Santander Consumer Finance,
S.A. and Subsidiaries composing the
Santander Consumer Finance Group
Consolidated Financial Statements and Consolidated
Management's Report for the year ended 31 December
2022
Translation of consolidated financial statements originally issued in
Spanish and prepared in accordance with the regulatory financial
reporting framework applicable to the Group in Spain (see Notes 1
to 47). In the event of a discrepancy, the Spanish-language version
prevails.
Audit report on the consolidated annual accounts
issued by an independent auditor
To the shareholders of Santander Consumer Finance, S.A.:
Report on the consolidated annual accounts
Opinion
We have audited the consolidated annual accounts of Santander Consumer Finance, S.A. (parent
company) and its subsidiaries (the Group), consisting of the consolidated balance sheet at 31
December 2022, consolidated income statement, consolidated statement of recognised income and
expense, consolidated total statement of changes in equity, consolidated cash flow statement and
notes to the consolidated accounts for the year then ended.
In our opinion, the accompanying consolidated annual accounts present fairly, in all material respects,
the Group's consolidated equity and financial position at 31 December 2022 and the consolidated
results of its operations and consolidated cash flows for the year then ended in accordance with the
International Financial Reporting Standards adopted by the European Union (IFRS-EU) and other
provisions of the financial reporting framework applicable in Spain.
Basis for opinion
Our audit has been carried out in accordance with prevailing Spanish auditing regulations. Our
responsibilities under said regulations are described below under Auditors’ responsibilities in relation
to the audit of the consolidated annual accounts.
We are independent of the Group in accordance with the ethical requirements, including those relating
to independence, applicable to our audit of the consolidated annual accounts in Spain, as required by
auditing regulations. In this respect, we have not provided any services other than audit services, nor
have any situations or circumstances arisen that, in accordance with those regulations, might have
undermined said independence.
We consider that the audit evidence obtained provides a sufficient and appropriate basis for our
opinion.
Key audit matters
Key audit matters are those that, based on our professional judgement, have been of the most
significance in the audit of the consolidated annual accounts for the current period. These matters
have been addressed in the context of our audit of the consolidated annual accounts as a whole and
in the preparation of our opinion thereon, and we do not express a separate opinion on these matters.
PricewaterhouseCoopers Auditores, S.L., Torre PwC, Pº de la Castellana 259 B, 28046 Madrid, Spain
Tel.: +34 915 684 400 / +34 902 021 111, Fax: +34 915 685 400, www.pwc.es
1
R. M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3ª
Inscrita en el R.O.A.C. con el número S0242 - CIF: B-79 031290
Key audit matters
How the matter was addressed in the audit
Santander Consumer Finance, S.A. and subsidiaries
Estimation of the impairment of financial assets
at amortised cost – loans and advances to
customers – determined collectively.
The expected loss impairment calculation
models required by International Financial
Reporting Standard 9 (IFRS 9), imply a high
degree of subjectivity when incorporating
estimates and elements of judgement, especially
those updates and adjustments to the models to
determine the expected loss in the current
macroeconomic environment of uncertainty.
In this context, the main judgements and
assumptions made by management are as
follows:
•
•
The main estimates employed to calculate
the probability of default (PD) and loss
given default (LGD) parameters of the
recalibrated expected loss models.
The updating of the prospective
information in the forward looking models
and the definition and evaluation of
additional adjustments to the expected
loss models to consider the effect of
macroeconomic conditions in the current
environment.
These estimates involve a high degree of
management judgement and uncertainty. They
were therefore one of the most significant and
complex estimates when preparing the
accompanying consolidated annual accounts as
at 31 December 2022. Therefore, these
estimates have been identified as one of the key
audit matters.
See notes 2, 10 and 47 to the accompanying
consolidated annual accounts as at 31
December 2022.
With the assistance of our credit risk specialists
and our experts in macroeconomic forecasts, we
have obtained an understanding of
management's process for estimating the
impairment of financial assets at amortised cost
- loans and advances to customers, collectively
estimated provisions. In addition, as part of our
procedures, we made enquiries with
management to gain an understanding of the
extent of the impact of climate change on credit
risk.
With regards to internal control, we gained an
understanding of and tested controls for the
main steps of the estimation process, paying
particular attention to the calculation of the most
relevant assumptions used to estimate the
parameters and, where appropriate, to the
monitoring and assessment of model
adjustments.
We also performed the following tests of detail:
•
•
•
•
Checks, for the main models, on: (i)
calculation and segmentation methods; (ii)
expected loss parameter estimation
methods; (iii) data used and main
estimates employed and (iv) loan staging
approach.
Evaluation of the main macroeconomic
variables used in the scenarios of the
forward looking models, including
verification of the methodology, the
assumptions used, the breakdown of the
projection of the macroeconomic
scenarios and their weighting.
Recalculation of collective provisions
using the parameters obtained from the
expected loss models.
Evaluation of additional adjustments to
the expected loss models made by
management derived from the current
macroeconomic environment.
No differences outside a reasonable
range ere identified in the tests described
above.
2
Santander Consumer Finance, S.A. and subsidiaries
Key audit matters
How the matter was addressed in the audit
Assessment of goodwill impairment
At least annually, the Group estimates the
recoverable amount of each cash-generating
unit (CGU) to which goodwill has been assigned,
based primarily on independent expert
valuations.
With the assistance of our valuation experts, we
obtained an understanding of management's
process for estimating the recoverable amount
and, where appropriate, calculating the
impairment of goodwill.
In view of the relevance to the Group,
management pays particular attention to
monitoring the goodwill of the cash-generating
units in Germany, Austria and the Nordics
(Scandinavia).
In 2022, Group management included, in its
estimates of the recoverable amount of the
above-mentioned cash-generating units, value in
use calculated by discounting cash flow
projections.
The most relevant assumptions used in the
assessment of goodwill impairment, such as
financial projections, the discount rate and the
perpetuity growth rate, require complex
estimation and involve a high degree of
management judgement, so the assumptions
made have been treated as a key audit matter.
See Notes 2 and 14 to the accompanying
consolidated annual accounts at 31 December
2022.
As regards internal control, we gained an
understanding and tested controls of the steps in
the goodwill measurement process, paying
special attention to the budgeting process on
which the projections are based, management's
reliable forecasting ability and the assessment of
the reasonableness of the discount rate and the
perpetuity growth rate, as well as the evaluation
of annual valuation reports prepared by
management's experts on the impairment of
goodwill.
We also conducted the following tests of detail:
•
•
•
•
Assessment of the reasonableness of the
methods and main assumptions used by
management's experts when analysing
goodwill impairment, including financial
projections, the discount rate and the
growth rate.
Verification of the mathematical accuracy
of the calculation of goodwill impairment
and of the discounting of cash flow
projections.
Specific sensitivity analysis of key
parameters, such as: (i) financial
projections for the coming years; (ii) the
discount rate; and (iii) the perpetuity
growth rate.
Verification of the adequacy of the
information disclosed in the
accompanying consolidated annual
accounts in accordance with applicable
regulations.
No differences outside a reasonable range were
identified in the tests described above.
3
Key audit matters
Information systems
Santander Consumer Finance, S.A. and subsidiaries
How the matter was addressed in the audit
The Group’s financial information relies largely
on the information technology (IT) systems in
the geographies in which it operates, so suitable
control over the systems is a key to assuring the
correct processing of the information.
Assisted by our IT systems specialists, our work
consisted of assessing and checking internal
controls over the systems, databases and
applications that support the Group's financial
reporting.
The technology environment has been
developed mainly by the Group, although a part
has also been developed by External Partners.
In this context, it is critical to assess aspects
such as the organisation of the Group's
Technology and Operations Area and External
Partners, controls over application maintenance
and development, physical and logical security
and system operations, which was therefore
treated as a key audit matter.
Management continues to monitor internal
control over IT systems, including access control
supporting the Group's technology processes.
We carried out procedures on internal controls
and substantive tests, in the environment of both
the Group and its External Partners, relating to:
•
•
•
•
Functioning of the IT governance
framework.
Access control and logical security of the
applications, operating systems and
databases that support relevant financial
information.
Change management and application
development.
IT operation maintenance.
In addition, considering management's
monitoring of internal control over IT systems,
our audit approach and plan focused on the
following aspects:
•
•
Assessment of management’s monitoring
as part of the Group's internal control
environment.
Verification of the design and operability
of controls implemented by management,
including access control.
The results of the above-mentioned procedures
revealed no relevant exceptions in this regard.
4
Santander Consumer Finance, S.A. and subsidiaries
Other information: Consolidated Management Report
The other information only relates to the consolidated management report for 2022, the preparation of
which is the responsibility of the parent company’s directors and which does not form an integral part
of the consolidated annual accounts.
Our audit opinion on the consolidated annual accounts does not cover the consolidated management
report. Our responsibility for the consolidated management report, in accordance with auditing
legislation, consists of:
a)
b)
Only checking that the non-financial information statement has been issued in the form required
by applicable legislation and, if not, report it.
Assessing and reporting on the consistency of the other information included in the consolidated
management report with the consolidated annual accounts, based on our knowledge of the
Group obtained during the audit of the accounts, as well as reporting on whether the content
and presentation of the consolidated management report are in conformity with applicable
legislation. If, based on the work carried out, we conclude that there are material misstatements,
we are required to disclose them.
On the basis of the work performed, as described above, we have verified that the information
mentioned in paragraph a) above is furnished as envisaged in applicable legislation and that the other
information contained in the consolidated management report is consistent with that of the
consolidated annual accounts for 2022 and its content and presentation comply with application
legalisation.
Responsibility of the directors and the audit committee in relation to the consolidated annual
accounts
The directors of the parent company are responsible for the preparation of the accompanying
consolidated annual accounts such that they present fairly the Group’s consolidated equity, financial
situation and results in accordance with IFRS-EU and other provisions of the financial reporting
framework applicable to the Group in Spain, and for the internal control which they consider necessary
to enable the preparation of annual accounts free from material misstatements due to fraud or error.
In the preparation of the consolidated annual accounts, the parent company’s directors are
responsible for assessing the Group’s capacity to continue as a going concern, disclosing, as
appropriate, any going concern-related issues and using the going concern basis of accounting,
unless the directors intend to wind up the Group or to cease trading, or have no other realistic
alternative but to do so.
The parent company's audit committee is responsible for overseeing the preparation and presentation
of the consolidated annual accounts.
5
Santander Consumer Finance, S.A. and subsidiaries
Auditors’ responsibilities in relation to the audit of the consolidated annual accounts
Our objectives are to obtain reasonable assurance that the consolidated annual accounts as a whole
are free from material misstatement due to fraud or error, and to issue an audit report containing our
opinion.
Reasonable assurance is a high degree of assurance but does not guarantee that an audit conducted
in accordance with current Spanish auditing regulations will always detect a material misstatement
when such exists. Misstatements may be due to fraud or error and are regarded as material if,
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated annual accounts.
As part of an audit conducted in accordance with prevailing Spanish audit regulations, we apply our
professional judgement and maintain an attitude of professional scepticism throughout the audit. In
addition:
•
•
•
•
We identify and assess the risks of material misstatement in the consolidated annual accounts
due to fraud or error; we design and apply audit procedures to respond to those risks and obtain
sufficient and adequate audit evidence to provide a basis for our opinion. The risk of not
detecting material misstatement due to fraud is higher than in the case of a material
misstatement due to error, as fraud may involve collusion, falsification, deliberate omissions,
misrepresentations or the override of internal control.
We obtain knowledge of internal control mechanisms relevant for the audit in order to design the
audit procedures which are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
We assess whether the accounting policies applied are adequate and the reasonableness of
the accounting estimates and the relevant information disclosed by the parent company’s
directors.
We conclude on the appropriateness of the parent company’s directors’ use of the going
concern basis of accounting and based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated
annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on audit evidence obtained up to the date of our audit report. However, future events
or conditions may cause the Group to cease to continue as a going concern.
6
Santander Consumer Finance, S.A. and subsidiaries
•
•
We evaluate the overall presentation, structure and presentation of the consolidated annual
accounts, including the disclosures, and assess whether the consolidated annual accounts
represent the underlying transactions and events in a manner that achieves fair presentation.
We obtain sufficient, adequate evidence relating to the financial information of the Group’s
entities or business activities to express an opinion on the consolidated annual accounts. We
are responsible for the direction, supervision and performance of the Group audit. We are solely
responsible for our audit opinion.
We communicate with the parent company's audit committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, as well as any significant internal
control weakness that we identify in the course of the audit.
We also provide the parent company’s audit committee with a statement to the effect that we have
complied with applicable ethical requirements, including independence requirements, and we have
communicated with the audit committee to report matters that could reasonably pose a threat to our
independence and, where appropriate, related safeguards.
Among the matters that are reported to the parent company's audit committee, we determine those
that were of most significance in the audit of the consolidated annual accounts for the current period
and which are therefore key audit matters.
We describe these matters in our audit report unless legal or regulatory provisions prohibit the public
disclosure of the matter concerned.
Report on other legal and regulatory requirements
European Single Electronic Format
We have examined the European Single Electronic Format (ESEF) digital files of Santander
Consumer Finance, S.A. and subsidiaries for 2022, comprising the XHTML file containing the
consolidated annual accounts for the year and the XBRL files containing the entity's tags, which will
form part of the annual financial report.
The directors of Santander Consumer Finance, S.A. are responsible for presenting the 2022 annual
financial report in accordance with the formatting and tagging requirements set out in Commission
Delegated Regulation (EU) 2019/815 of 17 December 2018 (hereinafter the ESEF Regulation).
We are responsible for examining the digital files prepared by the parent company's directors in
accordance with auditing legislation in force in Spain. This legislation requires that we plan and
perform our audit procedures so as to check that the contents of the consolidated annual accounts
included in the above-mentioned digital files fully match those of the consolidated annual accounts
that we have audited, and that the formatting and tagging of the consolidated annual accounts and the
above-mentioned digital files have been performed, in all material respects, in accordance with the
requirements of the ESEF Regulation.
In our opinion, the digital files examined fully match the audited consolidated annual accounts, which
are presented and have been tagged, in all material respects, in accordance with the requirements of
the ESEF Regulation.
7
Santander Consumer Finance, S.A. and subsidiaries
Additional information for the parent company's audit committee
The opinion expressed in this report is consistent with that of our additional report for the parent
company's audit committee dated 23 February 2023.
Term of engagement
The General Shareholders’ Meeting of 3 March 2022 appointed us as the Group's auditors for a one-
year period for the financial year ended 31 December 2022.
We were previously appointed by resolution of the Annual General Meeting for a period of three years
and we have been auditing the accounts uninterruptedly since the financial year ended 31 December
2016.
Services rendered
The non-audit services provided to the audited Group are disclosed in Note 40 to the consolidated
annual accounts.
PricewaterhouseCoopers Auditores, S.L. (S0242)
Ignacio Martínez Ortiz (23834)
23 February 2023
8
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
ASSETS
Note
31/12/2022
31/12/2021 (*)
Cash and balances at central banks
Financial assets held for trading
Derivatives
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 profit or loss
Financial assets at fair value through other comprehensive income
Equity instruments
Debt instruments
Financial assets at amortised cost
Debt instruments
Loans and advances
Central banks
Credit institutions
Customers
Derivatives – hedge accounting
Changes of the fair value of hedged items in an interest rate risk hedging portfolio
Investments in associates and joint-ventures
Joint-ventures
Associates
Assets under insurance and reinsurance contracts
Tangible assets
Property, plant and equipment
For own use
Leased out under operating leases
Investment property
Memorandum items: acquired through finance lease
Intangible assets
Goodwill
Other
Tax assets:
Current tax assets
Deferred tax assets
Other assets
Inventories
Other
Assets included in disposal groups classified as held for sale
Total assets
2
9
8
7
10
8
7
7
6
10
29
29
12
13
14
15
22
16
11
6,826,225
18,965,097
494,664
494,664
1,876
45
1,444
387
—
51,476
51,476
2,998
26
2,593
379
—
748,469
21,961
726,508
1,077,351
22,591
1,054,760
113,094,548
103,663,354
6,185,061
3,472,396
106,909,487
100,190,958
19,736
390,306
10,452
621,223
106,499,445
99,559,283
1,131,071
121,585
(709,133)
(46,269)
724,777
281,915
442,862
682,414
260,115
422,299
—
—
3,163,609
3,163,609
367,958
2,795,651
—
2,306,339
2,306,339
400,330
1,906,009
—
264,104
289,600
2,097,941
1,712,426
385,515
1,675,146
1,116,612
558,534
985,164
8,880
976,284
2,063,513
1,707,480
356,033
1,280,479
692,567
587,912
712,466
3,777
708,689
45,337
50,386
130,279,694
130,931,189
(*) Presented for comparison purposes only
The accompanying notes, 1 to 47, and Appendices I-VI are an integral part of the consolidated balance sheet for the year ended 31 December 2022.
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
LIABILITIES
Note
31/12/2022
31/12/2021 (*)
Financial liabilities held for trading
Derivatives
Financial liabilities at fair value through profit or loss
Financial liabilities at amortised cost
Deposits
Central banks
Credit institutions
Customers
Debt securities in issue
Other
Memorandum items: subordinated liabilities
Derivatives – hedge accounting
Changes in the fair value of hedged items in portfolio hedges of interest rate risk
Liabilities under insurance and reinsurance contracts
Provisions
Pensions and other retirement benefit obligations
Other long term employee benefit obligations
Taxes and other legal contingencies
Contingent liabilities and commitments
Other
Tax liabilities
Current tax liabilities
Deferred tax liabilities
Other liabilities
Liabilities included in disposal groups classified as held for sale
Total liabilities
Shareholder’s equity
Capital
Called-up share capital
Memorandum items: uncalled capital
Share premium
Other equity instruments
Equity component of hybrid securities
Other
Other equity
Retained earnings
Revaluation reserves
Other reserves
Reserves or accumulated losses in investments in joint ventures and associates
Other
(-) Treasury stock
Profit or loss after tax attributable to equity holders of the parent
(-) Dividends paid
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Items not reclassified to profit or loss
Non-controlling interests
Other comprehensive income
Other
Equity
Total liabilities and equity
Memorandum items: off-balance sheet items
Loans commitment granted
Financial guarantees granted
Other
9
17
17
18
19
20
17, 18, 19
29
11
21
22
16
23
24
23
25
25
3
26
26
27
28
28
28
466,031
466,031
—
58,169
58,169
—
111,077,230
113,270,031
70,848,070
17,900,641
11,620,202
41,327,227
38,855,760
1,373,400
1,514,223
70,866,247
19,997,499
11,780,269
39,088,479
40,652,231
1,751,553
898,750
193,787
128,650
—
—
610,875
414,385
31,488
10,089
28,010
126,903
1,864,753
581,279
1,283,474
—
—
825,910
598,456
44,442
9,576
39,403
134,033
1,411,213
338,699
1,072,514
1,874,830
1,842,887
—
—
116,087,506
117,536,860
12,219,470
11,702,523
5,638,639
5,638,639
—
1,139,990
1,200,000
—
5,638,639
5,638,639
—
1,139,990
1,200,000
—
1,200,000
1,200,000
—
—
3,629,337
2,985,858
—
20,847
439,882
(419,035)
—
1,242,860
(652,203)
—
53,909
398,835
(344,926)
—
1,174,689
(490,562)
(582,107)
(645,973)
(33,865)
(548,242)
2,554,825
(3,715)
2,558,540
14,192,188
(155,201)
(490,772)
2,337,779
2,157
2,335,622
13,394,329
130,279,694
130,931,189
27,052,044
25,756,041
84,997
1,211,006
25,495,968
24,122,179
189,841
1,183,948
(*) Presented for comparison purposes only
The accompanying notes, 1 to 47, and Appendices I-VI are an integral part of the consolidated balance sheet for the year ended 31 December 2022.
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED INCOME STATEMENTS AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
Note
Income / (Expenses)
31/12/2022
31/12/2021 (*)
INTEREST INCOME
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
Other
INTEREST EXPENSE
NET INTEREST INCOME
DIVIDEND INCOME
INCOME FROM COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD
COMMISSION INCOME
COMMISSION EXPENSE
GAINS OR LOSSES IN FINANCIAL INTRUMENTS NOT AT FAIR VALUE THROUGH PROFIT OR LOSS, NET
GAINS OR LOSSES ON FINANCIAL INSTRUMENTS HELD FOR TRADING, NET
GAINS OR LOSSES ON NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS,
NET
GAINS OR LOSSES ON FINANCIAL INSTRUMETNS AT FAIR VALUE THROUGH PROFIT OR LOSS, NET
GAINS OR LOSSES FROM HEDGE ACCOUNTING, NET
CURRENCY TRANSLATION DIFFERENCES, NET
OTHER OPERATING INCOME
OTHER OPERATING EXPENSE
INCOME FROM ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS
CHARGES FROM LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS
OPERATING INCOME
ADMINISTRATION AND GENERAL EXPENSES
Staff costs
Other
DEPRECIATION AND AMORTISATION COST
PROVISIONS OR REVERSAL FROM PROVISIONS, NET
IMPAIRMENT CHARGES AND REVERSALS FROM FINANCIAL ASSETS NOT AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets at fair value through other comprehensive income
Financial assets at amortised cost
IMPAIRMENT CHARGES OR REVERSAL OF INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
IMPAIRMENT CHARGES OR REVERSAL OF NON-FINANCIAL ASSETS
Tangible assets
Intangible assets
Other
GAINS OR LOSSES ON NON-FINANCIAL ASSETS, NET
NEGATIVE GOODWILL RECOGNISED IN RESULTS
GAINS OR LOSSESS ON NON-CURRENT ASSETS HELD FOR SALE FROM DISCONTINUED OPERATIONS
PROFIT OR LOSS BEFORE TAX IN RESPECT OF CONTINUING OPERATIONS
OPERATING TAX EXPENSE OR INCOME FROM CONTINUING OPERATIONS
PROFIT OR LOSS AFTER TAX FROM CONTINUING OPERATIONS
(LOSS)/PROFIT AFTER TAX FROM DISCONTINUED OPERATIONS
PROFIT /(LOSS) AFTER TAX
Attributable to non-controlling interests
Attributable to equity holders of the parent
EARNIGNS PER SHARE:
Basic
Diluted
30
31
32
33
34
35
35
35
35
35
36
37
38
39
40
13, 15
21
10
41
42
43
22
27
4
4
4,195,233
4,021,364
767
4,089,331
105,135
(624,026)
3,571,207
236
96,736
1,133,025
(349,489)
807
(10,077)
—
—
86,600
(17,644)
551,078
(415,988)
—
—
85
3,869,373
151,906
(463,392)
3,557,972
275
63,790
1,095,656
(334,182)
(6,654)
1,413
7
—
10,889
(4,331)
383,075
(325,336)
—
—
4,646,491
4,442,574
(1,756,232)
(1,663,948)
(884,182)
(872,050)
(189,183)
(20,467)
(842,630)
(821,318)
(191,320)
(50,453)
(451,931)
(495,060)
285
(82)
(452,216)
(494,978)
—
(21,859)
(985)
(11,647)
(9,227)
1,202
—
—
(14,872)
2,701
(11,662)
(5,911)
236
—
(128)
(3,225)
2,207,893
(606,270)
2,023,932
(533,271)
1,601,623
1,490,661
—
1,601,623
358,763
1,242,860
0.66
0.66
—
1,490,661
315,972
1,174,689
0.59
0.59
(*) Presented for comparison purposes only
The accompanying notes, 1 to 47, and Appendices I-VI are an integral part of the consolidated income statement for the year ended 31 December 2022.
SANTANDER CONSUMER FINANCE, S.A. Y SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE
CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
Nota
31/12/2022
31/12/2021 (*)
Profit or loss after tax
1,601,623
1,490,661
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial gains or losses on defined benefit pension plans
Non-current assets held for sale
Other recognised income and expense from investments in joint ventures and associates
Changes in the fair value of equity instruments measured at fair value through other comprehensive
income
Income tax in respect of items not reclassified to profit or loss
Items that may be reclassified to profit or loss
Hedges of net investments in joint ventures and associates (effective portion)
Revaluation gains/(losses)
Amounts transferred to the income statement
Other reclassifications
Currency translation differences
Revaluation gains/(losses)
Amounts transferred to the income statement
Other reclassifications
Cash flow hedges
Revaluation gains/(losses)
Amounts transferred to the income statement
Transferred to initial carrying amount of hedged items
Other reclassifications
Debt instruments at fair value through other comprehensive income
Revaluation gains/(losses)
Amounts transferred to the income statement
Other reclassifications
Assets included in disposal groups classified as held for sale
Revaluation gains/(losses)
Amounts transferred to the income statement
Other reclassifications
Share of other recognised income of joint ventures and associates
Income tax in respect of items that may be reclassified to profit or loss
Total recognised income and expenses for the year
Attributable to non-controlling interests
Attributable to equity owners of the parent
26
22
26
26
26
26
22
57,994
120,796
180,485
—
35
(968)
(58,756)
(62,802)
54,046
54,046
—
—
(154,051)
(154,051)
—
—
73,002
41,409
31,593
—
—
(2,082)
(1,797)
(285)
—
—
—
—
—
61,836
33,245
43,346
—
91
3,278
(13,470)
28,591
(112,307)
(112,307)
—
—
131,765
131,765
—
—
19,312
1,316
17,996
—
—
(369)
(6,062)
5,693
—
—
—
—
—
(18,231)
(15,486)
(4,819)
(4,991)
1,659,617
1,552,497
352,891
322,141
1,306,726
1,230,356
(*) Presented for comparison purposes only
The accompanying notes, 1 to 47, and Appendices I-VI are an integral part of- the consolidated statement of recognised income and expense for the year ended 31 December
2022.
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
Sources of changes in shareholders’
equity
Capital (Note
23)
Share
premium
(Note 24)
Equity
instruments
issued other
than capital
Other equity
instruments
Retained
Earnings
(Note 25)
Revaluation
reserves
Other
reserves
(-) Own
shares
Balance as of 31/12/21
5,638,639
1,139,990
1,200,000
Adjustments due to errors
Adjustments due to changes in
accounting policies
Beginning of period balance
(01/01/22)
Total recognised income and expenses
(Note 4)
Other changes in equity
Common stock issued
Preferred stock issued
Other equity instruments issued (Note
23)
Redemption or maturity of other equity
instruments
Debt conversion to equity
Reduction of capital
Dividends (Note 4)
Stock buybacks
Sale or cancellation of shares
Transfers from equity to liabilities
Transfers from liabilities to equity
Transfers between equity items
Increases/(decreases) due to business
combinations
Vesting of shares under employee
share schemes
Other increase/(decreases) of equity
—
—
—
—
—
—
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
End of period balance 31/12/22
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,985,858
—
—
2,985,858
—
643,479
—
—
—
—
—
—
—
—
—
—
—
643,479
—
—
—
3,629,337
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
53,909
—
—
53,909
—
(33,062)
—
—
—
—
—
—
—
—
—
—
—
40,648
—
—
(73,710)
20,847
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Profit or loss
attributable to
shareholders
of the parent
(-)
Interim
dividends paid
Other
comprehensive
income
Non-controlling interests
(Note 27)
Other
comprehensiv
e e income
Other
Total
1,174,689
(490,562)
(645,973)
2,157
2,335,622
13,394,329
—
—
—
—
—
—
—
—
—
—
—
—
1,174,689
(490,562)
(645,973)
2,157
2,335,622
13,394,329
1,242,860
—
63,866
(5,872)
358,763
1,659,617
(1,174,689)
(161,641)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(652,203)
—
—
—
—
(1,174,689)
490,562
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(135,845)
(861,758)
—
—
—
—
—
—
—
—
—
—
—
—
(135,837)
(788,040)
—
—
—
—
—
—
—
(8)
—
—
—
—
—
—
—
(73,718)
1,242,860
(652,203)
(582,107)
(3,715)
2,558,540
14,192,188
(*) Presented for comparison purposes only.
Notes 1-47 and Appendices I-VI are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2022.
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY AS AT 31 DECEMBER 2022 AND 2021
Sources of changes in shareholders’
equity
Capital (Note
23)
Share
premium
(Note 24)
Equity
instruments
issued other
than capital
Other equity
instruments
Balance as of 31/12/20 (*)
Adjustments due to errors
Adjustments due to changes in
accounting policies
Beginning of period balance (01/01/21)
(*)
Total recognised income and expenses
(Note 4)
Other changes in equity
Common stock issued
Preferred stock issued
Other equity instruments issued (Note
23)
Redemption or maturity of other equity
instruments
Debt conversion to equity
Reduction of capital
Dividends (Note 4)
Stock buybacks
Sale or cancellation of shares
Transfers from equity to liabilities
Transfers from liabilities to equity
Transfers between equity items
Increases/(decreases) due to business
combinations
Vesting of shares under employee share
schemes
Other increase/(decreases) of equity
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
End of period balance 31/12/21 (*)
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Retained
Earnings
(Note 25)
3,919,209
—
—
3,919,209
—
(933,351)
—
—
—
—
—
—
(1,385,226)
—
—
—
—
451,875
—
—
2,985,858
(EUR Thousands)
Revaluation
reserves
Other
reserves
(-) Own
shares
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
74,864
—
—
74,864
—
(20,955)
—
—
—
—
—
—
—
—
—
—
—
52,180
—
—
(73,135)
53,909
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Profit or loss
attributable to
shareholders
of the parent
504,055
—
—
504,055
1,174,689
(-)
Interim
dividends paid
Other
comprehensive
income
Non-controlling interests (Note
27)
Other
comprehensive
income
Other
Total
—
—
—
—
—
(701,640)
(4,012)
2,135,908
13,907,013
—
—
—
—
—
—
—
—
(701,640)
(4,012)
2,135,908
13,907,013
55,667
6,169
315,972
1,552,497
(504,055)
(490,562)
—
—
—
—
—
—
—
—
—
—
—
(504,055)
—
—
—
—
—
—
—
—
—
(490,562)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(116,258)
(2,065,181)
118,720
118,720
—
—
—
—
—
—
—
—
—
—
(233,406)
(2,109,194)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,572)
(74,707)
1,174,689
(490,562)
(645,973)
2,157
2,335,622
13,394,329
(*) Presented for comparison purposes only.
Notes 1-47 and Appendices I-VI are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2022.
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
Cash flow from operating activities
Profit or loss after tax
Adjustments made to obtain the cash flows from operating activities:
Amortisation
Other
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 amortised cost
Other operating assets
Net increase/(decrease) in operating liabilities
Financial liabilities held for trading
Financial liabilities at fair value through profit or loss
Financial liabilities at amortised cost
Other operating liabilities
Corporate income tax paid
Cash flow from investing activities
Payments
Tangible assets
Intangible assets
Investments in joint ventures and associates
Subsidiaries and other business units
Assets and liabilities included in disposal groups classified as held for sale
Other cash flows associated with investing activities
Proceeds
Tangible assets
Intangible assets
Investments in joint ventures and associates
Subsidiaries and other business units
Non-current assets held for sale and associated liabilities
Other cash flows associated with investing activities
Cash flow from financing activities
Payments
Dividends paid
Subordinated debt
Redemption of own equity instruments
Repurchase of own equity instruments
Other cash flows associated with financing activities
Proceeds
Subordinated debt
Issuance of equity instruments
Disposal of own equity instruments
Other cash flows associated with financing activities
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
MEMORANDUM ITEMS:
Cash and cash equivalents comprise:
Of which: held by group entities but not available for the group
Cash
Cash equivalent balances at central banks
Other financial assets
(Less)- Bank overdrafts repayable on demand
Note
31/12/2022
31/12/2021 (*)
(10,121,259)
11,617,981
1,601,623
1,605,540
189,183
1,416,357
(11,940,967)
(445,008)
1,120
—
326,049
(11,240,158)
(582,970)
(953,502)
409,700
—
(1,636,653)
273,451
(433,953)
(1,022,024)
(1,321,383)
(1,145,924)
(154,150)
—
1,490,661
1,728,148
191,320
1,536,828
1,812,150
(27,686)
(2,607)
—
(300,886)
2,327,470
(184,141)
7,042,718
29,348
—
6,944,753
68,617
(455,696)
(740,742)
(1,517,770)
(1,019,856)
(137,848)
—
(21,309)
(360,066)
—
—
299,359
255,257
—
28,422
—
15,680
—
(937,684)
(1,537,684)
(1,259,296)
(32,659)
—
—
(245,729)
600,000
600,000
—
—
—
(57,905)
(12,138,872)
18,965,097
6,826,225
—
—
777,028
307,226
—
1,639
449,946
18,217
—
(2,219,096)
(2,532,646)
(1,268,694)
(815,445)
—
—
(448,507)
313,550
100,000
—
—
213,550
(9,845)
8,648,298
10,316,799
18,965,097
82,148
3,900,413
2,843,664
—
94,086
16,570,595
2,300,416
—
7,8
6, 7, 10
13
14 , 15
12
3
14 , 15
3
17
19
23
2
(*) Presented for comparison purposes only
The accompanying notes, 1 to 47, and Appendices I-VI are an integral part of the consolidated cash flow statement for the year ended 31 December 2022.
Santander Consumer Finance, S.A. and subsidiaries composing the Santander Consumer
Finance Group
Notes to the Consolidated Financial Statements for
the year ended 31 December 2022
1.
Introduction, basis of presentation of the consolidated financial statements, basis of consolidation and other
information
a)
Introduction
Santander Consumer Finance, S.A. (“the Bank”) was incorporated in 1963 under the name of Banco de
Fomento, S.A.. It is a private-law entity subject to the rules and regulations applicable to banks operating in
Spain, and has its headquarters at Avenida de Cantabria s/n, Edificio Dehesa, Boadilla del Monte, Madrid, where
the bylaws and other public information on the Bank can be consulted. The Bank is registered in the Official
Register of Institutions of the Bank of Spain under code 0224.
The Bank’s object is to receive funds from the public in the form of deposits, loans, repos or other similar
transactions entailing the obligation to refund them, and to use these funds for its own account to grant loans
and credits or to perform similar transactions. Also, as the holding company of a finance group (the Santander
Consumer Finance Group, “the Group”), the Bank manages and handles the investments in its subsidiaries.
The Bank is part of the Santander Group, the parent entity of which (Banco Santander, S.A.) owns, directly or
indirectly, all the share capital of the Bank at 31 December 2022 and 2021 (see Note 23). Banco Santander, S.A.
has its registered office at Paseo de Pereda 9-12, Santander. In this regard, the Bank's activity should be
considered to be carried on in the framework of its belonging to and the strategy of the Santander Group, with
which it performs transactions that are relevant to its activity (see Note 46). The consolidated financial
statements for 2021 of the Santander Group were authorised for issue by the Directors of Banco Santander, S.A.
at its Board of Directors Meeting on 24 February 2022, were approved by the shareholders at the Annual
General Meeting on 1 April 2022 and were filed at the Santander Mercantile Registry. The consolidated
financial statements of the Santander Group for 2022 are expected to be authorised for issue by its Directors on
27 February 2023.
The Bank has one bank office located in Madrid, is not listed and, in 2022, it carried on most of its direct
business activities in Spain.
Additionally, since December 2002 the Bank has been the head of a European corporate group, consisting
mainly of financial institutions, which engages in commercial banking, consumer finance, operating and finance
leasing, full-service leasing and other activities. As of 31 December 2022, the Group had 311 offices distributed
throughout Europe, 48 of which were located in Spain (314 branches, 49 of which were located in Spain as of
31 December 2021).
During 2020, after obtaining authorization, a branch has been established in Greece for the purpose of carrying
out activities related to the financing of purchases of any type of consumer goods made by third parties,
leasing, renting and other activities.
During 2021 and after the merger of the Bank with its subsidiaries Santander Consumer Bank, S.A., Banco
Santander Consumer Portugal, S.A. and Santander Consumer Finance Benelux, B.V. (see Note 3), Branches were
established in Belgium, Portugal and the Netherlands in order to continue the activities that had been provided
until this date.
During the year 2022 and after the merger of the Bank with its subsidiary Santander Consumer Banque, S.A.
(see Note 3), a branch has been established in France in order to continue the activities that had been provided
until this date.
1
As required by Article 21 of Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on
the regulation, supervision and capital adequacy of credit institutions, the accompanying Appendix IV lists the
agents of the Group as of 31 December 2022.
b)
Basis of presentation of the consolidated financial statements
Under Regulation (EC) no. 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 accordance with the International Financial Reporting Standards
(hereinafter “IFRSs”) previously adopted by the European Union (hereinafter “EU-IFRSs”).
In order to adapt the accounting regime of Spanish credit institutions with the principles and criteria established
by the IFRS adopted by the European Union (IFRS-EU), the Bank of Spain issued Circular 4/2017, dated 27
November 2017, on Public and Reserved Financial Information Standards and Financial Statements Formats.
During 2021 and 2020, the Bank of Spain published Circulars 6/2021, dated December 22, 2/2020 and 3/2020,
dated June 11, amending Circular 4/2017, dated November 27 to credit institutions on Public and Reserved
Financial Information Standards and Financial Statements Formats.
The Group’s consolidated financial statements for 2022 were formally prepared by the Directors of the Bank, as
Parent (at the Board Meeting of 22 February 2023), in accordance with the International Financial Reporting
Standards as adopted by the European Union, taking into account Bank of Spain Circular 4/2017 and its
subsequent amendments, as well as the regulatory financial reporting framework applicable to the Group
using the basis of consolidation, accounting policies and measurement basis set forth in Note 2 to these
consolidated financial statements and, accordingly, they presented fairly the Group’s consolidated equity and
consolidated financial position on 31 December 2022, and the consolidated results of its operations, income
and expense recognised, the changes in consolidated equity and its consolidated cash flows in the year then
ended 2022. These consolidated financial statements have been prepared from the accounting entries
registered by the Bank and the rest of the entities that conform the Group, and includes all adjustments and
reclassifications needed to standardise all accounting policies and valuation criteria applied by the Santander
Consumer Finance Group.
These notes to the consolidated financial statements contain information in addition to that presented in the
accompanying balance sheet, income statement, statement of recognised income and expense, statement of
changes in total equity and statement of cash flows, all of them consolidated. The notes provide, in a clear,
relevant, reliable and comparable manner, narrative descriptions and disaggregation of items presented in
those statements.
The Group’s consolidated financial statements for 2021 were approved by the Shareholders at the Annual
General Meeting of the Bank on 3 March 2022 and filed at the Madrid Mercantile Registry. The 2022
consolidated financial statements of the Group and the 2022 financial statements of the Bank and as well as
substantially all the Group entities have not yet been approved by their Shareholders at the respective Annual
General Meetings. However, the Bank’s Board of Directors considers that the aforementioned financial
statements will be approved without any significative changes.
Adoption of new standards and interpretations issued
The following modifications came into force and were adopted by the European Union in 2022:
•
Amendment to IFRS 3, Business Combinations: to update the references to the conceptual framework for
financial reporting and add an exception for the recognition of liabilities and contingent liabilities within
the scope of IAS 37, Provisions, Contingent Liabilities and Contingent Assets and IFRIC 21, Levies. The
amendments also confirm that an acquirer should not recognize contingent assets acquired in a business
combination. It will apply from 1 January 2022.
2
•
•
•
Amendment to IAS 16, Property, Plant and Equipment: prevents an entity from deducting from the cost of
an item of property, plant and equipment any revenue from the sale of finished goods while the entity is
preparing the item for its intended use. It is also clear that an entity is "testing whether the asset is
functioning properly" when evaluating the technical and physical performance of the asset. The financial
performance of the asset should not be taken into account for this evaluation.
Additionally, entities should disclose separately the amounts of income and expenses related to finished
goods that are not the product of the entity's ordinary activities. It will apply from 1 January 2022.
Amendment to IAS 37, Provisions, Contingent Liabilities and Contingent Assets: clarifies that the direct
costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation
of other costs directly related to fulfilling contracts. Before recognising a separate provision for an
onerous contract, the entity recognises any impairment loss that has occurred on assets used in fulfilling
the contract. It will apply from 1 January 2022.
Amendment to IFRS Cycle (2018-2020): introduces minor amendments, that are applied from 1 January
2022, to the following standards:
•
•
•
IFRS 9, Financial Instruments: clarifies which rates must be included in the 10% test for derecognition
of financial liabilities.
IFRS 16, Leases: amendment to remove possible confusion regarding the treatment of leasing
incentives in the application of IFRS 16 Leases.
IFRS 1, in relation to the first-time adoption of International Financial Reporting Standards, allows
entities that have measured their assets and liabilities at the carrying amounts recorded in their
parent's books to also measure any cumulative translation differences using the amounts reported
by the parent. This amendment also applies to associates and joint ventures that have adopted the
same exemption from IFRS 1.
The application of the aforementioned amendments to accounting standards and interpretations, has not
resulted in significant effects on the consolidated annual accounts of Santander Consumer Finance Group.
Likewise, as of the date of preparation of these consolidated annual accounts, the following standards are in
force, the effective date of which is after December 31, 2022:
•
IFRS 17, Insurance Contracts and modifications of 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 period in
which the service is provided, presents separately the financial results from the results for the provision of
the service and allows entities, through the choice of an accounting policy option, to recognize the
financial results in the income statement or in other comprehensive income. It will apply from 1 January
2023 retrospectively.
The Group has carried out a project to implement IFRS 17 with all Group entities and has drawn up an
accounting policy that establishes the accounting criteria for recording insurance contracts.
The Group has concluded the analysis about the possible effects of this new standard, without noticing
material impacts on the consolidated financial statements of Santander Consumer Finance Group.
3
•
•
•
The amendments to IAS 1 Presentation of Financial Statements require companies to disclose material
information about their accounting policies rather than their significant accounting policies. It will be
applicable from 1 January 2023.
The amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clarifies how
to distinguish changes in accounting policies, which are generally applied retrospectively, from changes in
accounting estimates, which are generally applied prospectively. It will be applicable from 1 January
2023.
The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions
that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. In
addition, entities should recognise deferred tax assets (to the extent that it is probable that they can be
utilised) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible
and taxable temporary differences associated with:
a.
Right-of-use assets and lease liabilities, and
b. Decommissioning, restoration and similar liabilities, and the corresponding amounts
recognised as part of the cost of the related assets.
The cumulative effect of recognising these adjustments is recognised in retained earnings, or another
component of equity, as appropriate. It will be applicable from 1 January 2023.
Finally, as of the date of preparation of these consolidated annual accounts, the following standards were
pending adoption by the European Union, the effective dates of which come into force are after December
31, 2022:
•
Classification of Liabilities, amendments to IAS 1 Presentation of Financial Statements, considering
non-current liabilities those in which the entity has the possibility of deferring payment for more than
12 months from the closing date of the reporting period.
Likewise, during 2022 an additional amendment to IAS 1 on the classification of liabilities with
covenants as current or non-current has been included, specifying that covenants that must be
complied with after the reporting date do not affect the classification of liabilities to that date, also
requiring breakdowns on them.
They must be applied retrospectively in accordance with the normal requirements in IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. It will apply from 1 January 2024.
•
IFRS 16 Leases: the lease liability in a sale and leaseback requires a lessee-seller to subsequently
measure the lease liabilities arising from a leaseback so that it does not recognize any amount for the
gain or loss in relation to the right. of use. On the other hand, the new requirements do not prevent a
seller-lessee from recognizing in results any gain or loss related to the partial or total termination of a
lease. It will be applicable, retrospectively, from January 1, 2024.
Santander Consumer Finance Group is currently analysing the possible effects of these new standards and
interpretations.
All accounting policies and measurement bases with a material effect on the consolidated financial
statements for 2022 were applied in the preparation of these consolidated annual accounts.
4
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 Board of Directors of the Santander Consumer Finance Group
in preparing the consolidated financial statements.
The main accounting principles and policies and measurement basis are set forth in note 2.
In the Group’s consolidated financial statements, estimates were occasionally made by the senior
management of the Santander Consumer Finance Group 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:
1. The impairment losses on certain financial assets at fair value through other comprehensive income,
non-current assets held for sale, financial assets at amortised cost, investments in joint ventures and
associates, tangible assets and intangible assets (see Notes 6, 7, 8, 10, 11, 12, 13, 14, 15 and 47);
2. The assumptions used in the actuarial calculation of the post-employment benefit liabilities and
commitments and other obligations (see Notes 2-r, 2-s and 21);
3. The useful life of tangible and intangible assets (see Notes 13 and 15);
4. The measurement of goodwill arising from consolidation (see Note 14);
5. The calculation of provisions and the consideration of contingent liabilities (see Note 21);
6. The fair value of certain unquoted assets and liabilities (see Notes 6, 7, 8, 9, 10, 11, 12, 17, 18 and 19);
7. The recoverability of deferred tax assets and the income tax expense (see Notes 2-t and 22);
8. The fair value of the identifiable assets acquired and liabilities assumed in business combinations
according to IFRS 3 (see Note 3).
To update the previous estimates, the Group's management has taken
into account the current
macroeconomic scenario resulting from the Ukrainian war, as well as the growing level of inflation and the
difficulties in the supply chains, which is having a certain impact on the economic evolution and is being
closely monitored, and which generates uncertainty in the Group's estimates. For this reason, the
Management of the Group has carried out an evaluation of the current situation in accordance with the best
information available to date, developing in the notes the main estimates made and the potential impacts of
the Ukrainian war and the macroeconomic situation on them during the period ended December 31, 2022
(see Notes 14, 22 and 47).
Although these estimates were made on the basis of the best information available at the end of 2022 and
considering information updated at the date of preparation of these consolidated annual accounts, future
events might make it necessary to change these estimates (upper or lower) in coming years, which, would be
prospectively, recognising any changes in estimates in the related consolidated income statements.
c) Comparability of information presented
The information contained in this report referring to the 2021 financial year is presented solely and exclusively
for comparative purposes with the information referring to the 2022 financial year and, therefore, does not
constitute the Group's annual accounts for the 2021 financial year.
5
d) 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. This situation generally occurs when the
Bank has, directly or indirectly, over half of the voting rights in the investee or situations where, without
reaching that level of participation, agreement or other circumstances exist that give the Bank control 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 14). Negative differences are recognised
in profit or loss on the date of acquisition.
Additionally, the share of third parties of the Group's equity is presented under “Non-controlling interests” in
the consolidated balance sheet (see Note 27). 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.
Regarding entities that, without having the majority of the voting rights, were classified as dependent entities
and, therefore, consolidated in these annual accounts, such circumstance would be a consequence of the
existence of agreements that affect the relevant activities of these entities and that give control to the Bank. As
of December 31, 2022 and 2021, there are no companies in which the Group does not have at least 50% of the
voting rights and which have been considered as Group entities.
On 31 December 2022 and 2021, no entities were identified in which the Group held over half of the voting
power and were not considered subsidiaries.
Appendix I to these consolidated financial statements contains relevant information on the Group’s subsidiaries
as of 31 December 2022.
ii. Interests in joint ventures
Joint ventures are deemed to be ventures 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 entities
(ventures) have interests in entities (jointly controlled entities) or undertake operations or hold assets so that
strategic financial and operating decisions affecting the joint venture require the unanimous consent of the
ventures.
In the consolidated financial statements, 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 in the jointly controlled entity.
Certain relevant information on joint ventures as of December 31, 2022 is provided in Appendix II to these
consolidated financial statements.
6
iii. Associates
“Associates” are entities over which the Bank is in a position to exercise significant influence, but not control or
joint control, usually because it holds 20% or more of the voting power of the investee.
In the consolidated financial statements, investments in associates are accounted for using the equity method,
i.e. at the Group's share of net assets of the investee, after taking into account the dividends received therefrom
and other equity eliminations. The profits and losses resulting from transactions with an associate are
eliminated to the extent of the Group's interest in the associate.
Appendix II to these consolidated financial statements contains relevant information on associates as of 31
December 2022.
iv. Structured entities
When the Group incorporates entities, or holds ownership interests therein, to enable its customers to access
certain investments, or for the transfer of risks or other purposes (also called structured entities since the
voting or similar power is not a key factor in deciding who controls the entity), the Group determines, using
internal criteria and procedures and taking into consideration the applicable legislation, whether control (as
defined above) exists and, therefore, whether these entities should be consolidated. Specifically, for those
entities to which this policy applies (mainly investment funds and pension funds), the Group analyses the
following factors:
•
•
•
•
•
Percentage of ownership held by the Group; 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 the Group's 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 asset securitization funds which are consolidated in those cases
where, being exposed to variable returns, it is considered that the Group continues to exercise control.
The exposure associated with unconsolidated structured entities are not material with respect to the Group’s
consolidated financial statements.
Appendix I contains, amongst other information, the structured entities (securitization Funds) that are subject
to consolidation in these consolidated financial statements as of 31 December 2022.
7
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 the Group obtains control over an entity or business are recognised for
accounting purposes as follows:
•
•
•
The Group measures the cost of the business combination which will normally correspond to the
consideration provided, defined as the fair value of the assets transferred, the liabilities incurred and the
equity instruments issued, if any, by the acquirer. The cost of the business combination does not include any
costs related to the combination, such as fees paid to auditors involved in the transaction, legal advisers,
investment banks and other consultants. If, prior to the business combination, the Group already held an
equity interest in the acquiree, this equity interest is measured at its fair value and the difference between
this fair value and its carrying amount at the date of the business combination is recognised in profit or loss.
This equity interest measured at fair value forms part of the cost of the business combination.
The fair value of the assets, liabilities and contingent liabilities of the acquired entity or business is
estimated, including those intangible assets identified in the business combination that might not be
recognised by the acquiree, which are included in the consolidated balance sheet at those values, as well as
the amount of the minority interests (non-controlling interests) and the fair value of the previous interests
in the acquire.
The difference between these items is recorded in accordance with section k) of this Note 2 if it is positive. If
the difference is negative, it is recognised under "Negative Goodwill" in the consolidated income statement.
Goodwill is only recognised once, when control of a business is obtained.
vi. Changes in the levels of ownership interests in subsidiaries
Acquisitions and disposals not giving rise to a change in control are accounted for as equity transactions in “
Other reserves”, and no gain or loss is recognised in the consolidated 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 valuation adjustments in “other accumulated 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 consolidated profit or loss.
vii. Acquisitions and disposals
Note 3 to these consolidated financial statements provides information on the most significant acquisitions and
disposals in 2022 and 2021.
e) Capital and capital adequacy management
Management of the Bank's and the Group's capital should be understood within the framework of the
management performed by the Santander Group, of which they form part (see Note 1-a). The Santander
Group's capital management is performed at regulatory and economic levels.
The aim is to secure the Santander Group's solvency and guarantee its economic capital adequacy and its
compliance with regulatory requirements, as well as an efficient use of capital.
8
To this end, the regulatory and economic capital figures and their associated metrics -return on riskweighted
assets (RORWA), return on risk-adjusted capital (RORAC) and value creation of each business unit- are
generated, analysed and reported to the relevant governing bodies on a regular basis.
In order to adequately manage the Santander Group's capital, it is essential to estimate and analyse future
needs, in anticipation of the various phases of the economic cycle. Projections of regulatory and economic
capital are made based on the budgetary information (balance sheet, income statement, etc.) and the
macroeconomic scenarios defined by the Santander Group's economic research service. These estimates are
used by the Group as a reference when planning the management actions (issues, securitisations, etc.) required
to achieve its capital targets.
In addition, certain stress scenarios are simulated in order to assess the availability of capital in adverse
situations. These scenarios are based on sharp fluctuations in macroeconomic variables (GDP, interest rates,
housing prices, etc.) that mirror historical crises that could happen again or plausible but unlikely stress
situations.
Following is a brief description of the regulatory capital framework to which the Group is subject:
On 26 June 2013, the Basel III legal framework was included in European law through Directive 2013/36 (CRD
IV), repealing Directives 2006/48 and 2006/49, and through Regulation 575/2013 on prudential requirements
for credit institutions and investment firms (Capital Requirements Regulation (CRR).
The CRD IV was transposed into Spanish legislation through Law 10/2014, on the regulation, supervision and
capital adequacy of credit institutions, and its subsequent implementing regulations contained in Royal Decree-
Law 84/2015 and Bank of Spain Circular 2/2016, which complete its adaptation to Spanish regulation.
The CRR, of immediate application in each European country, contemplates a gradual implementation calendar
that allows a progressive adaptation to the new requirements in the European Union regarding AT1 and T2
capital instruments. These calendars have been incorporated into Spanish regulation through Bank of Spain
Circular 2/2014, affecting both new deductions and those issues and equity elements that with this new
regulation are no longer eligible as such.
In 2014, the Basel III came into force, which established new global capital, liquidity and leverage standards for
financial institutions.
From a capital standpoint, Basel III redefined what is considered as available capital in financial institutions
(including new deductions and raising the requirements for eligible equity instruments), raised the minimum
capital requirements, demanded that financial institutions provide excess capital (capital buffers) and added
new requirements for the risks considered.
In Europe, Basel III was implemented through Directive 2013/36/EU (CRD IV) and Regulation 575/2013 (CRR).
CRD IV was transposed into Spanish regulations through Law 10/2014 on the regulation, supervision and
solvency of credit institutions and its subsequent regulatory development contained in Royal Decree 84/2015.
The CRR is directly applicable in the EU Member States and therefore repeals the national regulations regarding
minimum capital requirements existing prior to its entry into force.
On 27 December 2017, Regulation 2017/2395 was published, amending the CRR with regard to transitional
provisions to mitigate the impact of the introduction of IFRS 9, which took place on 1 January 2018. However,
as a consequence of the Covid-19 health crisis, on June 24, 2020, the European Commission published
Regulation (EU) 2020/873, which amends the previous one regarding the transitional adjustments arising from
the application of IFRS 9 accounting standards.
The regulatory changes introduced in the new regulation are focused mainly on the dynamic approach and the
extension of the phase-in until 2024 in order to mitigate the impact of the increase in the volume of provisions.
In terms of how to determine their impact, the static and dynamic approach must be taken into account:
9
Regarding the static approach, it would correspond to apply the factor of 0.7 expected for the year 2020 while
the dynamic approaches should be distinguished between:
• Dynamic approach 1: it measures the evolution of non-default provisions from the date of first
application of IFRS 9 (January 1, 2018) to the reporting date (January 1, 2020), maintaining the phase-in
factors for 5 years (2018-2022) provided in the previous Regulation.
• Dynamic approach 2: it measures the evolution of non-default provisions from January 1, 2020 until the
reporting date, applying new phase-in factors updated until 2024.
The main objective of this modification was to isolate the effect of the increase in non-default provisions caused
by the COVID-19 health crisis and thus not to harm the top-quality capital of credit institutions.
In addition, on 28 December 2017 Regulations 2017/2401 and 2017/2402 were published, incorporating the
new securitisation framework. The first regulation established a new methodology for calculating capital
requirements for securitisations and a transitional period ending on 31 December 2019, while the second
regulation defines a type of STS securitisation which, due to characteristics ('simple, transparent and
standardised')s, receives preferential treatment in terms of lower capital requirements.
With regard to Non-Performing Exposures (NPEs), rules have been published with the aim of implementing the
"Action Plan for Non-Performing Exposures in Europe", published by the European Council in July 2017. The
most relevant are the following:
•
•
•
The ECB's supervisory expectation to address the stock of NPEs through provisioning,
European Central Bank Guidance on Non-performing loans to credit institutions, published in March 2017:
the Appendix to this Guidance, published in March 2018, sets out timetables with quantitative supervisory
expectations for provisioning of this type of exposure. Applicable to exposures originated prior to 26 April
2019 and which have become NPE on or after 1 April 2018. Non-compliance could result in a higher charge
for Pillar 2.
Amendment of the RRC by Regulation 2019/630 regarding the minimum coverage of losses arising from
doubtful exposures (prudential backstop), published in April 2019: this regulation includes timetables of
quantitative requirements for minimum provisioning of NPE's. It applies to PPE's originated after 26 April
2019 and failure to comply would result in a deduction from the institutions' CET1.
i. Plan for the roll-out of advanced approaches and authorisation from the supervisory authorities
Santander Consumer Finance Group, following Santander Group policies, continues with its proposal to adopt,
progressively, over the next few years, the advanced internal ratings-based (AIRB) approach for substantially all
its banks, until the percentage of exposure of the loan portfolio covered by this approach exceeds 90%. The
commitment assumed before the supervisor still implies the adaptation of advanced models within the key
markets where it operates.
Accordingly, the Group continued in 2022 with the project for the progressive implementation of the
technology platforms and methodological improvements required for the roll-out of the AIRB approaches for
regulatory capital calculation purposes at the various Group units.
The Group has obtained authorisation from the supervisory authorities to use the AIRB approach for the
calculation of regulatory capital requirements for credit risk for the Parent and the main subsidiaries in Spain as
well as for certain portfolios in Germany, the Nordic countries (Norway, Sweden and Finland), and France.
With respect to operational risk, the Group currently uses the standardised approach for calculating regulatory
capital as foreseen in the Capital Requirements Regulation (CRR).
10
f) Deposits Guarantee Fund and Single Resolution Fund
The Bank and other consolidated entities participate in the Deposit Guarantee Fund, National Resolution Fund
or equivalent scheme in their respective countries.
i. Deposit Guarantee Fund
The Spanish Deposit Guarantee Fund (Fondo de Garantía de Depósitos, "FGD") was established by Royal Decree-
Law 16/2011, of 14 October, which was amended pursuant to the wording given in final provision ten of Law
11/2015, of 18 June, on the recovery and resolution of credit institutions and investment services companies (in
force as from 20 June 2015). This Law transposes Directive 2014/49/ EU, of 16 April 2014, on deposit
guarantee schemes into Spanish legislation. The annual contribution to be made to the fund by Spanish
institutions is determined by the FGD Management Committee. Contributions are based on the amount of
covered deposits, adjusted for the entity's risk profile, which takes into account the phase in the economic cycle
and the impact of pro-cyclical contributions, pursuant to article 6,3 of Royal Decree-Law 16/2011.
The purpose of the FGD is to guarantee deposits at credit institutions, up to the limit foreseen in the
aforementioned Royal Decree-Law. To fulfil its objectives, the FGD is funded by the above-referenced annual
contributions, the extraordinary contributions the fund requires from its members and the resources secured in
securities markets and through loans or other financing operations.
Taking into account the foregoing and to strengthen the FGD, Royal Decree-Law 6/2013, of 22 March, on the
protection of holders of certain savings and investment products and other financial measures established an
extraordinary contribution equal to 3 per thousand of the institutions’ deposits at 31 December 2012. This
extraordinary contribution was payable in two tranches:
i.
Two-fifths to be paid within 20 business days from 31 December 2013.
ii.
Three-fifths to be paid within a maximum of seven years in accordance with the payment schedule set
by the FGD Management Committee.
The notes to the Bank’s individual financial statements for 2022 include additional information on the
contributions of this nature made by the Bank in 2022 and 2021.
ii. Single Resolution Fund
In March 2014, a political agreement was reached between the European Parliament and Council on
establishing the second pillar of the Banking Union, the Single Resolution Mechanism (“SRM”). The main
objective of the SRM is to ensure that potential future bank failures in the banking union are managed
efficiently, with minimal costs to taxpayers and the real economy. The scope of the SRM mirrors that of the
SSM. This means that a central authority -the Single Resolution Board (“SRB”) is ultimately in charge of the
decision to initiate the resolution of a bank, while operationally the decision will be implemented in
cooperation with national resolution authorities. The SRB started its work as an independent EU agency on 1
January 2015.
While the rules governing the banking union aim to ensure that any resolution is first financed by a bank’s
shareholders and, if necessary, also partly by a bank’s creditors, there is now another funding source available
that can step in if the contributions of shareholders and creditors are insufficient, namely the Single Resolution
Fund (“SRF”), which is administered by the SRB. The legislation establishes that contributions to the SRF will be
paid in by the banks over the course of eight years.
11
In this regard, the SRF, which was introduced by Regulation (EU) No 806/2014 of the European Parliament and
of the Council, became operational on 1 January 2016. The basis for the calculation of the contributions that
must be made by credit institutions and investment firms to the SRF lies with the SRB. As from 2016, these
contributions base on: (a) a flat contribution (or basic annual contribution), that is prorata with respect to the
total liabilities, excluding own funds and guaranteed deposits, of all of the institutions authorised in the
territories of the participating Member States; and (b) a risk-adjusted contribution, that shall be based on the
criteria laid down in Article 103(7) of Directive 2014/59/EU, taking into account the principle of proportionality,
without creating distortions between banking sector structures of the Member States. The amount of these
contributions accrues from 2016 in an annual basis.
The amount accrued for contributions to both funds stood at EUR 81,891 thousand as of 31 December 2022
(EUR 82,156 thousand as of 31 December 2021), recognised under “Other operating expenses” on the
accompanying income statement (see Note 38).
iii. National Resolution Fund
In 2015 Royal Decree 1012/2015 of 6 November was published, implementing Law 11/2015 of 18 June on the
recovery and resolution of credit institutions and investment service companies and amending Royal Decree
2606/1996 of 20 December on deposit guarantee funds for credit institutions. The aforementioned Law
11/2015 regulates the creation of the National Resolution Fund, whose financial resources should reach 1% of
the amount of guaranteed deposits by 31 December 2024, through contributions from credit institutions and
investment service companies established in Spain. The details of how the contributions to this Fund are to be
calculated are governed by the Delegated Regulation (EU) 2015/63 of the Commission of 21 October 2014 and
are calculated by the Fondo de Resolución Ordenada Bancaria ("FROB"), on the basis of the information
provided by each institution.
The expense incurred for the contribution made by the Bank to the National Resolution Fund of Spain in 2022,
which amounted to EUR 451 thousand (EUR 535 thousand in 2021), is recognised under "Other Operating
Expenses" in the accompanying income statement (see Note 38).
g) Environmental impact
In view of the business activities carried on by the Group entities, they do not have any environmental liability,
expenses, assets, provisions or contingencies that might be material with respect to the Group’s consolidated
equity, financial position or results. Therefore, no specific disclosures relating to environmental issues are
included in these notes to the consolidated financial statements.
h) Events after the reporting period
Subsequent to the close of the fiscal year ended December 31, 2022 and up to the date of preparation of these
Consolidated Financial Statements for said fiscal year, no event has occurred that significantly affects or
modifies the information contained therein.
However, there are two events to highlight:
– On December 28, 2022, the Law establishing a temporary tax on credit institutions and financial credit
establishments was published in Spain (see note 22 for more details). The impact recorded in the year 2023 is
not material in the consolidated profit and loss account.
– As of December 31, 2022, SCF S.A. presents in its balance sheet deposits taken from its parent entity Banco
Santander S.A. for an amount of 6,050 million euros, which constitute part of the entity's structural financing
(Financial liabilities at amortized cost – Deposits- note 17).
During the month of January 2023 Banco Santander S.A. has cancelled in advance a total of 5,250 million euros
that were part the financing, which have been fully replaced by deposits taken from Openbank S.A, an entity
100% owned by Banco Santander S.A.
12
2. Accounting policies and valuation criteria
The accounting policies and valuation criteria used in the preparation of the accompanying financial statements
were as follows:
a)
Foreign currency transactions
i. Presentation currency
The Bank’s functional and presentation currency, as well as the Group’s presentation currency, is the Euro.
ii. Translation of foreign currency balances
Foreign currency balances are translated into Euro in two stages:
–
–
Translation of the foreign currency to the presentation currency (currency of the main economic
environment in which it operates); and
Translation to Euro of the balances held in the functional currencies of entities whose functional
currency is not the Euro.
iii. Translation of foreign currency to the presentation currency
Foreign currency transactions performed by consolidated entities (or entities accounted for using the
equity method) not located in European Monetary Union 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 presentation 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.
iv. Translation of functional currencies to Euro
The balances in the financial statements of consolidated entities (or entities accounted for using the
equity method) whose functional currency is not the euro are translated to euros as follows:
•
•
•
Assets and liabilities, at the closing rates.
Income and expenses, at the average exchange rates for the year.
Equity items, at the historical exchange rates.
13
v. Recognition of exchange differences
The exchange differences arising from the translation of foreign currency balances to the presentation
currency are generally recognised at their net amount under Currency translation differences in the
consolidated income statement, except for exchange differences arising from 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 from
nonmonetary items measured at fair value through equity, which are recognised under Other
comprehensive income – Items that may be reclassified to profit or loss – Currency translation
differences, except for the exchange differences of equity instruments, in which the option of irrevocably
has been chosen, to be valued at fair value with changes in other accumulated comprehensive income,
which are recognized under Other accumulated comprehensive income - Items that will not be
reclassified into results - Changes in the fair value of equity instruments measured at fair value with
changes in other comprehensive income (see Note 26).
The exchange differences arising from 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- Currency translation differences in the consolidated balance sheet,
whereas those arising from 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, until the related item is
derecognised, at which time they are recognised in profit or loss, unless it is part of items not reclassified
to profit or loss.
Exchange differences arising from 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 21).
vi. Entities located in hyperinflationary economies
As at 31 December 2022 and 2021 none of the functional currencies of the consolidated entities and
associates located abroad related to hyperinflationary economies as defined by International Financial
Reporting Standards as adopted by the European Union. Accordingly, at the end of the last three reporting
periods it was not necessary to adjust the financial statements of any of the consolidated entities or
associates to correct for the effect of inflation.
vii. Exposure to foreign
The equivalent Euro value of the total assets and liabilities in foreign currency held by the Group as of 31
December 2022 and 2021 amounted to EUR 20,296 million and EUR 12,221 million, respectively (EUR
20,136 million and EUR 13,183 million, respectively in 2021) –see Note 44.b.–. 98.80% (98.90% on 31
December 2021) of these assets and 100% of these liabilities (100% in 2021), approximately, 99.2%
correspond to, Norwegian kroner and sterling pounds. Virtually all the remainder relates to other
currencies traded in the Spanish market. The effect on the consolidated income statement and
consolidated equity of variations of 1% in the various foreign currencies in which the Group holds
significant balances, taking into account the exchange rate hedges arranged by the Group in this
connection, would not be significant.
b) Definitions and classification of financial instruments
i) Definitions
A “financial instrument” is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
An “Capital or equity instrument” is a contract that evidences a residual interest in the assets of the issuing
entity after deducting all of its liabilities.
14
A “financial derivative” is a financial instrument whose value changes in response to the change in an
observable market variable (such as an interest rate, foreign exchange rate, financial instrument price, market
index or credit rating), whose initial investment is very small compared with the investment that would have to
be made in other financial instruments with a similar response to changes in market factors, and which is
generally settled at a future date.
“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract
together with a derivative, known as an embedded derivative, that is not separately transferable and has the
effect that some of the cash flows of the hybrid contract vary in a way similar to a stand-alone derivative.
Compound financial instruments are contracts that simultaneously create a financial liability and an equity
instrument for their issuer (such as convertible bonds that give the holder the right to convert them into equity
instruments of the issuing entity).
The preference shares contingently convertible into ordinary shares eligible as Additional Tier 1 capital
(“CCPSs”) -perpetual preference shares, which may be repurchased by the issuer in certain circumstances, the
interest on which is discretionary, and would convert into a 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.
Also, the contingently redeemable perpetual debentures, which may be purchased by the issuer under certain
circumstances, whose remuneration is discretionary, and which will be redeemed, in whole or in part, on a
permanent basis if the Bank or its consolidated group has a capital ratio below a certain percentage (trigger
event), as defined in the related prospectuses, are accounted for by the Group as equity instruments.
Las operaciones señaladas a continuación no se tratan, a efectos contables, como instrumentos financieros:
•
•
•
•
Investments in joint ventures and associates (see Note 12).
Rights and obligations under employee benefit plans (see Note 21).
The rights and obligations arising from insurance contracts.
Contracts and obligations related to remuneration for employees based on own equity instruments. (see
Note 8).
ii) Classification of financial assets for measurement purposes
Financial assets are initially classified into the various categories used for management and measurement
purposes, unless they have to be presented as “Assets included in disposal groups classified as held for sale” or
they relate to “Cash and balances at central banks”, “Derivatives – hedge accounting” and “Investments in joint
ventures and associates”, which are reported separately.
The classification criteria for financial assets depends both on the business model underlying its management
and the characteristics of its cash flows.
The business models refer to the way the Group manages its financial assets to generate cash flows. To define
these models, the Group considers the following:
• How key management staff are assessed and reported on the performance of the business model and the
financial assets held in the business model.
•
The risks that affect the performance of the business model (and the financial assets held in the business
model) and, specifically, the way in which these risks are managed.
15
• How business managers are remunerated.
•
The frequency and volume of sales in previous years, as well as expectations of future sales.
The analysis of the characteristics of the contractual flows of financial assets requires the assessment of the
consistency of these flows with a basic loan agreement. The Group determines whether the contractual cash
flows of its financial assets are only payments of principal and interest on the amount of principal outstanding
at the beginning of the transaction. This analysis takes into consideration four factors (performance, covenants,
contractually linked products and currencies). In this regard, the most significant judgements made by the
Group in performing this analysis include the following:
•
•
•
The return on the financial asset, specifically in cases of periodic interest rate adjustments where the term of
the reference interest rate does not coincide with the frequency of the adjustment. In these cases, an
assessment is made in order to determine whether the contractual cash flows differ significantly from the
flows without this change in the time value of money, establishing a tolerance level of 2%.
The contractual clauses that may modify the cash flows of the financial asset, for which purpose the structure
of the cash flows before and after the activation of such clauses is analysed.
Financial assets whose cash flows have different priority for payment due to a contractual link to underlying
assets (e.g. securitisations) require a look-through analysis by the Group so as to review that both the financial
asset and the underlying assets are only principal and interest payments and that the exposure to credit risk of
the set of underlying assets belonging to the tranche analysed is less than or equal to the exposure to credit
risk of the set of underlying assets of the instrument.
On this basis, the asset can be measured at amortised cost, at fair value through other comprehensive income
or at fair value through profit or loss. IFRS 9 also provides the option to designate an instrument as at fair value
through profit or loss if doing so would eliminate or significantly reduce a measurement or recognition
inconsistency (sometimes referred to as 'accounting mismatch') that would otherwise arise from measuring
assets or liabilities or recognising gains and losses on them on different bases. The Group uses the following
criteria for the classification of 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 those other than those related to an increase in the credit risk of the asset,
unanticipated funding needs (stress case scenarios). Additionally, the characteristics of its contractual
flows represent substantially a "basic financing agreement".
Fair value with changes in other comprehensive income: financial instruments held in a business model
whose objective is to collect principal and interest cash flows and the sale of these assets, where fair
value is a key factor in their management. Additionally, the contractual cash flow characteristics
substantially represent a “basic financing agreement”.
Fair value with changes in profit or loss: financial instruments included in a business model whose
objective is not obtained through the models mentioned above, 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”.
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) in the initial moment.
iii) Classification of financial assets for presentation purposes
Financial assets are classified by nature into the following items in the consolidated balance sheet:
•
Cash and balances at Central Banks: cash balances and balances receivable on demand relating to deposits
with central banks and credit institutions.
16
•
Loans 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 favor 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 based on 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 instruments: bonds and other securities that represent a debt for their issuer, that generate an interest
return, and that are in the form of certificates or book entries.
•
Equity instruments: financial instruments issued by other entities, such as shares, which have the nature of
equity instruments for the issuer, other than investments in subsidiaries, joint ventures or associates.
Investment fund units are included in this item.
• Derivatives: includes the fair value in favour of the Group of derivatives which do not form part of hedge
accounting, including embedded derivatives separated from hybrid financial instruments.
•
Changes in the fair value of hedged items in portfolio hedges of interest rate risk: this item is the balancing
entry for the amounts credited to the consolidated income statement in respect of the measurement of the
portfolios of financial instruments which are effectively hedged against interest rate risk through fair value
hedging derivatives.
• Derivatives – hedge accounting: Includes the fair value in favour of the Group of derivatives, including
embedded derivatives separated from hybrid financial instruments, designated as hedging instruments in
hedge accounting.
iv) Classification of financial liabilities for measurements purposes
Financial liabilities are initially classified into the various categories used for management and measurement
purposes, unless they must 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.
Financial liabilities are included for measurement purposes in one of the following categories:
•
•
Financial liabilities held for trading (at fair value through profit or loss): this category includes financial
liabilities incurred for the purpose of generating a profit in the near term from fluctuations in their prices,
financial derivatives not designated as hedging instruments, and financial liabilities arising from the
outright sale of financial assets acquired under reverse repurchase agreements ("reverse repos") or
borrowed (short positions
Financial liabilities 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.
17
•
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.
v) Classification of financial liabilities for presentation purposes
Financial liabilities are classified by nature into the following items in the consolidated balance sheet:
• Deposits: includes all repayable balances received in cash by the Group –including subordinated liabilities
(amount of the loans received that rank below other loans or securities with regards to claims on assets and
earnings) - save for debt instruments in issue. This item also includes those cash bonds and cash
consignments received whose amount may be invested without restriction. Deposits are classified based on
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, 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.
Santander Consumer Finance Group chose to accrue interest in accordance with the specific periods of
adjustment to market rates, so that the interest corresponding to said period (-1%) has been recorded in
the income statement from June 2020 to June 2022, having met the computable loan threshold that gave
rise to the extra rate on that date.
Subsequently, and as a result of the modifications introduced by the European Central Bank in the
conditions of the program, which include changes in its interest rates, the Group has updated the effective
interest rate at which interest accrues on said financial liability, maintaining the criterion adopted in
previous years, and considering said modifications a change in the variable interest rate (which affects the
EIR) and is applied prospectively.
• Marketable debt securities: includes the amount of bonds and other debt represented by marketable
securities, other than those having the substance of subordinated liabilities (amount of the loans received,
which for credit priority purposes are after common creditors, and includes the amount of the financial
instruments issued by the Group which, having the legal nature of capital, do not meet the requirements to
qualify as equity, such as certain preferred shares issued). This item includes the component that has the
consideration of financial liability of the securities issued that are compound financial instruments.
• Derivatives: includes the fair value, with a negative balance for the Group, of derivatives, including
embedded derivatives separated from the host contract, which do not form part of hedge accounting.
•
Short positions: includes the amount of financial liabilities arising from the outright sale of financial assets
acquired under reverse repurchase agreements or borrowed.
• Other financial liabilities: includes the amount of payment obligations having the nature of financial
liabilities not included in other items (includes, among others, the balance of lease liabilities), and liabilities
under financial guarantee contracts, unless they have been classified as non-performing.
•
Changes in the fair value of hedged items in portfolio hedges of interest rate risk: this item is the balancing
entry for the amounts charged to the consolidated income statement in respect of the measurement of the
portfolios of financial instruments which are effectively hedged against interest rate risk through fair value
hedging derivatives.
18
• Derivatives – hedge accounting: 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.
c) 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. Financial instruments not measured at fair value through
profit or loss are adjusted by the transaction costs. Financial assets and liabilities are subsequently measured at
each year-end as follows.
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. The Group has opted to make such recognition on
the trading date or the settlement date, depending on the convention of each of the markets in which the
transactions take place. 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 with changes in profit or loss is adjusted for transaction
costs. Subsequently, at each accounting close, they are valued in accordance with the following criteria:
i) Measurement of financial assets
Financial assets are measured at fair value are valued mainly at their fair value without deducting any
transaction cost for their sale.
The fair value of a financial instrument on a given date is taken to be the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants. The most objective
and common reference for the fair value of a financial instrument is the price that would be paid for it on an
active, transparent and deep market (quoted price or market price). At 31 December 2022 there were no
significant investments in quoted financial instruments that had ceased to be recognised at their quoted price
because their market could not be deemed to be assets.
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 designated as accounting hedges from the trade date are recognised in
Gains/losses on financial assets and liabilities held for trading (net) in the consolidated income statement.
Specifically, the fair value of financial derivatives traded in 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 OTC derivatives.
The fair value of OTC 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 (NPV), 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 if they meet the SPPI test criteria, 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.
19
The effective interest rate is the discount rate that exactly matches the carrying amount of a financial
instrument to all its estimated cash flows of all kinds over its remaining life. For fixed rate financial
instruments, the effective interest rate coincides with the contractual interest rate established on the
acquisition date plus, where applicable, the fees and transaction costs that, because of their nature, form part
of their financial return. In the case of floating rate financial instruments, the effective interest rate coincides
with the rate of return prevailing in all connections until the next benchmark interest reset date.
Equity instruments and contracts relating to those instruments should be measured at fair value. However, in
certain specific circumstances the Group considers that the cost is an adequate estimate of fair value. This may
be the case if the recent information available is insufficient to measure such fair value, or if there is a wide
range of possible fair value measurements and cost represents the best estimate of fair value within that
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. The Group has taken out guarantees and other credit
enhancements to mitigate its exposure to credit risk, consisting mainly of mortgage guarantees, cash
guarantees, equity and personal guarantees, assets leased and rented, assets acquired under repurchase
agreements, securities loans and credit derivatives.
ii) Measurement of financial liabilities
Financial liabilities are generally measured at amortised cost, as defined above, except for those included under
the headings “Financial liabilities held for trading”, “Financial liabilities at fair value through profit or loss” and
“Financial liabilities designated as hedged items in fair value hedges (or as hedging instruments)”, whose
carrying amount changes due to changes in their fair value in connection with the risk or risks covered by such
hedges. 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 give rise to 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.
iii) Valuation techniques
The following table shows a summary of the fair values, at the end of 2022 and 2021, of the financial assets
and liabilities indicated below, classified on the basis of the various measurement methods used by the Group
to determine their fair value:
EUR Thousands
31/12/2022
31/12/2021
Published
price
quotations in
active markets
(Level 1)
Internal
Models
(*)
Total
Published
price
quotations in
active markets
(Level 1)
Internal
Models
(*)
Total
Financial assets help for trading
Non-trading assets mandatorily at fair
value through profit or loss
Financial assets at fair value through
other comprehensive income
Derivatives – hedge accounting (assets)
Financial liabilities held for trading
Financial liabilities at fair value through
profit or loss
Derivatives – hedge accounting
(liabilities)
—
494,664
494,664
—
51,476
51,476
6
1,870
1,876
26
2,972
2,998
735,775
12,694
748,469
1,062,405
14,946
1,077,351
—
—
—
—
1,131,071
1,131,071
466,031
466,031
—
—
193,787
193,787
—
—
—
—
121,585
121,585
58,169
58,169
—
—
128,650
128,650
(*) En su práctica totalidad, las (Virtually all the main variables (inputs) used in these models come directly from observable market data (Level 2, compliant with IFRS 7
– Financial Instrument: Disclosures)
20
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 and derivatives traded in organized
markets, securitized assets, shares, and fixed income issued.
In cases where the fair value of a financial instrument cannot be obtained from its market price quotations, the
Group makes its best estimate of fair value using its own internal models. In most cases, these internal models
use data based on observable market parameters as significant inputs (Level 2) and, in very specific 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.
The Group did not make any material transfers of financial instruments between one measurement method
and another in 2022 or 2021. Also, there were no changes in the valuation techniques used to measure
financial instruments. Likewise, the movement of Level 3 financial assets has not been significant during the
years 2022 and 2021.
General measurement criteria
The Santander Group, of which the Group is a part of, has developed a formal process for the systematic
valuation and management of financial instruments, which has been implemented worldwide across all units,
including the Santander Consumer Finance Group´s units. The governance scheme for this process distributes
responsibilities between two independent divisions: the financial management (in charge of the daily
management of financial products) 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 financial instruments, and the
related valuation techniques and inputs, by asset class. In the case of the Group, the main positions are derived
from simple (simple) instruments, mainly interest rate swaps and cross currency swaps.
Interest rate and fixed income
The interest rate 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.
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.
21
Fixed-income instruments include products such as bonds, bills or notes whose valuation, as described above,
can be made through the observation of their price in quoted markets, models constructed from observable
data or other techniques in cases where neither of the above two alternatives is possible.
Equity and exchange rate
The most important products in these asset classes are forward and futures contracts, as well as single
derivatives (vanilla), listed and OTC (over-the-counter), on individual underlyings and asset baskets. Plain
vanilla options are valued using the standard Black-Scholes model, while more exotic derivatives, involving
forward yields, average yield or digital, barrier or callable features are valued using generally accepted industry
models or custom models, as appropriate. For illiquid equity derivatives, hedging is performed considering
liquidity constraints in the models.
The inputs to the equity models in general consider interest rate curves, spot prices, dividends, repo margin
spreads, implied volatilities, correlation between stocks and indices and cross-correlation between assets. The
implied volatilities are obtained from market prices of European and American call and put options. Using
various interpolation and extrapolation techniques, continuous areas of volatility are obtained for illiquid
stocks. Dividends are generally estimated in the medium and long term. Correlations are obtained, where
possible, implicitly from market quotations of correlation-dependent products; in other cases, proxies are made
to correlations between reference underlyings or are obtained from historical data.
Inputs to exchange rate models include the interest rate curve of each currency, the spot rate and implied
volatilities and the correlation between assets of this type. The volatilities are obtained from European call and
put options that are quoted in the markets as at-the-money, risk reversal or butterfly options. Illiquid currency
pairs are generally treated using data from liquid pairs from which the illiquid currency can be decomposed.
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
collateralized 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 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.
Loss Given Default: 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.
22
• 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.
At the end of December 2022 and 2021, no CVA and DVA adjustments were recorded for significant amounts.
In addition, Santander Group amounts the funding fair value adjustment (FFVA) is calculated by applying future
market funding spreads to the expected future funding exposure of any uncollateralized component of the OTC
derivative portfolio. This includes the uncollateralized component of uncollateralized derivatives in addition to
derivatives that are fully uncollateralized. The expected future funding exposure is calculated by a simulation
methodology, where available. The FFVA impact in the group is not material for the consolidated financial
statements as of 31 December 2022 and 2021.
Valuation adjustments for model risk
The fair value of financial instruments obtained from the aforementioned internal models takes into account,
inter alia, the contract terms and observable market data, which include interest rates, credit risk, exchange
rates and prepayments.
The valuation models described above do not entail a significant degree of subjectivity, given that the
methodologies may be adjusted and recalibrated, where needed, through the internal calculation of fair value
and the subsequent comparison with the corresponding actively-traded price. However, certain valuation
adjustments may be necessary when quoted market prices are not available for comparison purposes.
Risk sources include uncertain model parameters, illiquid underlying issuers, poor quality market data or
missing risk factors (at times, the best option available 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 as follows:
•
•
•
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. The disparity of price depending on the
different market contributors, or the concentration of the asset, could also be potential sources of risk to
consider in the fixed income market.
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.
Set forth below are the financial instruments at fair value whose measurement was based on internal models (Level 2
and Level 3) at 31 December 2022 and 2021:
23
EUR Thousands
Fair Values calculated
using internal models
31-12-22 (Level 2)
Fair Values calculated
using internal models
31-12-22 (Level 3)
Valuation techniques
Main assumptions
ASSETS:
Financial assets held for trading
Derivatives
494,664
494,664
—
—
Swaps
425,843
— Present Value Method
Yield curves, Fx market
rates, Basis
Interest rate options
Other
37,316
31,505
—
Black Sholes SLN
Yield curves, volatility
— Present Value Method
Yield curves, volatility
surface
1,870
Non-trading assets mandatorily at fair
value through profit or loss
Equity instruments
Debt securities
Loans and advances
—
—
—
—
39
Present Value Method
1,444
Present Value Method
387
Present Value Method
Derivatives – hedge accounting
1,131,071
—
Swaps
1,068,242
— Present Value Method
Other
62,829
— Present Value Method
Yield curves, Fx market
rates, Basis
Yield curves, Fx market
rates, Basis
Yield curves, Fx market
rates, Basis
Yield curves, Fx market
rates, Basis
Yield curves, Fx market
rates, Basis
Financial assets at fair value through
other comprehensive income
Equity instruments
1,205
1,205
11,489
11,489
Present Value Method
Yield curves, Fx market
rates, Basis
TOTAL ASSETS
LIABILITIES:
1,626,940
13,359
Financial liabilities held for trading
Derivatives
466,031
466,031
—
—
Swaps
430,526
— Present Value Method
Exchange rate options
Interest rate options
Other
Derivatives – hedge accounting
6
35,484
15
193,787
Swaps
163,493
Other
30,294
TOTAL LIABILITIES
659,818
—
—
—
—
—
—
Black Sholes SLN
Present Value Method
Yield curves, Fx market
rates, Basis
Yield curves, volatility
surface
Yield curves, Fx market
rates, Basis
Present Value Method
Yield curves, Fx market
rates, Basis
Present Value Method
Yield curves, Fx market
rates, Basis
Present Value Method
Yield curves, Fx market
rates, Basis
24
EUR Thousands
Fair Values calculated
using internal models
31-12-21 (Level 2
Fair Values calculated
using internal models
31-12-21 (Level 3)
Valuation techniques
Main assumptions
ASSETS:
Financial assets held for trading
Derivatives
Swaps
Interest rate options
Other
Non-trading assets mandatorily at fair
value through profit or loss
Equity instruments
Debt securities
Loans and advances
51,476
51,476
45,978
5,450
48
—
—
—
—
Derivatives – hedge accounting
121,585
—
—
— Present Value Method
Yield curves, Fx market
rates, Basis
—
— Present Value Method
Yield curves, volatility
surface
2,972
— Present Value Method
Yield curves, Fx market
rates, EQ, dividends,
other
2,593
379
—
Swaps
107,759
— Present Value Method
Other
13,826
— Present Value Method
Yield curves, Fx market
rates, Basis
Yield curves, volatility
surface, Fx market rates
Yield curves, Fx market
rates, EQ, dividends,
other , credit, other
14,946
Present Value Method
14,946
17,918
—
—
— Present Value Method
Yield curves, Fx market
rates, Basis
—
—
Financial assets at fair value through
other comprehensive income
Equity instruments
TOTAL ASSETS
LIABILITIES:
Financial liabilities held for trading
Derivatives
Swaps
Interest rate options
Other
—
—
173,061
58,169
58,169
46,982
5,460
5,727
Derivatives – hedge accounting
128,650
Swaps
80,677
— Present Value Method
Other
47,973
— Present Value Method
Yield curves, Fx market
rates, Basis
Yield curves, volatility
surface, Fx market rates
TOTAL LIABILITIES
186,819
—
25
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.
• Unrealised 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
are recognised in Other comprehensive income under Items that may be reclassified to profit or loss –
Non-current assets held for sale.
v) Hedging transactions
The consolidated entities use financial derivatives to manage the risks of the Group entities’ own positions
and assets and liabilities (“hedging derivatives”) or for the purpose of obtaining gains from changes in the
prices of these derivatives.
Financial derivatives that do not qualify for hedge accounting are treated for accounting purposes as trading
derivatives.
A derivative qualifies for hedge accounting if all the following conditions are met:
1. The derivative hedges one of the following three types of exposure (and therefore can be classified in one
of the following categories):
•
•
Changes in the fair value of assets and liabilities due to fluctuations, among others, in the interest rate
and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);
Changes in the estimated cash flows arising from the hedged financial assets and liabilities,
commitments and highly probable forecast transactions (“cash flow hedge”);
•
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:
•
At the date of arrangement, the hedge is expected under normal conditions, to be highly effective
(“prospective effectiveness”);
26
•
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 of the hedging transaction that evidences 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 risks.
The changes in value of financial instruments qualifying for hedge accounting are recognised as follows:
•
•
•
•
•
In fair value hedges, the gains or losses arising from both the hedging instruments and the hedged items
attributable to the type of risk being hedged are recognised directly in the consolidated income statement.
In fair value hedges of interest rate risk on a portfolio of financial instruments, the gains or losses that arise
on measuring the hedging instruments are recognised directly in the consolidated income statement,
whereas the gains or losses due to changes in the fair value of the hedged amount (attributable to the
hedged risk) are recognised in the consolidated income statement with a balancing entry under “Changes in
the Fair Value of Hedged Items in Portfolio Hedges of Interest Rate Risk” on the asset or liability side of the
consolidated balance sheet, as appropriate.
In cash flow hedges, the effective portion of the change in fair value of the hedging instrument is
recognised temporarily under “Other comprehensive income – Items that may be reclassified to profit or
loss - Cash Flow Hedges” in the consolidated balance sheet until the forecast transactions occur, when it is
recognised in the consolidated income statement, unless, if the forecast transactions result in the
recognition of non-financial assets or liabilities, it is included in the cost of the non-financial asset or
liability. The ineffective portion, if any, of the change in value of hedging derivatives is recognised under
“Gains/Losses on Financial Assets and Liabilities (Net)” in the consolidated income statement.
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.
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 as an adjustment to
the carrying amount of the hedged asset or liability are amortised to profit or loss at the effective interest rate
recalculated at the date of hedge discontinuation. The adjustments must be fully amortised at maturity.
When cash flow hedge accounting is discontinued, any cumulative gain or loss on the hedging instrument
recognised in equity under “Other comprehensive income - Items that may be reclassified to profit or
loss” (from the period when the hedge was effective) remains in this equity item until the forecast transaction
occurs, at which time it is recognised in profit or loss, unless the transaction is no longer expected to occur, in
which case the cumulative gain or loss is recognised immediately in profit or loss.
vi) Derivatives embedded in hybrid financial instruments
Derivatives embedded in financial liabilities 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 liabilities designated at fair value through profit or loss or as
Financial assets/liabilities held for trading.
27
d) 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:
•
•
•
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 and obligations created or retained in the transfer are recognised
simultaneously.
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, securitisation of assets in which the transferor retains a subordinated debt or grants a credit
enhancement to the new holders that entails assuming substantially all the credit risk of the transferred
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:
•
•
An associated financial liability, for an amount equal to the consideration received; this liability is, in
general, subsequently measured at amortised cost unless it meets the requirements for classification
under Financial liabilities designated at fair value through profit or loss.
The income from the transferred financial asset not derecognised and any expense incurred on the new
financial liability.
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:
•
•
If the transferor does not retain control of the transferred financial asset, the asset is derecognised and
any rights and obligations created or retained in the transfer are recognised.
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 of the asset 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, the Group has differentiated them into two main
categories in relation to the conditions under which a modification leads to a de-recognition or cancellation of
the financial asset (and the recognition of a new financial asset) and those under which the accounting of the
original financial instrument with the modified terms is maintained:
•
Contractual modifications for commercial or market reasons, which are generally carried out at the
request of the debtor to apply current market conditions to the debt. The new contract is considered a
new transaction and, consequently, it is necessary to derecognize the original financial asset and
recognize a new financial asset subject to the classification and measurement requirements established
by IFRS 9. Also, the new financial asset will be recorded at fair value and, if applicable, the difference
between the carrying amount of the asset derecognized and the fair value of the new asset will be
recognized in profit or loss.
28
• 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 assured that it
would not be able to meet such payment obligations. In this case, the modification does not result in the
derecognition of the financial asset, but rather the original financial asset is maintained and does not
require a new assessment of its classification and measurement. When assessing credit impairment, the
current credit risk (considering the modified cash flows) should be compared with the credit risk at initial
recognition. Finally, the gross carrying amount of the financial asset (the present value of the
renegotiated or modified contractual cash flows discounted at the original effective interest rate of the
financial asset) should be recalculated, with the difference recognized as a gain or loss in profit or loss.
The Group habitually performs financial asset securitisation transactions in which it retains substantially all the
risks and rewards of ownership of the assets. The detail, by consolidated entity, of the securitised assets
retained on the consolidated balance sheets as at 31 December 2022 and 2021 is included in Note 10 to the
accompanying consolidated financial statements.
e) 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 entities of the Group 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.
Financial asset and liability balances are offset, i.e. reported in the consolidated balance sheet at their net
amount, only if the entities of the Group 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.
No material financial assets and liabilities were offset in the consolidated balance sheets as at 31 December
2022 and 2021.
f)
Impairment of financial assets
i) Definition
The Group associates an impairment in the value to financial assets measured at amortised cost, debt
instruments measured at fair value with changes in other comprehensive income, lease receivables and
commitments and guarantees granted that are not measured at fair value.
The impairment for expected credit losses is recorded with a charge to the consolidated income statement for
the period in which the impairment arises. In the event of occurrence, the recoveries of previously recognised
impairment losses are recorded in the consolidated income statement for the period in which the impairment
no longer exists or is reduced.
In the case of purchased or originated credit-impaired assets, the Group only recognizes at the reporting date
the changes in the expected credit losses during the life of the asset since the initial recognition as a credit loss.
In the case of assets measured at fair value with changes in other comprehensive income, the changes in the
fair value due to expected credit losses are charged in the consolidated income statement of the year where the
change happened, reflecting the rest of the valuation in other comprehensive income.
As a rule, the expected credit loss is estimated as the difference between the contractual cash flows to be
recovered and the expected cash flows discounted using the original effective interest rate. In the case of
purchased or originated credit-impaired assets, this difference is discounted using the effective interest rate
adjusted by credit rating.
Depending on the classification of financial instruments, which is mentioned in the following sections, the
expected credit losses may be along 12 months or during the life of the financial instrument:
•
12-month expected credit losses: arising from the potential default events, as defined in the following
sections that are estimated to be likely to occur within the 12 months following the reporting date. These
losses will be associated with financial assets classified as "normal risk" as defined in the following
sections.
29
•
Expected credit losses over the life of the financial instrument: arising from the potential default events
that are estimated to be likely to occur throughout the life of the financial instruments. These losses are
associated with financial assets classified as "normal risk under watchlist" or "doubtful risk".
With the purpose of estimating the expected life of the financial instrument all the contractual terms have
been taken into account (e.g. prepayments, duration, purchase options, etc.), being the contractual period
(including extension options) the maximum period considered to measure the expected credit losses. In the
case of financial instruments with an uncertain maturity period and a component of undrawn commitment
(e.g.: credit cards), the expected life is estimated through quantitative analyses to determine the period
during which the entity is exposed to credit risk, also considering the effectiveness of management
procedures that mitigate such exposure (e.g. the ability to unilaterally cancel such financial instruments, etc.).
The following constitute effective guarantees:
a) Mortgage guarantees on housing as long as they are first duly constituted and registered in favour of the
entity. The properties include:
i) Buildings and building elements, distinguishing among:
• Houses;
• Offices, stores and multi-purpose premises;
•
Rest of buildings such as non-multi-purpose premises and hotels.
ii) Urban and developable ordered land.
iii) Rest of properties that classify as: buildings and building elements under construction, such as property
development in progress and halted development, and the rest of land types, such as rustic lands.
b) Collateral guarantees on financial instruments in the form of cash deposits and debt securities issued by
creditworthy issuers.
c) Other types of real guarantees, including properties received in guarantee and second and subsequent
mortgages on properties, as long as the entity demonstrates its effectiveness. When assessing the
effectiveness of the second and subsequent mortgages on properties the entity will implement particularly
restrictive criteria. It will take into account, among others, whether the previous charges are in favour of the
entity itself or not and the relationship between the risk guaranteed by them and the property value.
d) Personal guarantees, as well as the incorporation of new owners, covering the entire amount of the
financial instruments and implying direct and joint liability to the entity of persons or other entities whose
solvency is sufficiently proven to ensure the repayment of the loan on the agreed terms.
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.
30
In order to determine whether a financial instrument has increased its credit risk since initial recognition and is
to be classified in Stage 2, the Group considers the following criteria:
Changes in the risk of a default occurring through the expected life of the
financial instrument are analysed and quantified with respect to its credit
level in its initial recognition.
With the purpose of determining if such changes are considered as
significant, with the consequent classification into stage 2, each Group unit
has defined the quantitative thresholds to consider in each of its portfolios
taking into account corporate guidelines ensuring a consistent interpretation
in all units.
Within these quantitative thresholds, two types are considered: a relative
threshold is understood to be that which compares the current credit quality
with the credit quality at the time of origination in percentage terms of
change. Additionally, 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 this type of threshold or another (or both) is
determined according to the rational process explained in note 47, 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
its portfolios, according to the
particularities and normal management practices in line with the policies
currently in force (e.g. use of management alerts, etc.).
indicators, for each of
The use of these qualitative criteria is complemented with the use of an
expert judgement, under the corresponding governance.
Quantitative criteria
Qualitative criteria
In the case of forbearance, 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, offbalance-sheet
exposures whose payment is probable and their recovery doubtful are considered in Stage 3. Within this
category, two situations are differentiated:
• Doubtful risk for non-performing loans: financial instruments, irrespective of the client and guarantee, with
balances more than 90 days past due for principal, interest or expenses contractually agreed. This category
also includes all loan balances for a client which overdue amount more than 90 days past due is greater
than 20% of the loan receivable balance.
These instruments may be reclassified to other categories if, as a result of the collection of part of the past
due balances, the reasons for their classification in Stage 3 do not remain and the client does not have
balances more than 90 days past due in other loans.
• Doubtful risk for reasons other than non-performing loans: this category includes doubtful recovery
financial instruments that are not more than 90 days past due.
31
The Group 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:
1) Negative net equity or decrease because of losses of the client's net equity by at least 50% during the
last financial year.
2) Continued losses or significant decrease in revenue or, in general, in the client's recurring cash flows.
3) Generalised delay in payments or insufficient cash flows to service debts.
4) Significantly inadequate economic or financial structure or inability to obtain additional financing by the
client.
5) Existence of an internal or external credit rating showing that the client is in default.
6) Existence of overdue customer commitments with a significant amount to public institutions or
employees.
These financial instruments may be reclassified to other categories if, as a result of an individualised study,
reasonable doubts do not remain about the total repayment under the contractually agreed terms and the
client does not have balances with more than 90 days past due.
In the case of forbearances, instruments classified as doubtful risk may be reclassified to the category of
'normal risk under watchlist' when the following circumstances are present: a minimum period of one year has
elapsed from the forbearance date, the client has paid the accrued principal and interest amounts, and the
client has no other loan balance with more than 90 days past due.
• Default Risk: includes all financial assets, or part of them, for which, after an individualised analysis, their
recovery is considered remote due to a notorious and irrecoverable deterioration of their solvency.
In any case, except in the case of financial instruments with collateral covering more than 10% of the balance
of the loan, the Group considers as a general rule the following as a remote recovery: the loans of clients who
are in the liquidation phase of bankruptcy proceedings and doubtful balances due to non-performing loans
older than two years at less, depending on the country, in this category.
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
The Group has policies, methods and procedures in place to hedge its credit risk, both due to the insolvency
attributable to counterparties and its residence in a specific country. These policies, methods and procedures
are applied in the concession, study and documentation of financial assets, commitments and guarantees, as
well as in the identification of their impairment and in the calculation of the amounts needed to cover their
credit risk.
The asset impairment model in IFRS 9 applies to financial assets measured at amortised cost, debt instruments
at fair value with changes in other comprehensive income, lease receivables and commitments and guarantees
granted that are not measured at fair value.
32
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.
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.
•
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.
The Group performs retrospective and monitoring tests to evaluate the reasonableness of the collective
estimate.
On the other hand, the methodology required to estimate the expected credit loss due to credit events is based
on an unbiased and weighted consideration by the probability of occurrence of a series of scenarios,
considering a range of three to five possible future scenarios, depending on the characteristics of each unit,
which could have an impact on the collection of contractual cash flows, always taking into account the time
value of money, as well as all available and relevant information on past events, current conditions and
forecasts of the evolution of macroeconomic factors 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 factors. Grupo Santander uses prospective information in internal management and
regulatory processes, incorporating various scenarios, taking advantage of the experience with such
information to ensure the consistency of the processes.
Santander Consumer Finance Group uses prospective information both in internal risk management processes
and in prudential regulation, therefore various scenarios are incorporated to calculate the correction for
impairment of value that take advantage of experience with said information, thus ensuring consistency in
obtaining the expected loss.
The complexity of the estimation in this financial year has been impacted by 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 regarding the development of
the economy.
Santander Consumer Finance Group has internally ensured the criteria to be followed regarding the guarantees
received from the State Administrations, both through credit lines and other public guarantees, so that when
they are adequately reflected in each of the contracts, they are accounted for as mitigating factors of the
potential expected losses, and therefore of the provisions to be recorded, based on the provisions of the
applicable standard. Likewise, when appropriate, these guarantees are adequately reflected in the mitigation of
the significant increase in risk, considering their nature as personal guarantees.
33
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 noncompliance. 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 failed, 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 rest of the units of 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 material delays with respect to any significant
credit obligation.
Santander Consumer Finance Group has partially and voluntarily aligned during the 2022 financial year the
accounting definition of Phase 3, both the accounting definition of Phase 3, and for the calculation of the
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 non-payment on a daily basis and thresholds of materiality minimum amount in arrears). The
alignment of criteria will be done taking into account the criteria of IFRS 9 as well as the accounting principles
of unbiased presentation of financial information. Santander Consumer Finance Group has registered an
expected increase in the default rate estimated at around 23 basis points, with no material impact on the
provision figures for credit risk.
Additionally, the Group considers the risk that is generated in all cross-border operations, due to circumstances
other than the usual commercial risk due to insolvency (sovereign risk, transfer risk or risks derived from
international financial activity, such as wars, natural catastrophes, balance sheet crises of payments, etc.).
IFRS 9 includes a series of practical solutions that can be implemented by entities, with the aim of facilitating
their implementation. However, in order to achieve a complete and high-level implementation of the standard,
and following the best practices in the industry, the Group does not apply these practical solutions in a general
way:
•
•
Rebuttable presumption of a significant increase in risk from 30 days of default: this threshold is used as an
additional indicator, but not as a primary indicator, in determining significantly increased risk. Additionally,
there are some cases in the Group, in which its use has been refuted by studies that show a low correlation
of the significant increase in risk with this delay threshold. The disputed volume does not exceed 0.1% of
the Group's total exposure.
Assets with low credit risk at the reporting date: the Group analyzes the existence of a significant increase
in risk in all its financial instruments.
This information is broken down in greater detail in Note 47.II (Credit Risk).
34
g) Details of the individualised estimate of the correction of impairment
For the individualised estimation of the correction for impairment of financial assets, the Group has a specific
methodology to estimate the value of the cash flows expected to be collected. Generally, this recovery may be
estimated on the basis of:
•
•
Recovery via repayment of the debt for cash flows generated by the debtor's ordinary activities ("Going
Concern" approach).
Recovery through repayment of the debt by execution and subsequent sale of the collateral guaranteeing
the operations ("Gone Concern" approach).
If recovery is estimated using a "Gone Concern" approach, each of the Group's units has developed its own
methodology based on the following methodological principles:
a. Evaluation of the effectiveness of guarantees
The Group evaluates the effectiveness of all guarantees associated with the financial asset subject to an
individual impairment assessment. The following aspects are considered in making this assessment:
•
•
•
The time required to execute these guarantees;
The ability of the Group to enforce or value these guarantees in its favour;
The existence of limitations imposed by the local regulation of each unit on the foreclosure of guarantees.
Under no circumstances does the Group consider that a guarantee is effective if its effectiveness depends
substantially on the solvency of the debtor or its economic group, as could be the case:
•
•
Promises of shares or other securities of the debtor himself when their valuation may be significantly
affected by a debtor's default.
Personal cross-collateralisation: when the guarantor of a transaction is, at the same time, guaranteed by
the holder of that transaction.
On the basis of the foregoing, the Group considers the following types of guarantees to be effective:
• Mortgage guarantees on properties, which are first charge, provided that they are duly constituted and
registered in the Group's favour. Real estate includes:
•
Buildings and finished building elements, distinguishing between: Dwellings; Offices and commercial
premises and multipurpose buildings; Other buildings such as non-multipurpose buildings and hotels.
• Urban land and land for development.
•
Rest of real estate where buildings and elements of buildings under construction would be classified,
among others, such as developments in progress and stopped developments, and the rest of land, such
as rustic properties.
•
Pledges on financial instruments such as cash deposits, debt securities of recognised issuers or equity
instruments.
• Other types of security interests, including movable property received as security and second and
subsequent mortgages on real estate, provided that the entity demonstrates their effectiveness. In
assessing the effectiveness of second and subsequent mortgages on property, the Group applies
particularly restrictive criteria. It will take into account, inter alia, whether or not the foregoing charges are
in the Group's own favour and the relationship between the risk guaranteed by them and the value of the
property.
35
•
Personal guarantees, as well as the incorporation of new owners, covering the entire amount of the
transaction and involving the direct and joint liability before the entity of persons or entities whose equity
solvency is sufficiently proven to ensure repayment of the transaction under the agreed terms.
b. Valuation of guarantees
In this regard, the Group will assess the guarantees associated with the financial instruments based on the
nature of the guarantees in accordance with the following:
• Mortgage guarantees on properties associated with financial instruments taking into account all
available information, using complete individual valuations made by independent valuation experts and
under generally accepted valuation standards. If it is not possible to obtain a complete individual
valuation, alternative valuations may be used provided that they have been carried out by duly
documented and approved internal valuation models.
•
•
Personal guarantees will be individually assessed on the basis of updated information from the
guarantor.
The rest of the guarantees will be valued on the basis of current market values if available or on the
basis of other management information.
c. Adjustments to the value of guarantees and estimation of future cash inflows and outflows
The Group applies a series of adjustments to the value of the guarantees which can be positive or negative in
order to adjust the reference values:
•
•
Adjustments based on the historical sales experience of the local units for certain types of assets. These
adjustments will be made in the same way if the current valuations are not updated.
Individual expert adjustments based on additional management information (e.g. if there is a binding offer
to acquire the asset or the asset is severely impaired).
In addition, the Group will take into account the time value of money when adjusting the value of the
guarantees. Basically, for this purpose and based on the historical experience of each of the units, it is
estimated:
•
•
Period of adjudication.
Estimated time of sale of the asset
The Group must also take into account the cash inflows and outflows that would be generated by the
guarantee until it is sold. To this end, the Group considers the present value of the future cash flows of the
guarantee when estimating the value of the asset:
•
•
•
•
Possible future income commitments in favour of the borrower which will be accessible after the award of
the asset.
Estimated foreclosure costs.
Asset maintenance costs, taxes and community costs.
Estimated marketing or sales costs.
Finally, when 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.
This adjustment is made on the basis of estimated future price indices or external information.
36
d. Scope of application of the individual estimate of the assessment for impairment
Santander Consumer Finance Group 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.
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 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
credit model, the individual treatment of the client facilitates the continuous updating of information. The risk
assumed must be followed and monitored throughout its life cycle, enabling anticipation and action to be taken
in the event of possible impairments. In this way, the customer's credit quality is analysed individually, taking
into account specific aspects such as his competitive position, financial performance, management, etc. In the
wholesale risk management model, every customer with a credit risk position is assigned a rating, which has an
associated probability of customer default. Thus, individual analysis of the debtor triggers a specific rating for
each customer, which determines the appropriate parameters for calculating the expected loss, so that it is the
rating itself that initially modulates the necessary coverage, adjusting the severity of the possible loss to the
guarantees and other mitigating factors that the customer may have available. In addition, if as a result of this
individualised monitoring of the customer, the analyst finally considers that his coverage is not sufficient, he
has the necessary mechanisms to adjust it under his expert judgement, always under the appropriate
governance.
h) Repurchase agreements and reverse repurchase agreements
Any purchases (sales) of financial instruments under a non-optional resale (repurchase) agreement at a fixed
price (repos) are recognised, where appropriate, in the consolidated balance sheet as financing granted
(received), based on the nature of the debtor (creditor), under Loans and advances to central banks, Loans and
advances to credit institutions or Loans and advances to customers, Deposits from central banks, Deposits from
credit institutions or Customer deposits, if any.
Differences between the purchase and sale prices are recognised as interest over the contract term using the
effective interest method.
i) Assets and liabilities included in disposal groups classified as held for sale
Assets included in disposal groups classified as held for sale” includes the carrying amount of any individual
items or integrated into a group (disposal group) or items that are 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 carrying amount of these items which can be of a
financial nature or otherwise- will foreseeably be recovered through the proceeds from their disposal rather
than through their continuing use.
Similarly, “Liabilities included in disposal groups classified as held for sale” includes the balances payable
relating to the assets held for sale or disposal groups and to discontinued operations.
Non-current assets held for sale -both individual items and disposal groups, if any- are generally measured at
the lower of fair value less costs to sell and their carrying amount at the date of classification in this category.
Non-current assets held for sale are not depreciated as long as they remain in this category. However, any
financial instruments, assets arising from employee benefits, deferred tax assets and reinsurance assets
classified as “Non-Current Assets Held for Sale” continue to be measured using the methods described in this
Note, with no changes being made thereto as a result of the classification of these items as non-current assets
held for sale. The Group measures foreclosed property assets located in Spain by taking into consideration the
appraisal value on the date of foreclosure and the length of time each asset has been recognised in the
consolidated balance sheet.
37
The Group 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 neutrality and credibility requirements, so that the use of their estimates does not reduce the
reliability of its valuations. This policy establishes that all the appraisal companies and agencies with which the
Group works in Spain should be registered in the Official Register of the Bank of Spain and that the appraisals
performed by them should follow the methodology established in Ministry of Economy Order ECO/805/2003,
of 27 March. The main appraisal companies and agencies with which the Group worked in Spain in 2021 are as
follows: AESVAL, Logica de valoraciones, S.A., Alia Tasaciones, S.A., Arco Valoraciones, S.A., Agrupación Técnica
del Valor, S.A. (AT Valor), Sociedad de Tasación CATSA, S.A., CBRE Valuation Advisory, S.A., Compañía Hispana
de Valoraciones y Tasaciones, S.A., Eurovaloraciones, S.A., Gesvalt Sociedad de Tasación, S.A., Gloval Valuation,
S.A., Instituto de Valoraciones S.A., Krata, S.A., Savills Aguirre Newman Valoraciones y Tasaciones S.A.U.,
Sociedad de Tasación, S.A., Tasalia Sociedad de Tasaciones, S.A., Tasasur Sociedad de Tasaciones, S.A.,
Tasibérica, S.A., Grupo Tasvalor, S.A., Técnicos en Tasación, S.A., Tinsa, Tasaciones Inmobiliarias, S.A. (Tinsa),
UVE Valoraciones, S.A., Valoraciones Mediterráneo, S.A.
Also, the aforementioned policy stipulates that the various subsidiaries abroad must work with appraisal
companies that have recent experience in the local area and with the type of asset under appraisal and that
meet the independence requirements established in the corporate policy. They should verify, 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.
Impairment losses on an asset or disposal group resulting from the write-down of its carrying amount to its fair
value (less costs to sell) and gains or losses on the sale thereof are recognised under “Gains (Losses) on Non-
Current Assets Held for Sale Not Classified as Discontinued Operations” in the consolidated income statement.
Any gains on a non-current asset held for sale resulting from increases in fair value (less costs to sell)
subsequent to impairment increase its carrying amount and are recognised with a credit to the consolidated
income statement up to an amount equal to the impairment losses previously recognised.
Assets and liabilities relating to discontinued operations are presented and measured in accordance with the
criteria indicated for disposal groups. Revenue and expenses arising from these assets and liabilities are
presented net of the related tax effect under “Profit or loss after tax from discontinued operations” in the
consolidated income statement.
j)
Tangible assets
Tangible assets in the consolidated balance sheet includes any buildings, land, furniture, vehicles, computer
hardware and other fixtures owned by the consolidated entities or acquired under finance leases, for their own
use. Tangible assets are classified by use as follows:
i) Property, plant and equipment for own use
Property, plant and equipment for own use -including any 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 own 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).
Amortisation 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.
38
The period depreciation charge is recognised under “Depreciation and Amortisation cost” in the consolidated
income statement and is calculated using the following depreciation rates (based on the average years of
estimated useful life of the various assets):
Buildings for own use
Furniture
Vehicles
Computer hardware
Other
Right of use of lease
Annual
Average Rate
1.5 % - 2 %
10%
28.6%
25%
12%
10%
The consolidated entities assess at the reporting date whether there is any indication that an asset may be
impaired (i.e. its carrying amount exceeds its recoverable amount). If this is the case, the carrying amount of the
asset is reduced to its recoverable amount with a charge to the consolidated income statement and future
depreciation charges are adjusted in proportion to the revised carrying amount and to the new remaining useful
life (if the useful life has to be re-estimated).
Similarly, if there is an indication of a recovery in the value of a previously impaired tangible asset, the
consolidated entities recognise the reversal of the impairment loss recognised in prior periods with a credit to
the consolidated income statement 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 each reporting period with a view to detecting possible significant changes therein. If changes are
detected, the depreciation charges relating to the new useful lives of the assets are adjusted by correcting the
charge to be recognised in the consolidated income statement in future years.
Upkeep and maintenance expenses of tangible assets for own use are charged to the consolidated income
statement for the year in which they are incurred.
ii)
Investment property
“Tangible Assets - Investment Property” reflects the net values of any land, buildings and other structures held
either to earn rentals or for capital appreciation.
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..
iii) Assets leased out under an operating lease
“Tangible Assets - Property, Plant and Equipment - Leased out under an Operating Lease” in the consolidated
balance sheets includes the amount of the assets, other than land and buildings, leased out 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.
39
k) Leases
The main aspects contained in the standard (IFRS 16) adopted by the Group are included below: When the
Group acts as lessee, a right-of-use asset is recognized, representing its right to use the leased asset and the
corresponding lease liability on the date on which the leased asset is available for use by the Group. Each lease
payment is allocated between the liability and the financial expense. The finance expense is expensed over the
term of the lease so as to produce a constant periodic interest rate on the remaining balance of the liability for
each year. The right-of-use asset is amortized over the shorter of the useful life of the asset or the lease term
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 on a present value basis. Lease liabilities include the net present value of the following lease
payments. lease:
•
•
•
•
•
Fixed payments (including inflation-linked payments), less any lease incentives receivable.
Variable lease payments that depend on an index or rate.
Amounts expected to be paid by the lessee for residual value guarantees.
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option.
Lease termination penalty payments, if the lease term reflects the lessee's exercise of that option. Lease
payments are discounted using the interest rate implicit in the lease. Since in certain situations this interest
rate cannot be obtained, the discount rate used in such cases is the lessee's incremental borrowing rate at
the date. For these purposes, the entity has calculated this incremental interest rate by taking as a
reference the quoted debt instruments issued by the Group; in this regard, the Group has estimated
different rate curves depending on the currency and economic environment in which the contracts are
located.
Specifically, in order to construct the incremental interest rate, a methodology has been developed at 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 taken into account:
•
•
Economic and political situation (country risk).
Entity's credit risk.
• Monetary policy.
•
Volume and seniority of the entity's debt instrument issuances.
The incremental interest rate is defined as the interest rate that a lessee would have to pay to borrow, for a
term similar to the lease term 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's entities have a large stock and variety
of financing instruments issued in currencies other than the euro (pound sterling, dollar, etc.) which provide
sufficient information to be able to determine an all in rate (reference rate plus credit spread adjustment at
different maturities and in different currencies). In cases where the lessee entity has its own financing, this has
been used as the starting point for determining the incremental interest rate. On the other hand, for those
Group entities that do not have their own financing, the information from the financing of the consolidated
subgroup to which they belong has been used as the starting point for estimating the entity's curve, analyzing
other factors to evaluate whether it is necessary to make any type of negative or positive adjustment to the
initially estimated credit spread. Right-of-use assets are valued at cost, which includes the following:
•
•
•
•
The amount of the initial valuation of the lease liability.
Any lease payment made on or before the commencement date less any lease incentive Any lease payment
made on or before the commencement date less any lease incentive received.lease received.
Any initial direct costs.
Restoration costs.
40
Payments associated with short-term leases and leases of low value assets are recognized on a straight-line
basis as an expense in income. Short-term leases are leases with a lease term less than or equal to 12 months
(a lease with a purchase option does not constitute a short-term lease).
l)
Intangible assets
“Intangible Assets” are identifiable non-monetary assets (separable from other assets) without physical
substance which arise as a result of a legal transaction or which are developed internally by the consolidated
entities and goodwill other than that arising from acquisition of entities accounted for using the equity method.
Only intangible assets whose cost can be estimated reliably and from which the consolidated entities consider
it probable that future economic benefits will be generated are recognised.
Intangible assets other than goodwill are recognised initially at acquisition or production cost and are
subsequently measured at cost less any accumulated amortisation and/or 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 firsttime
consolidation, is allocated as follows:
•
•
•
If it is attributable to specific assets and liabilities of the companies acquired, by increasing the value of the
assets (or reducing the value of the liabilities) whose fair values were higher (lower) than the carrying
amounts at which they had been recognised in the acquired entities' balance sheets.
If it is attributable to specific intangible assets, by recognising it explicitly in the consolidated balance sheet
provided that the fair value of these assets within twelve months following the date of acquisition can be
measured reliably.
The remaining amount is recognised as goodwill, which is allocated to one or more cash-generating units (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 is only recognised when it has been acquired for consideration and represents, therefore, a payment
made by the acquirer in anticipation of future economic benefits from assets of the acquired entity or business
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 on non financial assets (net) -
Intangible assets” in the consolidated income statement.
An impairment loss recognised for the goodwill is not reversed in a subsequent period
In the event of sale or abandonment of an activity that is part of a CGU, the part of the goodwill assignable to
said activity would be derecognized, taking as a reference its relative value over the total of the CGU in the time
of sale or abandonment. In the event that the distribution by currency of the remaining goodwill is applied, it
will be made based on the relative values of the activity.
ii) Other intangible assets
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
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.
41
Intangible assets with finite useful lives are amortised over those useful lives using methods similar to those
used to depreciate tangible assets. The intangible asset amortisation charge is recognised under “Depreciation
and Amortisation Charge” in the consolidated income statement”.
In both cases the consolidated entities recognise any impairment loss on the carrying amount of these assets
with a charge to Impairment losses on other assets (net) in the consolidated income statement. The criteria
used to recognise the impairment losses on these assets and, where applicable, the reversal of impairment
losses recognised in prior years are similar to those used for tangible assets (See Note 2.i). iii. Group internally
developed computer software).
iii) 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.
Any expenses incurred during the research phase are recognised directly in the consolidated income statement
for the year in which they are incurred and cannot subsequently be included in the carrying amount of the
intangible asset.
m) Other assets and Other liabilities
“Other Assets” in the consolidated balance sheets includes the amount of any 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, are in the process of production, construction or development for such
sale, or are to be consumed in the production process or in the rendering of services. “Inventories” includes
the assets that have been acquired for the purpose of leasing them to third and for which the related
operating lease agreements had not been formalised at the date of the consolidated balance sheets.
Inventories are measured at the lower of cost and net realisable value, which is the amount expected to be
obtained from lease or sale thereof in the ordinary course of business, less the estimated costs of
completion and the estimated costs required for operation.
The amount of any write-down of inventories -such as that due to damage, obsolescence or reduction of
selling price- to net realisable value and all other losses of inventories are recognised as an expense in the
year in which the write-down 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, as the case may be, the balance of all prepayments and accrued income
(excluding accrued interest and financial commissions), the net amount of the difference between pension
plan obligations and the value of the plan assets with a balance in the Group’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.
“Other Liabilities” in the consolidated balance sheets includes the balance of all accrued expenses and deferred
income, excluding accrued interest, and the amount of any other liabilities not included in other consolidated
balance sheet line items.
n) Provisions and contingent assets and liabilities
Provisions are 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, and the consolidated entities expect that an outflow of resources embodying
economic benefits will be required to settle such obligations.
42
Contingent liabilities are 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 present obligations of the consolidated entities when, although
possible, it is not considered probable that an outflow of resources embodying economic benefits will be
required to settle them and their amount cannot be measured with sufficient reliability. The Group will disclose
a contingent liability, unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are 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 events beyond the control of the Group. Any
contingent assets that arise 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.
The Group’s consolidated financial statements include all the material provisions with respect to which it is
considered that it is more likely than not that the obligation will have to be settled. In accordance with current
standards, contingent liabilities are not recognised in the consolidated financial statements, but rather are
disclosed in the notes thereto.
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 21):
•
Provisions for pensions and similar obligations: includes the amount of the provisions made to cover
defined-benefit post-employment benefits, commitments to pre-retirees and similar obligations (see Note
21).
• Other long-term employee compensation: includes other obligations assumed with employees taking early
retirement (see Notes 2.r and 21).
•
•
Provisions for taxes and other legal contingencies includes the amount of the provisions made to cover tax
and legal contingencies and litigation (see Note 21). Among other items, it includes provisions for
restructuring and environmental actions, if any.
Provisions for contingent liabilities and commitments: includes 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
(see Note 21).
• Other provisions: includes the amount of other provisions made by the Group (see Note 21).
The provisions considered necessary pursuant to the foregoing criteria are recognised or released, as
appropriate, with a charge or credit, respectively, to “Provisions (Net)” in the consolidated income statement.
The criteria applied to account for the provisions for pensions and similar obligations are described in Notes 2-r
and 2-s.
o) Court proceedings and/or claims in process
At the end of 2022 and 2021 certain court proceedings and claims were in process against the consolidated
entities arising from the ordinary course of their operations. The Group’s legal advisers and the Bank’s Directors
consider that any economic loss that might ultimately result from these court proceedings and claims has been
adequately provided for (see Note 21) and, therefore, will not have a material effect on these consolidated
financial statements.
43
p) Recognition of income and expenses
The most significant criteria used by the Group to recognise its income and expenses are summarised as
follows:
i)
Interest income, interest expense 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 companies other than subsidiaries, associates or jointly
ventures entities are recognised as income when the 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 which meet the conditions to form part of the initial acquisition cost of the financial instruments
(other than those measured at fair value through profit or loss) are recognised in the income statement
using the effective interest method or at the time the instruments are sold, based on their nature.
•
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-financial 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, information and application fees, are credited to the
consolidated income statement, on a time-proportion basis, over the term of the loan.
q) Financial guarantees
“Financial guarantees” are defined as contracts whereby an entity undertakes to make specific payments on
behalf of a third party if the latter fails to do so, irrespective of the various legal forms they may have, such as
guarantees, insurance policies or credit derivatives.
44
The Group initially recognises 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, as a balancing entry on the
asset side of the consolidated balance sheet, the amount of the fees, commissions and similar interest received
at the inception of the transactions and an account receivable 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-f above).
The provisions made for these transactions are recognised under “Provisions - Provisions for commitments and
guarantees given” on the liability side of the consolidated balance sheet (see Note 21). These provisions are
recognised and reversed with a charge or credit, respectively, to “Provisions or reversal of provisions” in the
consolidated income statement.
If a provision is required for these financial guarantees, the unearned commissions recognised under “Financial
Liabilities at Amortised Cost - Other Financial Liabilities” in the consolidated balance sheet are reclassified to
the appropriate provision
r) Post-employment benefits
Under the collective agreements currently in force, the financial institutions included in the Group and certain
other Spanish and foreign consolidated entities have undertaken to complement the public social security
system benefits accruing to certain employees, and to their beneficiary right holders, for retirement,
permanent disability or death, and other welfare benefits post-employment.
The Group’s post-employment obligations to its employees are deemed to be “defined contribution plans”
when the Group makes pre-determined contributions 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 21).
i) Defined contribution plans
The Group recognises the defined contributions accrued in the year under “Administrative Expenses - Staff
Costs” in the consolidated income statement. At year-end any amount not yet contributed to the external plans
funding the obligations is recognised at its present value under “Provisions - Provision for pensions and other
employment defined benefit obligations” on the liability side of the consolidated balance sheet (see Note 21).
ii) Defined benefit plans
The Group recognises under “Provisions - Provisions for other long term employee benefits” 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 (see Note 21).
"Plan assets” are defined as those that will be used directly to settle the 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 or of the entity to current and former employees, or they are returned to reimburse
employee benefits already paid by the Group.
45
If the Group 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.
Post-employment benefits are recognised as follows:
•
Service cost is recognised in the consolidated income statement and includes the following items::
•
•
•
Current service cost, i.e. the increase in the present value of the obligations resulting from employee
service in the current period, is recognised under “Administrative Expenses - Staff Costs” (see Notes 21
and 39).
Any past service cost, which arises from changes to existing post-employment benefits or from the
introduction of new benefits and includes the cost of curtailments, is recognised under “Provisions or
reversal of provisions” (see Note 21).
Any gain or loss arising from plan settlements is recognised under “Provisions or reversal of
provisions” (see Note 21).
• Net interest on the net defined benefit liability (asset), i.e. the change in the year in the net defined
benefit liability (asset) as a result of the passage of time,
is recognised under “Interest
Expense” (“Interest Income” if it constitutes income) in the consolidated income statement (see Notes
21 and 31).
The remeasurement of the net defined benefit liability (asset) recognised
in equity under “Other
comprehensive income. Items not reclassified to profit or loss. Actuarial gains or (-) losses on defined benefit
pension plans” in the consolidated balance sheet includes:
•
•
•
Actuarial gains and losses generated in the year, arising from the effects of 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).
s) Other long-term benefits and other obligations
Other long-term employee benefits, defined as obligations to pre-retirees -taken to be those employees 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 by widowhood and
invalidity prior to retirement that depend on the seniority of the employee in the entity and other similar
concepts treated for accounting purposes, where applicable, as established above for defined benefit post-
employment plans, except that actuarial gains and losses which are recognised under `Provisions or reversal of
provisions´ in the consolidated income statement (see Note 21).
Certain Spanish Group entities’ obligations for death or disability of current employees until they reach
retirement age are covered by an internal fund with renewable temporary annual coverage and, therefore, no
contributions are made to plans.
t) 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.
46
u)
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 it results from a transaction recognised directly
in equity, in which case the tax effect is also 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 measured at the amount expected to be
payable or recoverable on differences between the carrying amounts of assets and liabilities and their related
tax bases, and any tax loss and tax credit carry forwards that have been recognised. These amounts are
measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is
settled.
“Tax Assets” includes 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 and tax credit carry forwards.
“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.
Deferred tax assets are only recognised for temporary differences to the extent that it is considered probable
that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets
can be utilised, and the deferred tax assets do not arise from the initial recognition (except in a business
combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting
profit. Other deferred tax assets (tax loss and tax credit carry forwards) are only recognised if it is considered
probable that the consolidated entities will have sufficient future taxable profits against which they can be
utilised.
The differences generated by the different accounting and tax qualification of some of the Income and
expenses recognised 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.
v) Residual maturity periods and average interest rates
The analysis of the maturities of the balances of certain items in the consolidated balance sheets as at 31
December 2022 and 2021 and of the average annual interest rates in 2022 and 2021 is provided in Note 44.
w) 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.
The statement presents the various items separately by nature, grouping them into those items which, in
accordance with the applicable accounting standards, will not be reclassified subsequently to profit or loss, and
those items which will be reclassified subsequently to profit or loss since the requirements established by the
corresponding accounting standards are met.
Accordingly, this statement presents:
1. Consolidated profit for the year.
47
2. The net amount of the income and expenses recognised as “Other accumulated overall result” in equity
which won´t be reclassified as profit or loss.
3. The net amount of the income and expenses recognised in consolidated equity which can be reclassified as
profit or loss.
4. The income tax incurred in respect of the items indicated in the letters b and c above, except for the
adjustments in other comprehensive income arising from investments in associates or joint ventures
entities accounted for using the equity method, which are presented net.
5. Total consolidated recognised income and expense, calculated as the sum of a) to d) above, presenting
separately the amount attributable to the Parent and the amount relating to non-controlling interests.
The statement presents items separately by nature, grouping them into those that, in accordance with the
applicable accounting standards, will not be subsequently reclassified to profit and loss and those that will be
subsequently reclassified to profit and loss when the requirements established by the corresponding
accounting standards are met.
x) Consolidated statement of changes in total equity
This statement presents all the changes in consolidated equity, including those arising from changes in
accounting policies and from the correction of errors, if any. 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:
1. 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
due to changes in accounting policies or to the correction of errors, if any.
2.
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.
3. Other changes in equity: includes the remaining changes, if any, recognised in consolidated equity,
including, inter alia, increases and decreases in the Bank's 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.
y) Consolidated statements 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.
• Operating activities: the principal revenue-producing activities of credit institutions and other activities that
are not investing or financing activities.
•
•
Investing activities: the acquisition and disposal of long-term assets and other investments not included in
cash and cash equivalents.
Financing activities: activities that result in changes in the size and composition of the consolidated equity
and liabilities that are not operating activities.
In addition, dividends received and paid by the Group are detailed in Notes 4 and 27, including dividends paid to
minority interests (non-controlling interests).
With regards to the cash flows from interests paid and collected, there are no significant differences with those
registered in the income statement, which is why they are not presented separately in the consolidated
statement of cash flows. Nevertheless, the cash flows from financing activities are presented in Note 17,
regardless of their significance.
48
For the purposes of preparing the consolidated statement of cash flows, “Cash and cash equivalents” were
considered to be short-term, highly liquid investments that are subject to an insignificant risk of changes in
value. Accordingly, the Group considers the following financial assets to be cash and cash equivalents.
•
Net cash balances and net balances with central banks, which are recognised under “Cash and Balances with
Central Banks and other deposits on demand” in the consolidated balance sheet at 31 December 2022 and
2021, details by type and currency as follows:
Type:
Cash
Current accounts
Reciprocal accounts
Other accounts at credit institutions and central banks
Currency:
Euro
Foreign currency
z) Own equity instruments
EUR Thousands
2022
2021
82,148
3,900,413
1,585,659
94,086
16,570,596
1,612,286
1,258,005
6,826,225
688,129
18,965,097
5,960,743
865,482
6,826,225
18,198,959
766,138
18,965,097
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 nonderivative
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.
49
3. Santander Consumer Finance Group
a) Santander Consumer Finance, S.A.
The Bank is the parent of the Santander Consumer Finance Group (see Note 1). For information purposes,
following are the condensed balance sheets, income statements, statements of changes in equity and
statements of cash flows of the Bank for 2022 and 2021:
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
(EUR Thousands)
ASSETS
2022
2021
LIABILITIES AND EQUITY
2022
2021
Cash and balances at central banks
489,246
4,036,549 LIABILITIES
Financial assets held for trading
125,187
5,873 Financial liabilities held for trading
95,224
11,573
387
379 Financial liabilities at amortised cost
36,758,895
34,843,929
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets through other
comprehensive income
2,462,252
2,012,055 Derivatives – hedge accounting
Financial assets at amortised cost
31,833,829 27,017,876 Provisions
Derivatives – hedge accounting
454,166
76,568 Tax liabilities
Changes of the fair value of hedged items
in an interest rate risk hedging portfolio
Investments in subsidiaries, joint ventures
and associates
(171,757)
(5,561) Other liabilities
11,292,945 10,944,440
60,577
89,521
368,899
114,770
103,131
348,264
153,008
140,487
Tangible assets
Intangible assets
Tax assets
Other assets
26,391
118,289
365,721
53,964
20,040 TOTAL LIABILITIES
37,526,124
35,562,154
80,133
239,303 Equity
9,534,480
8,907,406
49,077 Other comprehensive income
(7,338)
9,952
Assets included in disposal groups
classified as held for sale
2,646
2,780
TOTAL ASSETS
47,053,266 44,479,512 TOTAL LIABILITIES AND EQUITY
47,053,266 44,479,512
TOTAL EQUITY
9,527,142
8,917,358
Memorandum items: off balance sheet
items
Loans commitment granted
630,107
660,587
Financial guarantees granted
4,063,980
5,348,250
50
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED INCOME STATEMENTS AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
Interest income
Interest expenses
NET INTEREST INCOME
Dividend income
Income from companies accounted for using the equity method
Commissions income
Commissions expense
Gains or losses on financial instruments not at fair value through profit or loss, net
Gains or losses on financial instruments held for trading, net
Gains or losses from hedge accounting, net
Currency translation differences, net
Gains or losses on derecognition of investments in subsidiaries, joint ventures or associates, net
Other operating income
Other operating expenses
OPERATING INCOME
Administration and general expenses
Depreciation and amortisation cost
Provisions or reversal from provisions, net
Income / (expenses)
2022
2021
693,257
(242,460)
450,797
899,631
—
92,654
(69,900)
5
(208)
(4,735)
(17,742)
—
9,583
(26,856)
1,333,229
(293,014)
(30,737)
(13,690)
606,701
(143,554)
463,147
600,528
—
79,094
(64,255)
19
(172)
(80)
(4,967)
(7,319)
5,255
(24,787)
1,046,463
(241,647)
(28,286)
(17,306)
Impairment charges and reversals from financial assets not at fair value through profit or loss
(100,102)
(142,443)
NET OPERATING PROFIT
Impairment charges or reversals on investments in joint ventures and associates
Impairment charges or reversals on non-financial assets
Gains or losses on assets and liabilities included in disposal groups classified as held for sale from
discontinued operations
PROFIT OR LOSS BEFORE TAX IN RESPECT OF CONTINUING OPERATIONS
Taxation
Gains or losses after tax in respect of continuing operations
PROFIT/(LOSS) AFTER TAX
895,686
—
(8,352)
(2,684)
884,650
(32,857)
851,793
851,793
616,781
—
(806)
(4,553)
611,422
(10,567)
600,855
600,855
51
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED STATEMENTS OF RECOGNISED INCOME AND EXPENSE AS AT 2022 AND 2021
(EUR Thousands)
PROFIT OR LOSS AFTER TAX
OTHER COMPREHENSIVE INCOME
Items not reclassified to profit or loss
Actuarial gains or losses on defined benefit pension plan
Assets included in disposal groups classified as held for sale
Changes in the fair value of equity instruments at fair value through other comprehensive income
Income tax in respect of items not reclassified to profit or loss
Items that may be reclassified to profit or loss
Currency translation differences
Hedging of net investments in joint ventures and associates (effective portion)
Cash flow hedges (effective portion)
Financial assets available-for-sale
Assets included in disposal groups classified as held for sale
Share of other recognised income
Income tax in respect of items that may be reclassified to profit or loss
TOTAL RECOGNISED INCOME AND EXPENSE
2022
2021
851,793
(17,291)
1,333
4,228
—
(593)
(2,302)
(18,624)
—
—
47,023
(73,627)
—
—
7,980
834,502
600,855
28,322
1,519
1,555
—
553
(589)
26,803
—
—
13,071
25,218
—
—
(11,486)
657,499
52
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED STATEMENTS OF TOTAL CHANGES IN EQUITY AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
Capital
Share
premium
Equity
instruments
issued other
than capital
Other equity
instruments
Retained
earnings
Profit/(loss)
after tax
Dividends
paid
Other
comprehensi
ve income
TOTAL
Balance as of 31/12/21
5,638,639
1,139,990
1,200,000
Acquisition effect
—
—
—
Beginning of period balance
(01/01/2022)
Acquisition due to errors
Adjustments due to changes in
accounting policies
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
Total adjusted balance
5,638,639
1,139,990
1,200,000
Total recognised income and
expense
Other changes in equity
Common stock issued (Note 23)
Preferred stock issued (Note 23)
Other equity instruments issued
(Note 24)
Dividends (Note 4)
Transfers between components of
equity
Other increases/(decreases) of
equity (Note 25)
End of period balance 31/12/22
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
818,484
600,855
(490,562)
9,952
8,917,358
500,359
—
—
—
500,359
1,318,843
600,855
(490,562)
9,952
9,417,717
—
—
—
—
—
—
—
—
—
—
1,318,843
600,855
(490,562)
9,952
9,417,717
—
851,793
—
(17,291)
834,502
37,418
(600,855)
(161,641)
—
—
—
—
—
—
—
—
—
—
—
(652,203)
110,293
(600,855)
490,562
(72,875)
—
—
—
—
—
—
—
—
—
(725,078)
—
—
—
(652,203)
—
(72,875)
1,356,261
851,793
(652,203)
(7,339)
9,527,141
Capital
Share
premium
Equity
instruments
issued other
than capital
Other equity
instruments
Retained
earnings
Profit/(loss)
after tax
Dividends
paid
Other
comprehensi
ve income
TOTAL
Balance as of 31/12/20 (*)
5,638,639
1,139,990
1,200,000
Acquisition effect (**)
—
—
—
Beginning of period balance
(01/01/21)
Adjustments due to errors
Adjustments due to changes in
accounting policies
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
Beginning adjusted balance
5,638,639
1,139,990
1,200,000
Total recognised income and
expense
Other changes in equity
Common stock issued (Note 23)
Preferred stock issued (Note 23)
Other equity instruments issued
(Note 24)
Dividends (Note 4)
Transfers between components of
equity
Other increases/(decreases) of
equity (Note 25)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
End of period balance 31/12/21
5,638,639
1,139,990
1,200,000
—
—
—
—
—
—
—
2,098,457
127,908
50,217
—
2,148,674
127,908
—
—
—
—
2,148,674
127,908
—
600,855
—
—
—
—
—
—
—
(18,364)
10,186,630
(6)
50,211
(18,370)
10,236,841
—
—
—
—
(18,370)
10,236,841
28,322
629,177
— (1,330,190)
(127,908)
(490,562)
— (1,948,660)
—
—
—
—
—
—
— (1,385,225)
—
—
—
—
—
—
—
—
—
—
—
—
—
(490,562)
— (1,875,787)
—
—
—
127,908
(127,908)
(72,873)
—
—
—
—
—
—
(72,873)
818,484
600,855
(490,562)
9,952
8,917,358
53
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED STATEMENTS OF CASH FLOWS AS AT 31 DECEMBER 2022 AND 2021
(EUR Thousands)
A. CASH FLOWS FROM OPERATING ACTIVITIES:
Profit or loss after tax
Adjustments made to obtain the cash flows from operating activities
Net change in operating assets
Net change in operating liabilities
B. CASH FLOWS FROM INVESTING ACTIVITIES:
Payments
Proceeds
C. CASH FLOWS FROM FINANCING ACTIVITIES
Payments
Proceeds
E. NET INCREASE/(DECREASE) OF CASH AND CASH EQUIVALENTS (A+B+C+D):
F. Cash and equivalents at beginning of period
G. Cash and equivalents at end of period
b) Acquisitions and sales
2022
2021
(3,336,265)
851,793
(375,033)
(5,224,163)
1,411,138
(85,960)
(87,062)
1,102
(125,078)
(725,078)
600,000
(3,547,303)
4,036,549
489,246
4,273,290
600,855
1,262,603
(1,243,130)
3,652,962
(110,242)
(228,216)
117,974
(1,241,567)
(1,341,567)
100,000
2,921,481
1,115,068
4,036,549
The most significant acquisitions and sales of equity interests in Group companies and other significant corporate
transactions affecting the Group's consolidation scope in 2022 and 2021 were as follows:
b.1) Financial Year 2022
Merger of Santander Consumer Finance, S.A. and Santander Consumer Banque, S.A. (France)
On 22 and 24 February 2022, the members of the Boards of Directors of Santander Consumer Banque, S.A. and
Santander Consumer Finance, S.A. approved the common plan for the merger of Santander Consumer Banque, S.A.
(target company) into Santander Consumer Finance, S.A. (acquiring company).
Therefore, when the merger was registered, with effects on 14 October 2022, Santander Consumer Banque, S.A. was
dissolved without liquidation and all its assets and liabilities were transferred en bloc to Santander Consumer Finance,
S.A., which acquired them by way of universal succession and without interruption. In addition, on that same date,
Santander Consumer Banque, S.A.'s assets and liabilities were automatically assigned to the branch that Santander
Consumer Finance, S.A. had set up in France during the merger process.
In accordance with applicable legislation, the date of the merger was 1 January 2022 for accounting purposes, as the
date as from which the target's operations were deemed to be effected by the acquiring company.
Riemersma Leasing, B,V.
On 15 April 2022, Santander Consumer Finance, S.A., through its branch in the Netherlands, reached an agreement to
acquire 100% of the share capital of Riemersma Leasing, B.V., comprising 45,400 shares with a par value of EUR 1
each. This company’s core business is the provision of operating lease services in the Dutch market through its
platform.
After obtaining the relevant authorisations from the Dutch authorities, the acquisition was completed for a total
amount of EUR 21,308,805 on 9 June 2022.
The acquisition was carried out as follows:
•
Acquisition of the entire ownership interest (66.67%) held by Lathouwers Beheer B.V., consisting of 30,268 shares,
for EUR 14,206,496.
54
•
Acquisition of the entire ownership interest (33.33%) held by ING Corporate Investments Participaties B.V.,
consisting of 15,132 shares, for EUR 7,102,309.
Details of the acquired business are set out below:
Business acquired
Main activity
Acquisition
date
Ownership interest
(voting rights)
acquired
Purchase
consideration (million
euro)
Riemersma Leasing, B.V.
Operating lease services
09/06/2022
100%
21.3
Set out below is an analysis of the net assets acquired:
Loans and advances to customers
Non-current assets
Current assets
Financial liabilities at amortised cost
Non-current and current liabilities
Provisions
Net assets
Agreed dividend (*)
Net assets after dividend
Purchase consideration
Goodwill
Carrying amount
(Million euro)
0.4
63.7
1.2
(49.6)
(2.7)
(2.0)
11.0
(3.6)
7.4
21.3
13.9
(*) Relates to the dividend agreed with the seller before completion of the transaction.
The fair value of the receivables acquired amounts to €0.4 million and does not differ from the gross contractual
amounts. The parent company’s directors consider that there were no indications that they would not be fully collected
at the acquisition date.
Net cash flow on acquisition:
Cash paid
Less: Cash and cash equivalents.
Total
Million
euro
21.3
-
21.3
This company contributed a profit of EUR 2.3 million to the consolidated Group's results at 31 December 2022.
Drive, S.r.l. and Santander Consumer Renting, S.r.l.
On 26 April 2022 and 30 March 2022, respectively, Santander Consumer Bank, S.p.A. set up two companies to engage
in the operating lease activity, Drive, S.r.l. and Santander Consumer Renting, S.r.l., by issuing 1,000,000 shares and
2,000,000 shares, respectively, with a par value of EUR 1 each. Both companies began to do business at the end of the
second quarter of 2022.
In December 2022, both companies increased capital directly under reserves without issuing any shares:
55
•
•
Drive, S.r.l.: capital increase of EUR 4 million.
Santander Consumer Renting, S.r.l.: capital increase of EUR 2 million.
Reorganisation of the Stellantis global agreement
On 10 July 2014, Peugeot, S.A., Banque PSA Finance, S.A. and Santander Consumer Finance, S.A. entered into an initial
agreement (“Original Framework”) to cooperate in the distribution of financial and insurance products in a number of
European countries.
Following the January 2021 merger of Peugeot, S.A. and Fiat Chrysler, the Stellantis Group was formed and became
the successor of Peugeot, S.A., forcing the parties to reassess the terms of the agreement and establish a new
cooperation arrangement. The purpose of the new arrangement (“Framework Agreement”) entered into on 31 March
2022 between Stellantis, N.V., Santander Consumer Finance, S.A. and Banque PSA Finance is to define the terms and
conditions of the new cooperation, which supersedes the “Original Framework”.
The new terms and conditions (“Framework Agreement”) have enhanced the prevailing global cooperation (“Original
Agreement") and Santander Consumer Finance will finance all the Stellantis brand vehicles in seven European
countries: Spain, Belgium, France, Italy, Netherlands, Poland and Portugal, where financing, finance lease and
operating lease products will be offered jointly to end customers for all the Stellantis brands: Abarth, Alfa Romeo,
Chrysler, Citroën, Dodge, DS, Fiat, Fiat Professional, Jeep, Lancia, Maserati, Opel, Peugeot, RAM and Vauxhall.
In exchange, as a result of a process initiated by the Stellantis Group, it is also agreed that Santander Consumer
Finance will no longer finance the activities of Stellantis, N.V. and Banque PSA Finance, S.A. in Germany and the United
Kingdom, specifically at PSA Bank Deutschland GmbH (and its branch in Austria) and PSA UK Finance Limited,
respectively, which will entail the divestment of these subsidiaries in those countries.
The agreement is also subject to the obtainment of the corresponding regulatory and competition authorisations,
among other conditions. It is expected to be closed in the first half of 2023.
MCE Group Bank
In November 2022, Santander Consumer Bank AG reached an agreement to purchase all of the shares in MCE Bank,
GmbH on 31 March 2023.
MCE Bank GmbH is Mitsubishi's captive financial institution in Germany. It has a banking licence and is engaged in
providing financial services, essentially in the automotive industry, and in deposit-taking, its shareholders being
various companies of the Mitsubishi Group. MCE Bank GmbH in turn has the following subsidiaries that are wholly
owned, directly or indirectly:
• MCE Verwaltung GmbH, engaged in managing real estate for the group in Germany.
• Midata Service GmbH, engaged in providing IT services, particularly to dealers.
•
•
AMS Auto Markt am Schieferstein GmbH, engaged in remarketing activities.
TVG-Trappgroup Versicherungsvermittlungs GmbH, engaged in insurance intermediation for retail customers
and dealers.
Also in November 2022, Santander Consumer Bank AG reached an agreement with Emil Frey Automobil Holding
Deutschland GmbH to sell 9.99% of its ownership interest in MCE Bank GmbH following the acquisition described
above.
These agreements have bolstered Santander Consumer Bank AG’s activities in the German market.
The acquisition agreement is subject to the obtainment of the corresponding regulatory authorisations, among other
conditions. The acquisition agreement is expected to be closed during the first quarter of 2023 and the sale agreement
before the end of the first half of 2023.
Vinturas Group
In 2020 and 2021, Santander Consumer Finance, S.A. took part in several capital increases in the Dutch company
Vinturas Holding, B.V. (whose corporate objects include holding shares in companies developing a blockchain logistics
56
platform so as to digitalise the supply chain), having reached a shareholding of 14.75% at 31 December 2021 for a
total amount of EUR 500,000.
In 2022, an impairment loss was recognised for the entire ownership interest.
There were no other material changes to the Group's consolidation scope in 2022.
b.2) Financial Year 2021
PSA Finance Belux, S.A y PSA Financial Services Nederland, B.V.
During the month of August 2021, a corporate reorganization was carried out in the Group through which PSA Financial
Services Spain, E.F.C., S.A. acquired 100% of the stake in PSA Finance Belux, S.A and PSA Financial Services Nederland,
B.V. Prior to the acquisition, both were already controlled entities, 50% owned by Santander Consumer Finance, S.A.
(Belgian Branch) and Banque PSA Finance, and Santander Consumer Finance Benelux, B.V. and Banque PSA Finance,
S.A., respectively. Both purchase operations were carried out at consolidated book values after obtaining the
corresponding authorizations from the European and local authorities.
PSA Finance UK Limited
On 30 July 2021, the Group, through its Spanish subsidiary PSA Financial Services Spain E.F.C., S.A. (divided into a 50%
by equal parts between Santander Consumer Finance, S.A. and Banque PSA Finance, S.A), entered into a sale and
purchase agreement with Santander Consumer (UK) PLC and Banque PSA Finance, S.A. for the acquisition of 100% of
the shares in PSA Finance UK Limited. This company is engaged mainly in auto financing for Peugeot-Citroën and
providing other related services in the United Kingdom.
The above-mentioned purchase transaction was carried out after obtaining the corresponding authorisations from the
European and local authorities.
At the time of the transaction, PSA Finance UK Limited's share capital was fully paid up in the amount of GBP 437,280,
consisting of 437,280 shares with a par value of GBP 1 each. The acquisition was completed as follows:
•
•
Acquisition from Santander Consumer UK PLC of its entire equity interest (50%), comprising 218,640 shares, for
the amount of GBP 153,753,627.79.
Acquisition from Banque PSA Finance, S.A. of its entire equity interest (50%), consisting of 218,640 shares, for
the amount of GBP 153,753,627.79.
Under the sale and purchase agreement, in September 2021 PSA Financial Services Spain E.F.C., S.A. made payment of
the final price adjustment, paying an additional GBP 67,765.66 to each shareholder.
The detail of the acquired business is as follows:
Company acquired
Core business
Acquisition
date
% shareholding
(voting rights)
acquired
Purchase
consideration
(million euro)
PSA Finance UK Limited
Auto financing and other
related services.
30/07/2021
100%
360.1
57
Set out below is an analysis of the net assets of the acquired business:
Loans and advances
Non-current assets
Current assets
Financial liabilities at amortised cost
Non-current and current liabilities
Provisions
Net assets
Purchase consideration:
Carrying amount
(EUR millions)
2,896.0
7.4
984.9
(3,485.6)
(129.6)
(3.1)
360.1
360.1
At the issuance date of these annual accounts, the business combination recognised after studying the allocation of the
price to the net assets acquired.
The fair value of the acquired receivables, mainly of a financial nature, amounted to EUR 2,986 million and matched
the gross contractual amounts. At the acquisition date, the parent company's directors identified no indication that
they would not be collected in full.
Net cash flow on the acquisition:
Cash paid
Less: cash and cash equivalents.
Total
EUR
Million
360.1
(450.0)
(89.9)
At 31 December 2021, this company contributed a profit of EUR 10 million to the consolidated Group’s results. Had the
business combination taken place on 1 January 2021, a profit of approximately EUR 33 million had been contributed at
31 December 2021.
TIM-SCB JV S.p.A.
On 17 February 2020, the Group, through its Italian subsidiary Santander Consumer Bank, S.p.A., entered into a joint
venture agreement with the Italian mobile, telecommunications and Internet company TIM, S.p.A., with stakes of 51%
and 49%, respectively. The main purpose of this joint venture is to finance telecommunication devices and to sell other
financial products. The company was set up on 19 February 2020 subject to European and local authority approval,
which was received on 4 November 2020.
The company had an initial share capital of EUR 2 million, consisting of 2 million shares with a par value of EUR 1 each.
Each partner contributed capital in accordance with its percentage shareholding.
On 29 October 2020, a capital increase of EUR 4 million was agreed to reach a share capital figure of EUR 6 million.
This capital increase was subscribed and paid up by the shareholders according to their percentage shareholdings. The
capital increase was carried out by issuing 4 million shares with a par value of EUR 1 each.
On 4 January 2021, the pending capital increase of EUR 34 million carried out to reach share capital of EUR 40 million
and start up the business. This capital increase was subscribed by the shareholders in line with their percentage
shareholdings. The capital increase was carried out by issuing 34 million new shares with a par value of EUR 1 each.
The company's business began in February 2021.
In October 2021, the company carried out a new capital increase of EUR 15 million in reserves without issuing new
shares.
58
Hyundai Capital Bank Europe, GmbH
On 4 November 2020, Santander Consumer Bank AG, Hyundai Capital Services Inc. and Hyundai Capital Bank Europe,
GmbH entered into an addendum to the original shareholders' agreement in order to open a branch of Hyundai Capital
Bank Europe, GmbH in Italy to engage in auto financing for Hyundai and Kia (end customers and dealers), as well as
other related services, by raising funds from the public via deposits and loans in the Italian market.
After obtaining regulatory approvals, the branch began to operate in October 2021.
Merger of Santander Consumer Finance, S.A. and Santander Consumer Bank, S.A., Santander Consumer Mediación
OBSV, S.L., Banco Santander Consumer Portugal, S.A., and Santander Consumer Finance Benelux, B.V.
Belgium
On 11 December 2020, the sole shareholder of Santander Consumer Bank, S.A. (Santander Consumer Finance, S.A.)
approved the merger of Santander Consumer Bank, S.A. and Santander Consumer Finance, S.A.
On registration of this merger and with effect as from 3 March 2021, Santander Consumer Bank, S.A. was wound up
without liquidation and all its assets and liabilities were transferred en bloc to Santander Consumer Finance, S.A.,
which acquired them by way of universal succession and without interruption. On the same date, the assets and
liabilities of Santander Consumer Bank, S.A. were automatically assigned to the branch that Santander Consumer
Finance, S.A. had set up in Belgium in the framework of the merger.
In accordance with applicable accounting regulations, 1 January 2021 was set for the merger as the date as from which
the target company's operations are deemed to have been carried out by the acquiring company for accounting
purposes.
OBSV
On 18 March 2021, Santander Consumer Finance, S.A. approved the merger of Santander Consumer Mediación
Operador de Banca-Seguros Vinculado, S.L.U. (target company) into Santander Consumer Finance, S.A. (acquiring
company).
Under applicable accounting regulations, 1 January 2021 was set for the merger as the date as from which the target
company's operations are deemed to have been carried out by the acquiring company for accounting purposes.
Portugal
On 18 March 2021, the members of the Boards of Directors of Santander Consumer Finance, S.A. and Banco Santander
Consumer Portugal, S.A. approved the merger of Banco Santander Consumer Portugal, S.A. (target company) into
Santander Consumer Finance, S.A. (acquiring company).
On registration of this merger and with effect as from 28 September 2021, Banco Santander Consumer Portugal, S.A.
was wound up without liquidation and all its assets and liabilities were transferred en bloc to Santander Consumer
Finance, S.A., which acquired them by way of universal succession and without interruption. On the same date, the
assets and liabilities of Banco Santander Consumer Portugal, S.A. were automatically assigned to the branch that
Santander Consumer Finance, S.A. had set up in Portugal in the framework of the merger.
In accordance with applicable accounting regulations, 1 January 2021 was set for the merger as the date as from which
the target company's operations are deemed to have been carried out by the acquiring company for accounting
purposes.
Netherlands
On 20 September 2021, the Board of Directors of Santander Consumer Finance Benelux B.V. approved the merger of
Santander Consumer Finance Benelux B.V. (target company) into Santander Consumer Finance, S.A. (acquiring
company).
59
The merger took place in the context of the corporate reorganisation of the Santander Consumer Finance, S.A. Group’s
business in the Netherlands, which was conducted through its wholly-owned subsidiary, the Dutch financial institution
Santander Consumer Finance Benelux B.V., until 25 November 2021. Since the merger, business has been carried on
through a branch of Santander Consumer Finance, S.A. in the Netherlands, which was opened in parallel to the merger.
In addition, Santander Consumer Finance Benelux B.V. had a branch in Belgium through which it conducted business in
that country. Since the merger, the business has been carried on through the Belgian branch of Santander Consumer
Finance, S.A., which was already operational.
In accordance with applicable legislation, 1 January 2021 was set for the merger as the date as from which the target
company's operations are deemed to have been carried out by the acquiring company for accounting purposes.
Notifications of acquisitions of shareholdings:
The notifications on the acquisition of shareholdings that must be reported, if applicable, in the notes to the financial
statements in accordance with Articles 155 of the Capital Companies Act and Article 125 of Royal Legislative Decree
4/2015, of October 23, which approved the Consolidated Text of the Securities Market Act; if applicable. They are
included in Annex III.
4. The Bank’s profit distribution and earnings per share
a) The Bank’s profit distribution
The distribution of the Bank's net profit for 2022 that the Board of Directors will propose for approval by the
shareholders at the Annual General Meeting and the proposal approved for 2021 by the Bank’s Shareholders at
the Annual General Meeting held on 13 March 2022 is as follows:
Distributable profit:
Balance per the income statement
Appropriation:
To dividends paid
To legal reserve
To voluntary reserve
Total
EUR Thousands
2022
2021
851,793
600,855
652,203
85,179
114,411
851,793
490,562
60,086
50,207
600,855
On 28 April 2022, in view of the Company's liquidity statement, the Board of Directors resolved, to pay an
interim dividend of EUR 351,475 thousand. The dividend was settled on 29 April 2022.
On 28 July 2022, in view of the Company's liquidity statement, the Board of Directors resolved to pay an
interim dividend of EUR 300,728 thousand out of 2022 profits. The dividend was settled on 2 August 2022.
The provisional accounting statement required under article 277 of the Consolidated Text of the Spanish
Corporate Enterprises Act, prepared by the Bank's Directors and reflecting the existence of sufficient funds to
cover the distribution of an interim dividend, was as follows:
Estimated profit before tax
Less:
Estimated income tax
Appropriation to legal reserve
Distributable profit
Interim dividend to be distributed
Gross dividend per share (euros) (*)
EUR Thousands
30/06/2022 31/03/2022
802,973
400,627
(13,199)
(78,977)
351,475
359,322
0.16
(6,977)
(39,365)
—
354,285
0.19
(*) Estimate made based on the number of Bank shares existing at the date of approval of the interim dividend.
60
b) Basic and diluted earnings per share
Basic Earnings Per Share (EPS) is calculated by dividing the net profit for the year attributable to the Parent
adjusted by the after-tax amount of the remuneration of contingently convertible preference shares recognised
in equity (see Note 23) by the weighted average number of the Bank's shares outstanding during the year,
excluding the average number of treasury shares, if any, held in the year.
Accordingly:
Consolidated profit attributable to the parent
Remuneration of contingently convertible preferred
equity (Note 23)
Dilutive effect of changes in profit for the year arising
from potential conversion of ordinary shares
Profit or loss from discontinuing operations (net of
noncontrolling interests)
Profit or loss from continuing operations (net of
noncontrolling interests)
Weighted average number of shares outstanding
Adjusted number of shares
Basic and diluted EPS (Euro)
Of which:
From continued operations
EUR Thousands
2022
2021
1,242,860
1,174,689
(72,875)
1,169,985
(72,873)
1,101,816
—
—
—
—
1,169,985
1,101,816
1,879,546,172 1,879,546,172
1,879,546,172 1,879,546,172
0.5862
0.6225
0.6225
0.5862
5. Remuneration and other benefits of the Bank’s directors and senior management
a) Bylaw-stipulated emoluments and other fees
Certain criteria are established for setting directors' remuneration at the proposal of the Remuneration
Committee. Those who perform executive functions in any of the Santander Group companies do not receive
any remuneration for their Board and committee duties. Independent directors unrelated to the Santander
Group receive remuneration for the performance of their director duties and for each of their committee
positions.
In 2022 the Board of Directors received remuneration amounting to EUR 656 thousand in the form of bylaw-
stipulated emoluments and attendance fees (EUR 516 thousand in 2021), related in full to six external Board
members on 31 December 2022 and 2021, detailed as follows:
Antonio Escámez Torres
Jean Pierre Landau
Benita Ferrero-Waldner
Luis Alberto Salazar-Simpson Bos
José Manuel Robles
Javier Monzón de Cáceres
Andreu Plaza López
EUR Thousands
2022
2021
150
112
82
112
97
103
—
128
95
69
95
82
—
47
61
b) Post-employment and other long-term benefits
The Santander Group's supplementary pension obligations to all active and retired personnel include those
relating to current and former directors of the Bank who perform (or have performed) executive functions in the
Santander Group. Directors who perform such duties in any of the Santander Group companies do not receive
any post-employment or other benefits as remuneration for holding office at Santander Consumer Finance, S.A.
In 2022, the pension payments made to former members of the Bank’s Board of Directors amounted to EUR
775 thousand in 2022 (EUR 914 thousand in 2021) and were made mainly by other Santander Group entities
that do not belong to the Santander Consumer Finance Group.
c) Loans and deposits
The balances corresponding to direct exposures of the Bank and other Group entities at 31 December 2022 and
2021 are presented in Note 46.
All the transactions with the Group were performed on an arm’s-length basis or the related remuneration in
kind was recognised.
d) Senior management
The remuneration received by the Bank’s non-director senior managers (14 and 13 persons in 2022 and 2021,
respectively) amounted to EUR 9,417 thousand in 2022 and EUR 7,169 thousand in 2021 and was paid in full by
other Santander Group entities that do not belong to the Group. Additionally, in 2022 no senior managers have
perceived compensation for non-compete agreements.
The remuneration in kind paid to the Bank’s non-director senior managers totaled approximately EUR 99
thousand in 2022 (EUR 88 thousand at 31 December 2021).
In 2022 contributions amounting to EUR 1,023 thousand (EUR 685 thousand at 31 December 2021) were made
to defined contribution pension plans for the Bank’s non-director senior managers. These contributions were
made by other Santander Group entities that do not belong to the Group. In 2022 and 2021 no payments were
made in this connection.
The principles governing the share options granted to the Bank’s senior managers, excluding Directors, are the
same as those explained in Note 5-c. The Bank's and other Group entities' direct risk exposure to senior
managers who, as of 31 December 2022 and 2021, are not Bank Directors are detailed in Note 46.
All the transactions with the Group were performed on an arm’s-length basis or the related remuneration in
kind was recognised.
e) Termination benefits
The executive Directors and senior executives at Santander Group entities have indefinite-term employment
contracts. Executive Directors or senior executives whose contracts are terminated voluntarily or due to breach
of duties are not entitled to receive any economic compensation. If the contract is terminated for any other
reason, they will be entitled only to the corresponding legally-stipulated termination benefit.
f)
Information on investments held by the directors in other companies and conflicts of interest
None of the members of the Board of Directors has stated that he is involved in a situation of conflict of interest
of those established in article 229 of the Capital Company Law, direct or indirect, that they or persons related to
them may have with the interest of Santander Consumer Finance, S.A.
62
6. Loans and advances to credit institutions
The detail, by type and currency, of “Loans and Advances to Credit Institutions” in the accompanying
consolidated balance sheets as at 31 December 2022 and 2021 is as follows:
Type:
Time deposits
Reverse repurchase agreements
Other accounts
Currency:
Euro
Foreign currency
EUR Thousands
2022
2021
62,135
67,249
260,922
390,306
283,237
107,069
390,306
203,131
268,117
149,975
621,223
436,565
184,658
621,223
At December 31, 2022, the balances held under this heading relate mainly to Santander Consumer Bank A.S.
(Nordics) in the amount of EUR 96,768 thousand (EUR 177,989 thousand at December 31, 2021).
Note 44 contains a detail of the terms to maturity and estimated fair value of these assets at 31 December
2022 and 2021 and fair values in the years then ended.
A significant portion of the loans and advances to credit institutions relates to balances with associates and
Santander Group entities (see Note 46).
At 31 December 2022, the breakdown of the exposure by impairment phase of the assets recognised under
IFRS9 was EUR 392,325 thousand, all of which are registered in phase 1 ( EUR 623,353 thousand in phase 1 ,
in 2021) and of the impairment loss provision was EUR 2,019 thousand, all of which are registered in phase 1
(EUR 2,130 thousand in phase 1, in 2021).
63
7. Debt instruments
The detail, by classification, type and currency, of Debt Instruments in the accompanying consolidated balance
sheets as at 31 December 2022 and 2021 is as follows:
Classification:
Financial assets at fair value through other comprehensive
income
Non-trading financial assets mandatoriliy measured at fair value
through profit or loss
Financial assets at amortised cost
Type:
Spanish sovereign debt
Foreign sovereign debt
Issued by financial institutions
Other fixed income securities
Impairment losses
Currency:
Euro
Foreign currency
Gross total
Less - Impairment losses
EUR Thousands
2022
2021
726,508
1,054,760
1,444
2,593
6,185,061
6,913,013
3,472,396
4,529,749
921,128
5,347,062
141,587
503,362
(126)
6,913,013
1,135,286
2,665,246
244,149
485,467
(399)
4,529,749
6,582,093
331,046
6,913,139
3,962,246
567,902
4,530,148
(126)
6,913,013
(399)
4,529,749
At 31 December 2022 and 2021, the amount regarding the exposure by impairment staging relating to "Debt
securities" as well as the allowance for impairment was classified in its entirety in stage 1.
The balance at 31 December 2022 and 2021 of the "Spanish Government Debt Securities" account in the
foregoing table relates mainly to “other debts issued the Spanish Government” acquired by Santander
Consumer Finance, S.A.
The balance as of December 31, 2022 of the “Foreign Government Debt” accounted in the table above
corresponds mainly to Italian bonds acquired by Santander Consumer Finance, S.A. for EUR 1,157,907
thousand, to Finnish, Belgian and Norwegian Treasury Bonds acquired by the subsidiary Santander Consumer
Bank AS (Norway) for around EUR 43,672 thousand, EUR 72,477 thousand and EUR 70,896 thousand,
respectively, German, Italian, Luxembourg, Belgian and French treasuries acquired by the German subsidiary
Santander Consumer Bank AG for EUR 1,583,068 thousand, EUR 718,290 thousand, EUR 222,574 thousand,
EUR 316,592 thousand and EUR 268,148 thousand respectively, and Italian Treasury Bonds acquired by the
Italian subsidiaries Santander Consumer Bank S.p.A. and Banca PSA Italia S.p.A. for about EUR 448,845
thousand.
The balance at December 31, 2021 of the "Foreign Government Debt" account in the above table corresponds
mainly to Danish, Finnish and Norwegian Treasury Bonds acquired by the subsidiary Santander Consumer Bank
AS (Norway) for EUR 242,235 thousand, EUR 140,246 thousand and EUR 132,665 thousand, respectively,
Italian Treasury Bonds purchased by the Italian subsidiaries Santander Consumer Bank S.p.A. and Banca PSA
Italia S.p.A. for EUR 674,085 thousand, German and French Treasury Bonds purchased by the German
subsidiary Santander Consumer Bank AG for EUR 502,383 thousand and EUR 512,722 thousand respectively.
64
The balance as of December 31, 2022 of the "Debt Securities - Issued by Financial Entities" account in the above
table mainly includes bonds issued by the financial entities Nykredit Realkredit A/S, Nordea Eiendomskreditt
AS, DNB Boligkredit AS, acquired by the subsidiary Santander Consumer Bank A.S. (Norway) for an amount of
141,541 thousand euros; and the line "Other fixed income securities" in the above table mainly includes bonds
issued by KfW Kreditanstalt für Wiederaufbau - German Development Bank acquired by the subsidiary
Santander Consumer Bank AG (Germany) for an amount of EUR 501,031 thousand.
includes mainly bonds
The balance at December 31, 2021 of the "Debt securities - Issued by financial entities" account in the above
table
institutions Nykredit Realkredit A/S, Nordea
Eiendomskreditt AS, DNB Boligkredit AS purchased by the subsidiary Santander Consumer Bank A. S. (Norway)
for an amount of EUR 63,667 thousand; and bonds issued by European Investment Bank acquired by the
subsidiary Santander Consumer Bank AG (Germany) for an amount of EUR 155,274 thousand.
issued by the financial
Note 44 to these consolidated financial statements details the maturity of these financial assets at the end of
2022 and 2021.
8. Equity instruments
The detail of Equity instruments in the accompanying consolidated balance sheets for the year ended in 31
December 2022 and 2021, based on their classification and type is as follows:
Classification:
Financial assets at fair value through other
comprehensive income
Mandatory to VR with results changes
Type:
Spanish companies
Foreign companies
Add - Valuation adjustments
EUR Thousands
2022
2021
14,143
45
14,188
998
13,190
14,188
7,818
22,006
13,806
26
13,832
—
13,832
13,832
8,785
22,617
The changes in "Financial assets at fair value through other comprehensive income - Equity instruments" as of
December 31, 2022 and 2021 in the accompanying consolidated balance sheet is as follows:
Balance at beginning of period
Net additions (disposals)
Valuation adjustments
Currency translation and other differences
Balance at end of period
EUR Thousands
2022
2021
22,591
337
(967)
—
21,961
19,105
208
3,278
—
22,591
65
9. Financial assets and liabilities held for trading
a) Derivatives held for trading
In the following table, the detail of the fair value of the trading derivatives held by the Group as of 31 December
2022 and 2021 is presented, classified according to their inherent risk:
EUR Thousand
2022
2021
Assets
Liabilities
Assets
Liabilities
Inherent rate risk
Foreign exchange rate
463,159
31,505
466,009
22
51,428
48
52,440
5,729
494,664(*)
466,031(*)
51,476(*)
58,169(*)
(*) Of which, on 31 December 2022, EUR 334.747 thousand and EUR 307.105 thousand of asset and liability
balances, respectively, correspond to balances with Santander Group entities (EUR 29.519 thousand and
EUR 35.449 thousand of asset and liability balances, respectively, corresponded to balances with Santander
Group entities on 31 December 2021) -see Note 46.
The table above shows the maximum credit risk exposure of the asset balances.
b) Notional and market value of trading derivatives
Below is a detail of the notional and market value of trading derivatives arranged by the Group, as of December
31, 2022 and 2021, classified according to inherent risks:
Trading derivatives:
Inherent rate risk-
Forward rate agreements
Interest rate swaps
Options and futures and other
Credit risk
Credit Default Swap
Exchange risk
Buy foreign exchange
Currency options
Foreign exchange swaps
Derivatives on securities and commodities (*)
EUR Thousand
2022
2021
Notional
Value
Market Value
Notional
Value
Market Value
—
19,353,328
3,414,249
—
(4,682)
1,832
—
18,878,901
4,050,244
—
(997)
(10)
—
—
—
—
1,797,740
31,489
852,841
(5,680)
19
48,628
—
24,613,964
(6)
—
—
28,633
—
31,006
—
23,812,992
—
(6)
—
(6,693)
66
10. Loans and receivables - Customers
a) Balance composition
The composition of these balances in the consolidated balance sheets, broken down by classification is as
follows:
Financial assets at amortized cost
EUR Thousands
2022
2021
106,499,445
106,499,445
99,559,283
Non-trading financial assets mandatorily measured at fair valor
through profit or loss
387
379
Which:
Value corrections for impairment
(1,956,054)
(2,115,180)
Loans and advances to customers without considering value
corrections for impairment
108,455,886 101,674,842
Note 44 shows the detail of the maturity of financial assets at amortised cost and their average interest rates.
Note 47 shows the Group's total exposure, based on the geographical origin of the issuer. There are no
unspecified term loans to customers for significant amounts.
67
b) Detail
Following is a detail of the loans and advances granted to the Group's customers, which reflect the Group's
exposure to credit risk in its core business, excluding the balance of impairment losses, in accordance with the
type and status of the transactions, the geographical area of their residence and the type of interest rate on the
transactions:
Loan type and status:
Commercial credit
Secured loans
Other terms loans
Finance leases
Receivables on demand and other
Credit card receivables
Impaired assets
Geographical area:
Spain and Portugal
Italy
France
Germany and Austria
Scandinavia
United Kingdom
Other
Interest rate formula:
Fixed rate
Floating rate
Currency:
Euros
Foreign currency
Less:
Impairment changes
TOTAL
EUR Thousands
2022
2021
358,983
20,956,543
56,323,555
25,347,169
1,139,088
2,150,500
2,180,048
108,455,886
14,951,535
10,351,612
15,940,474
42,099,289
17,815,074
2,819,118
4,478,784
108,455,886
2,756,540
19,385,018
49,938,270
24,330,411
993,854
2,237,697
2,033,052
101,674,842
14,602,431
9,079,017
14,733,804
38,774,496
17,583,374
2,973,796
3,927,924
101,674,842
79,507,813
28,948,073
108,455,886
75,697,315
25,977,527
101,674,842
90,628,942
17,826,944
108,455,886
84,127,603
17,547,239
101,674,842
(1,956,054)
106,499,832
(2,115,180)
99,559,662
As of December 31, 2022 and 2021, the Group had EUR 919 and 179 thousand, respectively, of loans and
advances granted to Spanish Public Administrations with a rating of A and with EUR 198,952 and 192,369
thousand, respectively, granted to the Public Sector of other countries (as of December 31, 2022, this amount
included, based on the issuer's rating: 66% AAA, 30% AA, 0% A and 5% BBB and 0% without rating).
Excluding Public Administrations, the amount of loans and advances at December 31, 2022 and 2021 amounts
to EUR 108,256,015 and 101,482,294 thousand.
On 22 May 2014, the Bank subscribed 4,152 mortgage participation certificates issued by Banco Santander,
S.A. for EUR 424,397 thousand, which were recognised under “Loans and Receivables - Loans and Advances to
Customers” in the consolidated balance sheet and are included in the heading “Secured loans” in the table
above. These mortgage participation certificates relate to loans maturing at between 3 and 39 years and earn
annual interest of between 0.20% and 4.52%.
68
On 26 April 2012, the Bank subscribed 3,425 mortgage participation certificates issued by Banco Santander,
S.A. for EUR 416,625 thousand, which were recognised under “Loans and Receivables - Loans and Advances to
Customers” in the consolidated balance sheet and are included in the heading “Secured loans” in the table
above. These mortgage participation certificates relate to loans maturing at between 1 and 38 years and earn
annual interest of between 0.002 % and 4.08%.
The outstanding balance of these mortgage participation certificates amounted to EUR 303.311 thousand on 31
December 2022 (EUR 358.003 thousand as of 31 December 2021).
On December 2022, loans to customers assigned to own or third-party commitments amounted to EUR 0
thousand (31 December 2021: EUR 600,000 thousand) (see Notes 18 and 19), without taking into consideration
for these purposes the consolidated loan portfolio held through various securitisation special-purpose vehicles
included in the Group's scope of consolidation (see Appendix I).
Note 47 contains certain information relating to the restructured/refinanced portfolio, as well as the detail of
loans to customers by activity, net of impairment charges, as of 31 December 2022 and 2021.
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” in
2022 and 2021 is detailed below:
2022
Stage 1
Stage 2
Stage 3
Total
EUR Thousands
Balance at beginning of period
96,229,354
3,412,057
2,033,052
101,674,463
Movements
Transfers:
Transfer to Stage 2 from Stage 1
Transfer to Stage 3 from Stage 1
Transfer to Stage 3 from Stage 2
Transfer to Stage 1 from Stage 2
Transfer to Stage 2 from Stage 3
Transfer to Stage 1 from Stage 3
Net changes in financial assets
Write-offs
Exchange differences and other
Balance at end of period
(2,549,410)
2,549,410
(721,064)
—
—
(514,371)
1,140,767
(1,140,767)
—
28,108
137,777
—
8,935,179
(366,402)
—
(832,506)
102,230,428
—
(32,681)
4,045,023
—
721,064
514,371
—
(137,777)
(28,108)
(153,166)
(749,860)
(19,528)
—
—
—
—
—
—
8,415,611
(749,860)
(884,715)
2,180,048
108,455,499
In addition, the Group has EUR 27,052,044 thousand under loans commitments and financial guarantees
granted, subject to impairment, of which EUR 26,865,725 thousand are under stage 1, EUR 127,214 thousand
under stage 2 and EUR 59,105 thousand under stage 3.
2021
Stage 1
Stage 2
Stage 3
Total
Miles de Euros
Balance at beginning of period
93,457,480
4,153,264
2,026,916
99,637,660
Movements
Transfers:
Transfer to Stage 2 from Stage 1
Transfer to Stage 3 from Stage 1
Transfer to Stage 3 from Stage 2
Transfer to Stage 1 from Stage 2
Transfer to Stage 2 from Stage 3
Transfer to Stage 1 from Stage 3
Net changes in financial assets
Write-offs
Exchange differences and other
Balance at end of period
(3,005,374)
3,005,374
(524,834)
—
—
(723,395)
2,218,259
(2,218,259)
—
212,840
31,241
227,363
—
3,825,219
96,229,354
—
(1,103,925)
—
86,158
—
524,834
723,395
—
(212,840)
(31,241)
(221,303)
(803,588)
26,879
—
—
—
—
—
—
(1,097,865)
(803,588)
3,938,256
3,412,057
2,033,052
101,674,463
69
As of December 31, 2021, the Group had EUR 25,495,968 thousand under loans commitments and financial
guarantees granted, subject to impairment, of which EUR 25,192,422 thousand were under phase 1, EUR
237,580 thousand under phase 2 and EUR 65,966 thousand under phase 3.
c) Impairment losses on loans and advances to customers at amortised cost and at fair value through other
comprehensive income
The changes in the impairment losses on the assets making up the balances of financial assets at amortised
cost and at fair value through other comprehensive income - Loans and advances - Customers:
Balance at beginning of period
Impairment losses through profit or loss
Of which:
Impairment charges to profit or loss
Reversal of impairment charges to profit or loss
Write-off impaired balances against recorded impairment allowance
Currency translation differences and other changes
Balance at end of period
Of which:
By asset class:
Impaired Assets
Other
By calculation method:
Calculated individually
Calculated collectively
EUR Thousands
2022
2021
2,115,180
641,332
2,197,400
677,629
2,334,407
(1,693,075)
(749,860)
(50,598)
1,956,054
2,071,425
(1,393,796)
(803,588)
43,739
2,115,180
1,228,609
727,445
143,520
1,812,534
1,292,581
822,599
114,572
2,000,608
Following is the change in the loan loss provision in 2022 and 2021, broken down by impairment stage of loans
and advances to customers, recognised under "Financial assets at amortised cost" under IFRS 9:
Balance at beginning of period
Transfers:
Transfer to Stage 2 from Stage 1
Transfer to Stage 3 from Stage 1
Transfer to Stage 3 from Stage 2
Transfer to Stage 1 from Stage 2
Transfer to Stage 2 from Stage 3
Transfer to Stage 1 from Stage 3
Net changes in financial assets and changes in
credit risk
Write-offs
Exchange differences and other
Balance at end of period
2022
EUR Thousand
Stage 1
Stage 2
528,498
294,101
Stage 3
1,292,581
Total
2,115,180
(61,758)
(18,621)
—
38,894
—
881
307,013
—
(191,044)
(140,762)
20,220
—
(9,044)
(28,753)
(2,133)
476,717
(10,047)
250,728
—
226,461
400,045
—
(96,059)
(13,340)
207,199
(749,860)
(38,418)
1,228,609
245,255
207,840
209,001
(101,868)
(75,839)
(12,459)
169,402
(749,860)
(50,598)
1,956,054
70
Balance at beginning of period
Transfers:
Transfer to Stage 2 from Stage 1
Transfer to Stage 3 from Stage 1
Transfer to Stage 3 from Stage 2
Transfer to Stage 1 from Stage 2
Transfer to Stage 2 from Stage 3
Transfer to Stage 1 from Stage 3
Net changes in financial assets and changes
in credit risk
Write-offs
Exchange differences and other
Balance at end of period
2021
Stage 1
540,238
(85,952)
(15,809)
—
52,505
—
414
15,556
—
528,498
EUR Thousand
Stage 2
289,195
Stage 3
1,367,967
454,982
—
(195,825)
(250,356)
30,638
—
(50,469)
—
15,936
294,101
—
186,375
528,043
—
(155,726)
(12,683)
175,936
(803,588)
6,257
1,292,581
Total
2,197,400
—
369,030
170,566
332,218
(197,851)
(125,088)
(12,269)
141,023
(803,588)
43,739
2,115,180
As of 31 December 2022 and 2021, the Group had no significant amounts in purchased impaired assets.
In 2022, a reversal amounting to EUR 272 thousand (provision of EUR 75 thousand in 2021) and results for
assets on hold recovered amounting to EUR 189,129 thousand (EUR 183,219 thousand in 2021) have been
recorded in Fixed Income. Additionally, no amount has been recognized in the account for renegotiation or
contractual modification (EUR 575 thousand in 2021). With all of this, the amount recorded under the heading
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss and
net gain or loss from changes in: Financial assets at fair value through other comprehensive income and
financial assets at amortized cost (IFRS 9) and, in Loans and receivables (IAS 39); amounts to EUR 451,931
thousand (EUR 495,060 euros in 2021).
In 2022 and 2021, the Group has sold the following portfolios of written-off loans:
Company
Santander Consumer Bank AG (Germany)
Santander Consumer Bank S.p.A. (Italy)
Santander Consumer Bank AS (Norway)
Santander Consumer Finance Oy (Finland)
Santander Consumer Bank GmbH (Austria)
Financiera El Corte Inglés, E.F.C., S.A. (Spain)
PSA Banque France (France)
PSA Financial Services Spain (Spain)
PSA Bank Deutschland GmbH (Germany)
Santander Consumer Finance, S.A. (Spain)
Of which:
Spanish subsidiary in Portugal (*)
Spanish subsidiary in Netherlands (*)
EUR Thousands
31/12/2022
31/12/2021
Nominal
Value
258,000
16,600
58,700
10,600
41,800
—
40,000
—
21,400
151,300
Nominal
Value
204,400
39,500
81,600
19,700
34,700
88,500
—
—
—
28,800
25,400
7,900
662,700
10,700
18,100
497,200
(*) See note 1.a
The selling price of the portfolios of written-off loans in 2022 was EUR 145,600 thousand (EUR 138,800
thousand in 2021). The profit from these sales profit was registered in “Impairment charges and reversals from
financial assets not at fair value through profit or loss – Financial assets at amortised cost” of the accompanying
consolidated income statement.
71
Home purchase loans granted to those households by the main business in Spain
The quantitative information on the home purchase loans granted to households by the Group's main
businesses in Spain at 31 December 2022 and 2021 is as follows:
31-12-2022
EUR Thousands
31-12-2021
EUR Thousands
Gross amount
Of which:
nonperforming
Gross amount
Of which:
nonperforming
Loans for home purchases
Without mortgage guarantee
With mortgage guarantee
—
1,216,220
1,216,220
—
55,421
55,421
—
1,375,816
1,375,816
—
62,394
62,394
The detail, by loan-to-value ratio, of the home purchase mortgage loans granted by the Group to households in
Spain at 31 December 2022 and 2021 is as follows:
2022
Loan to value ratio
0-40%
40-60%
60-80%
60-100%
Over 100%
TOTAL
299
5
315
9
218
11
169
8
215
22
1,216
55
2021
Loan to value ratio
0-40%
40-60%
60-80%
60-100%
Over 100%
TOTAL
328
5
372
10
243
10
190
10
243
27
1,376
62
EUR millions
Gross amount
Of which :non-
performing
EUR millions
Gross amount
Of which :non-
performing
Securitizations
The balance of Financial assets at amortised cost – Customers in the accompanying consolidated balance
sheets for the years ended 31 December 2022 and 2021 includes the securitised loans transferred to third
parties on which the Group has retained risks, albeit partially, and which therefore, in accordance with current
regulations, cannot be derecognised. The breakdown of the securitised amounts as of 31 December 2022 and
2021 , classified by the subsidiaries which originated the securitised portfolio, and on the basis of whether the
requirements for derecognition had been met (see Note 2-d), is as follows:
72
Derecognised
Maintained in balance sheet
Of which
Santander Consumer Bank AG
Compagnie Generale de Credit Aux Particuliers - Credipar S.A.
Santander Consumer Bank S.p.A.
SANTANDER CONSUMER FINANCE, S.A. (*)
PSA Bank Deutschland GmbH
Banca PSA Italia S.p.a.
Financiera El Corte Inglés, E.F.C., S.A.
Santander Consumer Bank GmbH
PSA FINANCE UK LIMITED
Santander Consumer Finance Oy
PSA Financial Services, Spain, EFC, SA
Other securizations
Total
EUR Thousands
2022
2021
—
—
32,479,951
34,481,056
11,985,025
5,772,604
2,362,857
2,346,467
1,673,300
1,391,508
1,342,660
1,341,132
1,252,528
1,196,631
1,121,800
693,439
13,596,370
6,254,964
2,761,232
2,309,085
1,943,488
1,536,125
1,186,556
432,548
1,458,763
1,218,947
807,022
975,956
32,479,951
34,481,056
The securitised assets relate mainly to vehicle financing and consumer finance.
In 2022 and 2021 the subsidiaries mentioned in the foregoing table securitised receivables amounting to EUR
5,026,660 and 7,569,000 thousand respectively. Since substantially all the risks and rewards associated with
these receivables had not been transferred, they were not derecognised.
Note 19 details the liabilities associated with these securitisation transactions.
Impaired assets
The changes in balance of the financial assets classified as financial assets at amortised cost - Customers and
considered to be impared due to credit risk (non-performing assets) were as follows:
Balance at beginning of year
Additions net of recoveries
Written-off assets
Exchanges differences and other(net)
Balance at end of year
EUR Thousands
2022
2021
2,033,052
916,383
(749,860)
(19,527)
2,180,048
2,026,916
799,684
(803,588)
10,040
2,033,052
The amounts above, once the corresponding provisions are deducted, represent the Group’s best estimate of
the discounted cash flows expected to be recovered from impaired assets.
The non-performing loans ratio is calculated by dividing the financial assets at amortized cost (customers) in
Stage 3 and contingent risks recorded in the consolidated balance sheets at December 31, 2022 of this year by
the total balance of financial assets at amortized cost (customers and contingent risks), the ratio stood at
2.06% at 31 December 2022 and 2021.
73
11. Assets and liabilities in disposal groups classified as held for sale
The balance of “Non-Current Assets Held for Sale” in the accompanying consolidated balance sheets as at 31 December
2022 and 2021 includes the amount of foreclosed assets (recovered by the consolidated entities on non-performing
loans), net of impairment losses, and the assets of subsidiaries classified as discontinued operations, the detail being
as follows:
Enclosed tangible assets
Of which Foreclosed tangible assets in Spain
Other tangible assets held for sale
EUR Thousands
31/12/2022 31/12/2021
8,477
2,568
36,860
45,337
11,692
2,772
38,694
38,694
50,386
As of December 31, 2022, the provisions established for the total assets from foreclosures are 15,487 thousand euros
(16,566 thousand euros in 2021). The allocations made during said years have amounted to 753 and 2,455 thousand
euros respectively and the recoveries made during said years have amounted to 1,405 and 1,910 thousand euros (see
Note 43).
Disclosures on assets received by the businesses in Spain in payment of debts
The detail of the foreclosed assets of the Group's businesses in Spain, based on the purpose of the initially granted
loans or credit facilities giving rise to them, at 31 December 2022 and 2021 is as follows:
31/12/2022
31/12/2021
EUR Thousand
Gross book
value
Impairment
losses
Of which:
impaired
since
acquisition
Carrying
value
Gross book
value
Impairment
losses
Of which:
impaired
since
acquisition
Carrying
value
Property assets arising from financing
granted for construction and property
development
Of which:
Completed buildings
Residential
Other
Land
Developed land
Other
Property assets arising from home
purchase mortgage financing granted to
households
Other property assets received in
payment of debts
Total property assets
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
14,744
(12,364)
(8,973)
2,380
15,335
(12,813)
(9,393)
2,522
1,267
(1,079)
16,011
(13,443)
(1,062)
(10,035)
188
2,568
1,809
17,144
(1,559)
(14,372)
(1,346)
(10,739)
250
2,772
74
12. Investments in joint ventures and associates
The detail, by company, of investments in joint ventures and associates in the accompanying consolidated balance
sheets as at 31 December 2022 and 2021 is as follows:
Associates
Santander Consumer Bank S.A. (Poland)
Santander Consumer Multirent, Sp, z.o.o
Santander Consumer Finanse Sp. z.o.o. (Poland)
Payever Gmbh
PSA Finance Polska Sp. z.o.o.
Santander Consumer Financial Solutions SP. Z.O.O.
PSA Consumer Finance Polska SP. Z.O.O.
Other
Of which, Goodwill:
Payever Gmbh
Santander Consumer Bank S.A. (Poland)
Joint ventures:
Fortune Auto Finance Co. Ltd. (China)
Stellantis Insurance Europe Ltd (Malta)
Stellantis Life Insurance Europe, Ltd (Malta)
Other
EUR Thousands
2022
2021
401,297
24,270
8,393
6,124
1,480
717
550
31
442,862
1,238
97,049
98,287
244,333
30,621
6,681
280
281,915
724,777
394,026
11,723
6,152
1,462
7,473
803
628
32
422,299
1,238
98,891
100,129
222,290
29,939
7,655
231
260,115
682,414
The changes in 2022 and 2021 in investments in joint ventures and associates is as follows:
Balance at beginning of period
Purchases and capital increases
Sales
Dividends paid
Effect of equity method accounting (Note 32)
Changes in the consolidation perimeter
Value impairment adjustments (Note 3.b)
Currency translation differences and other
Balance at end of period
EUR Thousands
2022
2021
682,414
—
—
(3,894)
96,736
—
—
(50,479)
724,777
635,248
—
—
(1,639)
63,790
—
—
(14,985)
682,414
75
Impairment losses
In 2022 and 2021 there is no evidence of significant impairment of the Group's investments.
The financial information on the associates and joint ventures is summarised below:
Data on 31 December
Total assets
Total liabilities
Equity
Group's share of the net assets of associates
Goodwill
Total Group share
Data for the year
Total income
Total profit
Group's share of the profit of associates
EUR million
2022
2021 (*)
8,589
(6,932)
(1,657)
626
99
725
1,585
194
97
9,951
(8,396)
(1,555)
582
100
682
1,442
141
64
(*) This information was obtained from the financial statements of each of the investees, which had not yet been
approved by the respective control bodies at the date of preparation of these consolidated financial statements.
However, the Bank’s Directors consider that they will be approved without any changes.
Other information
A summary of the financial information as of the end of December 2022 on the main associates and joint ventures
(obtained from the information available at the date of preparation of the consolidated financial statements is
detailed below:
Joint ventures
Associates
SANTANDER CONSUMER BANK SPÓLKA
AKCYJNA
FORTUNE AUTO FINANCE CO., LTD
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net attributable profit for the period
Other comprehensive income
Other
Total equity
Total liabilities and equity
Income from ordinary activities
Profit for the period from continuing
operations
Income after taxes from discontinued
operations
185,310
3,449,798
3,635,108
166,033
2,648,217
2,814,250
76,717
(121,811)
865,952
820,858
3,635,108
399,469
76,718
—
175,682
1,863,766
2,039,448
29,237
1,521,546
1,550,783
56,671
12,313
419,681
488,665
2,039,448
257,290
56,670
—
76
13. Tangible assets
The changes in 2022 and 2021 in the balance of “Tangible Assets” in the accompanying consolidated balance sheets as
at 31 December 2022 and 2021 were as follows
EUR Thousands
For own use
Tangible assets
Of which: right pf use operating lease
Other assests
assigned under
operating
lease
Investment
Property
Total
For own use
Other assests
assigned under
operating
lease
Investment
Property
Total
Cost:
Balances as of 31 December 2020
714,926
1,528,269
Additions/Disposals(net)
Additions
Disposals
Net Additions/disposals due to changes in
the consolidation perimeter
Currency Transaction differences
Transfers and other
33,962
54,362
503,616
985,399
(20,400)
(481,783)
4,962
962
10,194
—
2,415
56,773
Balances as of 31 December 2021
765,006
2,091,073
Additions/Disposals (net)
Additions
Disposals
Net Additions/disposals due to changes in
the consolidation perimeter
Currency Transaction differences
Transfers and other
Balances as of 31 December 2022
15,435
24,652
(9,217)
2,419
(3,112)
(40,345)
739,403
736,533
1,129,494
(392,961)
59,504
2,922
388,298
3,278,330
Accumulated Amortization:
Balances as of 31 December 2020
(313,519)
(90,829)
Net Additions/disposals due to changes in
the consolidation perimeter
Charges
Disposals and retirements
Currency translation differences
Transfers and others
Balances as of 31 December 2021
Net Additions/disposals due to changes in
the consolidation perimeter
Charges
Disposals and retirements
Currency translation differences
Transfers and others
—
(74,847)
—
—
8,547
(434)
184,635
(281)
16,612
(274,166)
(363,641)
(180,641)
(1,383)
(71,061)
6,402
1,871
57,298
—
—
139,519
(1,358)
(436,889)
(479,369)
Balances as of 31 December 2022
(370,514)
Impairment losses:
Balances as of 31 December 2020
(527)
(7,124)
Net Additions/disposals due to changes in
the consolidation perimeter
Charges
Releases
Disposals and retirements
Transfers and other
Balances as of 31 December 2021
Net Additions/disposals due to changes in
the consolidation perimeter
Charges
Releases
Disposals and retirements
Transfers and other
Balances as of 31 December 2022
Net Tangible asset:
—
(1,041)
202
795
(464)
(1,035)
—
(968)
18
1,025
29
(931)
—
(89)
3,629
234
(1,073)
(4,423)
—
(1,397)
1,362
805
343
(3,310)
Balances as of 31 December 2021
400,330
1,906,009
Balances as of 31 December 2022
367,958
2,795,651
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,243,195
328,830
537,578
1,039,761
(502,183)
4,962
3,377
15,567
19,905
(4,338)
4,962
777
66,967
79,009
—
2,856,079
429,145
751,968
1,154,146
(402,178)
61,923
(190)
347,953
2,964
8,222
(5,258)
1,048
(2,446)
2,092
4,017,733
432,803
(404,348)
(82,993)
—
—
(74,847)
(45,314)
193,182
(715)
2,560
(325)
(257,554)
(12,439)
(544,282)
(138,511)
(1,383)
(71,061)
145,921
513
(379,591)
291
(42,523)
3,787
1,333
7,854
(849,883)
(167,769)
(7,651)
(527)
—
(1,130)
3,831
1,029
(1,537)
(5,458)
—
(2,365)
1,380
1,830
372
(4,241)
—
(684)
25
576
(424)
(1,034)
(353)
18
416
23
(930)
2,306,339
289,600
3,163,609
264,104
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
328,830
15,567
19,905
(4,338)
4,962
777
79,009
429,145
2,964
8,222
(5,258)
1,048
(2,446)
2,092
432,803
(82,993)
—
(45,314)
2,560
(325)
(12,439)
(138,511)
291
(42,523)
3,787
1,333
7,854
(167,769)
(527)
—
(684)
25
576
(424)
(1,034)
(353)
18
416
23
(930)
289,600
264,104
(1) The period depreciation charges are recognised under “Amortization” in the consolidated income statement.
77
The balance of tangible assets acquired under finance leases amounted to EUR 264,104 thousand as of 31 December
2022 (EUR 289,600 thousand in 2021). It is part of the Group’s policies to arrange for insurance contracts to cover all
possible risks deriving from all elements in its tangible assets.
The Group has incurred EUR 570 thousand in net gains in 2022 (EUR 236 thousand net losses in 2021) from the sale of
tangible assets (Note 42).
The detail, by class of asset, of “Property, Plant and Equipment - For Own Use” in the consolidated balance sheets as at
31 December 2022 and 2021 is as follows:
EUR Thousands
Cost
Accumulated
depreciation
Fund
Carrying
amount
Of which:
Right-of-use for
operating lease
Buildings
Furniture
IT equipment
Other
Balances as of December 2021
Buildings
Furniture
IT equipment
Other
Balances as of 31 December 2022
433,532
201,704
105,408
24,362
765,006
436,328
195,987
88,724
18,364
739,403
(135,611)
(123,092)
(87,945)
(16,993)
(363,641)
(164,762)
(123,586)
(70,748)
(11,418)
(370,514)
—
—
—
(1,035)
(1,035)
—
—
—
(931)
(931)
297,921
78,612
17,463
6,334
400,330
271,566
72,401
17,976
6,015
367,958
287,235
3,158
240
(1,033)
289,600
261,036
4,017
—
(949)
264,104
The net balance of “Property, Plant and Equipment for Own Use” on 31 December 2022 includes approximately EUR
337,732 thousand (EUR 372,090 thousand on 31 December 2021) relating to property, plant and equipment owned by
Group subsidiaries located abroad.
78
14. Goodwill
The detail of “Goodwill” in the accompanying consolidated balance sheets as of 31 December 2022 and 2021, based on
the cash-generating units which originate it, is as follows:
Germany
Austria
Nordics (Scandinavia)
Netherlands (*)
Spain
Total
Miles de Euros
2022
2021
1,297,469
98,074
215,443
13,897
87,543
1,712,426
1,297,469
98,074
223,974
—
87,963
1,707,480
(*) Corresponds to the goodwill originated by the acquisition of Riemersma Leasing, B.V.
(see note 3).
At least once per year (or whenever there is any indication of impairment), the Group reviews goodwill for impairment
(i.e. a potential reduction in its recoverable amount to below its carrying amount). The first step that must be taken in
order to perform this analysis is the identification of the cash-generating units, i.e. the Group's smallest identifiable
groups of assets that generate cash inflows that generate cash inflows that are largely independent of the cash inflows
from 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 from 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.
This book value to be recovered from the cash generating unit is compared with its recoverable amount in order to
determine whether there is impairment.
The Group assesses the existence of any indication that might be considered to be evidence of impairment of the cash-
generating unit by reviewing certain information, including the following: (i) various macroeconomic variables that
might affect its investments (population data, political situation and economic situation including the banking sector-,
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 and 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, if available,
market references (multiples), internal estimates, and appraisals performed by independent 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, and of the price earnings ratios of comparable local
entities.
In addition, the Group performs estimates of the recoverable amounts of certain cash-generating units by calculating
their value in use using discounted cash flows. The main assumptions used in this calculation are: (i) earnings
projections based on the financial budgets approved by the directors which normally cover a three- five year period
(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 to estimate earnings to perpetuity that do not exceed the long-term average growth rate for
the market in which the cash-generating unit in question operates.
79
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 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 on offer 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 that of
the market.
During the 2022 financial year, the Group has not recorded impairment losses.
The main assumptions used to determine the recoverable amount, at the end of 2022 and 2021, of the most significant
cash-generating units that have been valued by discounting cash flows are shown below:
2022
Projected
Period
3 years
5 years
5 years
Discount
rate (*)
9.4%
9.4%
11.0%
Nominal
perpetuity
growth rate
2.3%
2.3%
2.5%
Austria
Germany
Nordics (Scandinavia)
(*) Post-tax discount rate used for consistency with earnings projection estimates
2021
Projected
Period
3 years
5 years
5 years
Discount
rate (*)
8.3%
8.3%
9.9%
Nominal
perpetuity
growth rate
1.8%
1.8%
2.0%
Austria
Germany
Nordics (Scandinavia)
(*) Post-tax discount rate used for consistency with earnings projection estimates
The variations reflected in the hypotheses used in the 2022 financial year are mainly a consequence of the current
macroeconomic scenario, as well as the growing level of inflation and the difficulties in the supply chains, which have
caused a rapid increase in the reference interest rates of the central banks in the main countries where the Group's
CGUs are located.
Given the degree of uncertainty of the main hypotheses mentioned above on which the recoverable amount of the
cash-generating units is based, the Group performs a sensitivity analysis that has consisted of adjusting the discount
rate by +/- 50 basis points, adjusting +/-50 basis points the growth rate in perpetuity and reduce 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 book value and have been considered by the Group as reasonably possible in a stable
economic environment and in which no They contemplate non-recurring events that are unrelated to the business
operations of the cash-generating units.
80
The movement that has occurred in the balance of this heading of the accompanying consolidated balance sheets as of
December 31, 2022 and 2021, during the years 2022 and 2021, has been as follows:
Balance at beginning of period
Acquisitions
Additions
Impairment value (Note 41)
Currency translation differences and other
Balance at end of period
EUR Thousands
2022
2021
1,707,480
13,897
—
—
(8,951)
1,712,426
1,709,913
—
—
—
(2,433)
1,707,480
Santander Consumer Finance Group has goodwill generated by cash-generating units located in countries with
currencies other than the euro (mainly in Nordics) and consequently generate exchange differences when converting to
euros, at the closing exchange rate, the amount of such goodwill expressed in foreign currency. Thus, during the
financial year 2022 there has been a decrease due to exchange differences and other concepts amounting to 8,951
thousand euros (decrease of 2,433 million euros in 2021), which, in accordance with current regulations, have been
recorded charged to the heading 'Other accumulated comprehensive income - Items that can be reclassified in results -
Currency conversion of net worth, through the attached consolidated statement of recognized income and expenses.
15. Other intangible assets
The detail of “Other Intangible Assets” in the accompanying consolidated balance sheets as of 31 December 2022 and
2021 is as follows:
With finite useful lives
Client portfolio
IT developments
Other
Estimated
useful life
EUR Thousand
2022
2021
2 years
3 years
23,349
360,170
1,996
385,515
26,828
327,055
2,150
356,033
The changes in 2022 and 2021 in “Other Intangible Assets” in the accompanying consolidated balance sheets were as
follows:
Balance at beginning of period
Net additions
Amortization charges
Impairment losses (Note 41)
Balance at year-end
(1)
EUR Thousand
2022
2021
356,033
158,831
(117,702)
(11,647)
385,515
314,444
169,304
(116,053)
(11,662)
356,033
(1) The amortisation charges for the period are recognised under "Amortisation" in the
accompanying consolidated income statement.
Most of the additions in 2022 and 2021 relate to the implementation of management and accounting software at
certain Group companies, mainly in Germany, Spain, and Norway . Additionally, there are additions amounting to
EUR 26,724 thousand corresponding to the customer portfolio of Allane SE (entity acquired during 2021, see Note
3).
81
In 2022 the Group has derecognised intangible asset elements that have generated losses due to obsolescence for
EUR 11,647 thousand (EUR 11,662 thousand in 2021) recognised under “Impairment charges and reversals from
financial assets not at fair value through profit or loss” in the consolidated financial statements (see Note 41).
16. Other assets and other liabilities
The detail of “Other Assets” and “Other Liabilities” in the accompanying consolidated balance sheets as at 31
December 2022 and 2021 is as follows:
Inventories
Prepaid expenses
Accrued expenses
Transactions in transit
Other
EUR Thousand
Assets
Liabilities
2022
2021
2022
2021
8,880
200,307
—
3,894
772,083
985,164
3,777
178,822
—
8,179
521,688
712,466
—
—
967,856
76,225
830,749
1,874,830
—
—
867,763
47,675
927,449
1,842,887
17. Deposits - Central Banks and Deposits – Credit institutions
The balance of “Financial Liabilities at Amortised Cost - Deposits from Central Banks” in the accompanying
consolidated balance sheets as of 31 December 2022 and 2021, of EUR 17,900,641 thousand and EUR 19,997,499
thousand respectively, corresponds mainly to term deposits of the Group entities, including the balances of the long-
term conditional financing from the European Central Bank TLTRO (Targeted Longer-Term Refinancing Operation).
As of December 31, 2022, the balance of conditional long-term financing from the European Central Bank TLTRO
(Targeted Longer-Term Refinancing Operation) amounted to EUR 18,160,112 thousand, all belonging to TILTRO III.
As of December 31, 2022, the income recognized in the consolidated profit and loss account corresponding to TLTRO III
amounts to 83,202 thousand euros (184,139 thousand euros as of December 31, 2021).
The detail, by type and currency, of the balance of “Financial Liabilities at Amortised Cost - Deposits from Credit
Institutions” in the accompanying consolidated balance sheets as of 31 December 2022 and 2021 is as follows:
Type:
Deposits on demand
Term deposits
Reverse repurchase agreements
Subordinated deposits
Currency
Euro
Foreign currency
EUR Thousands
2022
2021
273,895
10,890,128
—
456,179
11,620,202
185,566
10,965,116
174,363
455,224
11,780,269
11,552,343
67,859
11,620,202
11,684,171
96,098
11,780,269
A significant portion of these deposits from credit institutions on 31 December 2022 and 2021 relate to transactions
performed with Santander Group entities (see Note 46).
82
Note 44 contains a detail of the terms to maturity and estimated fair value of these financial liabilities at amortised
cost on 31 December 2022 and 2021.
On 31 December 2022 and 2022, the consolidated entities had unused credit facilities amounting to EUR 368.650
thousand and 544,964 thousand, respectively.
The detail of the balance of subordinated liabilities on 31 December 2022 and 2021 based on the currency in which the
issue is denominated is as follows:
EUR Thousands
2022
2021
Currency of issue
Euros
Balance at end of
period
2022
456,179
2021
455,224
456,179
455,224
Outstanding
amount
(millions)
431,000
Annual interest
rate
(31/12/2022)
%
2.34
Outstanding
amount
(millions)
570,500
Annual interest
rate
(31/12/2021)
%
2.04
The list of subordinated liabilities denominated in euro on 31 December 2022 and 2021, set out by company, is as
follows:
2022
Company
EUR Thousands
Counterparty
Santander Consumer Finance S.A.
200,000 Banco Santander, S.A.
Santander Consumer Finance S.A.
200,000 Banco Santander, S.A.
Banca PSA Italia S.p.a.
11,000 Banque PSA France
PSA Financial Services Spain EFC SA
20,000 Banque PSA France
Date
Early
cancellation
Maturity date
(2)
(2)
(2)
(2)
06/06/2029
08/05/2029
22/11/2029
19/12/2027
Add - Valuation adjustments
Total
(1) It cannot be canceled early.
(2) It can be canceled early
25,179
456,179
2021
Company
EUR Thousands
Counterparty
Santander Consumer Finance S.A.
200,000 Banco Santander, S.A.
Santander Consumer Finance S.A.
200,000 Banco Santander, S.A.
Santander Consumer Holding GmbH
11,000 Banque PSA France
Santander Consumer Holding GmbH
22,500 Banque PSA France
Banca PSA Italia S.p.a.
20,000 Banque PSA France
Date
Early
cancellation
Maturity date
(2)
(2)
(2)
(2)
(2)
06/06/2029
08/05/2029
18/12/2028
24/10/2029
19/12/2027
Add- Valuation adjustments
Total
(1) It cannot be canceled early.
(2) It can be canceled early
1,724
455,224
83
The movement that has occurred in the balance of this heading of the consolidated balance sheets as of December 31,
2022 and 2021 is as follows:
Balance at beginning of period
Additions
Amortizations(*)
Santander Consumer Holding GmbH
Net additions/disposals due to changes in the consolidation perimeter
Currency translation and other
Balance at end of period
EUR Thousands
2022
2021
455,224
—
—
—
—
955
456,179
1,372,018
—
(800,000)
(800,000)
(117,000)
206
455,224
(*) During the 2022 financial year there have been no amortizations (the balance related to amortizations in the 2021
financial year amounted to 800,000 thousand euros). The interest paid as remuneration for these issues is 10,627 thousand
euros (13,361 thousand euros in 2021). The balance related to amortizations and interest paid are included in the cash flow
from financing activities.
18. Deposits - Customers
The detail, by type, geographical area and currency, of “Customer Deposits” in the accompanying consolidated balance
sheets as of 31 December 2022 and 2021 is as follows:
Type:
On demand-
Current accounts
Savings accounts
Other deposits on demand
Term deposits
Fixed-term and other deposits
Subordinated liabilities
Geographical area:
Spain and Portugal
Germany
Italy
France
Scandinavia
Austria
Other
By currency:
Euros
Foreign currency
EUR Thousands
2022
2021
20,183,923
12,490,865
1,453
19,365,490
12,320,358
1,129
8,510,920
140,066
41,327,227
7,261,195
140,307
39,088,479
2,070,991
25,201,401
1,357,795
3,387,033
7,217,679
2,060,958
31,370
41,327,227
1,633,728
23,518,888
1,290,210
3,467,646
7,340,655
1,789,291
48,061
39,088,479
34,106,738
7,220,489
41,327,227
31,740,455
7,348,024
39,088,479
84
As of December 31, 2021 in the above table, the “Impositions and other term deposits” account included individual
mortgage bonds issued by the Bank on July 20, 2007 for a nominal amount of 150,000 thousand euros that matured
on 20 July 2022 and that were guaranteed by mortgages registered in favor of the Bank (see Notes 10 and 19). These
bonds were subscribed by Santander Investment Bolsa, Sociedad de Valores, S.A., which assigned them, in turn, to the
Fondo de Titulización de Activos, Independent Mortgage Bond Securitization Program. The annual interest rate of these
bonds was 5.135% and they matured on July 20, 2022. There were no early repayment options for the Bank or the
holder, except for those legally established assumptions.
Likewise, on December 31, 2022, said heading includes guarantees received for an amount of EUR 141,255 thousand
(EUR 192,424 thousand as of December 31, 2021) and other installment debits for an amount of EUR 18,625 thousand
(EUR 20,239 thousand as of December 31, 2021).
Note 44 contains details of the terms to maturity and estimated fair value of these financial liabilities at amortised cost
on 31 December 2022 and 2021 and of the related average annual interest rates in the years then ended.
19. Debt securities issued
The detail, by type, of “Debt securities in issue” in the accompanying consolidated balance sheets as of 31 December
2022 and 2021 is as follows:
.
Bonds and debentures outstanding
Mortgage-backed bonds
Notes and other securities
Subordinated
EUR Thousands
2022
2021
31,242,461
—
6,695,321
917,978
38,855,760
34,756,330
450,012
5,142,670
303,219
40,652,231
Bonds and debentures outstanding
The balance of “Bonds and Debentures Outstanding” in the foregoing table includes, inter alia, the outstanding balance
of the bonds and debentures issued by Group subsidiaries – PSA Banque France, S.A. (France), Santander Consumer
Bank AG (Germany) and Santander Consumer Bank AS (Norway) – amounting to EUR 6,112 million as of 31 December
2022 (EUR 7,844 million in 2021), and the balance, at that date, of the financing obtained by the Group in the
securitisation transactions carried out by the Group's subsidiaries, amounting to 12,584 million euros (12,891 million
euros at December 31, 2021).
The Bank’s Shareholders Meeting, held on March 3, 2022, agreed to authorize the Bank's Board of Directors to issue
multi-currency fixed-income securities up to an amount of EUR 45 billion. In turn, the Board of Directors, at its meeting
held on April 28, 2022, delegated these powers to the Bank's Executive Committee. The Board of Directors, at its
meeting held on May 19, 2022, resolved to issue a Euro Medium Term Note Program, replacing the one described
above, for a maximum nominal outstanding amount not exceeding EUR 25 billion. This program was listed on the Irish
Stock Exchange on June 16, 2022.
As of December 31, 2022, the outstanding balance of these notes amounted to 12,942,874 thousand euros
(13,126,683 thousand euros as of December 31, 2021), maturing between May 30, 2023 and 12 May 2032. The
annual interest rate of these financial liabilities amounts between 0% and 4.110% (0% and 1.356% as of December
31, 2021).
Mortgage-backed bonds
On 31 December 2022, the balance of “Mortgage-Backed Bonds” in the foregoing table includes the amount of the
mortgage-backed bonds issued by the Bank on 6 May 2019. These bonds, which are listed on the Spanish AIAF fixed-
income market, are secured by mortgages registered in the Bank’s favour (see Note 9), have a principal amount of EUR
450,000 thousand and mature on 6 May 2022. The annual interest rate on these liabilities is 0.00% and there are no
early redemption options on these bonds for the Bank or for the holders, except in the legally stipulated circumstances.
85
Notes and other securities
The balance of the "Promissory notes and effects" account in the above table corresponds to issues made by the Bank,
admitted to trading, which have accrued an average annual interest of 0.19% in fiscal year 2022 (-0.367% in fiscal year
2021), According to the following detail:
•
At the meeting held on 20 October 2022, the Bank's Executive Committee resolved to issue a Notes
Programme, replacing the previous, with a maximum principal amount outstanding that may not exceed EUR
5,000 million. These notes, with a unit nominal value of EUR 100,000, have maturities ranging from a
minimum of 3 business days to a maximum of 731 calendar days (2 years and 1 day). This programme was
registered in the Official Registers of the Spanish National Securities Market Commission (CNMV) on 15
November 2022.
The balance of the promissory notes listed on the AIAF market amounted to 523,300 thousand euros as of December
31, 2022 (82,200 thousand euros as of December 31, 2021).
•
At the meeting held on 19 May 2022, the Bank’s Executive Committee resolved to launch a Euro Commercial
Paper programme with a maximum principal amount outstanding that may not exceed EUR 10,000 million.
The maturities of this commercial paper range from a minimum of 1 day to a maximum of 364 days. The
programme was registered in the Irish Stock Exchange on 16 June 2022.
The outstanding balance of this commercial paper recognised in these consolidated financial statements amounted to
EUR 4,408,500 thousand on 31 December 2022 (EUR 4,320,000 thousand as of 31 December, 2021).
Additionally, on 31 December 2022 Santander Consumer Bank AG maintained issues in promissory notes and
marketable securities amounting to EUR 835,000 thousand and PSA Banque France EUR 980,000 thousand (EUR
605,000 thousand and EUR 129,000 thousand, respectively as of December 31, 2022).
Subordinated marketable securities
In the scope of said programme, three subordinated notes whose outstanding balance amounts to EUR 900,000
thousand and whose average maturity date and average annual interest rate are 1 April 2031 and 2.157% each.
Other information
As of 31 December 2022 and 2021, none of these issues are convertible into Bank shares or granted privileges or rights
which, in certain circumstances, make them convertible into shares.
Note 44 contains a detail of the terms to maturity and estimated fair value of these financial liabilities at amortised
cost on 31 December 2022 and 2021 and of the related average annual interest rates in the years then ended.
86
Information on issues, repurchases and redemption of debt securities
Below is a detail, as of December 31, 2022 and 2021, of the outstanding balance of the debt securities issued by the
Bank or by any other entity of the Group, on said dates, taking into account the market in which they are traded, in each
case. Likewise, a detail of the movement that has occurred in this balance during the years 2022 and 2021 is shown:
EUR Thousands
2022
Santander Consumer Finance
Bonds and debentures in
circulation
Mortgage-backed bonds
Total Bonds and debentures in
circulation
Notes and other securities
Subordinated securities
Total
Outstanding
Balance at
01/01/22
34,756,330
450,012
35,206,342
5,142,670
303,219
40,652,231
Perimeter
Issues
Repurchases or
Redemptions
Exchange Rate
and Other
Adjustments (*)
Outstanding
Balance on
31/12/22
—
—
—
—
—
—
5,330,095
(8,589,994)
(253,970)
31,242,461
—
(450,000)
(12)
—
5,330,095
(9,039,994)
(253,982)
31,242,461
7,331,200
(5,720,600)
(57,949)
6,695,321
600,000
—
14,759
917,978
13,261,295
(14,760,594)
(297,172)
38,855,760
EUR Thousands
2021
Santander Consumer Finance
Bonds and debentures in
circulation
Outstanding
Balance at
01/01/21
Perimeter
Issues
Repurchases or
Redemptions
Exchange Rate
and Other
Adjustments (*)
Outstanding
Balance on
31/12/21
31,143,866
1,168,433
11,010,477
(8,575,706)
9,260
34,756,330
Mortgage-backed bonds
450,048
—
—
—
(36)
450,012
Total Bonds and debentures in
circulation
Notes and other securities
Subordinated securities
31,593,914
1,168,433
11,010,477
(8,575,706)
9,224
35,206,342
4,770,259
202,175
—
—
5,391,200
(5,022,400)
100,000
—
3,611
1,044
5,142,670
303,219
Total
36,566,348
1,168,433
16,501,677
(13,598,106)
13,879
40,652,231
Other issues guaranteed by the Group
As of December 31, 2022 and 2021, the Group guarantees certain debt securities issued by Group companies.
Information required Royal Decree 716/2009
Article 21 of Royal Decree 716/2009, of April 24, establishes that entities issuing mortgage backed assets or mortgage
bonds will keep a special accounting record of the mortgage loans and credits that serve as collateral for said issues, of
the replacement assets that back them and the derivative financial instruments linked to each issuance. Said special
accounting record must also indicate whether or not the mortgage loans and credits are eligible in accordance with
article 3 of the aforementioned Royal Decree 716/2009. The Bank of Spain will determine the essential data of the
aforementioned registry that must be included in the annual accounts of the issuing entity, having defined various
statements of public information on the mortgage market in Bank of Spain Circular 4/2017.
Mortgage-backed bonds
The mortgage-backed bonds issued by the Bank were securities the principal and interest of which were specifically
secured by mortgages, there being no need for registration in the Property Register, without prejudice to the issuer's
unlimited liability. The total amount of the mortgage backed bond issued have matured during 2022.
87
The mortgage-backed bonds included the holder’s financial claim on the issuer, secured as indicated in the preceding
paragraph, and may have been enforced to claim payment from the issuer after maturity. The holders of these
securities had the status of special preferential creditors vis-à-vis all other creditors (established in Article 1923,3 of
the Spanish Civil Code) in relation to all the mortgage loans and credits registered in the issuer's favour and, where
appropriate, in relation to the cash flows generated by the derivative financial instruments associated with the issues.
In the event of insolvency, the holders of mortgage-backed bonds enjoyed the special privilege established in Article
90, 1.1 of Insolvency Law 22/2003, of 9 July. Without prejudice to the foregoing, in accordance with Article 84, 2.7 of
the Insolvency Law, during the insolvency proceedings, the payments relating to the repayment of the principal and
interest of the bonds issued and outstanding at the date of the insolvency filing were settled up to the amount of the
income received by the insolvent party from the mortgage loans and credits and, where appropriate, from the
replacement assets backing the bonds and from the cash flows generated by the financial instruments associated with
the issues (Final Provision 19 of the Insolvency Law).
If, due to a timing mismatch, the income received by the insolvent party were to be insufficient to meet the payments
described in the preceding paragraph, the insolvency managers would have settled them by realising the replacement
assets set aside to cover the issue and, if this was not sufficient, they would have obtained financing to meet the
mandated payments to the holders of the mortgage-backed bonds, and the finance provider have subrogated to the
position of the bond-holders.
In the event that the measure indicated in Article 155 of the Insolvency Law were to be adopted, the payments to all
holders of the mortgage-backed bonds issued would have been made on a pro-rata basis, irrespective of the issue
dates of the bonds..
Mortgage-backed bond issuers had an early redemption option solely for the purpose of complying with the limits on
the volume of outstanding mortgage-backed bonds stipulated by mortgage market regulations.
None of the mortgage-backed bonds issued by the Group entities had replacement assets assigned to them.
Annex VI contains the additional information required by the Bank of Spain in relation to article 21 of Royal Decree
716/2009, of April 24, which establishes that the issuing entities of mortgage-backed bonds or mortgage bonds will
keep an accounting record of the mortgage loans and credits that serve as collateral for these issues, of the
replacement assets that back them and of the derivative financial instruments linked to each issue.
20. Other financial liabilities
The detail of “Other Financial Liabilities” in the accompanying consolidated balance sheets as of 31 December 2022
and 2021 is as follows:
Declared dividends payable
Trade payables
Tax collection accounts
Other financial liabilities (*)
EUR Thousands
2022
—
180,029
25,934
1,167,437
1,373,400
2021
637,093
171,519
25,213
917,728
1,751,553
(*) At 31 December 2022, the balance included EUR 3,718 thousand relating to balances payable on consolidation for
tax purposes to Banco Santander, S.A., (EUR 1,861 thousand as of 31 December 2021).
Note 44 contains a detail of the terms to maturity and estimated fair value of these financial liabilities on 31 December
2022 and 2021.
88
Lease liabilities
The cash outflow of leases in 2022 was EUR 37,017 thousand (EUR 36,762 thousand in 2021).
The analysis of the maturities of lease liabilities as of 31 December 2022 and 2021 is shown below:
Maturity Analysis – Discounted payments
Within 1 year
Between 1 year and 3 years
Between 3 years and 5 years
More than 5 years
EUR Thousands
2022
2021
45,351
93,687
43,577
75,522
54,615
74,101
60,547
94,960
Recognised lease liabilities as of December 31
258,137
284,223
No significant variable payments not included in the valuation of lease liabilities have been made during 2022 and
2021.
Disclosures on the average period of payment to suppliers. Additional Provision Three “Disclosure obligation” provided
for in Law 15/2010, of 5 July
Additional Provision Three of Law 15/2010, of 5 July, amending Law 3/2004, of 29 December, on combating late
payment in commercial transactions, amended by Final Provision Two of Law 31/2014, of 3 December, establishes the
obligation for companies to expressly disclose their average periods of payment to suppliers in the notes to their
financial statements, and stipulates that the Spanish Accounting and Audit Institute (“ICAC”) shall indicate, by way of a
resolution, such adaptations as may be required, in accordance with the provisions of this Law, in order for companies
not covered by Article 2,1 of Organic Law 2/2012, of 27 April, on Budgetary Stability and Financial Sustainability to
correctly apply the methodology for calculating the average period of payment to suppliers established by the Ministry
of Finance and Public Administration. This disclosure obligation is also applicable to the consolidated financial
statements of such companies as prepare them, although solely in respect of the fully consolidated companies located
in Spain.
The aforementioned ICAC Resolution (Resolution of 29 January 2016 on the disclosures to be included in notes to
financial statements on the average period of payment to suppliers in commercial transactions), which was published
in the Spanish Official State Gazette on 4 February 2016, implements, inter alia, the methodology that must be applied
to calculate the average period of payment to suppliers. Therefore, this methodology was applied by the Bank for the
purpose of preparing the disclosures included in this connection in these consolidated financial statements.
In order to ensure a proper understanding of the disclosures contained in this Note, as provided for in the
aforementioned applicable legislation, it should be noted that “suppliers” are considered to be only those suppliers of
goods and services to the Group's Spanish companies for which the related expense is recognised, mainly, under
“Administrative Expenses – Other Administrative Expenses” in the consolidated income statement; this Note does not
include, therefore, any information on payments in financial transactions constituting the Group's object and core
activity or on payments to any non-current asset suppliers, which in any case were made in accordance with the
periods established in the corresponding agreements and in current legislation.
Also, it should be noted that, in accordance with the provisions of the aforementioned ICAC Resolution, only
transactions for goods or services received for which payment has accrued since the entry into force of Law 31/2014
were taken into consideration and that, given the nature of the services that the Group's consolidated Spanish entities
receive, for the purpose of preparing this information “period of payment (days)” was deemed to be the period
between the date of receipt of the invoices and the payment date.
89
The information for 2022 and 2021 required under the aforementioned legislation, in the format required by the ICAC
Resolution mentioned above for the Spanish consolidated Group companies in these consolidated financial statements,
is as follows:
Average period of payment to suppliers
Ratio of transactions settled
Ratio of transactions not yet settled
Total payments made
Total payments outstanding
2022
Days
2021
Days
20.82
20.80
21.26
EUR Thousands
349,897
15.09
14.91
20.10
EUR Thousands
312,822
12,410
11,049
It should be noted that although under Law 3/2014, of 29 December, the maximum period for payment to suppliers is
60 days, Law 11/2013, of 26 July, established a maximum payment period of 30 days, extendable by agreement
between the parties to a maximum of 60 days.
The average period and the ratios of transactions settled and transactions not yet settled shown in the table above
were calculated on the basis of the definitions and methodology established in the aforementioned ICAC Resolution of
29 January 2016.
Additionally, in accordance with Law 18/2022 of September 28, listed commercial companies must report in the
average payment period to suppliers, additionally, the monetary volume and number of invoices paid in a period less
than the maximum established in the delinquency regulations and the percentage that it represents over the total
number of invoices and over the total monetary payments to its suppliers.
Paid Invoices
Invoices paid in a period less than the maximum
over the total number of invoices paid
Total payments made
Invoices paid in a period less than the maximum
on the total amount of invoices paid
EUR Thousands
2022
39,693
98.97%
1,330,871
96.71%
Suppliers, for the exclusive purpose of providing the information provided for in this Resolution, are considered to be
commercial creditors for debts with suppliers of goods or services.
“Average period of payment to suppliers” is understood to be the period that elapses from the delivery of the goods or
the provision of services by the supplier and the material payment of the operation.
90
21. Provisions
The detail of “Provisions” in the accompanying consolidated balance sheets as of 31 December 2022 and 2021 is as
follows:
Provision for pensions and other employment defined benefit obligations
Provisions for other long-term employee benefits
Provisions for taxes and other legal contingencies
Provisions for commitments and guarantees given
Other provisions
EUR Thousands
2022
2021
414,385
31,488
10,089
28,010
126,903
610,875
598,456
44,442
9,576
39,403
134,033
825,910
The changes in 2022 and 2021 in the balances of these items in the accompanying consolidated balance sheets were
as follows:
2022
Pensions and
similar
obligations
Other long
term
employee
benefits
Taxes and
other legal
contingencies
Contingent
liabilities and
commitments
Total
Other
provisions
(****)
Balances at beginning of period
Net inclusion (exclusion) of
Entities in (from) the Group
Additions/(Reversals) charged (credited) to
income:
Interest expense (Note 31)
Other Interest
Staff costs (Note 39)
Net additions to provisions (amounts used)
(*) (***)
Changes in value recognised in equity
Payments to retired employees and pre-
retirees with a charge to internal
provisions (**)
Insurance premiums paid, return premiums
received and payments to external funds
Amounts used
Transfers, exchange differences and other
changes
Balances at end of year
598,456
—
17,850
8,105
—
11,999
(2,254)
616,306
44,442
—
9,576
—
39,403
134,033
825,910
—
—
—
(2,447)
12,939
(11,332)
25,449
575
—
1,313
(4,335)
41,995
—
—
—
—
—
—
—
—
—
12,939
22,515
(11,332)
28,071
25,449
159,482
(177,950)
—
(15,232)
(10,193)
(2,935)
—
—
—
—
—
—
(13,106)
(5,804)
(314)
680
(201,921)
414,385
(10,507)
31,488
(12,426)
10,089
—
—
—
—
(61)
(61)
28,010
42,459
8,680
—
13,312
20,467
868,369
(177,950)
(25,425)
(2,935)
—
—
—
(47,964)
(61,070)
15,385
9,886
(32,579)
126,903
(257,494)
610,875
(***) This amount is recognised with a charge to “Provisions or reversal of provisions” in the consolidated income statement.
(****) Includes provisions allocated by the various group companies as a result of their normal operations.
91
71,780
7,395
—
13,932
50,453
966,663
(46,673)
(29,065)
(1,238)
(81,598)
17,821
(140,753)
825,910
2021
Pensions and
similar
obligations
Other long
term
employee
benefits
Taxes and
other legal
contingencies
Contingent
liabilities and
commitments
Other
provisions
(****)
Total
636,531
—
52,500
—
22,878
—
33,396
—
146,923
2,655
892,228
2,655
20,618
7,120
—
13,261
237
657,149
4,216
4,676
5,485
36,785
275
—
671
—
—
—
—
—
—
—
—
—
3,270
56,716
4,676
27,554
5,485
38,881
36,785
186,363
Balances at beginning of period
Net inclusion (exclusion) of
Entities in (from) the Group
Additions/(Reversals) charged (credited) to
income:
Interest expense (Note 31)
Other Interest
Staff costs (Note 39)
Net additions to provisions (amounts used)
(*) (***)
Changes in value recognised in equity
(46,673)
—
Payments to retired employees and pre-
retirees with a charge to internal
provisions (**)
Insurance premiums paid, return premiums
received and payments to external funds
Amounts used
Transfers, exchange differences and other
changes
Balances at end of year
(17,410)
(11,655)
(1,238)
—
6,628
(58,693)
598,456
—
—
(619)
(12,274)
44,442
—
—
—
(23,440)
5,462
(17,978)
9,576
—
—
—
—
522
522
39,403
—
—
—
(58,158)
5,828
(52,330)
134,033
(*) The balance of net allocations (applications) to provisions for pensions and other post-employment defined benefit obligations, as
well as long-term employee remuneration, related in the years 2022 and 2021 is broken down as follows:
EUR Thousands
2022
2021
Expenses / (revenue)
Post-employment benefits - Spanish entities:
Past service cost
Pre-retirements
Curtailments/settlements
Return premiums received on defined contribution pension plans
Other long-term benefits - Spanish entities:
Recognised actuarial losses/(gains) (obligations and assets)
Pre-retirements
Past service cost
Curtailments/settlements
Foreign entities:
Recognised actuarial losses/(gains) (obligations and assets)
Past service cost
Pre-retirements
Curtailments/settlements
—
—
—
—
—
—
(1,370)
—
45
—
(1,325)
(4,804)
—
—
(459)
(5,263)
(6,588)
The detail of “Payments to Retired Employees and Pre-retirees with a Charge to Internal Provisions” is as follows:
9
—
—
—
9
(246)
4,984
1
(133)
4,606
155
283
(15)
(1,108)
(685)
3,930
(**)
92
EUR Thousands
2022
2021
2,024
9,712
13,689
25,425
2,081
10,813
16,171
29,065
Post-employment benefits - Spanish entities
Other long-term benefits - Spanish entities
Foreign entities
a) Provisions for pensions and similar obligations
i. Post-employment benefits: defined contribution plans - Spanish entities
The Group guarantees the following defined contribution post-employment commitments:
Santander Consumer Finance, S.A.
Obligations guaranteed from the date of effective retirement to employees who took pre-retirement after May
1996, which were externalised through an insurance policy taken out with a non-related entity (Generali
España, Sociedad Anónima de Seguros y Reaseguros). Currently, pre-retired collective is already collecting the
retirement compensation.
No premiums were paid to the insurance company in 2022 and 2021 (see Note 2-r).
Spanish entities
The Collective Agreement of the Spanish entities of the Group, signed on February 2, 2012, has established a
complementary social welfare system for active personnel who meet certain conditions, which has been
implemented through a defined contribution Pension Plan. Said Pension Plan covers the following
contingencies: retirement, death, and permanent disability (total, absolute or severe disability). The Spanish
entities of the Group have assumed the commitment to make an annual contribution of 900 euros for each of
the participants. In 2022, contributions were made for this concept for an amount of 716 thousand euros
(439 thousand euros in 2021), which have been recorded under the heading "Administration expenses -
Personnel expenses" of the attached consolidated profit and loss account (see Note 39).
Additionally, some of the branches abroad have defined contribution plans (mainly Santander Consumer
Holland, Santander Consumer Benelux). The contributions made to these plans, in the years 2022 and 2021
have amounted to 3,034 and 1,015 thousand euros, respectively, which are recorded under the heading
"Administrative expenses - Personnel expenses" of the consolidated profit and loss account for both years
(See Note 39.)
ii. Post-employment benefits: Defined benefit plans – Spanish entities
The Group guarantees as a defined benefit the following commitments of the Spanish entities:
Santander Consumer Finance, S.A.
•
•
Pension obligations under the Banking Collective Agreement to current employees, employees who took
pre-retirement (including future insurance premiums) and retired employees, in addition to other
commitments acquired with early-retired personnel and liabilities prior to May 1996, which are covered in
full by an internal provision.
Life insurance guaranteed to retired employees from Banco de Fomento, S.A., covered by an insurance
policy (that does not meet the requirements for externalisation) taken out with a non-related entity (AXA
España, S.A.). The present value of future premiums is covered by an internal provision.
93
•
Company store and coal and gas benefits guaranteed to retired employees by virtue of the Internal
Regulations of Banking Company Stores, which are covered by an internal provision.
Additionally, to the post-employment defined benefit commitments of the foreign branches acquired during
2021 (Greece and Belgium), the post-employment defined benefit commitments of the branch in France
incorporated in 2022.
The present value of the commitments assumed by the consolidated Spanish entities in terms of post-
employment benefits, as of December 31, 2022 and 2021, are shown below:
Present value of the obligations: To current employees
Active employees
Vested obligations to retired employees and pre-retirees
Other obligations to retired employees
Provisions - Pensions and similar obligations for defined
contribution plans (Note 2-r)
EUR Thousands
2022
2021
—
21,006
—
—
22,351
9
21,006
22,360
The present value of the obligations was determined by independent actuaries using the following actuarial
techniques:
Valuation method: projected unit credit method, which considers each period of service as giving rise to an
additional unit of benefit entitlement and measures each unit separately.
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
2022
2021
3.70%
PERM/F-2020
2%
N/A
2%
0.70%
PERM/F-2020
1%
N/A
1%
The discount rate used for the update of cash-flows was determined by reference to high-quality corporate
bonds.
The estimated retirement age of each employee is the earliest at which the employee is entitled to retire or the
agreed-upon age, as appropriate.
94
The amounts recognised in the consolidated income statements in relation to these pension obligations in 2022 and
2021 were as follows:
Current service cost (Notes 2-r and 39)
Net interest cost (Note 31)
Expected return on assets
Extraordinary charges
Past service cost
Amount recognised in the year
EUR Thousands
2021
2022
Expenses/ (Income)
374
369
—
—
—
743
333
124
—
—
9
466
Additionally, during financial year 2022, the heading "Other accumulated comprehensive income - Actuarial gains or
losses in defined benefit pension plans" has recorded a net credit amounting to 1,945 thousand euros with respect to
defined benefit commitments (net charge of 1,126 thousand euros in 2021).
The movement that has occurred, during the years 2022 and 2021, in the present value of the obligation accrued for
defined benefit commitments of the Spanish entities of the Group, has been as follows:
Present value of the obligations at beginning of year
Increase or decrease by acquisition
Current service cost (Notes 39 and 2-r)
Interest cost (Note 31)
Pre-retirements
Effect of curtailments/settlements
Benefits paid
Past service cost
Actuarial (gains)/losses (Note 2-r) (*)
Other
Present value of the obligations at end of year
EUR Thousands
2022
2021
27,513
206
374
429
—
—
(2,429)
—
(5,097)
10
21,006
25,019
5,563
333
164
—
—
(2,643)
9
(932)
—
27,513
•
(*) In 2022 includes demographic actuarial losses of 185 thousand euros and actuarial gains for financial assumptions of
5,283 thousand euros (demographic actuarial gains of 177 thousand euros and financial actuarial losses of 755 thousand
euros in post-employment plans in financial year 2021).
95
The movement that has occurred, during the years 2022 and 2021, in the current value of the assets affected
by defined benefit commitments of the Spanish entities of the Group, has been as follows:
Present value of the obligations at beginning of year
6,341
5,871
EUR Thousands
2022
2021
Increase or decrease by acquisition
Expected return on plan assets
Actuarial (gains)/losses
Contributions
Benefits paid
Other
Fair value of plan assets at the end of year
iii. Other long term benefits - Spanish entities
—
59
(874)
408
(405)
(105)
5,424
—
40
658
439
(595)
(72)
6,341
The long-term benefit obligations (other than post-employment benefit obligations) guaranteed by the Spanish
subsidiaries of the Group and classified as defined benefit plans are as follows:
Santander Consumer Finance, S.A.
• Obligations to pre-retirees until the effective date of retirement, which are covered by an internal provision.
•
Life insurance guaranteed to pre-retirees, by virtue of the Group’s Collective Agreement, taken out with a
non-related entity (Generali España, Sociedad Anónima de Seguros y Reaseguros). The present value of
future premiums is covered by an internal provision.
• Health insurance guaranteed to pre-retirees by virtue of the Group’s Collective Agreement. The present
value of future premiums is covered by an internal provision.
•
Long-service bonus guaranteed to current employees, by virtue of the Group’s Collective Agreement, which
is covered by an internal provision.
Santander Consumer Renting, S.L.
• Obligations to pre-retirees until the effective date of retirement, which are covered by an internal provision.
•
Life insurance guaranteed to pre-retirees, by virtue of the Group’s Collective Agreement, taken out with a
non-related entity (Generali España, Sociedad Anónima de Seguros y Reaseguros). The present value of
future premiums is covered by an internal provision.
• Health insurance guaranteed to pre-retirees by virtue of the Group’s Collective Agreement. The present
value of future premiums is covered by an internal provision.
Transolver Finance, E.F.C.
• Obligations to pre-retirees until the effective date of retirement, which are covered by an internal provision.
•
Life insurance guaranteed to pre-retirees, by virtue of the Group’s Collective Agreement, taken out with a
non-related entity (Generali España, Sociedad Anónima de Seguros y Reaseguros). The present value of
future premiums is covered by an internal provision.
• Health insurance guaranteed to pre-retirees by virtue of the Group’s Collective Agreement. The present
value of future premiums is covered by an internal provision.
96
Santander Consumer Finance Global Services, S.L.
• Obligations to pre retirees until the effective date of retirement which are covered by an internal provision.
The present value of the aforementioned obligations on 31 December 2022 and 2021 was as follows:
Present value of the obligations:
To pre-retirees
Long-service
Provisions - Pensions and similar obligations for
defined contribution plans (Note 2-r)
EUR Thousands
2022
2021
20,921
145
31,527
130
21,066
31,657
The present value of the obligations was determined by qualified independent actuaries using the following
actuarial techniques:
Valuation method: projected unit credit method.
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
2022
2021
3.70%
PERM/F-2020
2%
N/A
0,70%-0,55%
PERM/F-2020
1%
N/A
Annual social security pension increase rate
2%
1%
The discount rate used for the flows was determined by reference to high-quality corporate bonds.
The estimated retirement age of each employee is the earliest at which the employee is entitled to retire or the
agreed-upon age, as appropriate.
97
The amounts recognised in the consolidated income statements for 2022 and 2021 in relation to these long-
term obligations were as follows:
Current service cost (Note 39)
Net interest cost (Note 31)
Expected return on insurance contracts linked to pensions
Extraordinary charges
Actuarial (gains)/losses recognised in the year
Past service cost
Pre-retirement cost
Curtailments/settlements
Amount recognised in the year
EUR Thousands
2021
2022
Expenses/(Income)
26
472
—
(1,370)
45
—
—
(827)
9
171
—
(246)
—
4,984
(132)
4,786
The changes in 2022 and 2021 in the present value of the accrued obligations for other long-term benefits at
the Spanish entities in the Group were as follows:
Present value of the obligations at beginning of year
Current service cost (Note 39)
Interest cost (Note 31)
Pre-retirement cost
Effect of curtailments/settlements
Benefits paid
Past service cost
Actuarial (gains)/losses recognised in the year
Other
Present value of the obligations at end of year
EUR Thousands
2022
2021
31,657
26
472
—
—
(9,712)
45
(1,370)
(52)
21,066
37,684
9
171
4,984
(132)
(10,813)
—
(246)
—
31,657
The table that follows shows the estimated benefits payable at 31 December 2021 for the next ten years:
2023
2024
2025
2026
2027
2028 a 2032
EUR Thousands
9,996
7,691
6,870
4,828
3,284
8,980
98
iv. Post-employment benefits – Other foreign subsidiaries
Some of the consolidated foreign entities have acquired obligations with their employees similar to
postemployment benefits and other long-term defined benefits. The technical assumptions applied by these
companies (discount rates, mortality tables, cumulative annual CPI growth, etc.) in their actuarial estimates of
these obligations are consistent with the economic and social conditions prevailing in the countries in which
they are located.
The detail of the present value of these obligations on 31 December 2022 and 2021, net of the assets that meet
the requirements established in the applicable legislation in order to qualify as plan assets, is as follows:
Present value of the obligations
502,741
734,375
EUR Thousands
2022
2021
Of which:
Germany
Nordics (Scandinavia)
Less-
Plan assets
Provisions - Provisions for pensions and similar obligations (Note
2-r)
Of which:
Internal pension funds
Net plan assets
404,410
27,576
583,341
40,000
(111,764)
(168,735)
390,977
565,640
406,972
(15,995)
588,520
(22,880)
The detail of assets classes in the plan as a percentage of the total amount of plan assets of foreign subsidiaries
is as follows:
Equity instruments
Debt instruments
Investment property
Other
2022
2021
9%
47%
18%
26%
6%
53%
17%
24%
The most significant actuarial assumptions used by the Group companies located in Germany to estimate the
value of their commitments are detailed below:
Annual technical interest rate
Mortality tables
I.P.C. cumulative annual
Annual growth rate of
Annual Social Security pension review
rate
Estimated retirement age
2022
2021
4.21%
Heubeck RT
2018
1.90%
2.75%
1.45%
Heubeck RT
2018
1.90%
2.75%
2.00%
2.00%
60/63(M/F)
60/63(M/F)
99
The discount rate used for the flows was determined by reference to high-quality corporate bonds.
The amounts recognised in the consolidated income statements for 2022 and 2021 in relation to these defined
benefit pension obligations of the Germany's foreign entities were as follows:
Current service cost (Note 39)
Net interest cost (Note 31)
Extraordinary charges
Actuarial gains or losses recognised
Past service cost
Early retirements
Effect of curtailments/settlements
Expected return on plan assets (Note 31)
Other interests
Amount recognised in the year
EUR Thousands
2022
2021
Expenses / (Income)
9,486
8,271
—
(2,530)
—
—
(134)
(417)
—
14,676
10,042
7,069
—
—
—
—
(1,131)
(336)
—
15,644
The movement that has occurred, during the years 2022 and 2021, in the current value of the obligation
accrued for defined benefit commitments of foreign entities in Germany:
Present value of the obligations at beginning of year
Net inclusion/(exclusion) of entities in/(from) the Group
Current service cost (Note 39)
Interest cost
Effect of curtailments/settlements
Benefits paid
Actuarial (gains)/losses (*)
Exchange differences, transfers and other items
Present value of the obligations at end of year
EUR Thousands
2022
2021
583,341
—
9,486
7,854
(134)
(13,720)
(182,821)
404
404,410
612,226
121
10,042
6,733
(1,131)
(13,469)
(30,972)
(209)
583,341
(*) In 2022 includes demographic losses amounting to 15,024 thousand euros (demographic actuarial gains
amounting to 9,040 thousand euros in 2021) and financial actuarial gains amounting to 197,845 thousand euros
(financial actuarial losses amounting to 21,932 thousand euros in financial year 2021).
100
The movement that has occurred, during the years 2022 and 2021, in the fair value of the plan assets
associated with these defined benefit commitments of the foreign entities dependent on Germany, has been as
follows:
Fair value of plan assets at beginning of year
Expected return on plan assets
Actuarial gains/(losses) arising in the year
Contributions
Benefits paid
Fair value of plan assets at end of year
EUR Thousands
2021
2022
30,057
417
(9,199)
786
(1,096)
20,965
30,754
336
(748)
503
(788)
30,057
The table below shows the estimated benefits payable at 31 December 2022 for the next ten years:
2023
2024
2025
2026
2027
2028 a 2032
EUR Thousands
15,114
16,112
17,705
18,995
20,106
117,244
The amounts recognised in the consolidated income statements for 2022 and 2021 in relation to these defined
benefit pension obligations of the Group's foreign entities (without Germany) were as follows:
Current service cost (Note 39)
Net interest cost (*)
Extraordinary endowments
Actuarial Gains/losses during period
Past service cost
Effect of curtailments/settlements
Expected return on plan assets (*)
Other interests
Amount recognised in the year
EUR (Thousands)
2022
2021
Expenses / (Income)
3,426
2,357
—
(2,274)
—
(325)
(2,371)
—
813
3,032
2,023
—
283
—
(259)
(1,656)
—
3,423
(*) These items are recorded for their net amount (15 thousand euros in the 2022 financial year and 367 thousand
euros in the 2021 financial year) under the heading "Interest expenses" of the consolidated profit and loss accounts
for said years (see Note 31).
101
The changes in the present value of the accrued obligation from defined benefit pension plans in 2022 and
2021 of all foreign entities, excluding Germany, as well as in the plan assets is as follows:
EUR (Thousands)
2022
2021
Present value of the obligations at beginning of year
151,034
112,823
Net inclusion/(exclusion) of entities in/(from) the Group
—
49,843
Current service cost (Note 39)
Interest cost
Pre-retirements
Effect of curtailments/settlements
Benefits paid
Benefits paid in case of liquidation
Past service cost
Actuarial (gains)/losses (*)
Exchange differences, transfers and other items
Present value of the obligations at end of year
3,426
2,357
—
(325)
(5,111)
(2,040)
—
3,032
2,023
—
(259)
(8,143)
—
—
(48,281)
(7,335)
(2,730)
98,330
(950)
151,034
(*) In 2022 includes demographic actuarial gains amounting to 5,665 thousand euros (demographic
actuarial losses amounting to 572 thousand euros in 2021) and financial actuarial gains amounting to
42,616 thousand euros (financial actuarial losses amounting to 7,907 thousand euros in fiscal year
2021).
The changes in 2022 and 2021 in the fair value of the plan assets associated with these defined benefit
obligations of the Group's foreign subsidiaries (without Germany) were as follows:
Fair value of plan assets at beginning of year
Net additions / (disposals) of Group's companies
Expected return on plan assets
Actuarial gains/(losses) arising in the year
Contributions
Benefits paid
Exchange differences and other items
Fair value of plan assets at end of year
EUR Thousands
2021
2022
138,679
—
2,371
(43,372)
2,383
(4,045)
(5,217)
90,799
67,967
64,695
1,656
7,180
3,617
(4,653)
(1,783)
138,679
The table below shows the estimated benefits payable at 31 December 2022 for the next ten years:
2023
2024
2025
2026
2027
2028 a 2032
EUR Thousands
3,668
3,719
3,183
3,818
4,768
28,100
102
Additionally, during the year 2022, the heading "Other accumulated comprehensive income - Items that will
not be reclassified in results - Actuarial gains or losses in defined benefit pension plans" has recorded a net
credit amounting to 119,532 thousand euros with respect to the defined benefit commitments of the foreign
companies of the Group (net payment amounting to 54,659 thousand euros in 2021).
Also, some foreign entities have defined contribution plans (mainly Santander Consumer Bank, S.p.A.,
Santander Consumer Bank AS, Santander Consumer Bank, AG, Compagnie Generale de Credit Aux Par). The
contributions made to these plans, in the years 2022 and 2021 have amounted to 37,868 and 37,214 thousand
euros, respectively, which are recorded under the heading "Administrative expenses - Personnel expenses" of
the consolidated profit and loss account for both years (See Note 39).
v. Sensitivity analysis
Variations in the main assumptions used in the valuation may affect the calculation of the commitments. As of
December 31, 2022, if the discount interest rate had decreased or increased by 50 b.p., there would have been
an increase or decrease in the present value of post-employment obligations of +6.61% and -7.40%,
respectively.
vi. Funded state of pension plans in current and four preceding fiscal years
The situation of the defined benefit obligations at the end of 2022 and the four preceding years was as follows:
1. Spanish entities
Post-employment benefits
Other long-term employee benefits
2022
2021
2020
2019
2018
2022
2021
2020
2019
2018
EUR Thousands
Present value of the obligation:
To current employees
—
—
—
—
—
—
—
21,006
27,512
25,023
25,601
26,149
20,921
31,527
—
—
—
—
—
—
Vested obligations to retired
employees
To pre-retirees
Long-service bonuses and other
obligations
Other
—
—
—
—
—
—
Fair value of plan assets
5,424
6,341
—
—
—
—
—
—
—
—
113
120
—
—
—
—
31,527
33,766
42,253
145
130
130
141
138
—
—
—
—
—
—
—
—
—
—
Provisions for pensions
15,582
21,171
25,023
25,714
26,269
21,066
31,657
31,657
33,907
42,391
Of which:
Internal pension funds
16,997
22,360
Net pension assets
(1,415)
(1,188)
—
—
—
—
—
—
21,066
—
—
—
—
—
—
—
—
—
2. Foreign entities-
2022
2021
2020
2019
2018
EUR Thousands
Present value of the obligation
502,741
734,375
725,050
687,925
576,177
Fair value of plan assets
Provisions for pensions
Of which:
Internal pension funds
Net pension assets
(111,764)
(168,735)
(98,721)
(95,192)
(79,034)
390,977
565,640
626,329
592,733
497,143
406,972
(15,995)
588,520
(22,880)
—
—
—
—
—
—
103
b) Other provisions
The balance of the headings "Procedural issues and pending tax litigation" and "Remaining provisions" in the
"Provisions" chapter, which, among other concepts, include those corresponding to provisions for restructuring and
tax and legal litigation, have been estimated by applying calculation procedures prudent and consistent with the
conditions of uncertainty inherent in the obligations they cover, the definitive moment of the outflow of resources
being determined that incorporate economic benefits for the Group for each one of the obligations in some cases
without a fixed term for cancellation, and in other cases, depending on ongoing litigation.
The balance of this item by geographic area is as follows:
Recognised in Spanish companies
Recognised in other European Union companies
EUR Thousands
2021
2022
55,779
81,212
136,991
56,113
87,496
143,609
The breakdown of the balance as of December 31, 2022 and 2021 is shown below, under the headings "Provisions
for taxes and other legal contingencies" and "Remaining provisions" for each type of provision. The types of
provisions have been determined by grouping those items of a similar nature
Provisions for taxes
Provisions for other proceedings of a legal nature
Provisions for operational risks
Provisions for restructuring
Other
EUR Thousands
2022
2021
7,862
2,227
65,107
18,097
43,698
136,991
7,655
1,921
49,935
32,188
51,910
143,609
Likewise, relevant information is broken down below for each of the types of provision shown in the table above:
•
•
Provisions for taxes include provisions for tax proceedings.
The provisions for other proceedings of a legal nature include provisions for court, arbitration and
administrative proceedings (other than those included in other categories or types of provisions stated
separately) initiated against companies in the Santander Consumer Finance Group
As of December 31, 2022, the main processes of a legal nature that affect the Group are the following:
Mortgage portfolio in Swiss francs (CHF) in Poland: on October 3, 2019, the Court of Justice of the European Union
(CJEU) resolved a preliminary ruling in relation to legal proceedings instituted against a bank unrelated to Grupo
Santander, declaring abusive certain clauses in the loan contracts indexed to CHF. The CJEU has left in the hands of
the Polish courts the decision regarding whether the contract can subsist without the abusive clause, for which they
must in turn decide if the effects of the cancellation of the contract are detrimental to the consumer. In case of
subsistence of the contract, the court may only integrate it with supplementary provisions of national law and
decide, according to them, the applicable rate.
As of December 31, 2022, Santander Consumer Bank S.A. presents a portfolio of mortgages denominated in or
indexed to CHF for an approximate amount of 1,891 million zlotys (EUR 404 million). On the same date, there is a
provision in the amount of PLN 745 million (EUR 159 million) to cover the CHF mortgage portfolio
104
In December 2020, the Chairman of the Financial Supervisory Authority (hereinafter “KNF”) announced a high-level
proposal for voluntary agreements between banks and borrowers under which Swiss franc-denominated loans
would be subject to settlement as loans in zlotys with interest referenced to the WIBOR rate plus the
corresponding margin. The Bank has been testing the KNF proposal in relation to different client groups in parallel
with its own settlement solutions. The results of the current tests have been incorporated into the provision
calculation model.
On February 16, 2023, the CJEU General Advocate (“AG”) issued his opinion in case no. C-520/21 pending before
the CJEU, concerning the right of the parties to exercise claims that go beyond the reimbursement of the monetary
benefit of a loan contract in Swiss francs that has been declared null. In the opinion of the AG, Directive 93/13/EEC
(Directive) does not prevent consumers from exercising additional claims against the bank as a result of the
declaration of invalidity, but the legitimacy of such claims should be decided by national courts from Poland. With
respect to the claims of the banks, the AG's opinion is that the Directive prevents the Bank from exercising
additional claims against the consumer as a consequence of such a declaration of nullity. The opinion is not binding
and does not definitively resolve these issues, a CJEU ruling in this case is expected in 2023. As of the date of the
consolidated annual accounts, it is not possible to predict a reliable estimate of the potential impact for the Group if
the CJEU were to assume AG's opinion.
The Group integrates its participation in Santander Consumer Bank, S.A. (Poland) by the equity method, being its
percentage of participation in it as of December 31, 2022 and 2021 40%.
In addition, provisions for other operational risks include mainly provisions for risks derived from the business
operations of Group companies, the most significant amounts as of December 31, 2022 corresponding to those
registered in Santander Consumer S.A. for an amount of 27,107 thousand euros (18,394 thousand euros at
December 31, 2021), Santander Consumer Bank, A.G. (Germany) for the amount of 12,367 thousand euros (17,855
thousand euros at December 31, 2021) and Santander Consumer Bank A.S. (Norway) in the amount of 14,400
thousand euros (149 thousand euros at December 31, 2021).
Provisions for restructuring include only the expenses derived from restructuring processes carried out by the
different entities of the Group. During 2020 and 2021, the Group carried out different restructuring processes in
some companies to adapt the business to the current market conditions in said geographies. In these cases, the
Group companies offer their employees the possibility of leaving by means of early retirement offers and
incentivized redundancies. As of December 31, 2022, the outstanding balance for this concept corresponds mainly
to the companies Santander Consumer Bank, A.G. (Germany), for the amount of 15,678 thousand euros (25,917
thousand euros at December 31, 2021), and Compagnie Generale de Credit Aux Particuliers - Credipar S.A. (France),
which amounts to 1,898 thousand euros (2,312 thousand euros at December 31, 2020).
The Group's general policy consists of recording provisions for processes of a tax and legal nature in which the risk
of loss is assessed as probable and no provisions are recorded when the risk of loss is possible or remote. The
amounts to be provisioned are calculated in accordance with the best estimate of the amount necessary to settle
the corresponding claim, based, among other things, on an individualized analysis of the facts and legal opinions of
internal and external advisors or taking into consideration the historical average figure. of losses derived from
claims of this nature. The final date for the outflow of resources that incorporate economic benefits for the Group
depends on each of the obligations. In some cases, the obligations do not have a fixed settlement term and, in other
cases, they depend on ongoing legal processes.
105
22. Tax matters
a) Current tax receivables and payables
The balance of “Tax Assets – Current Tax Assets” in the consolidated balance sheets as of 31 December 2022
and 2021 includes basically income tax prepayments made by the consolidated entities to the public
authorities of the countries in which they reside. The balance of “Tax Liabilities – Current Tax Liabilities” in the
consolidated balance sheet includes the liability for the various taxes applicable to the Group.
b) Reconciliation of the accounting profit to the income tax expense recognised in the consolidated income statement.
The reconciliation of the consolidated accounting profit to the income tax expense in the consolidated income
statements for 2022 and 2021 is as follows:
Consolidated profit (loss) before tax
Accounting profit multiplied by income tax rate (*)
Permanent differences and adjustments (**)
Consolidated income tax expense
Effective tax rate
EUR Thousands
2022
2021
Continuing
operations
Continuing
operations
2,207,893
662,368
(56,098)
606,270
27.46%
2,023,932
607,180
(73,909)
533,271
26.35%
(*) Computed using nominal tax rate applicable to the Bank (30%)
(**) These include the net tax effect of permanent differences at the consolidated entities, differences resulting from
the existence of different tax rates in the countries in which the Group operates, the effects of consolidation, prior
years' tax adjustments, and the effect of considering the exemptions, tax credits and tax relief based on the
jurisdictions in which the Group companies carry on their business.
c) Years open for review by the Tax Authorities
The Bank forms part of the Tax Group headed by Banco Santander, S.A. Under current legislation, taxes cannot
be deemed to have been definitively settled until the tax returns filed have been reviewed by the tax authorities
or until the four-year statute-of-limitations period has expired.
In June and November 2021 the conformity and non-conformity acts relating to the Corporate Income Tax
financial years 2012 to 2015 were formalised. The adjustments signed in conformity had no significant impact
on results and, in relation to the concepts signed in disconformity both in this year and in previous years
(Corporate Income Tax 2003 to 2011), Banco Santander, S.A., as the Parent of the Consolidated Tax Group,
considers, in accordance with the advice of its external lawyers, that the adjustments made should not have a
significant impact on the consolidated financial statements, and there are sound arguments as proof in the
appeals filed against them pending at the National Appellate Court (tax years 2003 to 2011) and the Economic
Administrative Court (tax years 2012-2015). Consequently, no provision has been recorded for this concept. On
the other hand, it should be noted that, in those cases in which it has been considered appropriate, the
mechanisms available to avoid international double taxation have been used.
As of the date of formulation of these accounts, the Corporate Income Tax and other tax concepts for the years
2017 to 2019 are being verified, with subsequent years up to 2022, included, being subject to review.
The other entities have the corresponding years open for review, pursuant to their respective tax regulations.
The notes to the separate financial statements of the Group's consolidated entities include other salient
information in relation to the tax matters affecting those entities.
106
Because of the possible different interpretations which can be made of the tax regulations, the outcome of the
tax audits of the rest of the years open for review may give rise to contingent tax liabilities. However, the
Group's tax advisers and the Bank's directors consider that it is unlikely that such tax liabilities will arise, and
that in any event the tax charge arising therefrom would not materially affect the Group's consolidated
financial statements.
d)
Regulatory changes
On the other hand, during 2022, Law 38/2022 was approved, which establishes a non-tax patrimonial benefit
payable to credit institutions and financial credit establishments in the years 2023 and 2024, the amount of
which will be 4.8%. of the sum of net interest income and commissions from the previous year derived from
the activity carried out in Spain. The payment obligation will arise on the first day of each financial year (see
Note 1.h). Likewise, said Law establishes a 50% limitation on the integration of negative individual tax bases in
the tax base of the Consolidated Tax Group. This limitation is expected to be in force only in 2023, setting a 10-
year term for the reversal of this positive adjustment.
107
e) Deferred taxes
The detail of the deferred taxes on 31 December 2022 and 2021 is as follows:
Tax assets (*)
Tax losses and tax credits
Temporary differences
Of which:
Non-deductible provisions
Valuation of financial instruments
Credit losses
Pensions
Valuation of tangible and intangible assets
Tax liabilities
Temporary differences
Of which:
Valuation of financial instruments
Valuation of tangible and intangible assets
Gains on disposal of investments
Valuation of Group investments
EUR Thousands
Monetisable
2022
Other
Total
Monetisable
2021
Other
Total
263,740
294,794
558,534
283,871
304,041
587,912
—
8,569
8,569
—
5,546
263,740
286,225
549,965
283,871
298,495
—
—
217,068
34,655
12,017
—
—
—
—
—
48,333
23,419
20,054
107,431
75,435
1,283,474
48,333
23,419
237,122
142,086
87,452
1,283,474
—
—
181,899
690,442
—
181,899
690,442
—
134,495
134,495
—
—
237,199
34,655
12,017
—
—
—
—
—
—
38,458
37,081
22,770
103,893
70,251
1,072,514
—
132,351
610,981
—
126,857
126,857
5,546
582,366
38,458
37,081
259,969
138,548
82,268
1,072,514
—
132,351
610,981
—
(*) As at 31 December 2022 and 2021, EUR 148 million in both exercises of monetisable tax assets correspond to Spain and EUR 136 and 162 million correspond to Italy in the
respective exercises.
108
The movement in the balance of deferred tax assets and liabilities over the last two years is shown below:
Balance as
(debit)/
credit to
of
the income
statement
31-12-2021
Conversion
differences on
foreign currency
balances and
other items
(debit) / credit to
asset and liability
valuation reserve
Acquisitions
(net) for the year
Balance as of
31-12-2022
Deferred tax assets
BIN's and deductions
Temporary differences
Of which monetisable
587,912
(24,177)
5,546
2,872
582,366
(27,049)
283,871
(20,131)
Deferred tax liabilities
(1,072,514)
(167,717)
Temporary differences
(1,072,514)
(167,717)
(1,439)
151
(1,590)
—
18,685
18,685
(3,762)
—
(3,762)
—
(61,928)
(61,928)
Total
(484,602)
(191,894)
17,246
(65,690)
—
—
—
—
—
—
—
558,534
8,569
549,965
263,740
(1,283,474)
(1,283,474)
(724,940)
Balance as
31-12-2020
of
(debit)/
credit to
the income
statement
Conversion
differences on
foreign currency
balances and
other items
(debit) / credit to
asset and liability
valuation reserve
Acquisitions
(net) for the
year
Balance as of
31-12-2021
Deferred tax assets
572,791
(18,113)
(14,990)
BIN's and deductions
Temporary differences
Of which monetisable
4,104
1,429
568,687
(19,542)
309,797
(26,346)
Deferred tax liabilities
Temporary differences
(946,424)
(105,150)
(946,424)
(105,150)
13
(15,003)
420
(12,898)
(12,898)
(6,199)
—
(6,199)
—
(2,800)
(2,800)
54,423
—
54,423
—
(5,242)
(5,242)
587,912
5,546
582,366
283,871
(1,072,514)
(1,072,514)
Total
(373,633)
(123,263)
(27,888)
(8,999)
49,181
(484,602)
The balance of “Tax Assets - Deferred” in the consolidated balance sheets includes the balances receivable from the tax
authorities in respect of deferred income tax assets. The balance of “Tax Liabilities” in the consolidated balance sheets
includes the liability for the various deferred taxes of the group.
On 26 June 2013, the Basel III legal framework was included in European law through Directive 2013/36 (CRD IV) and
Regulation 575/2013 on prudential requirements for credit institutions and investment firms (CRR), directly applicable
in every Member State as from 1 January 2014, albeit with a gradual timetable with respect to the application of, and
compliance with, various requirements.
This legislation establishes that deferred tax assets, the use of which relies on future profits being obtained, must be
deducted from regulatory capital.
In this regard, pursuant to Basel III, in recent years several countries have amended their tax regimes with respect to
certain deferred tax assets so that they may continue to be considered regulatory capital since their use does not rely
on the future profits of the entities that generate them (referred to hereinafter as "monetisable tax assets"). Italy had
similar regime to that described above, which was introduced by Decree-Law no. 225, of 29 December 2010, and
amended by Law no. 10, of 26 February 2011.
In addition, in Spain, through Royal Decree-Law 14/2013, of 29 November confirmed by Law 27/2014, of 27 November
tax regimes were established whereby certain deferred tax assets (arising from provisions to allowances for loan
losses, provisions to allowances for foreclosed assets and provisions for pension and pre-retirement obligations) may
be converted into tax receivables in specific circumstances. As a result, their use does not rely on the entities obtaining
future profits and, accordingly, they are exempt from deduction from regulatory capital..
In 2015 Spain completed its regulations on monetisable tax assets with the introduction of a financial contribution
which will involve the payment of 1.5% for maintaining the right to monetise which will be applied to the portion of the
deferred tax assets that qualify under the legal requirements as monetisable assets generated prior to 2016.
109
In a similar manner, Italy, by decree of 3 May 2016 has introduced a fee of 1.5% annually to maintain the monetisable
of part of the deferred tax assets.
The Group only recognises deferred tax assets for temporary differences or tax loss and tax credit carry forwards where
it is considered probable that the consolidated entities that generated them will have sufficient future taxable profits
against which they can be utilised.
The deferred tax assets and liabilities are reassessed at the reporting date in order to ascertain whether any
adjustments need to be made on the basis of the findings of the analyses performed.
These analyses take into account, inter alia: (i) the results generated by the various entities in prior years, (ii) each
entity or tax group's projected earnings, (iii) the estimated reversal of the various temporary differences, based on their
nature, and (iv) the period and limits established by the legislation of each country for the recovery of the various
deferred tax assets, thereby concluding on each entity or tax group's ability to recover its recognised deferred tax
assets.
The earnings projections used in this analysis are based on the financial budgets approved by the local management of
the relevant units and by the Group's directors. The Group's budget estimation process is common to all units. Group
management prepares its financial budgets based on the following key assumptions:
1) Microeconomic variables of the entities comprising the tax group at each location: consideration is given to
the existing balance sheet structure, the mix of products offered, and the commercial strategy defined by the
local management units at any given time based on the competitive, regulatory and market environment.
2) Macroeconomic variables: the estimated growths are based on the evolution of the economic environment
considering the expected evolution of the Gross Domestic Product of each location and the forecasts of the
behaviour of interest rates, inflation and exchange rates. Said data are provided by the Group's Research
Department, which are based on external information sources.
In addition, the Group performs backtesting on the variables projected in the past. The differential behaviour of these
variables with respect to the actual market data is considered in the projections estimated in each year. Thus, in
relation to Spain, the deviations identified by management in recent years are due to nonrecurring events unrelated to
the operation of the business, such as the impact of the first application of new applicable regulations, the costs
assumed for the acceleration of the restructuring plans and the changing effect of the current macroeconomic
environment.
Lastly, given the degree of uncertainty of these assumptions, the Group performs a sensitivity analysis of the most
significant assumptions considered in the analysis of the recoverability of deferred tax assets, considering reasonable
changes in the key assumptions on which the projected results of each entity or tax group are based and the estimated
reversal of the various temporary differences. In relation to Spain, the sensitivity analysis consisted of adjusting growth
(gross domestic product) by 50 basis points and adjusting inflation by 50 basis points.
In addition to the income taxes recognised in the consolidated income statements, in 2021 and 2020 the Group
recognised the following amounts in consolidated equity:
Actuarial gains and losses on pension plans
Cash flow hedges
Debt instruments at fair value through other
comprehensive income
Other
Total
EUR Thousands
Credits (Charges) to
Consolidated Equity
2021
2022
12,289
5,036
677
(2,910)
15,092
12,289
5,036
(99)
(2,133)
15,093
110
23. Registered share capital and equity instruments other than capital
a) Registered share capital
As of December 31, 2022 and 2021, the Bank's capital stock consisted of 1,879,546,172 registered shares, each
with a par value of EUR 3, fully subscribed and paid up, with identical voting and dividend rights.
On December 20, 2019, Holneth, B.V. sold the registered shares it held over the Bank, of which 469,886,523
registered shares were acquired by Banco Santander, S.A. and 20 by Cántabro Catalana de Inversiones, S.A.. Thus,
as of December 31, 2022 and 2021, Banco Santander, S.A. owned 1,879,546,152 shares and Cántabro Catalana de
Inversiones, S.A. owned 20 shares.
b) Equity instruments other than capital
At the meeting held on 3 December 2020, the Shareholders agreed to issue preferred participations, contingently
convertible into newly issued ordinary shares (henceforth “PPCC”), for a nominal amount of EUR 150,000
thousand. The payment of PPCC is subject to certain conditions, especially the availability of sufficient funds, and
which is also discretionary, was set at 5% annual for the first five years, revised thereafter by applying a yearly
margin of 5.551% over the 5-year Mid-Swap Rate.
On 14 December 2018, the Annual General Meeting of the Bank approved an issuance of contingently convertible
preferred shares in ordinary shares of the newly issued Bank (the "PPCC") for a nominal amount of EUR 200,000
thousand. The remuneration of the PPCCs, whose payment is subject to compliance with certain conditions for their
distribution linked mainly to the availability of the necessary funds, as well as the decision by the Bank, was fixed
at an annual 8.25% for the first five years, being revised thereafter applying a margin of 8.22% per year plus the
Mid-Swap rate to five years (5 year Mid-Swap Rate).
On 6 February 2019, the European Central Bank approved the computability of these PPCCs as Tier 1 capital
(additional tier 1) under the new European regulations on own resources of the European Regulation 575/2013.
The PPCCs are perpetual, although they can be amortized early if the Bank or its consolidated group presents a
ratio of less than 5.125% of ordinary capital (common equity Tier 1 ratio) calculated according to the applicable
regulations. In this case and subject to compliance with certain requirements, the shares would be converted into
ordinary shares of new issue of Santander Consumer Finance, S.A. in accordance with the value established in the
brochure of issuance of the shares. In addition, these shares may be redeemed by the Bank's decision only when
there is a change in the rules for calculating regulatory capital or the tax framework applicable to preferred shares,
and with the prior approval of the European Central Bank.
On 14 December 2017, the Annual General Meeting of the Bank approved an issuance of contingently convertible
preferred shares in ordinary shares of the newly issued Bank (the "PPCC") for a nominal amount of EUR 850,000
thousand. The remuneration of the PPCCs, whose payment is subject to compliance with certain conditions for their
distribution linked mainly to the availability of the necessary funds, as well as the decision by the Bank, was fixed
at an annual 5.75% for the first five years, being revised thereafter applying a margin of 5.545% per year plus the
Mid-Swap rate to five years (5 year Mid-Swap Rate).
On 7 February 2018, the European Central Bank has approved the computability of these PPCCs as Tier 1 capital
(additional tier 1) under the new European regulations on own resources of the European Regulation 575/2013.
The PPCCs are perpetual, although they can be amortized early if the Bank or its consolidated group presents a
ratio of less than 5.125% of ordinary capital (common equity Tier 1 ratio) calculated according to the applicable
regulations. In this case and subject to compliance with certain requirements, the shares would be converted into
ordinary shares of new issue of Santander Consumer Finance, S.A. in accordance with the value established in the
brochure of issuance of the shares. In addition, these shares may be redeemed by the Bank's decision only when
there is a change in the rules for calculating regulatory capital or the tax framework applicable to preferred shares,
and with the prior approval of the European Central Bank. PPCCs are traded on the Frankfurt Stock Exchange. All of
the preferred shares have been fully subscribed by Banco Santander, S.A. as of 31 December 2018 and 2017.
The accrued income on the shares issued at 31 December 2022 and 31 December 2021 amounted to EUR 325,375
thousand and EUR 252,500 thousand, respectively, and was recognised under "Retained Earnings" having accrued
EUR 72,875 thousand and EUR 72,873 thousand in the years 2022 and 2021, respectively.
111
24. Share premium
The balance of “Share Premium” in the accompanying consolidated balance sheets as of 31 December 2022 and 2021
includes the amount paid up by the Bank's shareholders in capital issues in excess of the par value. The Consolidated
Spanish Limited Liability Companies Law 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.
25. Retained earnings and other reserves
The balance of “Shareholders’ Equity - Reserves - Retained Earnings” in the accompanying consolidated balance sheet
includes the net amount of the accumulated profit or loss attributable to the Group recognised in previous years
through the consolidated income statement that, in the distribution of profit, was appropriated to consolidated equity,
as well as any own equity instrument issuance expenses and the differences between the selling price of treasury
shares and the cost of acquisition thereof, should the Bank perform such transactions, and the distribution of profits to
the Bank's shareholders recognised with a charge to reserves.
The balance of “Shareholders' Equity – Other Reserves – Reserves or Accumulated Losses in Investments in Joint
Ventures and Associates” in the accompanying consolidated balance sheets includes the net amount corresponding to
the Group of the undistributed accumulated profit or loss generated in previous years by entities accounted for using
the equity method, recognised through the consolidated income statement.
The detail of “Shareholders’ Equity – Other Reserves - Retained Earnings” and “Shareholders' Equity - Reserves -
Reserves or Accumulated Losses in Investments in Joint Ventures and Associates” in the consolidated balance sheets as
of 31 December 2022 and 2021 is as follows:
Retained earnings:
Legal reserve of the Bank
Unrestricted, voluntary and other reserves
Consolidation reserves attributable to the Bank
Reserves of subsidiaries
Other reserves
Other
Reserves or accumulated losses from investments in:
Joint ventures and associates
EUR Thousands
2022
2021
716,069
575,350
166,373
2,171,545
3,629,337
652,428
452,176
162,982
1,718,272
2,985,858
(419,035)
(344,926)
439,882
20,847
398,835
53,909
Legal reserve
Under the Consolidated Spanish Capital Companies Law, 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. Otherwise, until the legal reserve exceeds 20% of share capital, it can only be used
to offset losses, provided that sufficient other reserves are not available for this purpose.
112
Reserves of subsidiaries
The detail, by company, of “Reserves of Subsidiaries”, based on the subsidiaries' contribution to the Group (considering
the effect of consolidation adjustments), is as follows:
Santander Consumer Holding GmbH
Santander Consumer Bank S.p.A.
Auto Abs UK Loans PLC
PSA Finance UK Limited
Santander Consumer Bank Gmbh
Compagnie Generale de Credit Aux Particuliers - Credipar S.A.
PSA Financial Services, Spain, EFC, SA
Santander Consumer Finance OY
Andaluza de Inversiones, S.A. Unipersonal
Santander Consumer Bank A.S.
Santander Consumer Bank AG
PSA Banque France
Financiera el Corte Inglés, E.F.C., S.A.
Banca PSA Italia S.P.A.
PSA Bank Deutschland GmbH
Other
EUR Thousands
2022
(1,243,743)
134,787
(65,982)
90,913
213,468
321,492
37,253
255,561
9,723
1,391,900
575,757
106,062
52,359
42,528
85,985
163,484
2,171,547
2021
(1,431,523)
96,549
(3,938)
(15,356)
178,840
196,393
8,725
201,697
65,037
1,364,381
496,070
131,656
37,761
96,070
81,446
214,463
1,718,271
26. 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.
The amounts of these items are recognised gross, including the amount of the Other comprehensive income relating to
non-controlling interests, and the corresponding tax effect is presented under a separate item, except in the case of
entities accounted for using the equity method, the amounts for which are presented net of the tax effect.
113
a) Breakdown of Other comprehensive income - Items that will not be reclassified in results and Items that can be
classified in results
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial gains or losses on defined benefit pension plans
Assets included in disposal groups classified as held for sale
Other recognised income and expense in investments in joint ventures and associates
Changes in the fair value of equity instruments at fair value through other
comprehensive income
Other valuation adjustments
Items that may be reclassified to profit or loss
Hedges of net investments in foreign operations (effective portion)
Currency translation differences
Derivatives – hedge accounting. 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)
Assets included in disposal groups classified as held for sale
EUR Thousands
31-12-2022
31-12-2021
(582,107)
(33,865)
(41,487)
—
195
7,427
—
(548,242)
(46,397)
(495,612)
62,111
(1,149)
—
—
(645,973)
(155,201)
(163,721)
—
160
8,360
—
(490,772)
(100,443)
(351,791)
10,170
256
—
—
Share in other recognised income and expenses in investments in joint ventures and
associates
(67,195)
(48,964)
b) Other comprehensive income- Items not reclassified to profit or loss – Actuarial gains or (-) losses on defined benefit
pension plans
The balance of "Other comprehensive income - Items not reclassified to profit or loss - Actuarial gains or (-)
losses on defined benefit pension plans” includes 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 liability (asset) relating to the defined benefit
postemployment obligations of the consolidated companies.
Changes in these items are mainly recognised in the consolidated statement of recognised income and
expense. The most significant changes in 2022 relate mainly to the variations in the main actuarial assumptions
of the German subsidiary – actuarial gains by experience and increase of interest rates from 1.45% to 4.21%-,
as well as actuarial earnings , mainly financial, in Nordics (Scandinavia) – increases in interest rates from 2.00%
to 3.50% in Sweden and with actuarial gains from Spanish entities – increase in the interest rate from 0.70% to
3.70% and gains on affected assets (in 2021 changes related mainly due to the variations in the main actuarial
assumptions of the German subsidiary – increase in interest rates from 1.17% to 1.45%, and mainly financial
actuarial earnings in Nordics due to the increase in interest rates from 1.50% to 2.00% in Sweden).
c)
Items that may be reclassified to profit or loss
c.1) Hedges of net investments in foreign operations (hedging derivatives)
The balance of “Other comprehensive income – Items that may be reclassified to profit or loss - Hedge of net
investments in foreign operations (Effective portion)” in consolidated equity includes the net amount of the
changes in the derivatives arranged by the Group and designated as hedging instruments considered to be
effective in hedges of this type. The changes therein in 2022 and 2021 were as follows:
Balance at beginning of period
Valuation gains/(losses)
Transferred to the income statement
Balance at end of period
EUR Thousands
2022
2021
100,443
(54,046)
—
46,397
11,864
88,579
—
100,443
114
c.2) Currency translation differences
The balance of “Currency translation differences” includes the net amount of exchange differences arising from
non-monetary items whose fair value is adjusted against equity and the differences arising from the
translation to euros of the balances of the consolidated entities whose functional currency is not the euro (see
Note 2-a).
c.3) Derivatives – hedge accounting. Cash flow hedges (effective portion)
The balance of “Hedging derivatives. Cash flow hedges (Effective portion)” includes the net amount of the
changes in value of financial derivatives designated as hedging instruments in cash flow hedges, in respect of
the portion of these changes considered to be effective hedges.
The changes in 2022 and 2021 were as follows:
Balance at beginning of period
Valuation gains/(losses)
Amounts transferred to the income statement
Taxation
Balance at end of period (Note 29)
EUR Thousands
2022
2021
10,170
41,409
(3,587)
796
31,593
17,997
(21,061)
62,111
(5,036)
10,170
c.4) Changes in the fair value of debt instruments at fair value through other comprehensive income
The balance includes the net amount of unrealised changes in the fair value of financial assets classified as
items that may be reclassified to profit or loss – changes in the fair value of debt instruments at fair value
through profit or loss.
The changes, regardless of valuation adjustments attributable to non-controlling interests, in 2022 and 2021
were as follows:
Balance at beginning of period
Valuation gains/(losses)
Transferred to the consolidated income
statement
Taxation
Balance at end of period
27. Non-controlling interests
EUR Thousands
2022
2021
256
(1,797)
526
(6,062)
(285)
5,693
677
(1,149)
99
256
“Non-Controlling Interests” in the accompanying consolidated balance sheets as of 31 December 2022 and 2021
includes the net amount of the equity of subsidiaries attributable to equity instruments that are not held, directly or
indirectly, by the Group, including the portion attributed to them of the consolidated profit for the year.
115
The detail, by Group Company, of “Non-Controlling Interests” in the accompanying consolidated balance sheets as of
31 December 2022 and 2021 is as follows:
EUR Thousands
2022
2021
Suzuki Servicios Financieros, S.L.
PSA Banque France S.A
Financiera El Corte Inglés, E.F.C., S.A.
PSA Financial Services, Spain, E.F.C., S.A.
PSA Finance Belux S.A.
PSA Financial Services Nederland B.V.
PSA Bank Deutschland GmbH
Banca PSA Italia S.P.A.
Transolver Finance E.F.C., S.A.
PSA Renting Italia S.P.A.
Hyundai Capital Bank Europe GmbH
Allane SE
TIMFin S.p.A.
PSA FINANCE UK LIMITED
Other
Profit attributable to non-controlling
interests:
Suzuki Servicios Financieros, S.L.
PSA Banque France S.A.
Financiera El Corte Inglés, E.F.C., S.A.
PSA Financial Services, Spain, E.F.C., S.A.
PSA Finance Belux S.A.
PSA Financial Services Nederland B.V.
PSA Bank Deutschland GmbH
Banca PSA Italia S.P.A.
Transolver Finance E.F.C., S.A.
PSA Renting Italia S.P.A.
Hyundai Capital Bank Europe GmbH
Allane SE
TIMFin S.p.A.
PSA FINANCE UK LIMITED
Other
5,668
884,248
136,517
340,674
(10,273)
(6,253)
276,059
196,277
34,813
3,581
352,332
(41,627)
22,233
1,847
(34)
2,196,062
1,003
180,290
28,639
24,200
7,362
6,279
26,080
30,922
1,646
5,706
8,108
3,501
(1,690)
36,685
32
358,763
2,554,825
4,246
716,790
129,221
369,637
(5,633)
(5,600)
283,792
160,170
33,085
1,358
351,605
(47,331)
25,952
4,576
(61)
2,021,807
1,422
165,079
27,387
26,653
7,860
8,341
29,534
33,713
1,728
4,468
541
1,629
(3,722)
11,277
62
315,972
2,337,779
116
The changes in 2022 and 2021 in “Non-Controlling Interests” in the consolidated balance sheets were as follows:
Balance at beginning of period
Dividends
Currency translation differences and other
(*)
EUR Thousands
2022
2021
2,337,778
(135,837)
(5,876)
2,131,896
(233,406)
123,317
Profit/(loss) attributable to NCIs
Balance at end of period
358,760
2,554,825
315,971
2,337,778
(*) Mainly includes the balances of the business combination PSA Banque France S.A.
28. Memorandum items
The detail of the balances recognised under “Memorandum Items” in the consolidated balance sheets as of 31
December 2022 and 2021 is as follows:
Loan commitments granted
25,756,041
24,122,179
EUR Thousands
31/12/2022
31/12/2021
Memorandum item: of which,
doubtful
Financial guarantees granted
Memorandum item: of which,
doubtful
Financial guarantees
Credit derivatives sold
56,500
62,600
84,997
189,841
—
84,997
—
—
187,253
2,588
Other commitments granted
1,211,006
1,183,948
Memorandum item: of which,
doubtful
Technical guarantees
Other commitments
2,604
3,367
552,398
658,608
531,497
652,451
The breakdown as at 31 December 2022 of the exposures and the provision fund (see Note 10) out of balance sheet by
impairment stage under IFRS 9 is EUR 26,865,725 and EUR 21,000 thousand in stage 1, EUR 127,214 thousand and EUR
1,570 thousand in stage 2 and EUR 59,105 thousand and EUR 5,440 thousand in stage 3, respectively (EUR 25,192,422
thousand and EUR 22,928 thousand in stage 1, EUR 237,580 thousand and EUR 2,005 thousand in stage 2 and EUR
65,966 thousand and EUR 14,470 thousand in stage 3, respectively at 31 December 2021).
A significant portion of these guarantees will expire without any payment obligation materialising for the consolidated
entities and, therefore, the aggregate balance of these commitments cannot be considered as an actual future need for
financing or liquidity to be provided by the Group to third parties.
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.
117
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 include, 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.
29. Derivatives - Hedge accounting
The Group, 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, the Group 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 Euro.
118
EUR Thousands
2022
NOMINAL
VALUE
MARKET VALUE
ASSETS
LIABILITIES
Changes in fair
value used to
calculate hedge
ineffectiveness
20,979,888
19,694,967
876,854
869,796
143,424
113,915
679,319
705,127
19,694,967
869,796
113,915
705,127
Fair value hedges:
Interest rate risk
Interest Rate Swap
Exchange rate risk
Fx Forward
Interest rate and exchange rate risk
Currency Swap
Cash flow hedges
Inherent rate risk
Interest Rate Swap
Exchange rate risk
Currency swap
456,210
456,210
828,710
828,710
7,058
7,058
—
—
5,646,185
209,136
1,663,660
51,038
1,663,660
51,038
695,276
695,276
2,405
2,405
Interest rate and exchange rate risk
3,287,249
155,692
Currency swap
3,287,249
155,692
Hedges of net investments in foreign operations
Exchange rate risk
Fx Forward
Collected deposits
1,960,672
1,960,672
45,080
45,080
1,960,672
45,080
—
—
Balance sheet line items
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
—
—
(25,808)
(25,808)
74,001
84,861
84,861
2,787
2,787
(13,647)
(13,647)
20
20
163
Derivatives - hedge
accounting
(143) Deposits
1,258
1,258
28,251
28,251
49,584
3,000
3,000
46,137
46,137
3,444
3,444
778
778
778
—
28,586,744
1,131,071
193,786
753,341
EUR Thousands
2021
MARKET VALUE
ASSETS
LIABILITIES
Changes in fair
value used to
calculate hedge
ineffectiveness
Balance sheet line items
Fair value hedges:
Interest rate risk
Interest Rate Swap
Exchange rate risk
Fx Forward
Interest rate and exchange rate risk
Currency Swap
Cash flow hedges
Inherent rate risk
Interest Rate Swap
Exchange rate risk
Currency swap
Interest rate and exchange rate risk
Currency swap
Hedges of net investments in foreign operations
Exchange rate risk
Fx Forward
Collected deposits
NOMINAL
VALUE
15,022,347
13,576,712
13,576,712
793,625
793,625
652,009
652,009
6,424,718
2,208,724
2,208,724
59,766
50,966
50,966
5,500
5,500
3,299
3,299
21,625
14,000
14,000
6,738
6,738
887
887
57,788
66,746
8,943
8,943
314
314
1,006,904
13,865
50,877
1,006,904
13,865
50,877
3,209,090
3,209,090
34,980
34,980
2,136,966
2,136,966
2,136,966
—
4,031
4,031
4,031
—
15,555
15,555
40,279
40,279
40,279
—
54,914
61,171
61,171
—
—
(6,258)
(6,258)
19,489
13,149
13,149
1,812
1,812
4,529
4,529
—
—
—
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
Derivatives - hedge
accounting
— Deposits
23,584,030
121,585
128,650
74,403
119
Group entities mainly have long-term loan portfolios at fixed interest rates and are therefore exposed to changes in fair
value due to movements in market interest rates. Entities manage this risk by contracting Interest Rate Swaps in which
they pay a fixed rate and receive a variable rate. Only the interest rate risk is covered and, therefore, other risks, such as
credit risk, are managed, but not covered by the entities. The interest rate risk component is determined as the change
in the fair value of fixed rate loans that arise 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 the loans attributable to
changes in the benchmark interest rates with changes in the fair value of the interest rate swaps.
Additionally, certain Group entities issue fixed rate debt instruments both in their functional currency and foreign
currencies, to access foreign capital markets and obtain further sources of financing. Therefore, these entities are
exposed to both interest rate risk and exchange rate risk, which they hedge by entering different derivatives contracts
such as interest rate swaps, FX forwards and cross currency swaps in which they pay the floating rate and receive the
fixed rate, and which they cover with a fair value hedge.
Cash flow hedges for entities in the Santander Consumer Finance Group mitigate exchange rate risk for loans and
financing. These hedges involve mainly interest rate swaps and cross currency swaps.
In any case, in the event of ineffectiveness in fair value or cash flow hedges, the entity mainly considers the following
causes:
•
•
•
Possible economic events affecting the entity (e.g.: default),
For movements and possible market-related differences in the collateralized and non-collateralized curves
used in the valuation of derivatives and hedged items, respectively.
Possible differences between the nominal value, settlement/price dates and credit risk of the hedged item
and the hedging element.
Regarding net foreign investment hedges, the Group uses these to mitigate the foreign exchange risk of the equity
investments in NOK and CNY currencies.
In the case of this type of hedge, the ineffectiveness scenarios are considered to be of low probability, given that the
hedging instrument is designated considering the determined position and the spot rate at which it is found.
120
The following table sets out the maturity profile of the hedging instruments used in the Group's non-dynamic hedging
strategies:
Fair value hedges:
Interest rate risk
Interest Rate Swap
Exchange rate risk
Fx Forward
Interest rate and exchange rate risk
Currency Swap
Cash flow hedges
Inherent rate risk
Interest Rate Swap
Exchange rate risk
Currency swap
Interest rate and exchange rate risk
Currency swap
Hedges of net investments in foreign
operations
Exchange rate risk
Fx Forward
Fair value hedges:
Interest rate risk
Interest Rate Swap
Exchange rate risk
Fx Forward
Interest rate and exchange rate risk
Currency Swap
Cash flow hedges
Inherent rate risk
Interest Rate Swap
Exchange rate risk
Currency swap
Interest rate and exchange rate risk
Currency swap
Hedges of net investments in foreign
operations
Exchange rate risk
Fx Forward
EUR Thousands
2022
1-3 months
3-12 months
1-5 years
5+ years
Total
3,602,301
15,247,675
700,319
20,979,888
3,469,411
14,619,273
700,319
19,694,967
3,469,411
14,619,273
700,319
19,694,967
Up to 1
month
524,238
310,862
310,862
213,375
213,375
—
—
905,355
595,102
595,102
109,944
109,944
200,308
200,308
132,891
132,891
—
—
—
—
628,402
628,402
285,796
625,702
2,373,983
2,360,704
40,180
40,180
63,332
63,332
182,284
182,284
92,465
92,465
27,332
27,332
505,905
505,905
629,612
629,612
283,388
283,388
901,403
901,403
321,223
321,223
1,460,983
1,138,077
1,460,983
1,138,077
181,047
648,059
1,131,566
181,047
181,047
648,059
648,059
1,131,566
1,131,566
—
—
—
991,081
2,179,116
7,107,850
17,608,379
700,319
28,586,745
EUR Thousands
2021
1-3 months
3-12 months
1-5 years
5+ years
Total
2,591,528
9,533,400
1,845,599
15,022,346
1,928,538
9,031,990
1,845,599
13,576,711
1,928,538
9,031,990
1,845,599
13,576,711
617,976
540,440
540,440
77,535
77,535
—
—
495,346
129,991
129,991
38,677
38,677
326,678
326,678
662,990
662,990
—
—
—
—
501,410
501,410
2,741,769
2,969,477
558,561
558,561
597,335
597,335
1,450,962
1,450,962
343,872
343,872
1,585,873
1,174,643
1,585,873
1,174,643
Up to 1
month
433,843
230,144
230,144
53,100
53,100
150,599
150,599
218,100
69,184
69,184
27,020
27,020
121,895
121,895
217,203
217,203
869,146
—
—
—
—
—
—
—
—
—
—
—
—
—
—
456,210
456,210
828,710
828,710
5,646,185
1,663,660
1,663,660
695,275
695,275
3,287,249
3,287,249
1,960,672
1,960,672
1,960,672
—
—
—
—
26
26
26
—
—
—
—
—
—
—
793,625
793,625
652,009
6,424,718
2,208,724
2,208,724
1,006,904
1,006,904
3,209,089
3,209,089
2,136,967
2,136,967
2,136,967
217,203
499,269
1,420,495
499,269
499,269
1,420,495
1,420,495
—
—
—
1,612,591
6,753,792
12,502,877
1,845,625
23,584,031
Additionally, for the most significant Group entities, the maturity profile as well as the average interest rate and the
average changes in hedging instruments by term of maturity are set out in the table below.
121
Fair Value Coverages
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Average fixed interest rate (%) GBP
Exchange rate risk
exchange rate instruments
Nominal
Average exchange rate DKK/EUR
Average NOK/EUR exchange rate
Average CHF/EUR exchange rate
SEK/EUR average exchange rate
Average CAD/EUR exchange rate
Average GBP/EUR exchange rate
Exchange rate and interest risk
Interest rate instruments
Nominal
Average exchange rate DKK/EUR
Average fixed interest rate (%) DKK
Average fixed interest rate (%) SEK
Cash Flow Hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) EUR
Exchange rate risk
exchange rate instruments
Nominal
Average NOK/EUR exchange rate
Average CHF/EUR exchange rate
Average CAD/EUR exchange rate
Average JPY/EUR exchange rate
Exchange rate and interest risk
exchange rate instruments
Nominal
SEK/EUR average exchange rate
Average NOK/EUR exchange rate
Average CHF/EUR exchange rate
Average CAD/EUR exchange rate
Average exchange rate DKK/EUR
Average exchange rate PLN/EUR
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Hedges of net investments in foreign
businesses
Exchange rate risk
exchange rate instruments
Nominal
Average NOK/EUR exchange rate
Average CNY/EUR exchange rate
2022
EUR Thousands
Up to 1 month
1-3 months
3-12 months
1-5 years
5+ years
Total
310,862
595,102
3,469,411
14,619,273
700,319
19,694,967
(0.002)
(0.627)
0.015
—
(0.628)
0.014
0.002
1.200
0.013
0.006
1.419
0.019
0.002
—
—
—
—
—
213,375
109,944
132,891
—
—
1.034
0.000
—
—
—
—
—
1.027
—
1.412
—
200,308
0.000
0.000
0.000
—
—
—
7
—
—
0.992
10.767
—
—
—
—
—
—
—
—
—
—
—
—
628,402
0.004
7.439
0.001
456,210
—
—
—
—
—
—
828,710
—
—
—
—
—
—
—
—
—
—
—
40,180
0.121 %
92,465
0.541 %
629,612
0.299 %
901,403
1.465 %
—
— %
1,663,660
—
63,332
—
1.077
0.000
—
182,284
10.360
9.600
—
—
—
—
0%
0%
27,332
283,388
—
1.084
—
—
—
1.064
1.454
321,223
10.590
1.059
1.427
—
121.570
505,905
1,460,983
1,138,077
10.390
9.940
—
—
—
—
0%
0%
10.580
10.310
—
—
7.410
4.290
0%
0%
10.700
10.280
1.090
1.370
—
—
0%
2%
—
—
—
—
—
—
—
—
—
—
—
—
0%
0%
695,276
—
—
—
—
3,287,249
—
—
—
—
—
—
—
—
181,047
10.225
—
648,059
1,131,566
10.084
7.059
10.458
—
—
—
—
—
—
—
1,960,672
—
—
122
Fair Value Coverages
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Average fixed interest rate (%) GBP
Exchange rate risk
exchange rate instruments
Nominal
Average NOK/EUR exchange rate
Average CHF/EUR exchange rate
SEK/EUR average exchange rate
Average CAD/EUR exchange rate
Exchange rate and interest risk
Interest rate instruments
Nominal
Average exchange rate DKK/EUR
Average fixed interest rate (%) DKK
Cash Flow Hedges
Interest rate risk
Interest rate instruments
Nominal
Average fixed interest rate (%) EUR
Exchange rate risk
exchange rate instruments
Nominal
Average NOK/EUR exchange rate
Average CHF/EUR exchange rate
Average CAD/EUR exchange rate
Average JPY/EUR exchange rate
Exchange rate and interest risk
exchange rate instruments
Nominal
SEK/EUR average exchange rate
Average NOK/EUR exchange rate
Average CHF/EUR exchange rate
Average CAD/EUR exchange rate
Average exchange rate DKK/EUR
Average exchange rate PLN/EUR
Average USD/EUR exchange rate
Average JPY/EUR exchange rate
Average fixed interest rate (%) EUR
Average fixed interest rate (%) CHF
Hedges of net investments in foreign
businesses
Exchange rate risk
exchange rate instruments
Nominal
Average NOK/EUR exchange rate
Average CNY/EUR exchange rate
2021
EUR Thousands
Up to 1
month
1-3 months
3-12 months
1-5 years
5+ years
Total
230,144
540,440
1,928,538
9,031,990
1,845,599
13,576,711
(0.018)
(0.506)
0.540
(0.023)
(0.499)
0.529
(0.036)
(0.546)
0.504
(0.047)
(0.628)
0.498
(0.009)
0.000
0.000
53,100
77,535
662,990
—
1.017
0.862
—
150,599
7.454
0.006
—
—
0.848
—
—
—
—
1.041
—
0.858
9.907
—
—
—
—
—
—
—
—
501,410
7.454
0.006
793,625
652,009
—
—
—
—
—
—
—
—
69,184
0.178 %
129,991
0.189 %
558,561
1,450,962
26
2,208,724
0.183 %
0.055 %
-0.556%
27,020
38,677
597,335
343,872
0.000
1.077
1.570
—
121,895
10.200
—
—
—
—
—
—
—
—
—
—
1.08
1.51
—
—
1.131
1.52
10.59
1.094
1.548
77.139
121.57
326,678
1,585,873
1,174,643
10.14
—
—
—
—
—
—
—
0.01 %
—
10.18
9.85
—
—
—
4.63
—
—
—
—
10.18
9.95
1.07
1.46
—
4.29
—
—
0.89 %
0.15 %
217,203
10.247
—
499,269
1,420,495
10.235
7.548
10.211
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,006,904
3,209,090
2,136,966
123
The following table contains details of the hedged exposures covered by the Group's hedging strategies of 31
December 2022:
EUR Thousands
2022
Carrying amount of hedged
items
Accumulated fair value
adjustments to the hedge
items
Balance Sheet line
item
Assets
Liabilities
Assets
Liabilities
18,103,217
4,288,729
(766,024)
151,263
17,635,515
3,460,019
(766,024)
104,224
Loans and
advances
Fair value hedges
Interest rate risk
Exchange rate risk
467,703
—
Interest rate risk and Exchange rate
risk
—
828,710
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate
risk
—
—
—
—
Hedges of net investments in foreign
operations
Exchange rate risk
1,958,236
1,958,236
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
47,039
Equity Portfolio
Financial liabilities
at amortized cost
Equity
instruments
—
—
—
—
—
—
Changes in the
fair value of
hedged item
for
ineffectivenes
s assessment
Cash flow hedge/currency
translation reserve
Continuing
hedges
Discontinued
hedges
(568,406)
(615,816)
—
47,409
(112,488)
18,087
43,731
—
—
—
—
43,197
51,093
3,980
(174,307)
(11,876)
—
—
—
—
—
—
—
—
43,450
43,416
—
34
—
—
20,061,454
4,288,729
(766,024)
151,263
(680,894)
43,197
43,451
The cumulative amount of adjustments to fair value hedging instruments remaining on the balance sheet for hedged
items no longer adjusted for hedging gains and losses as of December 31, 2022 is EUR (4) million.
EUR Thousands
2021
Carrying amount of hedged
items
Accumulated fair value
adjustments to the hedge
items
Balance Sheet line
item
Changes in the
fair value of
hedged item
for
ineffectivenes
s assessment
Cash flow hedge/currency
translation reserve
Assets
Liabilities
Assets
Liabilities
Continuing
hedges
Discontinued
hedges
Fair value hedges
Interest rate risk
Exchange rate risk
12,609,225
3,815,067
11,575,330
3,163,058
(51,029)
(51,029)
1,033,895
—
Interest rate risk and Exchange rate risk
—
652,009
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate risk
—
—
—
—
Hedges of net investments in foreign
operations
Exchange rate risk
2,041,723
2,041,723
—
—
—
—
—
—
Loans and
advances
Equity Portfolio
(2,744)
(1,883)
—
(861)
Financial liabilities
at amortized cost
Equity instruments
—
—
—
—
—
—
(44,907)
(50,807)
—
5,901
—
—
—
—
16,440
1,286
37,012
13,644
9,996
1,335
(21,859)
2,313
—
—
—
—
—
—
—
—
—
—
—
—
14,650,948
3,815,067
(51,029)
(2,744)
(28,467)
13,644
—
—
—
—
—
—
—
—
—
—
—
124
The cumulative amount of adjustments to fair value hedging instruments remaining on the balance sheet for hedged
items no longer adjusted for hedging gains and losses at December 31, 2021 is EUR (7) million.
The net impact of the hedges is as follows:
EUR Thousands
2022
Amount reclassified to profit or loss due to:
Gains/(losses)
recognised in
other
comprehensive
income
Ineffective
coverage
recognised in
the
income
statement
—
—
—
86,252
89,020
(2,768)
Income statement line item that
includes the ineffectiveness of
cash flows
Gains/(losses) financial assets
and financial liabilities
Gains/(losses) financial assets
and financial liabilities
Gains/(losses) financial assets
and financial liabilities
73,003
84,513
2,645
(14,155)
—
—
348
348
—
—
—
—
73,003
86,600
Income statement line item including
the reclassified items
Net interest income/Assets Gains/
(losses)/ Financial Liabilities
Net interest income/Assets Gains/
(losses)/ Financial Liabilities
Net interest income/Assets Gains/
(losses)/ Financial Liabilities
Covered
transaction
affecting
the income
statement
—
—
—
(31,593)
5,650
(7,705)
(29,538)
—
—
(31,593)
EUR Thousands
2021
Income statement line item that
includes the ineffectiveness of
cash flows
Gains/(losses) financial assets
and financial liabilities
Gains/(losses)
recognised in
other
comprehensive
income
Ineffective
coverage
recognised in
the
income
statement
—
—
—
—
9,171
9,528
(357)
19,312
1,717
Gains/(losses) financial assets
and financial liabilities
9,633
4,956
4,723
—
—
—
1,911
—
(194)
—
—
19,312
10,888
Gains/(losses) financial assets
and financial liabilities
Amount reclassified to profit or loss due to:
Income statement line item including
the reclassified items
Net interest income/Assets Gains/
(losses)/ Financial Liabilities
Net interest income/Assets Gains/
(losses)/ Financial Liabilities
Net interest income/Assets Gains/
(losses)/ Financial Liabilities
Covered
transaction
affecting
the income
statement
—
—
—
—
(17,996)
(2,856)
(6,751)
(8,390)
—
—
—
(17,996)
Fair value hedges
Interest rate risk
Interest rate risk and Exchange rate risk
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate risk
Hedges of net investments in foreign
operations
Exchange rate risk
Fair value hedges
Interest rate risk
Interest rate risk and Exchange rate risk
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate risk
Hedges of net investments in foreign
operations
Exchange rate risk
()*) At 31 December 2021, the detail of the total amount registered under Gains/losses recognised in other comprehensive income
doesn't include EUR 332 thousand corresponding to Non-controlling interests from 2020.
125
The impact in shareholder’s equity in 2022 is as follows:
EUR Thousands
Balance at beginning of period 2021
Cash flow hedges
Interest rate risk
Transferred to the income statement
Other reclassifications
Exchange rate risk
Transferred to the income statement
Other reclassifications
Interest rate and exchange rate risk
Transferred to the income statement
Other reclassifications
Non-controlling interests
Taxation
Balance at end of period 2021
Cash flow hedges
Interest rate risk
Changes in equity transferred to the income statement
Other equity movements
Exchange rate risk
Changes in equity transferred to the income statement
Other equity movements
Interest rate and exchange rate risk
Changes in equity transferred to the income statement
Other equity movements
Non-controlling interests
Taxation
Balance at end of period 2022
(3,586)
19,312
9,633
2,856
6,777
4,956
6,751
(1,795)
4,723
8,390
(3,667)
(520)
(5,036)
10,170
73,003
84,513
(5,650)
90,163
2,645
6,891
(4,246)
(14,155)
29,538
(43,693)
(6,334)
(14,727)
62,112
126
30. Interest income
“Interest Income” in the consolidated income statements for 2022 and 2021 includes the interest accrued in the year
on all financial assets whose implicit or explicit return is calculated by applying the effective interest method,
irrespective of measurement at fair value, with the exception of trading derivatives; 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 items of interest income earned by the Group in 2022 and 2021 is as follows:
Loans and advances – Central banks
Loans and advances – Credit institutions
Debt instruments
Loans and advances - Customers
Non – performing assets
Rectification of income as a result of heading
transactions and other interest (*)
EUR Thousands
2022
2021
—
26,960
39,031
4,018,879
3,548
—
32,110
8,290
3,825,903
3,514
106,815
4,195,233
151,547
4,021,364
(*) Includes de recognized amount corresponding to TLTRO III (see note 17).
Most of the interest income was generated by the Group's financial assets that are measured at amortised cost or at
fair value through accumulated other comprehensive income.
31. Interest expenses
“Interest Expense” in the consolidated income statements for 2022 and 2021 includes the interest accrued 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, with the exception of trading derivatives; the
rectifications of cost as a result of hedge accounting; and the interest cost attributable to pension funds.
The detail of the main items of interest expense and similar charges incurred by the Group in 2022 and 2021 is as
follows:
Deposits from the Bank of Spain and
other central banks
Deposits from credit institutions
Customer deposits
Marketable debt securities
Subordinated liabilities
Provisions for pensions (Notes 2-r, 2-s
and 21) (*)
Rectification of expenses as a result of
hedging transactions
Other interest
EUR Thousands
2022
2021
29,514
55,488
165,595
318,350
13,633
8,680
801
31,965
624,026
41,270
31,834
125,637
201,476
14,560
7,395
(1,399)
42,619
463,392
(*) Includes the interest on post-employment and other long-term benefits of Spanish entities amounting
to 369 y 472 thousand, respectively in 2022 (EUR 124 y 171 thousand respectively in 2021) and of foreign
entities, amounting to EUR 7,837 thousand (EUR 7,100 thousand in 2021) - see Note 21-.
Most of the interest expense were generated by the Group's financial liabilities that are measured at amortised cost.
127
32. Income from entities accounted for using the equity method
“Income from entities accounted for using the equity method” in the consolidated income statements for 2022 and
2021 includes the amount of profit or loss attributable to the Group generated during the year by associates and joint
ventures.
The detail of this item on 31 December 2022 and 2021 is as follows (see Note 12):
Santander Consumer Bank S.A. (Polonia)
Fortune Auto Finance Co., Ltd.
PSA Insurance Europe, Ltd
PSA Life Insurance Europe Ltd
Santander Consumer Multirent, S.A.
PSA Finance Polska SP. Z O.O.
Other
EUR Thousands
2022
2021
32,941
28,335
20,260
12,032
2,093
1,060
15
96,736
9,730
28,549
12,794
9,867
1,719
1,026
105
63,790
33. Income from entities accounted for using the equity method
The balance of “Commission Income” in the consolidated income statements for 2022 and 2021 comprises the amount
of the fees and commissions accrued in the year, except those that form an integral part of the effective interest rate on
financial instruments, which are recognised under “Interest Income” in the accompanying consolidated income
statements.
128
The detail of “Commission Income” in the consolidated income statements for 2022 and 2021 is as follows:
Collection and payment services:
Bills
Demand accounts
Cards
Checks and orders
Marketing of non-banking financial
products:
Securities services:
Securities trading
Administration and custody
Equity management
Other:
Financial guarantees
Commitment fees
Other fees and commissions
Collection and payment services:
EUR Thousands
2022
2021
5,543
17,794
65,237
25,240
113,814
5,078
18,916
58,539
24,183
106,716
876,323
876,323
846,187
846,187
24,261
1,046
8,599
33,906
28,913
1,396
6,622
36,931
6,065
4,899
98,018
108,982
1,133,025
6,112
4,524
95,186
105,822
1,095,656
34. Commission expenses
The balance of “Commission Expense” in the consolidated income statements for 2022 and 2021 comprises the
amount of fees and commissions paid or payable by the Group accruing in the year, except those that form an integral
part of the effective interest rate on financial instruments, which are recognised under “Interest Expense” in the
accompanying consolidated income statements.
129
The detail of “Commission expenses” in the consolidated income statements for the years ended 31 December 2022
and 2021 is as follows:
Brokerage fees on lending and deposit transactions
Fees and commissions assigned in respect of off-balance-
Fees and commissions assigned for collection and return of
Fees and commissions assigned in other concepts
Fees and commissions assigned for cards
Fees and commissions assigned for securities
Fees and commissions assigned to intermediaries
Other fees and commissions for placement of insurance
Other fees and commissions
EUR Thousands
2022
2021
771
15,928
7,640
16,275
11,084
17,045
71,782
164,298
44,666
349,489
628
24,532
7,517
12,556
5,934
20,575
67,181
161,212
34,047
334,182
35. Gains or losses on financial assets and liabilities
The detail of this item of the consolidated income statements for 2022 and 2021, by nature of the instrument that
originates the change, is as follows:
Gains/(losses) on financial instruments not at fair value through profit
or loss, net
Financial assets at amortised cost
Other
Gains/(losses) on financial instruments held for trading, net
Gains/(losses) on non-trading financial assets mandatorily at fair
value through profit or loss, net
Gains/(losses) on financial instruments at fair value through profit or
loss, net
Gains/(losses) from hedge accounting, net (Note 29)
EUR Thousands
2022
2021
Income/(Expenses)
807
2
805
(6,654)
(841)
(5,813)
(10,077)
1,413
—
—
7
—
86,600
77,330
10,889
5,655
36. Currency translation differences (net)
"Currency translation differences (net)” in the consolidated income statements for 2022 and 2021 includes basically
the gains or losses on currency trading, the differences that arise on translating monetary items in foreign currencies to
the functional currency, and those disclosed on non-monetary assets in foreign currency at the time of their disposal.
130
37. Other operating income
The detail of “Other Operating Income” in the consolidated income statements for 2022 and 2021 is as follows:
Sales and income from non-financial services (*)
Other operating income
EUR Thousands
2022
2021
436,344
114,734
215,027
168,048
551,078
383,075
(*) As of December 31, 2022, primarily to operating lease income in Germany from Allane SE, Allane Mobility
Consulting GmbH, in Holland from Riemersma Leasing B.V. and Santander Consumer Leasing Gmbh.
38. Other operating expenses
The detail of “Other Operating Expenses” in the consolidated income statements for 2022 and 2021 is as follows:
Contributions to deposit guarantee funds and other national
resolution funds (Note 1-d)
Changes in inventories (*)
Other
EUR Thousands
2022
2021
81,891
82,156
216,568
117,529
415,988
23,233
219,947
325,336
(*) Relates mainly to the expenses related to the vehicle operating lease business in Germany and the
Netherlands.
39. Staff costs
“Staff Costs” in the consolidated income statements for 2022 and 2021 includes the remuneration accrued in the year
regarding to permanent or temporary employees on the payroll, regardless of their functions or duties.
The detail of “Staff Costs” on 31 December 2022 and 2021 is as follows:
Wages and salaries
Social security costs
Additions to pension provisions (Note 21) (*)
Contributions to defined contribution pension funds (Note 21)
Contributions to plans - Spanish entities
Contributions to plans - foreign entities
Share-based payment costs
Other staff costs
Termination benefits
EUR Thousands
2022
2021
649,661
101,065
13,312
40,902
3,034
37,868
7
77,280
1,955
884,182
620,502
99,850
13,932
39,566
2,223
37,343
—
67,332
1,448
842,630
131
(*) Of which:
•
•
•
•
In 2022, EUR 374 thousand relate to “current service cost of defined benefit post-employment obligations
Spanish entities” (EUR 333 thousand in 2021) (see Notes 2-r and 21).
In 2022, EUR 9,486 thousand relate to “current service cost of defined benefit post-employment obligations
Germany” (EUR 10,042 thousand in 2021) (see Notes 2-r and 21).
In 2022, EUR 3,426 thousand relate to “current service cost of defined benefit post-employment obligations
foreign entities” (EUR 3,032 thousand in 2021) (see Notes 2-r and 21).
In 2022, EUR 26 thousand relate to “current service cost of other long-term defined benefit obligations -
Spanish entities” (EUR 9 thousand in 2021) (see Notes 2-s and 21).
The average number of employees at the Group in 2022 and 2021, by professional category, was as follows:
The Bank:
Senior executives
Middle management
Clerical staff
Other companies
Avg no. of employees
2021
2022
43
237
829
1,109
10,168
11,277
145
484
371
1,000
10,281
11,281
The functional breakdown, by gender, of the number of employees at the Group on 31 December 2022 and 2021 is as
follows:
Total
2022
Men
Women
Total
2021
Men
Women
Senior executives
Middle
management
Clerical staff and
other
97
1,262
73
772
24
87
490
1,326
70
823
17
503
10,061
11,420
4,914
5,759
5,147
5,661
9,794
11,207
4,651
5,544
5,143
5,663
On 31 December 2022 the Board of Directors of the Bank had 12 members (13 in 2021), of whom 1 were women (2
women in 2021).
The work relations between employees and the various Group companies are governed by the related collective
agreements or similar regulations.
As 31 December 2022 and 2021, certain employees of the Group’s subsidiaries are beneficiaries of the retribution plans
set forth in Note 5.
132
40. Other administrative expenses
The detail of “Other Administrative Expenses” in the consolidated income statements for 2022 and 2021 is as follows:
Property, fixtures and supplies
Other administrative expenses
Communications
Taxes other than income tax
Technology and systems
Public relations, advertising and publicity
Per diems and travel expenses
External services
Technical reports
Insurance premiums
Other
EUR Thousands
2021
2022
46,235
8,408
37,325
55,737
319,454
80,634
13,436
214,419
86,194
7,584
2,624
872,050
43,899
39,119
37,731
55,730
288,043
68,723
8,005
191,455
79,836
6,089
2,688
821,318
“Technical reports” in the foregoing table includes the fees paid for the services provided by the auditor of the Bank and
of certain Group companies, the detail being as follows:
Audit
Services related with the audit
Tax Services
Other services
Total
EUR Thousands
2021
2022
17.4
0.6
—
0.2
18.2
15.0
0.6
0.1
0.3
16.0
The heading “Audit” includes the fees corresponding to the audit of the individual and consolidated annual accounts of
Santander Consumer Finance, SA, as the case may be, of the companies that are part of the Group, the internal control
audit (SOx) for the entities of the Group that require so and the mandatory regulatory reports required of the auditor,
corresponding to the different locations of the Group.
The main concepts included in “Services related with the audit” correspond to aspects such as the issuance of Comfort
letters, or other reviews required by different regulations in relation to aspects such as, for example, securitizations.
The “Audit” and "Services related with the audit" captions include the fees corresponding to the audit for the year,
regardless of the date on which the audit was completed. In the event of subsequent adjustments, which are not
significant in any case, and for purposes of comparison, they are presented in this note in the year to which the audit
relates. The rest of the services are presented according to their approval by the Audit Committee.
The services commissioned from the Group's auditors meet the independence requirements stipulated by the Audit
Law (Law 22/2015, July 20), the US Securities and Exchange Commission (SEC) rules and the Public Company
Accounting Oversight Board (PCAOB), applicable to the Group, and they do not include in any case the execution of any
work that is incompatible with the audit function.
133
41. Impairment or reversal of impairment of non-financial assets
The detail of “Impairment charges or reversal of non-financial assets” for the years 2022 and 2021 is as follows:
Tangible Assets (*)
Intangible Assets (Nota 14 y 15)
Other
EUR Thousands
2022
2021
985
11,647
9,227
21,859
(2,701)
11,662
5,911
14,872
(*) As of 31 December 2022 and 2021, no impairment charges have been registered in relation with
own – use tangible assets – see Note 13.
The amounts registered under “impairment charges or reversal of non-financial assets – intangible assets” for the
years ended 31 December 2022 and 2021 corresponds mainly to impairment charges derived from the obsolescence of
intangible assets.
The amounts registered under “impairment charges or reversal of non-financial assets – intangible assets” for the
years ended 31 December 2022 and 2021 corresponds mainly to impairment charges derived from the obsolescence of
intangible - see Note 15.
42. Gains or losses on non-financial assets and investments, net
The detail of “gains or losses on non-financial assets and investments, net” for the years ended 31 December 2022 and
2021 is as follows:
Gains
Property, plant and equipment and intangible assets
Losses
Property, plant and equipment and intangible assets
EUR Thousands
2021
2022
Income/(Expenses)
791
632
1,423
(221)
(221)
1,202
803
—
803
(567)
(567)
236
43. Gains or losses on non – current assets not classified as held for sale from discontinued operations
The detail of this line item in the consolidated income statements for the years ended 31 December 2022 and 2021 is
as follows:
EUR Thousands
2022
2021
Income/(Expenses)
Net gains/(losses) on disposals:
(780)
(2,680)
Impairment losses (net) (Note 11)
652
(128)
(545)
(3,225)
134
44. Other information
a) Residual maturity periods and average interest rates
The detail, by maturity, of the balances of certain items in the consolidated balance sheets as of 31 December
2022 and 2021 is as follows:
2022
EUR thousands
On demand
Up to 1 month
1-3 Months
3-12 Months
1-5 Years
5+ Years
Total
Assets:
Cash and balances at central
banks
Financial assets at fair value
through other comprehensive
income
Debt instruments (Note 7)
Financial assets at amortised
cost
6,826,225
—
—
—
—
—
19,144
19,144
409,678
409,678
296,686
296,686
—
—
—
—
6,826,225
1,000
1,000
726,508
726,508
6,957,723
5,517,489
7,836,587
22,883,416
56,688,948
13,210,385
113,094,548
Debt instruments (Note 7)
—
105,025
1,086,118
2,106,033
2,887,885
—
6,185,061
Loans and advances
6,957,723
5,412,464
6,750,469
20,777,383
53,801,063
13,210,385
106,909,487
Central banks
Credit institutions (Note 6)
Customers (Note 10)
—
248,388
6,709,335
13,783,948
19,736
13,777
5,378,951
5,536,633
—
11,483
—
18,282
—
98,279
—
97
19,736
390,306
6,738,986
20,759,101
53,702,784
13,210,288
106,499,445
8,246,265
23,180,102
56,688,948
13,211,385
120,647,281
Liabilities:
Financial assets at amortised
cost-Deposits
Deposits
31,982,008
2,789,937
3,198,629
12,254,331
20,370,972
252,193
70,848,070
Central banks (Note 17)
—
13
66
9,140,720
Credit institutions (Note 17)
487,358
330,687
Customers (Note 18)
31,494,650
2,459,237
1,558,296
1,640,267
788,927
2,324,684
8,750,588
8,304,618
3,315,766
9,254
17,900,641
150,316
11,620,202
92,623
41,327,227
—
274,496
4,272,678
7,616,878
17,583,722
9,107,986
38,855,760
Debt instruments in issue
(Note 19)
Other financial liabilities
(Note 20)
Difference (assets – liabilities)
(18,624,336)
426,276
32,408,284
750,831
3,815,264
1,721,369
602
30,698
87,623
77,370
1,373,400
7,471,909
19,901,907
38,042,317
9,437,549
111,077,230
774,356
3,278,195
18,646,631
3,773,836
9,570,051
135
2021
EUR Thousands
On demand
Up to 1
month
1-3 Months
3-12
Months
1-5 Years
5+ Years
Total
18,965,097
—
—
—
70,162
70,162
199,833
199,833
278,187
278,187
505,578
505,578
—
—
—
— 18,965,097
1,000
1,000
1,054,760
1,054,760
6,449,444
5,411,889
6,614,870
21,730,588
51,757,354
11,699,209 103,663,354
—
497,492
650,711
1,500,550
823,643
— 3,472,396
6,449,444
4,914,397
5,964,159
20,230,038
50,933,711
11,699,209 100,190,958
Assets:
Cash and balances at central
banks
Financial assets at fair value
through other comprehensive
income
Debt instruments (Note 7)
Financial assets at amortised
cost
Debt instruments (Note 7)
Loans and advances
Central banks
Credit institutions (Note 6)
289,216
—
10,452
17,961
—
—
—
—
10,452
99,178
7,237
197,358
10,273
621,223
Customers (Note 10)
6,160,228
4,885,984
5,864,981
20,222,801
50,736,353
11,688,936
99,559,283
25,484,703
5,611,722
6,893,057
22,236,166
51,757,354
11,700,209 123,683,211
Liabilities:
Financial assets at amortised
cost-Deposits
Deposits
29,562,819
4,591,332
2,557,760
5,890,881
27,602,970
660,485
70,866,247
Central banks (Note 17)
—
14
72
1,982,035
18,005,278
10,100
19,997,499
Credit institutions (Note 17)
206,869
268,011
1,298,551
2,912,656
6,636,415
457,767
11,780,269
Customers (Note 18)
29,355,950
4,323,307
1,259,137
996,190
2,961,277
192,618
39,088,479
Debt instruments in issue
(Note 19)
Other financial liabilities
(Note 20)
511,243
3,933,627
1,808,526
6,209,612
20,445,820
7,743,403
40,652,231
251,706
608,107
678,561
32,903
98,891
81,385
1,751,553
30,325,768
9,133,066
5,044,847
12,133,396
48,147,681
8,485,273 113,270,031
Difference (assets – liabilities)
(4,841,065)
(3,521,344)
1,848,210
10,102,770
3,609,673
3,214,936
10,413,180
For a proper understanding of the information included in the tables above, it should be noted that the these were
prepared taking into consideration the contractual maturities of the financial instruments detailed therein and,
therefore, they do not take into account the stability of certain liabilities, such as the current accounts of customers,
and the potential for renewal which has historically been a feature of the Group's financial liabilities. Since the tables
include only financial instruments at year-end, they do not show the Group's investments or the cash flows generated
therefrom, or the cash flows relating to the Bank's results.
136
b) Equivalent euro value of assets and liabilities
The detail of the equivalent euro value of the main foreign currency balances in the accompanying consolidated
balance sheets as of 31 December 2022 and 2021, based on the nature of the related items, is as follows:
Cash and balances at central banks
Financial instruments held for trading
Financial assets at fair value through
other comprehensive income
Derivatives - hedge accounting
Assets included in disposal groups
Investments in joint ventures and
associates
Tangible assets
Intangible assets
Tax assets and liabilities
Financial instruments at amortised cost
Liabilities included in disposal groups
classified as held for sale
Provisions
Others
Equivalent value in EUR millions
2021
2022
Assets
Liabilities
Assets
Liabilities
865
38
1
63
7
686
104
221
261
17,999
—
—
51
20,296
—
39
—
31
—
—
—
—
212
11,650
—
25
264
12,221
766
19
2
16
6
643
104
230
169
18,063
—
—
118
20,136
—
20
—
2
—
—
—
—
195
12,683
—
19
264
13,183
c) Fair value of financial assets and liabilities not measured at fair value
The financial assets owned by the Group are carried at fair value in the accompanying consolidated balance
sheets, except for items included under cash, cash balances at central banks and others deposits on demand,
loans and receivables, equity instruments whose market value, if any, cannot be estimated reliably and
derivatives that have these instruments as their underlyings and are settled by delivery thereof, if any.
Similarly, the Group’s financial liabilities -except for financial liabilities held for trading and derivatives-are
carried at amortised cost in the accompanying consolidated balance sheet.
137
i)
Financial assets at other than fair value
Following is a comparison of the carrying amounts on 31 December 2022 and 2021 of the Group's financial
assets measured at other than fair value and their respective fair values at the end of 2022 and 2021:
2022
2021
EUR Thousands
Assets
Carrying
amount
Fair Value
Level 1
Level 2
Level 3
Carrying
amount
Fair Value
Level 1
Level 2
Level 3
Financial
assets at
amortised cost
Loans and
advances
Debt
instruments
106,909,487
104,883,727
—
246,580
104,637,147
100,190,958
101,768,244
—
240,620
101,527,624
6,185,061
6,097,660
6,097,660
—
—
3,472,396
3,501,586
3,501,586
—
—
113,094,548
110,981,387
6,097,660
246,580
104,637,147
103,663,354
105,269,830
3,501,586
240,620
101,527,624
ii) Financial liabilities at other than fair value
Following is a comparison of the carrying amounts on 31 December 2022 and 2021 of the Group's financial
liabilities measured at other than fair value and their respective fair values at the end of 2022 and 2021:
2022
2021
EUR Thousands
Carrying
amount
Fair Value
Level 1
Level 2
Level 3
Carrying
amount
Fair Value
Level 1
Level 2
Level 3
Liabilities
Financial
liabilities at
amortized cost
Deposits
Debt securities
in issue and
other financial
liabilities (*)
70,848,070
69,483,115
— 33,413,317
36,069,798
70,866,247
70,688,225
— 35,495,682
35,192,543
38,855,760
37,826,675
4,979,748
29,533,203
3,313,724
40,652,231
40,969,477
6,920,769
30,431,583
3,617,125
109,703,830
107,309,790
4,979,748
62,946,520
39,383,522 111,518,478 111,657,702
6,920,769
65,927,265
38,809,668
(*) Additionally, other financial liabilities are registered amounting to EUR 1,373,400 thousand and EUR 1,751,553 thousand
at December 2022 and 2021 respectively.
3. Valuation methods and inputs used
The main valuation methods and inputs used in the estimates as of 31 December 2022 and 2021 of the fair
values of the financial assets and liabilities in the foregoing tables were as follows:
•
Loans and receivables: 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 assets at amortized cost:
1)
The fair value of deposits from central banks was taken to be their carrying amount since they are mainly
short-term balances.
2) Deposits from credit institutions: the fair value was obtained by the present value method using market
interest rates and spreads.
138
3)
Customer deposits: the fair value was estimated using the present value method. The estimates were
made considering factors such as the expected maturity of the transactions and the Group’s current cost of
funding in similar transactions.
4) Debt securities in issue: 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.
45. Geographical and business segment reporting
a) Geographical segments
This primary level of segmentation, which is based on the Group's management structure, comprises six
segments relating to six operating areas. The operating areas, which include all the business activities carried
on therein by the Group, are Spain, Italy, Germany, Nordics (Scandinavia), France and Other.
The financial statements of each operating segment are prepared by aggregating the figures for the Group’s
various business units. The basic information used for segment reporting comprises the accounting data of the
legal units composing each segment and the data available from the management information systems. All
segment financial statements have been prepared on a basis consistent with the accounting policies used by
the Group. Consequently, the sum of the figures in the income statements of the various segments is equal to
those in the consolidated income statements. 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 Group's balance
sheet.
Additionally, for segment presentation purposes, the shareholders' equity shown for each geographical unit is
that reflected in the related separate financial statements and is offset as a capital endowment made by the
Spain area, which acts as the holding unit for the other businesses; thus, the Group's total shareholders' equity
is reflected.
The condensed balance sheets and income statements of the various geographical segments are as follows:
139
Consolidated balance sheet (Condensed)
Spain
Italy
Germany
Nordics
France
Other
Intra-group
eliminations
(*)
Total
Spain
Italy
Germany
Nordics
France
Other
Intra-group
eliminations
(*)
Total
2022
2021
EUR Thousands
Financial assets at amortised cost – Customers
13,435,196
10,180,074
38,654,354
17,394,410
16,353,163
5,794,708
6,643,981
108,455,886
13,035,276
8,917,503
35,653,570
17,087,823
14,561,647
7,076,402
3,227,062
99,559,283
Financial assets held-for-trading
Debt instruments
Financial assets at amortised cost – Central banks and credit
institutions
3,540
1,926,404
2,444,141
—
120,854
9,916
450,751
3,619,344
492,215
944,262
2,451,564
1,807,037
3,394
249,295
209,173
—
1,000
356,960
494,664
174,004
6,913,013
(456)
(3,675)
139
7,649
1,449
—
674,085
1,681,037
968,561
70,162
455
1,000
42,240
51,476
1,138,579
4,529,749
853,300
(8,299,435)
410,042
713,698
370,482
276,132
1,866,363
148,170
1,066,920
(3,810,090)
631,675
Tangible and intangible assets
150,372
71,370
2,990,795
129,642
31,549
55,075
1,832,747
5,261,550
1,352,435
519,595
3,143,859
1,088,397
1,711,537
657,028
271,688
8,744,539
72,481
386,014
60,403
2,222,982
149,818
34,479
52,452
1,777,237
4,369,852
926,770
12,061,011
991,718
1,490,685
620,474
5,312,482
21,789,154
19,312,088
12,166,052
50,980,770
20,921,617
18,558,111
7,361,111
979,945
130,279,694
14,203,338
10,949,382
51,902,381
21,065,732
16,305,143
8,817,703
7,687,510
130,931,189
304,790
1,390,953
25,209,910
7,217,679
3,386,021
3,899,821
(81,947)
41,327,227
576,421
1,358,711
23,497,129
7,340,655
3,467,653
2,993,973
(146,064)
39,088,478
1,791,678
684,647
6,901,467
4,476,361
4,775,402
384,083
19,842,122
38,855,760
2,655,633
832,392
7,701,052
5,105,356
5,123,137
506,108
18,728,553
40,652,231
Cash and other
Total assets
Customer deposits
Debt securities in issued
Deposits from central banks and credit institutions
15,490,700
8,172,755
11,124,669
5,904,385
7,175,670
1,830,484
(20,177,820)
29,520,843
8,830,912
7,006,931
13,655,489
5,259,407
4,667,523
4,276,266
(11,918,761)
31,777,767
Other liabilities and equity accounting
1,258,558
749,020
2,816,140
478,134
2,573,047
244,552
236,943
8,356,394
1,080,610
610,427
2,507,292
486,877
2,098,248
Shareholders’ equity
466,362
1,168,677
4,928,585
2,845,057
647,970
1,002,171
1,160,648
12,219,470
1,059,761
1,140,919
4,541,418
2,873,438
948,582
344,553
696,804
582,182
7,710,189
441,602
11,702,524
Total funds under management
19,312,088
12,166,052
50,980,771
20,921,616
18,558,110
7,361,111
979,946
130,279,694
14,203,337
10,949,380
51,902,380
21,065,733
16,305,143
8,817,704
7,687,512
130,931,189
2022
2021
Consolidated income statement (Condensed)
Spain
Italy
Germany
Nordics
France
Other (*)
Total
Spain
Italy
Germany
Nordics
France
Other (*)
Total
NET INTEREST INCOME
540,404
357,183
1,025,770
668,299
532,357
447,194
3,571,207
579,292
357,740
1,032,130
697,293
514,898
376,619
3,557,972
Income from entities accounted for using the equity method
Net commissions
Profit/(loss) from financial operations
Other operating income/(expense)
OPERATING INCOME
16,049
62,799
8,244
9,618
3,489
80,755
12,277
(5,564)
28,486
439,316
12,215
152,164
1,865
36,344
(3,273)
(1,972)
637,114
448,140
1,657,950
701,262
10,115
104,558
48,989
(15,614)
680,405
36,732
59,764
(18,766)
(3,306)
96,736
783,536
59,686
135,326
14,792
57,620
189
7,321
3,200
74,389
(225)
(11,185)
27,172
432,734
1,086
88,089
2,583
31,252
3,003
(3,483)
10,702
109,348
1,655
(7,115)
5,341
56,131
(4,384)
(15,613)
63,790
761,474
1,324
58,014
521,620
4,646,491
659,214
423,919
1,581,211
730,648
629,488
418,094
4,442,574
Administrative and general expenses
(229,462)
(145,216)
(708,889)
(242,502)
(194,244)
(235,919)
(1,756,232)
(222,765)
(129,993)
(681,992)
(269,036)
(190,675)
(169,487)
(1,663,948)
Staff costs
Other
Amortisation
Provisions or reversal from provisions and impairment loss
charges (net)
PROFIT OR LOSS BEFORE TAX
PROFIT OR LOSS IN RESPECT OF CONTINUING
OPERATIONS
Profit or loss in respect of discontinued operations
CONSOLIDATED PROFIT OR LOSS
Attributable to the parent
(92,691)
(136,771)
(14,150)
(118,174)
275,329
(72,383)
(72,833)
(16,716)
(47,661)
238,547
(418,797)
(134,750)
(87,748)
(77,813)
(884,182)
(91,862)
(290,092)
(107,752)
(106,496)
(158,106)
(872,050)
(130,903)
(101,587)
(25,451)
(8,003)
(23,276)
(189,183)
(14,503)
(157,005)
690,470
(73,645)
359,664
(48,466)
429,692
(48,232)
(493,183)
(169,313)
214,191
2,207,893
252,633
(65,484)
(64,509)
(15,250)
(38,016)
240,660
(397,702)
(140,352)
(84,249)
(62,981)
(842,630)
(284,290)
(128,684)
(106,426)
(106,506)
(821,318)
(105,050)
(24,423)
(7,341)
(24,753)
(191,320)
(149,045)
(115,206)
645,124
321,983
(37,164)
394,308
(54,630)
(563,374)
169,224
2,023,932
205,405
165,600
469,856
272,881
340,528
147,353
1,601,623
183,724
157,682
438,460
247,299
310,260
153,236
1,490,661
205,405
149,887
165,600
129,422
469,856
433,407
272,881
272,881
340,528
147,353
1,601,623
160,238 1,241,714,165
1,242,860
183,724
126,381
157,682
125,112
438,460
404,848
247,299
247,299
310,260
145,162
153,236
1,490,661
125,888
1,174,689
(*) Includes reconciliation between segment information and the consolidated income statements, as well as corporate activities.
140
Additionally, and in agreement with regulatory requirements applicable to the Bank, below is a detail:
1.
By the geographical areas indicated in the aforementioned legislation, of the balance of “Interest and Similar
Income” recognised in the consolidated income statements for 2022 and 2021:
Spain
Abroad:
European Union
OECD countries
Other countries
Total
EUR Thousands
2022
2021
761,812
776,504
1,546,563
886,859
—
2,433,422
3,195,234
2,525,109
719,751
—
3,244,860
4,021,364
2.
A distribution of revenue (interest income, dividend income, commission income, gains/(losses) on financial
instruments not at fair value through profit or loss, gains/(losses) on financial assets held for trading, profit or
loss form financial assets not intended for trading compulsory valued at fair value with changes in profit or
loss or gains/(losses) from hedge accounting, and other operating income) by geographical segment as
presented to the Group. For the purposes of arranged in the following table, 2022 and 2021.
Revenue (EUR Thousand)
Revenue from external
customers
Inter-segment revenue
Total Revenue
2022
2021
2022
2021
2022
2021
969,368
599,648
2,051,454
845,036
798,404
702,770
959,559
547,300
2,006,721
799,749
734,574
458,122
206,602
23,652
441,713
94,663
523,491
256,753
118,184
14,548
448,935
64,979
507,853
183,501
1,175,970
623,300
2,493,167
939,699
1,321,895
959,523
1,077,743
561,848
2,455,656
864,728
1,242,427
641,623
—
5,966,680
—
5,506,025
(1,546,874)
—
(1,338,000)
—
(1,546,874)
5,966,680
(1,338,000)
5,506,025
Spain and Portugal
Italy
Germany
Scandinavia
France
Other
Inter-segment
revenue
adjustments and
eliminations
Total
2) Business segments
At the secondary level of segment reporting, the Group is structured into two main lines of business and a third
segment that includes those less relevant.
The “Automotive” business segment comprises all the businesses related to the financing of new and used
vehicles, including operating and finance lease transactions, as well as the contribution to the result
consolidation of all the activities carried out by the Group related to the financing granted with collateral
received as well as stock credit for vehicles sold by dealers.
The “Consumer Finance” business segment reflects the income from the consumer finance business, the direct
finance segment, regardless of the distribution channel – physical and online- and includes all of the products
commercialized for these purposes: fixed-term loans, credit cards, etc.
141
“Other” includes operations not included in any of the aforementioned categories, mainly mortgages and
corporate loans.
The condensed consolidated income statements for 2022 and 2021, by business, are as follows:
Consolidated income statement (Condensed)
EUR Thousand
2022
Vehicles
Consumer
Financing
Other (*)
Total
NET INTEREST INCOME
2,263,273
972,172
335,762
3,571,207
Income from entities accounted for using the equity method
Net commissions
Profit/(loss) from financial operations
Other operating income
OPERATING INCOME
71,275
450,423
16,649
202,696
12,293
282,422
6,878
8,648
13,168
50,691
36,159
(76,018)
96,736
783,536
59,686
135,326
3,004,316
1,282,413
359,762
4,646,491
Administrative and general expenses
(961,574)
(472,428)
(322,230)
(1,756,232)
Staff cost
Other
Amortisation
(453,899)
(229,598)
(200,685)
(884,182)
(507,675)
(242,830)
(121,545)
(872,050)
(65,290)
(43,210)
(80,683)
(189,183)
Provisions, Impairment losses on financial assets
PROFIT/(LOSS) BEFORE TAX
(171,312)
(283,029)
(38,842)
(493,183)
1,806,140
483,746
(81,993)
2,207,893
PROFIT/(LOSS) IN RESPECT OF CONTINUING OPERATIONS
1,350,989
342,973
(92,339)
1,601,623
Profit(/loss) in respect of discontinued operations
CONSOLIDATED PROFIT/(LOSS)
1,350,989
342,973
(92,339)
1,601,623
Consolidated income statement (Condensed)
EUR Thousand
2021
Vehicles
Consumer
Financing
Other (*)
Total
NET INTEREST INCOME
2,289,768
1,024,952
243,252
3,557,972
Income from entities accounted for using the equity method
Net commissions
Profit/(loss) from financial operations
Other operating income
OPERATING INCOME
58,591
443,830
218
9,929
258,384
21
(4,730)
59,260
1,085
124,580
(1,416)
(65,150)
63,790
761,474
1,324
58,014
2,916,987
1,291,870
233,717
4,442,574
Administrative and general expenses
(900,859)
(462,547)
(300,542)
(1,663,948)
Staff cost
Other
Amortisation
(395,416)
(217,623)
(229,591)
(842,630)
(505,443)
(244,924)
(64,372)
(46,430)
(70,951)
(80,518)
(821,318)
(191,320)
Provisions, Impairment losses on financial assets
(211,754)
(285,159)
(66,461)
(563,374)
Impairment losses on financial assets (net)
1,740,002
497,734
(213,804)
2,023,932
PROFIT/(LOSS) BEFORE TAX
1,257,492
353,329
(120,161)
1,490,660
PROFIT/(LOSS) IN RESPECT OF CONTINUING OPERATIONS
—
—
—
—
CONSOLIDATED PROFIT/(LOSS)
1,266,492
356,329
(132,160)
1,490,661
•
Includes mainly the results from the deposit and managed asset businesses, which are not individually material for the Group as a whole,
and those arising from the Group’s financial management activity.
142
46. Related parties
Following is a detail of the transactions performed by the Group with its related parties on 31 December 2022 and
2021, distinguishing between associates, Santander Group entities, members of the Bank's Board of Directors and the
Bank’s senior managers, and of the income and expenses arising from the transactions with these related parties in
2022 and 2021. Related party transactions were made on terms equivalent to those prevailing in arm's-length
transactions.
EUR Thousand
2022
2021
Associates
Santander
group
entities
Board
Members
(*)
Senior
management
(**)
Associates
Santander
Group
Entities
Board
Members
(**)
Senior
Management
(**)
Assets:
Cash, cash balances at central banks and other
deposits on demand
Debt instruments
Loans and advances:
Customers
Credit institutions
Trading Derivatives (Note 9)
Hedging derivatives
Other assets
Liabilities:
Financial liabilities at amortized cost
Deposits from credit institutions (Note 17)
Customer deposits
Marketable debt securities
Other financial liabilities
Trading Derivatives (Note 9)
Hedging Derivatives
Other liabilities
Income statement
Interest income
Interest expenses
Commission income
Commission expense
Gains or losses on financial assets and liabilities no
measured at fair value through profit or loss, net
Gains or losses of financial assets and liabilities held
for trading, net
Gains or losses from hedge accounting, net
Exchange differences
Other operating income
Other operating expenses
Administrative expenses
Other gains/losses
Memorandum items
Contingent commitments
Contingent liabilities
Other commitments
—
—
727,896
—
58,675
584,591
37,111
341,326
21,564
243,265
—
—
334,747
580,245
9,710
7,369
59,398 9,827,561
— 9,761,171
59,398
66,390
— 6,720,540
25,603
17,327
—
—
307,105
150,346
1,989
42,959
5,160
7,908
— (105,415)
135,902
158,051
(2)
(5,758)
—
—
—
—
353
—
—
1,161
319,060
152,469
10,735
(3)
(3,386)
(167,230)
—
—
—
—
—
29,298
—
750,238
—
—
—
14
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
—
—
—
—
—
—
—
—
810,307
—
149,421
411,127
40,597
305,347
108,824
105,780
—
—
6,431
29,519
55,849
8,920
112,786 9,942,182
— 9,895,822
259
112,786
46,360
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 5,259,465
23,206
624,434
—
—
695
35,449
69,301
33,374
815
7,483
—
(42,673)
137,676
(181)
36,547
(5,074)
—
—
—
—
285
19,375
— (160,298)
353
—
4,785
(122)
(4,117)
(149,982)
—
—
82,964
26,318
—
—
—
737,237
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,659
1,659
—
—
—
2
3,086
—
3,086
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(*) Excluding those entities belonging to the Santander Group that were classified as associates in these notes to the
consolidated financial statements.
(**) See Notes 5-b and 5-c.
143
47. Risk management
I. Risk management
Corporate principles
The Santander Group, of which Santander Consumer Finance forms part, has defined excellence in risk
management as a strategic objective. It has always been a priority area of action throughout more than 150 years
of history.
In recent years, the strategy has been accelerated to anticipate and respond to the major challenges of a constantly
changing economic, social and regulatory environment.
Therefore, the risk function is more important than ever for the Santander Group to remain a solid, safe and
sustainable bank, an example for the entire financial industry and a benchmark for all that aspire to turn risk
leadership into a competitive advantage.
Santander Consumer Finance aims to build the future by managing all risks in advance and protecting the present
thanks to a robust control environment. The risk function is based on the following pillars, which are aligned with
the Santander Group's strategy and business model and take account of the recommendations of supervisory and
regulatory bodies, and best market practices:
1.
2.
3.
4.
5.
6.
The business strategy is defined within the risk appetite. Santander Consumer Finance's Board determines
the amount and type of risk deemed reasonable to assume when implementing its business strategy and
development within objective, verifiable limits consistent with the risk appetite for each relevant activity.
All risks must be managed by the units that generate them through advanced, integrated business models
and tools. Santander Consumer Finance is promoting advanced risk management using innovative models
and metrics, combined with a control, reporting and escalation framework that enables risks to be identified
and managed from different perspectives.
Anticipatory thinking for all types of risks must be integrated into risk identification, assessment and
management processes.
The risk function's independence spans all risks and provides adequate separation between risk-generating
and risk-controlling units. It implies that it has sufficient authority and direct access to the management and
governance bodies responsible for setting and overseeing the risk strategy and policies.
Risk management requires the best processes and infrastructures. Santander Consumer Finance aims to be a
benchmark in the development of infrastructures and processes to support risk management.
A risk culture embedded throughout the organisation, comprising a set of attitudes, values, skills and
behavioural patterns for all risks. Santander Consumer Finance understands that advanced risk management
cannot be achieved without a strong and stable risk culture being present in each of its activities.
144
Risks map
Santander Consumer Finance has in place a recurring process for identifying the material risks to which it is or
could be exposed, as reflected in the risk map. Material risks must be covered by the risk profile assessment
exercise, risk appetite, risk strategy and ICAAP/ILAAP. Below is the latest update of Santander Consumer Finance's
risk map.
The first level includes the following risks (General Risks Framework):
•
Credit risk is the risk of financial loss arising from a contractual breach or impairment of the credit quality
of a customer or other third party that Santander Consumer Finance has financed or in respect of whom a
contractual obligation has been assumed.
• Market risk is the risk incurred as a result of changes in market factors that affect the value of positions in
trading portfolios. This risk is not considered relevant within Santander Consumer Finance since it is not a
trading institution.
•
•
•
Liquidity risk is the risk that Santander Consumer Finance does not have the liquid financial assets required
to meet its obligations when due, or can only obtain them at a high cost.
Structural risk is the risk arising from the management of balance sheet items, in the banking portfolio and
in relation to insurance and pension activities.
Capital risk is the risk that Santander Group does not have sufficient capital, in quantity or quality, to meet
its internal business objectives, regulatory requirements or market expectations.
• Operational risk is defined as the risk of loss due to inadequacy or failure of internal processes, staff and
systems or due to external events. This definition includes legal risk.
•
•
Financial crime risk is the risk derived from actions or the use of the group's means, products and services
in activities of a criminal or illegal nature. These activities include, but are not limited to, money laundering,
terrorist financing, violation of international sanctions programs, corruption, bribery, and tax evasion.
Strategic risk is the risk of loss or detriment arising from strategic decisions, or poor implementation of
such decisions, affecting the long-term interests of our main stakeholders; or from an inability to adapt to
the changing environment.
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•
Reputational risk is defined as the risk of a current or potential adverse economic impact due to a less
favourable perception of the bank by employees, customers, shareholders/ investors and society in general.
• Model risk is the risk of loss arising from misuse of a model or inaccurate predictions that may result in
sub-optimal decisions by the Bank.
The material risks at Santander Consumer Finance are: credit, default (including concentration and migration),
liquidity, structural, structural interest rate, capital, operational and strategic.
The relevant risks in Santander Consumer Finance are: direct residual value, structural exchange rate, pensions,
legal, fraud, technology and cyber risk, suppliers, business continuity, transformation, project execution, people,
data, processes money laundering and terrorist financing, regulatory compliance, product governance and
consumer protection, reputational, model and ESG risks (related to environmental and climate, social and
governance factors).
There are two types of risk whose relevance has been increasing in recent times and for which Santander
Consumer Finance is bolstering management and control: direct residual value risk and ESG/climate risks.
Direct residual value risk is defined as the risk of loss to which a company may be exposed if, at some point during
the life of an automobile agreement (loan, lease, etc.), the customer has the option or obligation to return the
vehicle as full and final settlement, due to uncertainty regarding the selling price of the vehicle realised at that
time.
ESG factors (environmental and climate, social and governance) can affect the traditional types of risk (credit,
liquidity, operational, reputational, etc.) due to the physical effects of climate change, generated by specific events
as well as chronic changes on the environment, or the process of transition to a development model with lower
emissions, including changes in legislation, technology or the behavior of economic agents, as well as failure to
meet the expectations and commitments acquired.
Corporate Risk Governance
The objective of the governance of the risk function is to ensure adequate and efficient decision-making and
effective risk control, and to ensure that these functions are managed in accordance with the risk appetite
approved by the board of directors of Santander Consumer Finance.
The following principles have been established for this purpose:
•
•
•
•
•
Segregation between risk decisions and control.
Enhancing the responsibility of risk generating functions in the decision-making process.
Ensuring that all risk decisions have a formal approval process.
Ensuring an aggregate overview of all risk types.
Bolstering risk control committees.
• Maintaining a responsive and efficient committee structure, ensuring:
•
•
•
•
Participation and involvement of the governance bodies and senior management in all risk
decisions, and supervision and control.
Coordination between the lines of defence in risk-management and control functions.
Alignment of objectives, monitoring to ensure they are being achieved and implementing corrective
measures when necessary.
The existence of an adequate management and control environment for all risks.
To achieve these objectives, the Committee structure in the management model must ensure an adequate:
•
Structure, with stratification by levels of relevance, balanced delegation capacity and protocols for escalating
incidents.
146
•
•
Composition, with members of sufficient rank and representation of business and support areas.
Operations, i.e. frequency, minimum attendance levels and appropriate procedures.
The governance of risk activity must establish and facilitate coordination channels between the units and
Santander Consumer Finance, together with alignment of management models and risk control.
The governance bodies of Santander Consumer Finance, S.A. units are set up in accordance with local legal and
regulatory requirements, considering the complexity of each unit.
In addition, the Silver and Bronze Committee at Santander Consumer Finance has monitored the war in Ukraine and
the microchip/supply chain crisis and its impact on the entity's business.
Roles and responsibilities
The Risk function is structured into three lines of defense, in accordance with corporate policy, to manage and
control risks effectively:
–
–
–
First line of defence: Business functions that take or generate exposure to risk constitute the first line of
defence. The first line of defence identifies, measures, controls, monitors and reports the risks that originate
and applies the internal regulations that regulate risk management. The generation of risks must be adjusted
to the approved risk appetite and the associated limits.
Second line of defence: made up of the Risk functions, which independently supervise and question the risk
management activities carried out by the first line of defence. This second line of defense must ensure,
within their respective areas of responsibility, that risks are managed in accordance with the risk appetite
defined by senior management and promote a strong risk culture throughout the organization.
Third line of defence: the Internal Audit function is independent to ensure the board of directors, and senior
management, the quality and effectiveness of internal controls, governance and risk management systems,
helping to safeguard our value , solvency and reputation.
Structure of Risk Committees
The board of directors is ultimately responsible for risk control and management, delegating these powers to
commissions and committees. In Santander Consumer Finance, the Board is supported by the Risk, Regulation and
Compliance Supervision Commission, which is an independent risk control and monitoring committee. These
bylaw-mandated bodies form the highest level of risk governance:
Independent control bodies
– Risk, Regulation and Compliance Supervision Commission:
This Committee's role is to assist the Board of Directors in the monitoring and control or risks, defining and
assessing risk policies, and determining the risk propensity and strategy.
It is made up of external or non-executive directors (mostly independent) and is chaired by an independent
Board member.
The main duties of the Risk, Regulation and Compliance Supervision Commission are:
– To support and advise the Board of Directors in defining and assessing Santander Consumer Finance's
risk policies and determining its risk propensity and risk strategy.
– To ensure that the pricing policy for assets and liabilities offered to customers fully respects the
business model and risk strategy.
– To understand and assess the management tools, ideas for improvement, progress with projects and
any other relevant activity relating to risk control.
147
– To determine with the Board of Directors the nature, amount, format and frequency of the risk
information to be received by the Committee and the Board.
– To help establish rational and practical remuneration policies. For this purpose, without prejudice to the
duties of the Remunerations Committee, the Risk Committee examines whether the incentives policy
planned for the remuneration scheme considers risk, capital, liquidity and the likelihood and suitability
of profits.
–
Executive Risk Control Committee (ERCC):
–
This collegial body is responsible for overall monitoring and control of Santander Consumer Finance's
risks, pursuant to the powers delegated to it by the Board of Directors of Santander Consumer
Finance, S.A.
Its objectives are:
•
To provide a tool for effective risk control, ensuring that risks are managed in accordance with the
Bank's risk appetite, as approved by the Board of Directors of Santander Consumer Finance, S.A.,
providing an overview of all of the risks identified in the risk map in the general risk framework,
including identification and monitoring of actual and emerging risks and their impact on the risk profile
of the Santander Consumer Finance Group.
•
To ensure the best estimate of provisions and that they are recognized correctly.
This Committee is chaired by the Santander Consumer Finance's Chief Risk Officer (CRO) and is made up of
members of its senior management. In addition to the risk function, which chairs the Committee, the
compliance, finance and management control functions are also represented. The CROs of local entities can
take part on a regular basis to report on the risk profile of the entities and other tasks.
The Executive Risk Control Committee reports to the Risk, Regulation and Compliance Supervision Commission,
which it assists in its function of supporting the Board.
Decision-making bodies
–
Executive Risk Committee (ERC):
The Executive Risk Committee is the collegiate body responsible for overall risk management pursuant to the
powers delegated to it by the Board of Directors of Santander Consumer Finance S.A., monitoring all the risks
identified in the Bank that fall within its remit.
Its objective is to provide a tool for decisions on accepting risks at the highest level, ensuring that risk decisions
are within the limits set by the Santander Consumer Finance Group's risk appetite, as well as informing of its
activity to the Board or its committees when it is required so.
This Committee is chaired by the Head of Santander Consumer Finance and is made up of executive directors
and other executive of Santander Consumer Finance. The risk, financial, management control and compliance
function are also represented, among others. The Bank's CRO is entitled to veto the Committee's decisions.
– Proposal Sub-committee (RPSc):
The Santander Consumer Finance Risk Proposal Sub-committee is a collegiate body in charge of making
decisions regarding business and country transactions, credit risk, market, liquidity and structural issues (or any
other risk if it were necessary), guaranteeing that the decisions made comply with the limits established in the
appetite risk framework of Santander Consumer Finance, as well as informing of its activity to the Risk
Executive Committee when it is required so.
This Committee is chaired by Santander Consumer Finance’s CRO, and it comprises Santander Consumer
Finance executive positions including but not limited to the risk, financial, management control and compliance
functions.
148
– Provisions Committee:
The Provisions Committee is the decision-making body responsible for overall management of provisions in
accordance with the powers delegated by the Executive Risk Committee of Santander Consumer Finance S.A.,
and supervises, within its sphere of action and decision, all matters relating to provisions in Santander
Consumer Finance. Its purpose is to be the instrument for decision-making, ensuring that decisions are
consistent with the governance of provisions established at Santander Consumer Finance, and reporting to the
Board of Directors or its committees on its activities when required.
The structure of the Risk Committees of the Western Hub branches:
Pursuant to the merger agreements and for the purpose of ensuring proper governance and continuing the risk
function of the Western Hub branches by Santander Consumer Finance, S.A. (absorbing company):
•
Any powers, faculties and attributions in terms of risks that were granted individually or collectively in the
branches, will remain in force under the same terms and conditions.
• What is particularly established in its approval and risk control committees will continue to be in force with
the same functions, unless one or more powers are expressly claimed for itself by a higher-ranking body.
•
Any discrepancy in the understanding of the attributions and competence of the committees will be
interpreted in the sense that best favors the governance functions of the company as a whole and, in any
case, subject to the practices and uses of the governing bodies superior hierarchy of the entity Santander
Consumer Finance S.A.
Structural organisation of the risk function
The Group Chief Risk Officer (GCRO) is responsible for the risk function in Santander Consumer Finance and reports
to the Head of Santander Consumer Finance, who is a member of the Board.
The GCRO advises and challenges the executive line and also reports independently to the Risk, Regulatory and
Compliance Committee and to the Board.
Advanced risk management is based on a holistic, forward-looking approach to risks, based on intensive use of
models, to foster a robust control environment that meets the requirements of the regulator and the supervisor.
Santander Consumer Finance's risk management and control model shares certain core principles via its corporate
frameworks. These frameworks are established by the Group and Santander Consumer Finance adheres to them
through its management bodies. They shape the relationship between the subsidiaries and Santander Consumer
Finance, including the role played by the latter in validity.
The Group-Subsidiaries Governance Model and good governance practices for subsidiaries recommend that each
subsidiary should have a bylaw-mandated risk committee and an executive risk committee chaired by the Chief
Executive Officer (CEO). This is in line with best corporate governance practices and consistent with those already
in place in the Group, as set out in the corporate framework, to which Santander Consumer Finance has signed up.
Under the Group's internal governance framework, the management bodies of Santander Consumer Finance have
their own model of risk powers (both quantitative and qualitative), which must follow the principles set out in the
benchmark models and frameworks developed at the corporate level.
Given its capacity for comprehensive and aggregated oversight of all risks, the corporation exercises a validation
and questioning role with regard to the operations and management policies of the units, insofar as they affect the
Group’s risk profile.
Identifying and evaluating risks is a cornerstone for controlling and managing risk. The main risk types to which the
Group is exposed are credit risk, market risk, operational risk and compliance and conduct risk.
Santander Consumer Finance has taken several initiatives to improve the relationship between Santander
Consumer Finance and its subsidiaries, and to improve the model of advanced risk management.
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II. Credit Risk
Credit risk stems from the possibility of losses arising from the failure of clients or counterparties to meet their
financial obligations with the Group, in full or in part.
The risk function in Santander Consumer Finance is organised by customer type, distinguishing between
individualised and standard customers throughout the risk-management process:
•
•
Individualised customers are those assigned to a risk analyst, mainly because of the risk they entail. This
category includes Wholesale Banking companies and some Retail Banking companies. Risk management
involves expert analysis, complemented by decision-making support tools based on internal risk assessment
models.
Standard risks are those customers to whom no risk analyst is expressly assigned. They generally include risk
with individuals, individual businesspeople and non-individualised retail banking companies. Management of
these risks is based on internal-assessment and automatic-decision models, complemented by teams of
analysts specialized in specific risk types when the model does not cover the risk or is not sufficiently accurate.
Key figures in 2022
The trend in non-performing assets and the cost of credit reflect the impact of the deterioration of the economic
environment mitigated by prudent risk management, which has generally kept these figures lower than those of
our competitors in recent years. As a result, Santander Consumer Finance maintains an adequate level of coverage
to meet the expected loss from the credit risk portfolios managed.
As of December 2022, the default rate was 2.06%, due to the good performance of the different portfolios, despite
the adverse situations that have been experienced throughout 2022, the measures applied in the units and the
Santander Consumer Finance risk appetite. Doubtful loans (2,239 million euros) are distributed by units as follows:
Nordics represents 22% of the total, Spain 26%, Germany 28%, France 9%, Italy 7%, Austria 6% and others 2%.
Regarding the type of portfolio, Auto represents 45% of the total, Direct 31%, Cards 7%, Stock Finance 3%,
Mortgages 3%, Durables 2% and others 9%.
Despite the uncertainty and instability generated by the post-pandemic situation, as well as the semiconductor
crisis and the war between Russia and Ukraine, the non-performing loan ratio has remained stable, compared to
the December 2021 data, being 2.06% in both years.
In terms of cost of credit, this ratio has a low risk profile thanks to the granularity and predictability of Santander
Consumer Finance's portfolios. The 12-month cost of credit at the end of December 2022 was 0.42%.
Highlights and trends
The profile of Santander Consumer Finance's credit risk portfolio is characterised by a diversified geographic
distribution and the predominance of retail banking.
150
Global Credit Risk Map 2022
The following table details the global map of Santander Consumer Finance's gross credit exposure by geographic
area:
SCF Group - Gross Credit risk exposure
2022
(EUR million)
14,952
10,352
15,940
42,099
17,815
2,819
4,479
108,456
Change on December
2021
% portfolio
2.39%
14.02%
8.19%
8.57%
1.32%
(5.20)%
14.02%
6.67%
13.79%
9.53%
14.70%
38.82%
16.43%
2.60%
4.13%
100.00%
Spain and Portugal (*)
Italy
France
Germany and Austria
Nordics (Scandinavia)
United Kingdom
Other
Total
In terms of outlook by product at December 2022, Auto represents 63% of the total gross exposure, Direct 12%,
Mortgages 3%, Durables 2%, Stock Finance 10% and Others 10%. Germany concentrates the highest percentage of
the portfolio with 39% along with Austria and their respective JVs. On the other hand, Nordics (Scandinavia)
represents 16%, and includes units from Norway, Denmark, Sweden and Finland. France, including the PSA Joint
Ventures, represents 10% of the total. Spain, Portugal and their respective units resulting from the cooperation
with PSA, represent 14% of the total.
Estimation of impairment losses
Calculation of expected credit losses:
Grupo Santander Consumer Finance calculates expected credit losses using parameters (mainly PD and LGD) based
on internal models according to specific requirements of IFRS 9 and other guidelines by regulators, supervisors and
other international organizations (EBA, NCAs, BIS, GPPC). Models are built using internal information with
sufficiently representative historical depth and granularity, regulatory and management experience, as well as
forward-looking information based on macroeconomic scenarios, and allow estimating losses throughout the life
of the operation. They follow a defined life cycle that includes, among others, a process of internal validation,
monitoring and governance models to ensure their robustness and suitability for use.
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.
151
•
•
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: Santander Consumer Finance reviews and quantifies changes in the risk of default
during their expected life based on their credit risk level on initial recognition. To recognize significant
changes so instruments can be classified in stage 2, each subsidiary set quantitative thresholds for its
portfolios based on Santander's guidelines for consistent interpretation across all our footprint.
Of those quantitative thresholds, Grupo Santander considers two: the relative threshold, which shows the
difference in credit quality since the transaction was approved as a percentage of change; and the
absolute threshold, which calculates the total difference in credit quality. All subsidiaries apply them
(with different values) in the same manner. The use of one or both depends on portfolio type and other
aspects, such as the starting point for average credit quality.
Qualitative criteria: Several indicators aligned with ordinary credit risk management indicators (e.g. past
due for over 30 days, forbearance, etc.). Each subsidiary defined these criteria for its portfolios. Santander
supplements these qualitative criteria with expert opinions. When the presumption of a significant
deterioration of credit risk is removed, due to a sufficient improvement of the credit quality, the obligor
can be re-classified to Stage 1, without any probationary period in Stage 2.
Definition of default: Santander incorporated the new definition to provisions calculation according to the
EBA’s guidelines; the Group is also considering applying it to prudential framework. In addition, the
default definition and stage 3 have been aligned.
This definition considers the following criteria to classify exposures as stage 3: financial instruments with
one or more payments more than 90 consecutive days past due, representing at least 1% of the client's
total exposure or the identification of other criteria demonstrating, even in the absence of defaults, that it
is unlikely that the counterparty is unlikely to meet all of its financial obligations. The Group applies the
default criteria to all exposures of the impaired client. Where an obligor belongs to a group, the default
criteria may also be applied to all exposures of the group. The default classification is maintained during
the 3-month test period following the disappearance of all default indicators described above, and this
period is extended to one year for forbearances that have been classified as default.
Expected life of financial instruments: Santander estimates the expected life of financial instruments
according to their contractual terms (e.g. prepayments, duration, purchase options, etc.). The contractual
period (including extension options) is the maximum time frame for measuring the expected credit loss. If
financial instruments have an undefined maturity period and available balance (e.g. credit cards),
Santander estimates its expected life based on the total exposure period and effective management
practices to mitigate exposure.
152
The context and monitoring of the expected credit loss was analysed and reviewed during the health crisis by
covid-19 , and was reinforced with collective analysis, monitoring of government measures, monitoring of the
evolution of the Group's customers, as well as remedial management actions if necessary. In terms of
classification, Grupo Santander has maintained the criteria and thresholds for classification applied prior to the
start of the pandemic, eliminating regulatory criteria of the effect of moratorium classification as they have
expired, as well as the collective analyses associated with these groups of loans. Regarding moratorium measures,
a rigorous identification and periodic monitoring of the credit quality of the clients and their payment behaviour
have been carried out and, through a specific individual or collective evaluation, the timely detection of the
significant increase in credit risk. At the end of December 2022 the credit risk provisions not included any special
measures or adjustments in relation to health crisis by covid-19.
1.
Forward-looking vision
To estimate expected losses, Grupo Santander requires a great deal of expert analysis as well as past, present and
future data. Santander quantifies expected losses from credit events using an unbiased, weighted consideration of
up to five future scenarios that could affect our ability to collect contractual cash flows. These scenarios take into
account the time value of money, the relevant information available about past events and current conditions, and
projections of macroeconomic factors that are considered important to estimate this amount (e.g. GDP, house
prices, rate of unemployment, among others).
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.
During 2022, the Group has updated the macroeconomic scenarios included in the provision models with the most
up-to-date information on the current environment. The IASB already indicated in 2021 that the macroeconomic
uncertainty surrounding the pandemic made it difficult to regularly apply the expected loss calculation models of
IFRS9. The European Central Bank recommended the use of a stable and long-term view (long-term). run) of
macroeconomic forecasts. In 2022, the economic recovery that was expected after the end of the pandemic has
been affected by the effects of the war in Ukraine, which introduces an additional effect of volatility in the
scenarios. Consequently, the Group uses a prospective vision to estimate expected losses.
2.
Additional elements
Additional elements such an analysis of sectors or other pilars of credit risk analysis are included when necessary if
they have not been captured by the two elements explained in the paragraph above, and their impacts has not
been captured sufficiently by the macroeconomic scenarios. Collective analysis techniques are also used, when the
potential impairment in a group of clients cannot be identified individually.
Based on the elements described above, Grupo Santander Consumer Finance has evaluated the performance of the
credit quality of its customers in each of the geographical areas, for the purposes of their staging classification and
consequently, the expected credit loss calculation.
Additional expected loss provisions due to the current macroeconomic environment
In the context of the covid-19 pandemic, during 2022 the authorities decided to gradually relax the social distance
measures. From an economic point of view, when the measures were softened and economic activity resumed,
new imbalances emerged in the economy. Accumulated savings caused a rapid increase in demand, but there were
supply restrictions due, in part, to the different speeds of incorporation into global supply chains and the scarcity of
some materials, such as semiconductors, with great impact on the automotive industry . The money supply was
still high and interest rates low, which caused inflation to begin to accelerate, very visibly from the second half of
2022. Additionally, in February 2022 the Russian invasion of Ukraine began, to which the Community International
reacted by imposing harsh economic sanctions against Russia. The fact that Russia is the main player in the oil and
gas market caused further distortions that put pressure on the energy market and further boosted inflation,
especially
in Europe (highly dependent on Russian gas). In these circumstances, the updating of the
macroeconomic scenarios has been accompanied by great uncertainty.
During 2021, following the recommendations of different organizations and international supervisors, accounting
and prudential policies were applied and adapted, under a criterion of responsibility, to the containment measures
put in place to combat the effects of the covid-19 health crisis, which were of a temporary and exceptional nature.
Long-term stable forecasts were taken into account and additional adjustments were made to the models (or
overlays) to recognize the increase in expected loss, since the mechanical application of the methodology for
estimating expected loss due to credit risk in that context could have led to unexpected results.
153
Throughout 2022, the adjustments have been continuously monitored, recalculating or reformulating them, in
such a way that the changes caused by overcoming the pandemic and the start of the war in Ukraine and the
inflationary effects and interest rate rises are adequately reflected in the account of each entity/geography of the
Group. In total, at the end of 2022, the additional adjustments recorded by the Santander Consumer Finance Group
due to macroeconomic aspects amount to EUR 104.9 million and are mainly due to the inclusion of additional
effects derived from inflation and interest rates. interest, which do not respond to the historical casuistry included
in the projection models. The Group geographies most affected by these additional adjustments are Spain, Nordics,
France and Italy.
The detail of the exposure and the impairment losses associated with each of the phases as of December 31, 2022
is shown below. In addition, based on the current credit quality of the operations, the exposure is divided in three
degrees (investment, speculation and default):
Exposure and impairment losses by stage 2022
Credit quality (*)
Investment grade
Speculation grade
Default
Total Risk (**)
Impairment losses
Credit quality (*)
Investment grade
Speculation grade
Default
Total Risk (**)
Impairment losses
Stage 2
Stage 3
(EUR millions)
Stage 1
116,422
12,674
—
129,096
477
—
4,172
—
4,172
—
—
—
2,239
2,239
1,229
Stage 3
—
—
2,099
2,099
1,307
Total
116,422
16,846
2,239
135,508
1,956
Total
113,018
12,054
2,099
127,171
1,858
Exposure and impairment losses by stage 2021
(EUR millions)
Stage 1
113,018
8,404
—
121,422
551
Stage 2
—
3,650
—
3,650
—
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances - Customers + Loan commitments granted
As of December 31, 2022 and 2021, the Group does not present significant amounts of impaired assets purchased with
impairment.
Provision sensitivity test
Regarding the evolution of losses due to credit risk, the Group carries out a sensitivity analysis through simulations in
which immediate variations (shocks) of +/- 100 bps take place in the main macroeconomic variables, assuming
constant distribution phases of each portfolio of financial assets. In this way, a set of specific and complete scenarios is
used, where different impacts that affect both the reference variable and the rest of the macroeconomic variables are
simulated. These impacts may originate from productivity factors, taxes, wages or exchange rates and interest rates.
Sensitivity is measured as the average variation of the expected loss corresponding to the aforementioned scenarios.
Following a conservative approach, negative movements take into account an additional standard deviation to reflect
the possible greater variability of losses. Finally, in order to provide a measure of comparable sensitivity between
154
portfolios, when using the statistical models for scenario analysis, the advances and lags of the model are eliminated,
thus avoiding capturing only part of the simulated shock.
Additionally, the Group performs stress test exercises and sensitivity analysis on a recurring basis in exercises such as
ICAAP, strategic plans, budgets and recovery and resolution plans. In these exercises, a prospective vision of the
sensitivity of each of the Group's portfolios is created in the event of a possible deviation from the baseline scenario,
considering both the macroeconomic evolution materialized in different scenarios, and the three-year business
evolution. These exercises include potentially more adverse scenarios as well as more plausible scenarios.
Detail of the main geographical areas
Following is the risk information related to the most relevant geographies in exposure and credit risk allowances.
• Germany
Information on the estimation of impairment losses
The detail of exposure and impairment losses associated to each stage for Santander Consumer Bank AG and
Santander Consumer Leasing GmbH as of 31 December 2022 is as follows. Additionally, in line with its current
credit quality, the exposure is classified in three grades (investment, speculation and default):
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2022
(EUR millions)
Stage 1
37,009
—
—
37,009
88
Stage 2
Stage 3
12
1,145
—
1,157
38
—
—
566
566
272
Exposure and impairment losses by stage 2021
(EUR millions)
Stage 1
34,352
—
—
34,352
89
Stage 2
Stage 3
—
941
—
941
70
—
—
509
509
360
Total
37,021
1,145
566
38,732
398
Total
34,352
941
509
35,802
519
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
The NPL ratio for Germany reached 1.47% at the end of December 2022 (1.55% at the end of 2021).
For the estimation of the expected losses, the prospective information is taken into account. Specifically, for the
most significant units in Germany (Santander Consumer Bank AG and Santander Consumer Leasing GmbH) five
prospective macroeconomic scenarios are considered, which are updated periodically, during a time horizon of 5
years.
The projected evolution in 2022 of the main macroeconomic indicators used to estimate expected losses at
Santander Consumer Bank AG and Santander Consumer Leasing, GmbH is presented below:
155
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
GDP growth
Housing market price surges
4.04 %
7.70 %
(0.45 %)
(4.54 %)
3.19 %
6.42 %
0.45 %
(2.55 %)
2.33 %
5.14 %
1.36 %
1.70 %
1.71 %
4.84 %
2.08 %
3.73 %
1.09 %
4.54 %
2.80 %
5.80 %
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Bank AG and Santander Consumer Leasing GmbH for estimating expected losses as of 31 December 2021 is
presented below:
Magnitudes
Interest rate
Unemployment rate
GDP growth
5-year scenario (2022-2026)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
1.03 %
6.46 %
0.05 %
0.63 %
6.16 %
0.46 %
(0.25 %)
(0.01 %)
5.17 %
1.87 %
2.59 %
4.69 %
2.44 %
3.33 %
0.48 %
4.53 %
3.21 %
4.08 %
Housing market price surges
(1.07 %)
(0.64 %)
Each of the macroeconomic scenarios is associated with a specific probability of occurrence. In terms of their
assignment, Santander Consumer AG and Santander Consumer Leasing, GmbH associate the highest weighting to
the Base Scenario, while they associate the lowest weightings to the most extreme scenarios. The weightings used
in fiscal years 2022 and 2021 are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Germany as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
Change in expected loss (IFRS9)
Vehicles
New
Vehicles
Used
Leasing
New
Direct
5.60%
4.98%
4.71%
2.61%
(3.71%)
(3.28%)
(2.85%)
(1.61%)
(9.97%)
14.73%
(8.95%)
13.21%
(7.84%)
14.08%
(4.33%)
7.16%
GDP growth:
(100) b.p.s.
100 b.p.s.
Unemployment rate:
(100) b.p.s.
100 b.p.s.
With regards to the determination of classification in stage 2, the quantitative criteria applied by the entity are
based on identifying whether any increase in the probability of default (PD) for the entire expected life of the
operation is greater than an absolute and relative threshold. This threshold is established for each portfolio and is
different depending on the credit risk profile characteristics of the products that form the portfolio.
156
The entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
positions past due for more than 30 days. These criteria depend on the risk management practices of each
portfolio.
• Nordics (Scandinavia)
Information on the estimation of impairment losses
The detail of exposure and impairment losses associated for the most significant Nordics unit (Santander Consumer
Bank AS) as of 31 December 2022 is as follows. Additionally, in line with its current credit quality, the exposure is
classified in three grades (investment, speculation and default):
Exposure and impairment losses by stage 2022
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
14,738
1,701
—
16,439
77
Stage 2
Stage 3
6
575
—
581
57
—
—
391
391
222
Exposure and impairment losses by stage 2021
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
5,228
10,983
—
16,211
119
Stage 2
Stage 3
—
533
—
533
58
—
—
462
462
254
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
Total
14,744
2,276
391
17,411
356
Total
5,228
11,516
462
17,206
431
The NPL ratio for Nordics (Scandinavia) has been reduced to 2.70% at the end of December 2022 (3.18% at the end
of 2021).
For the estimation of the expected losses, the prospective information is taken into account. Specifically, for
Santander Consumer Bank AS five prospective macroeconomic scenarios are considered, which are updated
periodically, during a time horizon of 5 years.
157
• Norway
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Bank AS for estimating expected losses as of 31 December 2022 is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
4.23 %
5.24 %
(1.22 %)
0.36 %
4.05 %
4.82 %
(0.49 %)
1.06 %
3.30 %
3.85 %
0.22 %
1.90 %
3.10 %
3.39 %
0.55 %
2.52 %
2.80 %
3.03 %
1.06 %
3.10 %
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Bank AS for estimating expected losses as of 31 December 2021 is presented below:
5-year scenario (2022-2026)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
0.62 %
4.86 %
0.22 %
0.85 %
1.53 %
4.42 %
0.61 %
1.46 %
1.52 %
3.79 %
2.46 %
2.58 %
2.39 %
3.55 %
2.79 %
3.19 %
3.52 %
3.02 %
3.72 %
3.71 %
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2022 and 2021, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Norway as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP growth
(100) bps
100 bps
Housing market price surges
(100) bps
100 bps
Change in expected loss (IFRS9)
Auto Individuals
5.05 %
(2.00 %)
2.72 %
(1.62 %)
158
•
Denmark
The projected evolution for the next five years of the main macroeconomic indicators for estimating expected
losses as of 31 December 2022 is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
3.88 %
5.74 %
(1.67 %)
0.19 %
3.23 %
5.24 %
0.27 %
0.80 %
2.58 %
4.72 %
2.17 %
1.59 %
1.96 %
4.22 %
4.15 %
2.11 %
1.34 %
3.90 %
5.87 %
2.60 %
The projected evolution for the next five years of the main macroeconomic indicators as of 31 December 2021 is
presented below:
5-year scenario (2022-2026)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
1.42%
7.68%
(0.15)%
0.91%
1.11%
6.93%
0.74%
1.29%
0.40%
4.85%
1.57%
2.15%
0.51%
4.32%
2.92%
2.46%
0.80%
3.77%
3.91%
2.81%
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2022 and 2021, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Denmark as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP Growth
(100) p.b.
100 p.b.
Change in expected loss (IFRS9)
Auto Individuals
3.76 %
(2.62 %)
159
•
Sweden
The projected evolution for the next five years of the main macroeconomic indicators for estimating expected
losses as of 31 December 2022 is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
4.33 %
7.61 %
3.51 %
7.36 %
(0.57 %)
0.39 %
0.45 %
0.95 %
3.19 %
7.08 %
1.60 %
1.78 %
2.74 %
6.80 %
2.70 %
2.33 %
2.11 %
6.48 %
3.73 %
2.83 %
The projected evolution for the next five years of the main macroeconomic indicators for estimating expected
losses as of 31 December 2021 is presented below:
5-year scenario (2022-2026)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
1.64 %
8.54 %
0.82 %
1.40 %
1.36 %
8.20 %
1.59 %
1.72 %
0.39 %
7.02 %
2.35 %
2.46 %
0.81 %
6.71 %
2.94 %
2.81 %
1.08 %
6.30 %
3.99 %
3.11 %
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2022 and 2021, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Sweden as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP growth:
(100) bps
100 bps
Change in expected loss (IFRS9)
Auto individuals
Direct
6.27 %
(1.30 %)
1.81 %
(0.19 %)
With regards to the determination of classification in stage 2, the quantitative criteria applied by the entity are
based on identifying whether any increase in the probability of default (PD) for the entire expected life of the
operation is greater than a relative threshold. This threshold is established for each portfolio and is different
depending on the characteristics of the transactions, and a transaction is considered to exceed this threshold when
the PD for the entire life of the transaction increases with respect to the PD it had at the time of initial recognition
by 10% in relative terms.
160
The entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
positions past due for more than 30 days. These criteria depend on the risk management practices of each
portfolio.
•
Spain
Information on the estimation of impairment
The detail of exposure and impairment losses associated to each stage for the most significant business units in
Spain (Santander Consumer Finance S.A.) as of 31 December 2022 is as follows. Additionally, in line with its current
credit quality, the exposure is classified in three grades (investment, speculation and default):
Exposure and impairment losses by stage 2022
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
4,069
10,967
—
15,035
121
Stage 2
Stage 3
5
236
—
241
32
—
—
477
477
288
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
Exposure and impairment losses by stage 2021
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
14,959
520
—
15,479
127
Stage 2
Stage 3
—
366
—
366
61
—
—
396
396
274
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
Total
4,074
11,203
477
15,753
441
Total
14,959
886
396
16,241
462
The delinquency rate in the case of Spain has increased to 3.44% at the end of December 2022 (3.09% at the end of
2021).
Prospective information has been considered for the estimation of the expected losses, . Specifically, regarding in
Santander Consumer Finance, S.A. portfolio, five prospective macroeconomic scenarios are considered, which are
updated periodically, during a time horizon of 5 years.
161
The projected performance in the years to follow of the macroeconomic indicators used during 2022 regarding the
estimation pf the expected credit losses for Santander Consumer Finance, S.A. portfolios in Spain is as follows:
5-year scenario (2023-2027)
Magnitudes
Interest rate
Unemployment rate
Housing market price surges
GDP growth
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
3.39 %
19.43 %
1.72 %
(0.57 %)
2.98 %
16.61 %
2.34 %
0.53 %
2.59 %
12.20 %
3.31 %
2.05 %
2.25 %
10.65 %
3.83 %
3.34 %
2.00 %
9.46 %
4.29 %
4.15 %
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Finance, S.A. for estimating expected losses as of 31 December 2021 is presented below:
5-year scenario (2022-2026)
Magnitudes
Interest rate
Unemployment rate
Housing market price surges
GDP growth
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
0.97 %
20.89 %
0.39 %
0.13 %
0.62 %
18.28 %
1.67 %
1.06 %
(0.25 %)
12.96 %
2.63 %
2.91 %
(0.20 %)
11.18 %
3.18 %
3.74 %
(0.01 %)
9.46 %
4.04 %
4.72 %
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Finance S.A. associates the base-case scenario with the highest probability of occurrence, while
associating the lower probabilities to the most extreme scenarios. The weightings used, both in 2021 and 2022,
are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Spain as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP growth:
(100) bps
100 bps
Auto New
Change in expected loss (IFRS9)
Mortgages
Auto Used
Cards
5.03%
(3.42%)
2.99%
(2.1%)
0.91%
(0.65%)
2.61%
(1.84%)
Regarding Stage 2 classification, the quantitative criteria that have been applied in the entity are based in
identifying if any increase in the PD for the whole operation life expectancy is greater than a series of absolute and
relative thresholds. Each portfolio has its own thresholds depending on the characteristics and credit risk profile of
the products that form this portfolio.
As an example, regarding the main portfolios of Santander Consumer Finance S.A., it is considered that a
transaction should be classified as stage 2 when the PD for the whole life expectancy of the operation at any given
moment is greater than its PD at initial recognition in absolute and relative thresholds, depending on the sub-
segment.
162
Furthermore, there are a series of specific qualitative criteria that signal if the exposure has had a significant
increase in credit risk, regardless of the performance of its PD at initial recognition. The entity, among other criteria,
considers that a given transaction presents significant increase in credit risk when it is 30 days past due. These
criteria depend on management practices depending on portfolio credit risk.
II. Credit risk
Changes in 2022
The development of non-performing assets and the cost of credit reflect the impact of the worsening economic
environment, mitigated by prudent risk management, which has generally kept these figures lower than those of
our competitors in recent years. As a result, Santander Consumer Finance maintains an adequate level of coverage
to face the expected loss of the credit risk portfolios it manages.
163
Following is a detail, by activity, of the loans and advances to customers at 31 December 2022(*):
Net exposure
Loan to Value (***)
EUR Thousands
Secured credit
Public sector
Other financial institutions
Non-financial companies and individual
traders
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual traders
Other households and non-profit institutions
serving households
Of which:
Residential
Consumer loans
Other purposes
Total (*)
Memorandum item
Refinancing, refinanced and restructured
transactions (**)
Unsecured loans
Property Collateral
Other collateral
Less than or Equal to
40%
40% and Less than or
Equal to 60%
60% and Less than or
Equal to 80%
80% and Less than or
Equal to 100%
More than 100%
Total
136,345
711,093
—
736
12,683
156,638
37
2,344
305
5,835
1,040
15,755
5,074
53,936
6,227
79,504
149,028
868,467
14,235,811
100,505
19,145,123
180,124
455,899
1,184,261
12,289,895
5,135,449
33,481,439
79,637
—
6,087,747
8,068,427
—
—
45,847
54,658
131,929
6,675
6,191,419
12,815,100
180
—
76,711
103,233
638
—
200,148
255,113
2,819
—
510,680
670,762
125,203
6,675
3,369,847
8,788,170
3,089
—
2,079,880
3,052,480
211,566
6,675
12,325,013
20,938,185
43,632,578
3,618,739
24,165,622
1,959,454
2,380,446
2,463,870
12,275,055
8,705,536
71,416,939
335,960
43,225,042
71,576
58,715,827
3,373,757
76,473
168,509
3,719,980
2,018
23,971,430
192,174
43,480,066
1,356,494
447,471
155,489
2,141,959
902,311
1,459,818
18,317
2,842,485
501,296
1,944,024
18,550
3,664,926
343,124
11,773,101
158,830
24,623,960
272,550
8,423,489
9,497
3,711,735
67,272,945
432,259
13,926,716
105,915,873
314,772
23,693
97,304
3,947
7,074
17,549
53,987
38,440
435,769
(*) The distribution of credit does not include 583,959 thousand euros corresponding to customer advances.
(**) Included net amount accumulated Impairment or accumulate losses at fair value due to credit risk.
(***) Ratio as a result of dividing the carrying value of the operations as of December 31, 2022 over the last valuation of the collateral.
164
Following is a detail, by activity, of the loans and advances to customers at 31 December 2021(*):
Net exposure
Loan to Value (***)
EUR Thousands
Secured credit
Public sector
Other financial institutions
Non-financial companies and individual traders
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual traders
Other households and non-profit institutions serving
households
Of which:
Residential
Consumer loans
Other purposes
Total (*)
Memorandum item
Refinancing, refinanced and restructured transactions
(**)
Unsecured loans
Property Collateral
Other collateral
Less than or Equal to
40%
40% and Less than or
Equal to 60%
60% and Less than or
Equal to 80%
80% and Less than or
Equal to 100%
More than 100%
Total
136,065
495,007
—
1,274
13,403
100,504
12
1,268
54
2,950
159
6,605
4,922
31,577
8,256
59,378
149,468
596,785
11,630,239
172,019
15,762,916
296,442
236,849
2,737,030
9,753,487
2,911,127
27,565,174
64,897
420
5,434,403
6,130,519
—
—
61,047
110,972
192,209
5,425
4,382,634
11,182,648
171
—
123,957
172,314
599
—
70,674
165,576
2,319
—
904,044
1,830,667
185,517
5,425
2,171,636
7,390,909
3,603
—
1,173,370
1,734,154
257,106
5,845
9,878,084
17,424,139
42,906,366
3,703,787
24,160,981
1,746,186
2,156,561
3,171,538
11,226,033
9,564,450
70,771,134
239,188
3,617,745
2,560
1,350,250
42,512,272
154,906
4,551
81,491
24,003,718
154,703
340,582
55,354
55,167,677
3,877,080
40,037,804
2,043,908
1,065,075
1,063,311
28,175
2,396,414
564,540
2,577,558
29,440
343,168
10,790,554
92,311
297,272
9,236,264
30,914
3,859,493
66,520,541
391,100
5,915,332
21,016,019
12,543,211
99,082,561
398,175
32,405
80,738
4,384
5,403
27,229
32,915
43,212
511,318
(*) The distribution of credit does not include 477,101 thousand euros corresponding to customer advances.
(**) Included net amount accumulated Impairment or accumulate losses at fair value due to credit risk.
(***) Ratio as a result of dividing the carrying value of the operations as of December 31, 2021 over the last valuation of the collateral.
165
Forborne loan portfolio
The term “forborne loan portfolio” refers, for the purposes of the Group's risk management, to those transactions in
which the customer has, or might foreseeably have, financial difficulty in meeting its payment obligations under the
terms and conditions of the current agreement with Santander Consumer Finance and, accordingly, the agreement has
been modified or cancelled or even a new transaction has been entered into.
The Santander Group, which Santander Consumer Finance Group belongs to, has a detailed customer debt forbearance
policy that serves as a reference for the various local adaptations made for all the financial institutions forming part of
the Group. This policy is adapted to the bank regulation establish by the EBA, like it is said in the "Guidelines relating to
the management of non-performing and restructured or refinanced exposures" (EBA/GL/2018/06) of October, 31
2018. It is also adapted the Bank of Spain Circular 6/2021 that modifies 4/2017.
This policy establishes strict prudential criteria for the assessment of these loans:
–
–
–
–
–
–
–
The use of this practice is restricted, and any actions that might defer the recognition of impairment must be
avoided.
The main aim must be to recover the amounts owed, and any amounts deemed unrecoverable must be
recognised as soon as possible.
Forbearance must always envisage maintaining the existing guarantees and, if possible, enhance them. Not
only can effective guarantees serve to mitigate losses given default, but they might also reduce the
probability of default.
This practice must not give rise to the granting of additional funding or be used to refinance debt of other
entities or as a cross-selling instrument.
All the alternatives to forbearance and their impacts must be assessed, making sure that the results of this
practice will exceed those which would foreseeably be obtained if it were not performed.
Forborne transactions are classified using more stringent criteria which prudentially ensure that the
customer's ability to pay is restored from the date of forbearance and for an adequate period of time
thereafter.
In addition, in the case of customers that have been assigned a risk analyst, it is particularly important to
conduct an individual analysis of each specific case, for both the proper identification of the transaction and
its subsequent classification, monitoring and adequate provisioning.
The forbearance policy also sets out various criteria for determining the scope of transactions qualifying as forborne
exposures by defining a detailed series of objective indicators that permit identification of situations of financial
difficulty.
Accordingly, transactions not classified as non-performing at the date of forbearance are generally considered to be
experiencing financial difficulty if at that date, they were more than one month past due. Where no payments have
been missed or there are no payments more than one month past due, other indicators of financial difficulty are taken
into account, including most notably the following:
–
–
–
Transactions with customers who are already experiencing difficulties in other transactions.
Situations where a transaction has to be modified prematurely, and the Group has not yet had a previous
satisfactory experience with the customer.
Cases in which the necessary modifications entail the grant of special conditions, such as the establishment
of a grace period, or where these new conditions are deemed to be more favourable for the customer than
those which would have been granted for an ordinary loan approval.
– Where a customer submits successive loan modification requests at unreasonable time intervals. In
Consumer Finance’s case, a maximum of 1 restructuring agreement is established in a year or 3 in a period of
5 years.
166
–
In any case, if once the modification has been made any payment irregularity arises during a given probation
period (as evidenced by back testing), even in the absence of any other symptoms, the transaction will be
deemed to be within the scope of forborne exposures.
Once it has been determined that the reasons for the modification of the customer’s debt conditions are due to
financial difficulties, regardless of whether or not the customer has outstanding payments and the number of days
payment has been outstanding, and the customer will be considered to be under monitoring for all purposes and,
as such, will be manages in accordance with this policy.
Once forbearance measures have been adopted, transactions that have to remain classified as nonperforming
because at the date of forbearance they do not meet the regulatory requirements to be reclassified to a different
category must comply with a continuous prudential payment schedule in order to assure reasonable certainty as to
the recovery of the ability to pay.
On successful completion of the period, the duration of which depends on the customer's situation and the
transaction features (term and guarantees provided), the transaction is no longer considered to be nonperforming,
although it continues to be subject to a probation period during which it undergoes special monitoring.
This monitoring continues until a series of requirements have been met, including most notably: a minimum
observation period of 24 months; repayment of a substantial percentage of the outstanding amounts; and
settlement of the amounts that were past due at the time of forbearance. In the case that it is justified that, while
an operation is in the 24-month Cure Period of Phase 2, there is no longer a Significant Increase in its Credit Risk,
said operation may be reclassified as Phase 1 and Non-Default. risk, without the need to complete the
aforementioned Cure Period. However, it is important to note that restructurings at the time of origination can only
be classified as Stage 2 or Stage 3, never as Stage 1.
When forbearance is applied to a transaction classified as non-performing, the original default dates continue to be
considered for all purposes, irrespective of whether as a result of forbearance the transaction becomes current in
its payments. Also, the forbearance of a transaction classified as non-performing does not give rise to any release
of the related provisions.
The renewals can be long or short term (less than two years). Carrying out renewals with terms not exceeding two
years will be taken into account, when the borrower meets the following criteria:
–
–
–
–
That experiences temporary liquidity restrictions, for which the recovery of the client will be evidenced in the
short term
That the application of long-term redirection measures was not effective given the temporary financial
uncertainty of a general or specific nature of the client.
That they have been complying with the contractual obligations before the reinstatement
Demonstrates a clear willingness to cooperate with the entity.
As a consequence of the analysis that is carried out, both of the client's situation and of the characteristics of the
redirection operation that is used, it must be ensured that the redirection will facilitate the reduction of the client's
debt, and therefore it will be viable. In this sense, to assess the feasibility of the operation, the following will be
taken into account:
a.
b.
c.
d.
That it can be demonstrated with evidence that the proposed renewal is within the customer's reach, that is,
that a full refund is expected.
The payment by the client of the outstanding amounts, in full or in their majority, and the considerable
reduction of exposure in the medium-long term.
The non-existence of repeated breaches of the payment plans that have given rise to successive renewals
(more than three renewals in a period of three years)
In the temporary application of short-term renewal measures, it can be proven through evidence that the
client has sufficient payment capacity to meet the debt, principal and interest, once the period of application
of the temporary renewal has expired.
167
e.
The measure does not give rise to the successive application of several refinancing or restructuring measures
for the same exposure.
In the event that operations are carried out that do not comply with the above, they will be considered non-viable
operations and will form part of the Non-performing refinancing category.
The quantitative information required by Bank of Spain is shown below, in relation to the restructured operations in
force as of December 31, 2022 and 2021, taking into account the above criteria:
168
Current restructuring balances at 31 December 2022:
Without real guarantee
(a)
TOTAL
With real guarantee
Number of
transactions
Gross
amount
Number of
transactions
Gross
amount
Maximum amount of
the actual collateral that can
be considered.
Real estate
guarantee
Rest of real
guarantees
Impairment
of
accumulate
d value or
accumulate
d losses in
fair value
due to credit
risk.
Of which: Non-performing/Doubtful
Without real guarantee
With real guarantee
TOTAL
Of which: Non-performing/Doubtful
Number of
transactions
Gross
amount
Number of
transactions
Gross
amount
Real
estate
guarant
ee
Maximum amount of
the actual collateral that can
be considered.
Real estate
guarantee
Rest of real
guarantees
Impairment
of
accumulate d
value or
accumulated
losses in
fair value due
to credit risk
Gross
amount
Total
Guarantees
Impairment
of
accumulate d
value or
accumulated
losses in
fair value due
to credit risk
Net
Amount
Gross
amount
Total
Guarantees
Impairment of
accumulate d
value or
accumulated
losses in
fair value due
to credit risk
Net
Amount
REFINANCING AND RESTRUCTURING
1. Credit entities
2. Public sector
3. Other financial institutions and:
individual shareholder
4. Non-financial institutions and individual
shareholder
Of which: Financing for constructions and
property development
—
—
63
—
—
699
—
—
20
—
—
276
—
—
—
—
—
—
—
200
344
—
—
24
—
—
289
—
—
8
—
—
85
—
—
—
—
—
67
—
—
—
—
—
—
—
—
—
—
—
—
256
975
200
344
631
374
—
—
67
—
—
—
—
256
118
7,632
76,197
6,055
77,004
3,209
39,386
33,122
2,519
22,466
1,631
17,156
1,611
6,408
24,171
153,201
42,595
33,122
120,079
39,622
8,019
24,171
15,451
299
2,740
26
285
—
213
805
36
364
7
41
—
23
323
3,025
213
805
2,220
405
23
323
82
5. Other warehouses
6. Total
107,193
418,382
4,224
71,992
114,888
495,278
10,299
149,272
ADDITIONAL INFORMATION
—
—
—
—
19,844
23,053
—
30,641
175,315
51,861
215,346
1,954
34,282
70,227
208,781
54,404
238,101
3,593
51,523
—
—
—
—
—
—
6,869
8,480
—
11,582
18,057
—
152,590
490,374
177,017
644,550
—
—
50,485
93,280
—
175,315
315,059
249,628
208,781
435,769
289,624
—
—
—
18,451
26,537
—
152,590
97,038
177,017
112,607
—
—
Financing classified as non-current assets and
disposable groups of items that have been
classified as held for sale
Off balance sheet: value of other guarantees
received (not real)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Current restructuring balances at 31 December 2021:
Without real guarantee
(a)
TOTAL
With real guarantee
Number of
transactions
Gross
amount
Number of
transactions
Gross
amount
Maximum amount of
the actual collateral that
can be considered.
Real estate
guarantee
Rest of
real
guarantee
s
Without real guarantee
With real guarantee
Of which: Non-performing/Doubtful
Number of
transactions
Gross
amount
Number of
transactions
Gross
amount
Real estate
guarantee
Maximum amount of
the actual collateral that can
be considered.
Real estate
guarantee
Rest of real
guarantees
Impairment
of
accumulate
d value or
accumulate
d losses in
fair value
due to credit
risk.
TOTAL
Of which: Non-performing/Doubtful
Impairment
of
accumulate
d value or
accumulate
d losses in
fair value
due to credit
risk
Gross
amount
Total
Guarantees
Impairment
of
accumulate d
value or
accumulated
losses in
fair value due
to credit risk
Net
Amount
Gross
amount
Total
Guarantees
Impairment of
accumulate d
value or
accumulated
losses in
fair value due
to credit risk
Net
Amount
—
3
83
—
74
988
—
1
22
—
1
251
—
—
—
—
—
—
5
200
402
—
1
22
—
7
244
—
1
8
—
1
97
—
—
—
—
—
57
—
2
—
75
—
—
—
5
—
70
—
8
247
1,239
200
402
837
341
—
—
57
—
2
247
—
6
94
12,936
140,827
2,811
55,759
1,990
42,086
47,422
2,710
32,592
1,183
14,482
1,389
5,601
29,687
196,586
44,076
47,422
149,164
47,074
6,990
29,687
17,387
411
4,637
—
—
—
—
1,189
35
344
—
—
—
—
254
4,637
—
1,189
3,448
344
—
254
90
REFINANCING AND RESTRUCTURING
1. Credit entities
2. Public sector
3. Other financial institutions and:
individual shareholder
4. Non-financial institutions and individual
shareholder
Of which: Financing for constructions and property
development
5. Other warehouses
6. Total
150,127
487,125
4,668
86,464
24,458
34,896
212,342
91,786
219,914
163,149
629,014
7,502
142,475
26,448
77,183
260,170
94,519
252,757
ADDITIONAL INFORMATION
—
—
—
—
—
—
—
—
—
1,654
2,846
—
37,220
51,800
—
9,130
7,695
181,617
573,589
59,354
212,342
361,247
257,134
10,519
13,353
211,553
771,489
103,631
260,170
511,319
304,557
—
—
—
—
—
—
—
—
16,825
23,872
—
181,617
211,553
—
75,517
93,004
—
Financing classified as non-current assets and
disposable groups of items that have been
classified as held for sale
Off balance sheet: value of other guarantees
received (not real)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
169
The transactions presented in the foregoing table were classified at 31 December 2022 and 2021 by nature, as
follows:
•
•
Non-performing: There will be reclassified to the non-performing category the transactions with an
inadequate payment plan, those which include conditions that imply a delay in the reimbursement of the
transaction thorough regular payments or have any write-off amounts.
Normal: they are classified within the category of normal risk, operations are not classified as doubtful or
have been reclassified in the category of doubtful risk to meet the criteria that are recognized below:
a)
That a period of one year has elapsed from the date of refinancing or restructuring.
b)
c)
That the holder has paid the accrued installments of the principal interests, reducing the main
renegotiation, from the date in which the restructuring or refinancing operation was formalized.
The holder has no other operation with amounts due in more than 90 days on the date of
reclassification to the normal risk category.
c) Measurement metrics and tools
Credit rating tools
In keeping with the Santander Group tradition, which has witnessed the use of proprietary rating models since
1993, at Santander Consumer Finance Group the credit quality of customers and transactions is also measured by
internal scoring and rating systems. Each credit rating assigned by models relates to a certain probability of default
or non-payment, based on the Group’s historical experience.
Since the Group focuses mainly on the retail business, assessments are based primarily on scoring models or tables
which, combined with other credit policy rules, issue an automatic decision on the loan applications received. These
tools have the dual advantage of allocating an objective appraisal of the level of risk and speeding up the response
time that would be required for a purely manual analysis.
In addition to the scoring models used for the approval and management of portfolios (rating of the transactions
composing the portfolios in order to assess their credit quality and estimate their potential losses), other tools are
available to assess existing accounts and customers which are used in the defaulted loan recovery process. The
intention is to cover the entire “loan cycle” (approval, monitoring and recovery) by means of statistical rating
models based on the Bank’s internal historical data.
For individualised corporates and institutions, which at the Group include mainly dealers/retailers, the assessment
of the level of credit risk is based on expert rating models that combine in the form of variables the most relevant
factors to be taken into account in the assessment, in such a way that the rating process generates appraisals that
are consistent and comparable among customers and summarise all the relevant information. In 2018 all the units
conducted reviews of the aforementioned portfolios, involving the participation of all areas of the Group. The
review meetings covered the largest exposures, companies under special surveillance and the main credit
indicators of these portfolios.
Ratings assigned to customers are reviewed periodically to include any new financial information available and the
experience in the banking relationship. The frequency of the reviews is increased in the case of customers that
reach certain levels in the automatic warning systems and of customers classified as requiring special monitoring.
The rating tools themselves are also reviewed in order to progressively fine-tune the ratings they provide.
To a lesser extent, certain exposures are also assessed using the global rating tools which cover the global
wholesale banking segment. Management of this segment is centralised at the Risk Division of the Santander
Group, for both rating calculation and risk monitoring purposes. These tools assign a rating to each customer,
which is obtained from a quantitative or automatic module, based on balance sheet ratios or macroeconomic
variables, supplemented by the analyst’s expert judgement.
The Group’s portfolio of individualised corporates is scarcely representative of the total risks managed, since it
relates mainly to vehicle dealer stock financing.
170
d) Credit risk parameters
The assessment of customers or transactions using rating or scoring systems constitutes a judgement of their
credit quality, which is quantified through the probability of default (PD).
In addition to customer assessment, the quantification of credit risk requires the estimation of other parameters,
such as exposure at default (EAD) and the percentage of EAD that will not be recovered (loss given default or LGD).
Therefore, other relevant aspects are taken into account in estimating the risk involved in transactions, such as the
quantification of off-balance-sheet exposures, which depends on the type of product, or the analysis of expected
recoveries, which is related to the guarantees provided and other characteristics of the transaction: type of product,
term, etc.
These factors are the main credit risk parameters. Their combination facilitates calculation of the probable loss or
expected loss (EL). This loss is considered to be an additional cost of the activity which is reflected in the risk
premium and must be charged in the transaction price.
These risk parameters also make it possible to calculate regulatory capital in accordance with the regulations
deriving from the new Basel Capital Accord (BIS III). Regulatory capital is determined as the difference between
unexpected loss and expected loss.
Unexpected loss is the basis for the capital calculation and refers to a very high, albeit scantly probable, level of
loss, which is not deemed to be recurring and must be catered for using capital.
Observed loss: measurement of cost of credit
To supplement the predictiveness provided by the advanced models described above, other habitual metrics are
used to facilitate prudent and effective management of credit risk based on observed loss.
In terms of recognition of losses, the cost of credit risk in Santander Consumer Finance is measured using different
approaches: Change in non-performing loans (new defaults – cures – recovery of assets written off), net loan-loss
provisions (gross provisions - recovery of assets written off), net losses (failures - recovery of losses) and expected
loss. In order to obtain a monitoring ratio, the first two indicators (in 12 months) are divided by the average of 12
months of the total portfolio to obtain the risk premium and the cost of credit. These gives the manager a full
insight into the evolution and future prospects of the portfolio.
It should be noted that unlike default, change in non-performing loans (end doubtful - initial doubtful + failed -
recovery of write-offs) refers to the total of the impaired portfolio in a period, regardless of the situation in which it
is found (doubtful and failed). This makes metrics a main driver when it comes to establishing measures for
portfolio.
The two approaches measure the same reality and, consequently, converge in the long term although they
represent successive moments in credit risk cost measurement: flows of non-performing loans (MOV), coverage of
non-performing loans (net credit loss provisions), respectively. Although they converge in the long term within the
same economic cycle, the three approaches show differences at certain times, which are particularly significant at
the start of a change of cycle, as observed in this period. These differences are explained by the different moment
of calculation of losses, which is basically determined by accounting regulations (for example, mortgage loans
have a coverage calendar and becomes written off “slower” than consumer portfolios). In addition, the analysis can
be clouded by changes in the policy of hedging and default, composition of the portfolio, doubtful of acquired
entities, changes in accounting regulations (IFRS9), sale of portfolios and adjustments on expected losses
calculation parameters, etc.
e) Credit risk cycle
The credit risk management process consists of identifying, measuring analysing, controlling, negotiating and
deciding on the risks incurred in the Group’s operations. This process involves the areas that take risks, senior
management and the Risk function.
As the Group is a member of the Santander Group, the process starts with senior management, through the board
of directors and the executive risk committee, which set the risk policies and procedures, the limits and delegation
of powers, and approve and supervise the framework for action by the risk function.
171
The risk cycle has three phases: pre-sale, sale and post-sale. The process is constantly revised, incorporating the
results and conclusions of the after-sale phase into the study of risk and pre-sale planning.
e1) Pre-sale
–
Study of risk and credit rating process
Generally speaking, risk study consists of analysing a customer’s capacity to meet their contractual
commitments with the Group and other creditors. This entails analysing the customer’s credit quality, risk
operations, solvency and profitability on the basis of the risk assumed.
With this objective, the Group has used rating models for classifying customer solvency since 1993. These
mechanisms are applied in the wholesale segment (sovereign, financial entities, corporate banking) and to
SMEs and individuals.
The rating results from a quantitative model based on balance sheet ratios or macroeconomic variables,
complemented by the expert judgement of analysts.
The ratings given to customers are regularly reviewed, incorporating the latest available financial information
and experience in the development of the banking relationship. The regularity of the reviews increases in the
case of customers who trigger certain levels in the automatic warning systems and who are classified as special
watch. The rating tools are also reviewed in order to adjust the accuracy of the rating.
While ratings are used in the wholesale sector and for companies and institutions, scoring techniques
predominate for individuals and smaller companies. In general, these techniques automatically assign a score
to the customer for decision-making purposes, as explained in the Decisions on operations section.
– Planning and setting limits
The purpose of this phase is to limit the levels of risk assumed by the Group, efficiently and comprehensively.
The credit risk planning process serves to set the budgets and limits at the portfolio level for subsidiaries.
Planning is carried out through a dashboard that ensures that the business plan and lending policy are
achieved, and that the resources needed to achieve these are available. This arose as a joint initiative between
the Sales area and the Risk function, providing a management tool and a way of working as a team.
Incorporating the volatility of macroeconomic variables that affect portfolio performance is a key aspect in
planning. The Group simulates this performance under a range of adverse and stressed scenarios (stress
testing), enabling assessment of the Group's solvency in specific situations.
Scenario analysis enables senior management to understand the portfolio's evolution in the face of market
conditions and changes in the environment. It is a key tool for assessing the sufficiency of provisions in stress
scenarios.
Limits are planned and established using documents agreed between the Business and Risk areas and approved
by the Group, setting out the expected business results in terms of risk and return, the limits to which this
activity is subject and management of the associated risks, by group or customer.
172
e2) Sales
– Decisions and operations
The sales phase consists of the decision-making process, analysing and deciding on operations. Approval by the
risk area is a prior requirement before the contracting of any risk. This process must take into account the
policies defined for approving operations, the risk appetite and the elements of the operation that are relevant
to the search for the right balance between risk and profitability.
In the sphere of standardised customers (individuals and businesses and SMEs with low turnover), large
volumes of credit operations can be managed more easily by using automatic decision models for classifying
the customer/transaction pair. The ratings these models give to transactions enable lending to be classified
consistently into homogeneous risk groups, based on information on the characteristics of the transaction and
its owner.
e3) After-sales
– Monitoring
The Monitoring function is based on a continuous process of ongoing observation, enabling early detection of
changes that could affect the credit quality of customers, in order to take measures to correct deviations with a
negative impact.
This monitoring is based on customer segmentation, and is carried out by dedicated local and global risk teams,
supplemented by internal audit.
The function includes, among other tasks, the identification, monitoring and assignment of policies at customer
level to anticipate surprises and manage them in the most appropriate way for their situation, credit policies,
rating reviews and continuous monitoring of indicators.
The system called Santander Customer Assessment Notes (SCAN) distinguishes between four levels depending
on the level of concern of the circumstances observed (Specialized Follow-up, Intensive Follow-up, Ordinary
Follow-up, Do Not Attend). The inclusion of a position in SCAN does not imply that non-compliance has been
recorded, but rather the convenience of adopting a specific policy with the same, determining the person
responsible and the time frame in which it must be carried out. SCAN qualified clients are reviewed at least
semi-annually, being such review quarterly and/or monthly for the most serious grades. The ways in which a
firm qualifies in SCAN are the monitoring work itself, the review carried out by the internal audit, the decision of
the commercial manager who oversees the firm or the entry into operation of the established system of
automatic alarms.
Ratings are reviewed at least every year, but this may be more frequent if weaknesses are detected or based on
the rating itself.
The main risk indicators for individual customers, businesses and SMEs with low turnover are monitored to
detect changes in the performance of the loan portfolio with respect to the projections in the commercial
strategic plans (CSPs).
f) Measurement and control
In addition to monitoring the customers' credit quality, the Group puts in place the necessary control
procedures to analyse the current credit risk portfolio and its performance throughout the different stages of
credit risk.
This function assesses risks from a range of interrelated standpoints. The key vectors of control are
geographies, business areas, management models, products, etc. The approach allows for early detection of
specific focal points, and the framing of action plans to correct any impairment.
173
Each control axis supports two types of analysis:
1.- Quantitative and qualitative portfolio analysis
Portfolio analysis continuously and systematically monitors changes in risk with respect to budgets, limits and
benchmark standards, evaluating the effects with a view to future situations driven by external factors or
arising from strategic decisions, so as to establish measures that place the profile and volume of the risk
portfolio within the parameters set by the Group.
In the credit risk control phase, the following metrics, among others, are used in addition to the conventional
ones:
– MDV (change in manage NPLs)
MDV measures how NPLs change over a period, stripping out write-offs and including recoveries. It is an
aggregate metric at the portfolio level that enables us to react to any impairments seen in the behaviour of
non-performing loans.
–
EL (expected loss) and capital
Expected loss is an estimate of the financial loss that will occur over the next year from the portfolio
existing at the given time. It is a further cost of business, and must be reflected in the pricing of
transactions.
2.- Evaluation of control processes
A systematic scheduled review of procedures and methods, implemented throughout the entire credit risk
cycle, to ensure control process effectiveness and validity.
In 2006, within the corporate framework established across the Group for compliance with the Sarbanes Oxley
Act, a corporate methodology was created for the documentation and certification of the Control Model,
specified in terms of tasks, operating risks and controls. The risk division annually evaluates the efficiency of
internal control of its activities.
Moreover, the internal validation function, as part of its mission to supervise the quality of the Group's risk
management, ensures that the management and control systems for the different risks inherent in the Group's
business comply with the most stringent criteria and best practices seen in the industry and/or required by
regulators. In addition, internal audit is responsible for ensuring that policies, methods and procedures are
adequate, effectively implemented and regularly reviewed.
g) Recoveries management
Recovery activity is an important function within the Group's risk management area. The area responsible is
Collection and Recoveries, which frames a global strategy and a comprehensive approach to recovery
management.
The Group combines a global model with local execution, taking account of the specific features of the business
in each area.
The main objective of the recovery activity is to recover outstanding debts and obligations by managing our
customers, thus contributing to a lesser need for provisions and a lower cost of risk.
The specific targets of the recovery process are guided as follows:
– Achieve collection or regularisation of outstanding balances, so that an account returns to its normal state;
if this is not possible, the objective is total or partial recovery of debts, whatever their accounting or
management status.
– Maintain and strengthen our relationship with the customer by addressing their behaviour with an offer of
management tools, such as refinancing products according to their needs, consistently with careful
corporate policies of approval and control, as established by the risk areas.
174
In the recovery activity, Standardised customers and Individually Managed customers are segmented or
differentiated with specific and comprehensive management models in each case, according to basic
specialisation criteria.
Management is articulated through a multichannel customer relationship strategy. The telephone channel is
oriented towards standardised management, with a focus on achieving contact with customers and monitoring
payment agreements, prioritising and adapting management actions based on the state of progress of their
situation of "in arrears", "doubtful" or "in default", their balance sheet and their payment commitments.
The commercial network of recovery management operates alongside the telephone channel. It is a means of
developing a closer relationship with selected customers, and is composed of teams of agents with a highly
commercial focus, specific training and strong negotiation skills. They conduct personalised management of
their own portfolios of high-impact customers (large balance sheets, special products, customers requiring
special management).
Recovery activities at advanced stages of non-performance are guided by a dual judicial and extra judicial
management approach. Commercial and follow-up activities by telephone and via agent networks are
continued, applying strategies and practices specific to the state of progress.
The management model encourages proactivity and targeted management through continuous recovery
campaigns with specific approaches for customer groups and non-performance states, acting with predefined
goals through specific strategies and intensive activities via appropriate channels within limited time frames.
Suitable local production and analysis of daily and monthly management information, aligned with corporate
models, have been defined as the basis of business intelligence for ongoing decision-making for management
guidance and results monitoring.
h)
Concentration risk
Concentration risk is a key component of credit risk management. The Santander Group, which Santander
Consumer Finance Group belongs, continuously monitors the degree of credit risk concentration, by
geographical area/country, economic sector, product and customer group.
The Board of Directors, by reference to the risk appetite, determines the maximum levels of concentration, and
the executive risk committee establishes the risk policies and reviews the appropriate exposure limits to ensure
the adequate management of credit risk concentration.
Santander Consumer Finance is subject to Bank of Spain regulations on large exposures contained in the fourth
part of the CRR (Regulation UE No.575 / 2013), according to which the exposure contracted by an entity with
respect to a client or related group of clients will be considered 'great exposure' when its value is equal or
greater than 10% of its computable capital. Additionally, to limit large exposures, no entity may assume
against a client or group of clients linked to each other an exposure whose value exceeds 25% of its eligible
capital, after taking into account the effect of credit risk reduction under rule.
At December closing, after applying risk mitigation techniques, no group reached the aforementioned
thresholds.
The Santander Consumer Finance Group’s Risk Division works closely with the Finance Division in the active
management of credit portfolios, which includes reducing the concentration of exposures through several
techniques, such as the arrangement of credit derivatives for hedging purposes or the performance of
securitisation transactions, in order to optimise the risk/return ratio of the total portfolio.
175
The detail, by activity and geographical area of the counterparty, of the concentration of the Group's risk (*) at
31 December 2022 and 2021 is as follows:
Credit institutions
Public sector
Of which:
Central government
Other
2022
EUR Thousands
Spain
Other EU
Countries
Americas
Rest of the
world
Total
2,940,703
924,475
6,497,642
5,504,140
921,804
4,255,960
2,671
1,248,180
—
—
—
—
242,744
9,681,089
42,951
6,471,566
60
5,177,824
42,891
1,293,742
Other financial institutions
10,863
1,145,014
338,628
246,749
1,741,254
Non-financial companies and individual traders
3,171,286
28,351,567
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual traders
Other households and non-profit institutions
serving households
Of which:
Residential
Consumer loans
Other purposes
—
—
211,566
6,678
1,034,445
10,699,079
2,136,841
17,434,244
—
—
—
—
—
2,673,489
34,196,342
—
—
211,566
6,678
986,488
12,720,012
1,687,001
21,258,086
10,121,975
54,814,108
14
6,575,205
71,511,302
1,318,606
2,394,903
8,714,320
52,074,766
89,049
344,439
—
14
—
—
3,713,509
6,575,205
67,364,305
—
433,488
Total 123,601,553
(*) The definition of risk for the purposes of this table includes the following items on the public consolidated balance sheet: 'Loans and
advances: to credit institutions', 'Loans and advances: central banks', 'Loans and advances: to customers' , 'Debt securities', 'Equity
instruments', 'Derivatives', 'Derivatives - Hedge accounting', 'Participations and guarantees granted'.
Credit institutions
Public sector
Of which:
Central government
Other
Other financial institutions
2021
Spain
5,096,843
1,136,219
Other EU
Countries
15,221,781
2,687,032
1,135,291
2,106,457
928
2,706
580,575
983,191
EUR Thousands
Americas
Rest of the
world
Total
3
—
—
—
419,861
20,738,488
177,194
4,000,445
132,741
3,374,489
44,453
625,956
206,888
225,043
1,417,828
Non-financial companies and individual traders
1,962,248
23,787,207
—
2,511,404
28,260,859
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual traders
Other households and non-profit institutions
serving households
Of which:
Residential
Consumer loans
Other purposes
—
—
257,106
5,846
698,777
8,693,490
1,263,471
14,830,765
11,112,915
53,012,709
1,441,332
2,418,162
9,575,949
50,296,449
95,634
298,098
—
—
—
—
7
—
7
—
—
—
257,106
5,846
967,906
10,360,173
1,543,498
17,637,734
6,694,057
70,819,688
—
3,859,494
6,694,057
66,566,462
—
393,732
Total 125,237,308
(*) For the purposes of this table, the definition of risk includes the following items in the public consolidated balance sheet: “Cash, cash
balances at central banks and others deposits on demand”, “Deposits to Credit Institutions”, “Loans and Advances to Customers”, “Debt
Instruments”, “Trading Derivatives”, “Hedging Derivatives”, “Investments”, “Equity Instruments” and “Contingent Liabilities”.
176
III. Market, structural and liquidity risk
a. Scope and definitions
The measurement perimeter, control and monitoring of the Market Risks function covers those operations where
equity risk is assumed, as consequence of changes in market factors.
These risks are generated through two fundamental types of activities:
–
The trading activity, which includes both the provision of financial services in markets for clients, in which the
entity is the counterparty, as well as the activity of buying and selling and own positioning in fixed income,
variable income and currency products.
Santander Consumer Finance does not do negotiation activities (trading), it limits its treasury activity to
manage the structural risk of the balance sheet and its coverage, as well as to manage the liquidity necessary
to finance the business.
–
The management activity of the balance sheet or ALM, which involves managing the risks inherent in the
entity's balance sheet, excluding the trading portfolio.
The risks generated in these activities are;
– Market: risk incurred because of the possibility of changes in market factors that affect the value of the
positions that the entity maintains in its trading portfolios (trading book).
–
–
Structural: risk caused by the management of the different balance sheet items. This risk includes both the
losses from price fluctuations that affect the available-for-sale and held-to-maturity portfolios (banking
book), as well as the losses derived from the management of the Group's assets and liabilities valued at
amortized cost.
Liquidity: risk of not meeting payment obligations on time or doing so at an excessive cost, as well as the
ability to finance the growth of its volume of assets. Among the types of losses caused by this risk are losses
due to forced sales of assets or impacts on margin due to the mismatch between forecast cash outflows and
cash inflows.
Trading and structural market risks, depending on the market variable that generates them, can be classified as:
–
–
–
–
–
–
–
Interest rate risk: identifies the possibility that variations in interest rates may adversely affect the value of a
financial instrument, a portfolio or the Group.
Credit spread risk: identifies the possibility that variations in credit spread curves associated with specific
issuers and types of debt may adversely affect the value of a financial instrument, a portfolio or the Group.
The spread is a differential between financial instruments that trade with a margin over other reference
instruments, mainly IRR (Internal Rate of Return) of government securities and interbank interest rates.
Exchange rate risk: identifies the possibility that variations in the value of a position in a currency other than
the base currency may adversely affect the value of a financial instrument, a portfolio or the Group.
Inflation risk: identifies the possibility that variations in inflation rates may adversely affect the value of a
financial instrument, a portfolio or the Group.
Volatility risk: identifies the possibility that variations in the listed volatility of market variables may adversely
affect the value of a financial instrument, a portfolio or the Group.
Liquidity risk: identifies the possibility that an entity or the Group will not be able to undo or close a position
on time without impacting the market price or the cost of the transaction.
Prepayment or cancellation risk: identifies the possibility that early cancellation without negotiation, in
operations whose contractual relationship explicitly or implicitly allows it, generates cash flows that must be
reinvested at a potentially lower interest rate.
177
There are other variables that exclusively affect market risk (and not structural risk), so that it can be further classified
into:
–
–
–
–
Variable income risk: identifies the possibility that changes in the value of prices or in the expectations of
dividends of variable income instruments may adversely affect the value of a financial instrument, a portfolio
or the Group.
Raw materials risk: identifies the possibility that changes in the value of merchandise prices may adversely
affect the value of a financial instrument, a portfolio or the Group.
Correlation risk: identifies the possibility that changes in the correlation between variables, whether of the
same type or of a different nature, quoted by the market, may adversely affect the value of a financial
instrument, a portfolio or the Group.
Underwriting risk: identifies the possibility that the placement objectives of securities or other types of debt
will not be achieved when the entity participates in underwriting them.
Liquidity risk can be classified into the following categories:
–
Financing risk: identifies the possibility that the entity is unable to meet its obligations as a result of the
inability to sell assets or obtain financing.
– Mismatch risk: identifies the possibility that the differences between the maturity structures of assets and
liabilities generate an extra cost to the entity.
–
Contingency risk: identifies the possibility of not having adequate management elements to obtain liquidity
as a result of an extreme event that implies greater financing or collateral needs to obtain it.
b. Measurement and methods
1. Structural interest-rate risk
The Group analyses the sensitivity of net interest income and of equity to interest rate fluctuations. This sensitivity
is determined by mismatches in the maturity and review dates of interest rates of different balance sheet items.
According to the interest rate positioning of the balance sheet, and considering the situation and perspectives of
the market, financial measures are adopted to adjust the positioning to that sought by the Bank. These measures
may range from taking up positions in markets to the specification of interest rate characteristics of commercial
products.
The metrics used to control the interest rate risk in these activities are the interest rate gap, financial margin
sensibility and equity in the levels of interest rate.
–
Interest rate gap
Analysis of the interest rate gap deals with the mismatch between the timing of re-pricing of on and off-balance
aggregates of assets and liabilities and of memorandum accounts (off-balance sheet). It provides a basic profile of
the balance sheet structure and can detect concentrations of interest rate risk at different terms. It is also a useful
tool for estimates of the potential impact of interest rate movements on net interest income and the equity of the
entity.
All on- and off-balance sheet aggregates have to be broken down so that they can be placed in the point of
repricing/maturity. For aggregates that do not have a contractual maturity, the Santander Group's internal model
for analysis and estimation of their durations and sensitivity is used.
–
Sensitivity of Net Interest Income (NII)
The sensitivity of net interest income measures the change in expected accruals for a certain period (12 months) in
the event of a shift in the interest rate curve.
178
–
Sensitivity of Economic Value of Equity (EVE)
This measures the implied interest rate risk in the economic value of equity which, for the purposes of interest rate
risk, is defined as the difference between the net present value of assets minus the net present value of liabilities,
based on the effect of a change in interest rates on such present values.
2. Liquidity risk
Management of structural liquidity aims to fund the recurring activity of the Santander Consumer Finance Group in
optimal conditions of term and cost, while avoiding undesired liquidity risks.
The measures used for the control of liquidity risk are the liquidity gap, liquidity ratios, the statement of structural
liquidity, liquidity stress tests, the financial plan, the liquidity contingency plan and regulatory reporting.
–
Liquidity Gap
The liquidity gap provides information on contractual and expected cash inflows and outflows for a given period in
each of the currencies in which the Santander Consumer Finance Group operates. The gap measures the net cash
needed or the surplus at a given date and reflects the liquidity level maintained under normal market conditions.
In the contractual liquidity gap, all balance sheet items that generate cash flows are analysed and placed at their
point of contractual maturity. For assets and liabilities with no contractual maturity, the Santander Group's internal
analysis model is used. It is based on a statistical study of products' time series, and the so-called stable and
unstable balance is determined for liquidity purposes.
–
Liquidity ratios
The minimum liquidity ratio compares liquid assets available for sale or transfer (after the relevant discounts and
adjustments have been applied) and assets at less than 12 months with liabilities of up to 12 months.
The Net Stable Funding Ratio measures the extent to which assets that require structural funding are being funded
by structural liabilities.
–
Structural liquidity
The purpose of this analysis is to determine the structural liquidity position according to the liquidity profile
(greater or lesser stability) of different asset and liability instruments.
–
Liquidity stress test
The purpose of the liquidity stress tests conducted by the Santander Consumer Finance Group is to determine the
impact of a severe, but plausible, liquidity crisis. In such stress scenarios, a simulation is made of internal factors
that may affect Group liquidity, such as, inter alia, a credit rating downgrade of the institution, a fall in the value of
balance sheet assets, banking crises, regulatory factors, a change in consumer trends and/or a loss of depositor
confidence.
Every month, four liquidity stress scenarios (banking crisis in Spain, idiosyncratic crisis at the Santander Consumer
Finance Group, global crisis and a combined scenario) are simulated by stressing these factors, and the results are
used to establish early warning levels.
–
Financial Plan
Every year, a liquidity plan is prepared based on the funding needs arising from the business budgets of all the
Group's subsidiaries. Based on these liquidity requirements, an analysis is made of limits on new securitisation
considering eligible assets available, in addition to potential growth in customer deposits. This information is used
to establish an issue and securitisation plan for the year. Throughout the year, regular monitoring is carried out of
actual trends in funding requirements, thus giving rise to the revisions of the plan.
–
Contingency Funding Plan
The purpose of the Liquidity Contingency Plan is to set out the processes (governance structure) to be followed in
the event of a potential or real liquidity crisis, as well as the analysis of contingency actions or levers available to
Management should such a situation arise.
179
The Liquidity Contingency Plan is underpinned by, and must be designed in line with, two key elements: liquidity
stress tests and the early warning indicator (EWI) system. Stress tests and different scenarios are used as the basis
for analysing available contingency actions and for determining such actions are sufficient. The EWI system
monitors and potentially triggers the escalation mechanism for activating the plan and subsequently monitoring
the situation.
–
Regulatory Reporting
Santander Consumer Finance applies the Liquidity Coverage Ratio (LCR) as required by the European Banking
Authority (EBA) for the consolidated sub-group on a monthly basis, and the net stable funding ratio (NSFR) on a
quarterly basis.
In addition, Santander Consumer Finance has produced an annual Internal Liquidity Adequacy and Assessment
Process (ILAAP) report as part of the consolidated document of the Santander Group, although the supervisor does
not require this report at sub-group level.
3. Structural change risk
Structural change risk is managed centrally, as part of the general corporate procedures of the Santander Group.
c.
Internal Control
The structural and liquidity risk control environment in Santander Consumer Finance Group is based on the
framework of the annual limits plan, where the limits for said risks are established, responding to the Group's level
of risk appetite.
The limit structure involves a process that considers:
–
–
–
–
–
Efficient and comprehensive identification and delimitation of the main types of market risk incurred,
consistently with the management of the business and the strategy defined.
Quantification and communication of the risk levels and profile considered acceptable by senior
management to the business areas, so that undesired risks are not incurred.
Providing flexibility for the business areas in the acceptance of risks, responding efficiently and
appropriately to developments in the market and changes in business strategies, within the risk limits
considered acceptable by the entity.
Enabling business generators to take sufficient prudent risks to achieve their budgeted results.
Delimiting the range of products and underlying assets in which each Treasury unit can operate,
considering characteristics such as the model and assessment systems, the liquidity of the instruments
involved, etc.
In the event of exceeding one of these limits or their sub-limits, the risk management officers involved must
explain the reasons and facilitate an action plan to correct it.
The main management limits for structural risk at the consolidated Santander Consumer level are:
–
–
One-year net interest income sensitivity limit.
Equity value sensitivity limit.
The limits are compared with the sensitivity that implies a greater loss among those calculated for different
scenarios of parallel rise and fall of the interest rate curve. During 2022, these limits applied to the scenarios of
plus and minus 25 basis points, and as of January 2023 they have been established on the most adverse loss
among 8 scenarios of parallel increases and decreases of up to 100 basis points. In addition, other parallel and
non-parallel scenarios are calculated, including those defined by the European Banking Authority (EBA). Using
various scenarios allows for better control of interest rate risk. In the lowering interest rates scenarios, negative
interest rates are contemplated.
180
During 2022, the level of exposure at the consolidated level in the SCF Group, both on the financial margin and on
economic value, is low in relation to the budget and the amount of own resources respectively, being in both cases
less than 1% throughout the year. year, and within the established limits.
With regard to liquidity risk, the main limits at the Santander Consumer Finance Group level include regulatory
liquidity metrics such as the LCR and NSFR, as well as liquidity stress tests under different adverse scenarios
previously mentioned.
At the end of December 2022, all liquidity metrics are above the internal limits in force, as well as regulatory
requirements. Both for the LCR and for the NSFR at the consolidated Group level, it has been at levels above 115%
and 103% throughout the year.
d. Management
Balance sheet management entails the analysis, projection and simulation of structural risks, along with the
design, proposal and execution of transactions and strategies to manage this risk. Finance Management is
responsible for this process, and it takes a projection-based approach where and when this is applicable or feasible
A high-level description of the main processes and/or responsibilities in managing structural risks is as follows:
–
Analysis of the balance sheet and its structural risks.
– Monitoring of movements in the most relevant markets for asset and liability management (ALM) for the
Group.
–
–
–
Planning. Design, maintenance and monitoring of certain planning instruments. Finance Management is
responsible for preparing, following and maintaining the financial plan, the funding plan and the liquidity
contingency plan.
Strategy proposals. Design of strategies aimed at funding the SCF sub-group's business by securing the best
available market conditions or by managing the balance sheet and its exposure to structural risks, thereby
avoiding unnecessary risks, preserving net interest income and safeguarding the market value of equity and
capital.
Execution. To achieve appropriate ALM positioning, Finance Management uses different tools. Chief among
these are issues in debt or capital markets, securitisation, deposits and interest rate and/or currency hedges,
and management of ALCO portfolios and the minimum liquidity buffer.
–
Compliance with risk limits and with risk appetite
181
e.
IBOR reform
Since 2013, various supranational bodies and authorities (IOSCO and FSB) have driven and monitored reform
initiatives to ensure more robust interest rate benchmarks. In this context, central banks and regulators in several
jurisdictions organised work groups to recommend risk-free indices so that the transition would be non-disruptive
and progressive.
The main aim was to facilitate the shift to the risk-free indices identified in various countries, particularly the SONIA
index, as the Libor's sterling index replacement, the SOFR for the USD Libor and the €STR for the euro Libor.
As a result of the combined efforts of market authorities and participants, this transition process led to various
milestones during the period from 2019 to 2022, leaving only the implementation of the sterling Libor and USD
Libor plans for 2023.
According to the regulatory transition milestones, the USD Libor terms (overnight, 1M, 3M, 6M and 12M) will still
be calculated using contributions from the panel banks until mid-2023, although their use in new operations has
been limited since the end of 2021. The final USD Libor publication date for the overnight and 12M terms will be 30
June 2023. For the 1, 3 and 6-month terms, on 23 November 2022 the FCA announced a consultation on its
proposal to require the Libor administrator IBA to carry on publishing these terms for the USD Libor using a non-
representative "synthetic" method until end-September 2024. Publication would be permanently discontinued
from then on.
Publication of the sterling Libor using the synthetic method for the 3-month term has been confirmed until end-
March 2024, while the 1 and 6-month terms will cease to be published in March 2023.
According to the milestones mentioned, the Group and its entities have been focusing on making all the
contractual, commercial, operational and technological changes necessary to shift to these benchmarks. Work will
continue in 2023 to meet the next transition milestones in each of the Group's jurisdictions. There follows a
breakdown of the carrying amount of financial assets, financial liabilities, derivatives and loan commitments that
remain referenced to the indices pending transition at 31 December 2022.
EUR Thousand
Loans and
advances
Debt Securities
(Assets)
Deposits
Debt securities
issued
(Liabilities)
Derivative
s (Assets)
Derivatives
(Liabilities)
Loan
commitments
granted
Referenced to EONIA
—
Referenced to LIBOR
Of which USD
Of which GBP
40,000
40,000
—
IV. Operational risk
a. Definition and objectives
—
—
—
—
—
—
—
—
—
—
—
977,612
41,533
25,713
—
—
—
977,612
41,533
25,713
—
—
—
—
The Bank defines operational risk (OR) as the risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external events.
Operational risk is inherent to all products, activities, processes and systems, and is generated in all business and
support areas. Accordingly, all employees are responsible for managing and controlling operational risks arising in
their area of activity.
The aim pursued by the Bank in operational risk control and management is primarily to identify, measure/ assess,
monitor, control, mitigate and report this risk.
The Bank's priority, therefore, is to identify and mitigate focal points of risk, irrespective of whether they have given
rise to any losses. Measurement also contributes to the establishment of priorities in the management of
operational risk.
182
Managing and mitigating risks sources is a priority to the Bank, regardless of whether these risks have originated
losses or not. Measurement has also contributed to establishing priorities in managing operational risk. To improve
and promote adequate operational risk management, Santander Consumer Finance has developed an advanced
loss distribution model (LDA) based on internal event database such as the external loss database of our banking
peers (ORX consortium database) and scenario analysis. This approach is accepted by t he industry and regulators.
b. Operational risk management and control model
Operational risk management cycle
The stages of the model of operational risk management and control involve the following:
– Identifying the operational risk inherent to all activities, products, processes and systems of the Group. This
process is carried out via the Risk and Control Self-assessment (RCSA) exercise.
– Definition of the target operational risk profile, specifying the strategies by unit and time horizon, through the
establishment of the operational risk appetite and tolerance, the budget and the related monitoring.
– Encouragement of the involvement of all employees in the operational risk culture, through appropriate training
for all areas and levels of the organisation.
– Objective and ongoing measurement and assessment of operational risk, consistent with industry and regulatory
standards (Basel, Bank of Spain, etc.).
– Continuous monitoring of operational risk exposures, implementation of control procedures, improvement of
internal awareness and mitigation of losses.
– Establishment of mitigation measures to eliminate or minimise operational risk.
– Preparation of periodic reports on the exposure to operational risk and its level of control for the senior
management of the Group and its areas/units, and reporting to the market and the regulatory authorities.
– Definition and implementation of the methodology required for calculating capital in terms of expected and
unexpected loss.
183
The following is required for each of the key processes indicated above:
– The existence of a system whereby operational risk exposures can be reported and controlled, as part of the
Group's daily management efforts.
Towards this end, in 2016 the Group implemented a single tool for management and control of operational risk,
compliance and internal control, called Heracles, and which is considered the Golden Source for Risk Data Aggregation
(RDA).
Internal rules and regulations based on principles for management and control of operational risk have been defined
and approved pursuant to the established governance system and in line with prevailing regulation and best practices.
In 2015, the Group adhered to the relevant corporate framework and subsequently, the model, policies and procedures
were approved and implemented, along with the Operational Risk Committee Regulation.
The model of operational risk management and control implemented by the Group provides the following benefits:
– It promotes the development of an operational risk culture.
– It allows for comprehensive and effective management of operational risk (identification, measurement /
assessment, control / mitigation, and reporting).
– It improves knowledge of both actual and potential operational risks and their assignment to businesses and
support lines.
– Information on operational risk helps improve processes and controls and reduce losses and income volatility.
– It facilitates the setting of limits for operational risk appetite.
c. Risk identification, measurement and assessment model
In November 2014, the Group adopted the new management system of the Santander Group, in which three lines of
defence are defined:
– 1st line of defence: integrated in areas of business or support areas. Its tasks are to identify, measure or assess,
control (primary control) mitigate and report the risks inherent to the activity or function for which it is
responsible.
184
Given the complexity and heterogeneous nature of Operational Risk within a large-scale organization with various
lines of business, appropriate risk management is carried out in two axes:
(1) Operational Risk Management: each business unit and support function of the Santander Group is responsible for
the Operational Risks arising within its scope, as well as for their management. This particularly affects the heads of
the business units and support functions, but also the coordinator (or OR team) in the 1LoD.
(2) Management of specialized Operational Risk controls: there are some functions that tend to manage specialized
controls for certain risks where they have greater visibility and specialization. Such functions have a global view of the
specific Operational Risk exposure in all areas. We can also refer to them as Subject Matter Experts or SME.
OR Managers:
Operational Risk management is the responsibility of all staff in their respective areas of activity. Consequently, the
Head of each division or area has the ultimate responsibility for Operational Risk in its scope.
OR Coordinators:
OR coordinators are actively involved in Operational Risk management and support the RO managers in their own
areas of OR management and control. Each coordinator has a certain scope for action, which does not necessarily
coincide with organizational units or areas, and has an in-depth knowledge of the activities within their scope. Their
roles and responsibilities include:
•
•
•
•
Interaction Undertake interaction with the second line of defense in day-to-day operations and
communication to Operational Risk Management in their scope.
Facilitate integration in the management of OR in each scope.
Support the implementation of qualitative and quantitative methodologies and tools for operations
management and control.
Provide support and advice on Operational Risk within its scope.
• Maintain an overview of risk exposure in scope.
•
•
•
Ensure the quality and consistency of data and information reported to 2LoD, identifying and monitoring
the implementation of relevant controls.
Review and monitor results provided by business units and support functions related to controls testing.
Support in sign-off and certification of controls (control testing).
• Monitor mitigation plans in your area.
•
Coordinate the definition of business continuity plans in your area.
– 2nd line of defence: Exercised by the Non-Financial Risks Department and reporting to the CRO. Its functions
are the design, maintenance and development of the local adaptation of the Operational Risk Management
Framework (BIS), and control and challenge on the first line of defense of Operational Risk. Their main
responsibilities include:
•
•
•
•
•
Design, maintain and develop the Operational Risk management and control model, promoting the
development of an operational risk culture throughout the Group.
Safeguard the adequate design, maintenance and implementation of the Operational Risk regulations.
Encourage the business units to effectively supervise the identified risks.
Guarantee that each key risk that affects the entity is identified and duly managed by the corresponding
units.
Ensure that the Group has implemented effective RO management processes.
185
•
•
Prepare Operational Risk appetite tolerance proposals and monitor risk limits in the Group and in the
different local units.
Ensure that Top Management receives a global vision of all relevant risks, guaranteeing adequate
communication and reports to Senior Management and the Board of Directors, through the established
governing bodies.
In addition, the 2LoD will provide the information necessary for its consolidation, along with the remaining risks, to the
risk consolidation and supervision function.
To ensure proper supervision, a solid knowledge of the activities of the Business Units / Support Functions is required,
as well as a specific understanding of the categories of risk events (IT, Compliance, etc.) and a Local Capacity and
Capability Plan. In that context, the RO control function (2LOD function) needs to take advantage of specific profiles
that can support the implementation of the RO framework in the 1LOD, but also provide specific risk exposure and
business information, to ensure that the RO profile related is well managed and reported. Business Risk Managers
(BRM) as business insight specialists (eg Global Corporate Banking) and Specialized Risk Managers (SRM) as OR control
specialists (eg IT and cyber risks) perform these functions within OR 2LOD and are positioned as key contact points for
1LOD business units and operations management support functions.
– 3rd line of defence: Exercised by Internal Audit, which evaluates the compliance of all activities and units of the
entity with its policies and procedures. His main responsibilities include:
•
•
•
•
•
Verify that the risks inherent to the Group's activity are sufficiently covered, complying with the policies
established by Senior Management and the applicable internal and external procedures and regulations.
Supervise compliance, effectiveness and efficiency of the internal control systems for operations in the
Group, as well as the quality of accounting information.
Carry out an independent review and challenge the OR controls, as well as the Operational Risk
management processes and systems.
Evaluate the state of implementation of the OR management and control model in the Group.
Recommend continuous improvement for all functions involved in operations management.
186
Management at the Bank is carried out based on the following elements:
To carry out the identification, measurement and evaluation of operational risk, a set of quantitative and qualitative
corporate techniques / tools have been defined, which are combined to carry out a diagnosis based on the identified
risks and obtain an assessment through the measurement / evaluation of area / unit.
The quantitative analysis of this risk is carried out mainly through tools that record and quantify the level of losses
associated with operational risk events.
–
Internal events database, whose objective is to capture all the Bank's operational risk events. The capture of
events related to operational risk is not restricted by establishing thresholds, that is, there are no exclusions
based on the amount, and it contains both events with an accounting impact (including positive impacts) and
non-accounting ones.
There are accounting reconciliation processes that guarantee the quality of the information collected in the database.
The most relevant events of the Bank and of each operational risk unit thereof are specially documented and reviewed.
–
–
External database of events, since the Bank, through the Santander Group, participates in international
consortiums, such as ORX (operational risk exchange). In 2016, the use of external databases that provide
quantitative and qualitative information and that allow a more detailed and structured analysis of relevant
events that have occurred in the sector was reinforced.
Analysis of RO scenarios. Expert opinion is obtained from the business lines and risk and control managers,
whose objective is to identify potential events with a very low probability of occurrence, but which, in turn,
may entail a very high loss for an institution. Its possible effect on the entity is evaluated and additional
controls and mitigating measures are identified that reduce the possibility of a high economic impact. In
addition, the results of this exercise (which has also been integrated into the HERACLES tool) will be used as
one of the inputs for the calculation of economic capital for operational risk based on the advanced model
(LDA).
The tools defined for the qualitative analysis try to evaluate aspects (coverage / exposure) linked to the risk profile,
thereby allowing the capture of the existing control environment. These tools are mainly:
–
RCSA: Methodology for the evaluation of operational risks, based on the expert criteria of the managers,
serves to obtain a qualitative vision of the main sources of risk of the Bank, regardless of whether they have
materialized previously.
Advantages of the RCSA:
a.
Encourage the responsibility of the first lines of defense: The figures of risk owner and control
owner in the first line are determined.
187
b.
c.
d.
Favor the identification of the most relevant risks: Risks that are not pre-defined, but arise from the
areas that generate risk.
Improve the integration of RO tools: Root cause analysis is incorporated.
Improve exercise validation. It is developed through workshops or workshops, instead of
questionnaires.
e. Make the exercises have a more forward-looking approach: The financial impact of risk exposure is
evaluated.
– Corporate system of operational risk indicators, in continuous evolution and in coordination with the
corresponding corporate area. They are statistics or parameters of various kinds that provide information on an
entity's exposure to risk. These indicators are reviewed periodically to warn of changes that may reveal
problems with risk.
– Recommendations from regulators, Internal Audit and the external auditor. These provide relevant information
on inherent risk arising from internal and external factors, and enable identification of weaknesses in controls.
– Other specific instruments that permit a more detailed analysis of technology risk, such as control of critical
incidences in systems and cyber-security events.
d. Operational risk information system
HERACLES is the corporate operational risk information system. This system has modules for risk self-assessment,
event registration, a risk and assessment map, indicators of both operational risk and of internal control, mitigation
and reporting systems and scenario analysis, and it is applied to all entities of the Consumer Group including Bank.
e. Business Continuity Plan
The Santander Group and, accordingly, the Santander Consumer Finance Group, have a Business Continuity
Management System (BCMS) to ensure the continuity of its entities' business processes in the event of a disaster or
serious incident.
The basic objective consists of the following:
– Minimising possible injury to persons, as well as adverse financial and business impacts for the Bank,
resulting from an interruption of normal business operations.
–
Reducing the operational effects of a disaster by supplying a series of pre-defined, flexible guidelines and
procedures to be employed in order to resume and recover processes.
188
–
–
–
–
Resuming time-sensitive business operations and associated support functions, in order to achieve business
continuity, stable earnings and planned growth.
Re-establishing the time-sensitive technology and transaction-support operations of the business if existing
technologies are not operational.
Safeguarding the public image of, and confidence in, the Bank.
Satisfy the Bank's obligations to its employees, customers, shareholders and other interested third parties.
f. Corporate information
The Santander Group's and Bank´s corporate operational risk control area has an operational risk management
information system that provides data on the Bank's main risk elements. The information available from each country/
unit in the operational risk sphere is consolidated to obtain a global view with the following features:
–
–
Two levels of information: a corporate level, with consolidated information, and an individual level containing
information for each country/unit.
Dissemination of best practices among the Santander Group countries/units, obtained from the combined
study of the results of quantitative and qualitative analyses of operational risk.
Specifically, information is prepared on the following subjects:
–
–
–
–
–
–
The operational risk management model in the Bank and the main units and geographic areas of the Group.
The scope of operational risk management.
The monitoring of appetite metrics
Analysis of internal event database and of significant external events.
Analysis of most significant risks detected using various information sources, such as operational and
technology risk self-assessment processes.
Evaluation and analysis of risk indicators.
– Mitigation measures/active management.
–
Business continuity plans and contingency plans.
This information is used as the basis for meeting reporting requirements to the Executive Risk Committee, the Risk
Supervision, Regulation and Compliance Committee, the Operational Risk Committee, senior management, regulators,
credit rating agencies, etc.
g. The role of insurance un operational risk management
The Santander Consumer Finance Group considers insurance to be a key tool in the management of operational risk.
Since 2014, common guidelines have been in place for coordination between the different functions involved in the
management cycle of operational risk-mitigating insurance, mainly the areas of proprietary insurance and operational
risk control, but also different areas of first line risk management.
These guidelines include the following activities:
– Identification of all risks at the Group that could be covered by insurance, as well as new insurance cover for
risks already identified in the market.
– Establishment and implementation of criteria for quantifying insurable risk, based on the analysis of losses and
in loss scenarios that make it possible to determine the Group's level of exposure to each risk.
– Analysis of the cover available in the insurance market, as well as preliminary design of the terms and
conditions that best suit the requirements previously identified and evaluated.
189
– Technical assessment of the level of protection provided by a policy, the cost and levels of retention that would
be assumed by the Group (deductibles and other items borne by the insured) for the purpose of deciding
whether to contract it.
– Negotiation with suppliers and contract awards in accordance with the relevant procedures established by the
Bank.
– Monitoring of claims reported under the policies, as well as those not reported or not recovered due to
incorrect reporting.
– Close cooperation between local operational risk officers and local insurance coordinators in order to enhance
operational risk mitigation.
– Regular meetings to inform on the specific activities, situation and projects of the two areas.
– Analysis of the adequacy of the group's policies to the risks covered, taking the appropriate corrective measures
for the deficiencies detected.
– Active participation of both areas in the global insurance sourcing table, the highest technical body in the Group
for the definition of insurance coverage and contracting strategies.
Cyber risk
Cybersecurity risk (also known as cyber risk) is defined as any risk that produces financial loss, business interruption or
damage to the reputation of Santander Consumer derived from the destruction, misuse, theft or abuse of systems or
information. This risk comes from inside and outside the corporation.
In the event of a cyber incident, the main cyber risks for the Bank are made up of three elements:
–
–
–
Unauthorized access or misuse of information or systems (eg. theft of business or personal information).
Theft and financial fraud.
Interruption of business service (eg, sabotage, extortion, denial of service).
During 2022, the Bank has continued to pay full attention to risks related to cybersecurity. This situation, which
generates concern in entities and regulators, prompts them to adopt preventive measures to be prepared for attacks of
this nature.
The Bank has evolved its cyber regulations with the approval of a new cybersecurity framework and the cyberrisk
supervision model, as well as different policies related to this matter.
Similarly, a new organizational structure has been defined and governance for the management and control of this risk
has been strengthened. For this purpose, specific committees have been established and cybersecurity metrics have
been incorporated into the Bank's risk appetite.
The main instruments and processes established to control cybersecurity risk are:
–
–
Compliance with the cyber risk appetite, the objective of this process being to guarantee that the cyber risk
profile is in line with the risk appetite. The cyber risk appetite is defined by a series of metrics, risk statements
and indicators with their corresponding tolerance thresholds and where existing government structures are
used to monitor and escalate, including Risk committees, as well as Cybersecurity committees. .
–
Cybersecurity risk identification and assessment: The cyberrisk identification and assessment process is a key
process to anticipate and determine risk factors that could estimate their probability and impact. Cyber risks
are identified and classified in line with the control categories defined in the latest relevant industry security
standards (such as ISO 27k, the NIST Cybersecurity Framework, etc.). The methodology includes the methods
used to identify, qualify and quantify cyber risks, as well as to evaluate the controls and corrective measures
that the first line of defense function develops. Cyber risk assessment exercises are the fundamental tool for
identifying and evaluating cyber security risks in the Bank. The cybersecurity and technological risk
assessment will be updated when reasonably necessary taking into account changes in information systems,
confidential or business information, as well as the entity's business operations.
190
–
Control and mitigation of cyber risk: processes related to the evaluation of the effectiveness of controls and
risk mitigation. Once the cyber risks have been assessed and the mitigation measures have been defined,
these measures are included in a Santander Consumer Finance cybersecurity risk mitigation plan and the
residual risks identified are formally accepted. Due to the nature of cyber risks, a periodic evaluation of risk
mitigation plans is carried out. A key process in the face of a successful cybersecurity attack is the business
continuity plan. The Bank has mitigation strategies and measures related to business continuity and disaster
recovery management plans. These measures are also linked to cyber attacks, based on defined policies,
methodologies and procedures.
– Monitoring, supervision and communication of cyber risk: Santander Consumer Finance carries out control
and monitoring of cyber risk in order to periodically analyze the information available on the risks assumed in
the development of the Bank's activities. For this, the key risk indicators (KRI) and the key performance
indicators (KPI) are controlled and supervised to assess whether the risk exposure is in accordance with the
agreed risk appetite. Escalation and reporting: The proper escalation and communication of cyber threats and
cyber attacks is another key process. Santander Consumer Finance has tools and processes to detect internal
threat signals and potential compromises in its infrastructure, servers, applications and databases.
Communication includes the preparation of reports and the presentation to the relevant committees of the
information necessary to assess the exposure to cyber risk and the profile of cyber risk and take the necessary
decisions and measures. For this, they prepare reports on the cyber risk situation for the management
committees. Also, there are mechanisms for internal escalation independent of the bank's management team
of technological and cybersecurity incidents and, if necessary, the corresponding regulator.
Other emerging risks
In addition to the aforementioned Cyber Risk, the Santander Consumer Group is increasingly strengthening the
supervision of new emerging risks derived from 1) supplier management and 2) transformation projects.
–
–
Regarding supplier management risks, the focus is on the quality and continuity of services provided to
SCF, but also on ensuring compliance with the new EBA Guidelines and Regulations such as DORA through
implementation of specific risk instruments throughout the different phases of the supplier's life cycle
The Transformation Operational Risk is that derived from changes in the organization, launch of new
products, services, systems or processes derived from imperfect design, construction, testing, deployment
of projects and initiatives, as well as the transition to the day- a-day (BAU). The transformation constitutes
a root cause, which can manifest itself in a variety of risks and impacts, not restricted to Operational Risk,
(for example, Credit, Market, Financial Crimes…)
Compliance and conduct risk
The compliance function includes all issues relating to regulatory compliance, prevention of money laundering and
terrorist financing, governance of products and consumer protection, and reputational risk according to the General
Corporate Compliance and Conduct Framework (Marco Corporativo General de Cumplimiento y Conducta).
The compliance function promotes the adhesion of Santander Consumer Finance, S.A. ("SCF") to standards,
supervisory requirements, and the principles and values of good conduct by setting standards, debating, advising
and reporting, in the interest of employees, customers, shareholders and the wider community. In accordance with
the current corporate configuration of the Santander Group's three lines of defence, the compliance function is a
second-line independent control function that reports directly to the Board of Directors and its committees through
the CCO. This configuration is aligned with the requirements of banking regulation and with the expectations of
supervisors.
The SCF Group's objective in the area of compliance and conduct risk is to minimise the probability that
noncompliance and irregularities occur and that any that should occur are identified, assessed, reported and
quickly resolved.
The main tools used by the Compliance function in order to meet their objectives are (among others):
establishment and coordination with the Compliance Program, coordination of the Risk Assessments of all the
areas of Compliance and Conduct, definition and monitoring of the Compliance Metrics that participate in the SCF
Appetite Risk Framework and monitoring of the Norms of Obligatory Compliance.
191
Climate and environmental risk
Santander Consumer Finance's ESG strategy (environmental, climate, social and governance factors) consists of
doing business in a responsible and sustainable way, supporting the green transition, building a more inclusive
society and doing business correctly, following the most rigorous government standards.
On the other hand, ESG factors can carry traditional types of risk (for example, credit, liquidity, operational or
reputational) due to the physical impacts of a changing climate, the risks associated with the transition to a new,
more sustainable economy and the Failure to meet expectations and commitments. For this reason, they are
included in the Santander Consumer Finance risk map as relevant risk factors.
In recent times, climate risks (physical risks and transition risks) have become very relevant, and for this reason
Santander Consumer Finance is reinforcing its management and control in coordination with the Santander Group
corporate teams within the framework of the Climate Project, being Some of the priorities are as follows:
a.
b.
EWRM (Enterprise-Wide Risk Management) approach, which provides a holistic and anticipatory vision of
climatic aspects as a basis for their proper management.
Availability of relevant data (for example, CO2 emissions from financed assets, financing ratio of green
assets, sectoral classification and location of companies, energy efficiency certificates and location of
collaterals, etc.).
c.
Integration of climatic risks in the day-to-day management and control of risks.
The relevance of the data and its quality is, if possible, even greater in this area than in the rest, given that some
data that until recently was not very relevant and perhaps was not even collected has become essential for issues
such as Alignment of portfolios to environmental objectives, information disclosure or climate risk management.
Therefore, one of the pillars of the Climate Project is to collect said data with the required quality.
Regarding the EWRM approach, first of all, a fundamentally qualitative evaluation has been carried out on the
implications and materiality of climatic aspects for Santander Consumer Finance, with special focus on the auto
portfolio, which is summarized in the following paragraphs.
As previously mentioned, for Banking in general, the climate is a transversal issue with multiple angles, but with
two main interrelated dimensions:
1.
Banks have a key role in mitigating climate change and the transition towards a new green
economy.
2. Weather aspects can cause losses to Banks through different transmission mechanisms.
With regard to Santander Consumer Finance in particular, our vision is as follows:
1. Our role in sustainable financing: the alignment of our portfolios to the ambition of net zero
emissions is happening naturally and gradually thanks to the policies of the European Union and the
short duration of our contracts. In any case, Santander Consumer Finance is becoming more
sustainable and proactively helping clients to become more sustainable. In this path, the effort that
is being made in terms of data and information dissemination is essential.
2.
Potential impacts of climate risks on Santander Consumer Finance: from the materiality analysis
carried out, it is concluded that the types of risk most affected for SCF are credit, residual value,
reputational and strategic (business model). The potential impacts are greatly mitigated thanks to
the context (gradual transformation of the automobile industry) and the business model of
Santander Consumer Finance (whose portfolios are mainly retail, of good quality, short-term and
diversified). On the other hand, climate issues could be the trigger for a general economic crisis, for
example due to a disorderly transition to the new green economy. We are already managing these
risks, but we will continue to strengthen their management and control.
192
Climate risks have been progressively incorporated into the different EWRM processes:
•
•
•
•
•
•
•
"Top Risks": framed within the event of evolution of the automotive sector, which has historically
been identified as one of the main ones in the matrix,
Risk map: as a transversal risk, included as such since 2021,
Assessment of the risk profile: through a questionnaire related to the control environment, as well
as a qualitative assessment,
Risk appetite: through stress metrics, as well as the opening of the residual value by the type of
engine,
Risk strategy,
Strategic risk, as a driver of changes in market trends,
Capital risk and stress tests. The stress tests included in the strategic plans and in the ICAAP of
Santander Consumer Finance take into account climate risks through idiosyncratic events, in
addition to a specific scenario included in this exercise to reflect the potential impact of a disorderly
transition towards an economically low emissions. The results of these stress tests form part of the
entity's risk appetite.
Stress test scenarios and methodologies will become more sophisticated as more information becomes available.
In 2022, Santander Consumer Finance has participated, together with the Santander Group teams, in the first ECB
climate stress test and in the thematic review of climate risks.
Finally, with regard to day-to-day integration of risk management and control, Santander Consumer Finance's
EWRM team prepares an internal climate risk monitoring report quarterly, which will also be incorporated from of
its publication the results of the exercise of Pillar III ESG. In parallel, work is being done on the integration of
climate risks in all phases of the risk cycle, ensuring compliance with the commitments acquired and supervisory
expectations. The initiatives for calculating emissions are framed within this axis, as a basis for the commitments of
the Net Zero Banking Alliance.
g) Compliance with regulatory framework
In 2022, the Santander Consumer Finance Group must maintain a minimum capital ratio of 7.89% CET1 phase-in
(4.5% for Pillar I, 0.84% for Pillar II, 2.5% for the capital conservation buffer, and 0.05% for the anticyclical buffer).
This requirement includes: (i) the minimum Common Equity Tier 1 requirement to be maintained at all times under
Section 92(1)(a) of Regulation (EU) No 575/2013 (ii) the Common Equity Tier 1 requirement to be maintained in
excess at all times under Section 16(2)(a) of Regulation (EU) No 1024/2013; and (iii) the capital conservation buffer
under Section 129 of Directive 2013/36/EU. In addition, the Santander Consumer Finance Group must maintain a
minimum capital ratio of 9.675% of Q1 phase-in as well as a minimum Total Ratio of 12.05% phase-in.
As of December 31, 2022, the Bank meets the minimum capital requirements required by current regulations.
193
Reconciliation of accounting capital with regulatory capital (EUR millions)
2022
2021
Subscribed capital
Share premium account
Reserves
Other equity instruments
Attributable profit
Approved dividend
Interim dividend
Shareholders’ equity on public balance sheet
Valuation adjustments
Non- controlling interests
Total Equity on public balance sheet
Goodwill and intangible assets
Accrued dividend
Eligible preference shares and participating securities
Other adjustments (*)
Tier 1 (Phase-in)
5,639
1,140
3,649
1,200
1,243
—
(652)
12,219
(582)
2,555
14,192
(1,849)
(1,243)
—
33
11,133
5,639
1,140
3,040
1,200
1,175
—
(491)
11,703
(646)
2,337
13,394
(1,783)
(1,175)
—
143
10,579
(*) The distribution of the result obtained in fiscal year 2022 has not been submitted to the General Shareholders' Meeting for
approval, however, a dividend distribution is proposed.
(*) Fundamentally for non-computable non-controlling interests and deductions and reasonable filters in compliance with CRR.
The following table shows the Phase-in capital coefficients and a detail of the eligible internal resources of the
Group:
Capital coefficients
Level 1 ordinary eligible capital (millions of euros)
Level 1 additional eligible capital (millions of euros)
Level 2 eligible capital (millions of euros)
Risk-weighted assets (millions of euros)
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
2022
2021
9,706
1,427
1,669
77,480
12.53%
1.84%
14.37%
2.15%
16.52%
9,167
1,412
1,045
72,898
12.58%
1.93%
14.51%
1.44%
15.95%
194
Eligible capital (EUR millions)
Eligible capital
Common Equity Tier I
Capital
Share Premium
Reserves
Other retained earnings
Minority interests
Profit net of dividends
Deductions
Goodwill and intangible assets
Others
Additional Tier I
Eligible instruments AT1
T1- excesses-subsidiaries
Residual value of dividends
Others
Tier II
Eligible instruments T2
Gen. funds and surplus loans loss prov. IRB
T2-excesses- subsidiaries
Others
Total eligible capital
2022
2021
9,706
5,639
1,140
3,649
(645)
1,456
591
(411)
(1,714)
—
1,427
1,200
227
—
—
1,669
1,471
—
199
—
12.802
9,167
5,639
1,140
3,040
(645)
1,306
684
(213)
(1,783)
—
1,412
1,200
212
—
—
1,045
871
—
175
—
11.624
The Bank is continuing its plan to implement the Basel advanced internal rating-based measurement approach
(AIRB). This objective is also conditioned by the acquisition of new entities, as well as by the need for coordination
of the validation processes for internal models by supervisors.
The Santander Consumer Finance Group mainly operates in countries within the same legal supervisory
framework, as is the case in Europe through the Capital Directive.
Santander Consumer Finance currently has supervisory authorisation to use advanced approaches for calculating
regulatory capital requirements for credit risk for its main portfolios in Spain, and some portfolios in Germany,
Scandinavia and France.
Santander Consumer Finance Group currently applies the standard approach to calculating regulatory capital for
operational risk, as set out in the European Capital Directive.
As for the other risks expressly considered in Basel Pillar I, market risk is not significant in Santander Consumer
Finance, as this is not part of its business purpose, and it therefore uses the standard approach.
Leverage ratio
The leverage ratio has been defined within the regulatory framework of Basel III as a measure of the capital
required by financial institutions not sensitive to risk. The Group performs the calculation as stipulated in CRD IV
and its subsequent amendment in EU Regulation no. 573/2013 of 17 January 2015, which was aimed at
harmonising calculation criteria with those specified in the BCBS “Basel III leverage ratio framework” and
“Disclosure requirements” documents. This ratio is calculated as the ratio of Tier 1 divided by leverage exposure.
The ratio mentioned is calculated as the quotient between Tier 1 divided by the leverage exposure. This exposure is
calculated as the sum of the following elements:
•
Accounting asset, without derivatives and without elements considered as deductions in Tier 1 (for
example, the balance of the loans is included but not the goodwill).
• Memorandum accounts (guarantees, unused credit limits granted, documentary credits, mainly) weighted
by credit conversion factors.
195
•
•
•
Inclusion of the net value of derivatives (gains and losses are netted with the same counterparty, less
collateral if they meet certain criteria) plus a surcharge for potential exposure
A surcharge for the potential risk of securities financing operations
Finally, a surcharge is included for the risk of credit derivatives (CDS).
Santander Consumer Finance maintains a fully loaded leverage ratio at sub consolidated level of 8.93% at the end
of 2022, based on a reference ratio of 3%.
EUR Millions
Leverage
Level 1 Capital
Exposure
Leverage Ratio
Economic capital
2022
2021
11,133
124,648
8.93%
10,579
112,492
9.40%
From the point of view of solvency, in the context of Basel Pillar II Santander Consumer Finance Group uses its
economic model for its internal capital adequacy assessment process (ICAAP). For this purpose, business
performance and capital needs are planned under a base case scenario and under alternative stress scenarios. In
this planning, the Group ensures that its solvency objectives are upheld even in adverse economic scenarios.
Economic capital is the capital required, according to an internally developed model, to support all the risks of our
business at a certain level of solvency. In our case, the solvency level is determined by the long-term objective
rating of 'A' (two steps above Spain's rating), which means applying a confidence level of 99.95% (above the
regulatory 99.90%) to calculate the necessary capital.
The Group's economic capital model includes in its measurement all significant risks incurred by the Group in its
operations, and therefore considers risks such as concentration, structural interest rate, business, pensions and
others that are outside the scope of "regulatory" Pillar 1. Furthermore, economic capital incorporates the
diversification effect, which in the case of the Group is crucial, due to the multinational and multi-business nature
of its activity, in order to determine the overall risk and solvency profile.
The Santander Consumer Finance Group uses the RORAC method in its risk management to calculate the economic
capital consumption and return on risk-adjusted capital of the Group's business units, segments, portfolios or
customers, in order to periodically analyse value creation and facilitate optimal allocation of capital.
The RORAC methodology makes it possible to compare, on a uniform basis, the returns on transactions, customers,
portfolios and businesses, identifying those that obtain a risk-adjusted return higher than the Group's cost of
capital, and thus aligning risk and business management with the intention of maximising value creation, which is
the ultimate objective of Santander Consumer Finance's senior management.
196
Appendix I
Subsidiaries
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Andaluza de Inversiones, S.A. Unipersonal
Auto ABS Belgium Loans 2019 SA/NV (d)
Auto ABS DFP Master Compartment France 2013 (d)
Auto ABS French Leases Master Compartment 2016
(d)
Auto ABS French Loans Master (d)
Auto ABS French LT Leases Master (d)
Auto ABS French Leases 2021 (d)
Auto ABS italian Loans 2018-1 S.R.L. (d)
Auto ABS italian Balloon 2019-1 S.R.L. (d)
AUTO ABS ITALIAN RAINBOW LOANS 2020-1 S.R.L.
Auto ABS Spanish Loans 2018-1, Fondo de
Titulización (d)
Auto ABS Spanish Loans 2020-1, Fondo de
Titulización (d)
Auto ABS Spanish Loans 2022-1, Fondo de
Titulización (d)
PBD Germany Auto Lease Master S.A., Compartment
2021-1 (d)
AUTO ABS ITALIAN RAINBOW LOANS 2020-1 SRL (d)
Auto ABS UK Loans PLC (d)
Ciudad Grupo Santander, Av. Cantabria, 28660,
Boadilla del Monte - Madrid
Spain
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Belgium
France
France
France
France
France
Italy
Italy
Italy
Spain
Spain
Spain
Luxembourg
Italy
United
Kingdom
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
100%
100%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Line of
business
Holding
Company
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
EUR Millions
Capital and
reserves (a)
Net profit (a)
Participation
amount (b)
37
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
27
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Line of
business
EUR Millions
Capital and
reserves (a)
Net profit (a)
Participation
amount (b)
Auto ABS UK Loans 2019 PLC (d)
-
United
Kingdom
Autodescuento S.L.
Calle Alcalá nº4, 5ª Planta 28014 Madrid, España Spain
Banca PSA Italia S.p.a.
Via Gallarate 199, 20151 Milano
Italy
Compagnie Generale de Credit Aux Particuliers -
Credipar S.A.
9 rue Henri Barbusse 92330 Gennevilliers
France
Compagnie Pour la Location de Vehicules - CLV
9 rue Henri Barbusse 92330 Gennevilliers
France
Drive S.r.l.
Via Giovanni Caproni 1, Bolzano
Italy
—
—
—
—
—
—
(d)
—%
—%
Securization
94%
94%
94%
Financial
50%
50%
50%
50%
50%
50%
100%
100%
50%
50%
50%
—%
Banking
Banking
Financial
Leasing
Financeira El Corte Inglés, Portugal, S.F.C., S.A.
Av. António Augusto Aguiar, 31 1069-413 Lisboa Portugal
—%
51%
51%
51%
Financial
—
2
392
460
22
5
8
Financiera El Corte Inglés, E.F.C., S.A.
C/ Hermosilla 112, 28009, Madrid
Fondation Holding Auto ABS Belgium Loans (d)
-
Spain
Belgium
Guaranty Car, S.A.
Santander Consumer Mobility Services, S.A.
Nacional II, Km 16,500 – 28830 San Fernando de
Henares (Madrid)
Spain
Ciudad Grupo Santander Av. Cantabria s/n,
28660 Boadilla del Monte
Spain
Isar Valley S.A. (d)
Pony S.A. (d)
Compartment German Auto Loans 2021-1 (d)
-
-
-
Luxembourg
Luxembourg
Luxembourg
51%
—
—
—
—
—
—
100%
(d)
(d)
(d)
One Mobility Management GmbH
Dr.-Carl-von-Linde-Straße,2 - Pullach i.Isartal
Germany
47%
47%
PBD Germany Auto 2018 UG (Haftungsbeschränkt)
(d)
PBD Germany Auto Lease Master 2019 (d)
PBD Germany Auto Loan 2021 UG
(Haftungsbeschränkt) (d)
-
-
-
Germany
Luxembourg
Germany
PSA Bank Deutschland GmbH
Siemensstraße 10, 63263 Neu-Isenburg, Hesse
Germany
PSA Banque France
9 rue Henri Barbusse 92330 Gennevilliers
France
—
—
—
—
—
(d)
(d)
(d)
50%
50%
—%
(d)
51%
—%
51%
—%
Financial
278
Securization
100%
100%
100%
Auto
—
3
12
—
—
—
—
—
—
—
Renting
Securization
Securization
Securization
Other
Management
Services
Securization
Securization
Securization
—
—
—
—
—
—
—%
—%
50%
50%
—
—
—
—
—
—
—%
—%
50%
50%
Banking
Banking
497
1,142
—
—
69
22
(1)
(1)
1
58
—
—
(4)
—
—
—
—
—
—
—
47
62
—
18
153
855
52
5
8
140
—
2
12
—
—
—
—
—
—
—
229
881
2
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Line of
business
EUR Millions
Capital and
reserves (a)
Net profit (a)
Participation
amount (b)
PSA Finance Belux S.A.
Parc L’Alliance Avenue Finlande 4-8 1420 Braine
Làlleud Belgium
Belgium
—
50%
50%
50%
Financial
PSA Financial Services Nederland B.V.
Hoofdweg 256, 3067 GJ Rotterdam
PSA Finance UK Limited
61 London Road - Londres
Holland
United
Kingdom
PSA FINANCIAL SERVICES, SPAIN, EFC, SA
C/ Eduardo Barreiros Nº 110. 28041, Madrid
Spain
Riemersma Leasing B.V.
Waterman 7ª, ‘s-Hertogenbosch
Santander Consumer Finance Global Services, S.L.
Ciudad Grupo Santander, Av Cantabria, 28660,
Boadilla del Monte - Madrid
Holand
Spain
Santander Consumer Finance Schweiz AG
Brandstrasse 24, 8952 Schlieren
Switzerland
Santander Consumer Bank AG
Santander Platz I, 41061 (Mönchengladbach)
Germany
—%
—%
50%
100%
100%
—
—%
Santander Consumer Bank A.S.
Strandveien 18, 1366 Lysaker, 0219 (Baerum)
Norway
100%
50%
50%
—%
—%
—%
—%
—
—
50%
50%
50%
100%
50%
50%
50%
—%
Financial
Financial
Financial
Leasing
99%
99%
Other services
100%
100%
Leasing
100%
100%
Banking
100%
100%
Financial
Santander Consumer Bank GmbH
Andromeda Tower, Donan City. Strów-Wien
Austria
—
100%
100%
100%
Banking
Santander Consumer Bank S.p.A.
Vía Nizza 262, I-10126 (Turín)
Santander Consumer Finance Oy
Hermannin Rantatie 10, 00580 (Helsinki)
Santander Consumer Holding Austria GmbH
Rennweg 17, A 1030 (Wien)
Italy
Finland
Austria
Santander Consumer Holding GmbH
Santander Platz I, 41061 (Mönchengladbach)
Germany
100%
—%
100%
100%
—%
100%
—%
—%
100%
100%
100%
100%
100%
100%
100%
100%
Banking
Financial
Holding
Company
Holding
Company
Santander Consumer Operations Services GmbH
Madrider Strabe, 1D – 41069, Monchengladbach
(Alemania)
Germany
—%
100%
—%
—%
Other services
Santander Consumer Technology Services GmbH
Kaiserstr 74, 41061, Monchengladbach
(Alemania)
Germany
Santander Consumer Leasing GmbH
Santander Platz I, 41061 (Mönchengladbach)
Germany
—%
—%
100%
—%
—%
Other Services
100%
100%
100%
Leasing
Hyundai Capital Bank Europe GmbH
Friedrich-Ebert-Anlage 35-37 · 60327 Frankfurt
am Main
Germany
—%
51%
51%
51%
Financial
Santander Consumer Renting, S.L.
Santa Bárbara 1, 28180, Torrelaguna - Madrid
Spain
100%
—%
100%
100%
Leasing
Santander Consumer Renting S.R.L.
Via Caproni 1, Bolzano
Santander Consumer Services GmbH
Thomas Alva Edison Str. I, Eisendstadt
Italy
Austria
—%
—%
100%
100%
—%
Renting
100%
100%
100%
Services
Santander Consumer Services, S.A.
Rua Gregorio Lopez Lote 1596 B-1400 195
Lisboa – Portugal
Portugal
100%
—%
100%
100%
Financial
SC Austria Finance 2020-1 Designated Activity
Company (d)
-
Ireland
—%
(d)
—%
—%
Securization
95
58
377
638
7
6
51
2,844
2,817
424
834
368
364
14
18
29
60
2
3
10
469
219
58
92
49
—
93
53
317
363
21
5
60
5,070
1,980
363
603
163
518
5,564
317
6,077
12
24
(23)
702
38
4
—
13
—
1
3
93
14
3
(1)
—
1
—
18
22
151
391
38
4
—
10
—
3
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Line of
business
EUR Millions
Capital and
reserves (a)
Net profit (a)
Participation
amount (b)
-
-
-
-
-
-
-
-
-
-
-
SC Austria Consumer Loan 2021 Designated Activity
Company (d)
SC Germany Auto 2016-2 UG (haftungsbeschränkt)
(d)
SC Germany Consumer 2018-1 UG
(haftungsbeschränkt) (d)
SC Germany Mobility 2019-1 UG
(haftungsbeschränkt) (d)
SC Germany Auto 2019-1 UG (haftungsbeschränkt)
(d)
SC Germany S.A., Compartment Mobility 2020-1 (d)
SC Germany S.A., Compartment Consumer 2020-1
(d)
SC Germany S.A., Compartment Consumer 2021-1
(d)
SC Germany S.A., Compartment Consumer 2022-1
(d)
SC Germany S.A. (d)
SCF Ajoneuvohallinto VII Limited (d)
SCF Ajoneuvohallinto VIII Limited (d)
SCF Ajoneuvohallinto IX Limited (d)
SCF Ajoneuvohallinto X Limited (d)
SCF Ajoneuvohallinto XI Limited (d)
SCF Rahoituspalvelut VII DAC (d)
SCF Rahoituspalvelut VIII DAC (d)
SCF Rahoituspalvelut IX DAC (d)
SCF Rahoituspalvelut X DAC (d)
SCF Rahoituspalvelut XI DAC (d)
Silk Finance No. 5 (d)
Secucor Finance 2021-1, DAC (d)
-
-
-
-
-
-
-
-
-
-
-
Ireland
Germany
Germany
Germany
Germany
Luxembourg
—%
—%
—%
—%
—%
—%
Luxembourg
—%
Luxembourg
—%
Luxembourg
Luxembourg
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Portugal
Ireland
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
—%
—%
Securization
—%
—%
Securization
—%
—%
Securization
—%
—%
Securization
—%
—%
—%
Securization
—%
Securization
—%
—%
Securization
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
Securization
—%
Securization
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
EUR Millions
Capital and
reserves (a)
Net profit (a)
Participation
amount (b)
Fondo de Titulización de Activos Santander
Consumer Spain Auto 2014-1 (d)
Fondo de Titulización Santander Consumer Spain
Auto 2016-1 (d)
Fondo de Titulización Santander Consumer Spain
Auto 2016-2 (d)
Santander Consumer Spain Auto 2019-1, Fondo de
Titulización (d)
Santander Consumer Spain Auto 2020-1, Fondo de
Titulización (d)
Santander Consumer Spain Auto 2021-1, Fondo de
Titulización (d)
Santander Consumer Spain Auto 2022-1, Fondo de
Titulización (d)
Golden Bar (Securitisation) S.r.l. (d)
Golden Bar Stand Alone 2016-1 (d)
Golden Bar Stand Alone 2018-1 (d)
Golden Bar Stand Alone 2019-1 (d)
Golden Bar Stand Alone 2020-1 (d)
Golden Bar Stand Alone 2020-2 (d)
Golden Bar Stand Alone 2021-1 (d)
Golden Bar Stand Alone 2022-1 (d)
Suzuki Servicios Financieros, S.L.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
C/Carlos Sainz 35, Pol. Ciudad del Automóvil,
Leganés - Madrid
Svensk Autofinans WH 1 Designated Activity
Company (d)
-
Transolver Finance EFC, S.A.
Av. Aragón 402, Madrid
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Spain
Ireland
Spain
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
Line of
business
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
Securization
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
51%
51%
51%
Intermediation
(d)
—%
—%
Securization
51%
—%
51%
51%
Leasing
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12
—
71
Allane SE
TIMFin S.p.A.
Dr.-Carl-von-Linde-Str. 2, Pullach i. Isartal –
Alemania
Germany
Corso Massimo D’Azeglio n. 33/E – 20126 Turín
Italy
PSA Renting Italia S.P.A.
Vía Nizza 262, I-10126 - Turín
Italy
—%
—%
—%
47%
47%
47%
Leasing
192
51%
50%
51%
50%
51%
50%
Financial
Renting
45
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
—
3
4
(4)
12
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17
343
28
6
5
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Allane Schweiz AG
Grossmattstrasse 9-Urdorf – Suiza
Allane Mobility Consulting AG
Grossmattstrasse 9-Urdorf – Suiza
Switzerland
Switzerland
Allane Leasing GmbH
Ortsstraße 18a – Vösendorf – Austria
Austria
Allane Mobility Consulting GmbH
Dr.-Carl-von-Linde-Str. 2, Pullach i. Isartal –
Alemania
Germany
Autohaus24 GmbH
Dr.-Carl-von-Linde-Str. 2, Pullach – Alemania
Germany
Allane Location Longue Durée S.a.r.l.
1 Rue Francois Jacob - Francia
Allane Services GmbH & co. KG
Grubenstrasse, 27 - Alemania
Allane Mobility Consulting B.V.
Kruisweg 791 - Holanda
Allane Services Verwaltungs GmbH
Grubenstraße, 27 - Alemania
Allane Mobility Consulting Österreich GmbH
Tuchlauben 7ª – Austria
Allane Mobility Consulting S.a.r.l
Rue Francois Jacob – Francia
France
Germany
Netherlands
Germany
Austria
France
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
47%
Line of
business
Renting
Consulting
Renting
47%
47%
47%
47%
Consulting
47%
47%
47%
47%
47%
47%
47%
Renting
Renting
Services
Consulting
Portfolio
management
Consulting
Consulting
EUR Millions
Capital and
reserves (a)
Net profit (a)
Participation
amount (b)
13
1
(2)
1
(3)
14
1
(3)
—
(1)
(1)
—
—
—
1
1
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(a)
(b)
(c)
(d)
Data obtained from the financial statements of each associate and/or jointly controlled entity for 2022. These financial statements have not yet been approved by the respective governing bodies. However, the Bank’s directors consider that they will be ratified without
any changes.
Amount registered for the stake in each associate, registered in the books of the holding entity, net of impairment, if applicable.
Pursuant o Article 3 of Royal Decree 1159/2010, of 17 September, approving the rules for the preparation of consolidated financial statements, in order to determine voting power, the voting power relating to subsidiaries or to other parties acting in their own name but
on behalf of Group companies was added to the voting power directly held by the Parent. Accordingly, the number of votes corresponding to the Parent in relation to companies in which it has an indirect interest is the number corresponding to the company holding a
direct ownership interest in such companies.
Vehicles over which effective control is maintained.
6
Appendix II
Associates and Joint Ventures
Name
Entity
Country
Bank’s ownership interest (%)
Voting rights (%) (b)
Direct
Indirect
2022
2021
Bank of Beijing Consumer Finance Company
Associate
Fortune Auto Finance Co., Ltd
Stellantis Insurance Europe Limited
Stellantis Life Insurance Europe Limited
Santander Consumer Bank S.A.
Santander Consumer Finanse Sp. z o.o.
Santander Consumer Multirent Sp. z o.o.
VCFS Germany GmbH
PSA Finance Polsja sp.z o.o
Payever Gmbh
PSA Consumer Finance Polska sp.zo.o.
Santander Consumer Financial Solutions SP. Z O.O.
JV
JV
JV
Associate
Associate
Associate
JV
Associate
Associate
Associate
Associate
China
China
Malta
Malta
Poland
Poland
Poland
Germany
Poland
Germany
Poland
Poland
20%
50%
50%
50%
40%
—
—
—
—
10%
—
—
—
—
—
—
—
40%
40%
50%
20%
—%
20%
40%
20%
50%
50%
50%
40%
40%
40%
50%
20%
10%
20%
40%
17%
50%
50%
50%
40%
40%
40%
50%
20%
10%
20%
40%
Line of
business
Financial
Financial
Insurance
Insurance
Banking
Services
Leasing
Marketing
Financial
Other Services
Financial
Leasing
Assets
1,418
2,039
267
123
3,650
15
763
1
282
3
37
12
EUR Million(a)
Capital and
reserves
Profit / (loss)
108
432
61
13
753
15
58
—
38
2
3
2
—
57
28
17
82
0
5
—
5
—
1
(1)
(a)
(b)
Data obtained from the financial statements of each associate and/or joint venture for 2022. These financial statements have not yet been approved by the respective governing bodies. However, the Bank’s directors consider that they will be ratified without any
changes.
Pursuant to Article 3 of Royal Decree 1159/2010, of 17 September, approving the rules for the preparation of consolidated financial statements, in order to determine voting power, the voting power relating to subsidiaries or to other parties acting in their own name but
on behalf of Group companies was added to the voting power directly held by the Parent. Accordingly, the number of votes corresponding to the Parent in relation to companies in which it has an indirect interest is the number corresponding to the company holding a
direct ownership interest in such companies.
1
Appendix III
Changes and notifications of acquisitions and disposals of investments in 2022
(Article 155 of the Consolidated Spanish Limited Liability Companies Law and Article 125 of Legislative Royal
Decree 4/2015, of 23 October, approving the Consolidated Spanish Securities Market Law).
Investee
Line of business
Acquisition in 2022:
Santander Consumer Renting,
S.R.L
Drive S.R.L.
Riemersma Leasing B.V.
Operating lease
Operating lease
Operating lease
Net ownership interest (%)
Acquired/sold in
the year
At year end
Effective date of
the transaction (or
date of notification
if appropriate)
100%
100%
100%
100%
03-30-2022
100%
100%
04-26-2022
04-15-2022
1
Appendix IV
List of agents as required by Article 21 of Royal Decree 84/2015, of 13 February, implementing Law
10/2014, of 26 June, on the regulation, supervision and capital adequacy of credit institutions, on 31
December 2022
Name
Domicile
Palma del Río
Finance, S.L.
POGL. IND EL
GARROTAL EDF
SARA BENITEZ C/
JARA 17 -1
(14700) Palma
del Río
Employer/
National
identification
number
Post
Code
14700
B09987843
Date of
granting
powers
Geographical area of activity
Scope of representation
13-07-2022 Almodóvar del Rio, Fuente Palmera,
Palma del Rio, Posadas, Lora del Rio,
Peñaflor, Carmona, La Campana, La
Puebla de los Infantes, Mairena del
Alcor, El Viso del Alcor
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Gestión Financiera
Villalba, S.L.U.
C/ Consuelo
Vega, 23 A -
A(11600)
Ubrique
11600
B011517620
15-12-2020 Ubrique,
del
Alcalá
Valle,
Algodonales, Arcos de la Frontera,
Benaocaz, Bornos, El Bosque, El
Gastor, Espera, Grazalema, Olivera,
Prado del Rey, Setenil, Torre
Alhaquine, Villanueva del Rosario,
Villa Martín, Puerto Serrano
Juan Jiménez
Gestión Financiera,
S.L.
C/ BARTOLOME
DE MEDINA ,
local 18 (41004)
Sevilla
41004
B91167973
01-02-2002 Bormujos, Coria del Río, Gelves,
la Mayor,
Gines, Pilas, Sanlucar
Umbrete, Villamanrique de
la
Condesa, Villanueva del Ariscal.
EFINCAR FLEET
SERVICES , S.L.
c/Doctor
Fleming, 1
41400 Écija
(Sevilla)
41400
B91958363
01-01-2012 Écija, Fuentes de Andalucía, La
Luisina, Cañada Rosal, La Carlota.
Financiaciones
Costa del Sol
Oriental, SCA
C/ Del Mar, 27
1º-C, Edificio
Jaime, 29740
Torre del Mar
29740
F093385102
Alfarnate,
Archez,
Algarrobo,
15-12-2020 Alcaucin,
Almachar,
Arenas,
Benamargosa, El Boger, Canillas de
Aceituno, Canillas de Albaida,
Comares, Competa, Macharaviaya,
Moclinejo, Frigiliana, Nerja, Periana,
Riogordo, Salares, Sayalonga, Torre
del Mar, Torrox, Velez Málaga,
Viñuela.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
INSEMA
INVERSIONES, S.L.
Av. de Andalucía,
11 (14500)
Puente Genil
14500
B14840896
19-12-2008 Aguilar de la Frontera, Benameji,
Castro del Río, Espejo, Fernan
Nuñez, Montalbal de Córdoba,
Montemayor, Montilla, Monturque,
Moriles, Palenciana, Puente Genil,
La Rambla y Santaella
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Carrasco Agentes,
S.L.
C/ BETULA Nº 9
PISO 1º A
(23400)ÚBEDA
23400
B023478704
Ramsa Serv. Fin. y
Empresariales, S.L.
C/ Blas Infante,
7A (21440) Lepe
21440
B021347190
02-01-2004 Alblanchez de übeda, Almenara,
Arquillos, Baeza, Beas de Segura,
Bedmar y Garciez, Begijar, Belmez
de la Moraleda, Benatae, Cabra de
Santo Cristo, Cambil, Canena,
Castellar, Cazorla, Chiclana de
Segura, Chilluevar, Escañuela,
Genave, Guarromán, Higuera de
15-12-2020 Punta Umbría, Cartaya, Lepe, Isla
Cristina y Ayamonte
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
1
Employer/
National
identification
number
Post
Code
41530
B091369231
Date of
granting
powers
Geographical area of activity
Scope of representation
15-12-2020 Algamitas, Arahal, Caripe, El Coronil,
Marchena, Montellano, Morón de la
Frontera, Paradas, Pruna, La Puebla
de Cazalla, Villanueva de San Juan
Name
Domicile
Martín & Castilla
Servicios
Financieros, S.L.
C/ Fray Diego de
Cádiz, 163
(41530) Morón
de la Frontera
Fromán
Consultores, S.L.U.
Av. Del
Mantecado, 21
(41560) Estepa
Geyba Servicios
Financieros, S.L.
Avda. La Libertad
nº 2 Local
(41980) La
Algaba
41560
B041969767
15-12-2020 Aguadulce, Badolatosa, Casariche,
Los Corrales, Estepa, Gilena,
Herrera, La Lentejuela, Lora de
Estepa, Marinaleda, Martin de la
Jara, Osuna, Pedrea, La Roda de
Andalucía, El Rubio, El Saucejo.
41980
B091385377
15-12-2020 Arevalillo de Cega, Alacala del Rio,
Alcolea del Rio, La Algaba, Almaden
de la Plata, Brenes, Burguillos,
Cantillana, Castilblanco de los
Arroyos, El Castillo de las Guardas,
Cazalla de la Sierra, Constantina, El
Garrobo, Gerena, El Madroño, Las
Navas de la Concepción, El Pedroso,
La Roda de Andalucía, La Rinconada
Fincar Gestiones
Financieras, S.L.
Avda. Buenos
Aires, 32 18500
Guadix
18500
B21507751
01-02-2012 Guadix, Baza, Huescar, Cullar,
Cuevas del Campo, Iznalloz y
Guadahortuna.
Hermanos P.Q.
Servicios
Financieros, S.L.
Pasaje Neptuno,
local 7 (Junto a
BBVA) Vera
(04620).
SERVITAL
ASESORES, S.L.
Pza. Nuestro
Padre Jesús, 3
(21700) La Palma
del Condado
FINANCIACEUTA,
S.L.U.
C/ Cervantes,
galería "La
Riojana", 2ª
planta, local nº
26 (51001) Ceuta
Gª y Trinidad
Asesoramiento y
Financiación S.L.
C/ Rosario Nº
46(04800) Albox
Antonio Gª Fdez.
Servicios
Financieros S.L.
C/ Jara, nº1 local,
esquina doctor
Antonio Cabrera
(14400)
Pozoblanco
04620
B004678348
15-12-2020 Vera
21700
B021261177
15-12-2020 Almonte, Bollullos Par del Condado,
Bonares, Chucena, Escacena del
Campo, Hinojos, Lucena del Puerto,
Manzanilla, Niebla, La Palma del
Condado, Paterna del Campo,
Rociana del Condado, Villalba del
Alcor, Villarrasa
51001
B051017101
15-12-2020 Ceuta
04800
B004577383
15-12-2020 Albox, Alcontar, Almanzorra,
Armuña de Almanzorra, Bacares,
Bayarque, Benitagla, Bezalon,
Cantoria, Cobrar, Fines, Laroya, Lijar,
Lubrin, Lucar, Macael, Olula del Rio,
Partaloa, Purchena, Seron, Sierro,
Somontin, Tahall, Tijola, Uleila del
Campo, Urracal y Zurgena.
14400
B014771554
15-12-2020 Alcaracejos, Añora, Belalcazar,
Belmez, Los Blázquez, Cardenas,
Conquista, Dos Torres, Espiel,
Fuente La Lancha, Fuente Obejuna,
El Guijo, Hinojosa del Duque,
Pedroche, Peñarroya-Pueblonuevo,
Pozoblanco,.
DONAT FINANCE
SERVICE, S.L.
Pza. Velazquez,
11 - Bajo (52004)
Melilla
52004
B052015435
01-02-2007 Melilla
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
2
Employer/
National
identification
number
Post
Code
Date of
granting
powers
Geographical area of activity
Scope of representation
Name
Domicile
ASEDIME
SERVICIOS
FINANCIEROS, S.L.
C/ Doctor
Dorronsoro, 2
(21600) Valverde
del Camino
SERVICIOS
FINANCIEROS
JIENENSES, SL.
c/plaza del
camping 4 local
10 23740 andujar
21600
B021380746
01-04-2008 Alajar, Almonaster la Real, Aracena,
Aroche, Arroyo Molinos de León,
Beas, Berrocal, Cala, Calañas, El
Campillo, Campofrío, Cañaveral de
León, Castaño de Robledo,
Corteconcepción, Cortegana,
Cortelazor, Cumbre de En Medio,
Cumbres de San Bartolomé,
Cumbres Mayores, Encinasola,
Fuenteheridos, Galaroza, La
Granada de Ríotinto, La Nava, Nerva,
Puerto del Moral, Rosal de la
Frontera, Santa Ana la Real, Santa
Olalla del Cala, Trigueros,
Valdelarco, Valverde del Camino,
Zalamea la Real y Zufre.
23740
B86340767
01-12-2011 Aldeaquemada, Andújar, Arjona,
FINANRONDA
SERVICIOS
FINANCIEROS, S.L.
C/ Molino, 82
(29400) Ronda
29400
B92963388
Arjonilla, Bailén, Baños de
Quemada, Carboneros, La Carolina,
Cazalilla, Espeluy, Higuera de
Arjona, Lopera, Marmolejo, Santa
Elena, Villanueva de la Reina,
Villardonpardo y Villa del Río,
02-01-2009 Agatocin, Alpendeire, Arriate,
Atajate, Benalid, Benalauria,
Benaojan, Benarraba, El Burgo,
Cañete La Real, Cartajima, Cortes de
la Frontera, Cuevas del
Becerro,Faraja, Gaucin, Genalquacil,
Igualeja, Jimera de Libas, Jubrique,
Juzcar, Montecorto, Montejaque,
Parauta, Pujerra, Ronda y Yunquera.
128INNOVA24H,
S.L.
c/Oasis, 17
ElEjido Almería
04700
B92999846
01-03-2011 El Ejido, Adta y Berja
Finangi Cat
Av. de la Rápita,
33 1º (43870)
Amposta
43870
B043571660
15-12-2020 Alcanar, Aldover, Alfara de Carles,
Amposta, Arbolí, Arnes, Ascó, Falset,
Fix, Freginals, Gandesa, Garcia,
Ginestar, Godall, Masdenverge,
Miravent, Móra dÉbre, Morá la
Nova, Pauls, Poboleda, Porrera,
Batea, Bellmunt de Falset,
Benicarló, Benifallet, Benissanet,
Bot, Cabassers, Camarles, Capcanes,
Caseres, Corbera dÉbre, Cormudella
del Montsant, Deltebre, El Lloar, El
Masroig, El Molar, El Perelló, El
Pinell de Bray, Els Guiaments,
Gratallops, Horta de Sant Joan,
LÁldea, Lámetlla de Mar, LAmpolla,
La Fatarella, La Figuera, La Galera,
La Morera de Montsant, La Palma
dÉbre, La Pobla de Massaluca, La
Sénia, La Torre de Fontanbella, La
Torre de Léspanyol, La Vilella Alta,
La Vilella Baixa, Marca, Margalef de
Montsant, Mas de Barberans,
Pradell de la Teixeta, Prat de
Compte, Rasquera, Riba Roja D´Ebre,
Roquetes, Sant Carles Rápita, Sant
Jaime Enveja, Santa Barbara, tivissa,
Torroja del Priorat, Tortosa,
Ulldecona, Ulldemolins, Vilalba dels
Arcs, Vinaroz, Vinebre, Xerta.
Indastec
Asociados, S.L.
C/ Madrid, 20 -
bajo (07800)
Ibiza
07800
B057150310
15-12-2020 Eivissa, Sant Antoni de Portmany,
Santa Eulalia del Rio San Jose
Formentera
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
3
Name
Domicile
Noguer Bau, S.L.
C/ Sant Fidel, 5 -
1º (08500) Vic
Employer/
National
identification
number
Post
Code
Date of
granting
powers
Geographical area of activity
Scope of representation
08500
B064018179
15-12-2020 Aiguafreda, Alpens, El Brull,
Calldetenes, Centelles, Collsuspina,
Espinelves, Folgueroles, Gurb, Els
Hostalets De Balenya, Lluça,
Perafita, Prats De Lluçanes, Roda De
Ter, Rupit-Pruit, Santa Cecilia De
Voltrega, Santa Eugenia De Berga
Santa Eulalia De Riuprimer, Sant
Agusti Del Lluçanes, Santa Maria De
Corco L'asquirol, Sant Bartomeu Del
Grau, Sant Boi De Lluçanes, Sant
Hipolit De Voltrega
Gestió de
Finançament i
Inversions de
Ponent, S.L.
Avda. Pau, 49
(25230)
Mollerusa
25230
B025539123
01-10-2006 Comarcas del Pla D´urgel, la
Noguera, L´urgell y La Segarra
Gestió de
Finançament i
Inversions de
Ponent, S.L.
Avda. Alcalde
Porqueras, 10
(25008) Lérida
25008
B025539123
01-10-2006 Lérida, Balafia; Les Basses D’Alpicat,
La Bordeta, Camps D’Escorts, Cap
Pont, Castel De Gardeny,
Clot_Princep de Viana, Gualda;
Llivia, Magraners, Mariola,
Pardinyes, Raimat, Seca Sant Pere,
Sucs, Suquets; Les Torres de Sanui,
Abella de la Conca Les Alamus,
L’Albages, Albatarrec, L’Albi, Alanco,
Alcarras, Alcoletge, Alfes, Alguaire,
Almatret, Almenar, Alpicat, Artessa
de Lleida, Aspa, Aitona, Benavent de
Segria, Bovera, Les Borges,
Blanquets, Castelldans, Cervia de
Garrigues, Corbins, L’Espluga Calba,
La Floresta, Fulleda, La Granja
D’Escarp, Gimenells i Pla de la Font,
Granyera de les Garrigues, Juncosa,
Juneda, Llardecans, Masalcoreig,
Maials de Lleida, Els Omellons, La
Pobla de Cervoles, Bellaguarda, La
Portella, Puiggros, Puigverd,de
Lleida; Roselló, Seros, El Soleras,
Soses, Tarres, Els TOrms,
Torrebesses, Torrefarrera, Torres de
Segre, Torre Serona, Vilanova de
Segria, El Vilosell, Vilanova de la
Barca y Vinaixa.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
4
Name
Domicile
BERGA GESTIÒ,
S.L.
C/ Gran Vía, 46
(08600) Berga
Employer/
National
identification
number
Post
Code
Date of
granting
powers
Geographical area of activity
Scope of representation
08600
B064396476
15-12-2020 Berga,Navas, Cardona y Nou de La
Bergueda.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
M&G figueres
Associats, S.L.
c/Col. Legi nº 54
bajos (17600)
Figueres
17600
B17673823
01-01-2011 Agullana, Albanya, Arrentera,
Bascara, Biure, Boadella i les
Escaudes, Cebanes, Cantallaps,
Capmany, Cistella, Escada,
Empolla,Figueres, Garniguelia,
Jenguera, Lladó, Masarac, Mollet de
Peralado, Pont de Mollins y Crespia.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Orges-Fin
Gestiones 2018,
s.l. Unipersonal
Consultoría
Financiera de la
Mancha, S.L.
SA ROVELLADA
DE DALT 38 bajos
izq (07702)
MAHON-
MENORCA (Illes
Balears)
C/ Ramiro
Ledesma, s/n
bloque 5 Local 3
(13630)
Socuéllamos
Estudios y Análisis
de Riesgos, S.L.
Plaza de los
carros, 2, 16001
Cuenca.
Intermediación y
Servicios Junval,
S.L.
C/ BEBRICIO , 39,
Pasaje Local nº 7
(26500)
Calahorra
Servicios
Financieros
Quintanar, S.L.
C/ Vicente Gálvez
Villarejo, 12.
(45800)
Quintanar de la
Orden
Medifirent, S.L.
C/Carretil, 2,
3ºD 26007.
Logroño (La
Rioja)
Soluciones
Financieras del
Este, S.L.
C/ Mariano
Barbacid, 5 - 2ª -
3 (28521) Rivas
Vaciamadrid
07702
B55733471
25-12-2020 Isla de Menorca
13630
B013354303
15-12-2003 Socuéllamos, Tomelloso,
Argamasilla de Alba, Pedro Muñoz,
Campo de Criptana, Alcázar de San
Juan, Las Pedroñeras, Monta del
Cuervo, Villanueva de los Infantes
16001
B016156598
30-06-2007 Cuenca
26500
B026319178
15-12-2020 Calahorra
45800
B045545167
15-12-2020 Quintanar de la Orden, Madridejos
26007
B009410572
15-12-2020 Miranda de Ebro y Logroño
28521
B084418904
15-12-2020 Arganda del Rey, Rivas –
Vaciamadrid
Servicios
Financieros
Sorianos
C/Del Ferial , 4
Oficina 3 B2
4200 Soria
4200
B042180927
15-12-2020 Soria
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
5
Name
Domicile
Employer/
National
identification
number
Post
Code
Date of
granting
powers
Geographical area of activity
Scope of representation
Finanduero 2007,
S.L.U.
GASTEIZ FINANCE,
SLU
FINANCESTHER
S.L.
CALLE EL CARRO,
9, 3ºB -09400
ARANDA DE
DUERO
(BURGOS)
Avda. de los
Huetos, 79 Ed.
Azucarera.
Vitoria 01010
(Álava)
AVENIDA
CENTRAL
NUMERO 1
OFICINA 1
(31500) TUDELA
NAVARRA .
Inversiones
Financieras Bilegi,
S.L.
Plaza Aita Arrupe
3 Oficina Nº 2
(48100)
Mungia_Bizkaia
PRAGA SERVICES
64, S.L.
Gestión de
Servicios
Financieros
Artimar
C/ Patrimonio
Mundial, 7 1ª
planta Oficina
13, 28300
Aranjuez
Av. de Canarias,
344 (35110)
Vecindario
09400
B009480013
02-11-2007 Aranda de Duero, Lerma, Huerta del
Rey, Salas de los Infantes y Roa.
01010
B10818698
02-03-2021 Álava
31500
B71392179
15-12-2020 Tudela
48100
B95659579
01-10-2012 Eibar, Mondragón, Genika - Lumo
28300
B85464402
01-03-2014 Aranjuez
35110
B035496777
15-12-2020 Agüimes, Santa Lucía de Tirajana,
San Bartolomé de Tirajana
L´Eliana Finance,
S.L.
Av. Cortes
Valencianas, 35 L
A2 (46183) L
´Eliana
46183
B097639462
01-10-2005 Riba - Roja de Turia, Lliria, Betera,
Buñol, Requena, Utiel, L'Eliana, La
Pobla de Vallbona
CENTRO ASESOR
DE TERUEL
FINANCIERA, S.L.
La calle es Ronda
Ambeles n. 52
(44004) Teruel
44004
B44224947
02-06-2008 Teruel.
Lual Soluciones y
Gestión, S.L.
C/ Isabel la
Catolica Nº 6
03803 Alcoy
( Aliacante)
03803
B01612019
15-12-2020 Villena, Sax, Biar, Benejama, Salinas,
Cañada, Campo de Mirra, Alcoy, Ibi,
Castalla, Onil, Bañeres, Tibi,
Penáguila, Benifallim, Cocentaina,
Muro de Alcoy, Beniarrés, Benilloba,
Planes, Lorcha, Agres, Alquería de
Aznar, Gayanes, Alfafara,
Benimarfull, Gorga. Millena, Alcocer
01-02-2016 Hellin, Jumilla, Albacete
GESTIÓN
FINANCIERA Y
DIVERSAS, S.L.
C/Molina de
Segura, nº5,
bloque 6º, 4ºA
(30007) Murcia
30007
B30512446
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
6
Name
Domicile
Alvarez y Garrúes,
S.L.U.
Av. A Coruña, 439
Bajo (27003)
Lugo
AVILA CONSUMER
SERVICES S.L
CALLE RIO TERA
Nº 30 1ª PLANTA
OFICINA 7
(05004) ÁVILA
Asesoramiento
Financiero Zafra,
S.L.
Avenida Antonio
Chacón nº
17 local. C.P.
06300 Zafra
( Badajoz )
Employer/
National
identification
number
Post
Code
Date of
granting
powers
Geographical area of activity
Scope of representation
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
27003
B027274216
15-12-2020 Lugo.
05004
B05265764
15-12-2020 Avila
06300
B006433973
15-12-2020 Zafra, Villanueva del Fresno,
Higuera de Vargas, Zahinos, Oliva de
la Frontera, Barcarrota, Valle de
Matamoros, Frejenal de la Sierra,
Higuera la Real, Burgullos del Cerro,
Salvatierra de los Barros, Feria,
Santa Marta, Villalba de los Barros,
Aceuchal, Fuente del Maestre,
Valencia del Ventoso, Segura del
León, Calera de León, Monesterlo,
Fuente de Cantos, Los Santos de
Malmona, Villafranca de los Barros,
Ribera del Fresno, Hornachos, Llera,
Valencia de las Torres, Usagre,
Bienvenida, Llerena, Berlanga,
Azuaga, Granja de Torrehermosa,
Peraleda de Zauecejo, Campillo de
Llerena, Higuera de la Serena,
Zalamea de la Serena, Monterrubio
de la Serena.
Alvarez y Garrúes
Dos, S.L.U.
Av. de Vigo, 65
(36003)
Pontevedra
36003
B027380799
01-08-2008 Pontevedra, Villagarcía de Arosa, O
Grove, Sanxenxo, Cambados, Lalín,
La Estrada, Silleda y Caldas de Rey
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
SOLUCIONES
FINANCIERAS
GRIGEM S.L.
Asfinza Badajoz,
S.L.
Cámara de
Comercio Gijon-
Vivero de
Empresas
Carretera de
Somio 652
Despacho
3.1(33203)
GIJON
Av. Sinforiano
Madroñero, nº 15
edificio Paraíso 3
entreplanta 4
locales A-B
06011 Badajoz –
Badajoz.
Álvarez y garrúes
Tres, S.L.U.
c/Salvador Dalí,
12 (32002)
Orense
33203
B05256375
01-04-2017 Gijón, Cabrales, Cangas de Onis,
Caravia, Caso, Colunga, Llanes,
Nava, Onis, Parres, Peñamellera
Alta, Peñamellera Baja, Pesoz,
Piloña, Ponga, Ribadedeva,
Rivadesella, Villaviciosa.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
06011
B06580708
01-06-2010 Badajoz.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
32002
B27412816
01-11-2010 Ourense, Barco de Valdeorras y Rua. Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
7
Name
Domicile
Employer/
National
identification
number
Post
Code
Date of
granting
powers
Geographical area of activity
Scope of representation
European Finantial
Consumer, S.L
FINZAMORA
SERVICES, SL.
Parc.ET-8
Complejo
Quitapesares,
Carretera CL-601
Km 7
Edificio Vicam
40194
Palazuelos de
Eresma
( Segovia )
C\ Juan II, 23. 1°
Dcha. 49011.
Zamora.
40194
B86080280
03-01-2011 Segovia.
49011
B49282403
01-01-2015 Zamora/Palencia
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
Automotive financing,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards, general
cards.
8
Appendix V
Annual Banking Report
This Annual Banking Report was prepared in compliance with Article 87 of Law 10/2014, of 26 June, on the regulation,
supervision and capital adequacy of credit institutions.
Pursuant to the aforementioned Article, from 1 January 2015, credit institutions must send the Bank of Spain and
publish annually a report as an appendix to the financial statements audited in accordance with the legislation
regulating audits of financial statements, which specifies, by country in which they are established, the following
information on a consolidated basis for each year:
a)
b)
c)
d)
e)
f)
Name(s), nature of activities and geographical location.
Turnover.
Number of employees on a full time equivalent basis.
Gross profit or loss before tax.
Tax on profit or loss.
Public subsidies received.
Following is a detail of the criteria used to prepare the annual banking report for 2022:
a) Name(s), nature of activities and geographical location
The aforementioned information is available in Appendices I and II to the Group's consolidated financial
statements, which contain details of the companies operating in each jurisdiction, including, among other
information, their name(s), geographical location and the nature of their activities.
As can be seen in the aforementioned Appendices, the main activity carried on by the Group in the various
jurisdictions in which it operates is commercial banking. The Group operates mainly in ten markets through a
model of subsidiaries that are autonomous in capital and liquidity terms, which has clear strategic and regulatory
advantages, since it limits the risk of contagion between Group units, imposes a double layer of global and local
oversight and facilitates crisis management and resolution. The Group has 250 branches in total, which provide its
customers with all their basic financial requirements.
b) Turnover
For the purposes of this report, turnover is considered to be gross income, as defined and presented in the
consolidated income statement that forms part of the Group's consolidated financial statements.
The data on turnover by country were obtained from the statutory accounting records of the Group companies
with the corresponding geographical location and translated to euros. Accordingly, this is aggregate information
from the separate financial statements of the companies that operate in each jurisdiction, reconciliation of which
with the information from the Group's consolidated financial statements requires a series of unifying adjustments
and the elimination of transactions between the various Group companies, such as those relating to the
distribution of dividends by subsidiaries to their respective parents.
c) Number of employees on a full-time equivalent basis
The data on employees on a full time equivalent basis were obtained from the average headcount of each
jurisdiction.
1
d) Tax on profit or loss
In the absence of specific criteria, this is the amount of tax effectively paid in respect of the taxes the effect of
which is recognised in Income tax in the consolidated income statement.
Taxes effectively paid in the year by each of the companies in each jurisdiction include:
•
•
Supplementary payments relating to income tax returns, normally for prior years.
Advances, prepayments, withholdings made or borne in respect of tax on profit or loss for the year. Given their
scantly representative amount, it was decided that taxes borne abroad would be included in the jurisdiction of
the company that bore them.
•
Refunds collected in the year with respect to returns for prior years that resulted in a refund.
• Where appropriate, the tax payable arising from tax assessments and litigation relating to these taxes.
The foregoing amounts are part of the statement of cash flows (EUR 433,953 thousand in 2022, which implies an
effective tax rate of 19.7%) and, therefore, differ from the income tax expense recognised in the consolidated
income statement (EUR 455,696 thousand in 2021, which implies an effective tax rate of 22.5%). Such is the case
because the tax legislation of each country establishes:
The time at which taxes must be paid. Normally, there is a timing mismatch between the dates of payment and
the date of generation of the income bearing the tax.
Its own criteria for calculating the tax and establishes temporary or permanent restrictions on expense deduction,
exemptions, relief or deferrals of certain income, etc., thereby generating the related differences between the
accounting profit (or loss) and taxable profit (or tax loss) which is ultimately taxed; tax loss carryforwards from
prior years, tax credits and/or relief, etc. must also be added to this. Also, in certain cases special regimes are
established, such as the tax consolidation of companies in the same jurisdiction, etc.
e) Public subsidies received
In the context of the disclosures required by current legislation, this term was interpreted to mean any aid or
subsidy in line with the European Commission's State Aid Guide and, in such context, the Group companies did not
receive public subsidies in 2022.
The detail of the information for 2022 is as follows:
2
Jurisdiction (EUR
million)
Turnover
No. of
employees on a
fulltime
equivalent basis
Gross profit/
(loss) before tax
Tax on profit /
(loss)
Germany
Austria
Belgium
Spain
Denmark
Finland
France
Greece
Ireland
Italy
Luxembourg
Norway
Netherlands
Portugal
United Kingdom
Sweden
Switzerland
Total
1,552
198
60
716
174
104
679
2
1
444
24
245
82
45
119
172
29
4,646
4,734
334
160
1,663
208
150
881
24
—
957
—
502
256
223
902
235
71
11,300
626
106
26
264
90
65
428
(4)
(2)
237
24
142
34
11
92
58
11
2,208
138
21
6
19
25
23
35
—
—
63
—
64
5
—
19
—
—
418
The return on assets (ROA) of the Group for the year ended 31 December 2022 was estimated at 1.23%.
3
Appendix VI
Disclosures required pursuant to Royal Decree 716/2009, of April 24, which establishes
that entities issuing mortgage bonds or bonds will keep a special accounting record of the
mortgage loans and credits that serve as collateral for said issues, of which replacement
assets that back them and the derivative financial instruments linked to each issue.
Disclosures relating to mortgage-backed bond issues
As of December 31, 2021, special mortgage bonds issued by the Bank on July 20, 2007 were registered for a nominal
amount of EUR 150,000 thousand that matured on July 20 2022 and which were guaranteed by mortgages registered
in favor of the Bank. Additionally, on December 31 2021, mortgage bonds issued by the Bank on May 6, 2019 were
registered for a nominal amount of EUR 450,000 thousand that matured on May 6, 2019.
The detail of the nominal value of the Bank's mortgage-backed bond issues outstanding on 31 December 2022 and
2021, indicating the annual interest rate and the maturity date of each issue, is as follows
Currency of issue
EUR Thousands (*)
2022
2021
Annual interest
rate (%)
Maturity date
Euros:
May 2016 issue
July 2007 issue (Note 18)
May issue 2019
Balance at end of year
(*) Face value.
—
—
—
—
—
150,000
450,000
600,000
0.125
5.135
0.000
May 2019
July 2022
May 2022
On 31 December 2022 and 2021, the detail of the mortgage loans and credits, indicating their eligibility and
computability for mortgage market regulatory purposes, was as follows:
Total mortgage loans and credits
Mortgage participation certificates issued
Mortgage transfer certificates issued
Mortgage loans securing borrowings
Mortgage loans backing mortgage and mortgage-backed bond issues (*)
i) Non-eligible mortgage loans and credits
• Which comply with the requirements to become eligible, except
for the limit established in Article 5,1 of Royal Decree 716/2009
•
Other
ii) Eligible mortgage loans and credits
• Non-computable amounts
•
Computable amounts
1) Mortgage loans and credits covering mortgage bond issues
2) Mortgage loans and credits eligible to cover mortgage-backed
bond issues
EUR Thousands
Face value
2022
2021
—
—
—
—
—
—
—
—
—
—
—
—
—
1,402,190
—
—
—
1,402,190
448,586
448,586
—
953,604
—
953,604
—
953,604
(*) On 31 December 2022 and 2021, the Bank had not issued mortgage bonds and, therefore, all the loans and credits back
the mortgage-backed bond issues.
1
The nominal value of the outstanding mortgage credits and loans and the nominal value of the loans and credits that
were eligible in accordance with Royal Decree 716/2009 are presented below, without considering the limits to their
computation established in article 12 of the aforementioned Royal Decree 716/2009, broken down according to their
origin, the currency in which they are denominated, payment status, average residual maturity, interest rate, holders,
type of guarantees as of December 31, 2022 and 2021:
EUR Thousands
2022
2021
Mortgage
Loans and Credits
Backing
Mortgage and
Mortgage-
Backed
Bond Issues
Of which: Eligible
Loans
Mortgage
Loans and Credits
Backing
Mortgage and
Mortgage-
Backed
Bond Issues
Of which: Eligible
Loans
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,402,190
—
—
953,604
—
—
1,402,190
—
953,604
—
1,334,759
67,431
928,321
25,283
163,904
652,700
542,133
43,453
26
1,402,164
—
152,795
516,434
259,157
25,218
—
953,604
—
Origin of transactions
Originated by the Bank
Subrogation from other entities
Other
Currency
Euro
Other currencies
Payment status
Current
Past due
Average term to maturity
Less than 10 years
10 to 20 years
20 to 30 years
More than 30 years
Interest rate
Fixed
Floating
Hybrid
(*) Including EUR 405,996 as of 31 December 2021, relating to mortgage participation certificates acquired from Banco
Santander, S.A. (see Note 10).
2
EUR Thousands
2022
2021
Mortgage
Loans and
Credits
Backing
Mortgage
and
Mortgage-
Backed
Bond Issues
Mortgage
Loans and
Credits
Backing
Mortgage
and
Mortgage-
Backed
Bond Issues
Of which:
Eligible
Loans
Of which:
Eligible
Loans
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
18,770
7,059
1,537,499
1,028,565
1,527,388
1,026,810
28,881
—
—
—
—
—
—
—
—
—
1,556,269
8,814
—
—
—
—
—
—
—
—
—
1,035,624
Borrowers
Legal entities and individual businessmen
Of which: Property developments
Other individuals and non-profit institutions serving
Type of guarantee
Completed buildings
•
•
•
Residential
Of which: Officially sponsored housing
Commercial
Other
•
Buildings under construction
Residential
Of which: Officially sponsored housing
Commercial
Other
•
•
Land
•
•
Developed
Other
With regards to the disclosures on guarantees associated with mortgage loans and credits, as well as those loans that
were eligible in accordance with the provisions of the aforementioned regulations, following is a detail of the nominal
value of these mortgage loans and credits, based on the related loan-to-value ratio, as of 31 December 2022 and
2021:
LTV ranges
2022
EUR millions
>60%,
<=80%
>40%,
<= 60%
<= 40%
>80%
Total
Mortgage loans and credits eligible for mortgage
and mortgage-backed bond issues
•
•
Home mortgage
Other mortgages
—
—
—
—
—
—
—
—
—
—
3
LTV ranges
2021
EUR millions
<= 40%
>40%,
<= 60%
>60%,
<=80%
>80%
Total
Mortgage loans and credits eligible for mortgage
and mortgage-backed bond issues
•
•
Home mortgage
Other mortgages
329
2
372
8
243
—
—
—
944
10
Following is a detail of the movements in 2021 in the nominal value of eligible and non-eligible mortgage loans and
credits pursuant to Royal Decree 716/2009:
Balance on 1 January 2021
Disposals in the year
Repaid on maturity
Early repayment
Subrogation by other entities
Other
Additions in the year
Originated by the Bank
Subrogation from other entities
Other
Balance on 31 December 2021
EUR Thousands
Eligible
Mortgage
Loans and Credits
Non-Eligible
Mortgage
Loans and Credits
1,035,624
109,530
—
4,856
—
104,674
27,510
718
—
26,792
953,604
520,645
74,161
—
694
—
73,467
2,102
1,352
—
750
448,586
4
The detail of the nominal value of the Bank's mortgage securities outstanding on 31 December 2022 and 2021 is as
follows:
EUR millions
Face value
Average term
to maturity
2022
2021
Mortgage bonds outstanding
Mortgage-backed bonds
Of which: Not recognised in liabilities
1)
Debt instruments. Issued through a public offering
Term to maturity of up to 1 year
2)
•
•
•
•
•
•
•
•
•
•
•
•
Term to maturity of 1 to 2 years
Term to maturity of 2 to 3 years
Term to maturity of 3 to 5 years
Term to maturity of 5 to 10 years
Term to maturity of more than 10 years
Debt instruments. Other issues
Term to maturity of up to 1 year
Term to maturity of 1 to 2 years
Term to maturity of 2 to 3 years
Term to maturity of 3 to 5 years
Term to maturity of 5 to 10 years
Term to maturity of more than 10 years
Deposits
3)
Term to maturity of up to 1 year
Term to maturity of 1 to 2 years
Term to maturity of 2 to 3 years
Term to maturity of 3 to 5 years
Term to maturity of 5 to 10 years
Term to maturity of more than 10 years
•
•
•
•
•
• Mortgage participation certificates issued
Issued through a public offering
1) Other issues
2) Mortgage transfer certificates issued
Issued through a public offering
1) Other issues
2) Mortgage bonds outstanding
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
600
600
600
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Mortgage-backed bond issuers have an early redemption option solely for the purpose of complying with the limits
on the volume of outstanding mortgage-backed bonds stipulated by mortgage market regulations.
None of the mortgage bonds issued by the Bank had affected substitution assets.
5
Santander Consumer Finance, S.A. and subsidiaries composing the
Santander Consumer Finance Group (Consolidated)
Consolidated Management Report for 2022
Alternative Performance Measures (APMs)
In addition to the financial information prepared under International Financial Reporting Standards (IFRS), this report
includes certain alternative performance measures (APMs) for the purpose of complying with the guidelines on
alternative performance measures issued by the European Securities and Markets Authority (ESMA) on October 5,
2015, as well as non-IFRS measures.
These APMs and non-IFRS measures have been used to plan, monitor and assess our performance. We believe these
APMs and non-IFRS measures are useful to management and investors as they facilitate comparisons of operating
performance between periods. Although we believe that these APMs and non-IFRS measures allow a better
assessment of our business performance, this information should be considered as additional information only, and in
no way replaces financial information prepared in accordance with IFRS. In addition, the way in which Santander Group
defines and calculates these MARs and non-IFRS measures may differ from the way they are calculated by other
companies using similar measures and, therefore, may not be comparable.
The APMs and non-IFRS measures used in this document can be categorized as follows:
Profitability and efficiency indicators
The efficiency ratio measures how much administrative expenses (personnel and other) and depreciation and
amortization expenses are necessary to generate revenues.
RoA ratios have been incorporated, as they are considered to better reflect the underlying business performance.
Ratio
Formula
Relevance of use
RoA (return on assets)
Profit /loss of the year
Average of total assets
Efficiency ratio
(cost to income)
Operating expenses (*)
Gross margin
(*) Operating expenses: Administrative expenses + amortization
This metric measures the return on the
Bank's total assets. It is an indicator
that reflects the efficiency in managing
the company's total assets to generate
profit
One of the most widely used indicators
when comparing the productivity of
different financial institutions. It
measures the level of resources used to
generate the Group's operating income.
1
Profitability and efficiency (thousands of euro and %)
2022
2021
RoA
Profit / loss for the year
Total assets
Efficiency ratio (cost to income)
Operating expenses
Administrative expenses
Amortization
Gross margin
Credit risk indicators
1.23%
1.14%
1,601,623
1,490,661
130,279,694
130,931,189
-41,87%
(1,945,415)
(1,756,232)
(189,183)
4,646,491
-41,76%
(1,855,268)
(1,663,948)
(191,320)
4,442,574
Credit risk indicators measure the quality of the loan portfolio and the percentage of the nonperforming portfolio that
is covered by loan loss provisions.
Ratio
Formula
Relevance of use
NPL ratio
Coverage ratio
Doubtful balances of loans
and advances to
customers, guarantees to
customers and
commitments granted to
customers
Total risk (1)
The NPL ratio is a very important variable
in the activity of financial institutions, as it
provides information on the level of credit
risk assumed by financial institutions. It
relates the risks classified for accounting
purposes as doubtful to the total balance
of
loans granted, for customers and
contingent risks.
Loan loss provisions (2)
Doubtful balances of loans
and advances to
customers, guarantees to
customers and
commitments granted to
customers
One of the most widely used indicators
when comparing the productivity of
different financial institutions. It measures
the level of resources used to generate the
Group's operating income
2
Ratio
Formula
Relevance of use
Cost of credit
Impairment (3)
Financial assets at
amortised cost – Loans and
advances - Customers
This ratio relates the level of accounting
impairments for credit risk in a given
period of time that are necessary based on
to
the portfolio of
customers, and
to
measure the Group's credit quality.
loans granted
serves
therefore
(*1) Total Risk = Normal and doubtful balances of Loans and Advances to customers and Customer Guarantees +
Normal and doubtful balances of Contingent Customer Commitments.
(*2) Provisions to cover impairment losses on loans and advances to customers, guarantees to customers and
commitments to customers.
(*3) Impairment or (-) reversal of impairment and gains or losses on changes in cash flows of financial assets not
measured at fair value through profit or loss and net gains or (-) losses on changes.
Credit risk (Thousands of euro and %)
Delinquency rate
Impaired assets
Commitments and guarantees granted
2022
2021
2.06%
2.06%
2,180,048
2,033,052
59,106
65,966
Loans and advances to customers without considering impairment adjustments
108,455,886 101,674,842
Commitments and guarantees granted total
362,244
355,245
Coverage ratio
Impairment losses on loans and advances to customers at amortized cost and at fair value
through other comprehensive income
Impaired assets
Commitments and guarantees granted
Cost of credit
Impairment
Loans and advances - Customers
General external framework
Economic, regulatory and competitive context
88.61%
102.65%
1,984,064
2,154,583
2,180,048
2,033,052
59,106
65,966
0.42%
0.50%
(451,931)
(495,060)
106,499,832 99,559,662
Santander has carried out its activity in 2022 in an environment dominated by the acceleration of global inflation to
levels not seen in several decades, the greater geopolitical tensions derived from the Russian invasion of Ukraine, and
the continuity, although decreasing, of bottlenecks and disruptions in global trade chains, as a result of the covid
pandemic and the aforementioned geopolitical tension.
In this context, the world's main central banks have raised interest rates to try to contain inflationary pressures. We
expect this process of monetary normalization to continue in some countries during 2023, also leading the global
economy to a gradual slowdown in the level of economic activity.
3
The evolution by geographical area is the following:
•
•
•
•
•
•
•
•
•
Eurozone (GDP: 3.4% estimated in 2022). The end of the restrictions due to the pandemic as of 2Q22 meant
the takeoff of activity in services. But the war in Ukraine, which has led to a rise in energy and staple food
prices, has hampered the post-pandemic recovery and created a risk of recession. Despite this, the labor
market has been resilient, as the unemployment rate has continued to fall and is at all-time lows (6.5%).
Inflation rose steadily to over 10% during 4Q22, to which the ECB responded with interest rate hikes that
began in July and have brought the official rate from -0.50% to 2% at the end of anus.
Spain (GDP: 5.7% estimated in 2022). The normalization in the service sector and in tourism after the
pandemic boosted growth in 2022, especially in the first half. The labor market remained robust with a low
unemployment rate. Inflation, after reaching its peak at levels above 10%, has fallen for three consecutive
months to 5.8% in December, although core inflation is still high (6.3%).
Germany (GDP: 1.9% estimated in 2022). In early 2022, the economy was being fueled by a post-pandemic
recovery in private consumption when the Russian invasion of Ukraine began, causing supply chains to suffer
persistent disruptions, and affecting exports and investment. Employment is growing at record high rates,
and the unemployment rate remained stable, although it increased from 5% to 5.5% due to the inclusion of
Ukrainian refugees in the registers. Inflation reached double figures in September. Since then, the moderation
in energy prices has allowed it to begin to fall and close the year at 8.6%, also due to the support of
government measures.
France (GDP: 2.6% estimated in 2022). GDP growth has been driven by the resilience of domestic demand
and the rebound in the services sector after the pandemic, which has offset the slowdown in activity in the
second half of the year. Job creation has remained high throughout the year and the unemployment rate has
fallen to a record low of (7.3% in 2022). Although they have eased since September, pressures on global
commodity prices have pushed up inflation, with the average annual rate expected to be 6.0%
Norway (GDP: 3.8% estimated in 2022). Economic activity has recovered significantly since March, and the
pace has moderated since then. However, in September the continental GDP exceeded the pre-pandemic
level of February 2020 by 4.4% and employment by 4.6%. The level of unemployment is low (unemployment
rate is 3.2% in 3Q22) and inflation is high (5.9% in December), which has led Norges Bank to raise interest
rates to 2.75 %.
Finland (GDP: 1.9% estimated annual average for 2022). The evolution of the Finnish activity during 2022 has
been very changeable; they started the year with zero growth, activity rebounded in the second quarter
(thanks to public and private consumption and the robustness of the labor market) and there was a
deterioration in GDP in the second part of the year. Inflation has continued to rise in the last months of 2022
and closed the year at 9.1% year-on-year (7.1% annual average).
Poland (GDP: 4.7% estimated in 2022). The economy has shown great resilience despite strong headwinds:
the war in Ukraine, the drastic increase in energy costs, or the tightening of financial conditions. Wages have
grown strongly, which has put even more pressure on high inflation. Everything has led the central bank to
raise the official rate to 6.75%.
Portugal (GDP: 6.7% estimated in 2022). The rapid and intense recovery after the pandemic has been
produced by the synchronization of internal and external demand, which has contributed to the maintenance
of full employment (the average unemployment rate is 6%). The strong recovery in demand in the face of a
supply unable to provide a united response to the effects of the Russian invasion of Ukraine has triggered an
acceleration in inflation to double-digit rates.
United Kingdom (GDP: 4.4% estimated in 2022). The acceleration of inflation has led to a growing
contraction in real income and domestic demand as we have progressed in the year, ending with a technical
recession. The labor market, with hardly any idle capacity, has been another factor of pressure on inflation.
For all these reasons, the Bank of England has raised interest rates to 3.5%.
4
2023 outlook
The management report contains certain forward-looking information reflecting the directors' plans, forecasts or
estimates, which are based on assumptions they believe to be reasonable. However, the user of this report should bear
in mind that forward-looking information should not be taken as a guarantee of the company's future performance, in
the sense that plans, forecasts or estimates are subject to numerous risks and uncertainties entailing that future
performance may not necessarily match the initial expectations. These risks and uncertainties are described in the risk
management section of this management report and in note 47 to the consolidated financial statements.
The economic prospects for 2023 are subject to several factors that generate some uncertainty, such as the
development of the geopolitical situation (particularly its impact on Europe's energy supply) or the restoration of
global value chains. However, in our base scenario we assume that during 2023 inflation will begin to slow down as a
result of the restrictive monetary policies of central banks, together with a relaxation of the geopolitical situation and
global bottlenecks.
The anticipated cooling of the economies will bring with it a slowdown in the growth rate of economic activity, which in
some countries could materialize as a mild recession. We do not expect this slowdown to have a marked impact in
terms of rising unemployment. Lastly, until inflation shows clear signs of cooling off, we estimate that central banks
will maintain the contractionary bias of monetary policy, keeping interest rates at levels similar to current ones
throughout 2023
In detail by geography, the macroeconomic forecast for the 2023 financial year is as follows:
Eurozone
The year 2023 begins with doubts about the security of energy supply, with monetary policy that needs to be tightened
to bring down inflation, and with the war in Ukraine unresolved. This may cause us to have a quarter of economic
contraction, so we expect the euro area to border on economic stagnation. We expect inflation to drop, but it will
remain far from the ECB's target (2%), so monetary policy will maintain its contractive tone. Thus, we expect to see
rises in official interest rates, reinforced with measures aimed at reducing the ECB's balance sheet.
Fiscal policy could be slightly expansive, as measures are being proposed to offset the energy shock. This will mean a
challenge of consistency between monetary and fiscal policy. In addition, a reform of the fiscal rules that bind the euro
countries is underway, since the previous ones were suspended due to the pandemic, but they will be activated again
in 2024.
The geopolitical environment will be especially relevant for the euro area over the next year, as economic development
may change as the war in Ukraine evolves, as well as the European Union's response to defense and energy security
challenges.
Spain
We expect a slowdown in growth in 2023 (1%) due to the drop in household consumption as a result of the decrease in
real income. In addition, the uncertainty about the evolution of energy prices and the tightening of financial conditions
will delay the investment decisions of economic agents. However, the acceleration in the use of Next Generation EU
funds will provide an element of support for the economy.
Germany
We expect a mild recession in the coming quarters that will lead to negative growth in 2023 as a whole due to the
global slowdown and uncertainty related to gas supply. In the second half of the year, with supply bottlenecks easing,
exporters will eliminate production delays and benefit from the recovery in global demand. Private consumption will
recover dynamism as inflation falls, which we expect to be gradual and will end the year below 5%. We expect the
unemployment rate to remain around 5.5% since, if adjustments are needed in the number of workers, a reduction in
working hours will be used.
5
France
In 2023, activity is expected to slow down significantly and GDP to expand by around 0.5% due to the impact of
inflation on purchasing power and the more restrictive monetary policy that will slow down investment. We expect
inflation to gradually decline in 2023, ending the year around 4%. The economic slowdown will weigh on the labor
market and we expect the unemployment rate to rise. Fiscal measures to support families and businesses will keep the
public deficit high in 2023.
Norway
After the great resilience shown by the economy in 2022, we expect 2023 to be a year of slowdown in which
continental GDP grows below 1.5%, due to the ongoing war in Ukraine, the effects of the general and simultaneous
tightening of monetary policy, the reincorporation of China, after abandoning the zero Covid policy, which could mean
higher prices for raw materials, and push inflation higher. All of this leads to the higher cost of living for companies and
families, which will lead to lower consumption and investment. The labor market will remain strong, although the
unemployment rate will increase, since there will be employment adjustments due to lower demand. Norges Bank will
continue raising interest rates (currently 2.75%), probably until mid-year and could end the year above 3%.
Finland
The outlook for 2023 is negative (stagnation or a slight decline in GDP in 2023), especially during the first half of the
year. Agents' confidence is not picking up, inflation will remain high -although subsiding throughout the year- and the
tightening of financial conditions will continue, which will continue to reduce the purchasing power of households -
and, therefore, private consumption - and the investment decisions of companies, which will be postponed until a
future with less uncertainty is glimpsed. The labor market will remain solid, which will protect against a further fall in
GDP, although in the medium term the shortage of labor in some sectors could be reflected in lower growth.
Poland
The economy ended 2022 with a slowdown marking the start of what will be a mild recession in 2023. The first quarter
is expected to mark the nadir of the mini-recession and then there will be a gradual recovery, leaving growth of GDP
for the year as a whole close to zero. Consumption will be the most resilient component of demand; investment will
fall. However, the contribution of net exports to GDP will be positive. After peaking in February (somewhat above
20%), inflation will come down, but not below 10%. The MPC agrees to postpone the return of inflation to the target
and it seems that it is not going to raise interest rates.
Portugal
Growth prospects for 2023 are subject to the impact that the more restrictive monetary policy may have on activity.
The increase in interest rates will affect domestic demand by reducing consumption, the intensity of which will depend
on the resilience of the labor market (we expect them to remain around their natural rate of 7%-8%), and on the use of
accumulated savings. Investment will moderate due to the increase in interest rates and the worst demand
expectations. However, investments in the energy transition could mitigate part of this effect. Inflation will start to
moderate, although wage pressures will help keep inflation levels above 2%.
United Kingdom
The economy will be in recession in 2023. Some measures to support families and businesses by the government will
prevent a deep economic recession. As high inflation is reducing real income, consumption is expected to decline.
Investment will also do so given the worst demand prospects. Inflation will start to decline from the first quarter,
although it is not expected to reach the Bank of England's target. Therefore, we expect it to continue raising interest
rates at its next meetings.
Economic outlook
Financial markets
The outlook for 2023 indicates a global economic slowdown, as a result of the drop in consumption and investment
due to inflation, higher interest rates and lower confidence. Inflation should also moderate, making it possible for
central banks to close the cycle of increases in the first months of the year. We believe these perspectives will dictate a
behavior from less to more in the financial markets as we move into 2023, although uncertainty is high.
6
Debt yields may have room to rise in the first tranche of 2023, but we expect a turning point to start a downward path
in the second half of the year, as inflation subsides and the market begins to speculate on a future cycle of rate cuts,
which could take place in 2024. On the periphery side of the euro, a gradual quantitative adjustment (QT) and the
safeguard that the Transmission Protection Instrument (TPI) represents in the ECB's chamber, should support spreads
over the medium term.
In equities, the interest rate ceiling should allow valuations to recover in 2023, but in a limited way, as rates will
remain relatively high and the economic slowdown will weigh on them.
In emerging economies, the focus remains on the recovery of the Chinese economy, which is making progress in easing
the covid zero policy, becoming more pragmatic, and taking measures to alleviate the real estate crisis.
We see the risk in this central scenario on the side of a slower-than-expected inflection in the path of inflation that
once again puts pressure on the target level for central banks. In this regard, we maintain a cautious stance, since if
this risk scenario materializes, financial markets may still be vulnerable in 2023.
The banking environment will be marked by the impact that the economic moderation and the tightening of financial
conditions will have on the payment capacity of the private sector and on balance sheet growth.
The tightening of monetary policy will be accompanied by the withdrawal of liquidity support measures, so entities
will have to adjust to the new conditions. With more expensive wholesale funding and lower deposit growth. Even so,
it is to be expected that the demand for credit will also be affected by the economic slowdown and the higher interest
rates.
The risks are skewed to the downside and may come from non-bank financial players, with the risk of disorderly
adjustments in asset prices and disturbances in market liquidity. Even so, for the moment, most of the entities are in a
solid solvency position to face a scenario of this type.
In addition to the economic environment, banks must face the acceleration of the business digitization process and the
knowledge and management of risks associated with climate change.
Financial regulation
In 2023 we expect continuity with respect to the 2022 regulatory agenda where the prudential, sustainability and
digital pillars will continue to boil. Retail topics will also gain focus.
Prudential aspect
Most notable will be the discussions on the implementation of the Basel III reform in Europe. Central to the discussions
will be the tension between the impact on banking of the requirements and the degree to which Europe deviates from
Basel. Once the final standards of the Basel Committee on the prudential treatment of exposures to crypto assets of
financial institutions have been published, their implementation process is expected to begin in the European Union
and other jurisdictions.
Resolution
During 2023 in Europe it is intended to start the third review of the resolution directive (BRRD- Banking Recovery and
Resolution Directive) with the objective, among others, of improving the application of the framework and that the
framework works for medium and small banks. At the same time, the first review of the Deposit Guarantee Schemes
Directive (DGSD) is planned, which is expected to serve as a boost to the negotiations on the creation of a common
deposit guarantee fund at the European level.
Sostenibility
In Europe, the Commission will work to complete the green taxonomy, advancing in the definition of the four
remaining environmental objectives pending development: protection of water and marine resources, transition to a
circular economy, pollution control and protection of ecosystems. Additionally, progress will be made in the definition
of sustainable reporting standards both at a European level, through the European Financial Reporting Advisory Group
(EFRAG), and at an international level, through the new group of the International Sustainability Standards Board
(ISSB).
7
Discussions will continue and it is foreseeable that an agreement will be reached during 2023 on the green bond and
due diligence proposals. In addition, it is expected that in 2023 the EBA will present its conclusions on the integration
of climate and environmental risks in the prudential framework, and that, together with EIOPA and ESMA, it will
advance in the analysis of greenwashing in the European financial sector.
Retail banking
Different initiatives are underway with an important focus on improving consumer protection and adapting regulations
to the digital environment. With regard to legislative actions, the approval of the proposal to review the consumer
credit directive is expected, the start of the review of the mortgage credit directive and a strategy plan for retail
investor participation in markets, which Its objective is to encourage investment beyond savings.
Strategy
SCF is the leader in consumer finance in Europe with a presence in 18 countries (16 in Europe, China and Canada) and
more than 130,000 associated points of sale (car dealers and shops). In addition, it is developing pan-European
initiatives to boost Direct's business in all its markets.
It supports its customers and partners (car manufacturers and dealers and distributors) to boost their sales capacity by
financing their products and developing advanced technologies that give them a competitive advantage. SCF is the
leading funder and mobility provider in Europe.
The strategy developed in 2022 is based on the following priorities:
•
Strengthen our leadership in digital consumer lending, focusing on growth and transformation:
•
•
•
Auto: reinforce our leadership position in auto financing, gain market share, strengthen our leasing
business and develop underwriting services. SCF focuses on providing advanced digital financing
capabilities to its partners to support their sales growth strategy and the best customer experience.
Consumption (not auto): Gain market share based on the specialization and development of the
technological platforms taking advantage of our leading position in Europe in buy now, pay later
(BNPL), credit cards and direct loans.
Retail: Promote digital banking activity.
•
Focus on profitable growth and transformation:
•
•
•
Simplify the operating model by going from operating through autonomous banks to European
hubs (Spain, Nordic, Germany hub) to increase competitiveness, allow benefits of scale and gain
efficiency.
Reduction of sensitivity to interest rate rises, boosting the collection of deposits and accelerating
the revaluation of new loans.
Increase profit by leveraging strategic operations started in 2021, such as Stellantis (auto), the
launch of leasing and underwriting, and the development of BNPL.; and the acquisition of Mitsubishi
Bank Germany.
•
•
Drive technological transformation projects to take advantage of the rapid growth of the digital transition,
support the expansion of the digital customer base and provide our partners with digital tools to achieve a
unique European digital connection, while maintaining high profitability and one of the best efficiency ratios
in the sector.
At ESG, we help the transition to a greener economy by doing business sustainably. We support the
ecological transition of our clients through the financing of non-polluting vehicles, solar panels, bicycles,
heating systems and efficient energy solutions.
• We are actively partnering with various European, US, Japanese and Chinese manufacturers with strong
portfolios of electrical products to develop joint solutions to capture growth in a market that is moving
towards lower emissions.
We were also recognized as Top Employer or Great Place to Work (GPTW) in 8 countries.
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Business evolution
2022 was a difficult year, with supply chain disruptions (covid-19, lack of chips, war in Ukraine) and global geopolitical
tensions. The high inflation in Europe and the shortage of energy are reducing the disposable income of consumers and
affecting their consumption and confidence decisions.
Our main indicator for the Santander Consumer business showed at the end of December (ACEA data) that the market
for passenger car registrations in Europe has decreased by 4.1% compared to 2021.
In this environment, credit production increased by 7.0% in the year. Our leadership position and strategic alliances
have allowed us to increase our car financing market share in most of our countries. New car production increased
6.6% year-on-year, while car transactions in Europe fell high single digits in the geographies in which we operate.
In the auto sector, we started to develop our own digital leasing platform in Europe (we hope to start the gradual
rollout before the end of the year) with the ambition to revolutionize the market.
Santander Consumer Finance's new subscription service, Wabi, is already up and running in Spain, Norway and
Germany, and will be launched in other countries in the coming years. In June, Santander Consumer Finance launched
Ulity, our new white-label platform to develop solutions for companies based on vehicle subscription.
In 2022 we expanded our alliance with Stellantis and the transaction is expected to be completed in the first half of
2023 (after the necessary authorizations). Santander Consumer Finance has also established a long-term global
agreement with the Piaggio Group, leader in the scooter segment in Europe.
By car, leasing solutions generated an increase of more than 20% in new contracts compared to the previous year. We
continue to develop our own digital leasing platform in Europe with the ambition to revolutionize the market. Wabi
(SCF's subscription service) is already up and running in Spain, Norway and Germany and will be launched in other
countries in the coming years. In June, SCF launched Ulity, our new vehicle underwriting solutions platform for
businesses.
The joint venture with TIMFin, the main Italian Teleco, already has more than 1.5 million contracts since its launch and
more than 5,800 active points of sale.
The group's total assets as of December 31, 2022 stood at 130,280 million euros (0.5% lower than at the end of the
previous year). Customer loans have grown 7.0%, gradually recovering from the effects caused by the pandemic. New
production has grown by 10.7% compared to 2021, growth that has been reflected in both auto business and
consumer loans.
Regarding liabilities, compared to December 2021, there is an increase in customer deposits of 5.7%. Our access to
wholesale funding markets remains strong and diversified. We are actively repricing new business to offset higher
financing costs stemming from rate hikes. However, in central banks it has decreased by 10.5%.
At the end of December 2022, customer deposits, medium- and long-term securitizations, and issues placed on the
market covered 75% of net customer loans.
Regarding the issuance plan, the volume issued by SCF SA in 2022 amounts to 6,479 million euros, of which 1,464
million correspond to senior debt, 600 million to subordinated debt, 1,050 million to non-preferred senior debt and
another 3,365 million to securitizations.
9
Results
In 2022, the attributable profit of Santander Consumer Finance was 1,602 million euros, demonstrating, once again,
the solidity of our business model, increasing the result compared to the previous year by 111 million.
By heading, the following impacts stand out:
•
Net interest income improved by 0.4% compared to the previous year, affected by the increase in financing
costs (strong rate hikes) and changes in TLTRO, partly mitigated by price review initiatives in the new loans
and active margin management. The liquidity position has remained solid at all times and no additional
liquidity tensions have been generated, thanks to the evolution of deposits and the drawdown of wholesale
lines. Liquidity metrics have remained above their internal limits and in compliance with regulatory levels. At
the end of December, the consolidated LCR (Liquidity coverage ratio) of SCF Subgroup was above 115% and
the NSFR (Net Stable Funding Ratio) for the same perimeter was above 103%, maintaining comfortable levels
throughout the year.
• With regard to commissions, they have increased in cumulative terms by 2.9% compared to the previous
year, reflecting the progressive recovery that is taking place and which has an impact mainly on an
improvement in insurance commissions.
•
•
•
•
Other operating results increased by 77.4 million thanks to the better results obtained in the operating
leasing activity. This line also includes the payment of the Single Resolution Fund (FUR), this payment has
increased with respect to the previous year by 0.3 million euros.
Operating costs stand at 1,945 million euros, 4.9% higher than in 2021, due to inflation, strategic
investments to increase future income and reduce operating expenses and new businesses. The efficiency
ratio stands at 41.9% at the end of the year (+10bp over 2021).
Provisions for bad debts have been 9% lower than the previous year, supported by portfolio sales. Credit
quality maintains a solid evolution, with a cost of credit of 0.42% (-8 bp year-on-year) and a non-performing
loan ratio of 2.06% (-0 bp).
Less negative contribution from other results and provisions despite regulatory charges in Poland (mortgage
moratorium) and insurance regulations in Germany.
In summary, the Santander Consumer Finance Group continues to demonstrate the ability to generate income
while maintaining high profitability, good efficiency and controlled delinquency. The expectations for 2023 are
positive in all the territories where it operates.
Corporate principles
The Santander Group, of which Santander Consumer Finance forms part, has defined excellence in risk
management as a strategic objective. It has always been a priority area of action throughout more than 150 years
of history.
In recent years, the strategy has been accelerated to anticipate and respond to the major challenges of a constantly
changing economic, social and regulatory environment.
Therefore, the risk function is more important than ever for the Santander Group to remain a solid, safe and
sustainable bank, an example for the entire financial industry and a benchmark for all that aspire to turn risk
leadership into a competitive advantage.
Santander Consumer Finance aims to build the future by managing all risks in advance and protecting the present
thanks to a robust control environment. The risk function is based on the following pillars, which are aligned with
the Santander Group's strategy and business model and take account of the recommendations of supervisory and
regulatory bodies, and best market practices:
1.
The business strategy is defined within the risk appetite. Santander Consumer Finance's Board determines
the amount and type of risk deemed reasonable to assume when implementing its business strategy and
development within objective, verifiable limits consistent with the risk appetite for each relevant activity.
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2.
3.
4.
5.
6.
All risks must be managed by the units that generate them through advanced, integrated business models
and tools. Santander Consumer Finance is promoting advanced risk management using innovative models
and metrics, combined with a control, reporting and escalation framework that enables risks to be identified
and managed from different perspectives.
Anticipatory thinking for all types of risks must be integrated into risk identification, assessment and
management processes.
The risk function's independence spans all risks and provides adequate separation between risk-generating
and risk-controlling units. It implies that it has sufficient authority and direct access to the management and
governance bodies responsible for setting and overseeing the risk strategy and policies.
Risk management requires the best processes and infrastructures. Santander Consumer Finance aims to be a
benchmark in the development of infrastructures and processes to support risk management.
A risk culture embedded throughout the organisation, comprising a set of attitudes, values, skills and
behavioural patterns for all risks. Santander Consumer Finance understands that advanced risk management
cannot be achieved without a strong and stable risk culture being present in each of its activities.
Risks map
Santander Consumer Finance has in place a recurring process for identifying the material risks to which it is or
could be exposed, as reflected in the risk map. Material risks must be covered by the risk profile assessment
exercise, risk appetite, risk strategy and ICAAP/ILAAP. Below is the latest update of Santander Consumer Finance's
risk map.
The first level includes the following risks (General Risks Framework):
•
Credit risk is the risk of financial loss arising from a contractual breach or impairment of the credit quality
of a customer or other third party that Santander Consumer Finance has financed or in respect of whom a
contractual obligation has been assumed.
• Market risk is the risk incurred as a result of changes in market factors that affect the value of positions in
trading portfolios. This risk is not considered relevant within Santander Consumer Finance since it is not a
trading institution.
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•
•
•
Liquidity risk is the risk that Santander Consumer Finance does not have the liquid financial assets required
to meet its obligations when due, or can only obtain them at a high cost.
Structural risk is the risk arising from the management of balance sheet items, in the banking portfolio and
in relation to insurance and pension activities.
Capital risk is the risk that Santander Group does not have sufficient capital, in quantity or quality, to meet
its internal business objectives, regulatory requirements or market expectations.
• Operational risk is defined as the risk of loss due to inadequacy or failure of internal processes, staff and
systems or due to external events. This definition includes legal risk.
•
•
•
Financial crime risk is the risk derived from actions or the use of the group's means, products and services
in activities of a criminal or illegal nature. These activities include, but are not limited to, money laundering,
terrorist financing, violation of international sanctions programs, corruption, bribery, and tax evasion.
Strategic risk is the risk of loss or detriment arising from strategic decisions, or poor implementation of
such decisions, affecting the long-term interests of our main stakeholders; or from an inability to adapt to
the changing environment.
Reputational risk is defined as the risk of a current or potential adverse economic impact due to a less
favourable perception of the bank by employees, customers, shareholders/ investors and society in general.
• Model risk is the risk of loss arising from misuse of a model or inaccurate predictions that may result in
sub-optimal decisions by the Bank.
The material risks at Santander Consumer Finance are: credit, default (including concentration and migration),
liquidity, structural, structural interest rate, capital, operational and strategic.
The relevant risks in Santander Consumer Finance are: direct residual value, structural exchange rate, pensions,
legal, fraud, technology and cyber risk, suppliers, business continuity, transformation, project execution, people,
data, processes money laundering and terrorist financing, regulatory compliance, product governance and
consumer protection, reputational, model and ESG risks (related to environmental and climate, social and
governance factors).
There are two types of risk whose relevance has been increasing in recent times and for which Santander
Consumer Finance is bolstering management and control: direct residual value risk and ESG/climate risks.
Direct residual value risk is defined as the risk of loss to which a company may be exposed if, at some point during
the life of an automobile agreement (loan, lease, etc.), the customer has the option or obligation to return the
vehicle as full and final settlement, due to uncertainty regarding the selling price of the vehicle realised at that
time.
ESG factors (environmental and climate, social and governance) can affect the traditional types of risk (credit,
liquidity, operational, reputational, etc.) due to the physical effects of climate change, generated by specific events
as well as chronic changes on the environment, or the process of transition to a development model with lower
emissions, including changes in legislation, technology or the behavior of economic agents, as well as failure to
meet the expectations and commitments acquired.
Corporate Risk Governance
The objective of the governance of the risk function is to ensure adequate and efficient decision-making and
effective risk control, and to ensure that these functions are managed in accordance with the risk appetite
approved by the board of directors of Santander Consumer Finance.
The following principles have been established for this purpose:
•
•
•
•
Segregation between risk decisions and control.
Enhancing the responsibility of risk generating functions in the decision-making process.
Ensuring that all risk decisions have a formal approval process.
Ensuring an aggregate overview of all risk types.
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•
Bolstering risk control committees.
• Maintaining a responsive and efficient committee structure, ensuring:
•
•
•
•
Participation and involvement of the governance bodies and senior management in all risk
decisions, and supervision and control.
Coordination between the lines of defence in risk-management and control functions.
Alignment of objectives, monitoring to ensure they are being achieved and implementing corrective
measures when necessary.
The existence of an adequate management and control environment for all risks.
To achieve these objectives, the Committee structure in the management model must ensure an adequate:
•
•
•
Structure, with stratification by levels of relevance, balanced delegation capacity and protocols for escalating
incidents.
Composition, with members of sufficient rank and representation of business and support areas.
Operations, i.e. frequency, minimum attendance levels and appropriate procedures.
The governance of risk activity must establish and facilitate coordination channels between the units and
Santander Consumer Finance, together with alignment of management models and risk control.
The governance bodies of Santander Consumer Finance, S.A. units are set up in accordance with local legal and
regulatory requirements, considering the complexity of each unit.
In addition, the Silver and Bronze Committee at Santander Consumer Finance has monitored the war in Ukraine and
the microchip/supply chain crisis and its impact on the entity's business.
Roles and responsibilities
The Risk function is structured into three lines of defense, in accordance with corporate policy, to manage and
control risks effectively:
– First line of defence: Business functions that take or generate exposure to risk constitute the first line of defence.
The first line of defence identifies, measures, controls, monitors and reports the risks that originate and applies the
internal regulations that regulate risk management. The generation of risks must be adjusted to the approved risk
appetite and the associated limits.
– Second line of defence: made up of the Risk functions, which independently supervise and question the risk
management activities carried out by the first line of defence. This second line of defense must ensure, within their
respective areas of responsibility, that risks are managed in accordance with the risk appetite defined by senior
management and promote a strong risk culture throughout the organization.
– Third line of defence: the Internal Audit function is independent to ensure the board of directors, and senior
management, the quality and effectiveness of internal controls, governance and risk management systems,
helping to safeguard our value , solvency and reputation.
Structure of Risk Committees
The board of directors is ultimately responsible for risk control and management, delegating these powers to
commissions and committees. In Santander Consumer Finance, the Board is supported by the Risk, Regulation and
Compliance Supervision Commission, which is an independent risk control and monitoring committee. These
bylaw-mandated bodies form the highest level of risk governance:
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Independent control bodies
•
Risk, Regulation and Compliance Supervision Commission:
This Committee's role is to assist the Board of Directors in the monitoring and control or risks, defining and
assessing risk policies, and determining the risk propensity and strategy.
It is made up of external or non-executive directors (mostly independent) and is chaired by an independent
Board member.
The main duties of the Risk, Regulation and Compliance Supervision Commission are:
•
•
•
•
•
To support and advise the Board of Directors in defining and assessing Santander Consumer Finance's
risk policies and determining its risk propensity and risk strategy.
To ensure that the pricing policy for assets and liabilities offered to customers fully respects the
business model and risk strategy.
To understand and assess the management tools, ideas for improvement, progress with projects and
any other relevant activity relating to risk control.
To determine with the Board of Directors the nature, amount, format and frequency of the risk
information to be received by the Committee and the Board.
To help establish rational and practical remuneration policies. For this purpose, without prejudice to the
duties of the Remunerations Committee, the Risk Committee examines whether the incentives policy
planned for the remuneration scheme considers risk, capital, liquidity and the likelihood and suitability
of profits.
•
Executive Risk Control Committee (ERCC):
This collegial body is responsible for overall monitoring and control of Santander Consumer Finance's risks,
pursuant to the powers delegated to it by the Board of Directors of Santander Consumer Finance, S.A.
Its objectives are:
•
To provide a tool for effective risk control, ensuring that risks are managed in accordance with the
Bank's risk appetite, as approved by the Board of Directors of Santander Consumer Finance, S.A.,
providing an overview of all of the risks identified in the risk map in the general risk framework,
including identification and monitoring of actual and emerging risks and their impact on the risk profile
of the Santander Consumer Finance Group.
•
To ensure the best estimate of provisions and that they are recognized correctly.
This Committee is chaired by the Santander Consumer Finance's Chief Risk Officer (CRO) and is made up of
members of its senior management. In addition to the risk function, which chairs the Committee, the
compliance, finance and management control functions are also represented. The CROs of local entities can
take part on a regular basis to report on the risk profile of the entities and other tasks.
The Executive Risk Control Committee reports to the Risk, Regulation and Compliance Supervision Commission,
which it assists in its function of supporting the Board.
Decision-making bodies
•
Executive Risk Committee (ERC):
The Executive Risk Committee is the collegiate body responsible for overall risk management pursuant to the
powers delegated to it by the Board of Directors of Santander Consumer Finance S.A., monitoring all the risks
identified in the Bank that fall within its remit.
Its objective is to provide a tool for decisions on accepting risks at the highest level, ensuring that risk decisions
are within the limits set by the Santander Consumer Finance Group's risk appetite, as well as informing of its
activity to the Board or its committees when it is required so.
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This Committee is chaired by the Head of Santander Consumer Finance and is made up of executive directors
and other executive of Santander Consumer Finance. The risk, financial, management control and compliance
function are also represented, among others. The Bank's CRO is entitled to veto the Committee's decisions.
•
Proposal Sub-committee (RPSc):
The Santander Consumer Finance Risk Proposal Sub-committee is a collegiate body in charge of making
decisions regarding business and country transactions, credit risk, market, liquidity and structural issues (or any
other risk if it were necessary), guaranteeing that the decisions made comply with the limits established in the
appetite risk framework of Santander Consumer Finance, as well as informing of its activity to the Risk
Executive Committee when it is required so.
This Committee is chaired by Santander Consumer Finance’s CRO, and it comprises Santander Consumer
Finance executive positions including but not limited to the risk, financial, management control and compliance
functions.
•
Provisions Committee:
The Provisions Committee is the decision-making body responsible for overall management of provisions in
accordance with the powers delegated by the Executive Risk Committee of Santander Consumer Finance S.A.,
and supervises, within its sphere of action and decision, all matters relating to provisions in Santander
Consumer Finance. Its purpose is to be the instrument for decision-making, ensuring that decisions are
consistent with the governance of provisions established at Santander Consumer Finance, and reporting to the
Board of Directors or its committees on its activities when required.
The structure of the Risk Committees of the Western Hub branches:
Pursuant to the merger agreements and for the purpose of ensuring proper governance and continuing the risk
function of the Western Hub branches by Santander Consumer Finance, S.A. (absorbing company):
• Any powers, faculties and attributions in terms of risks that were granted individually or collectively in the
branches, will remain in force under the same terms and conditions.
• What is particularly established in its approval and risk control committees will continue to be in force with the
same functions, unless one or more powers are expressly claimed for itself by a higher-ranking body.
• Any discrepancy in the understanding of the attributions and competence of the committees will be interpreted in
the sense that best favors the governance functions of the company as a whole and, in any case, subject to the
practices and uses of the governing bodies. superior hierarchy of the entity Santander Consumer Finance S.A.
Structural organisation of the risk function
The Group Chief Risk Officer (GCRO) is responsible for the risk function in Santander Consumer Finance and reports
to the Head of Santander Consumer Finance, who is a member of the Board.
The GCRO advises and challenges the executive line and also reports independently to the Risk, Regulatory and
Compliance Committee and to the Board.
Advanced risk management is based on a holistic, forward-looking approach to risks, based on intensive use of
models, to foster a robust control environment that meets the requirements of the regulator and the supervisor.
Santander Consumer Finance's risk management and control model shares certain core principles via its corporate
frameworks. These frameworks are established by the Group and Santander Consumer Finance adheres to them
through its management bodies. They shape the relationship between the subsidiaries and Santander Consumer
Finance, including the role played by the latter in validity.
The Group-Subsidiaries Governance Model and good governance practices for subsidiaries recommend that each
subsidiary should have a bylaw-mandated risk committee and an executive risk committee chaired by the Chief
Executive Officer (CEO). This is in line with best corporate governance practices and consistent with those already
in place in the Group, as set out in the corporate framework, to which Santander Consumer Finance has signed up.
15
Under the Group's internal governance framework, the management bodies of Santander Consumer Finance have
their own model of risk powers (both quantitative and qualitative), which must follow the principles set out in the
benchmark models and frameworks developed at the corporate level.
Given its capacity for comprehensive and aggregated oversight of all risks, the corporation exercises a validation
and questioning role with regard to the operations and management policies of the units, insofar as they affect the
Group’s risk profile.
Identifying and evaluating risks is a cornerstone for controlling and managing risk. The main risk types to which the
Group is exposed are credit risk, market risk, operational risk and compliance and conduct risk.
Santander Consumer Finance has taken several initiatives to improve the relationship between Santander
Consumer Finance and its subsidiaries, and to improve the model of advanced risk management.
Credit risk
Credit risk stems from the possibility of losses arising from the failure of clients or counterparties to meet their
financial obligations with the Group, in full or in part.
The risk function in Santander Consumer Finance is organised by customer type, distinguishing between
individualised and standard customers throughout the risk-management process:
•
•
Individualised customers are those assigned to a risk analyst, mainly because of the risk they entail. This
category includes Wholesale Banking companies and some Retail Banking companies. Risk management
involves expert analysis, complemented by decision-making support tools based on internal risk assessment
models.
Standard risks are those customers to whom no risk analyst is expressly assigned. They generally include risk
with individuals, individual businesspeople and non-individualised retail banking companies. Management of
these risks is based on internal-assessment and automatic-decision models, complemented by teams of
analysts specialized in specific risk types when the model does not cover the risk or is not sufficiently accurate.
Key figures in 2022
The trend in non-performing assets and the cost of credit reflect the impact of the deterioration of the economic
environment mitigated by prudent risk management, which has generally kept these figures lower than those of
our competitors in recent years. As a result, Santander Consumer Finance maintains an adequate level of coverage
to meet the expected loss from the credit risk portfolios managed.
As of December 2022, the default rate was 2.06%, due to the good performance of the different portfolios, despite
the adverse situations that have been experienced throughout 2022, the measures applied in the units and the
Santander Consumer Finance risk appetite. Doubtful loans (2,239 million euros) are distributed by units as follows:
Nordics represents 22% of the total, Spain 26%, Germany 28%, France 9%, Italy 7%, Austria 6% and others 2%.
Regarding the type of portfolio, Auto represents 45% of the total, Direct 31%, Cards 7%, Stock Finance 3%,
Mortgages 3%, Durables 2% and others 9%.
Despite the uncertainty and instability generated by the post-pandemic situation, as well as the semiconductor
crisis and the war between Russia and Ukraine, the non-performing loan ratio has remained stable, compared to
the December 2021 data, being 2.06% in both years.
In terms of cost of credit, this ratio has a low risk profile thanks to the granularity and predictability of Santander
Consumer Finance's portfolios. The 12-month cost of credit at the end of December 2022 was 0.42%.
Highlights and trends
The profile of Santander Consumer Finance's credit risk portfolio is characterised by a diversified geographic
distribution and the predominance of retail banking.
16
Global Credit Risk Map 2022
The following table details the global map of Santander Consumer Finance's gross credit exposure by geographic
area:
SCF Group - Gross Credit risk exposure
2022
(EUR million)
14,952
10,352
15,940
42,099
17,815
2,819
4,479
108,456
Change on December
2021
2.39%
14.02%
8.19%
8.57%
1.32%
(5.20)%
14.02%
6.67%
%portfolio
13.79%
9.53%
14.70%
38.82%
16.43%
2.60%
4.13%
100.00%
Spain and Portugal (*)
Italy
France
Germany and Austria
Nordics (Scandinavia)
United Kingdom (**)
Other
Total
In terms of outlook by product at December 2022, Auto represents 63% of the total gross exposure, Direct 12%,
Mortgages 3%, Durables 2%, Stock Finance 10% and Others 10%. Germany concentrates the highest percentage of
the portfolio with 39% along with Austria and their respective JVs. On the other hand, Nordics (Scandinavia)
represents 16%, and includes units from Norway, Denmark, Sweden and Finland. France, including the PSA Joint
Ventures, represents 10% of the total. Spain, Portugal and their respective units resulting from the cooperation
with PSA, represent 14% of the total.
Estimation of impairment losses
Calculation of expected credit losses:
Grupo Santander Consumer Finance calculates expected credit losses using parameters (mainly PD and LGD) based
on internal models according to specific requirements of IFRS 9 and other guidelines by regulators, supervisors and
other international organizations (EBA, NCAs, BIS, GPPC). Models are built using internal information with
sufficiently representative historical depth and granularity, regulatory and management experience, as well as
forward-looking information based on macroeconomic scenarios, and allow estimating losses throughout the life
of the operation. They follow a defined life cycle that includes, among others, a process of internal validation,
monitoring and governance models to ensure their robustness and suitability for use.
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.
17
•
•
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: Santander Consumer Finance reviews and quantifies changes in the risk of default
during their expected life based on their credit risk level on initial recognition. To recognize significant
changes so instruments can be classified in stage 2, each subsidiary set quantitative thresholds for its
portfolios based on Santander's guidelines for consistent interpretation across all our footprint.
Of those quantitative thresholds, Grupo Santander considers two: the relative threshold, which shows the
difference in credit quality since the transaction was approved as a percentage of change; and the
absolute threshold, which calculates the total difference in credit quality. All subsidiaries apply them
(with different values) in the same manner. The use of one or both depends on portfolio type and other
aspects, such as the starting point for average credit quality.
Qualitative criteria: Several indicators aligned with ordinary credit risk management indicators (e.g. past
due for over 30 days, forbearance, etc.). Each subsidiary defined these criteria for its portfolios. Santander
supplements these qualitative criteria with expert opinions. When the presumption of a significant
deterioration of credit risk is removed, due to a sufficient improvement of the credit quality, the obligor
can be re-classified to Stage 1, without any probationary period in Stage 2.
Definition of default: Santander incorporated the new definition to provisions calculation according to the
EBA’s guidelines; the Group is also considering applying it to prudential framework. In addition, the
default definition and stage 3 have been aligned.
This definition considers the following criteria to classify exposures as stage 3: financial instruments with
one or more payments more than 90 consecutive days past due, representing at least 1% of the client's
total exposure or the identification of other criteria demonstrating, even in the absence of defaults, that it
is unlikely that the counterparty is unlikely to meet all of its financial obligations. The Group applies the
default criteria to all exposures of the impaired client. Where an obligor belongs to a group, the default
criteria may also be applied to all exposures of the group. The default classification is maintained during
the 3-month test period following the disappearance of all default indicators described above, and this
period is extended to one year for forbearances that have been classified as default.
Expected life of financial instruments: Santander estimates the expected life of financial instruments
according to their contractual terms (e.g. prepayments, duration, purchase options, etc.). The contractual
period (including extension options) is the maximum time frame for measuring the expected credit loss. If
financial instruments have an undefined maturity period and available balance (e.g. credit cards),
Santander estimates its expected life based on the total exposure period and effective management
practices to mitigate exposure.
18
The context and monitoring of the expected credit loss was analysed and reviewed during the health crisis by
covid-19 , and was reinforced with collective analysis, monitoring of government measures, monitoring of the
evolution of the Group's customers, as well as remedial management actions if necessary. In terms of
classification, Grupo Santander has maintained the criteria and thresholds for classification applied prior to the
start of the pandemic, eliminating regulatory criteria of the effect of moratorium classification as they have
expired, as well as the collective analyses associated with these groups of loans. Regarding moratorium measures,
a rigorous identification and periodic monitoring of the credit quality of the clients and their payment behaviour
have been carried out and, through a specific individual or collective evaluation, the timely detection of the
significant increase in credit risk. At the end of December 2022 the credit risk provisions not included any special
measures or adjustments in relation to health crisis by covid-19.
1.
Forward-looking vision
To estimate expected losses, Grupo Santander requires a great deal of expert analysis as well as past, present and
future data. Santander quantifies expected losses from credit events using an unbiased, weighted consideration of
up to five future scenarios that could affect our ability to collect contractual cash flows. These scenarios take into
account the time value of money, the relevant information available about past events and current conditions, and
projections of macroeconomic factors that are considered important to estimate this amount (e.g. GDP, house
prices, rate of unemployment, among others).
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.
During 2022, the Group has updated the macroeconomic scenarios included in the provision models with the most up-
to-date information on the current environment. The IASB already indicated in 2021 that the macroeconomic
uncertainty surrounding the pandemic made it difficult to regularly apply the expected loss calculation models of
IFRS9. The European Central Bank recommended the use of a stable and long-term view (long-term). run) of
macroeconomic forecasts. In 2022, the economic recovery that was expected after the end of the pandemic has been
affected by the effects of the war in Ukraine, which introduces an additional effect of volatility in the scenarios.
Consequently, the Group uses a prospective vision to estimate expected losses.
2.
Additional elements
Additional elements such an analysis of sectors or other pilars of credit risk analysis are included when necessary if
they have not been captured by the two elements explained in the paragraph above, and their impacts has not been
captured sufficiently by the macroeconomic scenarios. Collective analysis techniques are also used, when the potential
impairment in a group of clients cannot be identified individually.
Based on the elements described above, Grupo Santander Consumer Finance has evaluated the performance of the
credit quality of its customers in each of the geographical areas, for the purposes of their staging classification and
consequently, the expected credit loss calculation.
Management overlays
In the context of the covid-19 pandemic, during 2022 the authorities decided to gradually relax the social distance
measures. From an economic point of view, when the measures were softened and economic activity resumed, new
imbalances emerged in the economy. Accumulated savings caused a rapid increase in demand, but there were supply
restrictions due, in part, to the different speeds of incorporation into global supply chains and the scarcity of some
materials, such as semiconductors, with great impact on the automotive industry . The money supply was still high and
interest rates low, which caused inflation to begin to accelerate, very visibly from the second half of 2022. Additionally,
in February 2022 the Russian invasion of Ukraine began, to which the Community International reacted by imposing
harsh economic sanctions against Russia. The fact that Russia is the main player in the oil and gas market caused
further distortions that put pressure on the energy market and further boosted inflation, especially in Europe (highly
dependent on Russian gas). In these circumstances, the updating of the macroeconomic scenarios has been
accompanied by great uncertainty.
During 2021, following the recommendations of different organizations and international supervisors, accounting and
prudential policies were applied and adapted, under a criterion of responsibility, to the containment measures put in
place to combat the effects of the covid-19 health crisis, which were of a temporary and exceptional nature. Long-term
stable forecasts were taken into account and additional adjustments were made to the models (or overlays) to
recognize the increase in expected loss, since the mechanical application of the methodology for estimating expected
loss due to credit risk in that context could have led to unexpected results.
19
Throughout 2022, the adjustments have been continuously monitored, recalculating or reformulating them, in such a
way that the changes caused by overcoming the pandemic and the start of the war in Ukraine and the inflationary
effects and interest rate rises are adequately reflected in the account of each entity/geography of the Group. In total, at
the end of 2022, the additional adjustments recorded by the Santander Consumer Finance Group due to
macroeconomic aspects amount to EUR 104.9 million and are mainly due to the inclusion of additional effects derived
from inflation and interest rates. interest, which do not respond to the historical casuistry included in the projection
models. The Group geographies most affected by these additional adjustments are Spain, Nordics, France and Italy.
The detail of the exposure and the impairment losses associated with each of the phases as of December 31, 2022 is
shown below. In addition, based on the current credit quality of the operations, the exposure is divided in three degrees
(investment, speculation and default):
Exposure and impairment losses by stage 2022
Credit quality (*)
Investment grade
Speculation grade
Default
Total Risk (**)
Impairment losses
Credit quality (*)
Investment grade
Speculation grade
Default
Total Risk (**)
Impairment losses
Stage 2
Stage 3
(EUR millions)
Stage 1
116,422
12,674
—
129,096
477
—
4,172
—
4,172
—
—
—
2,239
2,239
1,229
Stage 3
—
—
2,099
2,099
1,307
Total
116,422
16,846
2,239
135,508
1,956
Total
113,018
12,054
2,099
127,171
2,858
Exposure and impairment losses by stage 2021
(EUR millions)
Stage 1
113,018
8,404
—
121,422
551
Stage 2
—
3,650
—
—
—
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances - Customers + Loan commitments granted
As of December 31, 2022 and 2021, the Group does not present significant amounts of impaired assets purchased with
impairment.
Provision sensitivity test
Regarding the evolution of losses due to credit risk, the Group carries out a sensitivity analysis through simulations in
which immediate variations (shocks) of +/- 100 bps take place in the main macroeconomic variables, assuming
constant distribution phases of each portfolio of financial assets. In this way, a set of specific and complete scenarios is
used, where different impacts that affect both the reference variable and the rest of the macroeconomic variables are
simulated. These impacts may originate from productivity factors, taxes, wages or exchange rates and interest rates.
Sensitivity is measured as the average variation of the expected loss corresponding to the aforementioned scenarios.
Following a conservative approach, negative movements take into account an additional standard deviation to reflect
the possible greater variability of losses. Finally, in order to provide a measure of comparable sensitivity between
portfolios, when using the statistical models for scenario analysis, the advances and lags of the model are eliminated,
thus avoiding capturing only part of the simulated shock.
Additionally, the Group performs stress test exercises and sensitivity analysis on a recurring basis in exercises such as
ICAAP, strategic plans, budgets and recovery and resolution plans. In these exercises, a prospective vision of the
sensitivity of each of the Group's portfolios is created in the event of a possible deviation from the baseline scenario,
considering both the macroeconomic evolution materialized in different scenarios, and the three-year business
evolution. These exercises include potentially more adverse scenarios as well as more plausible scenarios.
20
Detail of the main geographical areas
Following is the risk information related to the most relevant geographies in exposure and credit risk allowances.
• Germany
Information on the estimation of impairment losses
The detail of exposure and impairment losses associated to each stage for Santander Consumer Bank AG and
Santander Consumer Leasing GmbH as of 31 December 2022 is as follows. Additionally, in line with its current
credit quality, the exposure is classified in three grades (investment, speculation and default):
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2022
(EUR millions)
Stage 1
37,009
—
—
37,009
88
Stage 2
Stage 3
12
1,145
—
1,157
38
—
—
566
566
272
Exposure and impairment losses by stage 2021
(EUR millions)
Stage 1
34,352
—
—
34,352
89
Stage 2
Stage 3
—
941
—
941
70
—
—
509
509
360
Total
37,021
1,145
566
38,732
398
Total
34,352
941
509
35,802
519
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
The NPL ratio for Germany reached 1.47% at the end of December 2022 (1.55% at the end of 2021).
For the estimation of the expected losses, the prospective information is taken into account. Specifically, for the
most significant units in Germany (Santander Consumer Bank AG and Santander Consumer Leasing GmbH) five
prospective macroeconomic scenarios are considered, which are updated periodically, during a time horizon of 5
years.
The projected evolution in 2022 of the main macroeconomic indicators used to estimate expected losses at
Santander Consumer Bank AG and Santander Consumer Leasing, GmbH is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
GDP growth
Housing market price surges
4.04 %
7.70 %
(0.45 %)
(4.54 %)
3.19 %
6.42 %
0.45 %
(2.55 %)
2.33 %
5.14 %
1.36 %
1.70 %
1.71 %
4.84 %
2.08 %
3.73 %
1.09 %
4.54 %
2.80 %
5.80 %
21
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Bank AG and Santander Consumer Leasing GmbH for estimating expected losses as of 31 December 2021 is
presented below:
Magnitudes
Interest rate
Unemployment rate
GDP growth
5-year scenario (2022-2026)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
1.03 %
6.46 %
0.05 %
0.63 %
6.16 %
0.46 %
(0.25 %)
(0.01 %)
5.17 %
1.87 %
2.59 %
4.69 %
2.44 %
3.33 %
0.48 %
4.53 %
3.21 %
4.08 %
Housing market price surges
(1.07 %)
(0.64 %)
Each of the macroeconomic scenarios is associated with a specific probability of occurrence. In terms of their
assignment, Santander Consumer AG and Santander Consumer Leasing, GmbH associate the highest weighting to
the Base Scenario, while they associate the lowest weightings to the most extreme scenarios. The weightings used
in fiscal years 2022 and 2021 are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Germany as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
Change in expected loss (IFRS9)
Vehicles
New
Vehicles
Used
Leasing
New
Direct
5.60%
4.98%
4.71%
2.61%
(3.71%)
(3.28%)
(2.85%)
(1.61%)
(9.97%)
14.73%
(8.95%)
13.21%
(7.84%)
14.08%
(4.33%)
7.16%
GDP growth:
(100) b.p.s.
100 b.p.s.
Unemployment rate:
(100) b.p.s.
100 b.p.s.
With regards to the determination of classification in stage 2, the quantitative criteria applied by the entity are
based on identifying whether any increase in the probability of default (PD) for the entire expected life of the
operation is greater than an absolute and relative threshold. This threshold is established for each portfolio and is
different depending on the credit risk profile characteristics of the products that form the portfolio.
The entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
positions past due for more than 30 days. These criteria depend on the risk management practices of each
portfolio.
22
• Nordics (Scandinavia)
Information on the estimation of impairment losses
The detail of exposure and impairment losses associated for the most significant Nordics unit (Santander Consumer
Bank AS) as of 31 December 2022 is as follows. Additionally, in line with its current credit quality, the exposure is
classified in three grades (investment, speculation and default):
Exposure and impairment losses by stage 2022
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
14,738
1,701
—
16,439
77
Stage 2
Stage 3
6
575
—
581
57
—
—
391
391
222
Exposure and impairment losses by stage 2021
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
5,228
10,983
—
16,211
119
Stage 2
Stage 3
—
533
—
533
58
—
—
462
462
254
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
Total
14,744
2,276
391
17,411
356
Total
5,228
11,516
462
17,206
431
The NPL ratio for Nordics (Scandinavia) has been reduced to 2.70% at the end of December 2022 (3.18% at the end
of 2021).
For the estimation of the expected losses, the prospective information is taken into account. Specifically, for
Santander Consumer Bank AS five prospective macroeconomic scenarios are considered, which are updated
periodically, during a time horizon of 5 years.
• Norway
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Bank AS for estimating expected losses as of 31 December 2022 is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
4.23 %
5.24 %
(1.22 %)
0.36 %
4.05 %
4.82 %
(0.49 %)
1.06 %
3.30 %
3.85 %
0.22 %
1.90 %
3.10 %
3.39 %
0.55 %
2.52 %
2.80 %
3.03 %
1.06 %
3.10 %
23
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Bank AS for estimating expected losses as of 31 December 2021 is presented below:
5-year scenario (2022-2026)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
0.62 %
4.86 %
0.22 %
0.85 %
1.53 %
4.42 %
0.61 %
1.46 %
1.52 %
3.79 %
2.46 %
2.58 %
2.39 %
3.55 %
2.79 %
3.19 %
3.52 %
3.02 %
3.72 %
3.71 %
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2022 and 2021, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Norway as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP growth
(100) bps
100 bps
Housing market price surges
(100) bps
100 bps
Change in expected loss (IFRS9)
Auto Individuals
5.05 %
(2.00 %)
2.72 %
(1.62 %)
•
Denmark
The projected evolution for the next five years of the main macroeconomic indicators for estimating expected
losses as of 31 December 2022 is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
3.88 %
5.74 %
(1.67 %)
0.19 %
3.23 %
5.24 %
0.27 %
0.80 %
2.58 %
4.72 %
2.17 %
1.59 %
1.96 %
4.22 %
4.15 %
2.11 %
1.34 %
3.90 %
5.87 %
2.60 %
24
The projected evolution for the next five years of the main macroeconomic indicators as of 31 December 2021 is
presented below:
5-year scenario (2022-2026)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
1.42%
7.68%
(0.15)%
0.91%
1.11%
6.93%
0.74%
1.29%
0.40%
4.85%
1.57%
2.15%
0.51%
4.32%
2.92%
2.46%
0.80%
3.77%
3.91%
2.81%
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2022 and 2021, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Denmark as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP Growth
(100) p.b.
100 p.b.
•
Sweden
Change in expected loss (IFRS9)
Auto Individuals
3.76 %
(2.62 %)
The projected evolution for the next five years of the main macroeconomic indicators for estimating expected
losses as of 31 December 2022 is presented below:
5-year scenario (2023-2027)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
4.33 %
7.61 %
(0.57 %)
0.45 %
3.51 %
7.36 %
0.39 %
0.95 %
3.19 %
7.08 %
1.60 %
1.78 %
2.74 %
6.80 %
2.70 %
2.33 %
2.11 %
6.48 %
3.73 %
2.83 %
25
The projected evolution for the next five years of the main macroeconomic indicators for estimating expected
losses as of 31 December 2021 is presented below:
5-year scenario (2022-2026)
Magnitudes
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
Interest rate
Unemployment rate
Housing market price surges
GDP growth
1.64 %
8.54 %
0.82 %
1.40 %
1.36 %
8.20 %
1.59 %
1.72 %
0.39 %
7.02 %
2.35 %
2.46 %
0.81 %
6.71 %
2.94 %
2.81 %
1.08 %
6.30 %
3.99 %
3.11 %
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2022 and 2021, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Sweden as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP growth:
(100) bps
100 bps
Change in expected loss (IFRS9)
Auto individuals
Direct
6.27 %
(1.30 %)
1.81 %
(0.19 %)
With regards to the determination of classification in stage 2, the quantitative criteria applied by the entity are
based on identifying whether any increase in the probability of default (PD) for the entire expected life of the
operation is greater than a relative threshold. This threshold is established for each portfolio and is different
depending on the characteristics of the transactions, and a transaction is considered to exceed this threshold when
the PD for the entire life of the transaction increases with respect to the PD it had at the time of initial recognition
by 10% in relative terms.
The entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
positions past due for more than 30 days. These criteria depend on the risk management practices of each
portfolio.
26
•
Spain
Information on the estimation of impairment
The detail of exposure and impairment losses associated to each stage for the most significant business units in
Spain (Santander Consumer Finance S.A.) as of 31 December 2022 is as follows. Additionally, in line with its current
credit quality, the exposure is classified in three grades (investment, speculation and default):
Exposure and impairment losses by stage 2022
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
4,069
10,967
—
15,035
121
Stage 2
Stage 3
5
236
—
241
32
—
—
477
477
288
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
Exposure and impairment losses by stage 2021
(EUR millions)
Credit Quality (*)
Investment grade
Speculation grade
Default
Total exposure (**)
Impairment losses
Stage 1
14,959
520
—
15,479
127
Stage 2
Stage 3
—
366
—
366
61
—
—
396
396
274
(*) Detail of credit quality rating calculated for Group’s management purposes.
(**) Amortised cost assets, Loans and advances, Customers + loan commitments granted
Total
4,074
11,203
477
15,753
441
Total
14,959
886
396
16,241
462
The delinquency rate in the case of Spain has increased to 3.44% at the end of December 2022 (3.09% at the end of
2021).
Prospective information has been considered for the estimation of the expected losses, . Specifically, regarding in
Santander Consumer Finance, S.A. portfolio, five prospective macroeconomic scenarios are considered, which are
updated periodically, during a time horizon of 5 years.
The projected performance in the years to follow of the macroeconomic indicators used during 2022 regarding the
estimation pf the expected credit losses for Santander Consumer Finance, S.A. portfolios in Spain is as follows:
5-year scenario (2023-2027)
Magnitudes
Interest rate
Unemployment rate
Housing market price surges
GDP growth
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
3.39 %
19.43 %
1.72 %
(0.57 %)
2.98 %
16.61 %
2.34 %
0.53 %
2.59 %
12.20 %
3.31 %
2.05 %
2.25 %
10.65 %
3.83 %
3.34 %
2.00 %
9.46 %
4.29 %
4.15 %
27
The projected evolution for the next five years of the main macroeconomic indicators used by Santander Consumer
Finance, S.A. for estimating expected losses as of 31 December 2021 is presented below:
5-year scenario (2022-2026)
Magnitudes
Interest rate
Unemployment rate
Housing market price surges
GDP growth
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
0.97 %
20.89 %
0.39 %
0.13 %
0.62 %
18.28 %
1.67 %
1.06 %
(0.25 %)
12.96 %
2.63 %
2.91 %
(0.20 %)
11.18 %
3.18 %
3.74 %
(0.01 %)
9.46 %
4.04 %
4.72 %
Each one of the macroeconomic scenarios is given a probability of occurrence. As for its allocation, Santander
Consumer Finance S.A. associates the base-case scenario with the highest probability of occurrence, while associating
the lower probabilities to the most extreme scenarios. The weightings used, both in 2021 and 2022, are as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
The estimated sensitivity of expected losses for the most relevant portfolios in Spain as of 31 December 2022,
based on what is detailed in the Provisions Sensitivity Exercise section is shown below:
GDP growth:
(100) bps
100 bps
Auto New
Change in expected loss (IFRS9)
Mortgages
Auto Used
Cards
5.03%
(3.42%)
2.99%
(2.1%)
0.91%
(0.65%)
2.61%
(1.84%)
Regarding Stage 2 classification, the quantitative criteria that have been applied in the entity are based in
identifying if any increase in the PD for the whole operation life expectancy is greater than a series of absolute and
relative thresholds. Each portfolio has its own thresholds depending on the characteristics and credit risk profile of
the products that form this portfolio.
As an example, regarding the main portfolios of Santander Consumer Finance S.A., it is considered that a
transaction should be classified as stage 2 when the PD for the whole life expectancy of the operation at any given
moment is greater than its PD at initial recognition in absolute and relative thresholds, depending on the sub-
segment.
Furthermore, there are a series of specific qualitative criteria that signal if the exposure has had a significant
increase in credit risk, regardless of the performance of its PD at initial recognition. The entity, among other criteria,
considers that a given transaction presents significant increase in credit risk when it is 30 days past due. These
criteria depend on management practices depending on portfolio credit risk.
Credit Risk
Changes in 2022
The development of non-performing assets and the cost of credit reflect the impact of the worsening economic
environment, mitigated by prudent risk management, which has generally kept these figures lower than those of our
competitors in recent years. As a result, Santander Consumer Finance maintains an adequate level of coverage to face
the expected loss of the credit risk portfolios it manages.
28
Forborne loan portfolio
The term “forborne loan portfolio” refers, for the purposes of the Group's risk management, to those transactions in
which the customer has, or might foreseeably have, financial difficulty in meeting its payment obligations under the
terms and conditions of the current agreement with Santander Consumer Finance and, accordingly, the agreement has
been modified or cancelled or even a new transaction has been entered into.
The Santander Group, which Santander Consumer Finance Group belongs to, has a detailed customer debt forbearance
policy that serves as a reference for the various local adaptations made for all the financial institutions forming part of
the Group. This policy is adapted to the bank regulation establish by the EBA, like it is said in the "Guidelines relating to
the management of non-performing and restructured or refinanced exposures" (EBA/GL/2018/06) of October, 31
2018. It is also adapted the Bank of Spain Circular 6/2021 that modifies 4/2017.
This policy establishes strict prudential criteria for the assessment of these loans:
•
•
•
•
•
•
•
The use of this practice is restricted, and any actions that might defer the recognition of impairment must be
avoided.
The main aim must be to recover the amounts owed, and any amounts deemed unrecoverable must be
recognised as soon as possible.
Forbearance must always envisage maintaining the existing guarantees and, if possible, enhance them. Not
only can effective guarantees serve to mitigate losses given default, but they might also reduce the
probability of default.
This practice must not give rise to the granting of additional funding or be used to refinance debt of other
entities or as a cross-selling instrument.
All the alternatives to forbearance and their impacts must be assessed, making sure that the results of this
practice will exceed those which would foreseeably be obtained if it were not performed.
Forborne transactions are classified using more stringent criteria which prudentially ensure that the
customer's ability to pay is restored from the date of forbearance and for an adequate period of time
thereafter.
In addition, in the case of customers that have been assigned a risk analyst, it is particularly important to
conduct an individual analysis of each specific case, for both the proper identification of the transaction and
its subsequent classification, monitoring and adequate provisioning.
The forbearance policy also sets out various criteria for determining the scope of transactions qualifying as forborne
exposures by defining a detailed series of objective indicators that permit identification of situations of financial
difficulty.
Accordingly, transactions not classified as non-performing at the date of forbearance are generally considered to be
experiencing financial difficulty if at that date, they were more than one month past due. Where no payments have
been missed or there are no payments more than one month past due, other indicators of financial difficulty are taken
into account, including most notably the following:
•
•
•
Transactions with customers who are already experiencing difficulties in other transactions.
Situations where a transaction has to be modified prematurely, and the Group has not yet had a previous
satisfactory experience with the customer.
Cases in which the necessary modifications entail the grant of special conditions, such as the establishment
of a grace period, or where these new conditions are deemed to be more favourable for the customer than
those which would have been granted for an ordinary loan approval.
• Where a customer submits successive loan modification requests at unreasonable time intervals. In
Consumer Finance’s case, a maximum of 1 restructuring agreement is established in a year or 3 in a period of
5 years.
29
•
In any case, if once the modification has been made any payment irregularity arises during a given probation
period (as evidenced by back testing), even in the absence of any other symptoms, the transaction will be
deemed to be within the scope of forborne exposures.
Once it has been determined that the reasons for the modification of the customer’s debt conditions are due to
financial difficulties, regardless of whether or not the customer has outstanding payments and the number of days
payment has been outstanding, and the customer will be considered to be under monitoring for all purposes and,
as such, will be manages in accordance with this policy.
Once forbearance measures have been adopted, transactions that have to remain classified as nonperforming
because at the date of forbearance they do not meet the regulatory requirements to be reclassified to a different
category must comply with a continuous prudential payment schedule in order to assure reasonable certainty as to
the recovery of the ability to pay.
On successful completion of the period, the duration of which depends on the customer's situation and the
transaction features (term and guarantees provided), the transaction is no longer considered to be nonperforming,
although it continues to be subject to a probation period during which it undergoes special monitoring.
This monitoring continues until a series of requirements have been met, including most notably: a minimum
observation period of 24 months; repayment of a substantial percentage of the outstanding amounts; and
settlement of the amounts that were past due at the time of forbearance. In the case that it is justified that, while
an operation is in the 24-month Cure Period of Phase 2, there is no longer a Significant Increase in its Credit Risk,
said operation may be reclassified as Phase 1 and Non-Default. risk, without the need to complete the
aforementioned Cure Period. However, it is important to note that restructurings at the time of origination can only
be classified as Stage 2 or Stage 3, never as Stage 1.
When forbearance is applied to a transaction classified as non-performing, the original default dates continue to be
considered for all purposes, irrespective of whether as a result of forbearance the transaction becomes current in
its payments. Also, the forbearance of a transaction classified as non-performing does not give rise to any release
of the related provisions.
The renewals can be long or short term (less than two years). Carrying out renewals with terms not exceeding two
years will be taken into account, when the borrower meets the following criteria:
•
•
•
•
That experiences temporary liquidity restrictions, for which the recovery of the client will be evidenced in the
short term
That the application of long-term redirection measures was not effective given the temporary financial
uncertainty of a general or specific nature of the client.
That they have been complying with the contractual obligations before the reinstatement
Demonstrates a clear willingness to cooperate with the entity.
As a consequence of the analysis that is carried out, both of the client's situation and of the characteristics of the
redirection operation that is used, it must be ensured that the redirection will facilitate the reduction of the client's
debt, and therefore it will be viable. In this sense, to assess the feasibility of the operation, the following will be
taken into account:
a.
b.
c.
d.
That it can be demonstrated with evidence that the proposed renewal is within the customer's reach, that is,
that a full refund is expected.
The payment by the client of the outstanding amounts, in full or in their majority, and the considerable
reduction of exposure in the medium-long term.
The non-existence of repeated breaches of the payment plans that have given rise to successive renewals
(more than three renewals in a period of three years)
In the temporary application of short-term renewal measures, it can be proven through evidence that the
client has sufficient payment capacity to meet the debt, principal and interest, once the period of application
of the temporary renewal has expired.
30
e.
The measure does not give rise to the successive application of several refinancing or restructuring measures
for the same exposure.
In the event that operations are carried out that do not comply with the above, they will be considered non-viable
operations and will form part of the Non-performing refinancing category.
c) Measurement metrics and tools
Credit rating tools
In keeping with the Santander Group tradition, which has witnessed the use of proprietary rating models since
1993, at Santander Consumer Finance Group the credit quality of customers and transactions is also measured by
internal scoring and rating systems. Each credit rating assigned by models relates to a certain probability of default
or non-payment, based on the Group’s historical experience.
Since the Group focuses mainly on the retail business, assessments are based primarily on scoring models or tables
which, combined with other credit policy rules, issue an automatic decision on the loan applications received. These
tools have the dual advantage of allocating an objective appraisal of the level of risk and speeding up the response
time that would be required for a purely manual analysis.
In addition to the scoring models used for the approval and management of portfolios (rating of the transactions
composing the portfolios in order to assess their credit quality and estimate their potential losses), other tools are
available to assess existing accounts and customers which are used in the defaulted loan recovery process. The
intention is to cover the entire “loan cycle” (approval, monitoring and recovery) by means of statistical rating
models based on the Bank’s internal historical data.
For individualised corporates and institutions, which at the Group include mainly dealers/retailers, the assessment
of the level of credit risk is based on expert rating models that combine in the form of variables the most relevant
factors to be taken into account in the assessment, in such a way that the rating process generates appraisals that
are consistent and comparable among customers and summarise all the relevant information. In 2018 all the units
conducted reviews of the aforementioned portfolios, involving the participation of all areas of the Group. The
review meetings covered the largest exposures, companies under special surveillance and the main credit
indicators of these portfolios.
Ratings assigned to customers are reviewed periodically to include any new financial information available and the
experience in the banking relationship. The frequency of the reviews is increased in the case of customers that
reach certain levels in the automatic warning systems and of customers classified as requiring special monitoring.
The rating tools themselves are also reviewed in order to progressively fine-tune the ratings they provide.
To a lesser extent, certain exposures are also assessed using the global rating tools which cover the global
wholesale banking segment. Management of this segment is centralised at the Risk Division of the Santander
Group, for both rating calculation and risk monitoring purposes. These tools assign a rating to each customer,
which is obtained from a quantitative or automatic module, based on balance sheet ratios or macroeconomic
variables, supplemented by the analyst’s expert judgement.
The Group’s portfolio of individualised corporates is scarcely representative of the total risks managed, since it
relates mainly to vehicle dealer stock financing.
Credit risk parameters
The assessment of customers or transactions using rating or scoring systems constitutes a judgement of their
credit quality, which is quantified through the probability of default (PD).
In addition to customer assessment, the quantification of credit risk requires the estimation of other parameters,
such as exposure at default (EAD) and the percentage of EAD that will not be recovered (loss given default or LGD).
Therefore, other relevant aspects are taken into account in estimating the risk involved in transactions, such as the
quantification of off-balance-sheet exposures, which depends on the type of product, or the analysis of expected
recoveries, which is related to the guarantees provided and other characteristics of the transaction: type of product,
term, etc.
31
These factors are the main credit risk parameters. Their combination facilitates calculation of the probable loss or
expected loss (EL). This loss is considered to be an additional cost of the activity which is reflected in the risk
premium and must be charged in the transaction price.
These risk parameters also make it possible to calculate regulatory capital in accordance with the regulations
deriving from the new Basel Capital Accord (BIS III). Regulatory capital is determined as the difference between
unexpected loss and expected loss.
Unexpected loss is the basis for the capital calculation and refers to a very high, albeit scantly probable, level of
loss, which is not deemed to be recurring and must be catered for using capital.
Observed loss: measurement of cost of credit
To supplement the predictiveness provided by the advanced models described above, other habitual metrics are
used to facilitate prudent and effective management of credit risk based on observed loss.
In terms of recognition of losses, the cost of credit risk in Santander Consumer Finance is measured using different
approaches: Change in non-performing loans (new defaults – cures – recovery of assets written off), net loan-loss
provisions (gross provisions - recovery of assets written off), net losses (failures - recovery of losses) and expected
loss. In order to obtain a monitoring ratio, the first two indicators (in 12 months) are divided by the average of 12
months of the total portfolio to obtain the risk premium and the cost of credit. These gives the manager a full
insight into the evolution and future prospects of the portfolio.
It should be noted that unlike default, change in non-performing loans (end doubtful - initial doubtful + failed -
recovery of write-offs) refers to the total of the impaired portfolio in a period, regardless of the situation in which it
is found (doubtful and failed). This makes metrics a main driver when it comes to establishing measures for
portfolio.
The two approaches measure the same reality and, consequently, converge in the long term although they
represent successive moments in credit risk cost measurement: flows of non-performing loans (MOV), coverage of
non-performing loans (net credit loss provisions), respectively. Although they converge in the long term within the
same economic cycle, the three approaches show differences at certain times, which are particularly significant at
the start of a change of cycle, as observed in this period. These differences are explained by the different moment
of calculation of losses, which is basically determined by accounting regulations (for example, mortgage loans
have a coverage calendar and becomes written off “slower” than consumer portfolios). In addition, the analysis can
be clouded by changes in the policy of hedging and default, composition of the portfolio, doubtful of acquired
entities, changes in accounting regulations (IFRS9), sale of portfolios and adjustments on expected losses
calculation parameters, etc.
e) Credit risk cycle
The credit risk management process consists of identifying, measuring analysing, controlling, negotiating and
deciding on the risks incurred in the Group’s operations. This process involves the areas that take risks, senior
management and the Risk function.
As the Group is a member of the Santander Group, the process starts with senior management, through the board
of directors and the executive risk committee, which set the risk policies and procedures, the limits and delegation
of powers, and approve and supervise the framework for action by the risk function.
The risk cycle has three phases: pre-sale, sale and post-sale. The process is constantly revised, incorporating the
results and conclusions of the after-sale phase into the study of risk and pre-sale planning.
32
e1. Pre-sale
•
Study of risk and credit rating process
Generally speaking, risk study consists of analysing a customer’s capacity to meet their contractual
commitments with the Group and other creditors. This entails analysing the customer’s credit quality, risk
operations, solvency and profitability on the basis of the risk assumed.
With this objective, the Group has used rating models for classifying customer solvency since 1993. These
mechanisms are applied in the wholesale segment (sovereign, financial entities, corporate banking) and to
SMEs and individuals.
The rating results from a quantitative model based on balance sheet ratios or macroeconomic variables,
complemented by the expert judgement of analysts.
The ratings given to customers are regularly reviewed, incorporating the latest available financial information
and experience in the development of the banking relationship. The regularity of the reviews increases in the
case of customers who trigger certain levels in the automatic warning systems and who are classified as special
watch. The rating tools are also reviewed in order to adjust the accuracy of the rating.
While ratings are used in the wholesale sector and for companies and institutions, scoring techniques
predominate for individuals and smaller companies. In general, these techniques automatically assign a score
to the customer for decision-making purposes, as explained in the Decisions on operations section.
•
Planning and setting limits
The purpose of this phase is to limit the levels of risk assumed by the Group, efficiently and comprehensively.
The credit risk planning process serves to set the budgets and limits at the portfolio level for subsidiaries.
Planning is carried out through a dashboard that ensures that the business plan and lending policy are
achieved, and that the resources needed to achieve these are available. This arose as a joint initiative between
the Sales area and the Risk function, providing a management tool and a way of working as a team.
Incorporating the volatility of macroeconomic variables that affect portfolio performance is a key aspect in
planning. The Group simulates this performance under a range of adverse and stressed scenarios (stress
testing), enabling assessment of the Group's solvency in specific situations.
Scenario analysis enables senior management to understand the portfolio's evolution in the face of market
conditions and changes in the environment. It is a key tool for assessing the sufficiency of provisions in stress
scenarios.
Limits are planned and established using documents agreed between the Business and Risk areas and approved
by the Group, setting out the expected business results in terms of risk and return, the limits to which this
activity is subject and management of the associated risks, by group or customer.
e2. Sales
• Decisions and operations
The sales phase consists of the decision-making process, analysing and deciding on operations. Approval by the
risk area is a prior requirement before the contracting of any risk. This process must take into account the
policies defined for approving operations, the risk appetite and the elements of the operation that are relevant
to the search for the right balance between risk and profitability.
In the sphere of standardised customers (individuals and businesses and SMEs with low turnover), large
volumes of credit operations can be managed more easily by using automatic decision models for classifying
the customer/transaction pair. The ratings these models give to transactions enable lending to be classified
consistently into homogeneous risk groups, based on information on the characteristics of the transaction and
its owner.
33
e3. After-sales
• Monitoring
The Monitoring function is based on a continuous process of ongoing observation, enabling early detection of
changes that could affect the credit quality of customers, in order to take measures to correct deviations with a
negative impact.
This monitoring is based on customer segmentation, and is carried out by dedicated local and global risk teams,
supplemented by internal audit.
The function includes, among other tasks, the identification, monitoring and assignment of policies at customer
level to anticipate surprises and manage them in the most appropriate way for their situation, credit policies,
rating reviews and continuous monitoring of indicators.
The system called Santander Customer Assessment Notes (SCAN) distinguishes between four levels depending
on the level of concern of the circumstances observed (Specialized Follow-up, Intensive Follow-up, Ordinary
Follow-up, Do Not Attend). The inclusion of a position in SCAN does not imply that non-compliance has been
recorded, but rather the convenience of adopting a specific policy with the same, determining the person
responsible and the time frame in which it must be carried out. SCAN qualified clients are reviewed at least
semi-annually, being such review quarterly and/or monthly for the most serious grades. The ways in which a
firm qualifies in SCAN are the monitoring work itself, the review carried out by the internal audit, the decision of
the commercial manager who oversees the firm or the entry into operation of the established system of
automatic alarms.
Ratings are reviewed at least every year, but this may be more frequent if weaknesses are detected or based on
the rating itself.
The main risk indicators for individual customers, businesses and SMEs with low turnover are monitored to
detect changes in the performance of the loan portfolio with respect to the projections in the commercial
strategic plans (CSPs).
Measurement and control
In addition to monitoring the customers' credit quality, the Group puts in place the necessary control
procedures to analyse the current credit risk portfolio and its performance throughout the different stages of
credit risk.
This function assesses risks from a range of interrelated standpoints. The key vectors of control are
geographies, business areas, management models, products, etc. The approach allows for early detection of
specific focal points, and the framing of action plans to correct any impairment.
Each control axis supports two types of analysis:
1.- Quantitative and qualitative portfolio analysis
Portfolio analysis continuously and systematically monitors changes in risk with respect to budgets, limits and
benchmark standards, evaluating the effects with a view to future situations driven by external factors or
arising from strategic decisions, so as to establish measures that place the profile and volume of the risk
portfolio within the parameters set by the Group.
In the credit risk control phase, the following metrics, among others, are used in addition to the conventional
ones:
• MDV (change in manage NPLs)
MDV measures how NPLs change over a period, stripping out write-offs and including recoveries. It is an
aggregate metric at the portfolio level that enables us to react to any impairments seen in the behaviour of
non-performing loans.
34
•
EL (expected loss) and capital
Expected loss is an estimate of the financial loss that will occur over the next year from the portfolio
existing at the given time. It is a further cost of business, and must be reflected in the pricing of
transactions.
2.- Evaluation of control processes
A systematic scheduled review of procedures and methods, implemented throughout the entire credit risk
cycle, to ensure control process effectiveness and validity.
In 2006, within the corporate framework established across the Group for compliance with the Sarbanes Oxley
Act, a corporate methodology was created for the documentation and certification of the Control Model,
specified in terms of tasks, operating risks and controls. The risk division annually evaluates the efficiency of
internal control of its activities.
Moreover, the internal validation function, as part of its mission to supervise the quality of the Group's risk
management, ensures that the management and control systems for the different risks inherent in the Group's
business comply with the most stringent criteria and best practices seen in the industry and/or required by
regulators. In addition, internal audit is responsible for ensuring that policies, methods and procedures are
adequate, effectively implemented and regularly reviewed.
Recoveries management
Recovery activity is an important function within the Group's risk management area. The area responsible is
Collection and Recoveries, which frames a global strategy and a comprehensive approach to recovery
management.
The Group combines a global model with local execution, taking account of the specific features of the business
in each area.
The main objective of the recovery activity is to recover outstanding debts and obligations by managing our
customers, thus contributing to a lesser need for provisions and a lower cost of risk.
The specific targets of the recovery process are guided as follows:
•
Achieve collection or regularisation of outstanding balances, so that an account returns to its normal state;
if this is not possible, the objective is total or partial recovery of debts, whatever their accounting or
management status.
• Maintain and strengthen our relationship with the customer by addressing their behaviour with an offer of
management tools, such as refinancing products according to their needs, consistently with careful
corporate policies of approval and control, as established by the risk areas.
In the recovery activity, Standardised customers and Individually Managed customers are segmented or
differentiated with specific and comprehensive management models in each case, according to basic
specialisation criteria.
Management is articulated through a multichannel customer relationship strategy. The telephone channel is
oriented towards standardised management, with a focus on achieving contact with customers and monitoring
payment agreements, prioritising and adapting management actions based on the state of progress of their
situation of "in arrears", "doubtful" or "in default", their balance sheet and their payment commitments.
The commercial network of recovery management operates alongside the telephone channel. It is a means of
developing a closer relationship with selected customers, and is composed of teams of agents with a highly
commercial focus, specific training and strong negotiation skills. They conduct personalised management of
their own portfolios of high-impact customers (large balance sheets, special products, customers requiring
special management).
Recovery activities at advanced stages of non-performance are guided by a dual judicial and extra judicial
management approach. Commercial and follow-up activities by telephone and via agent networks are
continued, applying strategies and practices specific to the state of progress.
35
The management model encourages proactivity and targeted management through continuous recovery
campaigns with specific approaches for customer groups and non-performance states, acting with predefined
goals through specific strategies and intensive activities via appropriate channels within limited time frames.
Suitable local production and analysis of daily and monthly management information, aligned with corporate
models, have been defined as the basis of business intelligence for ongoing decision-making for management
guidance and results monitoring.
Concentration risk
Concentration risk is a key component of credit risk management. The Santander Group, which Santander
Consumer Finance Group belongs, continuously monitors the degree of credit risk concentration, by
geographical area/country, economic sector, product and customer group.
The Board of Directors, by reference to the risk appetite, determines the maximum levels of concentration, and
the executive risk committee establishes the risk policies and reviews the appropriate exposure limits to ensure
the adequate management of credit risk concentration.
Santander Consumer Finance is subject to Bank of Spain regulations on large exposures contained in the fourth
part of the CRR (Regulation UE No.575 / 2013), according to which the exposure contracted by an entity with
respect to a client or related group of clients will be considered 'great exposure' when its value is equal or
greater than 10% of its computable capital. Additionally, to limit large exposures, no entity may assume
against a client or group of clients linked to each other an exposure whose value exceeds 25% of its eligible
capital, after taking into account the effect of credit risk reduction under rule.
At December closing, after applying risk mitigation techniques, no group reached the aforementioned
thresholds.
The Santander Consumer Finance Group’s Risk Division works closely with the Finance Division in the active
management of credit portfolios, which includes reducing the concentration of exposures through several
techniques, such as the arrangement of credit derivatives for hedging purposes or the performance of
securitisation transactions, in order to optimise the risk/return ratio of the total portfolio.
The detail, by activity and geographical area of the counterparty, of the concentration of the Group's risk (*) at
31 December 2022 and 2021 is as follows:
Credit institutions
Public sector
Of which:
Central government
Other
2022
Spain
2,940,703
924,475
Other EU
Countries
6,497,642
5,504,140
921,804
4,255,960
2,671
1,248,180
EUR Thousands
Americas
—
—
—
—
Rest of the
world
Total
242,744
9,681,089
42,951
6,471,566
60
5,177,824
42,891
1,293,742
Other financial institutions
10,863
1,145,014
338,628
246,749
1,741,254
Non-financial companies and individual traders
3,171,286
28,351,567
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual traders
Other households and non-profit institutions
serving households
Of which:
Residential
Consumer loans
Other purposes
—
—
211,566
6,678
1,034,445
10,699,079
2,136,841
17,434,244
—
—
—
—
—
2,673,489
34,196,342
—
—
211,566
6,678
986,488
12,720,012
1,687,001
21,258,086
10,121,975
54,814,108
14
6,575,205
71,511,302
1,318,606
2,394,903
8,714,320
89,049
52,074,766
344,439
—
14
—
—
3,713,509
6,575,205
—
67,364,305
433,488
Total 123,601,553
(*) The definition of risk for the purposes of this table includes the following items on the public consolidated balance sheet: 'Loans and
advances: to credit institutions', 'Loans and advances: central banks', 'Loans and advances: to customers' , 'Debt securities', 'Equity
instruments', 'Derivatives', 'Derivatives - Hedge accounting', 'Participations and guarantees granted'.
36
Credit institutions
Public sector
Of which:
Central government
Other
Other financial institutions
2021
Spain
5,096,843
1,136,219
Other EU
Countries
15,221,781
2,687,032
1,135,291
2,106,457
928
2,706
580,575
983,191
EUR Thousands
Americas
Rest of the
world
Total
3
—
—
—
419,861
20,738,488
177,194
4,000,445
132,741
3,374,489
44,453
625,956
206,888
225,043
1,417,828
Non-financial companies and individual traders
1,962,248
23,787,207
—
2,511,404
28,260,859
Of which:
Construction and property development
Civil engineering construction
Large companies
SMEs and individual traders
Other households and non-profit institutions
serving households
Of which:
Residential
Consumer loans
Other purposes
—
—
257,106
5,846
698,777
8,693,490
1,263,471
14,830,765
11,112,915
53,012,709
1,441,332
2,418,162
9,575,949
50,296,449
95,634
298,098
—
—
—
—
7
—
7
—
—
—
257,106
5,846
967,906
10,360,173
1,543,498
17,637,734
6,694,057
70,819,688
—
3,859,494
6,694,057
66,566,462
—
393,732
Total 125,237,308
(*) For the purposes of this table, the definition of risk includes the following items in the public consolidated balance sheet: “Cash, cash
balances at central banks and others deposits on demand”, “Deposits to Credit Institutions”, “Loans and Advances to Customers”, “Debt
Instruments”, “Trading Derivatives”, “Hedging Derivatives”, “Investments”, “Equity Instruments” and “Contingent Liabilities”,
Market, structural and liquidity risk
a) Scope and definitions
The measurement perimeter, control and monitoring of the Market Risks function covers those operations where
equity risk is assumed, as consequence of changes in market factors.
These risks are generated through two fundamental types of activities:
•
•
The trading activity, which includes both the provision of financial services in markets for clients, in which the
entity is the counterparty, as well as the activity of buying and selling and own positioning in fixed income,
variable income and currency products.
Santander Consumer Finance does not do negotiation activities (trading), it limits its treasury activity to
manage the structural risk of the balance sheet and its coverage, as well as to manage the liquidity necessary
to finance the business.
The management activity of the balance sheet or ALM, which involves managing the risks inherent in the
entity's balance sheet, excluding the trading portfolio.
The risks generated in these activities are;
• Market: risk incurred because of the possibility of changes in market factors that affect the value of the
positions that the entity maintains in its trading portfolios (trading book).
•
Structural: risk caused by the management of the different balance sheet items. This risk includes both the
losses from price fluctuations that affect the available-for-sale and held-to-maturity portfolios (banking
book), as well as the losses derived from the management of the Group's assets and liabilities valued at
amortized cost.
37
•
Liquidity: risk of not meeting payment obligations on time or doing so at an excessive cost, as well as the
ability to finance the growth of its volume of assets. Among the types of losses caused by this risk are losses
due to forced sales of assets or impacts on margin due to the mismatch between forecast cash outflows and
cash inflows.
Trading and structural market risks, depending on the market variable that generates them, can be classified as:
•
•
•
•
•
•
•
Interest rate risk: identifies the possibility that variations in interest rates may adversely affect the value of a
financial instrument, a portfolio or the Group.
Credit spread risk: identifies the possibility that variations in credit spread curves associated with specific
issuers and types of debt may adversely affect the value of a financial instrument, a portfolio or the Group.
The spread is a differential between financial instruments that trade with a margin over other reference
instruments, mainly IRR (Internal Rate of Return) of government securities and interbank interest rates.
Exchange rate risk: identifies the possibility that variations in the value of a position in a currency other than
the base currency may adversely affect the value of a financial instrument, a portfolio or the Grou .
Inflation risk: identifies the possibility that variations in inflation rates may adversely affect the value of a
financial instrument, a portfolio or the Group.
Volatility risk: identifies the possibility that variations in the listed volatility of market variables may adversely
affect the value of a financial instrument, a portfolio or the Group.
Liquidity risk: identifies the possibility that an entity or the Group will not be able to undo or close a position
on time without impacting the market price or the cost of the transaction.
Prepayment or cancellation risk: identifies the possibility that early cancellation without negotiation, in
operations whose contractual relationship explicitly or implicitly allows it, generates cash flows that must be
reinvested at a potentially lower interest rate.
There are other variables that exclusively affect market risk (and not structural risk), so that it can be further classified
into:
•
•
•
•
Variable income risk: identifies the possibility that changes in the value of prices or in the expectations of
dividends of variable income instruments may adversely affect the value of a financial instrument, a portfolio
or the Group.
Raw materials risk: identifies the possibility that changes in the value of merchandise prices may adversely
affect the value of a financial instrument, a portfolio or the Group.
Correlation risk: identifies the possibility that changes in the correlation between variables, whether of the
same type or of a different nature, quoted by the market, may adversely affect the value of a financial
instrument, a portfolio or the Group
Underwriting risk: identifies the possibility that the placement objectives of securities or other types of debt
will not be achieved when the entity participates in underwriting them.
Liquidity risk can be classified into the following categories:
•
Financing risk: identifies the possibility that the entity is unable to meet its obligations as a result of the
inability to sell assets or obtain financing.
• Mismatch risk: identifies the possibility that the differences between the maturity structures of assets and
liabilities generate an extra cost to the entity.
•
Contingency risk: identifies the possibility of not having adequate management elements to obtain liquidity
as a result of an extreme event that implies greater financing or collateral needs to obtain it.
38
b) Measurement and methods
1. Structural interest-rate risk
The Group analyses the sensitivity of net interest income and of equity to interest rate fluctuations. This sensitivity
is determined by mismatches in the maturity and review dates of interest rates of different balance sheet items.
According to the interest rate positioning of the balance sheet, and considering the situation and perspectives of
the market, financial measures are adopted to adjust the positioning to that sought by the Bank. These measures
may range from taking up positions in markets to the specification of interest rate characteristics of commercial
products.
The metrics used to control the interest rate risk in these activities are the interest rate gap, financial margin
sensibility and equity in the levels of interest rate.
•
Interest rate gap
Analysis of the interest rate gap deals with the mismatch between the timing of re-pricing of on and off-balance
aggregates of assets and liabilities and of memorandum accounts (off-balance sheet). It provides a basic profile of
the balance sheet structure and can detect concentrations of interest rate risk at different terms. It is also a useful
tool for estimates of the potential impact of interest rate movements on net interest income and the equity of the
entity.
All on- and off-balance sheet aggregates have to be broken down so that they can be placed in the point of
repricing/maturity. For aggregates that do not have a contractual maturity, the Santander Group's internal model
for analysis and estimation of their durations and sensitivity is used.
•
Sensitivity of Net Interest Income (NII)
The sensitivity of net interest income measures the change in expected accruals for a certain period (12 months) in
the event of a shift in the interest rate curve.
•
Sensitivity of Economic Value of Equity (EVE)
This measures the implied interest rate risk in the economic value of equity which, for the purposes of interest rate
risk, is defined as the difference between the net present value of assets minus the net present value of liabilities,
based on the effect of a change in interest rates on such present values.
2. Liquidity risk
Management of structural liquidity aims to fund the recurring activity of the Santander Consumer Finance Group in
optimal conditions of term and cost, while avoiding undesired liquidity risks.
The measures used for the control of liquidity risk are the liquidity gap, liquidity ratios, the statement of structural
liquidity, liquidity stress tests, the financial plan, the liquidity contingency plan and regulatory reporting.
•
Liquidity Gap
The liquidity gap provides information on contractual and expected cash inflows and outflows for a given period in
each of the currencies in which the Santander Consumer Finance Group operates. The gap measures the net cash
needed or the surplus at a given date and reflects the liquidity level maintained under normal market conditions.
In the contractual liquidity gap, all balance sheet items that generate cash flows are analysed and placed at their
point of contractual maturity. For assets and liabilities with no contractual maturity, the Santander Group's internal
analysis model is used. It is based on a statistical study of products' time series, and the so-called stable and
unstable balance is determined for liquidity purposes.
•
Liquidity ratios
The minimum liquidity ratio compares liquid assets available for sale or transfer (after the relevant discounts and
adjustments have been applied) and assets at less than 12 months with liabilities of up to 12 months.
39
The Net Stable Funding Ratio measures the extent to which assets that require structural funding are being funded
by structural liabilities.
•
Structural liquidity
The purpose of this analysis is to determine the structural liquidity position according to the liquidity profile
(greater or lesser stability) of different asset and liability instruments.
•
Liquidity stress test
The purpose of the liquidity stress tests conducted by the Santander Consumer Finance Group is to determine the
impact of a severe, but plausible, liquidity crisis. In such stress scenarios, a simulation is made of internal factors
that may affect Group liquidity, such as, inter alia, a credit rating downgrade of the institution, a fall in the value of
balance sheet assets, banking crises, regulatory factors, a change in consumer trends and/or a loss of depositor
confidence.
Every month, four liquidity stress scenarios (banking crisis in Spain, idiosyncratic crisis at the Santander Consumer
Finance Group, global crisis and a combined scenario) are simulated by stressing these factors, and the results are
used to establish early warning levels.
•
Financial Plan
Every year, a liquidity plan is prepared based on the funding needs arising from the business budgets of all the
Group's subsidiaries. Based on these liquidity requirements, an analysis is made of limits on new securitisation
considering eligible assets available, in addition to potential growth in customer deposits. This information is used
to establish an issue and securitisation plan for the year. Throughout the year, regular monitoring is carried out of
actual trends in funding requirements, thus giving rise to the revisions of the plan.
•
Contingency Funding Plan
The purpose of the Liquidity Contingency Plan is to set out the processes (governance structure) to be followed in
the event of a potential or real liquidity crisis, as well as the analysis of contingency actions or levers available to
Management should such a situation arise.
The Liquidity Contingency Plan is underpinned by, and must be designed in line with, two key elements: liquidity
stress tests and the early warning indicator (EWI) system. Stress tests and different scenarios are used as the basis
for analysing available contingency actions and for determining such actions are sufficient. The EWI system
monitors and potentially triggers the escalation mechanism for activating the plan and subsequently monitoring
the situation.
•
Regulatory Reporting
Santander Consumer Finance applies the Liquidity Coverage Ratio (LCR) as required by the European Banking
Authority (EBA) for the consolidated sub-group on a monthly basis, and the net stable funding ratio (NSFR) on a
quarterly basis.
In addition, Santander Consumer Finance has produced an annual Internal Liquidity Adequacy and Assessment
Process (ILAAP) report as part of the consolidated document of the Santander Group, although the supervisor does
not require this report at sub-group level.
3. Structural change risk
Structural change risk is managed centrally, as part of the general corporate procedures of the Santander Group.
c)
Internal Control
The structural and liquidity risk control environment in Santander Consumer Finance Group is based on the
framework of the annual limits plan, where the limits for said risks are established, responding to the Group's level
of risk appetite.
40
The limit structure involves a process that considers:
•
•
•
•
•
Efficient and comprehensive identification and delimitation of the main types of market risk incurred,
consistently with the management of the business and the strategy defined.
Quantification and communication of the risk levels and profile considered acceptable by senior
management to the business areas, so that undesired risks are not incurred.
Providing flexibility for the business areas in the acceptance of risks, responding efficiently and
appropriately to developments in the market and changes in business strategies, within the risk limits
considered acceptable by the entity.
Enabling business generators to take sufficient prudent risks to achieve their budgeted results.
Delimiting the range of products and underlying assets in which each Treasury unit can operate,
considering characteristics such as the model and assessment systems, the liquidity of the instruments
involved, etc.
In the event of exceeding one of these limits or their sub-limits, the risk management officers involved must
explain the reasons and facilitate an action plan to correct it.
The main management limits for structural risk at the consolidated Santander Consumer level are:
•
•
One-year net interest income sensitivity limit.
Equity value sensitivity limit.
The limits are compared with the sensitivity that implies a greater loss among those calculated for different
scenarios of parallel rise and fall of the interest rate curve. During 2022, these limits applied to the scenarios of
plus and minus 25 basis points, and as of January 2023 they have been established on the most adverse loss
among 8 scenarios of parallel increases and decreases of up to 100 basis points. In addition, other parallel and
non-parallel scenarios are calculated, including those defined by the European Banking Authority (EBA). Using
various scenarios allows for better control of interest rate risk. In the lowering interest rates scenarios, negative
interest rates are contemplated.
During 2022, the level of exposure at the consolidated level in the SCF Group, both on the financial margin and on
economic value, is low in relation to the budget and the amount of own resources respectively, being in both cases
less than 1% throughout the year. year, and within the established limits.
With regard to liquidity risk, the main limits at the Santander Consumer Finance Group level include regulatory
liquidity metrics such as the LCR and NSFR, as well as liquidity stress tests under different adverse scenarios
previously mentioned.
At the end of December 2022, all liquidity metrics are above the internal limits in force, as well as regulatory
requirements. Both for the LCR and for the NSFR at the consolidated Group level, it has been at levels above 115%
and 103% throughout the year.
d) Management
Balance sheet management entails the analysis, projection and simulation of structural risks, along with the
design, proposal and execution of transactions and strategies to manage this risk. Finance Management is
responsible for this process, and it takes a projection-based approach where and when this is applicable or feasible
A high-level description of the main processes and/or responsibilities in managing structural risks is as follows:
•
Analysis of the balance sheet and its structural risks.
• Monitoring of movements in the most relevant markets for asset and liability management (ALM) for the
Group.
•
Planning. Design, maintenance and monitoring of certain planning instruments. Finance Management is
responsible for preparing, following and maintaining the financial plan, the funding plan and the liquidity
contingency plan.
41
•
•
Strategy proposals. Design of strategies aimed at funding the SCF sub-group's business by securing the best
available market conditions or by managing the balance sheet and its exposure to structural risks, thereby
avoiding unnecessary risks, preserving net interest income and safeguarding the market value of equity and
capital.
Execution. To achieve appropriate ALM positioning, Finance Management uses different tools. Chief among
these are issues in debt or capital markets, securitisation, deposits and interest rate and/or currency hedges,
and management of ALCO portfolios and the minimum liquidity buffer.
•
Compliance with risk limits and with risk appetite
e)
IBOR reform
Since 2013, various supranational bodies and authorities (IOSCO and FSB) have driven and monitored reform
initiatives to ensure more robust interest rate benchmarks. In this context, central banks and regulators in several
jurisdictions organised work groups to recommend risk-free indices so that the transition would be non-disruptive
and progressive.
The main aim was to facilitate the shift to the risk-free indices identified in various countries, particularly the SONIA
index, as the Libor's sterling index replacement, the SOFR for the USD Libor and the €STR for the euro Libor.
As a result of the combined efforts of market authorities and participants, this transition process led to various
milestones during the period from 2019 to 2022, leaving only the implementation of the sterling Libor and USD
Libor plans for 2023.
According to the regulatory transition milestones, the USD Libor terms (overnight, 1M, 3M, 6M and 12M) will still
be calculated using contributions from the panel banks until mid-2023, although their use in new operations has
been limited since the end of 2021. The final USD Libor publication date for the overnight and 12M terms will be 30
June 2023. For the 1, 3 and 6-month terms, on 23 November 2022 the FCA announced a consultation on its
proposal to require the Libor administrator IBA to carry on publishing these terms for the USD Libor using a non-
representative "synthetic" method until end-September 2024. Publication would be permanently discontinued
from then on.
Publication of the sterling Libor using the synthetic method for the 3-month term has been confirmed until end-
March 2024, while the 1 and 6-month terms will cease to be published in March 2023.
According to the milestones mentioned, the Group and its entities have been focusing on making all the
contractual, commercial, operational and technological changes necessary to shift to these benchmarks. Work will
continue in 2023 to meet the next transition milestones in each of the Group's jurisdictions. There follows a
breakdown of the carrying amount of financial assets, financial liabilities, derivatives and loan commitments that
remain referenced to the indices pending transition at 31 December 2022.
EUR Thousand
Loans and
advances
Debt Securities
(Assets)
Deposits
Debt securities
issued
(Liabilities)
Derivatives
(Assets)
Derivatives
(Liabilities)
Loan
commitments
granted
Referenced to EONIA
—
Referenced to LIBOR
Of which USD
Of which GBP
40,000
40,000
—
—
—
—
—
—
—
—
—
—
—
—
977,612
41,533
25,713
—
—
—
977,612
41,533
25,713
—
—
—
—
42
Operational risk
a. Definition and objectives
The Bank defines operational risk (OR) as the risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external events.
Operational risk is inherent to all products, activities, processes and systems, and is generated in all business and
support areas. Accordingly, all employees are responsible for managing and controlling operational risks arising in
their area of activity.
The aim pursued by the Bank in operational risk control and management is primarily to identify, measure/ assess,
monitor, control, mitigate and report this risk.
The Bank's priority, therefore, is to identify and mitigate focal points of risk, irrespective of whether they have given
rise to any losses. Measurement also contributes to the establishment of priorities in the management of
operational risk.
To improve and promote adequate operational risk management, Santander Consumer Finance has developed an
advanced loss distribution model (LDA) based on internal event database such as the external loss database of our
banking peers (ORX consortium database) and scenario analysis. This approach is accepted by t he industry and
regulators
b. Operational risk management and control model
Operational risk management cycle
The stages of the model of operational risk management and control involve the following:
•
Identifying the operational risk inherent to all activities, products, processes and systems of the Group. This
process is carried out via the Risk and Control Self-assessment (RCSA) exercise.
• Definition of the target operational risk profile, specifying the strategies by unit and time horizon, through the
establishment of the operational risk appetite and tolerance, the budget and the related monitoring.
•
Encouragement of the involvement of all employees in the operational risk culture, through appropriate training
for all areas and levels of the organisation.
43
• Objective and ongoing measurement and assessment of operational risk, consistent with industry and regulatory
standards (Basel, Bank of Spain, etc.).
•
•
•
Continuous monitoring of operational risk exposures, implementation of control procedures, improvement of
internal awareness and mitigation of losses.
Establishment of mitigation measures to eliminate or minimise operational risk.
Preparation of periodic reports on the exposure to operational risk and its level of control for the senior
management of the Group and its areas/units, and reporting to the market and the regulatory authorities.
• Definition and implementation of the methodology required for calculating capital in terms of expected and
unexpected loss.
The following is required for each of the key processes indicated above:
•
The existence of a system whereby operational risk exposures can be reported and controlled, as part of the
Group's daily management efforts.
Towards this end, in 2016 the Group implemented a single tool for management and control of operational risk,
compliance and internal control, called Heracles, and which is considered the Golden Source for Risk Data Aggregation
(RDA).
Internal rules and regulations based on principles for management and control of operational risk have been defined
and approved pursuant to the established governance system and in line with prevailing regulation and best practices.
In 2015, the Group adhered to the relevant corporate framework and subsequently, the model, policies and procedures
were approved and implemented, along with the Operational Risk Committee Regulation.
The model of operational risk management and control implemented by the Group provides the following benefits:
– It promotes the development of an operational risk culture.
– It allows for comprehensive and effective management of operational risk (identification, measurement /
assessment, control / mitigation, and reporting).
– It improves knowledge of both actual and potential operational risks and their assignment to businesses and
support lines.
– Information on operational risk helps improve processes and controls and reduce losses and income volatility.
– It facilitates the setting of limits for operational risk appetite.
44
c. Risk identification, measurement and assessment model
In November 2014, the Group adopted the new management system of the Santander Group, in which three lines of
defence are defined:
•
1st line of defence: integrated in areas of business or support areas. Its tasks are to identify, measure or assess,
control (primary control) mitigate and report the risks inherent to the activity or function for which it is
responsible.
Given the complexity and heterogeneous nature of Operational Risk within a large-scale organization with various
lines of business, appropriate risk management is carried out in two axes:
(1) Operational Risk Management: each business unit and support function of the Santander Group is responsible for
the Operational Risks arising within its scope, as well as for their management. This particularly affects the heads of
the business units and support functions, but also the coordinator (or OR team) in the 1LoD.
(2) Management of specialized Operational Risk controls: there are some functions that tend to manage specialized
controls for certain risks where they have greater visibility and specialization. Such functions have a global view of the
specific Operational Risk exposure in all areas. We can also refer to them as Subject Matter Experts or SME.
OR Managers:
Operational Risk management is the responsibility of all staff in their respective areas of activity. Consequently, the
Head of each division or area has the ultimate responsibility for Operational Risk in its scope.
OR Coordinators:
OR coordinators are actively involved in Operational Risk management and support the RO managers in their own
areas of OR management and control. Each coordinator has a certain scope for action, which does not necessarily
coincide with organizational units or areas, and has an in-depth knowledge of the activities within their scope. Their
roles and responsibilities include:
•
•
•
•
Interaction Undertake interaction with the second line of defense in day-to-day operations and
communication to Operational Risk Management in their scope.
Facilitate integration in the management of OR in each scope.
Support the implementation of qualitative and quantitative methodologies and tools for operations
management and control.
Provide support and advice on Operational Risk within its scope.
• Maintain an overview of risk exposure in scope.
•
•
•
Ensure the quality and consistency of data and information reported to 2LoD, identifying and monitoring
the implementation of relevant controls.
Review and monitor results provided by business units and support functions related to controls testing.
Support in sign-off and certification of controls (control testing).
• Monitor mitigation plans in your area.
•
Coordinate the definition of business continuity plans in your area.
2nd line of defence: Exercised by the Non-Financial Risks Department and reporting to the CRO. Its functions are the
design, maintenance and development of the local adaptation of the Operational Risk Management Framework (BIS),
and control and challenge on the first line of defense of Operational Risk. Their main responsibilities include:
•
Design, maintain and develop the Operational Risk management and control model, promoting the
development of an operational risk culture throughout the Group.
45
•
•
•
•
•
•
Safeguard the adequate design, maintenance and implementation of the Operational Risk regulations.
Encourage the business units to effectively supervise the identified risks.
Guarantee that each key risk that affects the entity is identified and duly managed by the corresponding
units.
Ensure that the Group has implemented effective RO management processes.
Prepare Operational Risk appetite tolerance proposals and monitor risk limits in the Group and in the
different local units.
Ensure that Top Management receives a global vision of all relevant risks, guaranteeing adequate
communication and reports to Senior Management and the Board of Directors, through the established
governing bodies.
In addition, the 2LoD will provide the information necessary for its consolidation, along with the remaining risks, to the
risk consolidation and supervision function.
To ensure proper supervision, a solid knowledge of the activities of the Business Units / Support Functions is required,
as well as a specific understanding of the categories of risk events (IT, Compliance, etc.) and a Local Capacity and
Capability Plan. In that context, the RO control function (2LOD function) needs to take advantage of specific profiles
that can support the implementation of the RO framework in the 1LOD, but also provide specific risk exposure and
business information, to ensure that the RO profile related is well managed and reported. Business Risk Managers
(BRM) as business insight specialists (eg Global Corporate Banking) and Specialized Risk Managers (SRM) as OR control
specialists (eg IT and cyber risks) perform these functions within OR 2LOD and are positioned as key contact points for
1LOD business units and operations management support functions.
3rd line of defence: Exercised by Internal Audit, which evaluates the compliance of all activities and units of the entity
with its policies and procedures. His main responsibilities include:
•
•
•
•
•
Verify that the risks inherent to the Group's activity are sufficiently covered, complying with the policies
established by Senior Management and the applicable internal and external procedures and regulations.
Supervise compliance, effectiveness and efficiency of the internal control systems for operations in the
Group, as well as the quality of accounting information.
Carry out an independent review and challenge the OR controls, as well as the Operational Risk
management processes and systems.
Evaluate the state of implementation of the OR management and control model in the Group.
Recommend continuous improvement for all functions involved in operations management.
46
Management at the Bank is carried out based on the following elements:
To carry out the identification, measurement and evaluation of operational risk, a set of quantitative and qualitative
corporate techniques / tools have been defined, which are combined to carry out a diagnosis based on the identified
risks and obtain an assessment through the measurement / evaluation of area / unit.
The quantitative analysis of this risk is carried out mainly through tools that record and quantify the level of losses
associated with operational risk events.
•
Internal events database, whose objective is to capture all the Bank's operational risk events. The capture of
events related to operational risk is not restricted by establishing thresholds, that is, there are no exclusions
based on the amount, and it contains both events with an accounting impact (including positive impacts) and
non-accounting ones.
There are accounting reconciliation processes that guarantee the quality of the information collected in the database.
The most relevant events of the Bank and of each operational risk unit thereof are specially documented and reviewed.
•
•
External database of events, since the Bank, through the Santander Group, participates in international
consortiums, such as ORX (operational risk exchange). In 2016, the use of external databases that provide
quantitative and qualitative information and that allow a more detailed and structured analysis of relevant
events that have occurred in the sector was reinforced.
Analysis of RO scenarios. Expert opinion is obtained from the business lines and risk and control managers,
whose objective is to identify potential events with a very low probability of occurrence, but which, in turn,
may entail a very high loss for an institution. Its possible effect on the entity is evaluated and additional
controls and mitigating measures are identified that reduce the possibility of a high economic impact. In
addition, the results of this exercise (which has also been integrated into the HERACLES tool) will be used as
one of the inputs for the calculation of economic capital for operational risk based on the advanced model
(LDA).
The tools defined for the qualitative analysis try to evaluate aspects (coverage / exposure) linked to the risk profile,
thereby allowing the capture of the existing control environment. These tools are mainly:
•
RCSA: Methodology for the evaluation of operational risks, based on the expert criteria of the managers,
serves to obtain a qualitative vision of the main sources of risk of the Bank, regardless of whether they have
materialized previously.
47
Advantages of the RCSA:
a.
b.
c.
d.
Encourage the responsibility of the first lines of defense: The figures of risk owner and control
owner in the first line are determined.
Favor the identification of the most relevant risks: Risks that are not pre-defined, but arise from the
areas that generate risk.
Improve the integration of RO tools: Root cause analysis is incorporated.
Improve exercise validation. It is developed through workshops or workshops, instead of
questionnaires.
e. Make the exercises have a more forward-looking approach: The financial impact of risk exposure is
evaluated.
•
•
Corporate system of operational risk indicators, in continuous evolution and in coordination with the
corresponding corporate area. They are statistics or parameters of various kinds that provide information on an
entity's exposure to risk. These indicators are reviewed periodically to warn of changes that may reveal
problems with risk.
Recommendations from regulators, Internal Audit and the external auditor. These provide relevant information
on inherent risk arising from internal and external factors, and enable identification of weaknesses in controls.
• Other specific instruments that permit a more detailed analysis of technology risk, such as control of critical
incidences in systems and cyber-security events.
d. Operational risk information system
HERACLES is the corporate operational risk information system. This system has modules for risk self-assessment,
event registration, a risk and assessment map, indicators of both operational risk and of internal control, mitigation
and reporting systems and scenario analysis, and it is applied to all entities of the Consumer Group including Bank.
e. Business Continuity Plan
The Santander Group and, accordingly, the Santander Consumer Finance Group, have a Business Continuity
Management System (BCMS) to ensure the continuity of its entities' business processes in the event of a disaster or
serious incident.
48
The basic objective consists of the following:
• Minimising possible injury to persons, as well as adverse financial and business impacts for the Bank,
resulting from an interruption of normal business operations.
•
•
•
•
•
Reducing the operational effects of a disaster by supplying a series of pre-defined, flexible guidelines and
procedures to be employed in order to resume and recover processes.
Resuming time-sensitive business operations and associated support functions, in order to achieve business
continuity, stable earnings and planned growth.
Re-establishing the time-sensitive technology and transaction-support operations of the business if existing
technologies are not operational.
Safeguarding the public image of, and confidence in, the Bank.
Satisfy the Bank's obligations to its employees, customers, shareholders and other interested third parties.
f. Corporate information
The Santander Group's and Bank´s corporate operational risk control area has an operational risk management
information system that provides data on the Bank's main risk elements. The information available from each country/
unit in the operational risk sphere is consolidated to obtain a global view with the following features:
•
•
Two levels of information: a corporate level, with consolidated information, and an individual level containing
information for each country/unit.
Dissemination of best practices among the Santander Group countries/units, obtained from the combined
study of the results of quantitative and qualitative analyses of operational risk.
Specifically, information is prepared on the following subjects:
•
•
•
•
•
•
The operational risk management model in the Bank and the main units and geographic areas of the Group.
The scope of operational risk management.
The monitoring of appetite metrics
Analysis of internal event database and of significant external events.
Analysis of most significant risks detected using various information sources, such as operational and
technology risk self-assessment processes.
Evaluation and analysis of risk indicators.
• Mitigation measures/active management.
•
Business continuity plans and contingency plans.
This information is used as the basis for meeting reporting requirements to the Executive Risk Committee, the Risk
Supervision, Regulation and Compliance Committee, the Operational Risk Committee, senior management, regulators,
credit rating agencies, etc.
g. The role of insurance un operational risk management
The Santander Consumer Finance Group considers insurance to be a key tool in the management of operational risk.
Since 2014, common guidelines have been in place for coordination between the different functions involved in the
management cycle of operational risk-mitigating insurance, mainly the areas of proprietary insurance and operational
risk control, but also different areas of first line risk management.
49
These guidelines include the following activities:
•
•
•
•
Identification of all risks at the Group that could be covered by insurance, as well as new insurance cover for
risks already identified in the market.
Establishment and implementation of criteria for quantifying insurable risk, based on the analysis of losses and
in loss scenarios that make it possible to determine the Group's level of exposure to each risk.
Analysis of the cover available in the insurance market, as well as preliminary design of the terms and
conditions that best suit the requirements previously identified and evaluated.
Technical assessment of the level of protection provided by a policy, the cost and levels of retention that would
be assumed by the Group (deductibles and other items borne by the insured) for the purpose of deciding
whether to contract it.
• Negotiation with suppliers and contract awards in accordance with the relevant procedures established by the
Bank.
• Monitoring of claims reported under the policies, as well as those not reported or not recovered due to
incorrect reporting.
•
•
•
•
Close cooperation between local operational risk officers and local insurance coordinators in order to enhance
operational risk mitigation.
Regular meetings to inform on the specific activities, situation and projects of the two areas.
Analysis of the adequacy of the group's policies to the risks covered, taking the appropriate corrective measures
for the deficiencies detected.
Active participation of both areas in the global insurance sourcing table, the highest technical body in the Group
for the definition of insurance coverage and contracting strategies.
Cyber risk
Cybersecurity risk (also known as cyber risk) is defined as any risk that produces financial loss, business interruption or
damage to the reputation of Santander Consumer derived from the destruction, misuse, theft or abuse of systems or
information. This risk comes from inside and outside the corporation.
In the event of a cyber incident, the main cyber risks for the Bank are made up of three elements:
– Unauthorized access or misuse of information or systems (eg. theft of business or personal information).
– Theft and financial fraud.
– Interruption of business service (eg, sabotage, extortion, denial of service).
During 2022, the Bank has continued to pay full attention to risks related to cybersecurity. This situation, which
generates concern in entities and regulators, prompts them to adopt preventive measures to be prepared for attacks of
this nature.
The Bank has evolved its cyber regulations with the approval of a new cybersecurity framework and the cyberrisk
supervision model, as well as different policies related to this matter.
Similarly, a new organizational structure has been defined and governance for the management and control of this risk
has been strengthened. For this purpose, specific committees have been established and cybersecurity metrics have
been incorporated into the Bank's risk appetite.
The main instruments and processes established to control cybersecurity risk are:
•
Compliance with the cyber risk appetite, the objective of this process being to guarantee that the cyber risk
profile is in line with the risk appetite. The cyber risk appetite is defined by a series of metrics, risk statements
and indicators with their corresponding tolerance thresholds and where existing government structures are
used to monitor and escalate, including Risk committees, as well as Cybersecurity committees. .
50
•
•
Cybersecurity risk identification and assessment: The cyberrisk identification and assessment process is a key
process to anticipate and determine risk factors that could estimate their probability and impact. Cyber risks
are identified and classified in line with the control categories defined in the latest relevant industry security
standards (such as ISO 27k, the NIST Cybersecurity Framework, etc.). The methodology includes the methods
used to identify, qualify and quantify cyber risks, as well as to evaluate the controls and corrective measures
that the first line of defense function develops. Cyber risk assessment exercises are the fundamental tool for
identifying and evaluating cyber security risks in the Bank. The cybersecurity and technological risk
assessment will be updated when reasonably necessary taking into account changes in information systems,
confidential or business information, as well as the entity's business operations.
Control and mitigation of cyber risk: processes related to the evaluation of the effectiveness of controls and
risk mitigation. Once the cyber risks have been assessed and the mitigation measures have been defined,
these measures are included in a Santander Consumer Finance cybersecurity risk mitigation plan and the
residual risks identified are formally accepted. Due to the nature of cyber risks, a periodic evaluation of risk
mitigation plans is carried out. A key process in the face of a successful cybersecurity attack is the business
continuity plan. The Bank has mitigation strategies and measures related to business continuity and disaster
recovery management plans. These measures are also linked to cyber attacks, based on defined policies,
methodologies and procedures.
• Monitoring, supervision and communication of cyber risk: Santander Consumer Finance carries out control
and monitoring of cyber risk in order to periodically analyze the information available on the risks assumed in
the development of the Bank's activities. For this, the key risk indicators (KRI) and the key performance
indicators (KPI) are controlled and supervised to assess whether the risk exposure is in accordance with the
agreed risk appetite. Escalation and reporting: The proper escalation and communication of cyber threats and
cyber attacks is another key process. Santander Consumer Finance has tools and processes to detect internal
threat signals and potential compromises in its infrastructure, servers, applications and databases.
Communication includes the preparation of reports and the presentation to the relevant committees of the
information necessary to assess the exposure to cyber risk and the profile of cyber risk and take the necessary
decisions and measures. For this, they prepare reports on the cyber risk situation for the management
committees. Also, there are mechanisms for internal escalation independent of the bank's management team
of technological and cybersecurity incidents and, if necessary, the corresponding regulator.
Other emerging risks
In addition to the aforementioned Cyber Risk, the Santander Consumer Group is increasingly strengthening the
supervision of new emerging risks derived from 1) supplier management and 2) transformation projects.
– Regarding supplier management risks, the focus is on the quality and continuity of services provided to SCF, but
also on ensuring compliance with the new EBA Guidelines and Regulations such as DORA through implementation
of specific risk instruments throughout the different phases of the supplier's life cycle
– The Transformation Operational Risk is that derived from changes in the organization, launch of new products,
services, systems or processes derived from imperfect design, construction, testing, deployment of projects and
initiatives, as well as the transition to the day- a-day (BAU). The transformation constitutes a root cause, which can
manifest itself in a variety of risks and impacts, not restricted to Operational Risk, (for example, Credit, Market,
Financial Crimes…)
Compliance and conduct risk
The compliance function includes all issues relating to regulatory compliance, prevention of money laundering and
terrorist financing, governance of products and consumer protection, and reputational risk according to the General
Corporate Compliance and Conduct Framework (Marco Corporativo General de Cumplimiento y Conducta).
The compliance function promotes the adhesion of Santander Consumer Finance, S.A. ("SCF") to standards,
supervisory requirements, and the principles and values of good conduct by setting standards, debating, advising
and reporting, in the interest of employees, customers, shareholders and the wider community. In accordance with
the current corporate configuration of the Santander Group's three lines of defence, the compliance function is a
second-line independent control function that reports directly to the Board of Directors and its committees through
the CCO. This configuration is aligned with the requirements of banking regulation and with the expectations of
supervisors.
51
The SCF Group's objective in the area of compliance and conduct risk is to minimise the probability that
noncompliance and irregularities occur and that any that should occur are identified, assessed, reported and
quickly resolved.
The main tools used by the Compliance function in order to meet their objectives are (among others):
establishment and coordination with the Compliance Program, coordination of the Risk Assessments of all the
areas of Compliance and Conduct, definition and monitoring of the Compliance Metrics that participate in the SCF
Appetite Risk Framework and monitoring of the Norms of Obligatory Compliance.
Climate and environmental risk
Santander Consumer Finance's ESG strategy (environmental, climate, social and governance factors) consists of
doing business in a responsible and sustainable way, supporting the green transition, building a more inclusive
society and doing business correctly, following the most rigorous government standards.
On the other hand, ESG factors can carry traditional types of risk (for example, credit, liquidity, operational or
reputational) due to the physical impacts of a changing climate, the risks associated with the transition to a new,
more sustainable economy and the Failure to meet expectations and commitments. For this reason, they are
included in the Santander Consumer Finance risk map as relevant risk factors.
In recent times, climate risks (physical risks and transition risks) have become very relevant, and for this reason
Santander Consumer Finance is reinforcing its management and control in coordination with the Santander Group
corporate teams within the framework of the Climate Project, being Some of the priorities are as follows:
1.
2.
3.
EWRM (Enterprise-Wide Risk Management) approach, which provides a holistic and anticipatory vision of
climatic aspects as a basis for their proper management.
Availability of relevant data (for example, CO2 emissions from financed assets, financing ratio of green
assets, sectoral classification and location of companies, energy efficiency certificates and location of
collaterals, etc.).
Integration of climatic risks in the day-to-day management and control of risks.
The relevance of the data and its quality is, if possible, even greater in this area than in the rest, given that some
data that until recently was not very relevant and perhaps was not even collected has become essential for issues
such as Alignment of portfolios to environmental objectives, information disclosure or climate risk management.
Therefore, one of the pillars of the Climate Project is to collect said data with the required quality.
Regarding the EWRM approach, first of all, a fundamentally qualitative evaluation has been carried out on the
implications and materiality of climatic aspects for Santander Consumer Finance, with special focus on the auto
portfolio, which is summarized in the following paragraphs.
As previously mentioned, for Banking in general, the climate is a transversal issue with multiple angles, but with
two main interrelated dimensions:
1.
Banks have a key role in mitigating climate change and the transition towards a new green
economy.
2. Weather aspects can cause losses to Banks through different transmission mechanisms.
With regard to Santander Consumer Finance in particular, our vision is as follows:
1. Our role in sustainable financing: the alignment of our portfolios to the ambition of net zero
emissions is happening naturally and gradually thanks to the policies of the European Union and the
short duration of our contracts. In any case, Santander Consumer Finance is becoming more
sustainable and proactively helping clients to become more sustainable. In this path, the effort that
is being made in terms of data and information dissemination is essential.
52
2.
Potential impacts of climate risks on Santander Consumer Finance: from the materiality analysis
carried out, it is concluded that the types of risk most affected for SCF are credit, residual value,
reputational and strategic (business model). The potential impacts are greatly mitigated thanks to
the context (gradual transformation of the automobile industry) and the business model of
Santander Consumer Finance (whose portfolios are mainly retail, of good quality, short-term and
diversified). On the other hand, climate issues could be the trigger for a general economic crisis, for
example due to a disorderly transition to the new green economy. We are already managing these
risks, but we will continue to strengthen their management and control.
Climate risks have been progressively incorporated into the different EWRM processes:
•
•
•
•
•
•
•
"Top Risks": framed within the event of evolution of the automotive sector, which has historically
been identified as one of the main ones in the matrix,
Risk map: as a transversal risk, included as such since 2021,
Assessment of the risk profile: through a questionnaire related to the control environment, as well
as a qualitative assessment,
Risk appetite: through stress metrics, as well as the opening of the residual value by the type of
engine,
Risk strategy,
Strategic risk, as a driver of changes in market trends,
Capital risk and stress tests. The stress tests included in the strategic plans and in the ICAAP of
Santander Consumer Finance take into account climate risks through idiosyncratic events, in
addition to a specific scenario included in this exercise to reflect the potential impact of a disorderly
transition towards an economically low emissions. The results of these stress tests form part of the
entity's risk appetite.
Stress test scenarios and methodologies will become more sophisticated as more information becomes available.
In 2022, Santander Consumer Finance has participated, together with the Santander Group teams, in the first ECB
climate stress test and in the thematic review of climate risks.
Finally, with regard to day-to-day integration of risk management and control, Santander Consumer Finance's
EWRM team prepares an internal climate risk monitoring report quarterly, which will also be incorporated from of
its publication the results of the exercise of Pillar III ESG. In parallel, work is being done on the integration of
climate risks in all phases of the risk cycle, ensuring compliance with the commitments acquired and supervisory
expectations. The initiatives for calculating emissions are framed within this axis, as a basis for the commitments of
the Net Zero Banking Alliance.
Proposed appropiation of profit or loss
The appropriation of profit obtained by the Bank in 2022, amounting EUR 851,793 thousand, will be submitted for
approval by the shareholders at the Annual General Shareholder’s Meeting in accordance with the following proposal:
Legal reserve: EUR 85,179 thousand
Voluntary reserve: EUR 114,411 thousand
Capital and treasury shares
In 2022 the Group did not conclude any transactions involving treasury shares/own shares. There was no treasury
share balance on its balance sheet at 31 December 2022.
Research and development
Grupo Santander understands innovation and technological development as a key anchor point of the corporate
strategy, and seeks to take advantage of the opportunities offered by digitalization. Aligned with the Santander
Consumer Finance Group's technology and innovation strategy, it leverages global capabilities and incorporates local
particularities to maximize the development of its business and stay ahead of its competitors.
53
It is crucial for Technology and Operations to support the needs of the business, with specific value-added proposals
for the value offer of consumer finance, focusing on the point of sale, customer management and the design of
specialized products, guaranteeing optimal management of the process to maintain good efficiency ratios and ensure
control of technological and operational security.
On the other hand, like the rest of the Santander Group's units, Santander Consumer Finance is coming under
increasing pressure from ever more demanding regulatory requirements that impact the systems model and
underlying technology, and require additional investments to ensure compliance and legal security.
Events after the reporting date
Events occurring after the 2022 year-end are disclosed in Note 1-i to the consolidated financial statements.
Compliance with regulatory framework
The Basel III regulations came into effect in 2014, setting new global standards for the capital, liquidity and leverage of
financial entities.
From the capital perspective, Basel III redefines what is considered available capital for financial entities (including new
deductions and increasing requirements for eligible capital instruments); increases minimum capital requirements;
requires financial entities to always hold capital buffers; and adds new requirements for the risks considered.
These regulations were implemented in Europe through Directive 2013/36/EU, known as ‘CRD IV’, and its regulations,
575/2013 (CRR), which apply directly in all EU member states (Single Rule Book). These rules are currently subject to
regulatory development by the European Banking Authority (EBA).
CRD IV was introduced into Spanish law through Act 10/2014, on the ordering, supervision and solvency of credit
institutions, and its subsequent regulatory implementation through Royal Decree Act 84/2015. The CRR is directly
applicable to member states from 1 January 2014 and repeals lower-ranking standards that entail additional capital
requirements.
The CRR provides for a phase-in period that will allow institutions to adapt gradually to the new requirements in the
European Union. The phase-in arrangements have been introduced into Spanish law through Bank of Spain Circular
2/2014. The phase-in affects both the new deductions from capital and the capital instruments and elements that
cease to be eligible as capital under the new regulations. The capital conservation buffers provided for in CRD IV are
also being phased in gradually, starting in 2016 and reaching full implementation in 2019.
In 2022, the Santander Consumer Finance Group must maintain a minimum capital ratio of 7.89% CET1 phase-in (4.5%
for Pillar I, 0.84% for Pillar II, 2.5% for the capital conservation buffer, and 0.05% for the anticyclical buffer). This
requirement includes: (i) the minimum Common Equity Tier 1 requirement to be maintained at all times under Section
92(1)(a) of Regulation (EU) No 575/2013 (ii) the Common Equity Tier 1 requirement to be maintained in excess at all
times under Section 16(2)(a) of Regulation (EU) No 1024/2013; and (iii) the capital conservation buffer under Section
129 of Directive 2013/36/EU. In addition, the Santander Consumer Finance Group must maintain a minimum capital
ratio of 9.675% of Q1 phase-in as well as a minimum Total Ratio of 12.05% phase-in.
At the end of 2022, the Bank exceeds the prudential requirement defined by the ECB, with a CET1 (Fully Loaded) ratio
of 12.53% and a total capital ratio of 16.52% (Fully Loaded).
Regarding credit risk, the Bank continues its plan to implement the advanced internal models approach (AIRB) of Basel.
This progress is also conditioned by the acquisitions of new entities, as well as by the need for coordination between
supervisors of the internal model validation processes.
The Santander Consumer Finance Group is mainly present in geographies where the legal framework between
supervisors is the same, as is the case in Europe through the Capital Directive.
Currently, the Santander Consumer Finance Group has supervisory authorization for the use of advanced approaches
for the calculation of regulatory capital requirements for credit risk for its main portfolios in Spain, certain portfolios in
Germany, the Nordic countries and France.
With regard to operational risk, the Santander Consumer Finance Group currently uses the standard approach for
calculating regulatory capital provided for in the European Capital Directive.
54
In relation to the other risks explicitly contemplated in Pillar I of Basel, market risk is not significant in Santander
Consumer Finance since it is not the object of the business, and the standard approach is used.
Leverage ratio
The leverage ratio has been defined within the regulatory framework of Basel III as a measure of the capital required
by financial institutions not sensitive to risk. The Group performs the calculation as stipulated in CRD IV and its
subsequent amendment in EU Regulation no. 573/2013 of 17 January 2015, which was aimed at harmonising
calculation criteria with those specified in the BCBS “Basel III leverage ratio framework” and “Disclosure requirements”
documents. This ratio is calculated as the ratio of Tier 1 divided by leverage exposure.
The ratio mentioned is calculated as the quotient between Tier 1 divided by the leverage exposure. This exposure is
calculated as the sum of the following elements:
•
Accounting asset, without derivatives and without elements considered as deductions in Tier 1 (for example,
the balance of the loans is included but not the goodwill).
• Memorandum accounts (guarantees, unused credit limits granted, documentary credits, mainly) weighted by
credit conversion factors.
•
•
•
Inclusion of the net value of derivatives (gains and losses are netted with the same counterparty, less
collateral if they meet certain criteria) plus a surcharge for potential exposure
A surcharge for the potential risk of securities financing operations
Finally, a surcharge is included for the risk of credit derivatives (CDS).
Santander Consumer Finance maintains a fully loaded leverage ratio at sub consolidated level of 8.93% at the end of
2022, based on a reference ratio of 3%.
Economic capital
From the point of view of solvency, in the context of Basel Pillar II Santander Consumer Finance Group uses its
economic model for its internal capital adequacy assessment process (ICAAP). For this purpose, business performance
and capital needs are planned under a base case scenario and under alternative stress scenarios.
In this scenario, the Group ensures that it maintains its solvency targets even in adverse economic scenarios.
Economic capital is the capital required, according to an internally developed model, to support all the risks of our
business at a certain level of solvency. In our case, the solvency level is determined by the long-term objective rating of
'A' (two steps above Spain's rating), which means applying a confidence level of 99.95% (above the regulatory
99.90%) to calculate the necessary capital.
The Group's economic capital model includes in its measurement all significant risks incurred by the Group in its
operations, and therefore considers risks such as concentration, structural interest rate, business, pensions and others
that are outside the scope of "regulatory" Pillar 1. Furthermore, economic capital incorporates the diversification
effect, which in the case of the Group is crucial, due to the multinational and multi-business nature of its activity, in
order to determine the overall risk and solvency profile.
The Santander Consumer Finance Group uses the RORAC method in its risk management to calculate the economic
capital consumption and return on risk-adjusted capital of the Group's business units, segments, portfolios or
customers, in order to periodically analyse value creation and facilitate optimal allocation of capital.
The RORAC methodology makes it possible to compare, on a uniform basis, the returns on transactions, customers,
portfolios and businesses, identifying those that obtain a risk-adjusted return higher than the Group's cost of capital,
and thus aligning risk and business management with the intention of maximising value creation, which is the ultimate
objective of Santander Consumer Finance's senior management.
55
Annual corporate governance report
Pursuant to article 9,4 of Order ECC/461/2013, of 20 March, from the Ministry of Economy and Competitiveness, the
Bank, an entity domiciled in Spain with voting rights belonging, directly and/or indirectly, to Banco Santander, S.A., has
not prepared an annual corporate governance report, as this is drawn up and filed with the CNMV by Banco Santander,
S.A. as the parent of the Santander Group.
Non-financial information
On 28 December 2018, the Council of Ministers approved Law 11/2018 amending the Commercial Code, the
consolidated text of the Companies Law approved by Royal Legislative Decree 1/2010 of 2 July and Law 22/2015 of 20
July on account auditing, non-financial reporting and diversity.
The statement of non-financial information shall contain the following: a brief description of the group's business
model, the group's relevant policies and their outcomes, the principal risks related to its business, in addition to non-
financial key performance indicators on matters relating to the environment, employees, human rights, the fight
against corruption and bribery and diversity.
The Directive applies to entities whose average number of employees in the financial year exceeds 500 and which are
either considered to be public-interest entities in accordance with auditing legislation or, for two consecutive financial
years, at the closing date of each year engage at least two of the circumstances indicated in the Law. However,
subsidiaries belonging to a group are exempt from this obligation if the company and its subsidiaries are included in
another company's consolidated management report.
In this regard, as a subsidiary of Banco Santander S.A, Santander Consumer Finance, S.A. and the companies in the
Consumer Finance Group (consolidated) have included this information in the management report of Banco Santander
S.A. and subsidiaries for the year ended 31 December 2022, which has been filed with the Companies' Registry of
Santander, together with the consolidated financial statements of the Banco Santander Group and subsidiaries, as set
out in note 1 to the accompanying Notes. These are also available at www.santander.com
Capital structure and significant shareholders
Banco Santander, S.A.
1,879,546,152 Ownership 99.99%
Cántabro Catalana de Inversiones, S.A.
20 Ownership 0.00000106%
Total number of shares outstanding
Par value
Shareholder's equity
1,879,546,152
3.00
5,638,638,516
At 31 December 2022, the Bank’s share capital consisted of 1,879,546,172 registered shares, with a par value of EUR 3
each, all fully subscribed and paid up, and with equal dividend and voting rights.
Restrictions on the transferability of shares
Not applicable
Restrictions on voting rights
The shareholders attending the Annual General Meeting will have one vote for each share that they hold or represent.
Only the holders of 20 or more shares will be entitled to attend the Annual General Meeting, provided that they are
registered in their name in the share register.
Side agreements
Not applicable
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Appointment and replacement of members of the Board of Directors and amendment of the bylaws
The representation of the Bank is the responsibility of the Board of Directors, which will comprise no fewer than 5 and
no more than 15 members, who will be appointed by the Annual General Meeting for a period of three years, although
they may be re-elected, as many times as may be desired, for further three-year periods.
It is not necessary to be a shareholder of the Bank in order to be a director.
Powers of the member of the Board of Directors
On 17 December 2020, the SCF, S.A. Board of Directors granted powers of attorney to Mr. José Luis de Mora Gil-
Gallardo and Mr. Ezequiel Szafir as Managing Directors of Santander Consumer Finance, S.A. The Board of Directors
agreed to delegate in favor of Mr. José Luis de Mora Gil-Gallardo and Mr. Ezequiel Szafir, jointly and severally, all the
powers of the Board, except those that cannot be legally delegated.
Because of the reason of his re-election as Director, agreed by the General Shareholders' Meeting on February 24,
2022, the Board of Directors, agreed to the re-election of Mr. José Luis de Mora as CEO, attributing him, jointly and
severally, all the Board Directors’ faculties, except those that may not be delegated by law or bylaws, classified as non-
delegable in the Board Regulations, which are the following:
1.
2.
3.
4.
5.
6.
7.
8.
9.
The approval of the Company's general policies and strategies, and the supervision of their application.
The formulation of the annual accounts and their presentation to the general meeting.
The formulation of any kind of report required by law to the board of directors as long as the operation to
which the report refers cannot be delegated.
The announcement of the shareholders’ general meeting and the preparation of the agenda and the proposal
of agreements.
The definition of the Group’s structure of companies of which the Company is the parent entity
The monitoring, control and periodic evaluation of the corporate governance and internal governance system
and of the regulatory compliance policies, as well as the adoption of appropriate measures to solve, where
appropriate, its deficiencies.
The approval, within the framework of the Social Statute and the remuneration policy for directors approved
by the general meeting, of the remuneration that corresponds to each director.
The approval of the contracts that regulate the provision by the directors that its functions differs on those
that correspond to them in their capacity as such and the remuneration that corresponds to them for the
performance of other functions different from the supervision and collegiate decision that they carry out in
their capacity as mere council members.
The design and supervision of the director selection policy, as well as the director succession plans.
10. The selection and evaluation of directors.
11. The supervision of the development of the Responsible Banking Agenda.
12. The faculties that the general meeting has delegated to the board of directors, unless expressly authorized by
it to sub-delegate them.
13. The determination of its organization and operation and, in particular, the approval and modification of the
regulations of the Council
Significant agreements that are modified or terminated in the event of a change of control of the Company
Not applicable
Agreements between the Company, administrators, managers or employees that provide for compensation upon
termination of the relationship with the Company due to a takeover bid.
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