (1) (121) (33) (27) (39) (12) (10) 649 163 19 467 934 295 134 505 6,220 4,791 206 1,223 8,543 295 295 81 1 49 97 2 65 301 309 905 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) — — (42) (11) — — (11) 127 — 28 99 — — — — (65) (138) (138) (36) 4 (8) (27) — (71) (6) 6 (138) — — — — — — — — (228) (37) (43) (148) (228) — — — — — — — — — — — (163) (163) — — 485 (3) 17 471 (241) (173) (68) — 66 (21) (21) 3 — — (22) — (2) (289) — (310) 4 — 1 3 36 3 9 24 3 — 1 2 24 (19) (19) 2 — (22) 1 — — 2 3 (14) 418 — 18 400 1,865 268 366 1,231 4,847 3,880 146 821 7,667 160 160 44 7 26 67 — 16 151 318 629 714     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 51. Other disclosures a) Residual maturity periods The detail, by maturity, of the balances of certain items in the consolidated balance sheet at 31 December 2023, 2022 and 2021 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 2023 EUR million On demand Within 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Total 220,342 — — — — — 220,342 — — — — 40,687 — 40,687 — 6,783 33,904 261,029 711,093 697,339 168 6,572 690,599 — 13,754 711,093 (450,064) 13,544 13,078 466 466 202,066 12,281 189,785 18,730 26,671 144,384 215,610 246,898 210,538 20,224 25,990 164,324 28,371 7,989 246,898 (31,288) 9,234 8,433 801 801 171,494 14,114 157,380 — 6,313 151,067 180,728 182,516 118,035 6,941 21,390 89,704 63,440 1,041 182,516 (1,788) 19,372 18,432 940 940 232,190 18,608 213,582 — 7,151 206,431 251,562 161,784 61,332 16,846 13,434 31,052 92,554 7,898 161,784 89,778 14,162 12,764 1,398 1,085 158,556 11,281 147,275 — 1,521 145,754 172,718 88,527 22,161 4,581 5,963 11,617 57,639 8,727 88,527 84,191 25,235 20,858 4,377 4,377 386,410 47,275 339,135 1,352 9,478 328,305 411,645 77,885 15,903 22 7,897 7,984 61,204 778 77,885 333,760 81,547 73,565 7,982 7,669 1,191,403 103,559 1,087,844 20,082 57,917 1,009,845 1,493,292 1,468,703 1,125,308 48,782 81,246 995,280 303,208 40,187 1,468,703 24,589 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). 715                     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Assets Cash, cash balances at Central Banks and other deposits on demand Financial assets at fair value through other comprehensive income Debt 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. 716                                                 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Assets Cash, cash balances at Central Banks and other deposits on demand Financial assets at fair value through other comprehensive income Debt 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 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. 717                                                      2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The detail of the remaining contractual maturities of the existing financial liabilities at amortised cost at 31 December 2023, 2022 and 2021 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 2023 EUR million On demand Within 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Total 698,595 168 6,884 691,543 — 13,666 712,261 204,001 20,334 25,642 158,025 28,258 8,078 240,337 109,311 6,853 21,334 81,124 62,935 1,041 173,287 51,191 16,846 13,079 21,266 91,492 7,898 150,581 20,761 4,581 5,924 10,256 56,944 8,727 86,432 15,585 35 7,685 7,865 60,166 777 76,528 1,099,444 48,817 80,548 970,079 299,795 40,187 1,439,426 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 1,339,819 718                                                                                    2023 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 2023, 2022 and 2021: Within 3 months 3 to 12 months 31 December 2023 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 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 36,120 8,777 — 7,598 19,745 1,146 10,861 7,738 1,657 252 1,405 26 1,379 591 — 41 550 550 — — 1,188 49,668 10,551 — 18,315 20,802 16,571 2,076 2,155 557 77 480 22 458 153 — — 153 153 — — 412 (237) 39,319 (225) 50,565 30,602 17,775 — 10,274 2,553 — 1,079 1,474 2,529 1,269 1,260 3 1,257 71 — 57 14 14 — — 1,535 156 34,893 17,912 9,532 — 8,137 243 — 45 198 1,350 690 660 15 645 80 — 3 77 77 — — 937 42,619 9,693 15,057 17,800 69 — — 69 3,680 807 2,873 393 2,480 5,015 4,068 759 188 188 1,761 1,761 1,225 Total 176,921 56,328 15,057 62,124 43,412 17,717 14,061 11,634 9,773 3,095 6,678 459 6,219 5,910 4,068 860 982 982 1,761 1,761 5,297 (402) 19,877 (80) 54,220 (788) 198,874 719                 2023 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 2023 EUR million 1 to 3 years 3 to 5 More than 5 years years 73,257 8,147 21,381 43,729 7,808 17,228 18,693 23,190 22,688 1,158 1,161 20,369 502 1,525 12,127 9,486 1,288 1,353 — 209 1,144 7,583 6,459 51 57 6,351 1,124 2,064 19,180 17,990 765 425 — 425 — 4,863 3,223 — 84 3,139 1,640 1,577 10,591 10,060 531 — — — — 1,359 338 — 61 277 1,021 878 7,115 4,906 2,209 — — — — 3,372 2,288 — 372 1,916 1,084 1,612 Total 122,270 50,589 26,174 45,507 7,808 17,862 19,837 40,367 34,996 1,209 1,735 32,052 5,371 7,656 (1) 97,971 (4) 21,770 36 25,656 (5) 12,823 29 12,128 55 170,348 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 2023 EUR million 1 to 3 years 3 to 5 More than 5 years years 125,083 7,870 81,146 214,099 31,658 4,734 17,448 53,840 55,344 1,654 9,699 66,697 47,204 686 3,386 51,276 20,300 491 1,594 22,385 Total 279,589 15,435 113,273 408,297 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. 720                                 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 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 — 5,667 930 — — 930 2,732 1,026 1,706 — 23 1,683 265 — 52 213 — — 213 — — 1,356 20,177 15,533 — 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) 177,081 721                 2023 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 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 — — 25,180 25,017 1,702 1,284 22,031 163 947 11 12,012 9,671 888 1,453 — 1,435 18 — — 3,984 3,183 38 129 3,016 801 1,469 23,669 22,479 1,031 159 — 151 8 — — 4,389 3,278 — 54 3,224 1,111 3,650 (52) (140) 18,273 16,955 1,071 247 — 247 — — — 1,796 699 — 87 612 1,097 1,159 20 9,610 8,037 1,573 — — — — — — 4,918 2,663 — 404 2,259 2,255 2,003 44 Total 115,185 64,891 22,515 27,779 5,757 9,796 12,226 — — 40,268 34,841 1,740 1,958 31,143 5,427 9,228 (117) 77,759 17,413 31,568 21,248 16,575 164,564 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 Total 274,075 12,856 92,672 379,603 722                                 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Credit institutions Customers Non-trading financial assets mandatorily at fair value through profit or loss Equity instruments Debt instruments Loans and advances Customers Financial assets at fair value through other comprehensive income Equity instruments Hedging derivatives Changes in the fair value of hedged items in portfolio hedges of interest rate risk TOTAL FINANCIAL ASSETS 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 53,270 410 146,070 723                 2023 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 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 4,809 4,683 569 237 3,877 126 613 9,234 7,583 1,290 361 — 361 — 1,187 748 38 487 223 439 930 15,709 14,868 728 113 — 113 — 2,621 753 — 30 723 1,868 1,667 12,750 11,912 743 95 — 95 — 1,085 624 — 178 446 461 824 15,634 14,718 916 — — — — 5,241 2,681 — 132 2,549 2,560 1,429 Total 79,469 53,566 12,236 13,667 1,038 6,488 6,141 14,943 9,489 607 1,064 7,818 5,454 5,463 45 31,609 16 11,367 58 20,055 49 14,708 80 22,384 248 100,123 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 75,733 349,228 724                                 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Equivalent euro value of assets and liabilities The detail of the main foreign currency balances in the consolidated balance sheet, based on the nature of the related items, is as follows: Equivalent value in EUR million Cash, cash balances at central banks and other deposits on demand Financial assets/liabilities held for trading Non-trading financial assets mandatorily at fair value through profit or loss Other financial assets/liabilities at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at amortized cost Investments Tangible assets Intangible assets Financial liabilities at amortized cost Liabilities under insurance contracts Other 2023 2022 2021 Assets Liabilities Assets Liabilities Assets Liabilities 114,410 — 106,011 60,581 3,291 — 1,721 12,699 60,516 — 773,504 1,689 20,797 12,772 — — 26,236 1,120,947 — — — — 937,917 330 25,740 1,037,267 122,391 94,256 — 60,105 105,457 65,345 — 49,314 3,210 — 2,460 — 1,085 19,929 1,230 8,785 62,046 747,138 1,296 21,834 11,881 — — 23,886 1,089,023 — — — — — 893,531 349 24,372 998,286 78,086 680,774 1,666 22,350 10,066 — — 22,631 990,065 — — — — — 796,395 328 20,420 875,242 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 Carrying amount Fair value Loans and advances 1,087,844 1,077,543 2023 2022 2021 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 — 103,414 974,129 1,073,490 1,053,703 — 64,968 988,735 1,002,190 1,006,711 — 69,840 936,871 Debt securities 103,559 102,888 67,951 11,057 23,880 73,554 70,373 37,805 19,254 13,314 35,708 35,378 13,558 12,158 9,662 1,191,403 1,180,431 67,951 114,471 998,009 1,147,044 1,124,076 37,805 84,222 1,002,049 1,037,898 1,042,089 13,558 81,998 946,533 725                       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix ii) Financial liabilities measured at other than fair value EUR million Liabilities A Deposits Debt securities 2023 2022 2021 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 1,125,308 1,124,373 — 263,428 860,945 1,111,887 1,108,918 — 258,701 850,217 1,078,587 1,076,876 — 286,613 790,263 303,208 298,792 136,109 125,575 37,108 274,912 263,191 106,169 124,939 32,083 240,709 246,697 109,346 115,034 22,317 1,428,516 1,423,165 136,109 389,003 898,053 1,386,799 1,372,109 106,169 383,640 882,300 1,319,296 1,323,573 109,346 401,647 812,580 A. At 31 December 2023, Grupo Santander had other financial liabilities that amounted to EUR 40,187 million, EUR 37,059 million in 2022 and EUR 29,873 million in 2021. The main valuation methods and inputs used in the estimates at 31 December 2023 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. 726                       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix d) Offsetting of financial instruments Following is the detail of financial assets and liabilities that were offset in the consolidated balance sheets as of 31 December 2023, 2022 and 2021: 31 December 2023 EUR million Gross amount of financial assets 149,508 Gross amount of financial assets offset in the balance sheet (87,883) Net amount of financial assets presented in the balance sheet 61,625 179,580 329,088 (79,500) (167,383) 100,080 161,705 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 (13,917) (56,349) 58,106 117,160 Assets Derivatives Reverse repurchase agreements Total Assets Derivatives Reverse repurchase agreements Total Assets Derivatives Reverse repurchase agreements Total 31 December 2023 EUR million Gross amount of financial liabilities 146,128 Gross amount of financial liabilities offset in the balance sheet (87,883) Net amount of financial liabilities presented in the balance sheet 58,245 212,840 358,968 (79,500) (167,383) 133,340 191,585 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 Liabilities Derivatives Reverse repurchase agreements Total Liabilities Derivatives Reverse repurchase agreements Total Liabilities Derivatives Reverse repurchase agreements Total At 31 December 2023, Grupo Santander has offset other items amounting to EUR 910 million (EUR 1,024 million and EUR 1,188 million at 31 December 2022 and 2021, respectively). At 31 December 2023 the balance sheet shows the amounts EUR 151,044 million (EUR 141,529 million and EUR 106,430 million at 31 December 2022 and 2021) on derivatives and repos as assets and EUR 180,539 million (EUR 157,572 million and EUR 104,130 million at 31 December 2022 and 2021, respectively) on derivatives and repos as liabilities that are subject to netting and collateral arrangements. 727       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 52. 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. 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. 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. 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. 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 Santander US Capital Markets LLC (previously 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. 728 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. EUR million There are no customers located in any of the areas that generate income exceeding 10% of Total income. The condensed balance sheets and income statements of the various primary segments are as follows: Balance sheet (condensed) Total assets Total liabilities Total equity Other customer funds under management Other non-managed marketed customer funds Europe 955,344 911,173 44,171 111,933 26,390 North America 294,827 271,183 23,644 18,733 18,503 South America 325,049 299,155 25,894 78,076 1,087 2023 Digital Consumer Bank 166,796 153,355 13,441 996 4,057 Corporate Centre 254,705 166,809 87,896 — — Intra-Group eliminations Total (199,660) 1,797,062 (108,854) 1,692,821 104,241 209,737 50,036 (90,806) — — EUR million Balance sheet (condensed) Total assets Total liabilities Europe 958,207 North America 288,595 South America 292,925 2022 Digital Consumer Bank 151,015 Corporate Centre 262,218 Intra-Group eliminations Total (218,301) 1,734,659 915,167 262,931 268,417 137,986 178,651 (126,078) 1,637,074 Total equity Other customer funds under management Other non-managed marketed customer funds 43,040 100,178 23,305 25,664 15,571 20,908 24,508 65,251 1,077 13,029 880 3,089 83,567 — — (92,223) — — 97,585 181,880 48,379 EUR million Balance sheet (condensed) Total assets Total liabilities Total equity Other customer funds under management Other non-managed marketed customer funds Europe 943,875 899,007 44,868 114,698 25,572 North America 244,734 216,048 28,686 13,949 20,213 South America 257,805 237,375 20,430 57,428 103 2021 Digital Consumer Bank 148,005 135,599 12,406 852 2,497 Corporate Centre 215,467 135,950 79,517 — — Intra-Group eliminations Total (214,051) 1,595,835 (125,197) 1,498,782 97,053 186,927 48,385 (88,854) — — 729   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The condensed income statements for the primary segments are as follows: EUR million D Underlying income statement (condensed) A Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F Other gains (losses) and provisions Operating profit/(loss) before tax Tax on profit Profit from continuing operations Net profit from discontinued operations Consolidated profit Non-controlling interests Attributable profit to the parent Europe 15,910 4,399 1,033 97 21,439 (9,030) 12,409 (2,533) (1,681) 8,195 (2,371) 5,824 — 5,824 (342) 5,482 North America 10,159 2,192 505 318 13,174 (6,465) 6,708 (3,733) (138) 2,837 (468) 2,369 — 2,369 (15) 2,354 2023 South America 13,040 4,684 1,280 (1,033) 17,971 (6,920) 11,050 (5,401) (1,041) 4,608 (1,121) 3,487 — 3,487 (449) 3,038 Digital Consumer Bank 4,193 796 117 396 5,502 (2,618) 2,884 (792) (72) 2,019 (493) 1,526 — 1,526 (327) 1,199 Corporate centre (41) (13) (302) (83) (439) (391) (829) 2 (134) (961) (36) (998) — (998) — (998) Total 43,261 12,057 2,633 (304) 57,647 (25,425) 32,222 (12,458) (3,066) 16,698 (4,489) 12,209 — 12,209 (1,133) 11,076 A. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. '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 E. statement. 'Net loan-loss provisions' refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses from changes line item in the statutory income statement. Additionally, includes a release of EUR 24 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. F. 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 24 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. 730     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million D Underlying income statement (condensed) A Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions Other gains (losses) and provisionsF Operating profit/(loss) before tax Tax on profit Profit from continuing operations Net profit from discontinued operations Consolidated profit Non-controlling interests Attributable profit to the parent Europe North America 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. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. '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 E. statement. 'Loan loss provisions' refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses from changes line item in the statutory income statement. Additionally, includes a release of EUR 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. F. 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 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. 731     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million D Underlying income statement (condensed) A Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F Other gains (losses) and provisions Operating profit/(loss) before tax Tax on profit Profit from continuing operations Net profit from discontinued operations Consolidated profit Non-controlling interests Attributable profit to the parent Europe North America 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. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. '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 E. statement. 'Net loan-loss provisions' refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses from changes line item in the statutory income statement. Additionally, includes an addition of EUR 29 million mainly corresponding to the results by commitments and contingent risks includes in the line of the statutory income statement of provisions or reversal of provisions. F. 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. 732     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix b) Secondary segments At this secondary level, Grupo Santander is structured into Retail Banking, Santander Corporate & Investment Banking (SCIB), Wealth Management & Insurance (WM&I) and PagoNxt. • Retail Banking: this covers all customer banking businesses, including consumer finance, except those of corporate banking which are managed through Santander Corporate & Investment Banking, asset management, private banking and insurance, which are managed by WM&I. The results of the hedging positions in each country are also included, conducted within the sphere of their respective assets and liabilities committees. • Santander Corporate & Investment Banking (SCIB): this business reflects revenue from global corporate banking, investment banking and markets worldwide including treasuries managed globally (always after the appropriate distribution with Retail Banking customers), as well as equity business. • Wealth Management & Insurance: includes the asset management business (Santander Asset Management), the corporate unit of Private Banking and International Private Banking in Miami and Switzerland (Santander Private Banking) and the insurance business (Santander Insurance). • PagoNxt: this includes digital payment solutions, providing global technology solutions for Grupo Santander's banks and new customers in the open market. It is structured in 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. 733 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The condensed income statements are as follows: EUR million A D Underlying income statement (condensed) Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F 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 2023 Santander Corporate & Investment Banking 3,485 2,190 2,581 41 8,296 (3,391) 4,905 (162) (174) 4,570 (1,280) 3,290 — 3,290 (212) 3,078 Wealth Managemen t & Insurance 1,739 1,265 149 241 3,396 (1,156) 2,240 21 (26) 2,235 (528) 1,707 — 1,707 (71) 1,637 Retail Banking 37,985 7,661 214 (606) 45,254 (19,396) 25,858 (12,295) (2,691) 10,872 (2,586) 8,286 — 8,286 (849) 7,436 PagoNxt 93 954 (10) 102 1,140 (1,091) 49 (24) (42) (17) (59) (76) — (76) (1) (77) Corporate centre (41) (13) (302) (83) (439) (391) (829) 2 (134) (961) (36) (998) — (998) — (998) Total 43,261 12,057 2,633 (304) 57,647 (25,425) 32,222 (12,458) (3,066) 16,698 (4,489) 12,209 — 12,209 (1,133) 11,076 A. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. 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. E. 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 24 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. F. 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 24 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. 734 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million D Underlying income statement (condensed) A Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F 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 2022 Santander Corporate & Investment Banking (SCIB) 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 Management & 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. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. 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. E. 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 included in the line provisions or reversal of provisions, net of the statutory income statement. F. 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 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. 735     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million D Underlying income statement (condensed) A Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F 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 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. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. 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. E. Net loan-loss provisions refers to Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses from changes line item in the statutory income statement. Additionally, includes an addition of EUR 29 million mainly corresponding to the results by commitments and contingent risks included in the line provisions or reversal of provisions, net of the statutory income statement. F. Other gains (losses) and provisions includes the following line items in the statutory income statement, which are presented net for internal reporting and management reporting purposes: Provisions or reversal of provisions except an addition of EUR 29 million mainly corresponding to the results by commitments and contingent risks; Impairment of investments in joint ventures and associates, net; Impairment on non-financial assets, net; Gains or losses on non-financial assets, net; Negative goodwill recognized in results and Gains or losses on non-current assets held for sale not classified as discontinued operations. 736     2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix c) Reconciliations of reportable segment results The tables below reconcile the statutory basis results to the underlying 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 2023 A D Reconciliation of statutory results to underlying results Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F 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 Statutory results 43,261 12,057 2,633 (528) 57,423 (25,425) 31,998 (12,932) (2,607) 16,459 (4,276) 12,183 — 12,183 (1,107) 11,076 Adjustments — — — 224 224 — 224 474 (459) 239 (213) 26 — 26 (26) — Underlying results 43,261 12,057 2,633 (304) 57,647 (25,425) 32,222 (12,458) (3,066) 16,698 (4,489) 12,209 — 12,209 (1,133) 11,076 A. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. 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. E. 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 24 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. F. 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 24 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: • Temporary levy on revenue in Spain in the first quarter, totalling EUR 224 million, which was moved from total income to other gains (losses) and provisions. • Additional provisions for specific cases in the wholesale portfolio of Brazil for an amount of EUR 235 million, net of tax and non-controlling interests (EUR 474 million recorded in net loan-loss provisions, EUR 213 million positive impact in tax and EUR 26 million in non-controlling interests). 737               2023 Annual report Contents EUR million 2022 A D Reconciliation of statutory results to underlying results Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F 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 Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Adjustments — — — 37 37 — 37 327 (364) — — — — — — — 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 A. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. 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. E. 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. F. 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. 738     2023 Annual report Contents EUR million 2021 A D Reconciliation of statutory results to underlying results Net interest income Net fee income B Gains (losses) on financial transactions C Other operating income Total income Administrative expenses, depreciation and amortisation Net operating income E Net loan-loss provisions F 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 Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 Adjustments — — — — — — — — 713 713 (182) 531 — 531 (1) 530 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 A. Net interest income includes the net amount of the profit and loss account items 'Interest income' and 'Interest expense'. It is presented this way because it is how it is presented to the main operational decision maker. B. 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. C. 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. D. 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. E. 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. F. 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 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. 739       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 53. 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 senior management, 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 10,497 Members of the board of directors — Senior Management Other related parties 186 12 2023 154 405 9,275 391 272 2,480 463 1,727 — 290 1,698 427 (149) 43 1,499 (122) 4,189 10 274 3,905 — — — — — 14 — 14 — — — — — — — — 3 2 1 — — — 12 — — 5 — 5 — — — — — — — — 2 1 1 — — — 185 1 — 150 — 150 — — 11 9 (1) — 3 — 1,094 861 9 224 740   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix EUR million Assets Cash, cash balances at central banks and other deposits on demand Loans and advances: credit institutions Loans and advances: customers Debt 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 — Senior Management Other related parties 455 13 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 — — — 13 — — 11 — 11 — — — — — — — — 2 1 1 — — — 455 — — 109 — 109 — — 2 1 — — 1 — 79 23 13 43 741   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Associates and joint ventures 9,386 Members of the board of directors — Senior Management Other related parties 384 14 2021 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 The remaining required information is detailed in notes 5 and 46.c. 131 437 8,148 496 174 3,405 867 2,464 — 74 1,265 90 (13) (32) 1,268 (48) 3,965 11 314 3,640 — — — — — 8 — 8 — — — — — — — — 2 1 1 — — — 14 — — 11 — 11 — — — — — — — — 2 1 1 — — — 384 — — 197 — 197 — — 1 1 — — — — 76 17 13 46 742   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. 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, according to market consensus and to the execution of our materiality assessment, 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. Additionally, Grupo Santander has participated in the various climate stress regulatory exercises carried out recently, which have been classified as learning exercises in 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 2023. 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. In particular, we monitor progress in this regard both in the prudential area (mandate of the European Banking Authority in article 501c of Regulation (EU) 575/2013), and that resulting from the plan for the second phase of the post-review implementation of IAS 9 by the IASB regarding the calculation of expected losses, planned during 2024. 54. 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. Effective information management to identify, assess, manage and disclose risks at appropriate levels. 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. 743 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 that take or originate risks are primarily responsible for managing them. The first line detects, measures, controls, monitors and reports on the risks it originates according to internal risk management policies, models and procedures. Risk management must be consistent with the approved risk appetite and related limits. – Second line: formed by risk and compliance & conduct functions, independently oversees and challenges risk management at the first line of defence. Its duties include ensuring that risks will be managed according to the risk appetite approved by senior management and strengthening our risk culture across 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 establish additional governance measures for special situations, as it has done with the covid crisis, the war in Ukraine, the uncertainty caused by the collapse of several regional banks in the US and Credit Suisse, and the current geopolitical situation. We have upgraded the monitoring of all risks, with special attention to the main macroeconomic indicators, liquidity, vulnerable sectors and clients, cybersecurity reinforcement, among other areas. The special situations forums we have activated are enabling us to cope with the geopolitical and macroeconomic environment in a resilient manner. 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 Grupo Santander. The risk and compliance functions will continue to support global businesses and control at a global and local level. In 2023, Grupo Santander continued to build on our group- subsidiary relations model by leveraging our global scale to uncover synergy under a common operating model and platform. The model promotes process simplification and more enhanced control to help grow the 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 local CRO/CCO interacts regularly with its regional risk leader and with the Group CRO and the Group CCO, through periodic follow-up meetings, either business or country. There are also meetings between local and global risk and compliance functions to discuss issues specific to each function. 744 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. • 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, • Exchange of best practices that will strengthen processes, Personal and Fair culture. 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: • 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. • 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: 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). • 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. b) Credit risk 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: • A medium-low, predictable target risk profile, centred on retail and commercial banking, internationally diversified operations and a strong market share; 1.1. Planning Grupo Santander´s planning helps to set business targets and draw up action plans within our risk appetite statement. • Stable, recurrent earnings and shareholder remuneration, sustained by a sound base of capital, liquidity and sources of funding; 745 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. 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. 746 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. 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. It helps set individual monitoring levels and frequencies, policies, and actions for customers based on credit quality and particular circumstances. In addition to monitoring customer credit quality, Grupo Santander defines control procedures to analyse portfolios and performance, as well as any deviations from planning or approved alert levels. 1.5. 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. 747     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) 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 2023 624,696 278,569 247,360 39,503 39,329 190,720 137,893 52,785 177,380 113,937 46,565 3,903 135,608 5,494 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 1,051,114 1,133,898 Credit impaired loans (EUR million) 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 2023 14,495 8,529 3,518 1,024 1,397 7,805 6,303 1,489 10,142 7,479 2,332 78 2,877 301 35,620 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 NPL ratio (%) 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% 2023 2.32% 3.06% 1.42% 2.59% 3.55% 4.09% 4.57% 2.82% 5.72% 6.56% 5.01% 1.99% 2.12% 5.48% 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% 3.14% 3.08% 3.16% 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 2023: • Europe: The NPL ratio fell 5 bps to 2.32% from 2022 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 106 bps to 4.09% from 2022, mainly due to increases at SC USA (normalization of the portfolio) and in Mexico (portfolio growth in higher return-risk segment). • South America: The NPL ratio decreased 48 bp from 2022 to 5.72%,due to the portfolio growth in Brazil and the performance of the Chilean portfolio. • Digital Consumer Bank: The NPL ratio increased 6 bps to 2.12%, due to a slight increase in impaired loans, not offset by portfolio growth. 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, United Kingdom, Portugal and Poland, 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. 748 • 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. In order to consider significant changes when financial instruments are classified in stage 2, each subsidiary has defined the quantitative thresholds of its portfolios in accordance with the Group's guidelines, ensuring a consistent interpretation in all our geographies. These thresholds can be expressed as an absolute or relative increase in the probability of default. Within the aforementioned quantitative thresholds we consider two types: we understand a relative threshold as one that compares the current credit quality with the credit quality at the time of granting the operation in percentage terms of variation. For its part, an absolute threshold compares both references in total terms, calculating the difference between them. These absolute/relative concepts are used homogeneously (with different values) in all geographies. The calibration of these two thresholds will depend on the type of portfolio and characteristics such as the starting point of the average credit quality of the portfolio. • 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. 749 • Definition of default: Santander incorporated the new 2. Additional elements 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. 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. Grupo Santander 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. 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). 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. 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 fiscal year 2023, the Group has significantly reduced its amount of overlays, homogeneously among its different concepts, mainly due to adjustments associated with uncertainties resulting from the war in Ukraine and the current macroeconomic context, as said adjustments were included in the expected loss models or are no longer required. The amount of overlays at the end of the 2023 financial year is not material. 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 2023, 2022 and 2021. 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 2023 Stage 1 147,065 421,449 262,954 11,829 843,297 Stage 2 2,261 13,910 41,237 19,376 76,784 Stage 3 — — — 33,838 33,838 Total 149,326 435,359 304,191 65,043 953,919 3,592 5,055 14,131 22,778 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 1 172,440 394,084 272,456 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 22,854 750 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 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 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 68,788 million in stage 1; EUR 1,504 million in stage 2, and EUR 658 million in stage 3 (in 2022 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), and impairment losses of EUR 199 million in stage 1; EUR 73 million for stage 2, and EUR 161 million in stage 3 (in 2022, EUR 147 million, EUR 123 million and EUR 294 million and in 2021, EUR 408 million, EUR 322 million and EUR 841 million in stage 1, stage 2 and stage 3, respectively). The remaining exposure, including all financial instruments not included before, amounts to EUR 598,385 million (EUR 538,364 million in 2022 and EUR 349,228 million in 2021), and it includes all undrawn authorized lines (loan commitments). As of 31 December 2023, the Group had EUR 743 million net of provisions (EUR 322 million and EUR 420 million at 31 December 2022 and 2021, 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 Portfolio overview Credit risk with customers in the UK (excluding Santander Consumer UK and Santander London Branch) decreased year- on-year by 2.4% to EUR 247,360 million. This credit risk represents 22% of Santander’s loan portfolio is in the UK. At 1.42%, the NPL ratio increased 21 bps in comparison to the year end of 2022, due to the increase in the default stock in companies and individuals, as well as the reduction in the total portfolio. 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 2023, the mortgage portfolio of Santander UK decreased by 5.7% in local currency to EUR 200,173 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. Originations fell year on year in 2023 compared to 2022, a sign of a less active housing market on the back of interest rate hikes and a squeeze on households’ purchasing power. House prices continued to fall in 2023 as they had started to in late 2022. Higher instalments are being mitigated, in part, by our conservative assessments of customers’ ability to pay when approving them for a mortgage. We implemented measures to help customers who were current on their payments, including those under the UK Government’s “Mortgage Carter” in June. Under Santander's risk management principles, a property must be appraised independently before we can approve a new mortgage. In line with market practices and the law, we get updated values of properties used as mortgage collateral from an independent agency's automatic appraisal system. 751                                                       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 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. Santander UK's wide range of mortgages include: • Interest-only loans (22%): Customers pay interest every month and repay the principal at maturity. These mortgages, which are common in the UK, require borrowers to have an appropriate repayment vehicle, such as a pension plan or an investment fund. To mitigate inherent risk, Santander UK has restrictive approval requirements, such a maximum loan-to- value (LTV) ratio of 50% and an assessment of the ability to pay both interest and capital. • Flexible loans (3%): 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%): Buy-to-let mortgages account for a small portion of the total portfolio and are subject to strict risk approval policies. Despite the challenging economic environment, the NPL ratio reflects the strength of the mortgage portfolio, which was stable at 1.16% at the end of December 2023 (+18 bps YoY). At 31 December 2023, 85% of the mortgage portfolio had an LTV lower than 70%. 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, 2023, 2022 and 2021, 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 2023 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 46,236 145,884 13,588 0 205,708 Stage 2 1,273 10,850 13,995 — 26,118 Stage 3 — — — 3,518 3,518 Total 47,509 156,734 27,583 3,518 235,344 172 498 396 1,066 Exposure and impairment losses by stage EUR million 2022 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 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 1,032 752 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 2023 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 4.4% 5.8% -3.1% -0.2% Pessimistic scenario 2 2.8% 7.3% -4.8% 0.2% 2024 - 2028 Pessimistic scenario 1 3.9% 5.1% -0.9% 0.3% Base scenario 3.7% 4.4% 1.7% 1.2% Optimistic scenario 1 3.3% 3.6% 3.8% 2.1% 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 2023, 2022 and 2021, the weights used by Santander UK reflect the future prospects of the British economy in relation to its current political and economic position so that higher weights are assigned for negative scenarios: Pessimistic scenario 3 Pessimistic scenario 2 Pessimistic scenario 1 Base scenario Optimistic scenario 1 2023 20% 10% 10% 50% 10% 2022 20% 10% 15% 50% 5% 2021 5 % 20 % 25 % 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 2023, 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 9.5% -5.9% 6.7% -4.2% -8.6% 25.7% 3.0% -2.0% 4.6% -2.6% -4.4% 7.8% 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 278,569 million (25%% of Grupo Santander’s total). It is appropriately diversified among products and customer segments. The macroeconomic outlook continues to be marked by an environment of high uncertainty, both domestic and international. Economic forecasts for 2024 are being cut due to persistently high inflation, a weaker global scenario and tightening monetary conditions. The Spanish economy has been sustained largely by greater domestic demand in the face of a weaker than expected foreign sector. 753                   In a context of growing economic weakness and increasing financing costs, bank credit remained weak during 2023. It decreased significantly in the mortgage portfolio due to the rise in interest rates, which has led to a decrease in demand for credit and an increase in the early amortization of the portfolio, and in the SME segment due to lower demand for financing and the progressive amortization of support and liquidity programs (financing lines of the Official Credit Institute - ICO). On the contrary, the portfolios of larger companies and consumption showed greater resilience despite the environment. Total credit risk decreased 5% from December 2022. The ICO loans that were granted as a result of the pandemic (EUR 25,428 million) for which the majority of the grace periods have expired, standing at EUR 18,997 million, representing approx. 7% of Santander España total portfolio. The credit portfolio’s NPL ratio was 3.06%, 21 bps lower than in December 2022. This decrease was due to the good performance of the portfolio motivated by the management of specific cases and portfolio sales. 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 24% (26% and 27% in 2022 and 2021, respectively). • The 95% of the portfolio has a LTV below 80% calculated as total risk/latest available house appraisal. • All customers applying for a residential mortgage are subject to a rigorous credit risk and viability assessment, analysing whether their income is sufficient to meet all repayments and will remain stable over the term of the loan. The NPL coverage ratio remained at 49% (-2 bps year-on-year). The cost of credit remained stable at 0.62% (+1 bps vs. December 2022). The NPL ratio for the residential mortgages portfolio stood at 1.49%, with a reduction of 19 bps, compared to 31 December 2022, mainly due to by portfolio sales. Residential mortgage portfolio Residential mortgages in Spain, including Santander Consumer Finance business, amounted to EUR 61,097 million in 2023 (EUR 63,688 million and EUR 62,324 million in 2022 and 2021, respectively), 99.65% of which have a mortgage guarantee (99.55% and 99.33% in 2022 and 2021, respectively). Starting in mid-2022, the rise in the EURIBOR translated into increases in the instalments paid by clients with variable mortgages (approximately 75% of the portfolio). This increase is partially mitigated by the conservative evaluation of payment capacity made at the time of admission. EUR Million Home purchase loans to families Without mortgage guarantee With mortgage guarantee 2023 Gross amount Of which: impaired 61,097 215 60,882 2022 EUR Million Home purchase loans to families Without mortgage guarantee With mortgage guarantee 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 61,905 924 16 908 Of which: impaired 1,088 24 1,064 Of which: impaired 1,860 115 1,745 754           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 2023 Loan to value ratio Less than or equal to 40% 18,728 131 More than 40% and less than 60% 20,720 192 More than 60% and less than 80% 18,083 199 More than 80% and less than or equal to 100% 2,294 151 More than 100% 1,057 235 Total 60,882 908 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 code of good practices is focused on granting capital grace periods and extending the term of the operations. At 31 December 2023, the requests made have not been significant. Corporate & SME financing Credit risk with SME and corporates in commercial banking amounted to EUR 107,613 million, 4.7% lower than in December 2022, mainly due to the fall in the portfolio of SMEs of 6.1%. This is Santander Spain's main lending segment, accounting for 39% of the total, compared to 35% of CIB's portfolio, which from 2022 includes 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. Santander Spain has continued to rely on its support and proximity to SMEs and the self-employed and has positioned itself as the leading entity in ICO Loans in 2023 with a share of 39%. The majority of this financing was allocated to the ICO Companies and Entrepreneurs Lines and the ICO International Line. ICO financing represents around 35% of the SME portfolio, and its performance is as expected thanks to our robust risk management policies. The portfolio’s NPL ratio stood at 5.27% in December 2023. The NPL ratio decreased by 45 bps compared to December 2022, 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 Net variation Written-off assets Balance at end of year 2023 2022 2021 2,327 (1) 115 (8) 2,433 2,625 — (295) (3) 2,327 2,871 (1) (230) (15) 2,625 The NPL ratio of this portfolio ended the year at 3.04% (compared with 4.04% and 5.07% at December 2022 and 2021, 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 39.19% (35.11% and 30.08% in 2022 and 2021, respectively). EUR Million Financing for construction and property development (including land) (business in Spain) Of which impaired Memorandum items written- off assets 2023 Excess of gross exposure over maximum recoverable amount of effective collateral Gross amount Specific allowance 2,433 259 74 346 5 — 40 29 — 755       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) 2023 Carrying amount 241,695 1,797,062 1,230 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 2023 Loans: gross amount 16 2,417 1,032 642 390 1,364 1,292 72 21 14 7 2,433 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 complete the construction work so as to obtain completed buildings that can be sold in the market. To achieve this aim, the projects are analysed on a case-by-case basis in order to adopt the most effective series of measures for each case (structured payments to suppliers to ensure completion of the work, specific schedules for drawing down amounts, etc.). For the 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 2023, the net balance of these assets amounted to EUR 2,448 million (EUR 2,971 million and EUR 3,591 million at 31 December 2022 and 2021, respectively), gross amount of EUR 5,506 million (EUR 6,422 million and EUR 7,364 million at 31 December 2022 and 2021, respectively); recognised allowance of EUR 3,058 million (EUR 3,451 million and EUR 3,773 million at 31 December 2022 and 2021, respectively). 756                             The following table shows the detail of the assets foreclosed by the businesses in Spain at the end of 2023: 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 179 million (mainly Project Quasar Investment 2017, S.L. with EUR 155 million), and equity instruments foreclosed or received in payment of debts amounting to EUR 14 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 market value (appraisal) adjusted with discounts obtained according to internal valuation methodologies based on the entity's sales experience in goods with similar characteristics. 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. 2023 Gross carrying amount Valuation adjustments Of which impairment losses on assets since time of foreclosure Net Carrying amount 4,901 2,801 2,072 2,100 1,054 224 830 101 12 89 3,746 1,107 2,639 473 132 5,506 615 111 504 45 9 36 2,141 589 1,552 197 60 3,058 519 89 430 36 6 30 1,517 366 1,151 131 46 2,249 439 113 326 56 3 53 1,605 518 1,087 276 72 2,448 The gross movement in foreclosed properties were as follows (EUR billion): Gross additions Disposals Difference EUR Billion 2022 0.2 (1.3) (1.1) 2023 0.3 (1.2) (0.9) 2021 0.4 (1.1) (0.7) 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, 2023, 2022 and 2021, 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 2023 Stage 1 46,827 101,079 33,905 1,513 183,324 Stage 2 48 780 9,789 4,517 15,134 Stage 3 — — — 7,536 7,536 Total 46,875 101,859 43,694 13,566 205,994 300 663 2,959 3,922 757       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 33,104 336 186,353 Stage 2 352 555 11,716 5,008 15,647 Stage 3 — — — 13,762 12,761 Total 44,330 109,697 44,820 19,106 214,761 422 580 5,005 6,007 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 2023, is presented below: 2024-2028 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 December 31 2023, is as follows: GDP Growth -100 bp 100 bp Housing price change -100 bp 100 bp Change in Provision Mortgages Corporates Others 4.1% -1.9% 3.1% -2.1% 3.3% -1.2% 2.5% -1.2% 3.7% -2.2% 4.2% -2.1% Regarding the stage 2 classification determination, the quantitative criteria applied in Santander Spain are based on identifying whether any increase in the PD for the entire expected life of the operation is greater than a relative or absolute threshold. The established threshold is different for each portfolio depending on the characteristics of the operations, and an operation is considered to exceed said threshold when the PD for the entire life of the operation increases a certain amount over the PD it had at the time of initial recognition. The values of these thresholds depend on their calibration, carried out periodically, as indicated in previous paragraphs. Additionally, Santander Spain has implemented a backstop to the relative threshold in all portfolios. Consequently, contracts whose current PD has increased more than twice with respect to its PD at the time of its origination will be classified in phase 2. In addition, a series of specific qualitative criteria are defined that indicate that the exposure has had a significant increase in credit risk, regardless of the evolution of its PD since the moment of initial recognition. Santander Spain, among other criteria, considers that an operation presents a significant increase in risk when it presents irregular positions for more than 30 days or if it is determined based on a system of Early Warning Indicators (EWIs). Variables Interest rate Unemployment rate Housing price change GDP growth Pessimistic scenario Base scenario 3.1% 11.0% 2.1% 1.5% 3.6% 14.3% 0.5% 0.0% Optimistic scenario 3.0% 9.5% 2.6% 2.7% Each macroeconomic scenarios is associated with a given weight. As for its allocation, Santander Spain associates the Base scenario with the highest weight, while associating the lower weights to the most extreme scenarios: Pessimistic scenario Base scenario Optimistic scenario 1 2023 30% 40% 30% 2022 30% 40% 30% 2021 30% 40% 30% 758       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 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 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 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 Portfolio overview Santander US’s credit risk increased to EUR 137,893 million at the end of December 2023. It makes up 12.2% of Grupo Santander's total credit risk. As of December 2023, Santander US credit investment dropped 1.8% compared to 2022, mainly due to SCUSA and SBNA Individuals portfolios.. Once the fiscal stimuli were withdrawn and after several increases in interest rates, the NPL rate grew to 4.57% (+132 bps in the year) due to a higher stock of delinquencies in SC USA, and the cost of risk increased up to 1.92% (+57 bp in the year). Santander US includes the following business units: Santander Bank, National Association (SBNA) In 2023 lending amounted 58,826 million euros (representing 5% of the Group's credit risk) and presents a reduction of 9.1% in 2023, mainly due to the transfer of the CIB portfolio to the New York branch. Excluding the exchange rate effect, the portfolio decreased by 6.0%. Its activity is focused on commercial banking with 88% of the portfolio distributed in individuals (51%), and approximately 49% in corporates. To optimize profitability and growth opportunities, the retail segment focuses on the financing of consumer loans, as well as automobile financing and leasing, leaving aside the origination of mortgage loans and loans and lines of credit associated with mortgage guarantees. . The NPL ratio increased to 1.64% (+56 bp in the year) as of December 2023 the cost of credit increased to 0.98% once the provisions were normalized after the extraordinary releases of 2022 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, 2023, 2022 and 2021, 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 2023 Stage 1 4,834 20,468 25,312 52 50,665 409 Stage 2 76 459 3,439 450 4,424 335 Stage 3 — — — 894 894 141 Total 4,910 20,926 28,751 1,396 55,983 885 759   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 2023 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 A Manheim growth A. US used vehicle price car index. 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 2023 18% 20% 33% 30% 2022 18% 20% 33% 30% 2021 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 2023 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 9.9% -7.5% 11.3% -7.4% 8.7% -6.4% 10.7% -6.9% -30.3% 35.9% -23.8% 30.1% 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. Pessimistic scenario 2 2.4% 5.9% -0.7% 1.6% -1.6% 2024 - 2028 Pessimistic scenario 1 Base scenario 3.4% 4.1% 0.3% 1.8% -1.6% 3.1% 4.6% -0.2% 2.0% -1.5% Optimistic scenario 3.7% 3.3% 1.0% 2.6% -1.3% Additionally, for each portfolio, a series of specific qualitative criteria are defined, which indicate that the exposure has experienced a significant increase in credit risk, regardless of the evolution of its PD since the initial recognition. Santander Bank, National Association, among other criteria, considers that a transaction presents a significant increase in credit risk when it has arrears positions for more than 30 days or if it is determined based on a system of Early Warning Indicators (EWIs). 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. At 31 December 2023, lending amounted to EUR 28,876 million (representing 3% of the Group) and presents a reduction of 9.6% in 2023. Excluding the exchange rate effect, the portfolio decreased by 6.5%. 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 December 2023, the cost of credit is following a normalization trend, from the artificially good situation of previous years, due to government support and stimulus programs. Regarding the NPL ratio, it increased to 18.26% (+615 bp in the year); and the cost of credit stood at 6.41% (+173 bp YoY). Non-performing coverage ratio fell to 63% (-24 pp in the year), in line with the percentages of transfers from default to bad debts, which are at historically low levels. 760       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. 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 2023, 2022 and 2021, 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 Stage 1 — 99 12,120 6,754 18,973 597 2023 Stage 2 — — 395 4,237 4,632 1,019 Stage 3 — — — 5,272 5,272 1,712 Total — 99 12,515 16,263 28,877 3,327 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 — 171 14,564 7,735 22,470 672 2022 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 2021 Stage 1 417 800 18,655 222 20,094 524 Stage 2 4 35 5,930 1,931 7,900 1,741 Stage 3 — — — 1,658 1,658 572 Total 421 835 24,585 3,811 29,652 2,837 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. 761 The evolution forecasted in 2023 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 2023 18% 20% 33% 30% 2022 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 2023 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 0.8% -0.7% -3.7% 4.0% 1.6% -1.2% 1.4% -1.1% 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. 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. Pessimistic scenario 2 2.4% 5.9% -0.7% 1.6% -1.6% 2024 - 2028 Pessimistic scenario 1 Base scenario 3.4% 4.1% 0.3% 1.8% -1.6% 3.1% 4.6% -0.2% 2.0% -1.5% Optimistic scenario 3.7% 3.3% 1.0% 2.6% -1.3% 3.4. Banco Santander (Brasil) S.A. Portfolio overview Santander Brasil's credit risk amounted to EUR 113,937 million. It increased by 11.9% from 2022. Minus the exchange rate effect, it grew by 6.3%. As of December 2023, Santander Brasil accounts for 10% of Grupo Santander's loan book. The Brazilian economy has experienced a slow but continuous recovery, which has slowed down, although the labour market continued to show great resilience as did exports. Lending to individual observed moderate growth, with a focus on guaranteed portfolios, despite the restrictive measures implemented due to the deterioration of the macroeconomic situation since the second half of 2021. At Santander Auto, the alliance with Stellantis is expected to represent a relevant accelerator of vehicle production given that it is the main brand in Brazil, with 32% market share. The improvement observed in new production is already beginning to be reflected in metrics at the portfolio level, through the earliest irregularity indicators. SME lending, which represents 10% of the total risk, the restrictive admission measures adopted since the end of 2021 were maintained, also incorporating some additional ones, especially in the risk profiles with the worst behaviour, reviewing the strategies to ensure quality credit at budgeted levels, which was achieved during the year, avoiding deterioration in risk metrics. Regarding lending to corporates, the volume has grown above expectations (as of December 23), showing robust and constant growth. This portfolio growth has been achieved by maintaining stable credit profile and profitability. The NPL rate went from 7.57% in December 2022 to 6.56% in December 2023, and the coverage ratio increased from 80% to 85%. As of 31 December 2023 loan-loss provisions reached EUR 4,701 million, a 6.4% year-on-year increase (excluding the effect of the exchange rate, the increase would remain at 6%) Cost of risk rose from 4.79% in 2022 to 4.77% in 2023. 762       2022 Unemployment rate 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 31 December 2023, 2022 and 2021, 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 B Total exposure C Impairment losses Stage 1 20,670 38,869 36,107 1,153 96,799 722 2023 Stage 2 468 751 4,177 3,735 9,131 1,078 Stage 3 — — — 7,479 7,479 4,538 Total 21,138 39,620 40,284 12,367 113,409 6,338 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 18,033 35,902 31,269 432 85,636 575 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 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 2021 Stage 2 296 280 2,241 2,544 5,361 909 Stage 3 — — — 4,182 4,182 2,510 Total 22,851 24,283 29,281 8,268 84,683 4,651 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 2024-2028 Base scenario Optimistic scenario 10.8% 10.6% 1.8% 0.0% 26.6% 8.4% 8.4% 3.8% 1.8% 24.3% 6.6% 6.2% 5.6% 3.0% 23.0% 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 2023 10% 80% 10% 2022 10% 80% 10% 2021 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 2023 as follows: GDP growth -100 bp 100 bp -100 bp 100 bp Interest rate (SELIC) -100 bp 100 bp Change in provision Corporate Consumer Other 1.1% -0.6% -0.3% 1.4% -1.4% 2.7% 3.2% -1.8% -0.6% 3.7% -5.2% 6.2% 1.8% -0.8% -0.5% 2.3% -1.8% 4.1% Regarding the stage 2 classification determination, Santander Brazil analyses whether any increase in the PD for the expected entire life of the operation is greater than the combination of an absolute and a relative threshold. The established threshold is different for each portfolio depending on the characteristics of the operations, and an operation is considered to exceed said threshold when the PD for the entire life of the operation increases a certain amount over the PD it had at the time of initial recognition. The values of these absolute and relative thresholds depend on their calibration, carried out periodically, as well as the type of portfolio they affect. Additionally, Santander Brasil plans to introduce in February 2024 a backstop of 200% to the relative threshold of all portfolios 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 operation involves a significant increase in credit risk when it presents irregular positions for more than 30 days or if it is determined based on a system of Early Warning Indicators (EWI). 763 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. 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 2023. While the regulatory credit exposure with the 40 largest groups represents 8.5% of the credit risk. 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. As part of the exposure to counterparty credit risk, an additional risk known as wrong-way risk may arise. This risk is the one that arises in the event that the exposure with a portfolio or with a counterparty increases when its credit quality deteriorates. That is, wrong-way risk exists when there is an increase in the risk of default and, as a consequence, the exposure we have with the counterparty increases. Santander has specific models to measure this risk. Regarding settlement risk, this occurs when the settlement of a transaction involves a bilateral exchange of flows or assets between two counterparties, and there is a risk that one of the parties will fail to comply with their settlement commitments. To measure this risk, Santander has developed a global infrastructure and specific models. 764     The detail, by activity and geographical area of the Group's risk concentration at 31 December 2023 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 2023 Other EU countries 69,692 51,160 45,469 5,691 44,480 Spain 99,186 56,158 43,442 12,716 15,578 America 132,573 96,477 87,217 9,260 60,321 Rest of the world 78,082 11,243 10,744 499 38,351 Total 379,533 215,038 186,872 28,166 158,730 455,926 109,246 106,328 179,349 61,003 20,621 5,538 282,357 147,410 564,425 352,478 192,960 18,987 1,773,652 3,318 2,354 48,777 54,797 88,660 63,294 17,428 7,938 368,828 4,189 1,740 61,506 38,893 103,380 36,480 64,084 2,816 375,040 7,561 1,257 126,207 44,324 148,026 47,347 94,805 5,874 616,746 5,553 187 45,867 9,396 224,359 205,357 16,643 2,359 413,038 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 Sectors identification and management Grupo Santander conducts a quarterly review of exposure to customers operating in sectors that could be more affected by macroeconomic conditions (energy consumption, commodity prices, and key macroeconomic variables). This monitoring is complemented by the use of internal tools that allow projecting the behaviour and evolution of clients in each sector under different macroeconomic scenarios. Additionally, this process considers, among other things, the following information at the sector level: • Market information: Industries’ stock market performance. • Analysts’ EBITDA forecasts for the coming years. • Internal information: Changes in credit exposure, defaults (in different timelines) and stagings. • Our industry experts’ opinion, based on specific details about our exposures and our relationships with customers 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 4,404 million, 1.1% of total sovereign risk) according to our management criteria. Furthermore, exposure to non-local sovereign issuers involving cross-border risk is even less significant (EUR 11,085 million, 2.7% of total sovereign risk). Sovereign exposure in Latin America is mostly in local currency, and is recognised in the local accounts and concentrated in short- term maturities. Over the past few years, total exposure to sovereign risk has remained in line with regulatory requirements and our strategy to manage this portfolio. 765 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 A. Internal ratings are applied. 2023 18% 19% 41% 12% 10% 2022 27% 19% 34% 11% 9% 2021 15% 32% 26% 11% 16% Sovereign exposure at the end of 31 December 2023 is shown in the table below (data in million euros): 2023 Portfolio 2022 Financial assets Financial assets at fair value through other comprehensive income 97 1,247 415 — — 604 607 6,340 2,467 5,253 10,273 12,075 1,040 543 2,843 43,804 designated at fair value through profit or loss 4,996 462 (2,187) — — 2,899 1,261 194 16 2,049 11,715 3,311 97 277 229 25,319 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 34,534 5,150 7,366 — — 4,621 1,919 4,733 310 14,002 5,745 5,439 5,148 1,430 1,455 91,852 Total net direct exposure 39,627 6,859 5,594 — — 8,124 3,787 11,267 2,793 21,304 27,733 20,825 6,285 2,250 4,527 160,975 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 3,542 134,893 766       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. At 31 December 2023, forbearance stock fell again and stood at EUR 31,963 million, due to the good payment behaviour in the main geographies. In terms of credit quality, 47% of the loans is classified as credit impaired, with a coverage ratio of 44%. In addition, 53% 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. 767   Current refinancing and restructuring balances Amounts in EUR million, except number of transactions that are in units 2023 Total Without real guarantee With real guarantee Maximum amount of the actual collateral that can be considered Number of transactions — 12,851 Gross amount — 437 Number of transactions — 37 Gross amount — 5 Real estate guarantee — 2 Rest of real guarantees — — 1,011 258 833 285 38 728,123 7,709 61,110 6,977 4,079 14,236 106 2,035 506 4,400,346 5,142,331 6,107 14,511 507,378 569,358 10,185 17,452 415 4,602 8,721 182 1,461 41 4,043 5,686 — — — — — — Impairment of accumulated value or accumulated losses in fair value due to credit risk — 4 58 3,543 134 4,484 8,089 — 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 2023 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 — — — 1 Impairment of accumulated value or accumulated losses in fair value due to credit risk — 3 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 — 3 — 7 472 385,859 7,759 2,092,099 2,478,437 25 3,307 56 2,593 5,928 Number of transactions — 7 Gross amount — 1 428 107 37,225 3,751 1,155 293,433 331,093 235 5,257 9,116 21 2,134 183 1,744 3,900 51 709 18 2,394 3,154 — — — — — — 50 3,078 112 3,415 6,546 — In 2023, 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 2,902 million (2,379 million in 2022), without these modifications having a material impact on the income statement. Also, during 2023, 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 2,804 million (1,677 million in 2022). The transactions presented in the foregoing tables were classified at 31 December 2023 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. 768                     • 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 53% of the forborne loan transactions are classified as other than non-performing. Particularly noteworthy are the level of existing guarantees (45% of transactions are secured by collateral) and the coverage provided by specific allowances (representing 25% 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. 769 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 220,342 176,921 5,910 9,773 83,308 1,191,403 5,297 (788) 104,896 1,797,062 122,270 40,367 1,468,703 7,656 55 53,770 1,692,821 104,241 176,921 4,068 1,360 1,761 220,342 Interest rate 1,842 Interest rate, spread 8,413 Interest rate, spread 81,547 Interest rate, spread 1,191,403 Interest rate, spread 5,297 Interest rate, exchange rate (788) Interest rate — — 122,270 450 39,917 Interest rate, spread 1,468,703 Interest rate, spread 7,656 Interest rate, exchange rate 55 Interest rate 770         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 2023 and 97.5% ES at the end of December 2023: A VaR statistics and expected shortfall by risk factor EUR million. VaR at 99% and ES at 97.5% with one day time horizon 2023 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 7.5 (8.5) 8.9 1.4 2.3 2.7 0.7 6.6 (5.3) 5.6 1.5 2.1 2.7 — 1.8 (0.3) 1.8 — 0.3 4.2 (1.3) 4.3 0.0 0.5 0.7 Average 11.7 (14.9) 12.2 3.2 5.3 4.3 1.6 9.4 (10.5) 9.1 2.8 3.5 4.3 0.2 4.0 (0.7) 3.7 0.2 0.8 7.3 (6.2) 7.3 1.4 3.2 1.6 Max Latest 19.3 (27.3) 20.3 7.3 9.4 6.4 3.2 14.7 (21.6) 16.5 7.1 5.7 6.4 0.6 6.4 (2.6) 6.3 0.5 2.2 13.3 (14.2) 12.6 3.7 8.0 3.2 13.5 (17.1) 11.1 6.0 4.8 6.1 2.6 11.8 (13.8) 8.2 5.8 5.2 6.1 0.3 5.0 (0.5) 5.0 0.0 0.5 7.0 (6.6) 5.6 2.4 3.0 2.6 ES (97.5%) Latest 12.5 (18.9) 11.5 6.1 4.9 5.9 3.0 11.1 (14.9) 9.3 5.3 5.2 5.9 0.3 5.0 (0.5) 5.0 0.0 0.5 6.2 (7.6) 5.4 2.5 2.9 3.0 2022 VaR 2021 VaR 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 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 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 0.0 0.6 6.3 (5.1) 5.8 1.1 3.8 0.7 A. In South and North America, VaR levels of credit spreads and commodities are not shown separately due to their low or null materiality. VaR at the end of December was slightly higher (EUR 1.9 million) compared to the end of 2022, reflecting the spike in market volatility after the latest meetings of the main Central Banks, albeit generally less volatile this year than previous one. In 2023, average VaR (EUR 11.7 million) was lower than 2022 for all risk factors except exchange rate, which was slightly higher. Temporary VaR increases owe more to short-term price volatility than to significant changes in positions. By region, average VaR fell mainly in Europe (in almost every risk factor), while the slight increase in North America was due to interest rates. 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 an exception was observed (daily loss greater than the VaR) on 13 of March, as a consequence of market volatility coinciding with events related to some regional American banks. Regarding to 99% VaE, an exception (daily profit higher than VaE) was observed on 13 of December as a result of the devaluation of the Argentine peso. • The exceptions observed in the past year are consistent with the assumptions of the VaR calculation model. 771       IBOR reform Since 2013, different supranational organizations and authorities (IOSCO and FSB) have promoted and monitored initiatives aimed at carrying out reforms to strengthen interest rate indices. The main objective was to facilitate the transition to the risk-free indices identified in different jurisdictions, highlighting the SONIA index as a replacement for the LIBOR references in pounds, the SOFR for the LIBOR in dollars, and the €STR for the LIBOR in euros. In this sense and as a result of the joint effort of authorities and market participants, this transition process has been materialized in different milestones during the period between 2019 and 2023, pending, according to the regulatory milestones of the transition, the terms of the 3-month pound LIBOR, and the 1-month, 3-month and 6-month dollar LIBOR, which will continue to be published under a synthetic methodology until the end of March and September 2024, respectively, dates from which publication will cease permanently. The Group has carried out the operational and technological changes necessary to undertake the transition of these reference indices, with the book amount of financial assets and liabilities as of December 31, 2023 that continue to be referenced to the benchmarks being non-significant. pending transition indices. 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. 772 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 552.7 (368.7) 273.3 477.0 171.1 2023 Average 705.0 (416.6) 348.4 580.4 192.8 Max 914.5 (422.2) 478.0 661.1 197.6 2022 2021 Latest 749.5 (444.7) 380.2 642.9 171.1 Average 664.0 (417.1) 350.8 493.4 236.9 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 A. Includes credit spread VaR on ALCO portfolios. Structural interest rate risk • Europe At the end of December, the net interest income (NII) of our main balance sheets showed positive sensitivities to increases in interest rates. On the same date, in the case of the economic value of equity (EVE), it showed negative sensitivity to increases in interest rates in the case of the UK and positive sensitivity in the case of Spain in the same scenario. At the end of December, under the scenarios previously described, significant risk of NII sensitivity to the euro amounted to EUR 886.2 million; to the pound sterling, EUR 245.8 million; to the US dollar, EUR 99.4 million; and to the Polish złoty, EUR 24 million, all with risk of rate cuts. Significant risk of EVE sensitivity to yield curves of the euro was EUR 391.9 million; of the pound sterling, EUR 392.1 million; of the US dollar, EUR 364.3 million euros; and of the Polish złoty, EUR 176.4 million euros, mostly with risk of rate cuts. Exposure was moderate in relation to annual budget and capital levels in 2023. • 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 2023. At the end of December, significant risk to NII was mainly in the US and amounted to EUR 117 million. The most significant risk to EVE was in the US and amounted to EUR 786 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 2023. At the end of December, most significant risk to NII was mainly in Chile (EUR 36 million) and in Brazil (EUR 141 million). Most significant risk to EVE was recorded in Chile (EUR 255 million) and in Brazil (EUR 360 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 2023, the hedged of the different currencies that have an impact on our core capital ratio was close to 100%. In December 2023, 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 2023, 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 2023, VaR at a 99% confidence level over a one-day horizon was EUR 171 million (EUR 195 million and EUR 309 million in 2022 and 2021, respectively. 773                                   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. The sensitivity of the economic value of own funds is obtained as the difference between said economic value calculated with a selected scenario and that calculated with a base scenario. 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: • Define liquidity risk and provide detailed assessments of current and emerging material liquidity risks. • Define liquidity risk metrics, review and challenge liquidity risk appetite and limits on first line of defence proposals. • Evaluates and challenges commercial/business proposals; It provides senior management and business units with the necessary elements to understand the liquidity risk of Santander's businesses and operations. • Supervise the liquidity risk management of the first line of defence and assess the permanence of businesses within the limits of liquidity risk. • Reports on compliance with risk appetite limits and exceptions, if any, to governing bodies. • Provides a consolidated view of liquidity risk exposures and liquidity risk profile. • Confirms the existence of adequate liquidity procedures to manage the business within the limits of risk appetite. The effective application of these principles by all institutions comprising the Group required the development of a unique management framework built upon three fundamental pillars: • A solid organisational and governance model that ensures the involvement of the subsidiaries’ senior management in decision-taking and its integration into the Group’s global strategy. The decision-making process for all structural risks, including liquidity and funding risk, is carried out by local Asset and Liability Committees (ALCOs) in coordination with the global ALCO, which is the body empowered by the Bank's board in accordance with the corporate Asset and Liability Management (ALM) framework. This governance model has been reinforced as it has been included within Santander's Risk Appetite Framework. This framework meets demands from regulators and market players emanating from the financial crisis to strengthen banks’ risk management and control systems. • In-depth balance sheet analysis and measurement of liquidity risk, supporting decision-taking and its control. The Group objective is to 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. 774 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. 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. 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) 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 and expert judgment. a) 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. b) 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. c) 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. d) 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. 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). In this sense, deposits do not show a tendency towards concentration, maintaining a stable structure at 31 December 2023, where approximately 75% are transactional and more than 80% of retail deposits are insured by deposit guarantee systems of the different countries. g) Liquidity scenario analysis As liquidity stress tests, four standard scenarios have been defined: i. An idiosyncratic scenario of events detrimental only to Santander; ii. a local market scenario of events highly detrimental to a base country’s financial system or real economy; iii. a global market scenario of events highly detrimental to the global financial system; and iv. combined scenario consisting of a combination of more severe idiosyncratic and market events (local and global) occurring simultaneously and interactively. 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): 775 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. EUR million 2023 Amount 2021 2022 Amount Amount weighted weighted weighted applicable applicable applicable 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 217,935 119,043 4,236 6,814 348,028 127,285 177,887 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 2023, 2022 and 2021are presented below: EUR million High-quality liquid assets-HQLAs (numerator) Total net cash outflows (denominator) Cash outflows Cash inflows LCR ratio (%) NSFR ratio (%) 2023 2022 2021 348,028 312,042 297,300 209,892 204,759 181,953 282,982 270,748 233,294 65,989 73,090 51,341 166% 123% 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. Note 22, 'Debt securities', shows the composition of these liabilities based 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 wholesale markets. The movement in the composition of the buffer between “Level 1 marketable assets” to “Cash and reserves available at central banks” corresponds to a change in criteria in the classification of deposits with the Central Bank, at the request of the regulator. In the last quarter of 2022, Grupo Santander began 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. 776 The residual maturities of the liabilities associated with the assets and guarantees received and committed are presented below, as of 31 of December of 2023 (EUR thousand million): Residual maturities of the liabilities Committed assets Guarantees received committed Unmatured 40.8 <=1month 49.3 >1 month <=3 months 21.6 >3 months <=12 months 39.7 >1 year <=2 years 40.8 >2 years <=3 years 27.9 3 years <=5 years 55.0 5 years <=10 years 17.4 >10 years 13.8 Total 306.3 31.6 72.3 17.6 11.0 3.2 2.5 0.6 — — 138.8 The reported Group information as required by the EBA at 2023 year-end is as follows: On-balance-sheet encumbered assets EUR billion Carrying amount of encumbered assets 186.4 9.4 86.8 23.7 306.3 Fair value of encumbered assets 9.4 87.6 Fair value of non- encumbered assets 1,172.2 11.5 156.4 150.6 1,490.7 Carrying amount of non-encumbered assets 11.5 156.1 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 138.8 1.1 5.5 132.2 — Fair value of collateral received or own debt securities issued available for encumbrance 51.3 — 8.7 42.5 0.1 Taken together, these two categories represent a total of EUR 445,200 million of encumbered assets, which give rise to EUR 330,600 million matching liabilities. As of December 2023, total asset encumbrance in funding operations represented 22.4% of the Group’s extended balance sheet under EBA criteria (total assets plus guarantees received: EUR 1,987,100 million), as of December 2022. d) Capital risk In the second line of defence, capital risk management can independently challenge business and first-line activities by: — 1.9 • Supervising capital planning and adequacy exercises through a review of the main components affecting the capital ratios. 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 330.6 445.2 Total sources of encumbrance (carrying amount) On-balance-sheet encumbered assets amounted to EUR 306,300 million, of which 61% are loans (mortgage loans, corporate loans, etc.). Guarantees received committed amounted to EUR 138,800 million, relating mostly to debt securities received as security in asset purchase transactions and re-used. • Identifying key metrics to calculate the Group’s regulatory capital, setting tolerance levels and analysing significant variations, as well as single transactions with impact on capital. • Reviewing and challenging the execution of capital actions proposed in line with capital planning and risk appetite. Grupo Santander commands a sound solvency position, above the levels required by regulators and by the European Central bank. Regulatory capital At 1 January 2024, at a consolidated level, the Group must maintain a minimum capital ratio of 9.60% of CET1 (4.50% being the requirement for Pillar I, 0.98% being the requirement for Pillar 2R (requirement), 2.50% being the requirement for capital conservation buffer, 1.25% being the requirement for global systemically entity (G-SIB) and 0.37% being the requirement for anti-cyclical capital buffer). 777                 Grupo Santander must also maintain a minimum capital ratio of 11.42% of tier 1 and a minimum total ratio of 13.86%. The following table shows the capital coefficients and a detail of the eligible internal resources of the Group: In 2023, the solvency target set was achieved. Santander’s CET1 1 ratio stood at 12.30% 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 Approved dividendC 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 8,092 44,373 69,278 (1,078) 11,076 (1,298) 2021 8,397 46,273 62,111 (675) 9,605 (979) 2020 8,670 47,979 56,606 (894) 8,124 (836) 130,443 (35,020) 8,818 104,241 (17,313) 124,732 (35,628) 8,481 97,585 (17,272) 119,649 (32,719) 10,123 97,053 (16,132) 9,002 (1,471) (8,717) 85,742 8,831 10,050 (942) (5,169) 83,033 (895) (7,624) 82,452 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 25% 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. 1 Capital coefficients EUR million 2023 2022 2021 8,831 9,002 76,741 10,050 74,202 72,402 Level 1 ordinary eligible capital (EUR million) Level 1 additional eligible capital (EUR million) Level 2 eligible capital (EUR million) 16,497 14,865 Risk-weighted assets (EUR million) 623,731 609,266 578,930 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% 13.75% 2.64% 16.39% 12.18% 12.30% 14,359 1.45% 1.45% 14.24% 2.57% 16.81% 12.51% 1.73% 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 Excess IRB provision on PE T2-excesses - subsidiaries Total eligible capital 2023 2022 2021 76,741 8,092 74,202 8,397 72,402 8,670 (2,847) (60) (966) 44,373 68,721 (35,038) 6,899 8,307 (21,766) 46,273 62,246 (37,439) 7,416 7,684 (20,315) 47,979 58,157 (34,784) 6,736 6,394 (19,784) (17,220) (17,182) (16,064) (4,546) 9,002 8,461 541 16,497 17,101 76 (680) 102,240 (3,133) 8,831 8,344 487 14,359 14,770 — (411) 97,392 (3,720) 10,050 10,102 (52) 14,865 15,424 75 (634) 97,317 Note: Banco Santander, S.A. and its affiliates had not taken part in any State aid programmes. 1 Data calculated applying the transitional provisions of IFRS 9 778         Global systemically important banks Grupo Santander is one of 29 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. Additionally, Grupo Santander appears both on the list of global systemic entities and on the list of domestic systemic entities. Bank of Spain, based on rule 23 of Circular 2/2016, requires the application of the highest of the two corresponding buffers, in the case of Grupo Santander being the domestic one, 1.25%, a surcharge payable by 2024. The fact that Grupo Santander has to comply with these requirements makes it a more solid bank than its domestic rivals. 55. 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, is established an additional surcharge which will be 50% of the cushion ratio applicable to the EISM, applicable from January 2023. In addition, modifications are included in its calculation, including the exclusion of certain exposures from the total exposure measure: public loans when exceptional circumstances arise, public loans, transfer loans and officially guaranteed export credits, transfer loans and officially guaranteed export credits. EUR million Leverage Level 1 Capital Exposure Leverage Ratio 2023 2022 2021 85,742 1,826,922 83,033 1,750,626 82,452 1,536,516 4.69% 4.74% 5.37% 779       2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Appendix 780 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Appendix I Subsidiaries of Banco Santander, S.A. 1 Company 2 & 3 Triton Limited A & L CF (Guernsey) Limited (n) A & L CF June (2) Limited (e) (j) A & L CF June (3) Limited (e) A & L CF March (5) Limited (d) (j) A & L CF September (4) Limited (f) Abbey Business Services (India) Private Limited (d) Location United Kingdom Guernsey United Kingdom United Kingdom United Kingdom United Kingdom India 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 % of ownership held by Banco Santander Percentage of voting power (k) Direct Indirect Year 2023 Year 2022 Activity 0.00% 100.00% 100.00% 100.00% Real estate EUR million (a) Capital + reserves 19 Net results 1 Carrying amount 12 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% Leasing Inactive 100.00% 0.00% 100.00% 100.00% 100.00% Leasing 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Holding company — (b) — — Securitization 0.00% 100.00% 100.00% 100.00% Securitization 0 0 0 0 20 0 0 0 0 0 0 0 0 0 0 0 — (b) — — Securitization 399 84 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive Abbey National International Limited Jersey 0.00% 100.00% 100.00% 100.00% Financial services Abbey National Nominees Limited Abbey National PLP (UK) Limited Abbey National Property Investments Abbey National Treasury Services Investments Limited 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 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Finance company 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 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% 1.00% 99.00% 96.34% 100.00% 0.00% 100.00% 100.00% Allane Leasing GmbH Allane Location Longue Durée S.a.r.l. Allane Mobility Consulting AG Austria France Switzerland 0.00% 46.95% 0.00% 46.95% 0.00% 46.95% 100.00% 100.00% 100.00% Allane Mobility Consulting B.V. Netherlands 0.00% 46.95% 100.00% 100.00% Electricity production 100.00% Holding company 100.00% Payments and collection services 96.34% Cards 100.00% Holding company 100.00% Fund management company 100.00% Renting 100.00% Renting 100.00% Consulting services 100.00% Consulting services 0 0 0 0 0 0 0 0 0 0 0 4 0 0 0 0 3 0 0 0 0 0 0 0 243 10 159 0 0 0 0 0 0 0 0 0 0 (36) (69) 0 0 0 0 0 0 281 130 894 2 1 0 4 (2) 17 1 (3) (1) 0 30 0 0 4 (1) 0 4 1 0 4 0 0 0 0 781 2023 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 Mobility Consulting GmbH Location Germany % of ownership held by Banco Santander Percentage of voting power (k) Direct Indirect Year 2023 Year 2022 Activity 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% Allane Schweiz AG Allane SE Allane Services GmbH & co. KG Allane Services Verwaltungs GmbH Switzerland Germany Germany Germany 0.00% 46.95% 0.00% 46.95% 0.00% 46.95% 0.00% 46.95% 100.00% 92.07% 100.00% 100.00% 100.00% Consulting services 100.00% Consulting services 100.00% Consulting services 100.00% Renting 92.07% Renting 100.00% Services 100.00% Management of portfolios Alliance & Leicester Cash Solutions Limited Alliance & Leicester Commercial Bank Limited Alliance & Leicester Investments (Derivatives) Limited Alliance & Leicester Investments (No.2) Limited United Kingdom United Kingdom United Kingdom United Kingdom Alliance & Leicester Investments Limited United (j) Kingdom Alliance & Leicester Limited Alliance & Leicester Personal Finance Limited Altamira Santander Real Estate, S.A. Alternative Leasing, FIL (Compartimento B) Amazonia Trade Limited United Kingdom United Kingdom Spain Spain United Kingdom Amherst Pierpont Commercial Mortgage Securities LLC United States 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 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 0.00% 100.00% 100.00% 100.00% 100.00% 0.00% 0.00% 100.00% 100.00% 100.00% Finance company 100.00% Real estate Investment 100.00% fund 100.00% 0.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Securitization Amherst Pierpont International Ltd. AMS Auto Markt Am Schieferstein GmbH (d) AN (123) Limited Hong-Kong Germany 0.00% 100.00% 0.00% 90.01% 100.00% 100.00% 100.00% — Inactive Vehicle sales United Kingdom 0.00% 100.00% 100.00% 100.00% Inactive Andaluza de Inversiones, S.A. Unipersonal Spain 0.00% 100.00% 100.00% 100.00% Holding company ANITCO Limited AP Acquisition Trust I AP Acquisition Trust II AP Asset Acquisition LLC Apê11 Tecnologia e Negócios Imobiliários S.A. APSG GP LLC Aquanima Brasil Ltda. Aquanima Chile S.A. Aquanima México S. de R.L. de C.V. Aquanima S.A. Artarien S.A. Athena Corporation Limited Atlantes Mortgage No. 2 Atlantes Mortgage No. 3 United Kingdom United States United States United States Brazil United States Brazil Chile Mexico Argentine Uruguay United Kingdom Portugal Portugal 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Trust company 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Financial services 0.00% 81.17% 90.00% 90.00% Real estate 0.00% 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Holding company 100.00% E-commerce 100.00% Services 100.00% E-commerce 100.00% Services 100.00% Insurance intermediary 100.00% Financial services — — (b) (b) — — — — Securitization Securitization EUR million (a) Capital + reserves 11 Net results 1 Carrying amount 5 (1) (1) 14 195 2 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 (233) (11) 0 0 0 150 0 0 0 0 0 0 0 0 0 282 131 (152) 8 219 123 0 0 3 0 0 37 0 0 0 1 6 0 3 3 4 2 1 (9) 0 0 0 0 0 0 0 0 0 0 0 0 (2) 0 0 1 0 (1) 7 0 0 0 0 0 3 0 0 27 0 0 0 1 3 0 3 3 4 4 2 0 0 0 782 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Subsidiaries of Banco Santander, S.A. 1 Company 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 Location Portugal Brazil Belgium France Auto ABS French Leases 2021 Auto ABS French Leases 2023 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 Rainbow Loans S.r.l. Auto ABS Italian Stella Loans 2023-1 S.r.l. Auto ABS Spanish Loans 2018-1, Fondo de Titulización Auto ABS Spanish Loans 2020-1, Fondo de Titulización Auto ABS Spanish Loans 2022-1, Fondo de Titulización Autodescuento, S.L. France France France France France Italy Italy Italy Spain Spain Spain Spain Autohaus24 GmbH Auttar HUT Processamento de Dados Ltda. Aviación Antares, A.I.E. Aviación Británica, A.I.E. Aviación Comillas, S.L. Unipersonal Aviación Laredo, S.L. Aviación Oyambre, S.L. Unipersonal Aviación Santillana, S.L. Aviación Suances, S.L. Aymoré Crédito, Financiamento e Investimento S.A. Banco Bandepe S.A. Banco de Albacete, S.A. Unipersonal Banco Hyundai Capital 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 % of ownership held by Banco Santander Percentage of voting power (k) Indirect Year 2023 Year 2022 Activity Direct — (b) 0.00% 90.19% — — 100.00% 100.00% — — — — — — — — — — — — — (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) — — — — — — — — — — — — — 0.00% 93.89% 93.89% Securitization Investment fund Securitization Securitization Securitization Securitization Securitization Securitization Securitization Securitization Securitization Securitization Securitization — — — — — — — — — — — — Securitization — Securitization 93.89% Vehicles purchased by internet Internet IT services Germany Brazil 0.00% 46.95% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% Spain Spain Spain Spain Spain Spain Spain Brazil Brazil Spain Brazil Chile Brazil Mexico 99.99% 99.99% 100.00% 99.00% 100.00% 99.00% 99.00% 0.01% 0.01% 0.00% 1.00% 0.00% 1.00% 1.00% 0.00% 90.19% 100.00% 0.00% 90.19% 0.00% 0.00% 45.09% 0.00% 67.13% 0.04% 90.15% 0.00% 99.97% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 67.18% 90.80% 100.00% Mexico 0.00% 99.97% 100.00% Mexico 0.00% 99.97% 100.00% 100.00% Renting 100.00% Renting 100.00% Renting 100.00% Air transport 100.00% Renting 100.00% Renting 100.00% Air transport 100.00% Finance company 100.00% Banking 100.00% Banking 50.00% Banking 67.18% Banking 90.90% Banking 100.00% Finance company 100.00% Finance company 100.00% Finance company EUR million (a) Capital + reserves 0 529 Net results 0 106 Carrying amount 0 573 0 0 0 0 0 0 0 0 0 0 0 0 0 3 (2) 7 59 30 8 3 3 5 7 3,813 977 14 81 4,165 14,362 180 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 18 0 8 6 (7) (1) 0 0 1 1 444 88 0 17 514 1,652 23 28 6 7 3 0 2 3 3,839 960 9 44 3,927 10,795 130 5 16 0 2 5 18 Argentina Colombia 0.00% 99.82% 5.10% 94.90% 99.78% 100.00% 99.77% Banking 100.00% Banking 1,355 187 320 1 537 178 United States 0.00% 100.00% 100.00% 100.00% Banking 942 163 1,105 Banco Santander International SA Switzerland 0.00% 100.00% 100.00% 100.00% Banking 1,332 9 869 783   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Subsidiaries of Banco Santander, S.A. 1 Company Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México Banco Santander Perú S.A. Banco Santander S.A. Banco Santander Totta, S.A. Banque Stellantis France Bansa Santander S.A. BEN Benefícios e Serviços Instituição de Pagamento S.A. BEXs Banco de Cambio S/A BEXs Tech Participacoes Ltda. Location Mexico Peru Uruguay Portugal France Chile Brazil Brazil Brazil BEXs Tecnología da Informacao Ltda. Bilkreditt 7 Designated Activity Company (j) Brazil Ireland % of ownership held by Banco Santander Percentage of voting power (k) Direct 24.93% 75.05% Indirect Year 2023 Year 2022 Activity 96.24% Banking 99.97% 99.90% 97.75% 0.10% 2.25% 0.00% 99.87% 0.00% 50.00% 0.00% 100.00% 0.00% 90.19% 100.00% 100.00% 99.96% 50.00% 100.00% 100.00% 0.00% 66.54% 100.00% 0.00% 66.54% 100.00% 0.00% 66.54% (b) — 100.00% — 100.00% Banking 100.00% Banking 99.96% Banking 50.00% Banking 100.00% Real estate 100.00% Payment services — — — — Payment services Holding company IT services Securitization Blecno Investments, S.L. Unipersonal BRS Investments S.A. Spain Argentine 100.00% 0.00% 5.10% 94.90% 100.00% 100.00% Camine D - Services, Unipessoal Lda. Cántabra de Inversiones, S.A. Portugal Spain 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% Cántabro Catalana de Inversiones, S.A. Spain 100.00% 0.00% 100.00% Capital Street Delaware LP Capital Street Holdings, LLC Capital Street REIT Holdings, LLC United States United States United States 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% Capital Street S.A. Luxembourg 0.00% 100.00% 100.00% 100.00% Real estate 100.00% Finance company — Software 100.00% Holding company 100.00% Holding company 100.00% Holding company 100.00% Holding company 100.00% Holding company 100.00% Finance company Cartasur Cards S.A. Argentine 0.00% 99.82% 100.00% — Finance company Mexico 0.00% 99.97% 99.97% 99.97% Securities company 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive 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 (j) Cater Allen Syndicate Management Limited CCAP Auto Lease Ltd. United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United States Centro de Capacitación Santander, A.C. Mexico 0.00% 99.97% 100.00% 100.00% Non-profit institute Certidesa, S.L. Unipersonal Charlotte 2023 Funding Plc Charlotte 2023 Holdings Limited Chrysler Capital Auto Funding II LLC Chrysler Capital Master Auto Receivables Funding 2 LLC Cianite New Energy, S.r.l. Spain United Kingdom United Kingdom United States United States Italy 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% Aircraft rental Securitization — — (b) — — Securitization 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Finance company 100.00% Finance company 0.00% 49.00% 70.00% — Renewable energies EUR million (a) Capital + reserves 7,007 Net results 1,570 Carrying amount 9,085 257 525 3,110 1,060 25 11 54 159 943 129 4 1 122 191 3,815 881 29 10 15 4 4 0 176 60 0 127 274 0 11 953 0 11 71 0 0 1 0 (1) 0 4 (6) 0 (5) 7 0 0 46 0 (4) 22 0 0 11 5 4 0 183 50 3 103 267 0 11 999 0 7 93 0 0 0 0 393 1 (67) 0 0 36 0 0 44 0 (8) 0 0 1 (250) (22) 0 0 0 0 437 1 0 0 0 0 0 1 784 0.00% 100.00% 100.00% 100.00% Banking 293 141 256 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% Leasing 2023 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 CIMA Finance DAC Series 2022-1 CiMA Finance Designated Activity Company Loan Series 2023-11 CiMA Finance Designated Activity Company Series 2023-15 Location Ireland Ireland Direct — — Ireland — (b) (b) (b) — — — Cobranza Amigable, S.A.P.I. de C.V. Mexico 0.00% 85.00% 100.00% Indirect Year 2023 Year 2022 Activity — — — Securitization Finance company 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 0.00% 50.00% 100.00% 100.00% Banking Portugal 100.00% 0.00% 100.00% 100.00% Real estate Community Development and Affordable Housing Fund LLC (c) Compagnie Generale de Credit Aux Particuliers - Credipar S.A. Compagnie Pour la Location de Vehicules - CLV Consulteam Consultores de Gestão, Unipessoal, Lda. United States France France Consumer Totta 1 Credileads S.A. Cyber Guardian Solutions, S.L. Unipersonal Darep Designated Activity Company Decarome, S.A.P.I. de C.V. Portugal Uruguay Spain Ireland Mexico Decarope S.A.C. 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 Diglo Servicer Company 2021, S.L. Unipersonal Diners Club Spain, S.A. Unipersonal Dirección Estratega, S.C. 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 2023-1 Drive Auto Receivables Trust 2023-2 Drive Auto Receivables Trust 2023-3 Drive Auto Receivables Trust 2024-1 Drive S.r.l. Ductor Real Estate, S.L. Unipersonal Ebury Brasil Consultoria S.A. Peru Spain Spain Spain Spain Spain Spain Spain Mexico United States United States United States United States United States United States United States United States United States Italy Spain Brazil — (b) 0.00% 100.00% 0.00% 100.00% — — Securitization 100.00% 100.00% 100.00% Advertising — IT consulting 100.00% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% Reinsurances 100.00% Finance company 0.00% 100.00% 100.00% — Investment 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 0.00% 100.00% 100.00% 100.00% Real estate management 100.00% 100.00% 100.00% Cards 100.00% Services 100.00% 0.00% 0.00% 100.00% (b) — — — — — — — — — (b) (b) (b) (b) (b) (b) (b) (b) — — — — — — — — — — Securitization — Securitization — Securitization — Inactive — Inactive — Inactive — Inactive 100.00% 0.00% 75.00% 0.00% 0.00% 66.54% 75.00% 100.00% 100.00% 100.00% Renting 100.00% Real estate 100.00% Consulting services EUR million (a) Capital + reserves 0 0 Net results 0 0 Carrying amount 0 0 0 5 34 363 22 0 0 0 5 7 59 14 2 273 193 22 67 21 9 0 111 125 60 0 0 (1) 41 2 0 0 0 (1) (1) 3 2 1 (18) 21 (13) (5) 3 0 0 32 37 87 0 0 0 0 7 26 106 0 0 0 0 (1) 2 (2) 0 3 9 428 26 0 0 4 4 7 58 14 2 290 182 10 61 19 10 0 0 0 0 0 0 0 0 0 0 6 24 104 785 — Securitization (64) 111 — Securitization (117) 84 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 100.00% Software 100.00% Finance company 100.00% Holding company 100.00% Payment services Subsidiaries of Banco Santander, S.A. 1 Company Ebury Brasil Participacões S.A. Location Brazil % of ownership held by Banco Santander Percentage of voting power (k) Direct 0.00% 66.54% Indirect Year 2023 Year 2022 Activity 100.00% Holding company 100.00% Ebury Facilitadora De Pagamentos Ltda. Ebury Finance Belgium NV (g) (j) Brazil Belgium 0.00% 66.54% 0.00% 66.54% 100.00% 100.00% Ebury Mass Payments Holdco Limited (o) United Kingdom Ebury Mass Payments Limited (o) Ebury Partners (DIFC) Limited (o) United Kingdom Arab United Emirates 0.00% 66.54% 100.00% 0.00% 66.54% 100.00% 0.00% 66.54% 100.00% — Finance company Ebury Partners Australia Pty Ltd. (o) Australia 0.00% 66.54% 100.00% Ebury Partners Belgium NV (o) Belgium 0.00% 66.54% 100.00% Ebury Partners Canada Limited (o) Canada 0.00% 66.54% 100.00% 100.00% Finance company 100.00% Payment services 100.00% Finance company Ebury Partners Chile S.p.A. Chile 0.00% 66.54% 100.00% — Finance company Ebury Partners China Limited Ebury Partners Finance Limited (o) Ebury Partners Holdings Limited (g) 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 (o) Hong-Kong 0.00% 66.54% 100.00% Ebury Partners Limited (o) United Kingdom 0.00% 66.54% 66.54% 100.00% Inactive 100.00% Finance company 100.00% Holding company 100.00% Finance company 66.54% Holding company Ebury Partners Markets Cyprus Limited (o) Cyprus 0.00% 66.54% 100.00% — Finance company Ebury Partners Markets Limited (o) Ebury Partners SA (Pty) Ltd. (o) Ebury Partners South Africa (Pty) Ltd United Kingdom Republic of South Africa Republic of South Africa 0.00% 66.54% 100.00% 100.00% Finance company 0.00% 66.54% 100.00% 100.00% Inactive 0.00% 66.54% 100.00% — Finance company Ebury Partners Switzerland AG (o) Switzerland 0.00% 66.54% 100.00% Ebury Partners UK Limited (o) Ebury Payments PTE Ltd. (o) Ebury Technology Limited (o) 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% 100.00% Finance company 100.00% Electronic money 100.00% Payment services 0.00% 66.54% 100.00% 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% 99.97% 0.00% 100.00% 100.00% 100.00% Em Dia Serviços Especializados em Cobranças Ltda. Brazil 0.00% 90.19% 100.00% Empresa de Créditos Santander Consumo Perú S.A. Peru 100.00% 0.00% 100.00% Erestone S.A.S. (j) Esfera Fidelidade S.A. Evidence Previdência S.A. Eyemobile Tecnologia S.A. F1rst Tecnologia e Inovação Ltda. France Brazil Brazil Brazil Brazil 0.00% 90.00% 0.00% 90.19% 0.00% 90.19% 0.00% 100.00% 0.00% 90.19% 90.00% 100.00% 100.00% 100.00% 100.00% 70.00% Holding company 100.00% Services 100.00% Holding company 100.00% Collection services 100.00% Finance company 90.00% Inactive 100.00% Services 100.00% 60.00% 100.00% Insurance IT services IT services EUR million (a) Capital + reserves 105 Net results 0 Carrying amount 104 0 0 0 8 0 2 16 3 0 0 (11) 0 2 0 0 0 2 0 0 4 0 0 0 0 0 0 0 0 18 0 0 2 18 7 0 0 0 0 3 249 (10) 503 0 22 0 0 6 25 0 (54) 0 0 0 50 49 49 1 25 144 1 61 0 1 0 0 0 0 18 0 0 5 (8) 159 0 1 0 0 0 (3) (5) 2 0 145 11 (1) 18 2 0 0 0 0 50 36 48 1 153 139 0 71 786 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Subsidiaries of Banco Santander, S.A. 1 Company Financeira El Corte Inglés, Portugal, S.F.C., S.A. Location Portugal % of ownership held by Banco Santander Percentage of voting power (k) Direct Indirect Year 2023 Year 2022 Activity 100.00% Finance 100.00% 0.00% 51.00% company 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% 51.00% Finance company 100.00% Holding company EUR million (a) Capital + reserves 8 Net results 1 Carrying amount 4 267 1,255 41 30 140 1,020 0.00% 100.00% 100.00% 100.00% Securitization 84 (59) 0.00% 100.00% 100.00% 100.00% Securitization (1) 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% Foreign Exchange Solutions (UK) Limited (j) (o) United Kingdom 0.00% 66.54% 100.00% 100.00% First National Motor plc First National Tricity Finance Limited Fondation Holding Auto ABS Belgium Loans Fondo de Titulización PYMES Santander 15 Fondo de Titulización Santander Consumer Spain Auto 2016-2 Fondo de Titulización Santander Financiación 1 United Kingdom United Kingdom Belgium Spain Spain Spain Spain Ireland United Kingdom United Kingdom United Kingdom United Kingdom United States United States Brazil Brazil Brazil Foreign Exchange Solutions S.L. (o) 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 Fundo de Investimento em Direitos Creditórios Atacado - Não Padronizado Fundo de Investimento em Direitos Creditórios Tellus Fundo de Investimentos em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não padronizado Gamma, Sociedade Financeira de Titularização de Créditos, S.A. GC FTPYME Pastor 4, Fondo de Titulización de Activos 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Inactive — — — — (b) (b) (b) (b) — — — — — 100.00% — Securitization — Securitization — Securitization — Securitization — Securitization 100.00% Fund management company IT services 0.00% 66.54% 0.00% 100.00% 100.00% 100.00% IT services 100.00% 100.00% Finance company — (b) — — Securitization 0.00% 100.00% 100.00% 100.00% Securitization 0.00% 100.00% 100.00% 100.00% Holding company 0.00% 100.00% 100.00% 100.00% Securitization 0.00% 90.19% 100.00% 100.00% 0.00% 90.19% 100.00% — 0.00% 90.19% 100.00% 100.00% Investment fund Investment fund Investment fund Portugal 0.00% 99.87% 100.00% 100.00% Securitization Spain — (b) — — Securitization Gesban México Servicios Administrativos Mexico Globales, S.A. de C.V. Gesban Santander Servicios Profesionales Contables Limitada Chile 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% 100.00% Payments and collection services 100.00% Services 100.00% Holding company 0 6 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 42 0 64 0 0 0 0 0 0 0 0 0 0 0 120 0 409 7 0 2 0 5 2 15 (1) 0 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 147 0 427 8 0 0 0 1 0 15 0 787 2023 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 Getnet Adquirência e Serviços para Meios de Pagamento S.A. - Instituição de Pagamento Getnet Argentina S.A.U. Getnet Europe, Entidad de Pago, S.L. Unipersonal Getnet Fundo de Investimento em Direitos Creditórios Getnet Merchant Solutions UK Ltd Spain Brazil United Kingdom Location Brazil Direct 0.00% 100.00% Indirect Year 2023 Year 2022 Activity 97.10% Payment services 100.00% Argentine 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Payment methods 100.00% Payment services 0.00% 90.19% 100.00% 100.00% Investment fund 0.00% 100.00% 100.00% Getnet Sociedade de Credito Direto S.A. Brazil 0.00% 100.00% 100.00% Getnet Uruguay S.A. Uruguay 0.00% 100.00% 100.00% Gira, Gestão Integrada de Recebíveis do Agronegócio S.A. (p) GNXT Serviços de Atendimento Ltda. Golden Bar (Securitisation) S.r.l. 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 Golden Bar Stand Alone 2023-1 Golden Bar Stand Alone 2023-2 Grafite New Energy, S.r.l. Gravity Cloud Technology, S.L. Grupo Empresarial Santander, S.L. Brazil Brazil Italy Italy Italy Italy Italy Italy Italy Italy Italy Spain Spain 0.00% 72.15% 80.00% 0.00% 100.00% (b) (b) (b) (b) (b) (b) (b) (b) 0.00% 49.00% — — — — — — — — 100.00% — — — — — — — — 70.00% 100.00% 99.62% 0.00% 0.38% 100.00% 100.00% Grupo Financiero Santander México, S.A. de C.V. Mexico 100.00% 0.00% 100.00% Guaranty Car, S.A. Unipersonal Hipototta No. 13 Hipototta No. 4 FTC Hipototta No. 4 plc Hipototta No. 5 FTC Hipototta No. 5 plc Holbah Santander, S.L. Unipersonal Spain Portugal Portugal Ireland Portugal Ireland Spain 0.00% 100.00% (b) (b) (b) (b) (b) 0.00% 100.00% — — — — — 100.00% — — — — — 100.00% 100.00% Financial services 100.00% Finance company 100.00% Payment methods 80.00% Consulting services 100.00% Telemarketing Securitization Securitization Securitization Securitization Securitization Securitization Securitization Securitization Renewable energies — — — — — — — — — IT services 100.00% 100.00% Holding company 100.00% Holding company 100.00% Automotive — Securitization — Securitization — Securitization — Securitization — Securitization 100.00% Holding company EUR million (a) Capital + reserves 477 Net results 156 Carrying amount 354 20 185 2 6 (3) 18 (1) (1) 17 177 2 6 22 13 35 8 1 3 0 0 0 0 0 0 0 0 0 (2) (5) 2 0 0 0 0 0 0 0 0 0 6 0 5 0 0 0 0 0 0 0 0 1 33 4,556 0 364 27 3,089 5,380 1,193 5,980 3 0 (53) (2) (46) (11) 484 3 0 0 (1) (4) 0 (5) 86 0 Holding BEXs Banco Participacoes Ltda. Brazil 0.00% 66.54% 100.00% — Holding company Holmes Funding Limited Holmes Holdings Limited Holmes Master Issuer plc Holmes Trustees Limited Hyundai Capital Bank Europe GmbH Ibérica de Compras Corporativas, S.L. Independence Community Bank Corp. Innohub, S.A.P.I. de C.V. Insurance Funding Solutions Limited Inversiones Capital Global, S.A. Unipersonal United Kingdom United Kingdom United Kingdom United Kingdom Germany Spain United States Mexico United Kingdom Spain 0.00% 100.00% 100.00% 100.00% Securitization 67 (100) — (b) — — Securitization 0 0.00% 100.00% 100.00% 100.00% Securitization (12) 0.00% 100.00% 100.00% 100.00% Securitization 0 97.17% 0.00% 51.00% 2.83% 0.00% 100.00% 51.00% 100.00% 100.00% 51.00% Banking 100.00% E-commerce 100.00% Holding company 0.00% 62.01% 0.00% 100.00% 62.01% 100.00% 40.84% 100.00% IT services Inactive 100.00% 0.00% 100.00% 100.00% Holding company 868 26 3,566 2 0 97 0 2 0 4 0 46 (1) 0 (1) 2 0 0 0 0 0 871 0 0 0 0 0 445 6 3,612 1 0 106 788 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix — Securitization 100.00% Finance company 50.10% Insurance intermediary 100.00% Real estate management 61.59% Agricultural holding 100.00% Real estate 100.00% Renewable energies 100.00% Factoring — Mortgage credit company 96.34% Cards 100.00% Agricultural holding — — Banking Real estate rental 70.00% Payment methods 100.00% Financial advisory Subsidiaries of Banco Santander, S.A. 1 Company Inversiones Marítimas del Mediterráneo, S.A. Location Spain % of ownership held by Banco Santander Percentage of voting power (k) Direct Indirect Year 2023 Year 2022 Activity Inactive 100.00% 100.00% 0.00% 100.00% Isar Valley S.A. Isla de los Buques, S.A. Luxembourg Spain — 99.98% (b) 0.02% — 100.00% Klare Corredora de Seguros S.A. Chile 0.00% 33.63% 50.10% Landcompany 2020, S.L. Unipersonal Spain 100.00% 0.00% 100.00% Laparanza, S.A. Spain 61.59% 0.00% 61.59% Lerma Investments 2018, S.L. Unipersonal Spain Spain Liquetine, S.L. Unipersonal 100.00% 0.00% 0.00% 70.00% 100.00% 100.00% Liquidity Limited Lynx Financial Crime Tech, S.A. Unipersonal MAC No. 1 Limited Master Red Europa, S.L. Mata Alta, S.L. Unipersonal MCE Bank GmbH (d) MCE Verwaltung GmbH (d) 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% IT services United Kingdom Spain United Kingdom Spain Spain — (b) — 96.34% 0.00% 0.00% 61.59% 96.34% 100.00% Germany Germany 0.00% 90.01% 0.00% 90.01% 90.01% 100.00% 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. Mercury Trade Finance Solutions SpA Mercury Trade Finance Solutions, S.A. de C.V. Colombia Chile Mexico Mercury Trade Finance Solutions, S.L. Merlion Aviation One Designated Activity Company Spain Ireland 0.00% 50.10% 0.00% 50.10% 0.00% 50.10% 100.00% 100.00% 100.00% 100.00% IT services 100.00% Inactive 100.00% IT services 0.00% 50.10% (b) — 50.10% — 50.10% IT services — Renting Midata Service GmbH (d) Mobills Corretora de Seguros Ltda. Germany Brazil 0.00% 90.01% 0.00% 56.48% 100.00% 100.00% — IT services 100.00% Insurance intermediary Brazil 0.00% 56.48% 100.00% 100.00% IT services Mobills Labs Soluções em Tecnologia Ltda. - EPP Motor 2016-1 Holdings Limited Motor 2016-1 PLC Motor 2017-1 Holdings Limited Motor Securities 2018-1 Designated Activity Company (j) Mouro Capital I LP Multiplica SpA United Kingdom United Kingdom United Kingdom Ireland United Kingdom Chile — (b) — — Securitization 0.00% 100.00% 100.00% 100.00% Securitization — — (b) (b) — — 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% Munduspar Participações S.A. Brazil 80.00% 0.00% 80.00% EUR million (a) Capital + reserves 2 Net results (1) Carrying amount 0 4 1 1 0 0 (3) 0 1 0 1,679 (21) 1,670 29 10 1 (1) 48 0 1 1 125 10 1 0 0 0 0 11 23 0 0 3 0 0 0 0 1 0 0 (2) 0 0 0 8 0 12 0 0 0 0 (4) (1) 0 0 1 0 0 0 2 16 11 3 0 46 0 1 0 86 9 14 0 0 0 0 6 0 0 0 2 0 0 0 0 — Securitization — Securitization (2) 100.00% Investment fund 100.00% Payment services 80.00% Holding company 722 43 316 3 29 (1) (1) 3 66 789 2023 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 Navegante Américo Vespucio SpA Naviera Mirambel, S.L. Unipersonal Location Chile Spain Direct Indirect 0.00% 100.00% 0.00% 100.00% Year 2023 Year 2022 100.00% 100.00% 100.00% 100.00% Naviera Trans Gas, A.I.E. Naviera Trans Ore, A.I.E. Naviera Transcantábrica, S.L. Naviera Transchem, S.L. Unipersonal NeoAuto S.A.C. Spain Spain Spain Spain Peru 99.99% 99.99% 100.00% 100.00% 0.00% 0.01% 0.01% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 55.00% Newco Didier Holding Ltda. Brazil 0.00% 66.54% 100.00% — Newcomar, S.L., en liquidación (j) Novimovest – Fundo de Investimento Imobiliário Spain Portugal 40.00% 0.00% 40.00% 78.64% 80.00% 78.74% 80.00% 78.74% Activity Real estate Finance company Renting Renting Leasing Leasing Vehicles purchased by internet Holding company Real estate Investment fund NW Services CO. One Mobility Management GmbH Open Bank Argentina S.A. Open Bank, S.A. Open Digital Market, S.L. Open Digital Services, S.L. Openbank México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México Operadora de Carteras Gamma, S.A.P.I. de C.V. United States Germany Argentine Spain Spain Spain Mexico 0.00% 100.00% 0.00% 46.95% 0.00% 99.91% 100.00% 0.00% 0.00% 100.00% 99.97% 0.03% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% E-commerce 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Services Banking Banking Commerce Services Banking 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 (i) (m) Optimal Multiadvisors Ireland Plc / Optimal Strategic US Equity Ireland US Dollar Fund (i) (m) Paga Después, S.A. de C.V. Ireland 0.00% 0.00% 0.00% Ireland 0.00% 0.00% 0.00% Mexico 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 100.00% Financial services PagoFX UK Ltd PagoNxt Emoney, E.D.E., S.L. PagoNxt Ltd PagoNxt Merchant SoluçõesTecnológicas Brasil Ltda. PagoNxt Merchant Solutions FZ-LLC PagoNxt Merchant Solutions India Private Limited United Kingdom Spain United Kingdom Brazil Arab United Emirates India 0.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% Payment services Financial services Holding company 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Financial services 100.00% Financial services 100.00% Holding company PagoNxt Merchant Solutions, S.L. Spain 0.00% 100.00% 100.00% PagoNxt One Trade UK Ltd 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. United Kingdom Mexico Spain Brazil Chile Spain 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% IT services 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% Payment services 100.00% Financial services 100.00% Services 100.00% Services EUR million (a) Capital + reserves 68 0 Net results (1) 0 Carrying amount 98 0 33 38 5 1 1 13 0 172 8 0 33 563 0 82 48 11 46 0 0 4 4 3 4 18 12 0 0 0 (8) 0 3 1 0 (20) 126 0 (52) (4) 1 (3) 0 0 0 (2) (1) 2 57 17 4 1 2 102 0 138 8 0 13 630 0 0 44 11 30 0 0 4 2 4 0 0 1 0 0 1 1 1,147 (21) 1,323 0 0 20 1 1 305 0 (1) (2) 0 0 0 14 1 0 (72) 1 232 790 0.00% 100.00% 100.00% 100.00% IT services 142 (30) 112 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Subsidiaries of Banco Santander, S.A. 1 Company PagoNxt Trade, S.L. PagoNxt US, LLC PagoNxt, S.L. Location Spain United States Spain % of ownership held by Banco Santander Percentage of voting power (k) Year 2023 Year 2022 Activity Direct Indirect 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% Parasant SA Switzerland 100.00% 0.00% 100.00% Partners Ebury México, S.A. de C.V. Mexico 0.00% 66.54% 100.00% Paytec Logística e Armazém Ltda. Brazil 0.00% 100.00% 100.00% 100.00% IT services — Inactive 100.00% Holding company 100.00% Holding company — Payment services 100.00% Logistics services Paytec Tecnologia em Pagamentos Ltda. Brazil 0.00% 100.00% 100.00% 100.00% Commerce 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% Pingham International, S.A. (j) Pony S.A. Pony S.A., Compartment German Auto Loans 2021-1 Pony S.A., Compartment German Auto Loans 2023-1 Uruguay Luxembourg Luxembourg 0.00% 100.00% (b) (b) — — Luxembourg — (b) 100.00% — — — 100.00% Payment methods 100.00% Inactive — — Securitization Securitization — Securitization Portal Universia Argentina S.A. Portal Universia Portugal, Prestação de Serviços de Informática, S.A. Argentine Portugal 0.00% 75.75% 0.00% 100.00% 75.75% 100.00% 75.75% Internet 100.00% Internet Precato IV Fundo de Investimento em Direitos Creditórios - Não Padronizados Prime 16 – Fundo de Investimentos Imobiliário Brazil 0.00% 90.19% 100.00% — Investment fund Brazil 0.00% 90.19% 100.00% Punta Lima Wind Farm, LLC United States 0.00% 100.00% 100.00% Punta Lima, LLC Repton 2023-1 Limited United States United Kingdom 0.00% 100.00% (b) — 100.00% — Retailcompany 2021, S.L. Unipersonal Spain Retop S.A. (f) Uruguay 100.00% 100.00% 0.00% 0.00% 100.00% 100.00% Return Capital S.A. Roc Aviation One Designated Activity Company Roc Shipping One Designated Activity Company Rojo Entretenimento S.A. SAFO Alternative Lending, S.L. Unipersonal SALCO, Servicios de Seguridad Santander, S.A. SAM Argentina Sociedad Gerente de Fondos Comunes de Inversión S.A. SAM Asset Management, S.A. de C.V., Sociedad Operadora de Fondos de Inversión SAM Inversiones Argentina S.A. Brazil Ireland Ireland Brazil Spain Spain 0.00% 90.19% 100.00% — — (b) (b) — — 0.00% 85.32% 0.00% 100.00% 94.60% 100.00% 99.99% 0.01% 100.00% Argentine 0.00% 100.00% 100.00% — Investment fund management Mexico 0.00% 100.00% 100.00% 100.00% Fund Argentine 0.00% 100.00% 100.00% — management company Pension fund management company 100.00% Investment fund 100.00% Renewable energies 100.00% Leasing — Securitization 100.00% Real estate 100.00% Finance company 100.00% Collection services — Renting — Renting 94.60% Real estate 100.00% Finance company 100.00% Security EUR million (a) Capital + reserves 343 0 2,390 Net results (93) 0 (135) Carrying amount 250 0 2,558 1,284 (1) 1,013 0 0 5 112 52 18 0 0 0 0 0 0 0 9 19 38 38 0 305 20 0 0 0 (1) 25 (1) 0 0 0 0 0 0 0 0 (2) (4) (4) (3) (8) 12 0 0 5 112 4 0 3 0 0 0 0 0 0 8 13 34 34 0 296 61 1,244 152 1,258 (5) (4) 26 1 2 1 34 0 (3) 1 2 0 0 0 0 0 24 1 1 1 28 188 0 0 791 2023 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 SAM Investment Holdings, S.L. Location Spain Direct 92.37% Indirect 7.63% Year 2023 Year 2022 Activity 100.00% Holding company 100.00% EUR million (a) Capital + reserves 1,464 Net results 132 Carrying amount 1,597 Brazil 0.00% 90.19% 100.00% — Investment fund 257 46 273 San Créditos Estruturados i Fundo de Investimento em Direitos Creditórios Não Padronizados San Pietro Solar PV, S.r.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. Italy Brazil Brazil United Kingdom United Kingdom United Kingdom Spain 0.00% 56.00% 80.00% 0.00% 90.19% 100.00% 0.00% 90.19% 100.00% — Renewable energies 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% 100.00% 0.00% 100.00% 100.00% Investment fund 0.00% 100.00% 100.00% 100.00% Leasing 0.00% 100.00% 100.00% 100.00% Fund Santander Alternative Investments, S.G.I.I.C., S.A. Unipersonal Spain 0.00% 100.00% 100.00% Santander AM Global Working Capital Fund I Santander Asesorías Financieras Limitada Luxembourg 100.00% 0.00% 100.00% Chile 0.00% 67.45% 100.00% Santander Asset Finance (December) Limited Santander Asset Finance Opportunities Luxembourg United Kingdom 0.00% 100.00% 100.00% United Kingdom Portugal Santander Asset Finance plc Santander Asset Management - SGOIC, S.A. Santander Asset Management Chile S.A. Santander Asset Management Gerente de Fondos Comunes de Inversión S.A. Chile 0.00% 100.00% 100.00% Argentine 0.00% 100.00% 100.00% Santander Asset Management Luxembourg, S.A. Luxembourg 0.00% 100.00% 100.00% Santander Asset Management S.A. Administradora General de Fondos 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., SGIIC 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% 100.00% Leasing 100.00% Services 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% 90.19% 100.00% 67.41% 100.00% 100.00% 98.53% Real estate rental — — Fund management company Investment fund 100.00% Financial advisory 100.00% Leasing management company 100.00% Securities Investment 100.00% Fund management company 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 100.00% Advisory services 100.00% Banking 67.41% Banking 100.00% Banking 100.00% Services 2 3 0 (4) 10 0 129 124 206 0 0 0 1 19 55 0 80 66 77 6 0 16 4 4 223 35 253 0 3 2 0 0 0 0 (9) 1 3 (1) 3 14 3 0 12 1 12 68 7 49 0 1 0 0 0 0 1 19 55 3 0 67 167 12 0 3 0 132 186 150 393 0 1 2 377 5,713 10,336 84 14 1,076 238 108 332 4,570 10,565 173 792 2023 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 Brasil Gestão de Recursos Ltda. Location Brazil Direct Indirect 0.08% 99.92% Year 2023 Year 2022 Activity 100.00% 100.00% Securities Investment Santander Capital Holdings LLC United States 0.00% 100.00% 100.00% Santander Capital Structuring, S.A. de C.V. Santander Capitalização S.A. Santander Cards Ireland Limited (n) Santander Cards Limited Santander Cards UK Limited Santander Chile Holding S.A. Mexico 0.00% 100.00% 100.00% Brazil Ireland United Kingdom United Kingdom Chile 0.00% 90.19% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 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 Santander Consumer Auto Receivables Funding 2018-L1 LLC Santander Consumer Auto Receivables United States Funding 2018-L3 LLC United Kingdom United States 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% Santander Consumer Auto Receivables Funding 2018-L5 LLC Santander Consumer Auto Receivables Funding 2020-L1 LLC Santander Consumer Auto Receivables Funding 2022-B1 LLC Santander Consumer Auto Receivables Funding 2022-B2 LLC Santander Consumer Auto Receivables Funding 2022-B3 LLC Santander Consumer Auto Receivables Funding 2022-B4 LLC Santander Consumer Auto Receivables Funding 2023-B1 LLC Santander Consumer Auto Receivables Funding 2023-B2 LLC Santander Consumer Auto Receivables Funding 2023-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% 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% United States 0.00% 100.00% 100.00% United States 0.00% 100.00% 100.00% 100.00% Holding company 100.00% Investment Company 100.00% Insurance 100.00% Cards 100.00% Cards 100.00% Finance company 99.86% 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 100.00% Finance company — — Finance company Finance company 100.00% Finance company United States Santander Consumer Auto Receivables Funding 2023-B4 LLC Santander Consumer Auto Receivables United States Funding 2023-B5 LLC Santander Consumer Auto Receivables United States Funding 2023-B6 LLC Santander Consumer Auto Receivables United States Funding 2023-L1 LLC Santander Consumer Auto Receivables United States Funding 2024-B1 LLC Santander Consumer Auto Receivables United States Funding 2024-B2 LLC Santander Consumer Auto Receivables United States Funding 2024-B3 LLC Santander Consumer Auto Receivables United States Funding 2024-L1 LLC Santander Consumer Auto Receivables United States Funding 2024-L2 LLC Santander Consumer Auto Receivables United States Funding 2024-L3 LLC 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive 0.00% 100.00% 100.00% — Inactive Santander Consumer Auto Receivables Grantor Trust 2021-D United States — (b) — — Inactive EUR million (a) Capital + reserves 461 Net results 41 Carrying amount 488 1,039 (86) 953 8 (2) (30) (8) 97 107 0 0 0 69 0 97 159 0 111 1,878 181 1,712 9 1 4 1,042 178 300 286 134 186 122 (130) (157) (5) 0 (4) (6) 47 60 (259) 102 (178) 76 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (125) (79) (70) (82) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 793 2023 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 Auto Receivables Grantor Trust 2023-A Location United States Direct — Indirect (b) Year 2023 Year 2022 Activity Inactive — — Santander Consumer Auto Receivables Grantor Trust 2023-B United States Santander Consumer Auto Receivables Trust 2021-D United States Santander Consumer Auto Receivables Trust 2023-A United States Santander Consumer Auto Receivables Trust 2023-B United States — — — — (b) (b) (b) (b) — — — — — Inactive — Inactive — Inactive — Inactive 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% 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 0.00% 100.00% 100.00% Santander Consumer Finance Limitada Chile 49.00% 34.24% 100.00% 100.00% Holding company 100.00% Finance company Santander Consumer Finance México, Mexico S.A. de C.V., S.O.F.O.M., E.R., Grupo Financiero Santander México Santander Consumer Finance Oy Finland 0.00% 99.97% 100.00% 100.00% Inactive 0.00% 100.00% 100.00% 100.00% Finance company Switzerland 0.00% 100.00% 100.00% 100.00% Leasing Santander Consumer Finance Schweiz AG Santander Consumer Finance, S.A. Santander Consumer Financial Solutions Sp. z o.o. Santander Consumer Holding Austria GmbH Austria 0.00% 100.00% 100.00% Santander Consumer Holding GmbH Germany 0.00% 100.00% 100.00% Santander Consumer Inc. Canada 0.00% 100.00% 100.00% 100.00% Holding company 100.00% Holding company 100.00% Finance company Santander Consumer Leasing B.V. Santander Consumer Leasing GmbH Santander Consumer Leasing S.A. Santander Consumer Mobility Services, S.A. Netherlands Germany France Spain 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Renting 100.00% Leasing Renting 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 Santander Consumer Receivables 20 LLC Santander Consumer Receivables 21 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 100.00% Finance company 100.00% Finance company United States 0.00% 100.00% 100.00% — Inactive United States 0.00% 100.00% 100.00% — Inactive EUR million (a) Capital + reserves 0 Net results 0 Carrying amount 0 0 0 0 0 3,388 2,103 482 911 925 (38) 6 91 104 3 416 70 0 0 0 0 273 209 61 15 43 (1) 3 0 17 0 42 6 0 0 0 0 5,145 2,139 363 517 603 0 5 149 57 3 161 61 364 0 518 5,564 179 6,077 89 10 70 3 16 68 13 3 3 35 0 (5) 9 1 1,074 (173) 538 (69) (47) 0 0 95 81 4 0 0 47 21 151 3 20 28 18 0 0 0 0 0 0 794 Spain Poland 100.00% 0.00% 0.00% 80.44% 100.00% 100.00% 100.00% Banking 100.00% Leasing 8,886 1 917 (2) 10,037 2 2023 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 Receivables 7 LLC United States Location Direct Indirect 0.00% 100.00% Year 2023 Year 2022 Activity 100.00% Finance 100.00% company Santander Consumer Receivables Funding LLC United States 0.00% 100.00% 100.00% 100.00% Finance company Santander Consumer Renting S.r.l. Italy 0.00% 100.00% 100.00% 100.00% Renting Santander Consumer Renting, S.L. Santander Consumer S.A. Spain Argentine 0.00% 100.00% 0.00% 99.82% 100.00% 100.00% 100.00% Renting 100.00% Finance company 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% 100.00% Finance company 100.00% Services 100.00% Finance company 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 Santander Consumer Spain Auto 2023-1, Fondo de Titulización Spain Spain Spain Spain Spain Santander Consumer Technology Services GmbH Santander Consumer USA Holdings Inc. United States Germany — — — — — (b) (b) (b) (b) (b) — — — — — — Securitization — Securitization — Securitization — Securitization — Securitization Santander Consumer USA Inc. United States 0.00% 100.00% 100.00% Santander Consumo 4, F.T. Santander Consumo 5, F.T. Santander Corredora de Seguros Limitada Santander Corredores de Bolsa Limitada Santander Corretora de Câmbio e Valores Mobiliários S.A. Santander Corretora de Seguros, Investimentos e Serviços S.A. Spain Spain Chile Chile Brazil Brazil — — (b) (b) 0.00% 67.21% — — — — Securitization Securitization 100.00% 100.00% Insurance intermediary 0.00% 83.24% 100.00% 0.00% 90.19% 100.00% 0.00% 90.19% 100.00% 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% 90.19% 100.00% Santander Drive Auto Receivables Grantor Trust 2023-A Santander Drive Auto Receivables LLC United States United States 0.00% 100.00% 100.00% — (b) — — Inactive 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 United States United States United States United States United States United States — — — — — — (b) (b) (b) (b) (b) (b) — — — — — — 100.00% Securities company 100.00% Securities company 100.00% Insurance intermediary 100.00% Services 100.00% Fund management company 100.00% Securities company 100.00% Finance company — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization EUR million (a) Capital + reserves 484 Net results 219 Carrying amount 0 5 8 41 10 26 0 13 0 0 0 0 0 2 (2) 2 (1) 0 0 1 0 0 0 0 0 2 0 9 38 9 26 0 6 0 0 0 0 0 22 0 0 13 54 172 821 2 5 87 0 0 78 118 140 0 89 23 0 0 9 4 9 0 0 12 48 164 386 1,086 (3) 3 (2) 0 0 22 34 54 0 68 87 2 2 77 0 0 0 0 0 0 0 0 795 0.00% 100.00% 100.00% 100.00% IT services 27 0.00% 100.00% 100.00% 100.00% Holding company 100.00% Finance company 3,262 722 5,016 5,697 722 6,419 2023 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) Location United States Direct — Indirect (b) Year 2023 Year 2022 Activity — Securitization EUR million (a) Capital + reserves (21) Net results 119 Carrying amount 0 Company 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 2023-1 Santander Drive Auto Receivables Trust 2023-2 Santander Drive Auto Receivables Trust 2023-3 Santander Drive Auto Receivables Trust 2023-4 Santander Drive Auto Receivables Trust 2023-5 Santander Drive Auto Receivables Trust 2023-6 Santander Drive Auto Receivables Trust 2023-A Santander Drive Auto Receivables Trust 2023-S1 Santander Drive Auto Receivables Trust 2024-1 Santander Drive Auto Receivables Trust 2024-2 Santander Drive Auto Receivables Trust 2024-3 Santander Drive Auto Receivables Trust 2024-4 Santander Drive Auto Receivables Trust 2024-5 Santander Drive Auto Receivables Trust 2024-6 — — — — — — — — — — — — — — — — — — — — — — — (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) — — — — — — — — — — — — — — — — — — — — — — — — 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 United States United States United States Kingdom Spain United Kingdom Luxembourg 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 — Securitization (87) — Securitization (135) 90 77 — Securitization (187) 100 — Securitization (189) — Securitization (259) — Securitization (304) — Securitization (312) — Securitization (151) 93 117 130 143 66 — Securitization (1) (89) — Securitization — Securitization — Securitization — Securitization — Securitization — Inactive — Securitization — Inactive — Inactive — Inactive — Inactive — Inactive — Inactive — Inactive (152) (195) (175) (176) (144) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14 9 (7) 22 2 Santander Drive Auto Receivables Trust 2024-7 Santander Equity Investments Limited United United States Santander España Servicios Legales y de Cumplimiento, S.L. Santander Estates Limited Santander European Hospitality Opportunities 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 54 34 1 0 4 0 7 0 27 2 Santander F24 S.A. Poland 0.00% 67.41% 100.00% Santander Facility Management España, S.L. Unipersonal Santander Factoring S.A. Santander Factoring Sp. z o.o. Spain 100.00% 0.00% 100.00% 100.00% Real estate 414 (2) 393 Chile Poland 0.00% 99.86% 0.00% 67.41% 100.00% 100.00% 100.00% Factoring 100.00% Financial services 9 52 1 14 10 1 796 2023 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 Factoring y Confirming, S.A. Unipersonal, E.F.C. Location Spain Direct 100.00% Indirect 0.00% Year 2023 Year 2022 Activity 100.00% 100.00% Factoring EUR million (a) Capital + reserves 208 Net results 32 Carrying amount 126 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 3 0 Santander Financial Services plc Santander Financiamientos S.A. Kingdom United Kingdom Peru 0.00% 100.00% 100.00% 100.00% Banking 396 100.00% 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 (j) United Kingdom 100.00% 0.00% 100.00% 100.00% Finance company 100.00% Financial advisory 100.00% Financial services 100.00% Holding company 100.00% Finance company 23 (1) 60 323 0 0 0 14 (6) 2 9 6 0 3 0 446 18 0 20 366 0 Santander Flex Fundo de Investimento Brazil Direitos Creditórios 0.00% 90.19% 100.00% — Investment fund 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. Brazil 0.00% 90.19% 100.00% 100.00% Investment fund 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 United Kingdom Santander Global Consumer Finance Limited Santander Global Facilities, S.A. de C.V. Mexico Santander Global Services S.A. (j) Santander Global Services, S.L. Santander Global Sport, S.A. Santander Global Technology and Operations Brasil Ltda. Uruguay Spain Spain Brazil 0.00% 100.00% 100.00% 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Finance company 100.00% Services 100.00% Services 100.00% Real estate 100.00% Sports activity 100.00% IT services Santander Global Technology and Operations Chile Limitada Santander Global Technology and Operations, S.L. Unipersonal Santander Green Investment, S.L. Santander Guarantee Company Santander Hipotecario 2 Fondo de Titulización de Activos Santander Hipotecario 3 Fondo de Titulización de Activos Chile Spain Spain United Kingdom Spain Spain 0.00% 100.00% 100.00% 100.00% IT services 100.00% 0.00% 100.00% 100.00% IT services 99.97% 0.03% 100.00% 100.00% Holding company 0.00% 100.00% 100.00% 100.00% Leasing — — (b) (b) — — — — Securitization Securitization Santander Holding Imobiliária S.A. Santander Holding Internacional, S.A. Brazil Spain 0.00% 90.19% 0.05% 99.95% 100.00% 100.00% Santander Holdings USA, Inc. United States 100.00% 0.00% 100.00% Santander Inclusión Financiera, S.A. de C.V., S.O.F.O.M., E.R., Grupo Financiero Santander México Santander Insurance Agency, U.S., LLC United States Mexico Santander Insurance Services UK Limited Santander Insurance, S.L. United Kingdom Spain 0.00% 99.97% 100.00% 0.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% Insurance intermediary 100.00% Wealth management 100.00% Real estate 100.00% Holding company 100.00% Holding company 100.00% Finance company 330 55 347 1,514 259 1,225 8 92 220 7 166 0 392 17 4 6 469 82 5 0 0 2 (1) 0 0 11 0 0 (1) 0 0 22 1 0 0 0 9 91 216 7 176 0 391 16 1 7 438 83 3 0 0 90 4,125 2 83 82 2,530 14,990 844 14,743 18 1 43 (9) 0 2 8 1 46 100.00% 0.00% 100.00% — Holding company 3,139 (1) 3,140 797 2023 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 Intermediación Correduría de Seguros, S.A. Santander International Products, Plc. (l) Location Spain Direct 100.00% Indirect 0.00% Year 2023 100.00% Ireland 99.99% 0.01% 100.00% Santander Inversiones S.A. Chile 0.00% 100.00% 100.00% Santander Investment Chile Limitada Chile 0.00% 100.00% 100.00% Santander Investment, S.A. Santander Investments GP 1 S.à.r.l. Spain Luxembourg 100.00% 0.00% 0.00% 100.00% 100.00% 100.00% Year 2022 100.00% Activity Insurance intermediary Finance company 100.00% Holding company 100.00% 100.00% Finance company 100.00% Banking 100.00% Fund management company Securities company Management of funds and portfolios 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. Santander Leasing S.A. Santander Leasing S.A. Arrendamento Mercantil Spain Poland Brazil 100.00% 0.00% 0.00% 67.41% 0.00% 90.19% 100.00% 100.00% 100.00% 100.00% Leasing 100.00% Leasing 100.00% Leasing 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% Santander Mediación Operador de Banca-Seguros Vinculado, S.A. Spain 100.00% 0.00% 100.00% 100.00% Mortgage credit company 100.00% Insurance intermediary Santander Merchant S.A. Argentine 5.10% 94.90% 100.00% 100.00% Santander Mortgage Holdings Limited Santander New Business, S.A. United Kingdom Spain 0.00% 100.00% 100.00% 100.00% 99.00% 1.00% 100.00% — Finance company Holding company Trade intermediary Santander Paraty Qif PLC Ireland 0.00% 90.19% 100.00% 100.00% Investment Company Santander Pensiones, S.A., E.G.F.P. Spain 0.00% 100.00% 100.00% 100.00% Santander Pensões - Sociedade Gestora de Fundos de Pensões, S.A. Portugal 100.00% 0.00% 100.00% 100.00% Santander Prime Auto Issuance Notes 2018-A Designated Activity Company Santander Prime Auto Issuance Notes 2018-B Designated Activity Company Santander Prime Auto Issuance Notes 2018-C Designated Activity Company Santander Prime Auto Issuance Notes 2018-D Designated Activity Company Ireland Ireland Ireland Ireland Santander Prime Auto Issuance Notes 2018-E Designated Activity Company Ireland — — — — — (b) (b) (b) (b) (b) — — — — — Pension fund management company Pension fund management company Inactive Inactive — — — Inactive — Inactive — Inactive EUR million (a) Capital + reserves 28 Net results 4 Carrying amount 18 1 0 0 1,507 142 1,032 517 43 1,316 1 14 49 61 180 1,998 1 252 52 0 (23) 1 2 0 0 7 (1) 17 136 (2) 13 0 0 0 0 321 245 1 7 6 51 39 1,924 0 239 3 2 0 1 283 215 85 14 500 184 3 0 0 0 0 0 74 14 0 0 0 0 0 0 9 0 3 0 0 0 0 0 35 8 Santander Private Banking Gestión, S.A., S.G.I.I.C. Santander Private Banking s.p.a. in Liquidazione (j) Spain 100.00% 0.00% 100.00% 100.00% Italy 100.00% 0.00% 100.00% 100.00% Fund management company Finance company Santander Private Banking UK Limited United Kingdom 0.00% 100.00% 100.00% 100.00% Holding company 294 117 401 Santander Private Real Estate Advisory & Management, S.A. Spain Santander Private Real Estate Advisory, S.A. Spain 99.99% 0.01% 100.00% 100.00% Real estate 100.00% 0.00% 100.00% 100.00% Real estate 4 16 0 1 4 16 798 2023 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 Real Estate Debt 1 sub-fund Luxembourg Location Direct 100.00% Indirect 0.00% Year 2023 Year 2022 Activity 100.00% — Investment fund Santander Real Estate, S.A. Spain 100.00% 0.00% 100.00% 100.00% Inactive EUR million (a) Capital + reserves 0 Net results 1 Carrying amount 0 United States 0.00% 100.00% 100.00% 100.00% Finance company — Securitization 116 Santander Retail Auto Lease Funding LLC 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 Santander RMBS 6, Fondo de Titulización Santander S.A. Sociedad Securitizadora Chile Spain Santander Secretariat Services Limited United Kingdom United States — — — — — — — — — (b) (b) (b) (b) (b) (b) (b) (b) (b) — — — — — — — — — — Securitization — Securitization — Securitization — Securitization — Inactive — Securitization — Inactive — Securitization 0.00% 67.25% 100.00% 100.00% Fund management company 0.00% 100.00% 100.00% 100.00% Inactive Santander Totta, SGPS, S.A. Portugal 99.91% 0.00% 99.91% Poland 50.00% 33.70% 100.00% 99.91% Holding company 100.00% Fund management company Santander Securities LLC Santander Seguros y Reaseguros, Compañía Aseguradora, S.A. Santander Servicios Corporativos, S.A. de C.V. Santander Technology USA, LLC Santander Tecnología Argentina S.A. Santander Tecnología México, S.A. de C.V. Santander Totta Seguros, Companhia de Seguros de Vida, S.A. Santander Towarzystwo Funduszy Inwestycyjnych S.A. Santander Trade Services Limited Santander Trust S.A. Santander UK Group Holdings plc Santander UK Investments Santander UK Operations Limited Santander UK plc Santander UK Technology Limited 0.00% 100.00% 100.00% 100.00% Securities company 25 12 37 Spain 0.00% 100.00% 100.00% 100.00% Insurance 1,221 167 1,536 Mexico 0.00% 99.97% 100.00% 100.00% Services United States Argentine Mexico 0.00% 100.00% 0.00% 99.83% 0.00% 99.97% 100.00% 100.00% 100.00% 100.00% IT services 100.00% IT services 100.00% IT services Portugal 0.00% 100.00% 100.00% 100.00% Insurance 0.00% 100.00% 0.00% 99.99% 77.67% 22.33% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Inactive 100.00% Services 100.00% Holding company 100.00% Finance company 100.00% Finance company 100.00% Banking Hong-Kong Argentine United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom 0.00% 100.00% 100.00% 100.00% IT services 43 0 7 799 1 0 115 136 14 21 0 29 0 0 1 0 0 0 50 45 36 4 (8) 0 40 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 14 59 8 58 98 1 (10) 12 1 16 50 16 58 25 281 3,442 795 5,352 4 21 12 25 0 13,703 0 0 1,934 16 0 16,825 117 7 (4) 0 115 0 12,610 2,204 15,240 2023 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 US Capital Markets LLC Location United States Direct Indirect 0.00% 100.00% Year 2023 Year 2022 Activity 100.00% 100.00% Real Estate investment Santander Valores S.A. Argentine 5.10% 94.73% 100.00% Santusa Holding, S.L. Spain 69.76% 30.24% 100.00% SBNA Auto Lease Funding LLC United States 0.00% 100.00% 100.00% SBNA Auto Lease Trust 2023-A United States SBNA Auto Lease Trust 2024-A United States — — (b) (b) — — SBNA Auto Lease Trust 2024-B SBNA Auto Lease Trust 2024-C SBNA Investor LLC United States United States United States — — (b) (b) 0.00% 100.00% — — 100.00% SC Austria Auto Finance 2020-1 Designated Activity Company SC Austria Consumer Loan 2021 Designated Activity Company SC Canada Asset Securitization Trust SC Germany Auto 2014-2 UG (haftungsbeschränkt) (j) SC Germany Auto 2016-2 UG (haftungsbeschränkt) (j) SC Germany Auto 2018-1 UG (haftungsbeschränkt) (j) SC Germany Auto 2019-1 UG (haftungsbeschränkt) SC Germany Consumer 2018-1 UG (haftungsbeschränkt) (j) SC Germany Mobility 2019-1 UG (haftungsbeschränkt) (j) SC Germany S.A. SC Germany S.A., Compartment Consumer 2020-1 SC Germany S.A., Compartment Consumer 2021-1 SC Germany S.A., Compartment Consumer 2022-1 SC Germany S.A., Compartment Consumer 2023-1 SC Germany S.A., Compartment Consumer Private 2023-1 SC Germany S.A., Compartment Leasing 2023-1 SC Germany S.A., Compartment Mobility 2020-1 SC Mobility AB SC Mobility AS SC Poland Consumer 23-1 Designated Activity Company SCF Ajoneuvohallinto IX Limited SCF Ajoneuvohallinto VII Limited (j) SCF Ajoneuvohallinto VIII Limited SCF Ajoneuvohallinto X Limited SCF Ajoneuvohallinto XI Limited SCF Ajoneuvohallinto XII Limited SCF Eastside Locks GP Limited Ireland Ireland Canada Germany Germany Germany Germany Germany Germany Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Sweden Norway Ireland Ireland Ireland Ireland Ireland Ireland Ireland United Kingdom — — — — — — — — — — — — — — — — — (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) (b) — — — — — — — — — — — — — — — — — 0.00% 100.00% 0.00% 100.00% (b) — 100.00% 100.00% — — — — — — — (b) (b) (b) (b) (b) (b) 0.00% 100.00% — — — — — — 100.00% 100.00% Securities company 100.00% Holding company — Finance company — Securitization — Inactive — Inactive — Inactive — Holding company — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Renting — Renting — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization 100.00% Real estate management EUR million (a) Capital + reserves 1,123 Net results (93) Carrying amount 1,030 3 5 8 9,289 512 6,524 0 0 0 0 0 1,016 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 0 0 0 0 0 0 0 0 (2) 0 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,019 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 0 0 0 0 0 0 0 0 800 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Subsidiaries of Banco Santander, S.A. 1 Company SCF Rahoituspalvelut IX DAC SCF Rahoituspalvelut VII Designated Activity Company (j) SCF Rahoituspalvelut VIII Designated Activity Company SCF Rahoituspalvelut X DAC SCF Rahoituspalvelut XI Designated Activity Company SCF Rahoituspalvelut XII DAC SCM Poland Auto 2019-1 DAC SDMX Superdigital, S.A. de C.V., Institución de Fondos de Pago Electrónico Secucor Finance 2021-1, DAC Location Ireland Ireland Ireland Ireland Ireland Ireland Ireland Mexico % of ownership held by Banco Santander Percentage of voting power (k) Year 2023 Year 2022 Activity Direct — — — — — — Indirect (b) (b) (b) (b) (b) (b) — (b) 0.00% 100.00% — 100.00% — — — — — — — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization 100.00% Payment platform Ireland — (b) — — Securitization Services and Promotions Delaware Corp. Services and Promotions Miami LLC United States 0.00% 100.00% 100.00% 100.00% Holding company United States 0.00% 100.00% 100.00% 100.00% Real estate Servicios de Cobranza, Recuperación y Mexico Seguimiento, S.A. de C.V. 0.00% 85.00% 85.00% 85.00% Finance company Sheppards Moneybrokers Limited Shiloh III Wind Project, LLC United Kingdom United States 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Inactive SIB Besaya, S.L. Unipersonal Spain 0.00% 100.00% 100.00% 100.00% Renewable energies 100.00% Holding company — Securitization 100.00% Payments and collection services Portugal Mexico — (b) 0.00% 100.00% — 100.00% Spain Chile 100.00% 0.00% 100.00% 100.00% Appraisals 0.00% 67.13% 100.00% 100.00% Payments and Uruguay 100.00% 0.00% 100.00% 100.00% Finance collection i company United Kingdom Brazil 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 72.15% 80.00% 80.00% Vehicle rental United States 0.00% 100.00% 100.00% United States 0.00% 100.00% 100.00% Silk Finance No. 5 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. Socur S.A. (f) Solarlaser Limited (j) Solution 4Fleet Consultoria Empresarial S.A. Sovereign Community Development Company Sovereign Delaware Investment Corporation Sovereign Lease Holdings, LLC United States 0.00% 100.00% 100.00% Sovereign REIT Holdings, Inc. United States 0.00% 100.00% 100.00% Sovereign Spirit Limited (n) SPIRE SA Compartment 2023-265 Bermudas Luxembourg SPIRE SA Compartment 2023-374 Luxembourg 0.00% 100.00% — — (b) (b) 100.00% — — SSA Swiss Advisors AG Switzerland 0.00% 100.00% 100.00% Stellantis Consumer Financial Services Poland Polska Sp. z o.o. 0.00% 40.22% 100.00% Stellantis Financial Services Belux SA Belgium 0.00% 50.00% 100.00% Stellantis Financial Services España, E.F.C., S.A. Spain 0.00% 50.00% 50.00% 100.00% Holding company 100.00% Holding company 100.00% Financial services 100.00% Holding company 100.00% Leasing — Finance company — Finance company 100.00% Wealth management 100.00% Finance company 100.00% Finance company 50.00% Finance company EUR million (a) Capital + reserves 4 0 Net results 0 0 Carrying amount 0 0 0 0 (7) 0 0 3 0 64 58 46 0 334 472 52 154 1 16 59 0 2 41 142 228 0 0 0 0 0 (1) 0 2 3 2 0 7 5 (15) 51 0 11 14 0 (2) 2 6 7 0 0 0 0 0 2 0 66 61 32 0 341 619 0 205 1 18 59 0 0 43 148 235 7,913 323 8,236 0 0 0 1 4 0 0 0 0 0 0 0 0 4 0 102 543 18 57 202 283 801 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix % of ownership held by Banco Santander Percentage of voting power (k) Direct Indirect 0.00% 50.00% Year 2023 Year 2022 Activity 50.00% Banking 50.00% EUR million (a) Capital + reserves 741 Net results 61 Carrying amount 293 Subsidiaries of Banco Santander, S.A. 1 Company Stellantis Financial Services Italia S.p.A. Stellantis Financial Services Nederland Netherlands B.V. Location Italy Stellantis Financial Services Polska Sp. Poland z o.o. 0.00% 50.00% 100.00% 0.00% 40.22% 50.00% Stellantis Renting Italia S.p.A. Sterrebeeck B.V. Italy Netherlands 0.00% 50.00% 0.00% 100.00% 100.00% 100.00% Suleyado 2003, S.L. Unipersonal Spain 0.00% 100.00% 100.00% Summer Empreendimentos Ltda. Brazil 0.00% 90.19% 100.00% 100.00% Finance company 50.00% Finance company 100.00% Renting 100.00% Holding company 100.00% Securities Investment 100.00% Real estate management IT services IT services 100.00% 100.00% 100.00% Holding company Superdigital Argentina S.A.U. Superdigital Colombia S.A.S. Superdigital Holding Company, S.L. Superdigital Instituição de Pagamento S.A. Superdigital Perú S.A.C. Suzuki Servicios Financieros, S.L. Svensk Autofinans WH 1 Designated Activity Company (j) Argentine Colombia Spain Brazil Peru Spain 0.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% 100.00% Payment 0.00% 100.00% 100.00% 0.00% 51.00% 51.00% services 100.00% Financial services Intermediation 51.00% Ireland — (b) — — Securitization Swesant SA Switzerland 0.00% 100.00% 100.00% SX Negócios Ltda. Tabasco Energía España, S.L. Unipersonal Taxagest Sociedade Gestora de Participações Sociais, S.A. Brazil Spain 0.00% 90.19% 0.00% 100.00% 100.00% 100.00% Portugal 0.00% 99.87% 100.00% 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% 100.00% Holding company 100.00% Telemarketing 100.00% Holding company 100.00% Holding company 100.00% Renewable energies 100.00% Holding company The Alliance & Leicester Corporation Limited United Kingdom 0.00% 100.00% 100.00% 100.00% Real estate The Best Specialty Coffee, S.L. Unipersonal Time Retail Finance Limited (j) TIMFin S.p.A. United Kingdom Italy Spain 100.00% 0.00% 100.00% 100.00% Restaurant services 0.00% 100.00% 100.00% 100.00% Services 0.00% 51.00% 51.00% Tonopah Solar I, LLC United States 0.00% 100.00% 100.00% Tools Soluções e Serviços Compartilhados Ltda. Tornquist Asesores de Seguros S.A. (j) Toro Asset Management S.A. Argentine Brazil 0.00% 99.99% 0.00% 56.48% 99.99% 100.00% Brazil 0.00% 90.19% 100.00% 100.00% Services Toro Corretora de Títulos e Valores Mobiliários Ltda. Toro Investimentos S.A. Brazil Brazil 0.00% 56.38% 62.51% 0.00% 56.48% 91.32% Totta (Ireland), PLC (h) Ireland 0.00% 99.87% 100.00% 51.00% Finance company 100.00% Holding company 99.99% Inactive 100.00% Securities Investment 63.00% Securities company 91.32% Securities company 100.00% Finance company Totta Urbe - Empresa de Administração e Construções, S.A. Trabajando.com Mexico, S.A. de C.V. en liquidación (j) Trainera Venture Finance I, F.C.R.- PYME Portugal 0.00% 99.87% 100.00% 100.00% Real estate Mexico 0.00% 100.00% 100.00% 100.00% Services Spain 99.00% 0.00% 99.00% — Venture capital fund 67 52 13 5,404 33 5 1 1 176 76 1 14 0 10 10 15 491 (1) 1 0 (1) (10) (21) (1) 1 0 112 227 16 1 56 2 5 0 0 0 39 13 3 11,095 28 5 1 1 164 139 0 0 0 0 19 0 0 11 1,843 169 2,151 0 1 0 62 5 37 0 2 57 40 451 88 0 2 0 1 0 0 0 6 0 0 (2) 1 22 (2) 0 0 0 2 0 38 5 39 0 1 31 23 450 90 0 2 802 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 1 Subsidiaries of Banco Santander, S.A. Company Trans Skills Employment Services - Sole Proprietorship LLC Location Arab United Emirates Saudi Arabia Trans Skills Information Technology LLC Trans Skills Investment in Commercial Enterprises & Management Co. LLC Republic of Trans Skills South Africa (Pty) South Africa Limited Trans Skills Technology Services LLC Arab United Arab United Emirates Emirates Spain Spain United Kingdom Germany Transolver Finance EFC, S.A. Tresmares Santander Direct Lending, SICC, S.A. Tuttle and Son Limited (j) TVG-Trappgroup Versicherungsvermittlungs-GmbH (d) Universia Brasil S.A. Universia Chile S.A. % of ownership held by Banco Santander Percentage of voting power (k) Direct 0.00% 0.00% Indirect Year 2023 Year 2022 Activity Human 66.54% resources services Inactive 100.00% 100.00% 66.54% — — 0.00% 66.54% 100.00% — Holding company 0.00% 66.54% 100.00% — Inactive 0.00% 66.54% 100.00% — IT services 0.00% 99.67% 51.00% 0.00% 51.00% 99.67% 51.00% Leasing 99.60% Fund management company 0.00% 100.00% 100.00% 100.00% Inactive 0.00% 90.01% 100.00% — Insurance brokerage Brazil Chile 0.00% 100.00% 100.00% 100.00% Internet 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. Universia Holding, S.L. Universia México, S.A. de C.V. Universia Perú, S.A. Spain Spain Mexico Peru 0.00% 89.45% 89.45% 89.45% Internet 100.00% 0.00% 100.00% 100.00% Holding company 0.00% 100.00% 100.00% 100.00% Internet 0.00% 99.40% 99.40% 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% 99.99% Real estate investment Virtua Advanced Solutions FZE Wallcesa, S.A. Waycarbon Soluções Ambientais e Projetos de Carbono S.A. Arab United Emirates Spain Brazil 0.00% 66.54% 100.00% — Payment services 100.00% 0.00% 100.00% 100.00% Financial services 0.00% 80.00% 100.00% 100.00% Consulting WIM Servicios Corporativos, S.A. de C.V. Mexico 0.00% 85.00% 100.00% WTW Shipping Designated Activity Company Ireland 100.00% 0.00% 100.00% 100.00% Leasing services 100.00% Advisory services EUR million (a) Capital + reserves 0 Net results 0 Carrying amount 0 0 0 0 2 0 0 0 0 0 5 0 0 74 1,037 5 54 17 1,027 0 0 1 1 0 2 15 0 0 0 160 1 (926) 29 0 13 0 0 0 0 0 0 (4) 0 0 0 17 0 0 (1) 0 5 0 2 0 0 0 2 12 1 0 0 179 0 0 23 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 2023 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 2022, latest available accounts. d. Data as at 31 March 2023, latest accounts available. e. Data as at 30 June 2023, last accounts available. f. Data as at 30 September 2023, last accounts available. g. Data as at 30 April 2022, last accounts available. h. Data as at 30 November 2023, last accounts available. i. Companies in liquidation. Pending registration. j. k. Pursuant to Article 3 of Royal Decree 1159/ 2010, of 17 September, approving the rules for the preparation of consolidated annual accounts, in order to determine the voting rights, voting rights held directly by the parent company have been added to those held by companies controlled by the parent company or by other persons acting in their own name but on behalf of a Group company. For these purposes, the number of votes corresponding to the parent company, in relation to the companies indirectly dependent on it, is that corresponding to the dependent company that directly participates in the share capital of the latter. Company in liquidation as at 31 December 2023. l. Company resident for tax purposes in Spain. m. Data as of 30 June 2021, latest available accounts. n. Company resident for tax purposes in the United Kingdom. o. Data as at 30 April 2023, last accounts available. p. Data as at 30 June 2022, last accounts available. 803 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix (1) Companies issuing preference shares are listed in Annex III, together with other relevant information. 804 Morocco 0.00% 5.10% 5.10% 5.10% Banking — 57,795 5,139 556 2023 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 % of ownership held by Banco Santander Percentage of voting power (f) Direct — Indirect (h) Year 2023 — Year 2022 Activity Leasing — EUR million (a) Capital + reserves — Asset — Net results — Type of company Joint ventures 0.00% 13.43% 20.00% 20.00% Collection and Associated payment services Location Cayman Island Chile Company Abra 1 Limited (k) Administrador Financiero de Transantiago S.A. 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% 49.00% 49.00% 49.00% Insurance Portugal 0.00% 49.00% 49.00% 49.00% Insurance Portugal 0.00% 19.97% 20.00% 20.00% Inactive Joint Ventures Joint Ventures — — — — — Joint Ventures Joint Ventures 70 72 129 0 — — 4 18 12 22 0 — — 0 4 18 18 0 — — 4 264 214 49 40 57 531 2,152 205 44 30 528 206 97 (15) 2 26 31 14 15 5 14 6 3 (2) 2 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 30.00% Holding company 33.33% Investment fund Joint Ventures Joint Ventures Alma UK Holdings Ltd (consolidado) (b) United Kingdom 30.00% 0.00% 30.00% Brazil 0.00% 30.06% 33.33% Apolo Fundo de Investimento em Direitos Creditórios Attijariwafa Bank Société Anonyme (consolidado) (b) AutoFi Inc. (b) United States 0.00% 18.01% 4.99% 4.99% E-commerce — Autopistas del Sol S.A. (b) Argentina 0.00% 14.17% 14.17% 14.17% Highway concession Avanath Affordable Housing IV LLC (b) Banco RCI Brasil S.A. United States Brazil 0.00% 7.27% 7.27% 7.27% Investment company 0.00% 35.98% 39.89% 39.89% Banking Mexico 0.00% 50.00% 50.00% 50.00% Banking Banco S3 Caceis México, S.A., Institución de Banca Múltiple Bank of Beijing Consumer Finance Company Bank of Shanghai Co., Ltd. (consolidado) (b) Biomas – Serviços Ambientais, Restauração e Carbono S.A. China China 0.00% 20.00% 20.00% 20.00% Financial company Associated 1,668 129 6.54% 0.00% 6.54% 6.54% Banking — 366,810 25,405 2,839 Brazil 0.00% 15.03% 16.67% — Consulting services Associated Bizum, S.L. (b) Spain 20.92% 0.00% 20.92% 20.92% Payment Associated CACEIS (consolidado) France 0.00% 30.50% 30.50% services 30.50% Custody services Associated 116,331 4,384 392 Campo Grande Empreendimentos Ltda. (k) (e) Carrow Works (Norwich) Limited 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 CNP Santander Insurance Services Ireland Limited Brazil 0.00% 22.84% 25.32% 25.32% Inactive — United Kingdom Portugal 0.00% 88.00% 88.00% — Real Estate investment 0.00% 49.98% 49.98% 49.98% Real Estate Chile 0.00% 22.38% 33.33% services 33.33% Collection and payment services Joint Ventures Joint Ventures Associated — 0 0 18 — 0 0 10 Spain 0.00% 49.00% 49.00% 49.00% Technology Associated 3 3 Brazil 0.00% 15.80% 17.52% 17.87% Financial services Associated 615 Ireland 0.00% 49.00% 49.00% 49.00% Insurance Associated 1,274 Ireland 0.00% 49.00% 49.00% 49.00% Insurance Associated 1,086 Ireland 0.00% 49.00% 49.00% 49.00% Services Associated 14 434 247 89 6 — 0 0 5 0 102 43 56 1 805 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. DoRes Securitisation S.r.l Enauta Participaçoes S.A. (consolidado) (b) 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. 2023 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 Comder Contraparte Central S.A Location Chile Direct 0.00% Indirect 8.37% Year 2023 12.47% Companhia Promotora UCI Brazil 0.00% 25.00% 25.00% Spain Spain 20.18% 0.00% 20.18% 23.33% 0.55% 23.88% Year 2022 Activity 12.47% Financial services 25.00% Financial services 20.18% Financial company 23.88% Credit Insurance Type of company Associated Joint Ventures — — EUR million (a) Capital + reserves 11 Asset 32 Net results 2 1 (1) 194 1,227 169 491 Spain 24.07% 0.00% 24.07% 24.07% Real Estate Associated 556 378 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% 27.54% 0.00% 18.04% 27.58% 20.00% 27.58% Cork industry — 20.00% Financial services Associated Spain Italy 45.00% 0.00% 45.00% 45.00% Renewable energies — (h) — — Securitization Brazil 0.00% 5.52% 6.12% — Holding company Spain Spain Spain Spain 0.00% 55.00% 55.00% 0.00% 55.00% 55.00% 0.00% 55.00% 55.00% 0.00% 55.00% 55.00% 2 3 41 49 0 1 20 39 7 0 1,543 695 1 1 1 1 1 1 1 5 51 41 0 89 0 1 1 1 1 1 1 1 5 29 13 0 0 1 Joint Ventures Joint Ventures — Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Associated Associated Joint Ventures Joint Ventures Joint Ventures 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 — Leasing 50.00% Payment services 49.00% Holding company 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% Ethias Lease N.V. Euro Automatic Cash Entidad de Pago, S.L. European Hospitality Opportunities S.à r.l. (b) Belgium Spain 0.00% 50.00% 0.00% 50.00% 50.00% 50.00% Luxembourg 0.00% 49.00% 49.00% Evacuación Liquesun, S.L. Spain 0.00% 35.00% 50.00% — Evolve SPV S.r.l. Italy — (h) — — Exploitation of electrical energy Securitization Portugal 0.00% 36.58% 36.62% 36.62 % Real Estate — FAFER- Empreendimentos Urbanísticos e de Construção, S.A. (b) (e) Federal Home Loan Bank of Pittsburgh (b) 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 Spain Spain Spain United States 0.00% 7.48% 7.48% 6.05% Banking 0.00% 19.14% 19.14% 19.12% Banking — — 86,982 4,226 205 201,292 1,602 25 — — — (h) (h) (h) — — — — Securitization — Securitization — Securitization Joint Ventures Joint Ventures Joint Ventures 95 229 283 0 0 0 0 0 0 806 0 20 72 9 0 0 0 1 (2) 0 71 0 0 0 0 0 0 0 (1) 0 0 0 0 0 2023 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 (h) Year 2023 — Year 2022 Activity — Securitization Spain Spain Spain Spain Spain Spain Spain — — — — — — — (h) (h) (h) (h) (h) (h) (h) — — — — — — — — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization — Securitization Company Fondo de Titulización de Activos UCI 16 Fondo de Titulización de Activos UCI 17 Fondo de Titulización Hipotecaria UCI 12 Fondo de Titulización, RMBS Green Prado XI Fondo de Titulización, RMBS Prado IX 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% 50.00% Finance Company EUR million (a) Capital + reserves 0 Asset 388 338 129 467 425 399 370 498 0 0 0 0 0 0 0 Net results 0 0 0 0 0 0 0 0 2,220 459 50 Type of company Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures 6 13 232 96 139 404 880 9 1 7 1 75 55 63 0 0 9 1 4,984 341 1 0 0 0 1 0 (112) 0 0 1 FrauDfense, S.L. Spain 0.00% 33.33% 33.33% — Technological services Joint Ventures Fremman limited Gestora de Inteligência de Crédito S.A. United Kingdom Brazil 32.99% 0.00% 4.99% 4.99% Finance Company 0.00% 14.03% 16.00% 10.00% Collection service Associated Joint Ventures Gire S.A. Argentina 0.00% 58.23% 58.33% 58.33% Collection and Associated payment services Holding company Glenrowan Solar Holdings Pty Ltd Australia 49.00% 0.00% 49.00% — HCUK Auto Funding 2017-2 Ltd United Kingdom HCUK Auto Funding 2022-1 Limited (m) United Kingdom Healthy Neighborhoods Equity Fund I LP (b) Hillcrest Private Equity Real Estate LLP Hyundai Capital UK Limited United States United Kingdom United Kingdom — — (h) (h) — — — Securitization — Securitization 0.00% 22.37% 22.37% 22.37% Real Estate — 0.00% 88.00% 88.00% — Real Estate 0.00% 50.01% 50.01% Hyundai Corretora de Seguros Ltda. Brazil 0.00% 45.09% 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% 50.01% Finance Company 50.00% Insurance mediation 36.36% Securities Investment 40.20% Holding company Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures — — Joint Ventures Joint Ventures Inverlur Aguilas I, S.L. Inverlur Aguilas II, S.L. Inversiones Ibersuizas, S.A. en liquidación (e) (l) Spain Spain Spain 0.00% 50.00% 50.00% 50.00% Real Estate 0.00% 50.00% 50.00% 50.00% Real Estate 25.42% 0.00% 25.42% 25.42% Venture — 11 11 Capital company Inversiones ZS América Dos Ltda. Chile 0.00% 49.00% 49.00% Inversiones ZS América SpA Chile 0.00% 49.00% 49.00% 49.00% Seurities and Real Estate Investment 49.00% Seurities and Real Estate Investment Associated 268 231 Associated 395 357 LB Oprent, S.A. (b) Spain 40.00% 0.00% 40.00% Mapfre Santander Portugal - Companhia de Seguros, S.A. Portugal 0.00% 49.99% 49.99% 40.00% Rental of industrial machinery 49.99% Insurance Associated 4 Associated 20 1 8 (2) 3 (7) (3) 2 0 (2) 10 0 72 0 0 0 0 (1) 0 38 39 1 0 807 2023 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 Company Massachusetts Business Development Corp. (consolidado) (b) MB Capital Fund IV, LLC (b) Merlin Properties, SOCIMI, S.A. (consolidado) (b) Location United States United States Spain % of ownership held by Banco Santander Direct Indirect 0.00% 21.61% Percentage of voting power (f) Year 2023 21.61% Year 2022 Activity 21.61% Finance Company Type of company — EUR million (a) Capital + reserves 14 Asset 85 Net results 3 0.00% 21.51% 21.51% 19.03% 5.63% 24.66% 21.51% Finance Company 24.64% Real Estate investment 49.44% Real Estate promotion — 14 14 1 Associated 12,051 7,031 263 Associated 2,514 1,829 (23) Metrovacesa, S.A. (consolidado) (b) Spain 31.94% 17.55% 49.49% Niuco 15, S.L. (k) Ocyener 2008, S.L. Spain Spain 0.00% 45.00% 45.00% 57.10% 0.00% 57.10% 57.10% Technical — Operadora de Activos Beta, S.A. de C.V. Mexico 49.99% 0.00% 49.99% Payever GmbH Play Digital S.A. Germany Argentina 0.00% 10.00% 0.00% 14.69% 10.00% 14.71% services 45.00% Holding company 49.99% Finance Company 10.00% Software 15.38% Payment platform Associated Associated Associated Associated POLFUND - Fundusz Poręczeń Kredytowych S.A. Poland 0.00% 33.70% 50.00% 50.00% Investment management Associated Portland SPV S.r.l. Italy — (h) — — Securitization Premier House (Twickenham) Limited Procapital - Investimentos Imobiliários, S.A. (e) (l) Project Quasar Investments 2017, S.L. (consolidado) (b) Promontoria Manzana, S.A. (consolidado) (b) Redbanc S.A. Redsys Servicios de Procesamiento, S.L. (consolidado) Retama Real Estate, S.A. Unipersonal Rías Redbanc S.A. RMBS Belém No.2 United Kingdom Portugal Spain Spain Chile Spain Spain Uruguay Portugal RMBS Green Belém No.1 Portugal 0.00% 88.00% 88.00% — Real Estate 0.00% 39.97% 40.00% 40.00% Real Estate 49.00% 0.00% 49.00% 20.00% 0.00% 20.00% 49.00% Holding company 20.00% Holding company 0.00% 22.44% 0.06% 24.90% 33.43% 24.96% 33.43% Services 24.96% Cards 0.00% 50.00% 50.00% 50.00% Real Estate 0.00% 25.00% 25.00% 25.00% Services — — — (h) (h) — — — Securitization — Securitization 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% S3 CACEIS Colombia S.A. Sociedad Fiduciaria San Preca Federal I Fundo de Investimento em Direitos Creditórios 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. Colombia 0.00% 50.00% 50.00% Brazil 0.00% 45.09% 50.00% Spain 0.00% 32.95% 32.95% Poland 0.00% 33.03% 49.00% 50.00% Securities company 50.00% Holding company 50.00% Finance Company 50.00% Investment fund 41.60% Venture Capital company 49.00% Insurance Poland 0.00% 33.03% 49.00% 49.00% Insurance Associated Santander Assurance Solutions, S.A. Spain 0.00% 66.67% 66.67% Santander Auto S.A. Santander Caceis Latam Holding 1, S.L. Brazil Spain 0.00% 45.09% 0.00% 50.00% 50.00% 50.00% 66.67% Insurance mediation 50.00% Insurance 50.00% Holding company Joint Ventures Associated Joint Ventures Associated 340 Joint Ventures Joint Ventures — — Associated Associated Associated Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures — — 35 0 4 13 33 166 0 0 — 2 0 2 21 22 0 0 13 — (2) 0 1 (13) 1 0 0 0 4,770 366 (288) 846 28 155 222 (46) 12 80 1 8 17 (48) (3) 4 252 178 274 231 11 12 8 88 16 59 742 1 0 0 192 195 7 10 9 27 40 6 7 731 0 0 0 33 32 0 0 (1) 35 10 1 7 11 808 2023 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% 50.00% Year 2023 50.00% Year 2022 Activity 50.00% Holding company EUR million (a) Capital + Asset reserves 3 3 Net results 0 0.00% 49.00% 49.00% 49.00% Insurance 765 180 0.00% 50.00% 50.00% 45.00% Finance Company Associated 29 0.00% 49.99% 49.99% 49.99% Insurance Associated 150 10 81 0.00% 49.00% 49.00% 49.00% Insurance Joint Ventures 1,009 339 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% 15.54% 15.56% 16.55% Portfolio Management 0.00% 20.00% 20.00% — Finance Company 0.00% 20.00% 20.00% 20.61% 0.00% 20.61% 20.00% Investment company 20.61% Payment methods 45.70% Payment services Spain 45.70% 0.00% 45.70% Spain Spain 24.94% 0.22% 25.16% 22.21% 0.00% 22.21% 25.60% Financial services 22.21% Financial services — — 17,846 (1,040) (1,506) Chile 0.00% 19.66% 29.29% 29.29% Securities depository Associated 9 Spain Spain Spain Spain Spain Chile United States United States Spain Company Santander Caceis Latam Holding 2, S.L. Santander Generales Seguros y Reaseguros, S.A. Santander Mapfre Hipoteca Inversa, E.F.C., 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 SIG RCRS A/B MF 2023 Venture LLC (o) Siguler Guff SBIC Fund LP (b) Sistema de Tarjetas y Medios de Pago, S.A. (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) 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. Ireland — (h) — — Leasing Malta Malta United States Brazil United States Chile Chile Spain Spain 0.00% 50.00% 50.00% 50.00% Insurance 0.00% 50.00% 50.00% 50.00% Insurance 0.00% 17.00% 17.00% 20.50% Renewable energies 0.00% 17.11% 0.00% 26.80% 19.81% 26.80% 0.00% 33.33% 0.00% 16.78% 0.00% 40.00% 33.33% 25.00% 40.00% 40.00% 0.00% 40.00% 18.98% ATMs 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 Unicre-Instituição Financeira de Crédito, S.A. Portugal 0.00% 50.00% 50.00% Spain 0.00% 50.00% 50.00% 50.00% Real Estate Portugal 0.00% 21.83% 21.86% services 21.86% Finance Company 50.00% Holding company 50.00% Financial services 50.00% Holding company 50.00% Insurance mediation Type of company Joint Ventures Joint Ventures — — — Associated Joint Ventures Joint Ventures Joint Ventures Joint Ventures — Associated Joint Ventures Associated Associated — — — Joint Ventures Joint Ventures Joint Ventures Joint Ventures Joint Ventures — 40 (1) (8) 68 — 1 13 — 2 0 1 0 — 34 239 — 41 851 120 17 — 14 74 — 26 5 35 11 7 11 73 18 183 177 — 0 115 76 58 109 338 1 (1) 0 0 2 0 30 16 (3) 4 — 1 28 (3) (2) (7) (8) 0 0 0 0 146 222 78 212 519 — 2 1,583 74 56 103 720 2 2 0 1 530 106 22 809 2023 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 Unión de Créditos Inmobiliarios, S.A. Unipersonal, EFC Location Spain Direct Indirect 0.00% 50.00% Year 2023 50.00% Year 2022 Activity 50.00% Mortgage company VCFS Germany GmbH Germany 0.00% 50.00% 50.00% 50.00% Marketing Venda de Veículos Fundo de Investimento em Direitos Creditórios Volvo Car Financial Services UK Limited Webmotors S.A. Zurich Santander Brasil Seguros e Previdência S.A. 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) Brazil 0.00% 35.87% 39.77% — Securitization United Kingdom Brazil Brazil Spain Spain Spain 0.00% 50.01% 50.01% 50.01% Leasing 0.00% 27.06% 0.00% 48.79% 30.00% 48.79% 70.00% Services 48.79% Insurance 0.00% 49.00% 49.00% 0.00% 49.00% 49.00% 0.00% 49.00% 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 Zurich Santander Seguros de Vida Chile S.A. Zurich Santander Seguros Generales Chile S.A. Chile Chile 0.00% 49.00% 49.00% 49.00% Insurance Associated 0.00% 49.00% 49.00% 49.00% Insurance Associated Zurich Santander Seguros México, S.A. Zurich Santander Seguros Uruguay S.A. Mexico 0.00% 49.00% 49.00% 49.00% Insurance Associated 1,827 Uruguay 0.00% 49.00% 49.00% 49.00% Insurance Associated 44 Associated 1,497 1,450 Type of company Joint Ventures Joint Ventures Joint Ventures Joint Ventures Associated Associated Associated Associated EUR million (a) Capital + reserves 897 Asset 10,475 Net results (70) 1 1 389 348 2,101 90 18,421 937 384 126 44 436 936 382 32 238 284 19 41 56 53 19 0 40 27 22 210 210 171 412 3 34 21 191 11 a. Amount according to the provisional books at the date of publication of these annexes of each company, generally referring to 31 December 2023, 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 2022, 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 2023. 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 2022, latest available accounts. j. Data as at 30 June 2023, latest available accounts. k. Company with no financial information available. l. Data as 31 December 2021, latest available account. m. Data as at 30 September 2023, latest available accounts. n. o. Recently created company, without financial information available. 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. 810 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Appendix III Issuing subsidiaries of shares and preference shares % of ownership held by Banco Santander EUR million (a) Company Emisora Santander España, S.A. Unipersonal Santander Global Issuances B.V. (b) Santander UK (Structured Solutions) Limited Sovereign Real Estate Investment Trust Location Spain Direct 100.00% Netherlands 100.00% United Kingdom United States 0.00% 0.00% Indirect Activity 0.00% Finance company 0.00% Finance company 100.00% Finance company 100.00% Finance company Cost of Capital Reserves preferred 0 0 2 0 0 0 0 0 0 4,763 (3,150) 92 Net results 0 0 0 12 a. Amount according to the books of each interim company as at 31 December 2023, converted into euro (in the case of foreign companies) at the year-end exchange rate. b. Company with tax residence in Spain. 811 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Appendix IV Notifications of acquisitions and disposals of investments in 2023 (Art. 155 of the Corporate Enterprises Act and Art. 105 of the Securities Market Law). Details of the notifications of acquisitions and disposals of participations for 2023 in accordance with Article 105 of the Securities Market Law may be found below: On 29 June 2023, Banco Santander, S.A. disclosed to the CNMV the increase of its stake in REPSOL, S.A. above the 3% threshold, keeping a stake of 3.213%, as of 23 June 2023. On 31 July 2023, 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 2.512%, as of 26 July 2023. In relation to the information required by art.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. 812 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Appendix V Other information on the Group’s banks Following is certain information on the share capital of the Group’s main banks based on their total assets. 1. Santander UK plc a) Number of financial equity instruments held by the Group. At 31 December 2023, the Company was a subsidiary of Banco Santander, S.A. and Santusa Holding, S.L. On 12 November 2004 Banco Santander, S.A. acquired the then entire issued ordinary share capital of 1,485,893,636 Ordinary shares of 10p. each. On 12 October 2008 a further 10 billion Ordinary shares of 10p. each were issued to Banco Santander, S.A. and an additional 12,631,375,230 Ordinary shares of 10p. each were issued to Banco Santander, S.A. on 9 January on 2009. On 3 August 2010, 6,934,500,000 Ordinary shares of 10p. each were issued to Santusa Holding, S.L.. With effect from 10 January 2014, Santander UK Group Holdings Limited, a subsidiary of Banco Santander, S.A. and Santusa Holding, S.L., became the beneficial owner of 31,051,768,866 Ordinary shares of 10p. each, being the entire issued ordinary share capital of the Company, by virtue of a share exchange agreement between Santander UK Group Holdings Limited, Banco Santander, S.A. and Santusa Holding, S.L.. Santander UK Group Holdings Limited became the legal owner of the entire issued Ordinary share capital of the Company on 1 April 2014 and on 25 March 2015 became a public limited company and changed its name from Santander UK Group Holdings Limited to Santander UK Group Holdings plc. In addition to this, there are 325,000,000 Non-Cumulative Non-Redeemable 10.375% and 8.625% Sterling Preference Shares of GBP 1.00 each. In addition to this there were 13,780 Series A Fixed (6.222%)/Floating Rate Non-Cumulative Callable Preference Shares of GBP 1.00 each which were redeemed and cancelled in their entirety on 24 May 2019. The legal and beneficial title to the entire issued Preference share capital is held by third parties and is not held by Banco Santander, S.A. b) Capital increases in progress At 31 December 2023, there were no approved capital increases. c) Share capital authorised by the shareholders at the general meeting The shareholders resolved at the Annual General Meeting held on 6 April 2023, to authorise unconditionally, the company to carry out the following repurchases of the share capital: (1) To buy back its own 8.625% Sterling Preference shares on the following terms: (a) The Company may buy back up to 125,000,000 8.625% Sterling Preference shares; (b)The lowest price which the Company can pay for 8.625% Sterling Preference shares is 75% of the average of the market values of the preference shares for five business days before the purchase is made; and (c) The highest price (not including expenses) which the Company can pay for each 8.625% Sterling Preference share is 125% of the average of the market values of the preference shares for five business days before the purchase is made. This authority shall begin on the date of the passing of this resolution and end on the conclusion of the next Annual General Meeting of the Company. The Company may agree, before this authorisation ends, to buy back its own 8.625% preference shares even though the purchase may be completed after this authorisation ends. (2) To buy back its own 10.375% Sterling Preference shares on the following terms: (a) The Company may buy up to 200,000,000 10.375% Sterling Preference shares; (b)The lowest price which the Company can pay for 10.375% Sterling Preference shares is 75% of the average of the market values of the preference shares for five business days before the purchase is made; and (c) The highest price (not including expenses) which the Company can pay for each 10.375% Sterling Preference share is 125% of the average of the market values of the preference shares for five business days before the purchase is made. This authority shall begin on the date of the passing of this resolution and end on the conclusion of the next Annual General Meeting of the Company. The Company may agree, before this authorisation ends, to buy back its own 10.375% preference shares even though the purchase may be completed after this authorisation ends. d) Rights on founder’s shares, “rights” bonds, convertible debentures and similar securities or rights Not applicable. e) Specific circumstances that restrict the availability of reserves Not applicable. f) Non-Group entities which hold, directly or through subsidiaries, 10% or more of equity Not applicable. g) Quoted equity instruments The preference share capital of Santander UK plc is traded on the London Stock Exchange under the following details: • 10.375% Sterling Preference - ISIN: GB0000064393 • 8.625% Sterling Preference - ISIN: GB0000044221 2. Santander Financial Services plc a) Number of financial equity instruments held by the Group The Group holds ordinary shares amounting to GBP 249,998,000 through Santander UK Group Holdings plc (249,998,000 ordinary shares with a par value of GBP 1 each). 813 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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. 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) Capital increases in progress No approved capital increases are in progress. c) Capital authorised by the shareholders at the general meeting Not applicable. 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) Rights on founder’s shares, “rights” bonds, convertible debentures and similar securities or rights d) Priority in the reimbursement of capital in the event company’s dissolution. 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 2023 year-end, the bank’s treasury shares consisted of 27,192,697 ordinary shares and 27,192,697 preferred shares, with a total of 54,385,394 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. 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 2023, 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. 814 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix f) Non-Group entities which hold, directly or through subsidiaries, 10% or more of equity Not applicable. g) Listed capital instruments All the shares are listed on the São Paulo Stock Exchange ( B3 - Brasil, Bolsa, Balcão) and the shares deposit certificates (American Depositary Receipts - ADR) are listed on the New York Stock Exchange (NYSE). 4. Santander Bank, National Association a) Number of financial equity instruments held by the Group At 31 December 2023, 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. 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 (RNV) 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. Tender offers for the acquisition of shares were carried out from February 7 to April 10, 2023, where Banco Santander, S.A. acquired a total of 244,306,313 Series “B” shares. Once the offers were finalized and in accordance with the Mexican regulation, on May 8, 2023, a trust was established for a period of 6 months, to carry out the acquisition of shares of Banco Santander México, including those represented by American Depositary Shares listed on the New York Stock Exchange (which were not owned at that time by Banco Santander, S.A. or its subsidiaries) owned by shareholders who did not participate in the tender offers made by Banco Santander, S.A. b) Capital increases in progress At 31 December 2023 there were no approved capital increases. On May 4 and 12, 2023, respectively, the Bank was delisted from the New York Stock Exchange, LLC and the RNV . On November 8, 2023, the trust ended; as a result, Banco Santander, S.A. repurchased 9,243,880 Series “B” shares from shareholders who did not participate in the tender offers, leaving a total of 1,714,399 shares of the Series “B” in the hands of minority shareholders. b) Ongoing capital stock increases. To this date there are not ongoing capital stock 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 1,691,806,903 shares which represent the 24.92% of such capital stock. 815 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix • 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. d) Rights incorporated into parts of founder, bonds or debt, convertible obligations and securities or similar rights. (i) The Board of Directors on its meeting held on October 22, 2015, was updated regarding the situation of the debt issuance of Banco Santander Mexico, S.A. , which had been previously ratified in the meeting held on October 17, 2013, in order to issue debt for the amount of 6,500 million dollars in local or international markets, for a maximum period of 15 years, senior or subordinated debt including debt instruments qualifying for purposes of capital in accordance with the legislation in force, which can be implemented individually or through several issuance programs. The approved debt issuance of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México is currently composed as follows: 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 RNV, 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. 816 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Instrument Issuance Program of unsecured bonds and unsecured certificates of deposit Type Revolving Term 4- Mar-2026 Private banking structured bonds Act with subsequent placements (JBSANPRIV 21-1) Not RevolvingA 28- Ene-2026 Amount 55,000 million Mexican pesos, or its $10,060 million Mexican equivalent in UDIs, dollars or any other foreign currency 20,000 million Mexican pesos $0 million Mexican pesos Available 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 $0 million Mexican pesos Private structured bonds Act with subsequent placements (JBSANPRIV 23-1) Private structured bonds Act with subsequent placements (JBSANPRIV 23-2) 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 Not Revolving Not Revolving 47010 20,000 million Mexican pesos $7,825 million Mexican pesos 47095 20,000 million Mexican pesos 16- Dic-2027 10,000 million Mexican pesos $20,000 million Mexican pesos $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 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 up to 1,500 million American dollars. On October 18, 2012 such senior debt issuance under 144ª Rules was approved on the amount of up to 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. 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. Likewise, such meeting approved the issuance of Tier 2 preferred subordinated debt for an amount of 1,300 million American dollars. (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. 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 June 15th., 2020, the Bank’s Shareholders' Meeting was held, which approved to increase the debt securities issuance in order to be settled in the amount of 10,000 million American dollars, to be used considering the following, among others: i) issuance of debt securities in local and international markets; ii) senior or subordinated debt, including in both cases preferred and not preferred securities, and debt securities classified as capital on a regulatory point of view. The Board of Directors on its meeting held on June 18th., 2020, ratified the 10,000 million American dollars limit approved by the above mentioned Shareholders Meeting. 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 817 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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” issued by the Bank, 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 1,391,248,074 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 435,492 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 2023, there were no equity increases in progress. c) Capital authorised by the shareholders at the general meeting Not applicable. 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 2023, 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. 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. d) Rights on founder’s shares, “rights” bonds, convertible debentures and similar securities or rights Not applicable. b) Capital increases in progress At 31 December 2023, there were no approved capital increases. 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. c) Capital authorised by the shareholders at the general meeting Share capital at 31 December 2023 amounted to CLP 891,302,881,691. 818 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix d) Rights on founder’s shares, “rights” bonds, convertible debentures and similar securities or rights Not applicable. e) Specific circumstances that restrict the availability of reserves 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, 2023, 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, 2023, there were no equity increases in progress. c) Capital authorised by the shareholders at the general meeting There was no share capital increase in 2023. d) Rights on founder’s shares, “rights” bonds, convertible debentures and similar securities or rights Not applicable. e) Specific circumstances that restrict the availability of reserves Not applicable. f) Non-Group entities, which hold, directly or through subsidiaries, 10% or more of equity Not applicable. g) Quoted equity instruments All the shares of Santander Bank Polska S.A. are listed on the Warsaw Stock Exchange. 819 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix Appendix VI Annual banking report Grupo Santander’s total tax contribution (taxes incurred directly and by third parties, generated in the course of business) is around EUR 19.9 billion, including more than EUR 9.6 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 5,214 million in 2023, with an effective tax rate of 31.7%) 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 4,276 million in 2023, representing an effective rate of 26.0%, 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 significant public subsidies in 2023. 820 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix The breakdown of information is as follows: Jurisdiction Germany Argentina Australia 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 United Kingdom Romania Singapore Sweden Switzerland Uruguay Consolidated Group Total Turnover (EUR million) 1,524 1,574 6 218 45 98 12,424 73 2,244 25 87 4 9,994 7,072 216 101 916 9 96 — 20 49 578 20 532 5,872 243 155 196 3,600 2,058 6,436 5 24 153 165 591 57,423 2023 Full-time equivalent employees 5,422 8,152 61 333 26 217 57,438 275 9,573 104 1,092 79 35,142 13,250 224 157 987 54 225 97 1 88 1,294 72 27 30,444 516 362 867 12,601 5,307 21,118 30 36 275 359 1,528 207,833 Gross profit or loss before tax (EUR million) 375 552 — 104 37 58 2,033 9 938 (8) 3 (4) 2,013 752 112 51 567 — 15 — 3 31 233 10 524 2,134 118 96 74 1,513 1,348 2,444 3 9 44 29 239 16,459 Tax on profit or loss (EUR million) 173 54 — 16 — 5 1,396 1 167 — 20 — 323 446 34 8 43 — 9 — 1 3 68 2 193 840 5 114 28 150 302 728 — 1 19 8 57 5,214 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 492 million. Includes the Corporate Centre. At 31 December 2023, the Group’s return on assets (ROA) was 0.69%. 821   2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix 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 2023 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 2023 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 Banco Santander, S.A. 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), 19 February 2024 ANA PATRICIA BOTÍN-SANZ DE SAUTUOLA Y O’SHEA Chair HÉCTOR BLAS GRISI CHECA Chief Executive Officer GLENN HOGAN HUTCHINS Vice Chair JOSÉ ANTONIO ÁLVAREZ ÁLVAREZ Vice Chair 822 2023 Annual report Contents Auditor's report Consolidated financial statements Notes to the consolidated financial statements Appendix MEMBERS: HOMAIRA AKBARI FRANCISCO JAVIER BOTÍN-SANZ DE SAUTUOLA Y O’SHEA BRUCE CARNEGIE-BROWN SOL DAURELLA COMADRÁN HENRIQUE MANUEL DRUMMOND BORGES CIRNE DE CASTRO GERMÁN DE LA FUENTE ESCAMILLA GINA LORENZA DÍEZ BARROSO AZCÁRRAGA LUIS ISASI FERNÁNDEZ DE BOBADILLA RAMIRO MATO GARCÍA-ANSORENA BELÉN ROMANA GARCÍA PAMELA ANN WALKDEN 823 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. 824 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 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 oficina@defensorcliente.es 825 santander.com 

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