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
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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.
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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.
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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.
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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.
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2023 Annual report
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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.
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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
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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
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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.
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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
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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.
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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.
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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'
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2023 Annual report
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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.
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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
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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.
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2023 Annual report
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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.
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2023 Annual report
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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.
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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.
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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.
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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.
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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).
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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.
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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'.
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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.
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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
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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.
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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;
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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.
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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
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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.
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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.
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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’.
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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.
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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.
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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
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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.
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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.
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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
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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.
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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.
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• 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.
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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.
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→ 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.
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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'.
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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'
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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.
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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).
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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
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• 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,
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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.
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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
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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
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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
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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
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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
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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.
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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
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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
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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.
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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%
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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Corporate income tax accrued on profit/loss and the tax due if the statutory tax rate is applied to profit/loss before tax are different
mainly because of tax calculation standards, which establish temporary or permanent restrictions on the deduction of expenses,
exemptions, deductions and other adjustments that cause the tax and accounting result to differ.
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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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
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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'.
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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
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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
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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.
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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.
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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/
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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.
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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/
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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
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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
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Non-financial information to be disclosed
Detailed information on the current and foreseeable effects
of the activities of the company in the environment and,
where appropriate, health and safety, environmental
evaluation or certification procedures; the resources
dedicated to the prevention of environmental risks; the
application of the principle of caution, the amount of
provisions and guarantees for environmental risks.
Contamination:
Measures to prevent, reduce or repair CO2 emissions that
seriously affect the environment, taking into account any
form of air pollution, including noise and light pollution.
Circular economy and waste prevention and management:
Waste prevention measures, waste recycling measures,
waste reuse measures; other forms of waste recovery and
reuse; actions against food waste.
Sustainable use of resources:
Use and supply of water according to local limitations
1.
Environmental 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
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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
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Non-financial information to be disclosed
Accessibility:
Universal accessibility of people
2.
Social
Equality:
Measures taken to promote equal treatment and
opportunities between women and men, 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
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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.
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Economic and financial review
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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
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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%).
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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.
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Principle 2: Impact and Target Setting
We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and
environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the
most significant impacts.
2.1 Impact Analysis (Key Step 1)
Show that your bank has performed an impact analysis of its portfolio/s to identify its most significant impact areas and determine priority areas for
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.
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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.
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2.2 Target Setting (Key Step 2)
Show that your bank has set and published a minimum of two targets which address at least two different areas of most significant impact that you
identified in your impact analysis.
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
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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.
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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.
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Principle 3: Clients and Customers
We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that
create shared prosperity for current and future generations.
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.
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3.2 Business opportunities
Describe what strategic business opportunities in relation to the increase of positive and the reduction of negative impacts your bank has identified
and/or how you have worked on these in the reporting period. Provide information on existing products and services , information on sustainable
products developed in terms of value (USD or local currency) and/or as a % of your portfolio, and which SDGs or impact areas you are striving to
make a positive impact on (e.g. green mortgages – climate, social bonds – financial inclusion, etc.).
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
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Principle 5: Governance & Culture
We will implement our commitment to these Principles through effective governance and a culture of responsible banking
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
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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.
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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
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Principle 6: Transparency & Accountability
We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable
for our positive and negative impacts and our contribution to society’s goals.
6.1 Assurance
Has this publicly disclosed information on your PRB commitments been assured by an independent assurer?
☒ Yes ☐ Partially ☐
If applicable, please include the link or description of the assurance statement.
This is our 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.
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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
-
-
-
-
-
-
-
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-
-
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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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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C
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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
-
-
-
-
-
-
-
-
-
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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
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2023 Annual report
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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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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D
7
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-
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-
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D
-
D
-
-
-
-
3
2
-
-
-
-
-
6
-
6
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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
-
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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
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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
-
-
-
-
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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
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2023 Annual report
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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
-
-
-
-
-
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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.
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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).
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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).
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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.
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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.
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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).
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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).
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Theme
Health and well being
Skills for the future
Metric
Freedom of Association and Collective Bargaining at
Risk (%):
1. Percentage of active workforce covered under
collective bargaining agreements
2. An explanation of the assessment performed on
suppliers for which the right to freedom of association
and collective bargaining is at risk including measures
taken by the organization to address these risks.
Health and Safety (%):
1. The number and rate of fatalities as a result of work-
related injury; high-consequence work-related injuries
(excluding fatalities); recordable work-related injuries,
main types of work- related injury; and the number of
hours worked.
2. An explanation of how the organization facilitates
workers’ access to non-occupational medical and
healthcare services and the scope of access provided for
employees and workers.
Training provided (#, $):
1. Average hours of training per person that the
organization’s employees have undertaken during the
reporting period, by gender and employee category (total
number of trainings provided to employees divided by the
number of employees).
2. Average training and development expenditure per full
time employee.
Response
1. Refer to 'Our progress in figures' section (p. 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.
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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
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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).
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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)
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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
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11. Independent verification report
GRI 2-5
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Corporate governance
Economic and financial review
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Corporate governance
Economic and financial review
Risk, compliance & conduct management
Corporate
governance
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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
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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
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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
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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
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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
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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.
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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.
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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.
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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
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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).
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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.
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• 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%
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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.
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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
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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
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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.
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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.
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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.
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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.
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The following chart summarizes the resolutions approved and voting results:
1. Annual accounts and corporate management
1A. Annual accounts and directors’ reports for 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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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%
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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%.
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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.
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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%)
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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%
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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).
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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.
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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.
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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.
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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.
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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.
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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.
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This makes sure the number of board roles that our directors
have at once is within the legal limit (i.e. no more than one
executive and two non-executive roles, or four non-executive
roles; roles in the same group are considered a single role and
roles in not-for-profit or non-commercial organizations are not
included).
Director training and induction programmes
The board has an annual training and development programme
to help directors continue to develop skills and increase their
understanding of the Group and industry, taking into account
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;
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• 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.
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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.
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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).
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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%
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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.
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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.
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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.
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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:
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Capital & Liquidity 5%Compliance and Conduct27%Additional oversight activities3%Risk65%
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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:
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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
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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
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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
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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
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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.
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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.
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6. Remuneration
Sections 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 9.4 and 9.5 comprise the
annual report on directors’ remuneration that must be prepared
and submitted to the consultative vote of the general
shareholders' meeting.
In addition, 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.
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Directors can receive shares, share options or other forms of
share-based compensation, subject to prior approval at the
general meeting. Directors can also receive other compensation
following a proposal made by the remuneration committee and
upon resolution by the board of directors, as may be deemed
appropriate, in consideration for the performance of other
duties in Banco Santander, whether they are executives duties
or not, in addition to their oversight and collective decision-
making as board members.
Non-executive directors do not have the right to receive any
benefit on the occasion of their removal from office.
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
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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.
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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.
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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.
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• 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.
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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.
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• 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.
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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.
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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.
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• '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.
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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.
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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).
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I. Comparative analysis of directors' remuneration,
company performance and average remuneration of
employees
This chart summarizes directors’ compensation (short-term
remuneration, deferred variable remuneration and/or deferred
variable remuneration linked to multi-year targets included,
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.
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The following chart shows the comparative analysis between the directors' remuneration, the company performance (underlying
profit attributable to the Group, audited profit before taxes and ordinary ROTE) and the average remuneration of Santander
employees (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.
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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:
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• 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
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(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
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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).
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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
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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).
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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
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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
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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.
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• 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 .
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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.
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7. Group structure
and internal governance
Grupo Santander is structured into legally independent
subsidiaries whose parent company is Banco Santander, S.A. Its
registered office is in Santander (Cantabria, Spain), while its
corporate centre is located in Boadilla del Monte (Madrid,
Spain). It has a Group-Subsidiary Governance Model (GSGM)
and good governance practices in place for its core subsidiaries.
Any references to subsidiaries in this section are to the Group’s
most prominent entities.
The key features of the GSGM are:
• The subsidiaries’ governing bodies must ensure their rigorous
and prudent management and economic solvency while
pursuing the interests of their shareholders and other
stakeholders.
• The subsidiaries are managed locally by teams that possess
extensive knowledge on, and experience with, their customers
and markets, while benefiting from the synergies and
advantages of belonging to the Group.
• The subsidiaries are subject to local authority regulation and
supervision, although the ECB supervises the Group overall.
• Customer funds are secured by the deposit guarantee
schemes in the subsidiaries’ countries and are subject to local
laws.
The subsidiaries finance their own capital and liquidity. The
Group’s capital and liquidity are coordinated by corporate
committees. Intra-group risk transactions are limited,
transparent and carried out under market conditions. Grupo
Santander retains a controlling interest in subsidiaries listed in
certain countries.
Each subsidiary runs independently and has its own recovery
plan, limiting the contagion of risk between them and reducing
systemic risk.
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
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• 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.
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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.
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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
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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.
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• Before they are rolled out, a complete software testing cycle
is run in a pre-production computerized environment that
simulates real situations. Testing includes technical and
functional tests, performance tests, user-acceptance tests and
pilot and prototype tests, which are defined by the entities
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.
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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.
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9. Other corporate
governance information
Since 12 June 2018, CNMV allows the annual corporate
governance and directors’ remuneration reports Spanish listed
companies must submit to be drafted in a free format, which is
what we selected for our corporate governance and directors’
remuneration reports since 2018.
The CNMV requires any issuer opting for a free format to
provide certain information in a format it dictates so that it can
be aggregated for statistical purposes. This information is
included (i) for corporate governance matters, under section 9.2
'Statistical information on corporate governance required by the
CNMV', which also covers the section 'Degree of compliance
with corporate governance recommendations', and (ii) for
remuneration matters, under section 9.5 'Statistical information
on remuneration required by the CNMV'.
Some shareholders or other stakeholders may be used to the
formats of the corporate governance and directors'
remuneration reports set the by the CNMV. Therefore, each
section under this format in sections 9.1 'Reconciliation with the
CNMV’s corporate governance report model' and 9.4
'Reconciliation to the CNMV’s remuneration report model'
include a cross reference indicating where this information may
be found in the 2022 annual corporate governance report
(drafted in a free format) and elsewhere in this annual report.
We have normally completed the 'comply or explain' section for
all recommendations in the Spanish Corporate Governance Code
to clearly show the ones we complied with, and explain the
ones we partially complied or failed to comply with. In section
9.3 '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'.
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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.
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Section in the CNMV
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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.
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Section in the CNMV
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F. ICFRS
F.1
F.2
F.3
F.4
F.5
F.6
F7
Included in
statistical report
Comments
No
No
No
No
No
No
No
See section 8.1 'Control environment'.
See section 8.2 'Risk assessment in financial reporting'.
See section 8.3 'Control activities'.
See section 8.4 'Information and communication'.
See section 8.5 'Monitoring 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
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A.3 Give details of the participation at the close of the fiscal year of the members of the board of directors who are holders of voting
rights attributed to shares of the company or through financial instruments, whatever the percentage, excluding the directors who
have been identified in Section 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
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Indicate whether the company is aware of the existence of any concerted actions among its shareholders. If so, give a brief
description as applicable:
Yes þ No o
Participants in the concerted action
Javier Botín-Sanz de Sautuola y O’Shea
(directly and indirectly through
Agropecuaria El Castaño, S.L.U.)
Emilio Botín-Sanz de Sautuola y O’Shea,
Puente San Miguel, S.L.U.
Ana Botín-Sanz de Sautuola y O’Shea,
CRONJE, S.L.U.
Nueva Azil, S.L.
Carmen Botín-Sanz de Sautuola y O’Shea
Paloma Botín-Sanz de Sautuola y O’Shea
Bright Sky 2012, S.L.
% of share
capital affected Brief description of concerted action
Expiry date, if
applicable
0.67
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
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B. GENERAL SHAREHOLDERS’ MEETING
B.4 Indicate the attendance figures for the general shareholders’ meetings held during the financial year to which this report relates
and in the two preceding financial years:
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
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C. MANAGEMENT STRUCTURE
C.1 Board of directors
C.1.1 Maximum and minimum number of directors provided for in the Bylaws:
Maximum number of directors
Minimum number of directors
Number of directors set by the General Meeting
C.1.2 Complete the following table with the directors’ details:
Name or corporate
name of director
Ana Botín-Sanz de Sautuola y O’Shea N/A
Representative director
Category of
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
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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
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Identify any independent director who receives from the company or its group any amount or perk other than his or her director
remuneration, as a director, or who maintain or have maintained during the financial year covered in this report a business
relationship with the company or any group company, whether in his or her own name or as a principal shareholder, director or
senior manager of an entity which maintains or has maintained such a relationship.
In such a case, a reasoned statement from the Board on why the relevant director(s) is able to carry on their duties as independent
director(s) will be included.
Name or
corporate name
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.
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Other external directors
Identify all other external directors and explain why these cannot be considered proprietary or independent directors and detail their
relationships with the company, its executives or shareholders:
Name or corporate name of
director
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
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C.1.11 List the positions of director, administrator or representative thereof, held by directors or representatives of directors who are
members of the company's board of directors in other entities, whether or not they are listed companies:
Identity of the director or
representative
Ana Botín-Sanz de Sautuola y
O’Shea
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
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C.1.12 Indicate and, if applicable explain, if the company has established rules on the maximum number of directorships its directors
may hold and, if so, where they are regulated:
Yes þ No o
The maximum number of directorships is established, as provided for in article 30 of the Rules and regulations of the board, in article
26 of Spanish Law 10/2014 on the ordering, supervision and solvency of credit institutions. This rule is further developed by articles
29 and subsequent of Royal Decree 84/2015 and by Rules 30 and subsequent of Bank of Spain Circular 2/2016.
C.1.13 Identify the following items of the total remuneration of the board of directors:
Board remuneration accrued in the fiscal year (EUR thousand)
Funds accumulated by current directors for long-term savings systems with consolidated economic rights (EUR thousand)
Funds accumulated by current directors for long-term savings systems with unconsolidated economic rights (EUR thousand)
Pension rights accumulated by former directors (EUR thousand)
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
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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
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Responsible banking
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Economic and financial review
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C.1.34 Indicate the number of consecutive years during which the current audit firm has been auditing the financial statements of
the company and/or its group. Likewise, indicate for how many years the current firm has been auditing the financial statements as a
percentage of the total number of years over which the financial statements have been audited:
Number of consecutive years
Number of years audited by current audit firm/Number of years the company’s or its Group
financial statements have been audited (%)
Individual financial
statements
Consolidated
financial statements
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
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C.2 Board committees
C.2.1 Give details of all the board committees, their members and the proportion of executive, independent and other external
directors.
Executive committee
Name
Ana Botín-Sanz de Sautuola y O’Shea
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
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Corporate governance
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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
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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
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D.5 Give individual details of the operations that are significant due to their amount or relevant due to their subject matter carried
out by the company or its subsidiaries with other related parties pursuant to the international accounting standards adopted by the
EU, which have not been reported in previous sections.
Not applicable.
G. DEGREE OF COMPLIANCE WITH THE CORPORATE
GOVERNANCE RECOMMENDATIONS
Indicate the degree of the company’s compliance with the
recommendations of the good governance code for listed
companies.
Should the company not comply with any of the
recommendations or comply only in part, include a detailed
explanation of the reasons so that shareholders, investors and
the market in general have enough information to assess the
company’s behaviour. General explanations are not acceptable.
1. The bylaws of listed companies should not place an upper
limit on the votes that can be cast by a single shareholder, or
impose other obstacles to the takeover of the company by
means of share purchases on the market.
Complies þ Explain o
2. When the listed company is controlled, pursuant to the
meaning established in Article 42 of the Commercial Code, by
another listed or non-listed entity, and has, directly or through
its subsidiaries, business relationships with that entity or any of
its subsidiaries (other than those of the listed company) or
carries out activities related to the activities of any of them, this
is reported publicly, with specific information about:
a) The respective areas of activity and possible business
relationships between, on the one hand, the listed company or
its subsidiaries and, on the other, the parent company or its
subsidiaries.
b) The mechanisms established to resolve any conflicts of
interest that may arise.
Complies o Partially complies o Explain o Not applicable þ
3. During the AGM the chair of the board should verbally inform
shareholders in sufficient detail of the most relevant aspects of
the company’s corporate governance, supplementing the
written information circulated in the annual corporate
governance report. In particular:
a) Changes taking place since the previous annual general
meeting.
b) The specific reasons for the company not following a given
Good Governance Code recommendation, and any alternative
procedures followed in its stead.
Complies þ Partially complies o Explain o
4. The company should define and promote a policy for
communication and contact with shareholders and institutional
investors within the framework of their involvement in the
company, as well as with proxy advisors, that complies in full
with the rules on market abuse and gives equal treatment to
shareholders who are in the same position. The company should
make said policy public through its website, including
information regarding the way in which it has been
implemented and the parties involved or those responsible its
implementation.
Further, without prejudice to the legal obligations of disclosure
of inside information and other regulated information, the
company should also have a general policy for the
communication of economic-financial, non-financial and
corporate information through the channels it considers
appropriate (media, social media or other channels) that helps
maximise the dissemination and quality of the information
available to the market, investors and other stakeholders.
Complies þ Partially complies o Explain o
5. The board of directors should not make a proposal to the
general meeting for the delegation of powers to issue shares or
convertible securities without pre-emptive subscription rights
for an amount exceeding 20% of capital at the time of such
delegation.
And that whenever the board of directors approves an issuance
of shares or convertible securities without pre-emptive rights
the company immediately publishes reports on its web page
regarding said exclusions as referenced in applicable mercantile
law.
Complies þ Partially complies o Explain o
6. Listed companies drawing up the following reports on a
voluntary or compulsory basis should publish them on their
website well in advance of the AGM, even if their distribution is
not obligatory:
a) Report on auditor independence.
b) Reviews of the operation of the audit committee and the
nomination and remuneration committees.
c) Audit committee report on third-party transactions.
Complies þ Partially complies o Explain o
7. The company should broadcast its general meetings live on
the corporate website.
The company should have mechanisms that allow the
delegation and exercise of votes by electronic means and even,
in the case of large-cap companies and, to the extent that it is
proportionate, attendance and active participation in the general
shareholders’ meeting.
Complies þ Explain o
8. The audit committee should strive to ensure that the financial
statements that the board of directors presents to the general
shareholders’ meeting are drawn up in accordance to accounting
legislation. And in those cases where the auditors includes any
qualification in its report, the chair of the audit committee
should give a clear explanation at the general meeting of their
opinion regarding the scope and content, making a summary of
that opinion available to the shareholders at the time of the
publication of the notice of the meeting, along with the rest of
proposals and reports of the board.
Complies þ Partially complies o Explain o
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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
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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;
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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.
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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.
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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
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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.
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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.
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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'.
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9.4 Reconciliation to the CNMV’s remuneration report model
Included in
statistical
report
Section in
the CNMV
model
A. Remuneration policy for the present fiscal year
A.1
No
Further information elsewhere and comments
• See section 6.4: A.1.1, A.1.2, A.1.3, A.1.4, A.1.5, A.1.6, A.1.7, A.1.8, A.1.9, A.1.10, A.1.11 (note 5), A.1.12.
• See also sections 4.7 and 6.5 for A.1.1 y A.1.6.
• See 'Summary of link between risk, performance and reward' in section 6.3.
See section 6.4.
See section 6.4. See Introduction.
See section 6.5.
No
No
No
A.2
A.3
A.4
B. Overall summary of application of the remuneration policy over the last fiscal year
B.1
No
For B.1.1, see sections 6.1, 6.2. and 6.3.
For B.1.2 y B.1.3 (not applicable) see section 6.5.
See 'Summary of link between risk, performance and reward' in section 6.3.
See sections 6.1, 6.2 and 6.3.
See section 6.5.
See section 6.2 and 6.3.
See 'Gross annual salary' in section 6.3.
See 'Variable remuneration' in section 6.1, 6.2 and 6.3.
Not applicable.
See 'Main features of the benefit plans' in section 6.3.
See 'Other remuneration' in section 6.3.
See 'Terms and conditions of executive directors´ contracts' in section 6.4.
See section 6.3: "Remuneration of board members as representatives of Banco Santander"
See note 5 to the consolidated financial statements.
See 'Insurance and other remuneration and benefits in kind' in section 6.4.
See 'Remuneration of board members as representatives of the Bank' in section 6.3.
No remuneration for this component.
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
B.2
B.3
B.4
B.5
B.6
B.7
B.8
B.9
B.10
B.11
B.12
B.13
B.14
B.15
B.16
C. Breakdown of the individual remuneration of directors
Yes
C
Yes
C.1 a) i)
Yes
C.1 a) ii)
Yes
C.1 a) iii)
Yes
C.1 a) iii)
Yes
C.1 b) i)
No
C.1 b) ii)
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
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9.5 Statistical information on remuneration required by the CNMV
B. OVERALL SUMMARY OF HOW REMUNERATION POLICY WAS APPLIED DURING THE YEAR ENDED
B.4 Report on the result of the consultative vote at the general shareholders’ meeting on remuneration in the previous year,
indicating the number of votes in favour, votes against, abstentions and blank ballots:
Votes cast
Number
11,116,958,970
% 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.
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C.1 Complete the following tables on individual remuneration of each director (including the remuneration for exercising executive
functions) accrued during the year.
a) Remuneration from the reporting company:
i) Remuneration in cash (thousand euros)
Fixed
remuneration
Per diem
allowances
Remuneration
for
membership
of Board's
committees
Short-term
variable
Salary remuneration
Long-term
variable
remuneration
1 Severance
pay
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.
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ii) Table of changes in share-based remuneration schemes and gross profit from consolidated shares or financial instruments
Financial instruments at start
of year 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
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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.
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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%.
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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
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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
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c) Summary of remuneration (thousands of EUR)
The summary should include the amounts corresponding to all the items of remuneration included in this report that have been
accrued by the director, in thousand euros.
Remuneration accrued in the company
Remuneration accrued in group companies
Gross profit
on
consolidated
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.
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C.2 Indicate the evolution in the last five years of the amount and percentage variation of the remuneration accrued by each of the
directors of the listed company who have held this position during the year, the consolidated results the company and the average
remuneration on an equivalent basis with regard to full-time employees of the company and its subsidiaries that are not directors of
the listed company.
Directors' remuneration (EUR thousand)
• Executive Directors
Ana Botín-Sanz de Sautuola y O’Shea
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
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Economic and
financial review
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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
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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
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350
354
362
374
377
377
379
381
399
401
411
420
427
430
431
441
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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.
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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
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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
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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.
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2. Group selected data
BALANCE SHEET (EUR million)
Total assets
Loans and advances to customers
Customer deposits
Total funds A
Total equity
INCOME STATEMENT (EUR million)
Net interest income
Total income
Net operating income
Profit before tax
Profit attributable to the parent
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
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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.
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3. Group financial
performance
Santander follows IFRS to report its results (see note 1.b to the
consolidated financial statements), which generally inform
reporting of our financial situation in this consolidated directors’
report. However, we also use non-IFRS measures and
Alternative Performance Measures (APMs) to assess our
performance (see section 8. 'Alternative Performance Measures'
of this chapter). Thus, the main adjustments to our IFRS results
consist of:
• underlying results measures: we present what we call
underlying results measures which exclude items outside the
ordinary course of business and reclassify certain items under
some headings of the underlying income statement as
described at the end of section 3.2 ‘Results’ in this chapter and
in note 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.
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• 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%.
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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).
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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
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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.
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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.
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Average balance sheet - liabilities and interest expense
EUR million
Liabilities and stockholders’ equity
Deposits from central banks and credit institutions A
Domestic
International - Mature markets
International - Developing markets
of which:
Repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Customer deposits
Domestic
International - Mature markets
International - Developing markets
of which:
Repurchase agreements
Domestic
International - Mature markets
International - Developing markets
Marketable debt securities B
Domestic
International - Mature markets
International - Developing markets
of which:
Commercial paper
Domestic
International - Mature markets
International - Developing markets
Other interest-bearing liabilities 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
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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
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2023 Annual report
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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
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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
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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
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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.
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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
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Gross loans and advances to customers
(minus reverse repos)
EUR billion
Gross loans and advances to customers
(minus reverse repos)
% of operating areas. December 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
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2023 Annual report
Contents
Business model and strategy
Responsible banking
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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
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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.
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2023 Annual report
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Business model and strategy
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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:
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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
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2023 Annual report
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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.
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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
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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
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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.
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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.
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3.5 Capital management and adequacy. Solvency ratios
Executive summary
Fully-loaded capital ratio
The fully-loaded CET1 ratio remained above 12% in every
quarter in 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.
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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.
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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
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Regulatory capital ratios (phased-in)
The phased-in ratios are calculated by applying the CRR
transitory schedules.
On a consolidated basis, the minimum levels required by the
European Central Bank 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.
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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.
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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.
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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.
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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.
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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
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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.
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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
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Total Loss-Absorbing Capacity (TLAC) and Minimum
Requirement for own funds and Eligible Liabilities
(MREL)
In November 2015, the FSB published the TLAC term sheet
based on the previously published principles for crisis
management frameworks. It aims to ensure global systemically
important banks (G-SIBs) will have the capacity to absorb losses
and recapitalize as required to maintain critical functions during
and immediately after resolution proceedings without
compromising 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.
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3.6 Special situations and resolution
Corporate special situations and resolution
framework, crisis management, recovery and
resolution planning
This section summarizes the main developments in the year
relating to 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.
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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.
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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.
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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.
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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).
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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
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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
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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%
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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.
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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%
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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.
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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
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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:
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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,
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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.
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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.
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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
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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
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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.
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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
—
—
—
—
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5. Research, development
and innovation (R&D&I)
Research, development and innovation activity
Innovation and technological development are crucial to
Santander's strategy. We focus on operational excellence and
customer experience to meet the challenges that stem from
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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)
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Economic and financial review
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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
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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
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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
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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.
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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.
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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.
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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.
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Profitability and efficiency A B
RoE
(EUR million and %)
Profit attributable to the parent
Average stockholders' equity (excluding minority interests)
Underlying RoE
Profit attributable to the parent
(-) Net capital gains and provisions
Underlying profit attributable to the parent
Average stockholders' equity (excluding minority interests)
RoTE
Profit attributable to the parent
(-) Goodwill impairment
Profit attributable to the parent (excluding goodwill impairment)
Average stockholders' equity (excluding minority interests)
(-) Average intangible assets
Average stockholders' equity (excl. minority interests) - intangible assets
Underlying RoTE
Profit attributable to the parent
(-) 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.
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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.
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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.
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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.
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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
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• 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.
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2. Risk management
and control model
Our risk management and control model is underpinned by common
principles, a solid risk culture, 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.
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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
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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.
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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.
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• 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.
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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.
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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
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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
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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.
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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.
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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).
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Individuals56%Companies24%Large corporates20%
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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
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Financial asset impairment
The IFRS 9 impairment model applies to financial assets valued
at amortized cost; debt instruments valued at fair value with
changes in other comprehensive income; leasing receivables;
and commitments and guarantees not 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
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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
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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.
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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.
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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.
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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
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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');
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• 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.
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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.
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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
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Risk by factor
This table shows the latest and average VaR at a 99%
confidence level by risk factor in the last three years. It also
shows the high and low VaR values in 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
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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):
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Financial derivatives. Risk (VaR) by risk factor
EUR million. VaR at a 99% over a one day horizon
c
Total VaR Vega
Diversification effect
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).
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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.
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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.
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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).
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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.
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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.
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5. Capital risk
5.1 Introduction
Our structural risk includes the risk of insufficient quality or
quantity of capital to meet internal business objectives,
regulatory requirements and market expectations.
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.
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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)
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6. Operational risk
6.1 Introduction
In accordance with the Basel framework, Santander defines
operational risk as the risk of loss due to inadequate or failed
internal processes, people, and systems or to external events. It
covers risk types such as fraud, 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').
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• 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;
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• 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.
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• 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.
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• 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.
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6.3 Key metrics
Net losses (including incurred losses and net provisions) as per
Basel
risk categories in the last three years were:
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'.
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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%
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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.
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Employees’ compliance functions
Canal Abierto
Training and awareness
→ Provides a channel for employees to report
unethical conduct and breaches of internal
regulation.
→ Manages and investigate reported cases.
→ Promotes a culture of speaking up and truly
listening.
→ Develop employee training programmes and
awareness campaigns on corporate 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
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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).
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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.
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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
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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
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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.
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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.
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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.
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• 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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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Notes to the consolidated
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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.
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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.
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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).
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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).
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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.
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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.
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Translation of functional currencies to euros
The balances in the financial statements of consolidated entities
(or entities accounted for using the equity method) whose
functional currency is not the euro are translated to euros as
follows:
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.
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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.
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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.
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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'.
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• Fair value with changes in other comprehensive income:
financial instruments held in a business model whose
objective is to collect principal and interest cash flows and the
sale of these assets, where fair value is a key factor in their
management. Additionally, the contractual cash flow
characteristics substantially represent a 'basic financing
agreement'.
• Fair value with changes in profit or loss: financial instruments
included in a business model whose objective is not obtained
through the above mentioned models, where fair value is a
key factor in managing of these assets, and financial
instruments whose contractual cash flow characteristics do
not substantially represent a 'basic financing agreement'. In
this section it can be enclosed the portfolios classified under
'Financial assets held for trading', 'Non-trading financial
assets mandatorily at fair value through profit or loss' and
'Financial assets at fair value through profit or loss'. In this
regard, most of the financial assets presented in the category
of 'Financial assets designated at value reasonable with
change in results' are instruments financial services that, not
being part of the portfolio of negotiation, are contracted
jointly with other financial instruments that are recorded in
the category of 'held for trading', and that by both are
recorded at fair value with changes in results, so your record
in any other category would produce accounting asymmetries.
Equity instruments will be classified at fair value under IFRS 9,
with changes in profit or loss, unless the Group decides, for non-
trading assets, to classify them at fair value with changes in
other comprehensive income (irrevocably) at initial recognition.
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).
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• 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.
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• 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.
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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.
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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.
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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:
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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.
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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.
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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.
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• 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.).
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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
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v. Impairment individual assessment scope
Grupo Santander determines the perimeter over which it makes
an estimate of the assessment for impairment on an individual
basis based on a relevance threshold set by each of the
geographical areas and the stage in which the operations are
located. In general, the Group applies the individualised
calculation of expected losses to the significant exposures
classified in stage 3, although Banco Santander, S.A. has also
extended its analyses to some of the exposures classified in
stage 2.
It should be noted that, in any case and irrespective of the stage
in which their transactions are carried out, for customers who
do not receive standardised treatment, a relational risk
management model is applied, with individualised treatment
and monitoring by the assigned risk analyst. In addition to
wholesale customers (Santander Corporate & Investment
Banking or SCIB) and large companies, this relational
management model also includes other segments of smaller
companies for which there is information and capacity for more
personalised and expert analysis and monitoring. As indicated
in the Group's wholesale credit model, the individual treatment
of the client facilitates the continuous updating of information.
The risk assumed must be followed and monitored throughout
its life cycle, enabling anticipation and action to be taken in the
event of possible impairments. In this way, the customer's
credit quality is analysed individually, taking into account
specific aspects such as his competitive position, financial
performance, management, etc. In the wholesale risk
management model, every customer with a credit risk position
is assigned a rating, which has an associated probability of
customer default. Thus, individual analysis of the debtor
triggers a specific rating for each customer, which determines
the appropriate parameters for calculating the expected loss, so
that it is the rating itself that initially modulates the necessary
coverage, adjusting the severity of the possible loss to the
guarantees and other mitigating factors that the customer may
have available. In addition, if as a result of this individualised
monitoring of the customer, the analyst finally considers that
his coverage is not sufficient, he has the necessary mechanisms
to adjust it under his expert judgement, always under the
appropriate governance.
h) '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.
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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.
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For this segmentation of assets, when they are completed, the
real costs are known and the actual expenses for the
marketing and sale of the asset must be taken into account.
Therefore, Banco Santander uses the actual costs in its
calculation engine or, failing that, those estimated on the
basis of its observed experience.
• Market Value Model according to Evolution of Market Values
used to update the valuation of developments in progress. The
valuation model estimates the current market value of the
properties based on complete individual valuations by third
parties, calculated from the values of the feasibility studies
and development costs of the promotion, as well as the
selling costs, distinguishing by location, size and type of
property. The inputs used in the valuation model for
residential assets under construction are actual revenues and
costs.
For this purpose, in order to calculate the investment flows,
Banco Santander considers, on the basis of the feasibility
studies, the expenditure required for construction, the
professional fees relating to the project and to project
management, the premiums for mandatory building
insurance, the developer's administrative expenses, licenses,
taxes on new construction and fees, and urban development
charges.
With respect to the calculation of income flows, Banco
Santander takes into account the square metres built, the
number of homes under construction and the estimated
selling price over 1.5 years.
The market value will be the result of the difference between
the income flows and the investment flows estimated at each
moment.
• Land Valuation model. The methodology followed by the
Group regarding land valuation consists of updating the
individual reference valuation of each of the land on an annual
basis, through updated valuation valuations carried out by
independent professionals and following the methodology
established in the Order ECO/805/2003, of 27 March, whose
main verifications in the case of land valuation, regardless of
the degree of urbanisation of the land, correspond to:
– Visual verification of the assessed property.
– Registry description.
– Urban planning.
– Visible easements.
– Visible state of occupation, possession, use and
exploitation.
– Protection regime.
– Apparent state of preservation.
– Correspondence with cadastral property.
– Existence of expropriation procedure, expropriation plan
or project, administrative resolution or file that may lead
to expropriation.
– Expiry of the urbanization or building deadlines.
– Existence of a procedure for failure to comply with
obligations.
– Verification of surfaces.
For the purposes of valuation, the land will be classified in the
following levels:
– Level I: It will include all the lands that do not belong to
level II.
– Level II: It shall include land classified as undeveloped
where building is not allowed for uses other than
agriculture, forestry, livestock or linked to an economic
exploitation permitted by the regulations in force. Also
included are lands classified as developable that are not
included in a development area of urban planning or that,
in such an area, the conditions for its development have
not been defined.
In those cases where the Group does not have an updated
reference value through an ECO valuation for the current
year, we use as a reference value the latest available ECO
valuation reduced or corrected by the average annual
coverage ratio of the land on which we have obtained an
updated reference value, through an ECO valuation.
Grupo Santander applies a discount to the aforementioned
reference values that takes into account both the discount
on the reference value in the sales process and the
estimated costs of marketing or selling the land; discount
on reference value = % discount on sales + % marketing
costs being:
– % discount on Sales: = 100 - (sales price / updated
appraisal value).
– marketing costs: calculated on the basis of our historical
experience in sales and in accordance with the marketing
management fees negotiated with our suppliers of this
type of service.
In this way the Group obtains the corrected market value, an
amount that we compare with the net cost of each piece of land
to determine its correct valuation and conclude with our
valuation process.
In addition, in relation to the previously mentioned valuations,
less costs to sell, are contrasted with the sales experience of
each type of asset in order to confirm that there is no significant
difference between the sale price and the valuation.
Impairment losses on an asset or disposal group arising from a
reduction in its carrying amount to its fair value (less costs to
sell) are recognised under 'Gains or (losses) on non-current
assets held for sale not classified as discontinued operations' in
the consolidated income statement.
The gains on a non-current asset held for sale resulting from
subsequent increases in fair value (less costs to sell) increase its
carrying amount and are recognised in the consolidated income
statement up to an amount equal to the impairment losses
previously recognised.
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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.
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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.
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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.
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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.
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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.
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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).
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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.
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'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.
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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').
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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
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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.
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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
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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.
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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.
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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.
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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.
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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
—
—
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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.
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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.
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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.
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Contents
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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
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Contents
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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
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2023 Annual report
Contents
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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.
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Contents
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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
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Consolidated financial statements
Notes to the consolidated financial statements
Appendix
b) Breakdown
Following is a breakdown of the loans and advances granted to
the Group's customers, which reflect the Group's exposure to
credit risk in its main activity, without considering the balance of
value adjustments for impairment, taking into account the type
and situation of the transactions, the geographical area of their
residence and the type of interest rate on the transactions:
EUR million
Loan type and status
Commercial credit
Secured loans
Reverse repurchase agreements
Other term loans
Finance leases
Receivable on demand
Credit cards receivables
Impaired assets
Geographical area
Spain
European Union (excluding Spain)
United States and Puerto Rico
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.
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Contents
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Consolidated financial statements
Notes to the consolidated financial statements
Appendix
Following is a detail, by activity, of the loans to customers at 31
December 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
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Consolidated financial statements
Notes to the consolidated financial statements
Appendix
c) Impairment losses on loans and advances to
customers at amortised cost and at fair value through
other comprehensive income
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
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Consolidated financial statements
Notes to the consolidated financial statements
Appendix
11. Trading derivatives
The detail of the notional amounts and the market values of the
trading derivatives held by the Group in 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
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Contents
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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
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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
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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
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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.
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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.
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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.
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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
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2023 Annual report
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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
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Contents
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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
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Contents
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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
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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
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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
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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.
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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:
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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).
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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.
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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
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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.
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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.
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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
—
—
—
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2023 Annual report
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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
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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
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2023 Annual report
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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
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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.
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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.
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The main categories of plan assets as a percentage of total plan
assets are as follows:
The types of provision were determined by grouping together
items of a similar nature:
Equity instruments
Debt instruments
Properties
Other
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.
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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.
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• Banco Santander (Brasil) S.A. has also appealed against
infringement notices issued by the tax authorities questioning
the tax deductibility of the amortisation of the goodwill
arising on the acquisition of Banco Comercial e de
Investimento Sudameris S.A from years 2007 to 2012. No
provision was recognised in connection with this matter as it
was considered to be a contingent liability.
• Banco Santander (Brasil) S.A. and other companies of the
Group in Brazil are undergoing administrative and judicial
procedures against Brazilian tax authorities for not admitting
tax compensation with credits derived from other tax
concepts, not having registered a provision for the amount
considered to be a contingent liability.
• Banco Santander (Brasil) S.A. is involved in appeals in relation
to infringement notices initiated by tax authorities regarding
the offsetting of tax losses in the CSLL 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.
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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.
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• '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.
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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.
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• CHF Polish Mortgage Loans: on 3 October 2019, the CJEU
rendered its decision in relation to a judicial proceeding
against an unrelated bank in Poland considering that certain
contractual clauses in CHF-Indexed loan agreements were
abusive. The CJEU 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.
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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
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27. Tax matters
a) Consolidated Tax Group
Pursuant to current legislation, the Consolidated Tax Group
includes Banco Santander, S.A. (as the parent) and the Spanish
subsidiaries that meet the requirements provided for in Spanish
legislation regulating the taxation of the consolidated profits of
corporate groups (as the controlled entities).
The other Group companies file income tax returns in
accordance with the tax regulations applicable to them.
b) Years open for review by the tax authorities
In 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.
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d) Tax recognised in equity
In addition to the income tax recognised in the consolidated
income statement, the Group recognised the following amounts
in consolidated equity in 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.
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The detail of deferred tax assets, by classification as
monetizable or non-monetizable assets, and of deferred tax
liabilities at 31 December 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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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.).
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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).
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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
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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.
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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.
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The following tables contains the detail of the hedging
derivatives according to the type of hedging, the hedge risk and
the main products used as of 31 December 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
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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
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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
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Considering the main entities or groups within the Group by the
weight of their hedging, the main types of hedging that are
being carried out in Santander UK Group Holdings plc group and
Banco Santander, S.A.
Santander UK Group Holdings plc group enters into fair value
and cash flow hedging derivatives depending on the exposure of
the underlying. Only designated risks are hedged and therefore
other risks, such as credit risk, are managed but not hedged.
Within fair value hedges, Santander UK Group Holdings plc
group has portfolios of assets and liabilities at fixed rate that are
exposed to changes in fair value due to changes in market
interest rates. These positions are managed by contracting
mainly interest rate swaps. Effectiveness is assessed by
comparing the changes in the fair value of these portfolios
generated by the hedged risk with the changes in the fair value
of the derivatives contracted.
Santander UK Group Holdings plc group also has access to
international markets to obtain financing by issuing fixed-rate
debt 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.
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Prospectively, the variations in the market values of the hedging
instrument and the hedged item (represented by the
hypothetical derivative) are measured in the event of parallel
shifts of a positive basis point in the affected market curves.
There is another macro-hedge, this time of cash flows, the
purpose of which is to actively manage the risk-free interest
rate risk (excluding credit risk) of a portion of the floating rate
assets of Banco Santander, S.A., through the arrangement of
interest rate derivatives whereby the bank exchanges floating
rate interest flows for others at a fixed rate agreed at the time
the transactions are arranged. The items affected by the Macro-
hedging have been designated as those in which their cash
flows are exposed to interest rate risk, specifically the floating
rate mortgages of the Banco Santander, S.A. network
referenced to Euribor 12 Months or Euribor Mortgage, with
annual renewal of rates, classified as sound risk and which do
not have a contractual floor (or, if not, this floor is not
activated). The hedged position affecting the Macro Cash Flow
Hedge at the present time is 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.
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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
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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
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Auditor's report
Consolidated financial statements
Notes to the consolidated financial statements
Appendix
EUR million
Fair value hedges
Interest rate risk
Of which:
Interest rate swap
Call money swap
Exchange rate risk
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
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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).
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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.
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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.
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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 .
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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.
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Notes to the consolidated financial statements
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Deferred
variable
remuneration
systems
(iii) Digital
Transformation
Award (2019,
2020 and 2021)
Description and plan beneficiaries
The 2019, 2020 and 2021 Digital
Transformation Incentive (the
“Digital Incentive”) is a variable
remuneration system that includes
the delivery of Santander shares and
share options.
The aim of the Digital Incentive is to
attract and retain the critical skill
sets to support and accelerate the
digital transformation of the Group.
By means of this program, the Group
offers a remuneration element
which is competitive with the
remuneration systems offered by
other market operators who also
compete for digital talent.
The number of beneficiaries is
limited to a maximum of 250
employees and the total amount of
the incentive is limited to 30 million
euros.
Calculation Base
The Digital Incentive is structured 50% in Santander
shares and 50% in options over Santander shares,
taking into account the fair value of the option at the
moment in which they are granted. For Material Risk
Takers subject to five years deferrals, the Digital
Incentive (shares and options over shares) shall be
delivered in thirds, on the third, fourth and fifth
anniversary from their granting. For Material Risk
Takers subject to three years deferrals and employees
not subject to deferrals, delivery shall be done on the
third anniversary from their granting.
Any delivery of shares, either directly or via exercise of
options overs shares, will be subject generally to the
Group’s general malus & clawback provisions as
described in the Group’s remuneration policy and to the
continuity of the beneficiary within the Grupo
Santander. In this regard, the board may define specific
rules for non-Identified Staff.
Vested share options can be exercised until maturity,
with all options lapsing after ten years (for granting the
2019 incentive) and eight years (for granting the 2020
and 2021 incentive).
The total achievement for 2021 Digital Incentive was
77.5% (85% en 2020 and 83% en 2019).
Conditions
The funding of this incentive is subject to meeting
important milestones that are aligned with the Group´s
digital roadmap and have been approved by the board
of directors, taking into account the digitalization
strategy of the Group, with the aim of becoming the
best open, responsible global financial services
platform.
Performance of 2019 incentive was measured based on
achievement of the following milestones: (i) Launch of
a Global Trade Services (GTS) platform; (ii) launch of a
Global Merchant Services (GMS) platform; (iii)
migration of our fully digital bank, OpenBank, to a
"next generation" platform and launch in 3 markets;
(iv) extension of SuperDigital in Brazil to at least one
other country; (v) and launch of our international
payments app based on blockchain Pago FX to non-
Santander customers.
The milestones for the 2020 Digital Transformation
Award were: (i) rolling out the global merchant services
(GMS) platform in 3 new geographies, enhancing the
platform functionality and achieving volume targets for
transactions and participating merchants; (ii) doing the
commercial rollout of the global trade services (GTS)
platform in 8 new geographies, enhancing platform
functionality, and achieving volume targets for on-
boarded clients and monthly active users; (iii)
launching OpenBank in a new market and migrating
the retail banking infrastructure to “new-mode” bank;
(iv) launch the global platform SuperDigital in at least 4
countries, driving target active user growth; (v)
deploying machine learning across pre-defined
markets for 4 priority use cases, rolling out Conversion
Rate Optimization (Digital marketing) for at least 40
sales programs, delivering profit targets, and driving
reduction of agent handled calls in contact centers; (vi)
successfully implementing initiatives related to on-
board and identity services, common API (application
programming interface) layer, payment hubs, mobile
app for SMEs and virtual assistant services; and (vii)
launching the PagoFX global platform in at least 4
countries.
The milestones for 2021 were: (i)in relation to Pago Nxt
Consumer payment platform: implementation of
Superdigital platform in seven countries, acquisition of
over 1.5 million active customer base and accelerating
growth through B2B (business to business) and B2B2C
(business to business to customer) partnerships,
acquiring more than 50% of the new customers
through these channels, which are more cost-effective;
(ii)in relation to Digital Consumer Bank: launching
online API for checkout lending in the European Union
and completion of controllable items for Openbank
launch in USA; (iii)in relation to One Santander
strategy: implementation in Europe of One Common
Mobile Experience and, specifically, implementation of
Europe ONE app for individual customers in at least
three of the four countries by December 2021; and be
among the three-top rated entities in terms of Mobile
NetPromoter Score (Mobile NPS) in at least two of the
four countries by December 2021; (iv) In relation to
cloud adoption: host 75% of migratable virtual
machines on cloud technology (either public cloud or
OHE) by December 2021. For these purposes,
mainframes, physical servers and servers with non-x86
operating systems will be considered non-migratable.
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Notes to the consolidated financial statements
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Deferred
variable
remuneration
systems
(iv) Digital
Transformation
Award (2022)
Description and plan beneficiaries
The board of directors approved the
2022 Digital
Transformation Incentive. It is a variable
remuneration scheme
splits in two different blocks:
• The first one, with the same
mechanism than previous years,
that delivers Santander shares and
share options if the group hits major
milestones on its digital roadmap. This
is aimed at a group of up to 250 (is
limited to 30 million euros)employees
whose functions are deemed essential
to Santander’s growth.
• And the second one, which delivers
PagoNxt, S.L. RSUs and premium prices
options (PPOs), and is aimed at up to 50
employees (and limited to 15 million
euros) whose roles are considered key
to PagoNxt’s success.
The aim of the Digital Incentive is to
attract and retain the critical skill sets to
support and accelerate the digital
transformation of the Group. By means
of this program, the Group offers a
remuneration element which is
competitive with the remuneration
systems offered by other market
operators who also compete for digital
talent.
Conditions
Performance of the first block of the incentive shall be
measured based on achievement of the following
milestones:
i. Edelweiss: Our Santander future retail architecture
EDELWEISS will mean moving from our current Core
centric banking architecture towards a Customer and
Data-Centric Core supported by lean Record
Processing engines.
ii. Simplification: Speed up the simplification of our
technology platform and business model by Reducing
the total number of applications in production and
reducing number of products in the regions.
iii. Agile: Agile ways of working enable a better and
faster reaction to customers’ needs and is based on a
value-driven delivery that increases efficiency by
reducing time-to-market and development costs, and
increasing quality. People working in Agile are more
collaborative, engaged, empowered and creative.
iv. In Digital Consumer Bank:
a) To create the BNPL platform connected to at least
one merchant in Netherlands and Germany, and to
make sure the platform is ready to connect in Spain.
b) To support the definition of Openbank US’s IT digital
strategy and achieve 2022 milestones in it.
c) To have the new leasing platform connected to
dealers in Italy.
d) To expand the Wabi B2B online business to
Germany. To execute the first B2B deal with an
Original Equipment Manufacturer or mobility player in
at least one country. To expand coches.com business
and platform to Portugal.
And in regard to the second block of digital incentive:
the consolidation of PagoNxt Core Perimeter.
Calculation base
The first block of thee Digital Incentive is structured
50% in Santander shares and 50% in options over
Santander shares, taking into account the fair value
of the option at the moment in which they are
granted. For Material Risk Takers subject to five
years deferrals, the Digital Incentive (shares and
options over shares) shall be delivered in thirds, on
the third, fourth and fifth anniversary from their
granting. For Material Risk Takers subject to three
years deferrals and employees not subject to
deferrals, delivery shall be done on the third
anniversary from their granting.
Any delivery of shares, either directly or via exercise
of options overs shares, will be subject generally to
the Group’s general malus & clawback provisions as
described in the Group’s remuneration policy and to
the continuity of the beneficiary within the Grupo
Santander. In this regard, the board may define
specific rules for non-Identified Staff.
Vested share options can be exercised until maturity,
with all options lapsing after ten years.
The total achievement for 2022 Digital Incentive
was 96.5%.
The second block of Digital Incentive is structures in
restricted stock units (RSUs) and premium priced
Options (PPOs) of PagoNxt S.L. in a percentage
determined by the internal category of the
beneficiary. The total achievement for 2022 was
100%.
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.
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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).
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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
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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)
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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.
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Inflation-related assets include zero-coupon or year-on-year
inflation-linked bonds and swaps, valued with the present value
method using forward estimation and discounting. Derivatives
on inflation indices are priced using standard or more complex
bespoke models, as appropriate. Valuation inputs of these
models consider inflation-linked swap spreads observable in
the market and estimations of inflation seasonality, on the basis
of which a forward inflation curve is calculated. Also, implied
volatilities taken from zero-coupon and year-on-year inflation
options are also inputs for the pricing of more complex
derivatives.
Equity and foreign exchange
The most important products in these asset classes are forward
and futures contracts; they also include vanilla, listed and OTC
(Over-The-Counter) derivatives on single underlying assets and
baskets of assets. Vanilla options are priced using the standard
Black-Scholes model and more exotic derivatives involving
forward returns, average performance, or digital, barrier or
callable features are priced using generally accepted industry
models or bespoke models, as appropriate. For derivatives on
illiquid stocks, hedging takes into account the liquidity
constraints in models.
The inputs of equity models consider yield curves, spot prices,
dividends, asset funding costs (repo margin spreads), implied
volatilities, correlation among equity stocks and indices, and
cross-asset correlation. Implied volatilities are obtained from
market quotes of European and American-style vanilla call and
put options. Various interpolation and extrapolation techniques
are used to obtain continuous volatility for illiquid stocks.
Dividends are usually estimated for the mid and long term.
Correlations are implied, when possible, from market quotes of
correlation-dependent products. In all other cases, proxies are
used for correlations between benchmark underlyings or
correlations are obtained from historical data.
The inputs of foreign exchange models include the yield curve
for each currency, the spot foreign exchange rate, the implied
volatilities and the correlation among assets of this class.
Volatilities are obtained from European call and put options
which are quoted in markets as of-the-money, risk reversal or
butterfly options. Illiquid currency pairs are usually handled by
using the data of the liquid pairs from which the illiquid
currency can be derived. For more exotic products, unobservable
model parameters may be estimated by fitting to reference
prices provided by other non-quoted market sources.
Credit
The most common instrument in this asset class is the credit
default swap (CDS), which is used to hedge credit exposure to
third parties. In addition, models for first-to-default (FTD), n-to-
default (NTD) and single-tranche collateralised debt obligation
(CDO) products are also available. These products are valued
with standard industry models, which estimate the probability
of default of a single issuer (for CDS) or the joint probability of
default of more than one issuer for FTD, NTD and CDO.
Valuation inputs are the yield curve, the CDS spread curve and
the recovery rate. For indices and important individual issuers,
the CDS spread curve is obtained in the market. For less liquid
issuers, this spread curve is estimated using proxies or other
credit-dependent instruments. Recovery rates are usually set to
standard values. For listed single-tranche CDO, the correlation
of joint default of several issuers is implied from the market. For
FTD, NTD and bespoke CDO, the correlation is estimated from
proxies or historical data when no other option is available.
Valuation adjustment for counterparty risk or default risk
The Credit valuation adjustment (CVA) is a valuation adjustment
to over the counter (OTC) derivatives as a result of the risk
associated with the credit exposure assumed to each
counterparty.
The CVA is calculated taking into account potential exposure to
each counterparty in each future period. The CVA for a specific
counterparty is equal to the sum of the CVA for all the periods.
The following inputs are used to calculate the CVA:
• Expected exposure: including for each transaction the mark-
to-market (MtM) value plus an add-on for the potential future
exposure for each period. Mitigating factors such as collateral
and netting agreements are taken into account, as well as a
temporary impairment factor for derivatives with interim
payments.
• Severity: percentage of final loss assumed in a counterparty
credit event/default.
• Probability of default: for cases where there is no market
information (the CDS quoted spread curve, etc.), proxies based
on companies holding exchange-listed CDS, in the same
industry and with the same external rating as the
counterparty, are used.
• Discount factor curve.
The Debit Valuation Adjustment (DVA) is a valuation adjustment
similar to the CVA but, in this case, it arises as a result of the
Group’s own risk assumed by its counterparties in OTC
derivatives.
The CVA at 31 December 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.
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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.
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Set forth below are the financial instruments at fair value
whose measurement was based on internal models (levels 2
and 3) at 31 December 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.
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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.
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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.
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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)
—
—
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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.
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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.
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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.
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Notes to the consolidated financial statements
Appendix
b) Secondary segments
At this secondary level, Grupo Santander is structured into Retail
Banking, Santander Corporate & Investment Banking (SCIB),
Wealth Management & Insurance (WM&I) and PagoNxt.
• Retail Banking: this covers all customer banking businesses,
including consumer finance, except those of corporate
banking which are managed through Santander Corporate &
Investment Banking, asset management, private banking and
insurance, which are managed by WM&I. The results of the
hedging positions in each country are also included,
conducted within the sphere of their respective assets and
liabilities committees.
• Santander Corporate & Investment Banking (SCIB): this
business reflects revenue from global corporate banking,
investment banking and markets worldwide including
treasuries managed globally (always after the appropriate
distribution with Retail Banking customers), as well as equity
business.
• Wealth Management & Insurance: includes the asset
management business (Santander Asset Management), the
corporate unit of Private Banking and International Private
Banking in Miami and Switzerland (Santander Private
Banking) and the insurance business (Santander Insurance).
• PagoNxt: this includes digital payment solutions, providing
global technology solutions for Grupo Santander's banks and
new customers in the open market. It is structured in four
businesses: Merchant, International Trade, Payments and
Consumer.
Although WM&I and PagoNxt do not meet the quantitative
thresholds defined in IFRS 8, these segments are considered
reportable by Grupo Santander and are disclosed separately
because Grupo Santander's management believes that
information about these segments are useful to users of the
financial statements.
There are no customers located in a place different from the
location of the Group's assets that generate revenues in excess
of 10% of ordinary revenues.
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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.
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Appendix III
Issuing subsidiaries of shares and preference shares
% of ownership held
by Banco Santander
EUR million (a)
Company
Emisora Santander España, S.A. Unipersonal
Santander 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.
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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.
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Appendix V
Other information on the Group’s banks
Following is certain information on the share capital
of the Group’s main banks based on their total assets.
1. Santander UK plc
a) Number of financial equity instruments held by the
Group.
At 31 December 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).
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The Group also holds 1,000 tracker shares (shares without
voting rights but with preferential dividend rights) amounting to
GBP 1,000 and 1,000 B tracker shares amounting to GBP 1,000
through Santander UK Group Holdings plc, both with a par value
of GBP 1 each.
Additionally, the company issued GBP 50 million additional tier
1 (AT ) capital securities to Santander UK Group Holdings plc on
19 December 2022.
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.
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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.
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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.
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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
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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.
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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
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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